Canadian Securities Administrators propose enhanced diversity disclosure

The Canadian Securities Administrators (CSA) are seeking public comment on whether to increase disclosure obligations in relation to diversity on boards and in senior management to cover identified groups beyond women. 

On April 13, 2023, the CSA published CSA Notice and Request for Comment with respect to proposed amendments to Form 58-101F1 Corporate Governance Disclosure (Form 58-101F1) and National Policy 58-201 Corporate Governance Guidelines (NP 58-201), which can be found here (the Consultation). The proposals are initially intended to be applicable to non-venture issuers, but the Consultation requests public comment on whether they should also be applicable to venture issuers in the future. In accordance with current governance disclosure, the proposals adopt a “comply or explain” approach.

The Consultation envisions two proposed alternative models, each of which is endorsed by different provincial regulators. Regulators in British Columbia, Alberta, Saskatchewan and the Northwest Territories have suggested a model (the Western Model) that would require an issuer to disclose its approach to diversity for the board and senior management, but would not mandate disclosure about any specific groups, other than women. An issuer would be left to determine the groups whose representation on its board or in senior management positions form part of its diversity strategy.

The Ontario Securities Commission prefers the approach to diversity disclosure recently adopted under the Canada Business Corporations Act (CBCA), and has suggested a model (the OSC Model) that will require reporting on the representation of five designated groups, being women, Indigenous peoples, racialized persons, persons with disabilities and LGBTQ2SI+ persons, on boards and in executive officer positions. The remaining provincial regulators are not taking a position at this time.

Alternative disclosure proposals

Since 2005, reporting issuers have been required to make corporate governance disclosure under NI 58-101 against recommended governance practices set out in NP 58-201. In 2014, most CSA jurisdictions adopted amendments to Form 58-101F1 that required non-venture issuers to disclose information on their policies, considerations and targets for women in board and executive officer positions, and to disclose the numbers and proportions of women in those roles. Since January 2021, distributing corporations under the CBCA have been required to disclose more detailed information about “designated groups,” which means women, Aboriginal peoples, persons with disabilities and members of visible minorities.

Under the Western Model, a non-venture issuer would be required to describe its approach to achieving or maintaining diversity on its board and in its executive officer positions in relation to women and “identified groups.” An identified group means a group of individuals with “a shared personal characteristic” whose representation on the board or management of the issuer has been identified by the issuer as being part of its diversity strategy. Describing its approach to diversity would require an issuer to provide information on objectives, achievements, policies and targets, along with data on numbers and percentages of women and, where relevant, identified groups.

Corresponding amendments to NP 58-201 would recommend that a board should consider adopting a written board diversity policy and should consider setting objectives for achieving diversity in the composition of its board and officer positions.

Under the OSC Model, a non-venture issuer would be required to describe its written strategy for achieving or maintaining board diversity, disclose any targets along with annual and cumulative progress towards such targets, describe any measurable objectives, other than targets, and provide data on numbers and percentages of women and members of designated groups. To ensure comparability, the OSC Model would mandate a prescribed tabular presentation format.

Amendments to NP 58-201 under the OSC Model would provide that a board should adopt a written board diversity policy and set out what the policy should cover, including objectives and targets that are “specific, measurable and time bound.” The OSC Model also suggests mechanisms for achieving diversity, such as establishing a diversity council and implementing training and leadership programs.

Related proposals – board renewal and board nominations

Related amendments, agreed by all CSA members, are also proposed in the Consultation. They relate to disclosure and guidance around board renewal and board nominations.

New guidelines on board renewal have been suggested in the Consultation in respect of NP 58-201, specifically on maintaining an effective succession plan and adopting mechanisms of board renewal, including term limits or the use of a composition matrix to identify gaps in the composition of the board.

For board nominations, proposed amendments to Form 58-101F1 will require increased disclosure about how a board identifies and evaluates candidates for nomination, including any written nomination policy and if none exists, how the nomination process is carried out; how conflicts of interest during the nomination process are managed; whether the board has a composition matrix; and the skills, knowledge, experience, competencies and attributes that are considered when evaluating a candidate.

Corresponding amendments are proposed to NP 58-201, which would provide amended guidelines on the role of the nominating committee, and recommend the adoption of a composition matrix and a written nomination policy.

The proposed amendments discussed above are open for public comment until July 12, 2023.