On January 16, 2014, the Ontario Securities Commission (OSC) released proposed amendments to the corporate governance disclosure requirements under Ontario securities legislation regarding the disclosure of the representation of women on boards and in senior management of public companies and the disclosure of director term limits. The Canadian Securities Administrators, the umbrella organization of Canada’s provincial and territorial securities regulators, has not participated in this initiative and, if adopted, the proposed amendments would apply to reporting issuers in Ontario only.
OSC CONSULTATION PROCESS
The proposed amendments are the result of the OSC’s public consultation process regarding disclosure requirements for gender diversity, which included the publication of Consultation Paper 58-401 Disclosure Requirements Regarding Women on Boards and in Senior Management in July 2013 (OSC Consultation Paper). For further information on the OSC Consultation Paper, please see our September 2013 Blakes Bulletin: OSC Consultation Paper on Women on Boards and in Senior Management.
The purpose of the OSC Consultation Paper was to seek feedback from investors, issuers, other market participants and advisors on the proposed model of disclosure requirements. The OSC received 92 comment letters on the consultation paper from stakeholders and in October 2013 convened a public roundtable to further discuss the proposed model of disclosure requirements.
The proposed amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices (58-101) would require reporting issuers in Ontario, other than venture issuers and investment funds, to provide disclosure on an annual basis regarding the representation of women on boards and in executive positions using a “comply or explain” approach. The proposed amendments would also require such issuers to provide disclosure regarding director term limits or an explanation for the absence of such limits.
This bulletin summarizes the specific disclosure requirements set out in the proposed amendments.
Policies regarding the representation of women on boards
The proposed amendments would require issuers to disclose whether or not they have adopted a policy for the identification and nomination of female directors. If an issuer has adopted such a policy, then it would be required to disclose a short summary of the policy’s objectives and key provisions; the measures taken to ensure that the policy has been implemented effectively; annual and cumulative progress of the issuer on achieving the objectives of the policy; and whether, and if so how, the board or its nominating committee measures the effectiveness of the policy. If an issuer has not adopted such a policy, then it would be required to explain why it has not done so.
Consideration of the representation of women in the director identification and selection process
The proposed amendments would require issuers to disclose whether, and if so how, the board or nominating committee considers the level of representation of women on its board in 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.
Consideration of the representation of women for executive officer positions
The proposed amendments would require 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.
Number of women in board and executive officer positions
The proposed amendments would require issuers to disclose the number and proportion of executive officers of the issuer, including all subsidiary entities, who are women and the number and proportion of directors on the issuer’s board who are women.
Targets regarding the representation of women
The proposed amendments would require issuers to disclose whether they have adopted targets regarding the number or proportion of women on its board or in executive officer positions and, if they have not, to disclose why they have not done so. If an issuer has adopted such requirements, then it would be required to disclose its annual and cumulative progress in achieving its targets.
Director term limits
The proposed amendments would require issuers to disclose whether or not they have adopted term limits for the directors on its board and, if they have not, to disclose why they have not done so. In the OSC’s view, director term limits can promote an appropriate level of board renewal and in doing so provide opportunities for qualified board candidates, including those who are women.
APPLICATION OF PROPOSED MODEL OF DISCLOSURE
Reporting issuers in Ontario, other than venture issuers and investment funds, would be required to comply with the disclosure requirements contained in the proposed amendments. We would expect that such disclosure would be included with the annual summary of such issuer’s corporate governance practices typically contained in its management information circular.
Consistent with the current approach to other continuous disclosure obligations, the proposed amendments would not apply to SEC issuers and designated foreign issuers so long as such issuers complied with the requirements of National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.
The OSC has indicated that it intends to review compliance with any new disclosure requirements adopted after three annual reporting periods.
The OSC is soliciting comments on the proposed amendments. The comment period ends April 16, 2014.