On September 28, 2015, the Canadian Securities Administrators (CSA) released a staff notice summarizing the findings from its review of the corporate governance disclosure of non-venture issuers as it relates to the amendments to National Instrument 58-101– Disclosure of Corporate Governance Practices and Form 58-101F1 Corporate Governance Disclosure (Amendments), implemented by the securities regulatory authorities of Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Quebec, Saskatchewan and Yukon (Participating Jurisdictions) on December 31, 2014. These Amendments require non-venture issuers in the Participating Jurisdictions to disclose their policies regarding, and their consideration of, the levels of representation of women on boards and in senior management, and their actual and any targeted figures for such representation.

The staff notice, titled CSA Multilateral Staff Notice 58-307– Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices (Staff Notice), also provides guidance to assist issuers with the quality of their disclosure with respect to such policies, consideration of, and any targets with respect to the representation of women on boards and in senior management.

For background information regarding the development of the Amendments, please see our October 15, 2014 Blakes Bulletin: Just in Time for 2015 Proxy Season: Disclosure Requirements for Gender Diversity, Director Tenure, our January 2014 Blakes Bulletin: OSC Proposes Disclosure Requirements for Gender Diversity and Director Term Limitsand our September 2013 Blakes Bulletin: OSC Consultation Paper on Women on Boards and in Senior Management.

For a discussion of the CSA’s review of disclosure by issuers of director term limits and other board mechanisms, please see our forthcoming Blakes Bulletin: Director Term Limits Not Common.

FINDINGS

The Staff Notice summarizes the CSA’s review of the corporate governance disclosure of 722 non-venture issuers (Sample Group) listed on the Toronto Stock Exchange.

The CSA found that among the issuers in the sample group, 49 per cent have at least one woman on their board and 60 per cent have at least one woman in an executive officer position.

The most significant indicators of whether issuers adopted initiatives to increase the representation of women on their board or in executive officer positions were issuer size and industry. For example, the CSA found that:

  • 62 per cent of issuers with a market capitalization under C$1-billion had no women on their board and 48 per cent of such issuers reported having no women in executive officer positions
  • 60 per cent of issuers with a market capitalization above C$2-billion had at least two women on their board and 59 per cent of such issuers disclosed having at least two female executive officers
  • 60 per cent or more of issuers in each of the mining, oil and gas and technology industries had no women on their board
  • 57 per cent and 43 per cent of issuers in the utilities and retail industries, respectively, had two or more women on their board

Policies Regarding Representation of Women on Boards

The Amendments require non-venture issuers to disclose whether or not they have adopted a written policy for the identification and nomination of women directors. If an issuer has adopted such a policy, then it is required to disclose certain details about the policy. If an issuer has not adopted such a policy, then it is required to explain why it has not done so.

The CSA found that, among the issuers in the sample group, 65 per cent disclosed that they had not adopted a written policy and 14 per cent disclosed that they had adopted a written policy.

Of the issuers in the Sample Group that disclosed written policies concerning the representation of women, 47 per cent (representing approximately seven per cent of the Sample Group) set specific quotas or targets for female directors. The CSA found that the policy adoption rate varied considerably by issuer size (issuers with a larger market capitalization were more likely to adopt a written policy) and by industry. The CSA noted that almost 50 per cent of the disclosed policies were adopted or updated in the past year.

Consideration of Representation of Women in Director Identification and Selection Process

The Amendments require non-venture issuers to disclose whether, and if so how, the board or nominating committee considers the level of representation of women on its board when identifying and nominating candidates for election or re-election to the board and, if they do not, to disclose the reasons for not doing so.

The CSA found that, among the issuers in the sample group, 60 per cent disclosed that they considered the representation of women on the board as part of their director identification and nominating process, but only 42 per cent of these issuers specifically explained how this was considered. For issuers that disclosed that they did not specifically consider the representation of female directors on the board in their identification and nomination process, the most common reason given was that the issuer seeks the best candidates, regardless of gender (84 per cent). Eleven per cent of issuers stated that considering the representation of women on the board would not be in the issuer’s or shareholders’ best interest.

Consideration of Representation of Women in Executive Officer Positions

The Amendments require non-venture issuers to disclose whether, and if so how, the issuer considers the level of representation of women in executive officer positions when making executive officer appointments and, if they do not, to disclose the reasons for not doing so.

The CSA found that among the issuers in the sample group, 53 per cent disclosed that they considered the representation of women when making an executive officer appointment, but only 38 per cent of these issuers specifically explained how this was considered. For issuers that disclosed that they did not specifically consider the representation of women in executive officer positions, the most common reason given was that selection for executive officer appointments was based on merit (88 per cent). Thirteen per cent of issuers stated that considering the representation of women in executive officer positions would not be in the issuer’s or shareholders’ best interest.

Targets

The Amendments require non-venture issuers to disclose whether they have adopted targets regarding the number or proportion of women on their boards or in executive officer positions and, if they do not, issuers must explain why they have not done so.

The CSA found that among the issuers in the sample group, only seven per cent disclosed that they had a formal target for the appointment of women to the board, and only two per cent of such issuers disclosed that they had a formal target in respect of the appointment of women to executive officer positions. Reasons cited for not adopting such targets included that candidates for appointment to the board or executive officer positions are selected based on merit, targets were not believed to be effective or were believed to be arbitrary, and targets would be unduly restrictive or reduce flexibility with respect to such appointments.

DISCLOSURE QUALITY

In addition to setting out the findings of the CSA’s review of the corporate governance disclosure resulting from the Amendments, the Staff Notice also provides guidance to assist issuers with respect to the level and detail of disclosure that is necessary to satisfy the requirements of the amendments and sets out examples of both deficient and compliant disclosure.