Canadian Securities Regulators Release Results of Fourth Gender Diversity Review

The Canadian Securities Administrators (“CSA”) recently released CSA Multilateral Staff Notice 58-310 – Report on Fourth Staff Review of Disclosure regarding Women on Boards and in Executive Officer Positions, which outlines key trends from the CSA’s most recent review of gender diversity disclosure among non-venture issuers. This latest report continues the theme of the three previous reports that progress is being made in enhancing gender diversity among board and executive officer positions in Canada, albeit gradually.

Background

Since 2015, National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”) has required all non-venture issuers to disclose certain information regarding gender diversity among its board of directors and executive officers. The objective of these requirements is to increase transparency for investors and other stakeholders regarding the representation of women on boards and in executive officer positions, and the approach that issuers take in respect of such representation.

The gender diversity disclosure requirements in NI 58-101 consists of a “comply or explain” regime under which issuers must disclose, among other things:

• the number and percentage of women on its board of directors and in executive officer positions,
• whether the issuer has targets for the number or percentage of women in board and executive officer positions (and if not, why not),
• whether the issuer has a written policy relating to the identification and nomination of female directors (and if not, why not), and
• whether consideration is given to female representation in the director and officer recruitment process.

Currently, Canadian securities regulators have not imposed any requirements to achieve a minimum level of female representation on the board or in executive officer positions. However, issuers should be aware that a lack of female representation on the board could, in some circumstances, contribute to an adverse proxy voting recommendation by proxy advisors (see our November 20, 2017 Update, ISS Releases Final 2018 Voting Policy Updates for Canada and our December 4, 2017 Update, Glass Lewis Releases 2018 Canadian Proxy Voting Guidelines).

Key Trends

The CSA reviewed the gender diversity disclosure of 648 issuers that had year-ends between December 31, 2017 and March 31, 2018. It is the fourth such review since the gender diversity disclosure requirements were adopted.

Some of the key trends highlighted in the report include:

• Women currently occupy 15% of director positions (11% in 2015),
• 29% of vacated board seats were filled by women in 2018 (26% in 2017),
• 66% of issuers have at least one woman on their boards (49% in 2015),
• 16% of issuers have adopted targets for the representation of women on their boards (7% in 2015), with those issuers having an average of 24% of their board seats held by women (compared to an average of 13% for those issuers without targets),
• 42% of issuers have adopted policies for identifying and nominating female directors (15% in 2015), and
• Only 4% of issuers have a female CEO.

Moving Forward Toward Gender Diversity

It appears that the increased social, market and regulatory attention on gender diversity in recent years is having a positive impact on the level of female representation in board positions in particular. At the same time, the CSA’s reviews over the past four years highlight the slow pace at which change is occurring.

The CSA conducted extensive research and consultations relating to gender diversity and announced they are considering whether to adopt additional disclosure rules and/or best practices guidelines, though no decisions have yet been made. In the interim, market pressures, the full implementation of proxy advisors’ gender diversity policies for the 2019 proxy season, and recent and pending corporate law diversity disclosure requirements should all continue to enhance gender diversity among Canadian public companies.