CSA Releases Results of Ninth Gender Diversity Review

The Canadian Securities Administrators (CSA) recently released CSA Multilateral Staff Notice 58-316 – 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 by non-venture issuers. This ninth diversity review completed by the CSA reveals continued gradual improvement in the proportion of women on boards and in executive officer positions among such issuers.

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 consist 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.

The latest proxy voting guidelines published by proxy advisors Institutional Shareholder Services Inc. and Glass Lewis & Co. indicate that a vote against recommendation in respect of the nominating committee chair will be issued where an S&P/TSX Composite Index or TSX issuer, respectively, does not have at least 30% gender diversity on its board of directors.

Canadian securities regulators have not imposed any requirements to achieve a minimum level of female representation on an issuer’s board of directors or in executive officer positions. In April 2023, however, the CSA published for comment proposed amendments to Form NI 58-101F1 – Corporate Governance Disclosure of NI 58-101 and National Policy 58-201 – Corporate Governance Guidelines that, if implemented, would expand diversity disclosure requirements for non-venture issuers and provide enhanced (non-prescriptive) guidelines for all issuers, including with respect to adoption of a written diversity policy and setting diversity objectives (e.g. numerical targets and training programs).

For further details, see our August 17, 2023 Update, Canadian Securities Administrators Proposes Amendments and Changes to Corporate Governance Disclosure Practices and Guidelines and our February 2, 2023 Update, 2023 Annual Reporting and Proxy Season – Key Areas of Focus.

Key Trends

In its ninth consecutive gender diversity review, the CSA reviewed the gender diversity disclosure of 602 issuers that had year-ends between December 31, 2022 and March 31, 2023.

Some of the key trends highlighted in the report include:

• Women currently occupy 27% of director positions (11% in 2015),
• 43% of vacated board seats were filled by women in 2022 (26% in 2017),
• 89% of issuers have at least one woman on their boards (49% in 2015),
• 43% of issuers have adopted targets for the representation of women on their boards (7% in 2015), with those issuers having an average of 32% of their board seats held by women (compared to an average of 22% for issuers without targets),
• 64% of issuers have adopted policies for identifying and nominating female directors (15% in 2015), with those issuers having an average of 30% of their board seats held by women (compared to an average of 19% for issuers with no such policy),
• Issuers with director term limits or other board renewal mechanisms generally have more women on their boards (34% for issuers that have adopted term limits compared to 24% for issuers that have no such limits; 27% for issuers with alternative mechanisms for board renewal compared to 21% for issuers with no such mechanisms in place), and
• Only 5% of issuers have a female CEO.

Future of Gender Diversity in Canada

Since the implementation of NI 58-101 and the CSA’s inaugural diversity review, significant strides have been made toward increased levels of female representation among issuers and for board positions in particular. Notably, it appears issuers continue to consider gender diversity an important factor in the director recruitment process.

Issuers should expect the positive trend in gender (and overall) diversity to continue, particularly in light of proxy advisory firm voting recommendations and the proposed enhancements that are expected to bolster the disclosure requirements set forth in NI 58-101.

For further information regarding this update and diversity requirements, please contact any member of our Capital Markets Group.