Time for diversity in mining leadership

Carole Turcotte, partner at Denton's LLP, Montreal, makes a strong case for diversity on mining boards and in senior management structures. — Photo courtesy Denton's LLP

A recent study, “Mining for talent 2015: A review of women on boards in the mining industry 2012–2014,” co-authored by Women in Mining UK and Pricewaterhouse Cooper (PwC), said it is well-documented that companies with more women on their boards are socially and financially more successful.

From a financial standpoint alone, the benefit is unarguable. According to several studies, companies with boards that have more women on them, on average, outperform boards with fewer women by 53 per cent on return on equity, by 42 per cent on return on sales, and by 66 per cent on return on invested capital.

Carole Turcotte, partner at Dentons LLP's Montreal office and board member of Lamêlée Iron Ore Ltd., makes a strong case for diversity in mining leadership, agreeing the financial benefit is there, but adding money isn’t everything.

“Diversity is a main factor when it comes to people challenging the status quo,” she said. “Boards and organizations constituted of men only think a certain way, and when they bring on women or other diversity even, they will begin to have people who challenge that point of view.”

In mining and industry, diversification has become a priority, mainly thanks to policies that move corporations in that direction. Amendments made in October 2014 to Ontario’s policy created by the securities commission implements a “comply or explain” approach requiring a certain number of female board members or an explanation.

“The policy brings it forward so now they have to sit and think about their current structure,” said Turcotte. “It doesn’t obligate them to diversify, but it makes companies think and wonder if their selection processes are current.”

Women represent the majority of students and 48 per cent of the workforce, yet they only fill 16 per cent of positions in the mining industry.

“This has to trigger something in people,” she said. “What explains this difference? The numbers of people in mining should reflect the society around you. If your clients are women, it is important to consider their position and it makes sense to represent a cross-section of all the people around you.”

Studies have highlighted a plethora of benefits brought on by diversity including better financial management, better governance, greater stability in a crisis, more social responsibility and more focus on sustainability.

“Studies also point out more creativity and innovation result from diversity,” said Turcotte. “In mining there will eventually be a strong turnover of people as Baby Boomers retire, and there will be some lack of workmanship. They will have to fill the gap and if they look in the right places, they could fill those places with women, easily.”

According to the Women in Mining UK/PwC report, there has been a significant improvement in gender diversity in senior management and board roles in mining, but more work is needed.

At the current rate, it will take until 2039 for the top 100 listed mining companies to reach the 30 per cent critical mass of women that has been found to have the maximum positive impact on performance, and until 2045 for the top 500 to do the same.

Women face a number of barriers including mining being a male-dominated industry, they are less likely to be promoted because of family responsibilities, and there is a sparse labour pool from which to draw.

The report said only 11 per cent of women, as opposed to 96 per cent of men, placed significant emphasis on having a mining-specific degree to hold a board or senior management position, and 95 per cent of men said sector experience was important compared to 53 per cent of women.

At the same time, the report noted only 32 per cent of male directors in 2013 held a mining or engineering degree and that there is “no identifiable correlation between the financial performance of a company and the number of engineers on the board.”

“You don’t need an engineering degree,” said Turcotte “(Female board members') education could be in environmental science, sustainability, law or economics. Bringing these women in creates role models for other women and helps the company appear progressive.”

The result is compounding, helping to reduce turnover and improving the company’s reputation on the market.

In addition, “female board members are seen to bring a more collaborative leadership style that increases the amount of listening, social support and successful problem solving, benefiting boardroom dynamics and the ways in which controversial issues are addressed,” said the report.

It will only be a matter of time, said Turcotte, until shareholders realize these benefits and create social pressure to ensure a more diverse company structure.

Canada’s model is a “comply or explain” format, which asks companies to diversify or explain its choice to abstain.

In Europe there are many models, achieving various levels of success, including quotas requiring 25 to 40 per cent of a company’s board be comprised of women.

Norway and France have quotas imposed now that will rise to 40 per cent mandatory by 2017. In London, a 25 per cent flex quota is in effect that requires companies to comply or face a mandatory quota down the road.

“Follow up is important too,” said Turcotte. “You have to put (mining companies) on a quota, and then impose sanctions; otherwise, these programs don’t work.”

The caveat to quota impositions are “token” placements, which can belittle the process and make people feel they don’t really belong.

But diversity of all kinds is important, said Turcotte, who adds it is often imposed for women because it is easier to track, but encourages corporations to have a more diverse environment whichever way they can.

“There is not a one-size-fits-all solution, which makes comply or explain a good model,” she said.

Turcotte said the process of diversifying a board or senior management has to come from having an internal look at the company and rethinking the current structure to see what can be done to include diversity. Companies who refuse will miss out in the end, she added.

“If, year after year, a company discloses they don’t have a policy or special consideration, eventually shareholders and investors will see other companies that follow these principles and are more successful and will switch over,” said Turcotte.