Patricia VircGender diversity report highlights chicken-and-egg problem

January 2, 2020by Patricia Virc

The results of a recent gender equality survey of public issuers highlights the circular problem with finding meritorious board members, says Toronto civil litigator Patricia Virc.

The report, conducted by Torys LLP, reviewed the proxy circulars of all reporting issuers in the S&P/TSX Composite Index subject to new diversity disclosure rules. As of Jan. 1, the Ontario Securities Commission — along with most other Canadian jurisdictions, except Alberta, British Columbia and the Yukon — requires companies to disclose the number of women on their boards of directors and in executive officer positions. If a company does not have women on their boards or in executive officer positions, they must disclose why not or risk being delisted.

The 179 reporting issuers included in the survey make up approximately 71 per cent of the Index and have an average market capitalization of approximately $8.3 billion, says the report, entitled “Women in the C-Suite: Can Securities Law Advance Gender Equality?”

Of the issuers surveyed, 56 per cent had adopted formal policies addressing the representation of women on the board.

“This is a good example of disclosure rules driving corporate behaviour, as the vast majority of issuers who have policies appear to have adopted them between the 2014 and 2015 meeting seasons,” the report states. “While the rules only require disclosure regarding board policies, some issuers have gone further and adopted a policy that also addresses women’s representation in senior management (either as part of the board policy, or as a standalone policy).”

Virc, a lawyer with Steinberg Title Hope & Israel LLP, says the survey findings are set out fairly without editorializing the results. However, when it comes to why companies don’t have a women on their boards, almost half of the issuers said it was because candidates are selected based on merit.

“The findings show some things just don’t change,” she tells “The issuers who have been resistant to having a policy or practice of increasing the number of women on their boards, are continuing to stick with their story that they can’t find meritorious women or other diverse groups to sit on their boards.”

She says the issue of merit becomes a circular problem — you need experience to be viewed as meritorious, but you can’t get experience unless you are placed on a board.

“Another problem that exists, and is cited in the report, is that board composition is often determined by ownership,” Virc says. “In other words, some issuers have controlling shareholders or other groups who have nomination rights. Whether or not the issuer itself would like to adopt a gender diversity policy, as a practical matter, it’s impossible because controlling shareholders have their rights to nominate candidates.”

Virc notes that financial institutions were excluded from the Torys survey because, due to their fiscal years, they will not be subject to the new disclosure rules until next year. However, she says these institutions have generally been the leaders in board diversity.

“One of the survey highlights is the lack of women in the C-Suite,” she says. “Essentially it’s the same sort of chicken-and-egg problem: board members are often recruited from the C-Suite and without promoting women to those positions, the pool of female board candidates is very slim. If you’re looking in the men’s locker room for women, you’re not going to find them there.”

Patricia Virc

Steinberg Title Hope & Israel LLPSteinberg Title Hope & Israel LLP

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