Women are somewhat more conspicuous in commercial real estate’s executive suites and boardrooms than is the average for Canadian companies that disclose such information to regulators and unit/shareholders. A newly released report on diversity disclosure practices in public companies, from Osler, Hoskin and Harcourt LLP, draws findings from 629 companies that revealed the gender breakdowns of their boards and 575 companies that enumerated women executive officers as of July 31, 2021. Results show that women are gaining presence in these top echelons, but are still very much the minority.
“The Canadian public company boards continue to add more women directors at a steady pace. The rate at which women are being appointed this year reached its highest level yet, with women filling 39.1 per cent of the newly created or vacated board seats, a significant increase compared to a rate of 35 per cent last year,” observe the report’s authors, Andrew MacDougall, John Valley and Jennifer Jeffrey. “Women are making very little progress at the executive officer level. The proportion of women executive officers increased slightly to 18.2 per cent from 17 per cent last year, but is largely unchanged since 2015 (when it was 15 per cent), and only 10.7 per cent of TSX-listed companies have targets for women executive officers (largely unchanged from last year).”
This is the seventh year that TSX-listed companies have provided numbers aligned with the comply or explain rule. It requires venture issuers to report whether they have written policies, procedures and targets for bringing women onto boards and into executive officer roles or to explain why they do not.
Acute absence of visible minorities, Indigenous peoples and people with disabilities
Additionally, beginning in 2020, amendments to the Canada Business Corporation Act (CBCA) expanded the field of designated disclosers to cover all distributing corporations — i.e. to include those that trade on other exchanges inside or outside of Canada — with requirements for separate reports related to visible minorities, Indigenous peoples and people with disabilities. For the first seven months of this year, 318 companies offered data that indicates the modest to miniscule presence of these three additional groups within their top leadership.
Visible minorities filled 6.8 per cent of disclosed board positions, while Indigenous peoples and people with disabilities each accounted for 0.5 per cent. Visible minorities hold executive officer positions at 71 companies, while just eight companies count people with disabilities in their executive offices and a mere two companies have Indigenous executive officers.
The analysis reveals greater evidence of stated intent. More than one third of disclosing companies report that they have written policies committed to expanding the diversity of boards, while “a substantial portion” confirms that diversity is one of the decision-making factors for executive officer appointments. However, for now, companies are more likely to have stated policies pertaining only to women.
“In order to make progress on diversity beyond gender, public company boards will need to change their approach to the identification and appointment of directors from these designated groups,” MacDougall, Valley and Jeffrey conclude. “While we acknowledge that issuers must generally rely on executive officers to self-identify as being a member of any of the prescribed designated groups, the low numbers reflected above indicate that there is nonetheless significant room for improvement.”
Real estate makes relatively more space for women
Real estate ranks fourth among 13 identified sectors for the percentage of women holding executive officer positions. That’s pegged at an average of 2.06 women per disclosing real estate company or 24 per cent of executive officer positions versus an average of 1.69 women per company or 18.2 per cent of executive officer positions across all disclosing companies.
The report cautions that differing approaches to leadership structure and the size of executive ranks can skew sector-to-sector comparisons. “This explains why in the real estate industry, for example, the average number of executive officers is close to the overall average, but women represent a relatively high percentage of the executive officers,” it notes.
Accordingly, 3.19 female executive officers per company translates to 23 per cent of such roles in the financial services industry, while 1.72 female executive officers per company translates to 11 per cent of such positions in the energy services sector.
Real estate ranks fifth, tied with consumer products and services, for the 25 per cent female component of disclosing companies’ boards of directors. That breaks down to an average of 1.91 women directors per board. Meanwhile, women fill 22.1 per cent of board positions across all disclosing companies, equating to an average of 1.83 women per board.
Real estate companies are also highlighted in the report’s best practices section. Artis Real Estate Investment Trust, Dream Impact Trust and Dream Unlimited Corp. are among 10 companies cited for boards of directors with at least 50 per cent female representation.
Canadian Apartment Properties Real Estate Investment Trust (CAP REIT), Killam Apartment REIT, Timbercreek Financial Corp., MCAN Mortgage Corporation., Chartwell Retirement Residences, Melcor Developments Ltd., Melcor Real Estate Investment Trust and Dream Impact Trust are among 22 companies flagged for executive officer contingents of at least 50 per cent women.
Plodders don’t always explain lack of action
The percentage of public companies that lack diversity policies and practices continues to shrink, but remains a stubborn to sizeable fraction. As of mid-year 2021, about 67 per cent of disclosing companies have written policies specifically tied to identifying and nominating women board candidates and about 32 per cent have set targets for female board membership. Nearly 83 per cent of companies confirm they take female representation into account when identifying and appointing executive officers, but fewer than 11 per cent have set targets.
Despite the disclosure rule’s moniker, MacDougall, Valley and Jeffrey note that a significant minority of companies do not explain their inaction. For example, more than 40 of the 209 companies disclosing that they do not do not have written policies pertaining to the diversity of their boards were silent on the reasons.
Meanwhile, the majority that do not set targets for women on boards or in executive positions, most commonly cite misgivings about how targets could affect selection processes perceived to be based on merit. “Other reasons included the concerns that targets are ineffective and/or arbitrary or are inappropriate when considering the small number of directors on the board,” the report summarizes.
Generally, larger companies in the TSX-60 index appear to more proactively pursuing gender balance. For example, 98 per cent report at least two women on their boards and 31.5 per cent have at least five women directors. The number of women executive officers — an average of 3.3 per company, filling 21.6 per cent of disclosed executive officer positions — surpasses the overall average, while 20 per cent of TSX-60 companies have set targets for increasing women’s representation.
As with other environmental, social and governance (ESG) initiatives, MacDougall, Valley and Jeffrey hypothesize that institutional investors are helping to push the agenda forward.
“Only two companies in the S&P/TSX Composite Index that reported the number of women on their boards had all-male boards, perhaps reflecting a response to ISS’ (Institutional Shareholders Services) decision that, starting in 2022, it would recommend withhold votes on the chair of the nominating committee of such companies if women make up less than 30 per cent of the board and the board has not adopted a 30 per cent target,” they state.
