Board diversity has been at the forefront of the Canadian governance landscape for a number of years, and has recently been the subject of increased stakeholder focus. While gender and racial parity are ends in themselves, recent research shows that board diversity may be particularly beneficial in the M&A context.

The current state of affairs

Since 2014, Canadian securities regulators have required certain issuers to publish data on the representation of women on their boards and disclose the details of their gender diversity policies (or, if they do not have one, explain why not).

More recently, the federal government amended the CBCA to require publicly listed companies to provide diversity disclosure to their shareholders in advance of annual meetings, and also recently launched the “50/30” challenge (an initiative aimed at attaining gender parity and at least 30% representation of minority groups on boards and in senior management positions).

And in their updated 2021 Canadian proxy voting guidelines, influential proxy advisory firms ISS and Glass Lewis have expanded their policies on board gender diversity.

Yet, despite increased stakeholder attention to board diversity, studies show that progress remains slow. A Ryerson University report published in August 2020 found that women held only 25.3%, and Black people only 2%, of board seats at leading organizations in 8 Canadian cities. And in its October 2019 report on board gender diversity disclosure, the CSA found that only 17% of issuers’ board seats were occupied by women.

Board diversity and M&A

Studies have shown that board diversity is good for a company’s bottom line (one study found that companies with an ethnically diverse board are 43% more likely to have above-average profits). A recent study out of the Université de Sherbrooke shows that increasing board gender diversity may also lead to better M&A performance.

Key findings of the study include:

  • Bidders with a board that were comprised of less than 15% women paid premiums that were approximately 32% higher than premiums paid by more gender-diverse boards. Notably, each additional female director on the board reduced an acquirer’s premium by approximately 3%.
  • Bidders with more gender-diverse executive teams and boards of directors witnessed higher stock returns: each additional female director on the board increased the acquiring company’s return by approximately 3%.

While progress in Canada has been modest, companies should take note of the many benefits – including, it would seem, better M&A outcomes – of increasing board diversity.


The author would like to thank Nareesa Nathoo for her significant contribution to this blog post.

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