We are, respectively, the dean of the John Molson School of Business and an expert for decades on the place of women in the upper echelons of the business world, and we have combed through the 10th Review of Disclosure Regarding Women on Boards and in Executive Officer Positions, published on October 30, 2024, by the Canadian Securities Administrators.

It’s worth noting that issuers (i.e., publicly traded companies) must also provide information on board renewal mechanisms and policies, as well as targets for increasing female representation. Under this Canadian law, even if public companies are not obliged to adopt diversity policies or quotas, they are required to disclose whether or not they have done so – and if they haven’t, to explain why.

This is the application of the principle “comply or explain.”

Women are making progress . . . slowly but surely

This 10th report shows steady but slight improvement in the following areas:

• 29% of director positions were held by women in 2023, compared to 27% the previous year and 11% in the first year of the analysis, in October 2015.
• 90% of issuers had at least one woman on their board during 2023, compared with 89% the previous year and 49% in the first year.
• 72% of issuers had at least one woman in senior management in 2023, compared with 71% the previous year and 60% in the first year.

However, a number of other results are cause for concern:

• Weaker female representation in smaller companies: only 23% of director positions in companies with a capitalization of less than $1 billion are held by women.
• More than a third of organizations have not yet adopted a policy of female representation on their boards.
• More than half of companies have not set targets for female board representation.
• Only 42% of issuers have at least three women on their boards.

Quebec is doing better

An analysis of the data shows that the results for public companies in Quebec are more encouraging:

• 62% of them, compared to 44% of Canadian ones, have set targets for female representation on boards.
• 84% have at least one woman on their management team, compared to 72% for Canada as a whole.
• 58% have three or more women on their boards, versus 42% for all Canadian issuers.

What accounts for this greater openness? The presence of an ecosystem of government, community, academic and individual initiatives that promote female talent.

Three determining factors

The adoption in 2006 of quotas for Quebec’s state-owned companies certainly helped create an environment conducive to greater female representation among Quebec issuers.

This law required that boards of directors of certain Crown corporations be composed of equal numbers of men and women starting in 2011. In 2022, the law was amended to require all boards of directors of state-owned companies to respect a so-called parity zone, meaning that the proportion of women or men must be between 40% and 60% of the total number of directors.

Despite certain objections voiced at the time, the bill was passed, the state-owned companies were able to organize themselves to find suitable candidates, and the skills of the new female directors were not called into question. Some negative reactions even turned positive over time.

The pioneering female directors have thus been able to demonstrate the financial and extra-financial contribution of a critical mass of women, and to nurture the talent pool for these positions through their mentoring efforts.

In addition, there are many strong organizations in Quebec whose mission is to promote female talent within the Quebec business community, including La Gouvernance au Féminin, L’Effet A and Le Réseau des Femmes d’affaires du Québec, to name just a few.

Finally, the presence of universities and other educational institutions forms a critical mass of women who have the training required to sit on boards of directors.

Three women are better than one

Are the current results enough to get our society and regulators to carry through on a commitment made a decade ago?

The best indicator to answer this question is the number of companies with more than three women on their boards. This indicator is borrowed from the theory developed by professor Rosabeth Moss Kanter in her book Men and Women of the Corporation.

According to Kanter’s theory, first put forward in 1977, when the ratio between a minority group and a dominant group reaches 35/65, members of the minority group have the potential to become allies, form coalitions and influence the culture of the group as a whole.

The effect, in organizational terms, is similar to the impact of “critical mass” as described in nuclear physics. This implies the presence of a sufficient quantity of an element to cause an “uncontrollable chain reaction,” where change occurs dramatically, far beyond what could be predicted.

A number of studies have verified this theory, notably by professors Sara De Masi, Agnieszka Slomka-Golebiowska and Andrea Paci. Based on a sample of companies listed on the Spanish, Italian and French stock exchanges, the results suggest that boards of directors exercise more rigorous corporate oversight when the percentage of women directors reaches the one-third threshold.

More successful businesses

And what can we say about the impact of an increased presence of women on the financial performance of companies?

As far back as 2007, a study by the U.S. consulting firm Catalyst concluded that companies with a high proportion of women in their decision-making structure have 42% higher profits. Their invested capital yields a 66% higher return. MSCI’s study The Tipping Point: Women on Boards and Financial Performance had similar conclusions.

Another study led by Élisabeth Lamure and Jacques Le Nay, How to Value Responsible and Committed Companies, shows that companies with more than three women on their boards saw a median 10% increase in return on their shareholders’ equity (this refers to a company’s resources that belong to its shareholders, as opposed to debts to suppliers or banks, for example) and a 37% increase in earnings per share between 2011 and 2016.

Companies with no women on their boards in 2011, on the other hand, saw return on equity and earnings per share fall by 1% and 8%, respectively, over the same period. The same study also shows that while the appointment of a single woman to a board of directors has a positive impact, it is only when at least three women are present that the benefits become apparent and reverberate throughout the company.

A wait-and-see attitude is costly

A wait-and-see attitude is costly not only in terms of untapped female talent, but also in terms of the quality of the governance of our organizations. The time has undoubtedly come to legislate quotas if we are to collectively aim for a more equitable society where the talents of all are put to optimum use.

The results show that the presence of at least three women on the board of directors of a decision-making body boosts an organization’s financial performance. The trends are positive and cast a favourable light on the goal of valuing gender diversity, and diversity of perspectives, as a way to make our companies sustainable.

Louise Champoux-Paillé is cadre en exercice at the John Molson School of Business at Concordia University; Anne-Marie Croteau is dean of the John Molson School of Business. 

This article was first published in The Conversation. It has been edited to conform with Corporate Knights style. Read the original piece here.

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The analysis focused specifically on the gender of the people in these positions, their functions and the source of their appointments, whether they came from inside or outside the organization.

Studying the composition of top management, often referred to as the C-Suite, is particularly important since it allows us to see how many women make it to the position of CEO in an organization.

Respectively Dean of the John Molson School of Business, and an expert for several decades on the place of women in the upper echelons of the business world, we will discuss the main findings of the Spencer Stuart study.

Starting points

Three conclusions in particular caught our attention:

• Men represent 60 per cent of the select group that constitutes top management. Men principally occupy the positions that offer the greatest potential for appointment as CEO, according to the history of appointments to such positions. These include, for example, Chief Operating Officer, Head of Division and Chief Financial Officer;
• Although women are increasingly present in top management positions (40 per cent), they are still found in the positions of Head of Human Resources, Head of Communications, Head of Diversity and Inclusion and Head of Sustainable Development. In other words, women are in so-called support functions that, while important for organizations, are unfortunately perceived as having little impact on shareholder equity and financial performance;
• Appointments to top management positions that lead to the position of CEO come mainly from within the company. What does this mean? That an intimate knowledge of the organization gained over a long period is valued and that there is generally a promotion process in place to feed the succession pool.

Global overview of the situation

Our experience over the last few decades allows us to draw similar conclusions about Canada. So we wanted to check whether this situation was similar in other countries.

A report by the International Labour Organization called “The Business Case for Change” provides an overview of the position of women in the upper echelons of power in 13,000 companies operating on every continent.

As in the United States and Canada, the gender divide between positions that could be called support jobs, and those that contribute directly to an organization’s profitability, appears to be widespread. According to the authors of this study, it is also referred to as a “glass wall,” since it limits the pool of potential female candidates for the position of CEO.

But how can this phenomenon be explained?

Stereotypes, biases and prejudices

First of all, gender stereotypes and prejudices come into play from childhood.

They have an impact on the toys children play with, the subjects they study, their lives and their future careers.

Girls — generally speaking — aspire to become doctors, teachers, nurses, psychologists and veterinary surgeons. As for boys, they want to become engineers and work in IT and mechanical fields.

Organizational culture

Secondly, organizational culture is a mirror of our society and its traditions.

It therefore conveys biases regarding the leadership potential of women compared to men.

According to the International Labour Organization survey cited above, 91 per cent of the women questioned agreed or strongly agreed that women lead as effectively as men. However, only 77 per cent of men agreed with this statement.

Arguably, this leadership bias has an impact on the recruitment, appointment, talent development and “stretch assignment” processes that pave the way for career progression.

There is also reason to believe that these biases are equally present on boards of directors, which are responsible for appointing CEOs and which are still predominantly composed of men.

Different life goals

Finally, women and men have different preferences and career goals.

According to a study by Harvard Business School professors Francesca Gino and Alison Wood Brooks entitled “Explaining the Gender Differences at the Top,” women are just as interested in opportunities for advancement as men are. However, they find them less attainable because of their busy schedules. As a result, women have to more seriously take into account the compromises and sacrifices they will have to make to occupy positions of high responsibility and power.

The authors are careful to point out that these results do not mean that women are less ambitious, but that career success means different things to different people. For some, it takes the form of power. For others, it can mean making colleagues happy and helping to make the world a better place in a collaborative and supportive environment.

This research is in line with that of Viviane de Beaufort, a professor at the École supérieure des sciences économiques et commerciales (ESSEC). In a survey of the career aspirations of 295 French women managers, she found that women do want to rise to the highest positions. But not at any price.

What determines career paths?

This article therefore raises the following question:

Can we, as women, one day hope to be CEOs or fulfill our professional dreams despite the biases, prejudices, stereotypes and barriers we have to overcome?

Simone de Beauvoir wrote in 1949 in her essay “The Second Sex”:

Women determine and differentiate themselves in relation to men, not men in relation to women: they are inessential in relation to what is essential. He is the subject, he is the absolute, she is the other.

This excerpt reminds us that the skills and knowledge required to perform strategic functions have always been defined in terms of the male exercise of power in an environment where the organization’s performance is judged almost exclusively by financial success and growth of shareholder value.

It’s time to think about new career paths and skills that are not defined by gender, but rather, by an organization’s mission and objectives. These goals must take into account how they contribute to creating a better world, as much as ensuring the financial success of organizations.

Functional skills must be valued as much as softer skills such as emotional intelligence, empathy, a sense of community and boldness.

Breaking down glass walls also means that organizations and their boards have a responsibility to identify and encourage women to take up positions where they can gain experience and develop their leadership skills in front line rather than support roles.

In such a context, women, as much as men, will have a better chance of reaching the highest positions in a company while remaining true to themselves — and doing so on equal terms.

Louise Champoux-Paillé is cadre en exercice at the John Molson School of Business, Concordia University. Anne-Marie Croteau is Dean at the John Molson School of Business, Concordia University.

This article was first published by The Conversation. Read the original story here. 

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Women rising

Walking the talk: North American diversity policies failing to deliver

As of this year, most corporations have a formal diversity policy, but that doesn’t necessarily translate into higher levels of women at the top.  Case in point: 92% of North American companies have adopted diversity policies, 5% more than European firms. Meanwhile, Canadian and American companies lag behind their European and Australian peers in terms of gender diversity in leadership. It’s a clear sign that having a diversity policy is far from enough.

Target practice: Australian and European firms seeing results with gender targets

Canadian and American companies seem be reluctant to set quantifiable internal gender targets at the risk of being held accountable. Targets continue to remain a more European and Australian practice. Australia, in particular, has shown that even in the industries most traditionally perceived as male, such as mining, these targets produce results by attracting more women in the workforce with management and leadership roles.

% of women in leadership and management positions by country

Canadian corporations at the back of the global pack

To be blunt, Canada doesn’t fare well in LeaderXXchange’s global rankings conducted. First, LeaderXXchange only focuses on the largest publicly-traded companies in North America; it doesn’t rank the entire public company universe. However, it’s pretty clear from LeaderXXchange’s research that Canadian companies are more closely correlated to their American neighbors than they are to Australia (which has a similar industry base to Canada). While 93% of Canadian companies adopted gender policies, just 20.5% of board directors are women(versus 32.5 % in France). While three quarters of French companies disclose the number of women in management, only 31% of Canadian companies do (for more details on the Canadian scene read Don’t Fear the Gender Quota).

“If Canadian companies and regulators were to replicate what Australian companies have accomplished, it would rapidly move from laggard to leader,” says L’Helias. France and Australia adopted similar objectives using different strategies. France and Australia adopted similar objectives using different strategies. France adopted a 40% gender quota for boards and requires reporting on gender pay gaps, promotion gaps and more. Australia adopted the “comply or explain” model.

Changing board rooms, lagging C-suite

It’s become clear that having diversity in leadership and management is critical to attracting and retaining talent – as well as investors. Institutional investors have actually been the driving force behind gender shifts in boardrooms, particularly in Canada and the US. In fact, gender diversity on boards has become the leading issue investors want directors to address, alongside executive compensation and climate change. To hincentivize laggards, several large institutional investors, including New York’s State Comptroller, have adopted strict voting guidelines to vote against nominating committee members of boards that have no women. It’s no wonder that as the proxy season approaches, a number of highly visible companies – particularly in the tech sector – have added women on their boards.

The diversity advantage: Studies are revealing that diverse groups make better decisions. Researchers are finding that diversity brings a level of complexity to the decision-making process that reduces blind-spots and increases the probability of better identifying and assessing risks and opportunities.

Regardless of progress at the board level, the glaring reality is that the world’s largest corporations are stalled in second gear when it comes to hiring women in C-suite leadership roles. Top senior executive officers with the letter C in their title (CEO, CFO, CIO, COO, CSO) lag behind on gender in all markets.

It’s a problem that’s not going to fix itself. Says L’Helias, “Companies need to expand their efforts to fix the leakage in the gender leadership pipeline if they aim to close the gender gap in those critical roles.”

Average % of women in leadership and management positions by region

Some sectors are leading the way

Sectors can and do change. Once a notorious “boys club,” the financial sector now has the largest number of companies that outperform LeaderXXchange’s median score. What gave? For one, L’Helias points out that the 2008 financial crisis created a crisis of confidence. Investors and regulators used their new leverage to focus on improving the industry’s governance, particularly the banking industry. Employees and clients were also adding pressure.

After massive layoffs, the sector had became less attractive to young recruits. Moreover, clients (institutional retail and high net worth) voiced their concern about the lack of gender diversity.  Finally, in the United States in particular, the financial industry was subject to a number of class action lawsuits for racial and gender discrimination.

Number of companies performing above the global average

by sector

Percentage of companies performing above the global average

Nonetheless, while the financial industry has made great strides, and exceeds the median score, few financial institutions land in the top 50. That’s because there is significant room for progress for the C-Suite.

Notably, utilities and manufacturing have also statistically outperformed LeaderXXchange’s median grade.  The sectors are fighting to attract and retain talent at a time of intense competition and new disruptive technologies.

“By creating cultures that are more inclusive and closing the gender gap, these industries are signaling to female candidates, who may not have thought of working in these sectors, that they are welcome,” says L’Helias.

“Perhaps that is what the data is telling us: companies that want or need the change – make the change.”

The LeaderXXchange Gender Diversity in Leadership ranking uses a proprietary methodology created by Sophie L’Helias, President of LeaderXXchange, an international corporate governance expert, experienced board director, former managing director of an activist hedge fund and international M&A attorney in New York and Paris.

LeaderXXchange is a change-driven organization that promotes diversity and sustainability in governance and leadership with investment methodologies and other solutions – most recently the Gender Diversity Exchange, the award-winning search engine dedicated to Gender Diversity in leadership.

The proprietary data used for the ranking is provided by Vigeo-Eiris, a global provider of environmental, social and governance (ESG) research to investors and companies. Based in Paris, with offices around the world, the Vigeo-Eiris team is composed of a diverse team of more than 200 experts from 28 countries dedicated to bringing high quality data.

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Women are increasingly driving the global economy. According to a 2009 Harvard Business Review article, women controlled $20 trillion in consumer spending each year. Morgan Stanley reports that women control $11.2 trillion of the United States’ investable assets, too — assets held in one’s bank account, stocks, bonds and certificates of deposit.

Furthermore, investing that takes environmental, social and governance — ESG — issues into account has grown in popularity as women seek more meaningful investment options than traditional investors have. Commenting on a recent surveyof high-net-worth individuals, Jackie VanderBrug, a senior vice president and investment strategist at U.S. Trust, said just over half of respondents expressed interest in social and environmental impacts of their investments. For women and millennials, that rate jumped to 73 percent, according to VanderBrug — suggesting that as women invest more, ESG investing could become the norm.

Increased market attention to social and environmental issues is helping these issues gain broader public recognition. But the most important thing we can do to maximize women’s influence on finance and sustainability is to place more women in positions of power in boardrooms and C-suites.

One study from the Haas School of Business at the University of California, Berkeley, that looked at ESG categories across more than 1,500 companies found that companies with more women on their boards were more likely to address and reduce environmental risk through actions such as measuring carbon emissions, avoiding biodiversity disturbance and investing in renewable energy.

At the executive level we see companies such as Estée Lauder Companies Inc. — where women make up close to one-third of the executive team — committed to managing and understanding environmental, social and economic impacts throughout their value and supply chain, focusing on energy, waste, recycling and workplace safety. In a message to stakeholders, Pamela Gill Alabaster, vice president of global corporate responsibility for Estée Lauder, wrote that the company is planning to implement new governance structures, develop climate change policies and weave sustainability across its brands. Alabaster went on to note that Estée Lauder is continuing to increase how it transparently communicates on progress with its stakeholders, a critical component of long-term corporate improvement.

Estée Lauder is not alone. A Barclay’s report in partnership with the Economist Intelligence Unit highlights that gender diversity — specifically, the presence of women in senior management — is a main indicator of a company’s commitment to ESG criteria.

Estée Lauder is also one of the leading companies on the Pax Ellevate Global Women’s Index Fund, headed by Sallie Krawcheck, former president of the Global Wealth & Investment Management division of Bank of America and a notable promoter of gender diversity in the workplace. Krawcheck is working to ensure that the positive influence of women within companies grows. The Pax Ellevate Global Women’s Index Fundis the first of its kind dedicated to companies highly rated for advancing women. Every company in the fund has at least one woman on the board and 99 percent have two or more, resulting in women holding 32 percent of total board positions and 25 percent in senior management — compared with worldwide averages of 12 percent and 11 percent, respectively.

According to Kathleen McQuiggan, senior vice president of global women’s strategies for investment firm Pax World Management LLC — part of a partnership forming Pax Ellevate Management LLC, which manages the Pax Ellevate Global Women’s Index Fund — “If you have more women on the board, you see more women in senior management. It’s a simple cause-and-effect scenario.”

That’s exactly what the Thirty Percent Coalition is trying to accomplish. The group of over 70 women’s organizations, institutional investors, corporate governance experts and others is committed to placing women in 30 percent of board seats across public companies by 2016. Sponsors of the coalition include big brands with big dollars, such as Avon, Wal-Mart and Prudential. Members include representatives from companies such as Trillium Asset Management, an ESG-focused investment management firm, and the Sustainability Group, a wealth management firm that centers on a commitment to sustainability and human dignity founded by Amy Domini, an investment advisor focused on ethical investing.

In 2014, for the third time, investors who support the 30 Percent Coalition — and who represent more than US$3 trillion in assets — sent letters to 100 prominent companies calling on them to boost the presence of women on their board. Efforts so far have resulted in about 20 major companies adding women to their boardrooms.

Meanwhile, it’s never been easier for consumers to support companies committed to gender diversity — and the ecological and social consciousness it brings with it. The BUY UP Index, for example, is an app that rates brands and the companies behind them based on their gender diversity in the boardroom, C-suite and workforce as well as on their philanthropy and how they market to women. Amy-Willard Cross, founder of the BUY UP Index, states, “It’s important to bring capital to women, or to women-owned companies, not just sell us stuff.”

As more women become embedded in high-level investment, executive positions and boardroom decision-making, the conversation is shifting toward one that incorporates sustainability as the new norm. Therefore, it’s critical that those with the ability to promote gender diversity in companies continue to do so. And it’s just as important for the rest of us to put pressure on them to recognize the benefits of gender diversity. As we do, we can help usher in a future where, as U.S. Trust’s Jason Baron puts it, “no discernible distinction will exist between investors in ESG and investors in general.”

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