Are quotas the answer to get more women on Canada’s corporate boards?

Canada’s biggest companies are being asked directly to increase the number of women on their boards as part of a campaign spearheaded by the federal government, arguing the move is good for business.

Federal Status of Women minister Kellie Leitch is planning to use “moral suasion” to hit the government’s goal of boosting the female count on boards to at least 30 per cent in five years, Bloomberg reported this week.

Leitch told Bloomberg that letters were mailed to 500 of Canada’s biggest companies “compelling them to think about this.”

The campaign follows a federal advisory council report in June that recommends the 30-per-cent target for female board representation, but not quotas or regulatory requirements.

The report, called Good for Business: A Plan to Promote More Women on Canadian Boards, says women held just 10 per cent of board positions in 2012 and stated that “inertia in leadership networks is a key institutional obstacle to women’s advancement to board positions.”

Jennifer Reynolds, president and CEO of Women in Capital Markets, says the “comply and explain” proposal is the way to go, saying quotas would do more harm than good.

“I think quotas can be destructive to women who get on boards – raising questions about whether they’re there because they’re qualified, or because of the quota,” she told Yahoo Canada Finance.

Reynolds says putting pressure on companies to increase female representation will get them to start thinking differently about how to promote and hire.

“What we have now is inertia in the leadership network. There are lots of qualified women out there. If you force companies to disclose what they are doing … and what measures they are taking - and put the spotlight on that, it will be quite easy to find qualified [female] board members.”

The practice has worked in Australia and the UK, Reynolds says.

“Given the progress that has been made in other countries, this is a good first step,” she says of the federal advisory council’s proposal to Canadian companies.

More women equals more profitable companies

The call to Canadian corporations comes as more studies are being done to show that having more women on boards is good for the bottom line and Canada’s future competitiveness.

The Global Leadership Forecast 2014/2015 report released recently from Pittsburgh-based human resources consulting firm DDI, shows a link between corporate health and a higher count of female executives. Among companies that rank in the top 20 per cent based on financial performance, 37 per cent are women, including 12 per cent that are considered “high potential” women, the report says. That compares to companies that rank in the bottom 20 per cent of financial performance, where 19 per cent are women, and 8 per cent are considered “high potential.”

UBC Sauder School of Business professor Kai Li released a study last fall saying women board members are also better at protecting shareholder value. Li found that costs drop by 15.4 per cent for every female director on the board making decisions about merger and acquisitions deals.

Meantime, a Conference Board of Canada released a study late last year showing young women continue to face barriers to workplace advancement, citing so-called “unconscious bias” that’s underestimating their abilities.

The study finds that Millennial women (those between age 22 to 34) are less likely to be identified as "high-potential" employees (45 per cent) than their male peers (53 per cent), even though they are more likely to be "high performers" (74 per cent) than men (66 per cent).

Earlier this year, the Ontario Securities Commission proposed public companies start disclosing their female board representation. The Ontario Teachers’ Pension Plan wants it to go a step further by requiring all TSX-listed companies have a minimum of three women on their board of directors by 2020, or else be delisted.

The Association of Chartered Certified Accountants is also calling on Canadian public companies to adopt a rule ensuring 30 per cent of their board members are women. The so-called “30-per-cent rule” for certain boards is being adopted by countries such as Germany, while Norway has a law in place since 2003 requiring at least 40 per cent of its publicly listed companies include women members.