In time for the 2015 proxy season, the Canadian Securities
Administrators (CSA) announced last week the impending
implementation of new corporate governance disclosure rules aimed
at increasing gender diversity on boards and in senior management
positions. The new rules require non-venture reporting issuers
(essentially, TSX-listed companies) to disclose certain information
concerning the representation of women on boards and senior
management, and their director selection and renewal processes. The
change is effective in Ontario, Quebec, Manitoba, Saskatchewan, the
Atlantic provinces, Nunavut, and the Northwest Territories.
Generally, the rules will apply to all proxy circulars sent in
connection with an annual meeting filed following an issuer's
financial year ending on or after December 31, 2014. If the issuer
does not send a management information circular to investors, the
disclosure must be contained in the issuer's annual information
The new disclosure requirements are the culmination of a process
initiated by the Ontario Securities Commission (OSC) in July 2013,
discussed last year. Proposed amendments to Form 58-101F1 were
published by the OSC in
January 2014. Other participating CSA jurisdictions followed
suit in July.
The final amendments do not differ substantially from the
previous proposals. The disclosure requirements relate to the
following five areas:
Actual Representation: the number and
proportion of directors and executive officers (including executive
officers of major subsidiaries) who are women.
Targets: whether the issuer has adopted a
target for the number of women on its board or in executive
positions, such as a number or percentage range, and the progress
the issuer has made in achieving its target. If the issuer has not
adopted a target, it must explain why it has not done so.
Policies and Objectives: a summary of the
objectives of any written policy relating to the identification of
women directors, along with a description of the measures taken to
ensure the implementation of the policy, the annual and cumulative
progress of the objectives, and whether, and if so how, the board
or its nominating committee measures the effectiveness of the
policy. If the issuer has not adopted such a policy, it must
explain why it has not done so.
Hiring Process: whether, and if so how, the
issuer considers the level of representation of women on the board
or in executive officer positions when considering identifying new
candidates or making appointments, respectively. If the issuer does
not make such considerations, it must explain why it does not.
Board Renewal: a description of any term
limits for directors or other mechanisms for board renewal, or an
explanation why the issuer does not employ such measures.
The rules follow a "comply or explain" model similar
to that of Australia. If an issuer has not adopted the specified
measures or made the specified considerations, the issuer must
explain why it has not done so.
In response to the OSC's initial consultation paper,
McMillan suggested that additional requirements aimed
at increasing the representation of women could supplement the
"comply or explain" approach. Specifically, we suggested
the implementation of a rule similar to the National Football
League's "Rooney Rule," which requires teams to
interview at least one minority candidate for coaching or general
manager vacancies. McMillan proposed a modified "Rooney
Rule" for gender representation, which would require issuers
to interview at least one female candidate for open board or senior
management positions. Unfortunately, while the CSA acknowledged
this approach, it declined to adopt such a rule, preferring to
address solely disclosure.
Ultimately, the hope is the new disclosure rules will increase
the number of women on boards and in senior management positions.
The expanded disclosure on gender diversity and board renewal
policies will serve to enhance transparency and assist investors in
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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