Last year, the Canadian Securities Administrators (CSA) began an initiative to increase transparency regarding female representation on boards and in executive officer positions. This was done by way of proposing amendments to the existing National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101). In the proposal stage, these amendments faced the typical gamut of comments, ranging from applause to dissatisfaction. Deal Law Wire also commented on these amendments in a previous post.
On December 31, 2014 the proposed amendments to NI 58-101 were implemented and, as a participating jurisdiction, Ontario became subject thereto. The amendments require the following annual disclosure by non-venture issuers:
- female participation (number and percentage) in director and executive officer positions;
- director term limits or other mechanisms of board renewal;
- policies relating to the identification and nomination of female directors;
- consideration of the representation of women in the director identification and nomination process and in the appointment of executive officers; and
- targets for women on boards and in executive officer positions.
At a minimum, a non-venture issuer must explain its reasons for not adopting the above.
On September 28, 2015 the CSA released CSA Multilateral Staff Notice 58-307, disclosing its review on compliance with the amended NI 58-101. The review consisted of 722 TSX-listed issuers (the sample). Nearly half of the sample consisted of companies operating in the mining and oil and gas industries.
The results of the review include the following:
- 88% of the sample disclosed the number (or percentage) of women on their board. 15% of the sample added one or more female to their board in the past year.
- Only 19% of the sample adopted director term limits, although 56% use a similar mechanism (typically, a form of annual board assessment). The most common reason cited for not adopting this mechanism is that term limits reduce continuity or experience of the board.
- Only 14% of the sample disclosed whether they adopted a written policy and its contents relating to the identification and nomination of women directors. Interestingly, the adoption rate of such a policy was twice as common by a TSX-listed issuer with a significant market capitalization.
- 60% of the sample disclosed that they did not consider female directors in their identification and nomination process; rather, most of the sample disclosed that they opted to fill the available positions with the best candidates, without considering gender.
- Only 7% of the sample disclosed that they adopted a formal target for the appointment of women as directors, and 2% for executive officers. The most common reason cited for not adopting a formal target was that candidates are selected solely based on merit and not gender.
The review indicates that many non-venture issuers appear to be hesitant to adopt the amendments or may require additional guidance in order to increase compliance. Further, the review confirmed that the issuer’s size and its industry are the two most significant factors impacting its level of adoption. Despite these factors, issuers should note that the amended NI 81-101 presents the opportunity for issuers to increase transparency in gender diversity, which will likely be favourable to investment and voting decisions of shareholders to come.
The author would like to thank Lauren Day, articling student, for her assistance in preparing this legal update.
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