Critics of quotas

A message to critics of quotas

A report from the Corporate Women  Directors International (2013) noted that quotas have proved effective in increasing the numbers of women appointed to corporate boards, and in a short period of time. A recent Pitt Law study ( Working Paper no. 2012-13 May 2012) noted that a significant driver in promoting equity of opportunity for women in the board room were quota laws. 

None the less, critics of quota have been unrelenting, citing 5 consequences of imposing quotas including:

• the trophy phenomenon
• the celebrity phenomenon
• elitism
• statistical anomalies
• de-listing

The trophy director phenomenon refers to those who hold seats on more than 4 corporate boards. In an effort to comply with the Norwegian quota law, as an example, one woman was named to 11 Corporate boards. No country was immune. In the US and France, appointing celebrities has provided certain corporate boards with the opportunity to emphasize a sensitivity to gender equity in leadership. 

The Pitt Law report concluded that in the US, between 2001 and 2006, the appointment of celebrity women rose from 19-80, with the same women appointed and re-appointed.

However, what this ate failed to show was how  many women restrict these directorships to 3-4 boards. The reports are made without background disclosure. And with out this disclosure, a deeper review of who is a member of what board, the percentages reported by either side of the argument for-or against- quotas are meaningless. 

Laura Tyson (Jan2003) has some good advice. Nominating Committees should consider candidates from such sources as unlisted companies, private equity firms, business services, consultancies and organizations in the non-commercial sector. Derek Higgs (2003) advises corporations to consider a broader definition of diversity to include: age, ethnicity, nationality as well as gender so that candidates are selected in keeping with the needs and challenges of the corporation and its strategies. 

So, all this is ambiguous. Likely, Canada will not mandate quotas. And, regulators and politicians do not appear to have a stomach to impose quotas (Quebec aside). Therefore, what can women do to take control of their own fates? 

That is our next blog.

Your public service pension

In my last blog, I covered off  4 items which might give you a hint that things were not well with the way you pension plan is being governed.

There are a few other items to consider.

The common organization for boards is that they have an executive committee; a governance committee; an audit committee; a nominating committee; strategic planning committee. On top of that there may be a risk management committee. This latter committee is somewhat controversial. Some governance specialists argue that risk management is the responsibility of each of the committees. Each looks at risk through their specific lens.

If the Plan board does not have these committees, ask why. Consider this potential problem #5.

So, as an example, the NBPSPP board does not have a nominating committee. How, then are candidates recruited? What skills are required by the board consistent with the needs of the strategic plan? How ell do current members perform and should some be replaced? Are each of the committees performing properly? Should members be replaced? 

It is up to the nominating committee to make this determination and advise the board accordingly. Typically, as well, the nominating committee is the leading edge of the wedge in interviewing prospective candidates. 

NBPSPP announced that 3 new board members were appointed. There was no report as to how their particular qualifications were to add value to the work of the board and by extension, the Plan. Nor was there a statement as to how these new members were recruited. 

Consider this potential problem #6.

That said, there is no strategic planning committee. Now, this board, which is quite small, did do a strategic plan-or at least, the Vestcor staff did the plan. There is no indication if the Board played an active role in the development or  what the needs of the client base (us) are. Certainly, as noted above, it does not appear to have influenced the new appointments. 

Consider this potential problem #7.

There is an Audit Committee. But, curiously, the Audit Committee is made up of  executive director board members and is led by the Board Chair. So, essentially, lead board members are coordinating the audit of themselves and reporting to the membership that they are A OK.

This is called a conflict of interest.

CCGG guidelines recommend , if not mandate, that Independent Board members take control of the audit process and that chair of the audit committee, him/herself independent , repot the audit to the membership. 

Consider this potential problem #8 

Which now raises the question as to independence. How many of the Plan board members are aligned, and therefore by definition not independent? Why is independence important? More on this tomorrow. 

One committee, arguably the most important one, has not been touched. The Governance Committee. Typically this committee oversees the evaluation of the members, reporting the results to the membership. There are a variety of vehicles a board might use. However, at the very least, each member is evaluated by the chairman and the board is evaluated. NBPSPP noted in its annual report for 2017 that a board evaluation was done. However, no vehicle or tool was described and no results were produced. 

As well, either the Governance Committee or the Nominating Committee lead/coordinate board education . While there are elements which related directly to the nature of the business, there also must be related to their actual function..being governance. In this case there was no such education done.

So, how are members assured that their Plan board actually knows what they should be doing.

Consider this potential (and probable) problem #9

Tomorrow, I will cover off a few other issues before I get into fixes. These problems include: transparency, communication, succession planning, compensation, use of external advisors, risk management.