Canadian HR Strategy

28/CANADIAN HR STRATEGY MOUNTING PRESSURE SYSTEMS That rule amendment comes in the midst of a perfect storm for gender diversity on boards, said Beverly Behan, New York- based president of Board Advisor. It's important to understand that storm — the context and environment of the boardroom — to fully understand the im- portance of the OSC's gender diversity rule, she said. Boards of directors — not the C-suite — are really the ones setting the tone at the very top of an organization, said Behan. "We hear a lot about tone at the top and how important that is to setting corporate culture. But the real tone at the top starts with the board of directors," she said. "And you have to think about what kind of tone that you want the board to set. How do you want your executives to feel when they come in and work with the board? I would say number one: inspired, challenged — and in a good way." Boards add the most value when they stretch executives' thinking, give them new insights and offer different perspec- tives they didn't have before. "I have CFOs and CEOs who say to me 'I get so much value from the board because I know when I go to Bay Street and Wall Street, and stand up in front of the analysts, there is noth- ing that they're going to throw at me that I didn't hear at the board meetings.' That's tremendous value," she said. And the crucial factor to creating a great board — a board with that "wow" factor — is the composition, said Behan. "Board composition is probably the single most important fac- tor in board effectiveness," she said. "If you don't have the right board composition, you're never going to have a great board." In essence, the real job of the board nominating committee is to put the best possible governance team around the table — but a number of things are getting in the way, said Behan. One obstacle is that once someone is appointed to the board, he will probably be re-nominated pretty routinely until he re- tires — barring some kind of problem or conflict of interest. "The other thing is a lot of boards have relied on their own Rolodexes — people they know, people they hang out with at the Mississauga golf club — in order to source board can- didates, as opposed to the best possible governance team that they can find," she said. There have long been issues with director recruitment and, on top of that, shareholder activists are becoming very inter- ested in board composition, said Behan. Shareholder activism is a trend growing around the world, said Jensen. "In Canada, we have a very shareholder-friendly regime, much more so than in the U.S., and we can see that if we don't have strong, active, smart, engaged and thoughtful boards, we will have a hollowing-out of corporate Canada," she said. There's also mounting global pressure towards promoting women on boards that began in Norway in 2003, said Behan. The country passed a law requiring Norwegian boards to be comprised of 40 per cent women. Companies had five years to comply or were delisted from the Norwegian stock exchange. "So we've seen this tsunami effect of many other countries adopting these quotas. (But) quotas are not popular in North America," said Behan. "What the OSC put together was a graceful way for Canadian boards to address this tsunami." HOPE ON THE HORIZON Change may be on the way for Canadian boards, as the OSC collects disclosures from TSX-listed companies, said Jensen. "We are starting now to get this disclosure in. Our job now will be to compile what we get and look at it for compliance. We will talk to companies who are not in compliance, but we will also be publishing reports on what we see," she said, adding the Ontario government will likely be taking a close look at the numbers as well. There are two different ways Canadian boards might re- spond to the new rule, said Behan. "Number one is 'Hey, let's try some boilerplate,'" she said. "(But) I don't think boilerplate is going to get you that far… there's a second option and it's to actually capitalize on the op- portunity that the OSC policy has given boards." The new rule is actually a wonderful opportunity to go and enhance the calibre of the board, she said. "We are going to see some recruiting for tokenism — 'Give me a woman, any woman.' That is going to be a nightmare be- cause boards are bad at performance management. So that is the worst thing that could happen. But I'm optimistic that some of the best things will happen, which is to really bring some 'wow- calibre' directors onto Canadian boards," said Behan. The OSC is itself an example of what can happen when boards embrace diversity, said Jensen. "We didn't just do this as an academic exercise. We have a board that is 38 per cent women, we have a senior management team that is just over 60 per cent women. And what we found was, with a concerted effort to try to get gender diversity in our senior levels, the conversation has changed," she said. "We have fantastic board members of both genders, but the board as a whole works very, very differently. It is a collegial board, but it's filled with people who are bringing incredible background experience. "But just how they work together as a team and how they ask really tough questions, it really shows that if you get the gender balance right and you get true diversity — not just of gender but of thought — at the board level, it can really, really change the culture." "Board composition is probably the single most important factor in board effectiveness." DIVERSITY/FEATURE

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