Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 15 - Evidence - December 9, 2010

OTTAWA, Thursday, December 9, 2010

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill S-206, An Act to establish gender parity on the board of directors of certain corporations, financial institutions and parent Crown corporations, met this day at 10:30 a.m. to give consideration to the bill.

Senator Michael A. Meighen (Chair) in the chair.


The Chair: Welcome to this meeting of the Standing Senate Committee on Banking, Trade and Commerce.

Before we begin, I would like to get your approval, if it is all right; there are written presentations this morning and they are in both official languages with the exception of one from Catalyst Canada, which is in English only. Do I have permission to distribute it?

An Hon. Senator: Yes.

The Chair: I am Michael Meighen. I have the honour to chair this committee. I am a senator from Ontario. For the benefit of our witnesses, I will introduce the members of the committee here this morning.

The distinguished deputy chair of the committee is Senator Hervieux-Payette, from Quebec. We also have Senator Greene, from Nova Scotia; Senator Mockler, from New Brunswick; Senator Ataullahjan, from Ontario; Senator Plett, from Manitoba; Senator Kochhar, from Ontario; Senator Ringuette, from New Brunswick; Senator Harb, from Ontario; Senator Moore, from Nova Scotia; and Senator Massicotte, from Quebec.

Welcome to everyone. We have a tight schedule today. We have two hours and two different sets of witnesses.


We are going to examine Bill S-206. This bill requires that certain corporations and financial institutions establish gender parity on their board of directors. Among the designated entities, let us mention the publicly listed companies active in Canada, the banks, the insurance companies, the trust and loan companies, the cooperative credit associations and the parent Crown corporations named in Schedule II of the Financial Administration Act.

Bill S-206 was tabled during the second session of the 40th Parliament. It was debated at the stage of second reading and died on the Order Paper when Parliament was prorogued.


We initiated our consideration of this bill on June 16, 2010, when we heard from its sponsor, the deputy chair of the committee, Senator Hervieux-Payette.

Today we are privileged to receive testimony from two separate witness panels. In the first hour, we will hear from Ms. Deborah Gillis, Vice-President, Catalyst Canada Inc., and Ms. Nancy Peckford, Executive Director, Equal Voice.

Also joining us by video conference is Ms. Liv Monica B. Stubholt, Chief Executive Officer and member of the Board of Directors, Aker Clean Carbon.

Welcome to you all, and particularly to our distinguished guest from Norway. I hope you can hear us clearly. If you cannot, just wave your hand and ask us to speak more distinctly.

Deborah Gillis, Vice-President, Catalyst Canada Inc.: I am happy to start this important discussion. It is a distinct honour for me to be here today representing Catalyst Canada Inc., the leading non-profit organization working globally to advance women and business.

I would like to focus my comments this morning on the primary objective of Bill S-206, to establish gender parity on boards of directors of Canadian organizations. By drawing on Catalyst Canada Inc. research, recognized around the world as the gold standard on women in corporate leadership, I hope to provide some context for your deliberations.

Let me start with a very simple point: What is good for women is good for business. I say this because the issue of gender parity on boards is not driven simply by questions of fairness and equity. This is an issue that speaks directly to Canada's ability to compete and flourish in a global economy. How effectively Canadian businesses leverage diverse talent, starting with women, will be critical to our long-term competitiveness.

Consider that Catalyst Canada's 2007 study, The Bottom Line: Corporate Performance and Women's Representation on Boards, found that Fortune 500 companies with the highest representation of women directors, on average, significantly outperformed those with the lowest representation of women. Return on equity was 53 per cent higher in those companies; return on sales was 42 per cent higher; and return on invested capital was 66 per cent higher. Consider that more women in the boardrooms spark a virtuous cycle. Catalyst Canada Inc. research also discovered that having more women board directors predicts more women senior executives in the future, who, in turn, drive stronger financial performance.

Despite this compelling business case, women continue to be significantly underrepresented in Canadian boardrooms. According to the Catalyst Canada Inc. 2009 census of FP500 women board directors, women represent 14 per cent of board directors in the 500 largest companies in Canada. However, this top line number tells only part of the story. Public companies lag other company types in both the percentage of board seats held by women and the annual rate of change. Crown corporations represented on the FP500 lead the way at 29.1 per cent, followed by cooperatives at 20 per cent, and private companies at 16 per cent. In public companies, 10.3 per cent of directors are women, with close to 45 per cent of public companies in Canada having zero women directors.

For those who might think that hope is a strategy and argue that time will take care of the gender leadership gap in Canada, I point out that since Catalyst Canada Inc. began tracking women's representation on boards almost 10 years ago, women's representation has increased by 4.2 percentage points — an average of half a percentage point annually. There is only one conclusion to be drawn from this data: Unless something changes fundamentally to accelerate the pace of change, gender parity on Canadian boards will remain a pipedream for women and men who are committed to good corporate governance, improved financial performance and gender equity.

The central question for honourable senators, Canadian citizens, shareholders and business leaders to consider is: What instruments will most effectively bring about change? Catalyst Canada Inc. research, as I have cited, suggests that a decade of raising awareness, leadership from many prominent business leaders and organizations, and women knocking on the doors of boardrooms have had little impact. However, as we will hear today, the experience of Norway tells us that legislative quotas have definitely moved the needle in that country. Spain, Iceland and France are examples of countries following Norway's example and looking at legislated quotas.

Other countries, including the United Kingdom and Australia, have joined the United States in choosing mandatory disclosure and transparency on diversity policies for public companies. This is certainly an option or interim step for Canada to consider, avoiding protracted debates about the issue of quotas and focusing instead on the policies, practices and outcomes of the board selection process.

For Catalyst Canada Inc. two things are clear: Canada is trailing, not leading other countries in taking action on an issue that is central to the question of gender equity. At the end of the day, while the means to increase women's representation may vary, the key is that it gets done and gets done quickly. Until achieve parity in business leadership roles in Canada, they will be marginalized in every other arena. Quotas are one proven strategy to boost gender diversity at the top of organizations.

Thank you for your attention; I look forward to your questions.

Nancy Peckford, Executive Director, Equal Voice: Thank you for the opportunity to be here today.


It is a real pleasure to be here with you today. I am the executive director of Equal Voice, À voix égales.


Our mandate and mission is to promote women's advancement in the political sphere. You might wonder why I am here today. Certainly the considerations for Bill S-206 are very relevant to Equal Voice for many reasons, which Ms. Gillis touched upon.

Founded in 2001, Equal Voice has been advocating for the increase of women's representation at all levels of government for almost 10 years. We began in Toronto and now have chapters in six provinces across the country. We are growing. At this time, Equal Voice counts thousands of women and men among its supporters and members. As we enter our tenth anniversary year in 2011, Equal Voice is wholly committed to fostering a political culture among all parties and inspiring a dialogue with Canadians that advances the attraction and retention of women in the political sphere.

It will come as no surprise that our current global ranking is 51 per cent in terms of countries that evaluate and promote women's participation in the political sphere. As a consequence, the realities of women in the corporate sector and the business sector are very similar.

I distributed a postcard as a small cheat sheet of our numbers for the committee. The reverse side indicates that the provincial, municipal and federal levels of participation hover typically below 25 per cent. In terms of leadership positions, only two women currently occupy premierships in Canada, one of whom serves in an interim capacity and will not seek the leadership of her party. It remains to be seen whether we will continue to have a female premier in Newfoundland and Labrador.

As a consequence of these realities, it is important for Equal Voice to underscore that we have not attained something called critical mass. Critical mass is a number defined by global institutions, including the Inter- Parliamentary Union and the United Nations. It is a key threshold adopted by global institutions. Basically it means that until you have critical mass level, which is about one third or 30 per cent to 33 per cent, of women's representation, it is incredibly difficult for women to change the culture or the outcomes. This is why we are here today.

We have reviewed Bill S-206 with great interest. We regard it as a key structural change that will actively facilitate a sea change in women's participation on corporate boards. Aside from having the effect of considerably diversifying representation, we believe that the bill would serve to leverage the talents and skill sets of highly qualified and seasoned women, who often fly under the radar screens of many corporate entities. We think the bill could have the effect of inspiring better performance in the political realm.

While Equal Voice is pleased to have twice secured the commitment of Canada's federal political parties to work towards the nomination and election of higher numbers of women, change has been slow and sporadic in many respects. Just as Catalyst Canada Inc. has been advocating and knocking on doors for 10 years, so has Equal Voice. Our representation federally has shifted by 1 per cent such that 10 years ago we were just under 21 per cent and now we are just over 22 per cent.

Certainly, we are pleased by some recent successes, including the election of one third women at the municipal level in Toronto; the record number of women who ran in the 2008 federal election — slightly over 28 per cent of all federal candidates; and the 2010 New Brunswick election. We recognize that too often we rely on the goodwill and commitment of leaders and parties who manage competing demands and a constantly shifting set of priorities.

One example we draw upon in terms of considering the merits of this bill is where we look at nomination processes across the country. Our evidence suggests that where concerted efforts are made to explicitly identify potential women and other underrepresented groups as possible candidates before authorizing a riding association to proceed with its nomination, as is the case currently with the federal New Democrats, the outcomes are higher both in terms of the number of women running and the number of women winning.

This speaks to the power of a more thorough, transparent nominations process, where the identification of women and other groups who are often incredibly highly qualified is prioritized. The need for such transparency is also one of the benefits, or one of the outcomes of the proposed legislation, and may speak to some of the current challenges in recruiting and retaining women on corporate boards.

It is with this in mind that we are here to reflect on the merits of this bill, and I look forward to hearing from our colleague who is currently in Norway. Equal Voice had the pleasure of co-organizing an event with the Norwegian embassy, where we had the benefit of our colleague's insights into the impact of that legislation. I think she will enrich our discussion considerably.

The Chair: As a born and bred Quebecer, I cannot help but notice that you do not have a chapter in Quebec. Quebec's cabinet is over 50 per cent women, and I believe the Crown corporations in Quebec are over 50 per cent women. I hope that is not a result of not having a chapter there. If you had one there, maybe it would be 75 per cent.

Ms. Peckford: In the interest of respecting Quebec's distinctiveness, we have a partnership with Quebec where we decided not to establish a chapter. There are a couple of incredibly credible leading organizations who are doing good work. We partner with them strategically, but at this point, we did not feel a chapter in Quebec was necessary.

Liv Monica B. Stubholt, Chief Executive Officer and member of the Board of Directors, Aker Clean Carbon: Thank you very much for inviting me to submit some comments to the issue at hand in the committee.

I had the chance to join the conference that was organized by the Norwegian embassy and the business school in Toronto. I enjoyed the occasion to present some anecdotal evidence from Norway, from my background, having been invited to join the board of directors both before and after the introduction of the Norwegian legislation, which has been in force since 2008.

I concur with the views that have been presented by the previous speakers as to the hopes one may justifiably attach to time resolving the issue of too few women on the boards. That is taking too long to be a way of action that can be defended in any political way, in my opinion.

We experienced that in Norway when the then government said to industry and business leaders that we will introduce quota requirements by way of statute unless you mend your ways. It was said that if you do so, then we will not need to introduce legislation. Despite a lot of statements of goodwill, the changes were very few and the increase in women's representation on the boards of the larger companies was marginal.

Legislation was then introduced, as per the warning given. As a result, the situation in Norway today is that very few, if any, companies covered by the legislation do not comply with the legislation. The legislation has sanction provisions, whereby non-compliance may lead to the enforced dissolution of the company.

My main point to the committee is the following: The introduction of the legislation has improved the quality of the recruitment process to the boards in general. To put it in a rhetorical way, the legislation requiring female participation has brought us not only more women, but many better men as well.

Prior to the legislation, the recruitment process to boards was confined in practice to the group of people and to the environments well known to the existing board members and/or the nomination committees. Indeed, many companies did not have a proper nomination committee. The recruitment process was informal and it was not compliant with a professional recruitment process.

Including requirements for the number of women to join the board forced the hand of those working the recruitment process to become more professionalized to be able to muster proficient and relevant candidates. That meant they were looking further and broader. They were looking not only to business — for instance, CEOs of other companies — they looked further, into NGOs, academic and cultural institutions to find leadership talent that could be included in the board in question.

That meant that we presently have much more diversified boards, not only by way of having more women, but we are also recruiting men from a broader group of potential companies and institutions to improve the talent and leadership of a company. Furthermore, we have seen that in Norway, we are recruiting more people from our neighbouring countries, both men and women. This is a strong advantage in age of globalized business. Norwegian boards were very homogenous previously. Now, by way of looking for good women, we are also finding other men than what we used to find — for instance, by looking to our Scandinavian neighbours or to other European countries. Therefore, we have achieved more diversified and more international boards. This is important to any country with an open and international economy, such as Canada and Norway.

I know that many of the arguments in this type of proposal centre on fairness and equity; that is a given, in my book. It does not make sense not to take advantage of the 50 per cent talent that any population can provide.

It has been a very positive surprise that we have achieved near parity. I say "near parity" because I have taken note of the fact that the present proposal proposes 50 per cent, while Norway has introduced legislation for 40 per cent. There is no logical justification for that; 50 per cent is the only logical proposal. However, our near gender parity has produced more professional boards.

My final comment is with regard to an argument that I have read and heard, both in our country and in other countries looking into this issue, which is whether women act differently and/or better as board members than men. I think there is very little justification for that claim, although on an anecdotal basis, one could perhaps notice a certain increased openness — perhaps a lower threshold with regard to putting possibly stupid questions that are very often helpful in providing illuminating answers. I think perhaps women are less afraid of asking a question that may be interpreted as lack of knowledge because we know that the answers will get us where we want to go, which is to understand the issue at hand.

I view that as a supporting argument. I would not consider that as a driver in introducing legislation. Indeed, it is also not necessary. It is a positive added benefit, but the driver for supporting that legislation is that, in this age, requiring extremely professional boards with a wide variety of backgrounds to assess risks properly, we need women to be able to do that. They do not come in sufficient numbers unless you introduce legislation, if we are to look at this in an empirical way.

The Chair: Thank you for your excellent presentation. You may have said this; forgive me if I missed it. Does your legislation cover all publicly incorporated companies in Norway or just state companies?

Ms. Stubholt: I did not address that subject. The chair is paying perfect attention. The legislation in Norway does not cover all companies; it only covers the publicly listed companies and other bigger companies that are set up so they may be listed. It is according to the duality that is prevalent through all European Union and EEA countries, i.e., that you have the companies that are listed or could be listed, and then you have the SME-tied countries, meaning the Norwegian legislation only covers the big companies, including companies that are owned privately.

The Chair: They could be state companies as well as private companies, as long as they are big companies; is that right?

Ms. Stubholt: That is right.

The Chair: I presume the law says 40 per cent. You could have 50 per cent, though. The 40 per cent is a floor, is it not?

Ms. Stubholt: That is correct.

The Chair: I was talking to one of your colleagues, the ambassador from Finland, last night, who told me they have a 60-40 rule.

Ms. Stubholt: The 40 per cent is only a floor.

Senator Kochhar: Thank you, witnesses. You have done a remarkable job.

Ms. Gillis, you said that what is good for women is good for business. That was in your opening statement. I think you are slightly wrong. I would say that what is good for women is good for men.

In my opinion, I do not think you can legislate anything like that. You can encourage and educate. Let us look at some of the statistics. In the universities, 57.5 per cent of the people graduating are women and 42.5 per cent are men. Among women and men aged 25 to 34, 33 per cent of the women had a university degree in Canada compared to 25 per cent of the men. Women have outnumbered men in the public service since 1999. In 1983, women had less than 5 per cent of the executive positions, and now 43 per cent of executives are women.

It troubles me. If you legislate fifty-fifty, take the scenario that there are 12 people on the board, six men and six women, and one man retires. When they interview someone for that position, if the woman is more capable than the man, will you tell me not to get the woman on the board because it will create a gender inequality? I am troubled by that. Three of the best prime ministers of different countries — Margaret Thatcher, Indira Gandhi, and Benazir Bhutto — did outstanding jobs for their country. We realize women are superior in many ways to men. However, you cannot legislate it. You have to let nature take care of it. You encourage their education; you encourage them to get into business; you encourage them to run in politics, but you cannot fix quotas.

In the countries where there are fixed quotas, such as in India, giving more awards to people who are lower cast has always failed and the average calibre of the people on the board was weakened because you have not brought in the people most suitable to do the job.

I want the witnesses' comments on what I have said.

Ms. Gillis: Thank you for further outlining part of the important business case for why there is real importance attached to advancing women to leadership. You outlined some of the statistics in terms of women's representation in the labour force, women as graduates of universities. Women are a critical part of the economy and have an important role to play. However, when we look at the statistics, women's advancement into leadership roles, whether it is in business, as I have described, or in the political realm, as Ms. Peckford has described, has moved slowly. The key for us as an organization is that we accelerate the pace of change and that we get this done, because it is a business imperative for the country.

The means of getting it done may vary, and we have heard many different approaches taken by countries around the world. I hope to see Canada step forward and take the same kind of proactive approach. As I said earlier, hope is not a strategy. Time will not take care of this. We have seen that for a long time. The method of getting there is something that we can talk about and it varies, but we need to get this done, and get it done quickly, because Canada is falling behind.

The comment we heard earlier from the Norway experience, where Norwegian companies looked around the world to other countries to recruit qualified women directors, when we piece together the number of countries around the world that are proactively looking at the recruitment of women, we have to assume that many of those countries will tap into the many talented women who are here in Canada and are looking for the opportunity for board service. My concern is that Canadian organizations will lose out on the opportunity to tap into that female talent.

Ms. Stubholt: I think the senator's concern with regard to culture is a valid one; however, I believe the benefit of the legislation outweighs the concerns. There are no legislative measures that are 100 per cent free of flaw. On balance, it is worth it.

Ms. Peckford: I would add that globally our experience demonstrates that quotas are an incredibly effective strategy and that where quotas have been introduced, the participation of women in those countries has skyrocketed and has also fostered a culture where more women are both cultivated to be leaders and in fact recognized as leaders. There are countries in Africa, for example, where females are at the helm, and those tend to be countries where quotas are in place. I would concur with both my panellists.

Senator Plett: Ms. Gillis, further to Senator Kochhar's comments, I have found that overwhelmingly the top women who have been asked to serve, elected to serve, and so on, have told me that they hoped they would be elected or appointed because of their talent, not because of their gender. This is my experience; it is not scientific evidence. I have learned this from women from corporate boards, government boards and church boards.

As a shareholder in a company, if people are hiring for board appointments and for executive positions, I would be quite upset if they hired based on gender. I would want them to hire the best available person for the job.

You said that statistics show that when women have been dominant or when there have been a number of women on boards that these companies do better financially. I would be equally upset if a man were hired at the expense of profits for that company.

Will companies not naturally want to hire women if it is proven that the financial statement at the end of the year is better with more women on the board? I imagine that shareholders would want that. Would that not naturally happen if you can prove statistically that women do better than men?

Ms. Gillis: Let me start by agreeing with you that many of the senior women directors in Canada I talk to say that they hope to be recognized for their talent and their contribution. Many of them have concerns about being considered a token appointment to a board and want to be there for their qualifications.

I agree with you as well that board, every organization, and every institution wants to have the most qualified, talented people sitting around decision-making tables and supporting that organization, absolutely no question. However, if we look at the pace of change that I outlined in my statistics, we have seen that certainly women and minorities have not advanced into leadership roles as we might have expected. If you look at the many barriers that exist to women's advancement, it helps to explain why that is.

For a long time, the recruitment of directors was drawn from a pool of CEOs. That is the place where networks are the tightest and there are the fewest numbers of women. Looking beyond to a broader pool of talent gives the opportunity to tap into those experienced women to which you referred. Women do not have the same access to networks, mentors and sponsors and relationships that are often critical in the process of how one is recruited to become a director. Talented women do not have the same opportunity to be identified and tapped into serving on boards.

Of course, shareholders want to have the most qualified people leading and running their organizations, and I would argue that shareholders also would like to see their organizations reflect the marketplace that they serve. When women represent 50 per cent of the population, influence the majority of purchasing decisions — much research says it is 80 per cent or higher — and are the majority of employees in many organizations, reflecting the marketplace also becomes a key consideration for shareholders to consider.

Senator Plett: I know a number of women who are part of Equal Voice. I have spoken with many of them. I think men share your enthusiasm about having women on boards, if possible. Does Equal Voice have any men on their board?

Ms. Peckford: Equal Voice is an organization of both women and men, and certainly, in local chapter executives throughout the country there are some men on our boards. At the national level at the current time there are not. Obviously, as the organization evolves, we expect more significant engagement from men.

Senator Hervieux-Payette: You can apply, senator.

Ms. Peckford: Yes, we welcome nominations. We have a transparent call for nominations.

Senator Plett: Thank you. We will talk later.

I am more familiar with the political side of things, and that is what you spoke about, Ms. Peckford. I have tried to recruit women. I spent seven years as a president of one political organization; I am a campaign chair in another one, and I think it is tremendously important to have good, qualified women running. I am so happy that Manitoba is the leading province in having women serve in government.

However, I also know the problems in trying to get women to run for nomination because they are not the nicest thing politically. You mentioned New Brunswick. I was active in their election campaign, and a wonderful friend was elected and is a high-profile cabinet minister in the new government. That is great. She wanted to be elected because of her capabilities, not because of her gender.

How can we get women to run in nomination races? We are trying. We are out there every day, and I think other political parties are doing the same thing. Women are not anxious to run.

I will ask our friend from Norway, and this goes to the same question I had for Equal Voice, does Norway also require 40 per cent men on their boards as they do 40 per cent women?

Ms. Stubholt: The Norwegian legislation does not require 40 per cent men on the boards. Today we see that very few of the companies covered by the legislation have more than 40 per cent women. I believe the 40 per cent was translated from the political practice we have had in Norwegian political parties for at least 20 years, and that is that at least 40 per cent of the candidates on any ticket are women. This is not law; this is simple political practice. It would not be accepted to have less than 40 per cent women or men on any ticket. That is a translation from the political environment into legislation.

Ms. Peckford: I do not want to distract from the current discussion, which is on Bill S-206. I would say, and I think why we are here today and take an interest in this subject is that there are many qualified women flying under the radar screen, of political parties as well for similar reasons, in terms of networks, access to resources, being an integral part of riding associations and not necessarily being identified.

We acknowledge that all parties in Canada are working incredibly hard to attract more women. It is not for a lack of trying. Again, I think the hope strategy, as Ms. Gillis has underscored, is not working. Our projection suggests, as is the case for Catalyst; it could take another century to reach parity. We are at a point in our country's history where both in the private sector, the corporate world and the political world we can do better. For Canada to rank so poorly, both politically and in the corporate sector, does not make sense to me. It does not compute.

I support this initiative strategically because I think it allows for the best outcome as quickly as possible, and I think the results from other countries tell the tale.

Senator Ringuette: You have probably distinguished that many of my colleagues believe in "free market," and that belief is in whatever issues we discuss. They do not believe in government regulations. I welcome this bill because the facts are there.

I think one of the most impressive things is that the legislation in Norway gave these companies a tool to a definite and active recruitment process instead of the almost incestuous, backroom, old-boys' network.

The number one effect of your legislation has been to force these companies to get on board and have a proper human resources and management system for recruitment.

Ms. Stubholt: It is true that the legislation introduced and professionalized a significantly improved recruitment process. I have heard from a number of other CEOs of the main persuasion, who were not persuaded by the initial proposal, who acknowledge that the recruitment process has improved. They are now happy to benefit from that improved process. They see that you are looking for talent without looking down on a too-specific requirement list too early.

It does not mean we are lowering our quality requirements; we are simply casting our net wider, and it works. I have yet to hear anyone say that the qualities of the female board members we have now are inferior. I am completely foreign to the idea of being a token female. We are simply fighting against what has been positive, affirmative action for men for centuries. It is a completely foreign concept.

Senator Greene: Excuse my voice this morning. I was at a rock 'n' roll event last night and my voice is hoarse.

Let us look at graduate schools for a moment. As we know, there is a lot of information in both in Canada and in the United States shows that women are doing very well in graduate school: Law school, business school, the sciences, et cetera. In many universities in North America, the graduates for women exceed 50 per cent of all graduates.

Many of these institutions, of course, are publicly funded, either in whole or in part. Yet there is no affirmative action in any of these institutions, or many of them, with regard to enrolment or the like.

It seems to me that because these institutions are publicly funded, if there were a genuine interest in quotas, they should be the places where they be done because they are publicly funded by taxpayers. However, that is not the case. Women and girls are doing extraordinarily well, and I am lucky to have a daughter who is doing well.

We have seen in the United States the benefits of affirmative action 20 or 30 years ago. That was again through taxpayer-funded institutions like schools. Now we are moving into the realm of the private sector. In this complicated, fragile economic world, it seems to me that businesses and corporations need the maximum flexibility to have the very best people they can choose, whether they are women or men. The business leaders I know want the best people on their boards. They would be offended to be told that they are not attracting the best people.

Ms. Gillis: I agree with you that this is an issue of ensuring that the very best talent is available to organizations. When I see that 14 per cent of board directors are women in Canada — and that number is about 10 per cent for public company boards — that says to me we are not tapping into the full range of talent that is available to lead organizations.

I have one comment on women graduating from universities. Recent research from Catalyst done on a global basis looked at women graduates of the leading business schools around the world. That research found that in the first position, post-M.B.A., women start at a lower level, earn on average $4,600 less than their male colleagues and that gap never closes over the course of their careers unless they start in their first job post-M.B.A. in a mid-management position. Therefore, yes, while women are doing very well coming out of university and have the talents and skills to contribute to organizations, they are not getting the same opportunity to advance into critical leadership roles in organizations.

Senator Massicotte: Thank you for being with us.

I need your help. I will declare my prejudice, if you wish. I think there is an old boys' network because you have a tendency to choose people with whom you are comfortable. I acknowledge that.

Senator Greene: And a girls' network, too.

Senator Massicotte: I am sure there is.

I am not adverse to legislation if it gets us to a better society. However, I must admit the social argument and also the "soft" arguments do not go far with me. I buy into your argument that about what delivers the most competitive, best decisions of the board, and it has to be substantive. Let me summarize what I see. I will give you some facts and you can help me put it all together, if you wish.

I read your report, which shows that women on a board deliver better results. I would not mind knowing if it is multi-year or single year. I also think that Forbes has come out with a study showing, again, that women on boards deliver better results. You also have a major consulting firm. I forget the name. Is it McKinsey?

Ms. Gillis: Yes.

Senator Massicotte: I would like to know more about McKinsey.

Then I look at the Norway experience. I understand that when a woman got on the board, the stock price went down on many occasions. It may be incidental. I read recently that despite your 40 per cent number of women in upper management — because you would have thought it would help get women in upper management — there has been no significant progress there. Despite the fact that you have many women on boards, the percentage has not increased dramatically. I am trying to put all this together. What does it tell me, factually? Can someone help me there?

Ms. Gillis: You are right when you summarize Catalyst research. Research from many organizations has shown that having more women on boards is good for the financial performance of organizations. As I pointed out in my research from Catalyst, more women on boards predicts more female senior executive officers five years later, and more female senior executive officers also drives stronger financial performance.

There is a positive, virtuous circle that is good for the bottom line of organizations that happens, driven in large part by women on boards.

The Chair: Perhaps you could add something, Ms. Stubholt.

Ms. Stubholt: Of course. I am not familiar with any example of stock price going down because of women joining the board. I do not rule out that it has happened, or on a temporary basis, but I am not familiar with that example. It is certainly not a significant or lasting effect. I do not think it is a strong argument against doing what would otherwise be right, as I hear you have an open mind to.

With regard to the issue of bringing that experience into executive positions, it is true that it has been an assumption that it would help in having women qualify for CEO or top management positions. I think that is likely to happen. Certainly, I have placed weight on that in some of the recruitments I have done. However, the senator should keep in mind that our legislation has been in force only two and a half years, and the process to reach the upper echelons of a company and the openings that will be there in the course of two years are not sufficient to say that that is not happening. We also need to look at the experience being built over a year or two or three to see whether that will mature into a quicker promotion or more promotional opportunities for women as if they did not have that board experience. I think it is too early to say whether that effect will be there.

Senator Massicotte: Is your analysis multi-year?

Ms. Gillis: Yes.

Senator Massicotte: You have done that study frequently, and it gets the same results?

Ms. Gillis: The study was done one year but looked at data over several years.

Senator Massicotte: Can you summarize the Forbes conclusion as well as the McKinsey conclusions?

Ms. Gillis: I do not have their specific data in front of me to give you their numbers, but again, the same issue and finding was true in their research: more women on boards and leadership meant stronger financial performance.

Senator Massicotte: It was a good percentage.

Senator Moore: Do you advocate for the placement of women from visible minorities within Canada, and do your records include such statistics?

Ms. Gillis: That is a good question, senator. Would we advocate and like to see more visible minority women on boards? Absolutely. Catalyst has done extensive research looking at the experience of visible minorities and leadership in Canada, and, frankly, there is not good data available in terms of visible minority representation on boards. Most organizations do not collect that data, and because employees or directors, for example, would not be asked to self identify as a visible minority, it is very difficult to get that. Our data focuses on women generally and does not specify the representation of women visible minorities.

Senator Moore: Do you encourage that, given the makeup of Canada and the mosaic of our people?

Ms. Gillis: Absolutely. I would argue it is critical to Canada's competitiveness.

The Chair: Is diversity in terms of board representation other than gender diversity an issue of concern in Norway?

Ms. Stubholt: Norway does not have the mosaic of population that Canada has. That makes it even more important that we do get representation on boards from our minorities. That is not part of the Norwegian legislation. It is my understanding that it may be conducive to look into that based on the experiences we glean from the one element or one dimension of diversity that is part of a gender parity effort, but that has not been introduced as of yet.

Senator Oliver: I commend Catalyst for the excellent work you do now and have been doing for a long time. You are an excellent organization. I was delighted, Ms. Gillis, that you said, one "Women and minorities have not advanced into the leadership roles as we would have expected." As you know, 25 years ago, the Government of Canada, as a matter of national public policy, said we recognize that there are four target groups in need of special measures. This legislation is what I call 25 per cent legislation because it does not deal with those who need it, and that is the disabled, Aboriginal and visible minorities. The fourth category was women.

I would like to see legislation that deals with Aboriginals, the disabled and others. I am disappointed that visible minorities have not been included. I think that goes to the very weakness of this legislation. The Government of Canada said these are target groups that need special measures and protection by way of legislation, yet it has been expressly excluded. I find that sad.

Ms. Gillis: Catalyst certainly recognized your very good work on this topic for a long time and agrees with many of the comments that you have just made.

The bottom line is that diversity that represents the marketplace and represents the Canadian population is good for decision making around any table. We see that reflected here in the conversation that we are having today. We want to see the boardrooms of the nation represent the market place and the population of Canada. That will make them stronger, and it will make us stronger as a country.

Senator Hervieux-Payette: Senator Oliver, after our first meeting, I met with the legislative expert working for us in Parliament and asked about the possibility of an amendment. He told me that this has to be done with a different piece of legislation. We could not incorporate it because we have to stay within the scope of the legislation, which is parity of women. If you want to sponsor a bill introducing diversity, I would gladly support it. As far as I am concerned, it is a valuable item, and it is both for men and women. It does not have any restriction.

The parity is according to the social fabric of the population. With diversity, I think we would need to have a flexible rule. We cannot say 2 per cent of this or 3 per cent of that and 5 per cent of this. That would lead to chaos. We could have the principle included, as in the United States. The rule is that the board has to at least address this question. It is not mandatory, but, as far as I am concerned, I would not be shy about supporting such a piece of legislation.

The Chair: That will happen outside this context. We are now well beyond our time, so I will have to conclude. Ms. Gillis and Ms. Peckford, I know you would like to say something, but I have to cut it off because otherwise it will be unfair to our next panel. If you want to chat with anyone here after we conclude, please do so. If either of you have anything to add, please send it in writing to our clerk.

To your distinguished guest from Norway, thank you for taking the time to be with us. You have a distinguished record in your own right, and you have contributed meaningfully to the progress in your country. We appreciate the insights you have brought to our deliberations here today.


For the second hour today, we welcome a panel including Ms. Poonam Puri, Associate Professor of Law at York University, Ms. Marie-Soleil Tremblay, Professor at the École nationale d'administration publique and Mr. Richard Leblanc, Professor of Law, Governance and Ethics, at York University.


Poonam Puri, Associate Professor of Law, Osgoode Hall Law School and Co-Director of the Hennick Centre for Business and Law, York University, as an individual: We have a PowerPoint presentation that we have distributed and which is also up on the screen.

I am delighted and honoured to be appearing before the Standing Senate Committee on Banking, Trade and Commerce. Bill S-206 is an important piece of proposed legislation. I am here with my colleague Professor Richard Leblanc. We prepared this presentation together for your reference. Our detailed biographies are on pages 2 and 3 of the PowerPoint materials. Both Professor Leblanc and I teach and write in the area of corporate governance and boards of directors.

I have the privilege of serving on the board of directors of the Greater Toronto Airports Authority, also known as Pearson, and I am currently Chair of the Corporate Governance and Nominating Committee. I also serve on the board of governors of Mount Sinai Hospital in Toronto.

I would like to focus on three areas and Professor Leblanc will focus on others. The first area I will focus on is the financial crisis and the difference that better gender representation could have made. The second area will be the experience of other jurisdictions with regulation of gender representation on corporate boards, and the third will be the soundness of Bill S-206, which is before you.

We know from the data that the boards and the senior ranks of most large public companies look rather homogeneous. The previous panel shared those opinions. The data is clear. Of all public companies in Canada, it has been constant at around 9 per cent to 10 per cent. In the United States, it is around 11 per cent. In the United Kingdom, Australia and New Zealand it ranges from 6 per cent to 8 per cent. In South Africa, interestingly, it is higher at 17 per cent.

A lack of diversity on corporate boards can lead to groupthink, which is a dangerous phenomenon. It is something we want to avoid from a public policy perspective.

The global financial crisis had many causes that were complex, interrelated and interdependent. We know many of the causes: excessive risk taking, conflicts of interest, a lack of knowledge and, in some cases, simple greed.

Let me ask a question that has been asked by others: What if Lehman Brothers had been Lehman Sisters? Would a broader range of perspectives and backgrounds have resulted in better decisions and outcomes? Does diversity lead to a better understanding of the marketplace as the market itself has become more diverse? Does diversity increase creativity and innovation? Does it lead to more effective problem solving?

The academic and scholarly literature suggests that greater diversity does lead to better board effectiveness and greater diversity leads to better attendance of both men and women on boards. The evidence also suggests that women are more likely to sit on monitoring committees such as audit, governance and nominating. Scholarship also suggests that gender-diverse boards are more likely to replace non-performing CEOs. Studies also show that gender-diverse boards have more equity-based pay for directors so that directors have more of a stake in the game.

It is interesting that it is not the case that women are willing to take less risk. In fact, the issue is not that in the context of the global financial crisis women would necessarily have taken less risk; it is just that perhaps there would have been more views at the table and better processes in terms of decision making. At a minimum, let us consider whether Lehman Brothers would have been better off as Lehman Brothers and Sisters.

Second, governments and regulators around the world are pushing for better nomination and diversity practices. In the last session, you heard a number of different examples. There are generally two approaches. One is the disclosure approach, which I would call the softer approach. The other is the quota or harder law approach. The U.S. has the Securities and Exchange Commission mandating disclosure of diversity plans of all publicly listed companies.

Alternatively, Sweden has imposed a 25 per cent gender quota, Norway a 40 per cent gender quota, Spain a 40 per cent gender quota, and France a 40 per cent gender quota. Similar laws are currently being debated in Belgium, Germany and the Netherlands.

In Norway, before the quota in 2002 there were 6 per cent women on public company boards. There are now 45 per cent women on average. Initial reactions to the Norway legislation were negative all around, including criticism such as women have no time and we do not know where to find them. Eight years later, as a nation Norway has seen a huge increase in its competence and experience base of all board members, as the previous expert also indicated. Chairs of boards are happy with the changes. Finding talent was not a problem, and there are new, more rigorous recruiting and nomination processes in boards in Norway. In short, it is business as usual in Norway.

Third, Bill S-206 is an important piece of legislation. I had an opportunity to review earlier versions of it for the Senate Law Clerk's office. I believe this is a technically sound piece of proposed legislation that works with existing corporate law, banking law and insurance law.

In addition, while Norway's legislation would compel the dissolution of a company, the enforcement mechanism in this bill is, I think, much less draconian and much more proportionate in that it creates lesser sanctions if there is non- compliance with the rule, and that is an important point. We do not want to overdo it.

Also, under the bill, companies are given reasonable lead time to put into place the practices and the procedures, the governance and nominating procedures, so that they can comply with the proposed rules and there will not be a shortage of qualified people to meet the new rules. There will be years to allow for a proper process. As well, under this proposed legislation the minister has discretion to allow a company to have an extension of time to meet the quota if necessary.

In conclusion, I think this legislation is sound. It is measured and I think it is technically competent.


Marie-Soleil Tremblay, Professor, École nationale d'administration publique (ENAP), as an individual: Mr. Chair, I want first to thank you for this opportunity to contribute to this important debate on gender parity on boards of directors. My objective today is to share with you my academic point of view and the results of my research in the field of corporate governance.


Recent corporate governance scandals and the financial crisis that followed have led us to question the composition of corporate boards and their ability to address issues of business ethics and accountability. Excessive compensation has also been tied to the absence of cultural diversity in the boardroom. We need board members who can suggest new ways of tackling problems and who reject the groupthink that may have contributed to the challenges that we face.

In the same line of thought, Harvard professor Rosabeth Kanter recently tied the higher inclusion of women on boards with a reduction of self-interested greed, leading to less imprudent risk taking and more solid asset values, translating to healthier balance sheets.

Academics have long followed board composition, including the slow advancement of women to corporate boards. Arguments for greater diversity in boardroom representation have been explored within the literature following two approaches. The first is based on economic arguments and considers that firms who fail to select the most able candidates actually damage their financial performance. The second approach rests upon a moral viewpoint, arguing that it is wrong for women to be excluded from corporate boards on the grounds of gender. The business case for board diversity is clear, from economic and moral viewpoints.

Where does Canada stand and what stands in our way? In 2009, as you have heard, women held 14 per cent of board seats, which represents an increase of 1 percentage point since 2007. More than 40 per cent of companies still have no women directors. It seems that reliance on the informal old boys' networks continues to be a significant factor in the recruitment of new board directors.

Upon passing this bill, Canada will follow countries such Norway, Spain and Iceland, which have implemented 40 per cent female representation quotas for publicly traded companies. My attention as a researcher turned to women on corporate boards following Quebec's presentation of Bill 53 in December 2006. The bill required that boards of directors of its most important enterprises include an equal number of women and men within a five-year span. The nominations that followed quickly led to a 66 per cent increase in the number of women on boards. I interviewed many board members, both men and women, and I would like to share with you a few of my findings to contribute to tearing down the obstacles that stand in the way of this bill.

While the thought of a board nomination resulting from biological imperatives was perceived as offensive by 88 per cent of the people that I interviewed, most agreed that board parity regulation was necessary to accelerate a stagnant trend. They were frustrated by the idea that the glass ceiling had not been broken naturally. What you are feeling, we have seen in Quebec also.

Considering that resistance to change is normal and that groups have a tendency naturally to enlist people similar to themselves and that some competent men may lose their seat on a board as a result of this bill, we need to step away from individual considerations and recognize this bill as a necessity to change mentalities and attitudes. This process is essential to a full recognition of women's place in society. A common resistance mechanism that I would like to address is the idea that board parity legislation will lead to less competent board members.

Board competence in today's business is grounded in much more than experience as a former CEO. We will see an important pool of skilled candidates if we learn to look elsewhere. For example, there are 60,000 female professional accountants in Canada, Chartered Accountants, Certified General Accountants and Certified Management Accountants; 20,000 lawyers are women; over 16,000 are engineers; and thousands of women are university professors and actuaries. All of these women have extensive knowledge; most have considerable experience; and many would gladly serve on boards if they were approached.

Women have less linear career paths than their masculine counterparts. However, their different life experiences were reported to be beneficial for boards because they contribute to the richness of debates. As a possible effect of childbearing, women do not have the same opportunities to work on their social networks that men have. As a result, they are less often considered for board positions. Parity legislation urges nomination committees to broaden their horizons and reconstruct the image we have of a typical board member, as you have seen in the picture shown by my colleague.

While most of the board members I interviewed agreed that women are more analytical and show more preparation for board meetings, new boardroom dynamics were not otherwise redefined in gender terms. This means that board parity in Quebec did not cause a dramatic break, but rather was viewed as a part of the modernization of boardrooms initiated by bill 52-110 in 2003. Women brought their professional expertise to the table rather than radical feminist viewpoints.

I agree that in an ideal world, parity would be achieved without legal intervention. However, considering the current trend and for reasons mentioned above, this is not likely to happen before several decades without the adoption of Bill S-206. I recognize that it takes courage to promote social values of equality and initiate transformations that diffuse power. I congratulate you for stepping up.

Richard Leblanc, Associate Professor, Law, Governance and Ethics, York University, as an individual: Good morning. I am Mr. Leblanc, an associate professor at the School of Administrative Studies at York University. My research interest focuses on the effectiveness of boards of directors. I also advise significantly publicly listed companies in Canada. I am pleased to appear before you today for this important and timely meeting. My remarks include addressing the progress that has been made in women becoming members of boards of directors of significant Canadian companies. My remarks will also address four arguments that may be levelled and have been levelled thus far, not only against this bill but also on regulatory oversight of the gender diversity of boards of directors in particular. The four arguments are as follows: First, market forces should prevail; second, the less qualified director arguments; third, only a CEO can be an effective director argument; and fourth, the business case for women on boards argument. I will conclude my remarks with reference to progress other jurisdictions have made in addressing board room diversity since the global financial crisis.

The progress in placing women on boards of directors in Canada has been inadequate. Depending on the survey, the percentage of women on boards of directors of large listed companies has tended to fluctuate between 8 per cent and 13 per cent. By and large, these figures have not changed much over the last 20 or more years despite the ranks of women graduating from universities, women working in senior management positions and director programs now focusing on recruiting women. Understandably, women are frustrated and feel shut out.

I will address the argument against this bill and gender diversity on boards in general. On the first argument that market forces should prevail, it is incorrect to be of the view that the market alone is adequate to ensure sufficient representation of women of boards of directors. Free markets consist of buyers and sellers, the freedom to contract, equality of bargaining power, and complete information. In the case of women on boards and director nomination and election more broadly, the present system is largely self-selecting and opaque. In theory, shareholders of widely held companies elect directors. In reality, shareholders have little real power to elect directors to boards; hence, what is known as proxy access in the U.S., a modest proposal is intended to give shareholders owning 3 per cent of a company's equity over a three-year period the opportunity to nominate up to 25 per cent of the company's board for an uncontested director election. To claim that women have equal opportunity and power to nominate themselves as "sellers" to a board as a "buyer," when shareholders do not have that power at present, is to acknowledge that the market for corporate directors is not free but is stacked in favour of incumbent boards and senior management. There is precedent now for regulators stepping in to cure market imperfections.

The second argument is the less qualified director argument, which has been mentioned by a senator to the previous panel. It is both incorrect and unsupported by evidence to be of the view that requiring a company to recruit women would result in less qualified directors. This spurious argument is unsupported by empirical data and is demeaning to women. The argument that ought to be advanced is actually the opposite, namely that not ensuring sufficient representation of women on boards would be to compromise full access to a Canadian and global talent pool and impair the competitiveness of Canadian companies.

Quebec, under the act respecting governance of state-owned enterprises, is an example of ensuring parity of women and effective corporate governance. I am unaware that the governance or competitiveness of Quebec organizations has suffered as a result of the presence of women on boards. I applaud the leadership of the premier of Quebec for advancing and supporting this law.

The third argument is only a CEO can be an effective director. It is incorrect to be of the view that women need first be a sitting CEO before she can be regarded as qualified to sit on a board. To bootstrap gender diversity with CEO experience in this fashion, which is the consequence of companies according primacy to a CEO position as a condition precedent for directorship, is to nullify the intent and advantage of gender diversity.

Based on my research, in 2005, I advised that the Ontario Securities Commission institute a competency-based recruiting and assessment regime for listed company directors, which is now in place under National Policy 58-201. Numerous companies in a wide variety of sectors, including Crown and not-for-profit, now use competency matrices to guide their director recruiting.

I thought at the time that a competency-based regime would lead to a greater number of women on boards, but it has not. I do not therefore remain optimistic that those jurisdictions, including the U.S., currently approaching diversity through generic disclosure will achieve noteworthy success in increasing the actual numbers of women on boards.

Even with regulatory prompting, such as the disclosure of diversity plans, self-selection and homogeneity preference can and does occur, as boards "define down" diversity to mean "skill diversity" or "diversity of perspective," which is really — and arguably — not the intended meaning of gender diversity in particular. In other words, regulation, experience has shown, needs to be precise and prescriptive to achieve its desired goal. Exploring measurable objectives related to gender are therefore legitimate grounds of scrutiny for policy-makers, such as this committee.

The fourth argument is the business case for women on boards. Aside from the equality and fairness arguments, the business argument is made from business people to academics — "Show me that women on boards enhance shareholder wealth maximization." To buy into this argument as a condition precedent for addressing the number of women on boards is incorrect and misguided. Academics cannot prove for business people that more women on boards causes greater shareholder performance, any more than academics can prove for business people that better boards cause better shareholder performance. To my knowledge, there is no study that systematically shows — or perhaps will ever show — either of these two propositions. However, just because academics cannot prove something does not mean that the phenomenon does not exist. What separates effective from ineffective boards is the quality of the decision making in the boardroom and the qualities of the people sitting around the boardroom table.

It is exactly here where female directors may impact board effectiveness. What qualitative and quantitative research on gender diversity tends to support is that the nature of the dialogue and interplay during board deliberations and decision- making changes with additional women directors beyond the token one or two; namely, gender-diverse boards may be more innovative and there may be a greater likelihood of decision-making options and of expressed resistance because of lack of social embeddedness of endorsing decisions that may be suboptimal.

In addition, diverse boards may allocate more time and effort to monitoring and holding CEOs to account for poor stock performance more effectively. Although diverse boards may be somewhat more difficult to manage, this disadvantage may be more than offset by effective leadership and enhanced overall decision making.

It is hardly surprising, therefore, that in the aftermath of the global financial crisis, which was exacerbated by independent boards composed of largely male CEOs of unrelated industries approving risks they did not understand, the focus is now on enhancing the competitiveness, competencies and diversity of corporate boards, and women in particular.

Last year, for example, the United States, the United Kingdom, countries in Europe and Australia are now beginning to address boardroom gender diversity. What all these countries have in common is political leadership and courage, and acknowledging that more effort and policy making is needed.

Thank you for inviting me to participate. My colleagues and I look forward to responding to your questions.

The Chair: Most of the jurisdictions that have adopted legislation seem to have headed for the 40 per cent level. There must be a reason for that percentage. This bill proposes 50 per cent.

Also, many of the other jurisdictions that have legislated — and again correct me if I am wrong — seem to have focused on public companies or at least public and very large companies, as is the case for Norway. I think this bill goes farther. I would like to hear the comments of any of the panellists who care to provide their view.

Mr. Leblanc: Norway is 40 per cent, France is 40 per cent to 50 per cent, Iceland is 40 per cent, Finland is 40 per cent, Belgium is 30 per cent, and this bill proposes 50 per cent. As was pointed out earlier, this seems to me to be more logical, given that women comprise 50 per cent of the population, so it is more proportionally speaking than other jurisdictions. Other countries have approached more than just public companies, but publicly traded companies. The SEC legislation applies to every publicly listed company in the United States. Australia applies to all publicly listed companies as well. France, I believe, applies to all companies as well. There is some precedent for going beyond publicly traded companies — or companies in the public sector, rather.

The Chair: What about private companies; small, private companies? Where does this bill stop?

Ms. Tremblay: It stops at publically traded companies, financial institutions, Crown corporations and one other.

The Chair: Can anyone explain why most of the others are at 40 per cent and not 50 per cent? Is that just to be more timid or is there a reason in terms of flexibility?

Ms. Puri: I do not know for sure, but my sense is that it was probably because they did not have the courage to go to 50 per cent. I think 50 per cent is the only rational —

Ms. Tremblay: Our colleague from Norway actually addressed that issue in saying that they have had legislation for their government where they have 40 per cent quotas on the political side, which has been there for a while, so they mimicked that percentage.

Senator Greene: There are many business groups in this country: The Canadian Bankers Association, the Conference Board of Canada, the list goes on and on. The goal of all of these business groups is to improve the landscape, the environment from which corporations act and also in many ways they are very much interested in corporate governance and many of these associations have ideal policies with regard to this, which they promote amongst their members.

You and the previous witnesses have given us a great deal of interesting information and I tend to think it is probably right. Much of it is common sense. Why are these groups before us not campaigning for this bill? Why do they not demand this bill? If their goal is to improve the workings of corporations, why are they not in the streets saying this?

Mr. Leblanc: I completely agree and in some respects it is not in their interest to do so. The group that is fighting proxy access the most in the U.S., 3 per cent of shareholders, only 3 per cent of the company, is the U.S. round table. It may not be in their interest to support a bill that would change the status quo or change their prerogative to control.

Senator Greene: Do you mean in the interest of the individual personal members or in the interests of the corporation?

Mr. Leblanc: In the interests of the group as a whole. We are here as academics to say this is the evidence that has been gathered in an independent way. We do not represent a group. It is in the interest of industry associations to represent their members and to represent the ability of their members to control nomination to boards of directors.

It is hardly surprising that industry would not get behind a bill that would change that. I am using proxy access as an example.

Senator Greene: However, if they were educated to understand that the bill would actually make their membership better and stronger, why would they not be campaigning for it?

Ms. Tremblay: Paul Tellier, who not long ago received an award, said two things in The Globe and Mail that struck me. The first was that sometimes people stay on boards for too long. This will indirectly play a role. He also said that in Canada, we do not use women enough in our boardrooms. He might not come here and say it publicly, but he most certainly voices it.

Mr. Leblanc: There is also a political cost to getting out in front of an issue like this for an individual, for a company, for a group of companies or for an industry. To some extent, you have to understand why they are not coming forward. It does not mean they do not agree with it and rise above it.

Senator Greene: I am not convinced by any of these answers, although I do not understand what the answer is.

Senator Hervieux-Payette: I do not think we expect witnesses from universities to answer for the organizations. I just want to tell you that they were invited and they declined to appear. You cannot make a deduction. They do that on a regular basis before this committee. We have invited them over and over again. Sometimes they come and sometimes they do not. It is not just for this bill. They have their own agenda they need to prepare, and this question has been in the public arena, mostly in English Canada, and especially with The Globe and Mail, where we have read many articles about various persons. We have to remember that Paul Tellier was the Clerk of the Privy Council, the president of CN and the president of Bombardier, which are large organizations. Before a crowd of 700 CEOs in Montreal, he said we have to reform and he supported this idea.

Senator Greene: Maybe we should invite him.

Senator Hervieux-Payette: I have tried. He was in Australia.

Senator Harb: Thank you for the excellent presentations.

If the majority of the shareholders of these publicly traded companies were female, one can make the case that perhaps they would elect females to be on the board of directors. Sadly, that is not the case, as we live it now.

Professor Puri, you were one of two research directors appointed by the Minister of Finance as part of a panel on securities regulations. You have developed some sort of a model common security regulator for Canada. Have you looked at that issue as part of this model? As we know, these regulators have a say in terms of the board of directors, although they may not be directly telling the corporation the number of males or females on boards.

With regard to giving advance notice to the corporations, so it would be good for them to prepare. Section 19 of the bill says that it will come into force 180 days after the day it receives Royal Assent. Would it be your position that perhaps that should be extended in order to give sufficient notice?

Ms. Puri: Let me refer to the second question first. Yes, the act comes into effect 180 days after Royal Assent, but the section in terms of gender parity does not apply until the opening of the second annual meeting following the day on which the act comes into effect. After the 180 days, there are two additional years, effectively.

Senator Harb: Are you okay with that?

Ms. Puri: Yes, and there is still the opportunity for the minister to apply his or her discretion to add more time, if necessary. That is the more technical question.

On the more general question about the task force in which I was involved a few years ago, the mandate there was to look at a model securities regulator for Canada. In terms of priorities, this was not a priority that was explored in the research. However, certainly it is open to securities regulators to, as I mentioned in my formal remarks, have a disclosure-based system, to disclose what you do in terms of your nominating and governance process and how you take diversity issues into account, as the U.S. SEC has done.

Senator Ataullahjan: Successful corporations recruit their leadership from amongst the most qualified people. Do you think this legislation is encroaching on the shareholders' right to name and appoint a board of directors for companies in which they invest their money?

Mr. Leblanc: No, I think for the simple reason that for widely held companies it is difficult for shareholders, even for institutional shareholders, to exert influence on who is elected to the board. It is not inaccurate to say that the system now is very self-selecting. At one point, we took management out of the equation and left it to the board. Management can still have influence indirectly. The nomination to a board of directors of a publicly traded company in Canada is largely determined by the board, not by shareholders.

The Chair: That is in practice.

Mr. Leblanc: That is in practice, exactly.

Ms. Tremblay: I could add that there is the idea that the pool is limited for competence on the board, and if you take a woman, she will not be as competent as the man that you will leave behind. However, we have seen in Quebec and in many countries that there is a big pool of competent people to serve on boards. Past-CEO experience is not all that qualifies a person to be on a board. We do need people with CEO experience, but not all of the people on the boards. We have to change the perception that you need just people with CEO experience, as a definition of board competence.

Senator Massicotte: Let me give you some of my thoughts and you can tell me where I am wrong. I have sat on many boards and I do not mind whether it is male or female, but my starting point is: I will be convinced of whatever, as long as that board delivers the best decisions. If you can convince me monkeys deliver the best decisions, I will vote in favour of the monkey. I have no objection whether it is female or male. That is important.

From my own observation, the most serious problem of board members, and it is changing somewhat, is what I call friendly board members on boards, people who are not adversarial, who are friendly to the CEO, and that is the most significant weakness in a board, certainly in North America. I know changes are happening.

I think the most important board member — and you will not like what I will say — is the CEO who has experience in that industry or a very senior marketing person in another company, if you are an international company. To tell me it is a CEO or lawyer, does nothing for me. You need a person with a lot of experience. I agree it cannot only be CEOs. You must have diversity. I buy the diversity with regard to international experience. That is very important. That is my logical side.

What contributes to my decision and wins me over, is when you bring empirical data showing Catalyst, Forbes and McKinsey; that does a lot for me. Mr. Leblanc, you say to me that no empirical evidence shows that and we should not depend upon empirical evidence because none will show that female participation on a board contributes to better decisions.

If you do not have empirical evidence, it is only talk and opinions. Your opinion is not any better than that of Mr. Tellier. Other people have contrary opinions, including female CEOs, who have commented in the newspapers that they are against the quota system. I still would like to believe the empirical data suggests otherwise. Mr. Leblanc, you say no, empirical data does not support female contribution on boards.

Mr. Leblanc: There is a correlation and causation argument. Perhaps there was a miscommunication. I said that the literature was mixed and it is not the case that boards composed of women necessarily have higher shareholder performance. There are two roles of a director. There is an advisory role and a monitoring role. There is evidence from the University of Chicago to suggest that women make better monitors and contribute to decisions differently in holding the CEO to account. The literature, on a more broadly based business case is mixed, and we may never show that women sitting on boards necessarily enhance shareholder wealth maximization.

Senator Massicotte: I am disappointed with that. I thought otherwise. I saw a study where women CEOs, on average, deliver better results than male CEOs. You are saying that is not valid.

Mr. Leblanc: I have read other studies that, in fact, have not found that with women on boards. The literature is mixed. The literature is mixed in the board effectiveness field as well.

Senator Massicotte: I am disappointed because it made my argument easier.

Everyone speculates about Lehman Brothers, and so on. I do not buy that. If you look around the world and at studies of female board composition, companies in France, where there is high participation, had the same downfall. In Lehman Brothers, the guys on the board had a large percentage of their net equity at stake and they still made wrong decisions. Whether female or male, it did not matter; they had a significant stake. Look at the CEO. He had $1 billion dollars invested. He lost it all. I do not think we can simplify it by saying, "We should put females there. You corrected the financial disaster that we suffered a few years ago."

I am heavily influenced by empirical data, but you are saying that it is mixed. I guess I will keep on searching.

Senator Plett: Thank you, witnesses. One of you spoke, as the previous panel did, about women not having the same opportunities because of child-bearing, and so on.

In today's day and age, with the Internet, home computers, and so on, I cannot quite understand why even a woman who is at home on maternity leave would not be able to continue to be out there researching what is available to her and updating her expertise, and so on. I think that 20 or 30 years ago that would have been a valid argument; I am not convinced that it is today.

I think Mr. Leblanc said that because 50 per cent of our population is women we want a 50 per cent quota of women on our boards. I suggest that the vast majority of the males in our country who are of an age to enter the workforce are out there hunting for jobs. Your argument would be that the same would apply to women. I am not sure that I agree with that. Sure, many women are looking for jobs, but I do not know that it is the same percentage of men looking for jobs. I think it is simplistic to say that 50 per cent of the population is women, so 50 per cent should be on boards.

With the fear of my colleague opposite accusing me of only caring about free enterprise, and so on — and she is absolutely correct; I do — if my share value increases by having women on the board, then I will insist that we have women on the board. However, if my share value goes down as a result, then I do not want that. I want what is best people for the companies in which I invest, whether male or a female.

Ms. Tremblay: I will address the first question. Maybe I was not clear. I said that child-bearing has nothing to do with expertise.

Senator Plett: I agree with that.

Ms. Tremblay: The fact that I have had four sons does not change that and I have kept up to date during my maternity leaves. However, it made my networking less effective.

Senator Plett: That is what I do not agree with.

Ms. Tremblay: I speak from personal experience. It does take time to raise children to become responsible adults. Often, women will take on more of that load than men. One of the things that will be put aside temporarily is that networking. The women I have interviewed tell me that it is difficult afterwards to integrate the old boys' club because for a little while you were out there. I am not saying it is impossible; I am saying it is much more difficult.

When boards are looking to nominate, and it is a natural thing, you look at people you know and your network and your contacts. The parity legislation in Quebec has forced us to go out and go to professional associations such as the CICA to ask if they have women who are available. There are many women who are available.

The other thing is that women do not market themselves quite like men. Men may be more aggressive in searching for board positions, whereas women tend to be happy when they are asked but maybe a little less aggressive. That being said, I did meet several women during my interviews who told me they had attempted to get a place on boards and had not been able to do so. It is a question of networking.

Mr. Leblanc: Let me address your second point about the 50 per cent parity issue applied to universities and graduate schools, et cetera, that I referred to. Let me try to weave in Senator Massicotte's point about decision making.

Another senator mentioned that in the public sector they are not aware of quotas. At York University, we have a 40 per cent quota across four groups — women, visible minorities, Aboriginals and people with disabilities — for the hiring of faculty members. Our university is very diverse. In a class of 100 students, 80 per cent are visible minorities; 50 per cent would be women. We made a decision some time ago in our collective agreement that we would have a quota for women. We would think that they would have access, but they do not. We have to go out and recruit and shake the tree.

Senator Greene: Is that a decision by the university?

Mr. Leblanc: Absolutely, it is a decision by the university to match our student body. I cannot say with certainty that decision making of a group of academics is enhanced by the presence of people from diverse backgrounds. I can tell you from personal experience that having women, visible minorities, people with disabilities and Aboriginal people in a meeting absolutely enhances the decision making of that committee and of the faculty and of the university.

There are certain things we cannot prove. That does not mean it does not happen. If you have 50 per cent of the people graduating from universities, et cetera, we need to be conscious of trying to mirror that mosaic in metro Toronto or in Canada with actual numbers. To some extent, if we have to tweak the legislation to get us there, it is probably a good thing. It is not reactionary. It is proactive.

Senator Plett: In light of time, I will not rebut.

Senator Massicotte: You raised an interesting point that I want to debate. From what I read, every time, on average, when a woman leaves for maternity, every year represents a 3 per cent permanent decrease in salary compared to her male counterpart. That is unfortunate. Why is that? You are speculating that it is probably networking.

The other issue the experts raise is that, unfortunately or fortunately, many things get done via network be it on the golf course or wherever. Maybe we will get there; maybe progress will be made. However, men often like to golf with other men and hang around with men. Females are probably more flexible than males, but you sort of hang around with your own group. Women are prejudiced from that style of networking. Networking comes up a lot to explain the difference in salaries.

Is it true that networking is relevant to deal making? The bottom line on deal making — and there is a logic to it — is that in many behaviours you rationalize your logic when doing deals and business with people you enjoy being with and trust. It is not purely logic. Therefore, you must meet. That is why planes exist, namely, for business meetings. How do you get there if there is a difference?

Ms. Tremblay: My answer will be short. You get there with Bill S-206.


Senator Ringuette: We must recognize that this bill brings about so many changes that there will be an enormous resistance on the part of males who will be afraid to lose power. It is a dynamics of power, it is a dynamics of control and to limit networking to males is also a dynamics of power.

In Quebec, you have a legislation at the Crown corporations level which, I think, was excellent, and we see the results at the level of those corporations. According to what you could find in your research, did this legislation or the positive effects of boards of directors have an impact on the board of directors of public companies in Quebec? Or will we have to go further as well with a similar legislation in Quebec?

Ms. Tremblay: As it is about Crown corporations, they are not publicly listed. So if we want to limit ourselves to an assessment of financial performance, it does not apply. That is the reason why I did qualitative research; I went and met people. And I can tell you, like my colleagues already told you, that diversity has an incredible impact at the level of the dynamics on boards of directors.

And once again, as my colleague said, I think that if we want the best decisions, several options should be assessed. Thus, it is certain that if I have just one option and I decide that it will be my decision, I do not think I had the best decision making process in place. On the other hand, by having the diversity, people come from several backgrounds. And, retrospectively, men are very pleased to welcome women on boards of directors and, in spite of their initial resistance, they welcomed their arrival on those boards.

I cannot speak about financial performance but, at the level of dynamics, of perception, it was extremely beneficial.


Senator Ringuette: Professor Leblanc, many years ago, when we started our discussions about the globalization of companies, I remember the Canadian associations encouraging employers and Canadian businesses to diversify their human resources in order to have a better understanding of and better access to the world. Because of that, we are now trying to extend that vision to the board of directors. Do you understand why there is such resistance? Do you understand why it is okay for the average labour force to have that attitude, but not okay for the board of directors?

Mr. Leblanc: I think you are exactly right. This happened 10 years ago. Corporate governance is changing. The world is changing. It is passive resistance. It is power and control. There is an opportunity to show courage and leadership. We are academics, so you cannot fire us, because we have tenure. I think that, at the end of day, the progress in Canada has been wholly inadequate in this area. The world is changing. Other countries are changing and they are taking over. We should be a beacon of leadership in this area. When the United States, the United Kingdom, Australia and countries in Europe are changing, if we do not change, we will be a noticeable omission, and that is not good.

Senator Ringuette: We already are, in different spheres.

The Chair: What I get from you is that the carrot-and-stick approach, in your view, has not worked and that you are satisfied that the evidence is clear on that.

Mr. Leblanc: Absolutely.

The Chair: Therefore, the stick is the only solution; is that what you are saying?

Mr. Leblanc: Correct.


Senator Hervieux-Payette: I come back to Quebec. According to you, was public opinion opposed or even concerned because the governance of Crown corporations was changed? It is the taxpayers' money. That includes the Caisse de dépôt which has a capital of more than 100 billion dollars, and investment organizations like Investissement Québec. Was the public concerned about this? How did the people who, in fact, are those who will have to live with this decision, react?

Ms. Tremblay: At the very beginning, when the finance minister, who I met for my research, proposed this legislation, when he announced his intention, it was really fifty-fifty: half the people were completely opposed, for the reasons I mentioned earlier, thus a resistance to change, which is natural, and the fear to have a shortage of qualified women — I sometimes feel that people thought that we were going to take 82-year old women in their kitchen and bring them on boards of directors —, and the other half of the population thought that it was a very good idea, therefore had less of that resistance. I can tell you that the resistance did not come only from men. It wasn't as clear as women were for it and men were against it.

Now, I can tell you that four years after the initial announcement, this is not a matter of concern any more. That is because those women did not come on those boards of directors saying that they were going to change everything and do it in a woman's way; they came with their expertise. We went and looked for competent women and there are lots of competent women everywhere in Quebec and in Canada. So it is a matter of inviting them, they will be there and they will silence criticism.


The Chair: Thank you to each of our witnesses. It has been an interesting, informative and spirited discussion. I wish we could continue, but that will have to wait for another day.

(The committee adjourned.)

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