Yahoo Finance Ontario Teachers' raises threshold for women on boards to 40%
One of Canada’s largest pension funds is setting higher expectations for companies it invests in when it comes to gender representation on boards.
The Ontario Teachers’ Pension Plan Board adopted new guidelines that advocate for large-cap companies on developed market indices to increase board gender diversity to a minimum of 40 per cent representation of directors identifying as women. Since 2013, Teachers’ has pushed for women to hold a minimum of 30 per cent of board seats.
The pension fund said the average gender diversity on boards exceeds 30 per cent across most of the developed markets Ontario Teachers’ invests in, and data indicates “there is momentum around gender diversity at large public issuers in developed markets.”
As part of a broader effort to increase board diversity and make these efforts transparent, Teachers’ is calling for clear and timely disclosure of gender and other forms of diversity, including those who self-identify as non-binary.
Michael Cherny, director of diversity, equity and inclusion at Teachers’, said the guidelines are aimed at increasing the participation on boards of traditionally underrepresented groups such as women, visible minorities including Black and Indigenous Peoples, 2SLGBTQ+ identified individuals and Persons with Disabilities.
He added that evolving diversity reporting “supports non-binary individuals while also promoting greater diversity on boards.”
Teachers’ guidelines ask boards to set and disclose time-bound targets to increase the number of board directors identifying as a member of an underrepresented group and report on their progress.
A handful of developed markets including France, Italy and Norway have already adopted a minimum of 40 per cent women on boards, Teachers’ noted in a statement Jan. 19.
“Although we still consider a 30 per cent goal to be meaningful, we’re raising the threshold to challenge public companies in developed markets to keep improving as we strive for truly diverse and representative boards,” said Anna Murray, senior managing director and global head of sustainable investing.
“We believe improved diversity is key to board effectiveness, leads to better performance and delivers long-term value for shareholders.”
In 2013, after a study by the Canadian Board Diversity Council suggested it would take until 2097 for women to have equal representation in the boardroom if companies were left to their own devices, Jim Leech, who was chief executive of Teachers’ at the time, called for “an end to this debate” about whether companies should be compelled to more closely reflect representation in society.
He said at the time he was not opposed to quotas to get the job done — noting that Canada ranked behind Turkey and Poland on measures of gender diversity — but the Ontario Securities Commission ultimately adopted a “comply or explain” regime for diversity disclosure that gave companies the option to make efforts to increase board diversity or not, so long as they explained their rationale for doing so.
Securities regulators across the country followed the OSC and adopted disclosure rules for board diversity at non-venture companies. The eighth report on progress published by the Canadian Securities Administrators in October 2022 said 24 per cent of board seats across the country were held by women and seven per cent of corporate boards had a female chairperson.
The report said 87 per cent of reporting companies had at least one woman on the board, and 30 per cent had at least three. Women filled 45 per cent of board vacancies, up from 35 per cent a year earlier.
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