Boards of Canadian companies slowly becoming more diverse: report

Canadian companies have made some progress at improving the ethnic diversity of their boards, but there’s a long way to go before they mirror society, according to a new report from ISS Corporate Solutions Inc.

The firm reviewed data on the ethnic composition of corporate boards between 2019 and 2023. It found that representation for all minority groups has improved over the past five years.

According to the report, 87.3% of the directors for S&P/TSX companies are Caucasian/White, down from 93.0% in 2019. The percentage remains over-representative since about 70% of the Canadian population is Caucasian/White, it said.

In 2019, 57.8% of S&P/TSX companies had all-white boards. That’s down sharply, with 70% of companies now having at least one ethnically diverse director, the report said. About one-third of companies now have more than one diverse director, up from about 10% back in 2019.

While the report noted the improvement, it added that “unfortunately, the pace is slow.”

“At the current rate, it would take 10 years for overall board representation of diverse ethnicities to match the country’s demographic makeup,” it said.

For instance, while Indian/South Asian directors now account for 3.1% of all board seats — ranking second to Caucasian/White — this is still “less than half of the 7.1% this ethnicity represents in the total population,” the report said.

The research also indicated that much of the improvement in ethnic diversity has come alongside companies’ efforts to improve the gender balance of their boards.

According to the report, female directors have accounted for almost 70% of the increase in ethnic diversity.

As a result, women from ethnic minorities now account for almost half (47.7%) of diverse directors, up from 29.5% in 2019.

“At this pace, women directors from ethnic diverse groups will outnumber men in the next couple of years,” the firm said, noting that women already outnumber men in certain minority groups.

Ethnic diversity also varies with company size and industry, the report found.

For instance, it noted that while just 16.9% of S&P/TSX 60 companies have no ethnic diversity on their boards, about one-third (33.1%) of the companies in the TSX Composite index have no diversity.

By sector, more than 40% of companies in the energy and materials industries have no diversity, it reported.

Conversely, the consumer discretionary sector is the most diverse, with almost 20% diverse directors, followed by financials at 13.6%.

“While progress is welcome in terms of fewer homogenous boards of directors, Canadian companies could pick up the pace in terms of welcoming more potential directors with diverse backgrounds and ethnicities, who better reflect all stakeholders,” the report concluded.