Canadian Pension Steps Up Gender Board Diversity Advocacy

CPPIB will use its voting power to increase presence of women on boards.

The C$368.3 billion ($270.6 billion) Canada Pension Plan Investment Board (CPPIB) is looking to improve the gender balance of public company boards with its new Global Gender Diversity Voting Practice. Under the new policy, CPPIB will vote against the chair responsible for director nominations at the public companies it invests in if the board has no women directors.

The board cited research from financial services firm Credit Suisse and nonprofit Catalyst Inc. that has shown that companies with higher female representation earn higher returns. It also said that research and regulatory reviews of boards at major listed companies show women currently represent only 22% of directors, adding that it would take decades to reach parity even if the rate at which women are joining corporate boards were to double.

“We believe that companies with gender-diverse boards are more likely to achieve superior financial performance over the long-term,” Mark Machin, president and CEO of CPPIB, said in a release. “For that reason, engaging with companies to drive better corporate behaviors is a key part of CPPIB’s mandate.”

In the past year, CPPIB’s Sustainable Investing team added board effectiveness as a fifth area of focus, joining climate change, water, human rights, and executive compensation.

CPPIB said that in 2017, it leveraged its votes at the shareholder meetings of 45 Canadian companies with no women directors to demonstrate its goal to improve diversity. The board urged the companies to evaluate their directors, including their gender makeup. As a result, CPPIB said that nearly half of those companies have since appointed a woman director.

And during 2018, the CPPIB voted at 22 Canadian public company shareholder meetings with no women directors. It said that despite making efforts to work with the companies, it eventually voted against the nominating committee chair at six companies, and against the entire nominating committee at seven.

“We want to see companies commit to following up on gaps identified through our evaluations of directors and boards, and to renew their boards with directors who bring needed skills,” Machin wrote in an op-ed piece in Canadian newspaper The Globe and Mail in October. “We will continue monitoring developments in female director representation at our investee companies and commend those that take steps to professionalize their director search processes and appoint female directors … CPPIB urges other large institutional investors to send similar messages.”

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