Gender diversity on corporate boards continues to be a hot topic for activist shareholder groups in Canada. At the end of April 2015, the shareholders of BCE Inc. will vote on a proposal that would impose a strict quota on the proportion of women appointed to its 13-person board. The proposal is being advanced by a group of shareholders styled as Mouvement d’éducation et de défense des actionnaires (Médac). While the group has proposed gender-related resolutions before, this is the first time that it has sought to impose a strict quota on the company. The quota would require BCE to maintain a minimum of 40% female representation on its board by 2020. While BCE has itself pledged that women will occupy at least one-quarter of independent directorships by the end of 2016, Médac’s view is that this does not go far enough.
While public companies are increasingly setting their own targets for board-level gender diversity, the imposition of strict quotas via shareholder resolutions puts additional pressure – and more stringent legal requirements – on companies to deliver. As we discussed in a previous blog post, the implications of failing to meet a self-imposed corporate pledge are not to be discounted. That said, the consequences of falling short of a company-imposed promise to increase the number of women on the board of directors pale in comparison to those that would flow from breach of a successful shareholder resolution.
As recently reported by the National Post, upon making his quota request to BCE, the president of Médac said he was advised by the company that it does not “have a legal obligation to add more women”. If this proposed shareholder resolution is successful, BCE may suddenly find itself with one.
In its proxy circular, BCE has urged shareholders to reject this resolution. The circular states that BCE’s current pledge is “appropriate for promoting diversity and the attraction of the most highly qualified directors available”. This statement highlights the political sensitivity of quotas, discussed in our previous post. Quotas can difficult to live with, particularly if the appointment committee of a given board of directors feels that the best qualified candidate is male. That said, concerns that strict quotas will lead to a ‘watering down’ of talent at the board level have not be borne out by experience. Indeed, studies have shown, and commentators have expressed that, on an assessment of the available talent pool, there is no dearth of highly qualified women to consider for top jobs. Several European countries have had great success with the imposition of quotas, despite their political sensitivity.
The role of regulators in the matter is ongoing. Notably, the Ontario Securities Commission (“OSC”) – after extensive consultation and stakeholder engagement – did not impose pre-determined quotas on public companies in the province. Instead, as previously blogged, the Commission opted to propose a “comply or explain” regime for all Ontario issuers. On September 23, 2014, the OSC adopted the “comply or explain” regime as part of the amendments to National Instrument 58-101, which came into force on December 31, 2014.
The same amendments to National Instrument 58-101 were also adopted in most Canadian jurisdictions by the Canadian Securities Administrators affecting “Participating Jurisdictions” (i.e. Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec and Saskatchewan). Notably absent are two of the four largest jurisdictions, namely British Columbia and Alberta.
This means that issuers listed on the Toronto Stock Exchange, and other non-venture issuers in a “Participating Jurisdiction”, must annually disclose:
- director term limits and other mechanisms of renewal of board members;
- policies regarding the representation of women on the board;
- the board’s or nominating committee’s consideration of the representation of women in the director identification and selection process;
- the issuer’s consideration of the representation of women in executive officer positions when making executive officer appointments;
- targets regarding the representation of women on the board and in executive officer positions; and
- the number of women on the board and in executive officer positions.
While the regulatory “comply or explain” regime established a baseline standard for gender diversity on boards, it does not preclude more rigorous standards for specific companies if shareholder resolutions like the one proposed by Médac are successful.