In our continuing series, Corporate Governance Expert David Beatty offers insights into Board diversity and quotas.

What Do I Think About Quotas in Canada?

David R. Beatty:  One of the most contentious issues in selecting boards of directors is the issue of diversity, particularly gender diversity. Now, on the Toronto Stock Exchange 250 at the moment, the percentage of women on the boards of directors is 24%. It varies a lot by industry. The oil and gas, and mineral extractive industries are lower, but on average is 24%. That’s up 10 percentage points in the last decade, so you could think about it as a glacier proceeding at 1% a year.

So the question is, would you consider imposing a quota? Norway did it. They set 40%, and Christine Lagarde as Minister of Finance in France did it. In fact, she said to her operating companies on the CAC exchange, “You will get to 40% women on your board by 2018.” This was in 2016. “By 2018 or your company will be delisted and your last two years of director’s pay will be clawed back by the state. Did you hear what I said?”

So there are examples in Europe of quotas, and there’s no lack of talented women. Most of our classes though in the Directors Education Program, they basically don’t like to be quota-ized. They basically think, “I want to be chosen for my ability to add value here and not because I happened to be a female.” So I went to Lone Fonss Schroder who is on the board of Canada Steamship Lines with me. She’s also on the board of Ikea, Volvo, and Siemens, lives in Denmark, made a huge contribution to the Canada Steamship Lines Board, and I said, “Lone, if you were in this class, and the women come back, and they say they don’t want to be quota-ized, what would your advice to them be?”

Instantly, she turned to me and she said, “Get over it. Just get this behind you. Let’s get 40% of women are directors of Canadian publicly-traded companies, and let’s get on with working with the companies on their strategy, and their future, and their talent. Let’s get this behind us.” Will that happen? I don’t think so, but it’s very interesting to me that the European attitude is this, “Let’s get over this.” Whereas the North American attitude is still, “I personally don’t want to be categorized as a quota-ized kind of director.” Difference in points of view, very profound, but I think really important to think through. Maybe we ought to have quotas. I think we should.

David Beatty is an adjunct professor and Conway chair of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management. Over his career, he has served on more than 39 boards of directors and been chair of nine publicly traded companies. He was the founding managing director of the Canadian Coalition for Good Governance (2003 to 2008). A version of this article will also appear in the Winter 2017 edition of Rotman Management, published by the University of Toronto’s Rotman School of Management.