I had an interesting discussion with Kelly Blair, one of the longest-serving executives at Caldwell and a leader of our Canadian and global board and CEO practice. I know she’s seen a lot of change in governance practices over the past decade and asked her to share some of her insight about some of the topics on everyone’s mind in governance.
First response of Kelly was that “it has been a very interesting decade in terms of the change in governance and I don’t think we’ve ever seen a more rigorous or intense time for boards and governance. It has everything to do with issues like cyber security, risk management all the way to transformational change in organizations, whether it’s machine learning, artificial intelligence or any other change. Boards have never been under so much pressure to really respond to the shareholders demands.”
Those are certainly big issues but maybe something a little less threatening to the
enterprise is another top-of-mind issue within the boardroom. We have seen an increasing trend for mandating diversity of all types but most broadly for the percentage of board seats that must be occupied by women over time in various jurisdictions.
Can you give us a quick overview of how that developed in Ontario, and Canada more broadly where this was an early adopted practice?
“What really stands out is how we got there in Ontario, and in Canada more broadly. Some of our leading pension funds and major financial institutions with broad holdings and reach, really started to see that they needed to modernize the boardroom and the governance practices. This included developing deeper benches of diverse candidates that could serve on boards.
We started to see some activism on the part of institutional shareholders with provincial governments to create requirements in order to speed up the process. You can argue about this process and whether it was a good idea or a bad idea but it happened and
we all had to adjust to it.”
So it didn’t start with government intervention, but wound up with mandates and timelines in Ontario. What was the timeline and goals set specifically in the province to increase the percentage of board seats for women to serve on company boards?
“Let’s talk about Ontario. In 2016, our premier Kathleen Wynne announced the following gender diversity targets. She really got behind this and that was quite a movement for our country.
By 2019, women are and were able to make up at least 40% of all appointments to every provincial board and agency.
Businesses were set a target by the end of 2017, to appoint 30% of women to their boards and achieve his target within three to five years. Corporate Canada and the major CEOs of our largest companies got behind this initiative and created the 30% Club.
The private sector also needed to step up their efforts.
91% of TSX listed issuers are below the 30% target for women on their boards.
14% of TSX listed issuer board members are women.
And 35% of provincial agency boards are below about 40% target.
So while our aspirations are good we’re not quite hitting the mark, even in Ontario or Canada.”
That’s a daunting task for sure with just normal board recruitment processes and turnover. What are some of the insights from the past three years since this initiative was launched at Ontario, regarding diversity in the boardroom?
“Maybe we should have approached this a bit differently; but that’s hindsight. I
think by suggesting targets in terms of percentages of new appointments might have been a bit of a miss, because that caused accelerating or forcing turnover of really good high-performing board members. Secondly, I think we need to do a better job of activating potential female board members and preparing them for service. Unlike their male counterparts, in many cases it’s their first board role. And the role in a board versus the role of an executive is very, very different. Thirdly. I think we need to talk to the actual board and governance chairs in advance about what the technical or role needs were. There was a lot of panic initially about just finding the best qualified woman and that didn’t particularly serve the board very well.
As an example: the need for a qualified financial expert for an insurance company or an operator for an energy utility is very different. And let’s be honest, no one really wants to feel like they’re on a board just because of one aspect of their background, particularly if it’s gender or race.”
I appreciate you sharing that insight. It does bring to mind a concern I have and
hope you can address it. Do you see a shortage of qualified men and women for board service today and what obligation do you think companies have to prepare their next level leaders for board service both internally and on external boards?
“I’m glad you asked that question the way you did, because it’s a holistic problem. Boards are down with so much more and the rate of change is much faster than it has been; almost a Moore’s Law type of effect.
I think we do have a real shortage of qualified board members generally and because of three very practical reasons. Regardless of gender or race, today’s sitting c-level executives are almost constrained to serving on one outside board, 2 at best, if they are allowed to do any boards. When I started in the board room it was not uncommon to see a sitting CEO or CFO serve on three or four outside boards, now moving down to one maybe, even two or none; almost 50 percent from the onset.
The magnitude of issues facing the board in a technology supercharged and globally, economically and more complex environment has really created a dilemma in the boardroom. Do we add position players expertise such as cybersecurity — sustainability — artificial intelligence — CSR, or do we leverage experts for that and add cost.
So if you’ve got a board that it’s built for speed and decision-making, 2 to 3 seats can radically alter the board culture. And experts who don’t have more board background can be a liability in 60 to 70% of the board conversation and remit. Also executive turnover in the C-suite continues to accelerate and the average CEO tenure of more than seven years, ten years ago, is just over four today. So that means the board has to spend a lot more time on succession planning, and gender plays a role in that for sure. The next generation of women will be much better positioned if we are good stewards of the talent in a decade ahead.”
Those are great points and we are starting to see this unfold in California-based companies now, where the first mandates on female composition and the boardroom are being enacted. What advice would you have for female board candidates being considered in California and elsewhere in these evolving mandates?
“First, do a check — if you’re being considered for a board, ask yourself “other than
being a woman, why am I being considered”. If you don’t see the functional reason by domain or market expertise, it’s probably not a great fit. Remember, it’s a lot easier to join a board than it is to leave one.
Secondly, would you enjoy it, will you learn from it, what are you giving and what are you
getting out of it. And finally, can you see yourself doing this for three to six years. If not, don’t do a disservice to the board and accept an invitation to join. There’ll be lots of opportunities for women in the next five years, so don’t necessarily jump at the first
opportunity.
The other thing to think about, is that boards are doing a lot more performance management, on the board. You don’t want to be on that board if you’re not contributing, you don’t want to be that person that’s not at the table. And another thought is sometimes women are so anxious to get on a board, they may not evaluate the board opportunity right.
So on one hand, don’t sell yourself short if you’re being considered for a board while maybe you have the opportunity to contribute more to a bigger board at a larger company.
Also, have more of an expectation of what you can do in the boardroom versus the opportunity.”
Sage advice Kelly, and I’d say these three points apply to every board candidate and Governance Committee making a board decision. I know this isn’t the easiest topic and really appreciate you being so thoughtful about it today.
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