With gender diversity comes quality

Equal opportunities are driving performance, and BMO's Lesley Marks see potential with women at the helm in the Canadian corporate space

Ruth Saldanha 14 October, 2019 | 2:41AM

 

 

Ruth Saldanha: Last month a study by Moody's Investors Service found that companies with a higher percentage of female directors also have higher credit quality, which is good news for Canadian companies as Kingsdale Advisors in its 2019 proxy review found that 55 of the 60 companies in the TSX 60 held their annual general meetings with at least two women on board. Lesley Marks, Chief Investment Strategist at BMO Private Wealth Canada is here to talk about this.

Lesley, thank you so much for being here today.

Lesley Marks: Thank you for having me here today, Ruth.

Saldanha: First up, how important is gender diversity to overall corporate success?

Marks: I think overall, all diversity is very important to corporate success. But as it pertains to gender diversity, we've seen a plethora of studies around how corporations have done that have more diverse boards, as well as more diversity in their executive ranks as well. In general, what we've seen is companies with more diversity perform better on what is probably one of the most efficient metrics, which is, profitability. Certainly, BMO recognizes this as an important attribute for its own corporate success and has made a concerted effort to focus on diversity across the organization.

Saldanha: Certain parts of the Canadian corporate world have recognized this not only at the corporate level, but through the entire workforce. Do you think there's more work that needs to be done on gender diversity across all areas of corporate life?

Marks: I think there absolutely does. I mean, we see that women are entering the workforce at the same rate as men. They're in the business programs. They're well represented. But then something happens as we move up through the ranks. And there has been a lot of focus and attention on the C-suite and in the boardroom. But we're missing something still I think in the middle, in the middle management ranks, which is really where our pipeline grows in order to fill those upper rank seats. So, I think we still need to focus on that area.

Saldanha: As an investor, what are some of the things that I can do to screen for this to make sure that my portfolio is more gender diverse?

Marks: Well, there's a few different things that you can do. One you can do, which is probably the simplest, is to look at funds or strategies that focus on gender diversity. So, one example is the BMO Women in Leadership Fund, which actually uses a screening technique to look at companies that are diverse based on their board or their C suite in order to even include them for potential for investments. So, that's probably the most straightforward way.

If you want to be a little bit more ambitious, and you're looking at individual investments, we're very fortunate that in public disclosure documents, we have a lot of information and data around diversity. So, for any company that you're looking at investing in, you can look at the makeup of the company's executive board, as well as their own diversity policy. And that might be a helpful way to assess the diversity of a company you're looking at.

Saldanha: Are there any specific sectors that you like, or any specific ideas that makes sense from a diversity standpoint?

Marks: So, I think that when you think about sectors or ideas, you kind of have to start at the top with the largest companies because what we've seen is, diversity is a lot more prevalent in those companies. In the S&P/TSX 60, companies, they have a 30% of the board seats are occupied by women. And that dropped substantially to 18% for all TSX-listed companies. So, in general, what we've seen is better diverse policies, as well as more success when it comes to looking at diversity in larger companies over small companies.

And then, the second area to focus on is the sectors or industries in Canada. What we've also seen is sectors like the financials, consumer communication sectors, tend to also have more women represented in the senior ranks, in leadership in those sectors, and less so in areas like energy and materials. So not to say that there aren't very diverse management teams or leadership teams, in companies, in those sectors, the energy and material sectors, but you just have to look a little harder to find. Find those companies.

Saldanha: Thank you so much for joining us today. Lesley.

Marks: Thank you for having me, Ruth.

Saldanha: For Morningstar, I'm Ruth Saldanha.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BMO Women in Leadership F12.65 CAD-0.33

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Ruth Saldanha

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca