The Ontario Securities Commission said Wednesday it expects to make recommendations to the provincial government later this fall, which may include asking companies listed on the Toronto Stock Exchange to disclose how they're increasing the number of women in their highest executive ranks.
If it chooses to endorse the voluntary "comply or explain" policy, publicly-traded companies will be required to annually report their internal targets and progress — and be questioned if they refuse to comply.
Some observers say the proposal is too soft, and anything short of enforcing hard quotas or penalties will result in slow change, if anything happens at all.
"Let's skip this intermediate step we don’t think is going to work,” urged Jim Leech, head of the Ontario Teachers' Pension Plan.
The pension fund, which manages more than $100 billion of assets, wants to see at least three women on every corporate board of nine or 10 members by 2020, or have the company delisted on the exchange.
"If we're serious, and we really want to make that difference and we really believe in it, set up (quotas) for seven years from now as a target," he said, noting that Canada has fewer women on corporate boards than countries such as Turkey and Poland.
"It's clear to us that better boards have better diversity and that's what we as institution shareholders should be pushing."
Even without penalties for non-compliance, the OSC hopes that the voluntary program will encourage companies to come up with policies that would be the right fit for them, and encourages firms to publish these initiatives in their proxy circulars, annual reports and on their corporate websites.
Research shows that a higher mix of women in managerial and executive roles leads to more profitable companies and stronger organizations. Women often have leadership skills complementary to men, are often fairer with rewards, can be more focused on goals and can be stronger role models, said Eric Lamarre with global management consulting firm McKinsey and Company Canada.
Other countries have launched various gender diversity policies with varying degrees of success.
Since enacting a voluntary "comply or explain" policy in January 2012, Australia has seen gender diversity on corporate boards grow by about one per cent across all sectors. It also reports that 90 per cent of its publicly-listed companies now have an internal policy in place to promote more women as viable candidates for director positions.
In the U.K., the government is asking companies to aim for 25 to 30 per cent of their board members be women or be faced with stiffer quotas and penalties. France and Norway have penalties in place for companies that don't comply to their gender quotas.
One of the issues concerning a quotas system, is that companies fear that they will be forced to promote unqualified candidates solely to meet gender requirements. But the panellists argued that this could be prevented if companies look beyond industry and experience and more at skill set when recruiting at the executive level.
Kathleen Taylor, who will chair the board at the Royal Bank of Canada (TSX:RY), said that a gender diversity agenda begins with a company's chief executive who will make it a priority to not only seek out the best candidates for a position, but also ensure that the selection is made from a diverse list.
"When women are there in strong visible numbers, there is a catalyst for change," said Taylor, who takes on the new role in January.
Pamela Jeffery of the Canadian Board Diversity Council, said research shows that only 18 per cent of Canadian companies have internal policies in place for gender recruitment.
Jeffery said at the current pace, 20 per cent of board seats will be held by women by 2015. Complete gender parity, where half of those who sit on corporate boards are women, isn't expected to be achieved until 2097.
"By 2097, we’re all dead. Our children are all dead," she said, highlighting the urgency for immediate action.
Annette Verschuren, the chair and chief executive of renewable energy storage firm NRStor Inc., said companies need to know that gender diversity is not just a numbers game, but rather a smart business decision.
"Women see things through a different lens and the lens is changing on corporate boards," said Verschuren, who was previously the president of Home Depot Canada, and has held board positions at mining and tobacco companies.
One of the key issues is recruitment, where early hires must be mentored and groomed so they will be ready for future corporate board positions.
"We have to build the pool because more and more will float to the top," she said.