Exposing the Power Gap in Canada’s C-Suite and Challenging the Language of Merit in Corporate Disclosures

Telfer alumna and McKinsey & Company Geneviève Bonin (MBA’96) explains that while Canadian companies prioritize gender inclusion, there is still a long way to go. New research by University of Ottawa professors Walid Ben Amar and Philip McIlkenny, Carleton University professor Merridee Bujaki and Wilfrid Laurier University professor Bruce McConomy suggests that how Canadian corporations disclose information about their board diversity tells a lot about their openness to become inclusive or resistance to change. What are the main challenges and how can corporations promote gender diversity in Canada’s C-suite?

The glass ceiling exposed in Canada’s C-suite

The COVID-19 pandemic has threatened several years’ worth of slow progress for women in the workplace.  According to a report by McKinsey & Company, one out of four women in  U.S. companies are contemplating downshifting their careers or leaving the workplace altogether. The impact of the pandemic on women’s trajectory to leadership roles cannot be ignored, but the pandemic has simply exposed many systemic barriers that have persisted in Canada’s C-suite.

Canada leads many developed economies in gender equality. In 2019, McKinsey & Company surveyed 110 Canadian organizations employing over 500,000 employees and found that 80% of Canadian organizations consider gender diversity a priority, a threefold increase since a 2017 survey. “Our 2019 survey shows that gender diversity continues to be a challenge for many corporations and what is expected of them can also be challenging depending on the industry,” says Bonin, a partner at McKinsey & Company.

There is not only a gender gap in Canada’s workforce. The low representation of women in corporate boards and top leadership positions in the corporate sector also indicates a power gap, as recently shown by a Globe and Mail investigative series.

Understanding the barriers and their impact on inclusion

Merit is often described as an objective HR recruitment and selection tool: companies look for the most qualified candidate for a position, regardless of their gender. However, researchers have shown that the idea of merit that still dominates the corporate sector is conflated with a very gendered concept of leadership. “Historically, the majority of corporate leadership positions (CEO, CFO and board chairperson) have been held by men,” says Ben Amar, a full professor of accounting at the Telfer School of Management.

Ben Amar explains that, unfortunately, the concept of merit accepted today still reflects the experience of someone who prioritizes fierce competition, high performance, risks, individualism, commitment to long hours of work, and after-work networking activities. Often this experience of leadership is still perceived as inherently masculine.

The challenge is that defining job standards based on this definition of merit creates systemic barriers, leading the C-suite to exclude a large number of talented women. According to Philip McIlkenny, an associate professor of accounting at Telfer, “Men face fewer challenges to fulfill these merit criteria in corporate boards and senior management when compared to equally talented women searching for corporate career opportunities.”

The result is that women continue to stumble on many obstacles to being hired or promoted into top leadership positions and boards in the corporate sector. McKinsey & Company found that, compared to men, women are 30% less likely to be promoted from entry level to managerial positions and 60% less likely to move from a director to VP position. “Across all industries in Canada, a leaky talent pipeline still exists,” Bonin says. “When we see industries where women and men are equally distributed at the bottom but only a few women make it to senior managerial, VP and CEO positions, then there is an issue,” she adds.

Even when women advance to the top, some may experience a different set of challenges: they may not feel represented or supported. “At the senior manager/director level and above, women are two and a half times more likely than men to be the only person of their gender in the room,” says Bonin. This also creates another barrier: the lack of female sponsors who can support other women to unlock their potential and grow. “Sponsors play a critical role promoting and advocating for top talent, and many people feel more comfortable working with a sponsor of their gender,” says Bonin. “When a woman lacks that sponsorship because there are fewer senior women who could play that role, then she may not have as much ability to get to the top.”

How language exposes systemic barriers

A collaborative Telfer-led study examined if and how Canadian companies used the language of their diversity disclosures to legitimize board recruitment practices in the corporate sector. “We also wanted to understand how the corporate sector responded to diversity disclosure requirements introduced by the Government of Ontario in 2014,” says Merridee Bujaki, a full professor of accounting at Carleton University.

The researchers examined references to two terms, “merit” and “diversity,” in the first mandatory corporate governance diversity disclosures of a sample of 119 public corporations traded on the Toronto Stock Exchange (TSX). “We were able to show that language can be very powerful in this context: corporate disclosures can reflect how a company is committed to diversity and inclusion or how it maintains the power gap that persists in recruitment practices in the C-suite,” says Ben Amar. The researchers published their findings in Critical Perspectives on Accounting.

Findings: Change is needed

The study found that 59% of the sixty largest TSX companies in the sample have adopted a written policy for identifying and nominating women directors, whereas only 28% of the other TSX companies have adopted such a policy. The disclosures of 44 companies included in the sample mentioned merit as a justification for the appointment of board members, representing 32.2% of the 60 largest TSX companies and 41.7% of the other TSX companies in the sample.

A more detailed analysis of the language employed by the 44 companies that used the term in their disclosures found that:

• These companies tend to have fewer women directors than those that do not mention merit in their corporate disclosure.
• Their disclosures frequently had very low readability scores, an indication that the documents lacked clarity.
• The term “merit” lacks a consistent definition.
• Merit is often described as the key criterion for selecting board members.
• Companies appeal to vague or broad definitions of diversity, downplaying the importance of gender diversity.

Their findings suggest that many TSX companies use the term “merit” in their disclosures to maintain the existing power structures underlying corporate board appointments. These references also indicate a resistance to public pressure to increase the representation of women on boards. Overall, merit continues to be invoked as objective, but “the big issue is ‘who gets to define these standards of merit,’” says Bujaki. “When organizations position merit as a neutral and objective evaluation criterion, without any type of questioning, inequalities and patriarchal dominance are perpetuated,” she adds.

The researchers hope that their insights can positively influence board composition in Canada’s C-suite: “If meritocracy is not acknowledged and questioned, corporations will have little incentive to challenge the status quo and substantively promote inclusion in their recruitment, promotion and development practices,” says Ben Amar.

How to enact change

Research has shown that gender-diverse boards are not only the right thing to do — they also have a positive financial impact on companies. But how can Canada’s corporate sector get there?

Ben Amar and collaborators believe that overcoming corporate resistance to change may require a range of innovative practices by corporations and regulators. To foster gender diversity in top leadership positions, they recommend that companies:

• Formally acknowledge the value of diversity and its positive impact on corporate decision-making.
• Challenge existing recruitment and appointment systems based on merit.
• Reflect on current inclusion practices and consider the best options to enhance diversity in leadership positions.
• Accelerate the renewal of directorships (through mandatory retirements policies or director term limits) to bring fresh perspectives to the board table and foster better decision-making.
• Adopt ambitious diversity targets and report on progress towards these objectives.

Geneviève Bonin says that designing women leadership programs that include mentorships, sponsorship, training, coaching and women’s networks is crucial for corporations. These development opportunities allow women to navigate their own experiences and leadership journeys. “These programs also help women understand the unique values that they bring to the organization,” she says. Additionally, she proposes the following recommendations to help companies grow their female talent and increase gender representation at the top:

• Based on your industry sector, define your own diversity targets and strive to meet them.
• Increase the inclusiveness of re-skilling and recruitment practices.
• Create a diversity-enabling infrastructure with flexible working options, extended leave policies and back-to-work programs.
• Implement unconscious bias training.
• De-bias recruitment and performance evaluation processes.

Read the full article to learn more about this study:

Ben Amar, W., Bujaki, M.L., McConomy, B.J. and McIlkenny, P. 2020. “Gendering merit: How the discourse of merit in diversity disclosures supports the gendered status quo on Canadian corporate boards.” In Critical Perspectives on Accounting.