Canada: Gender Diversity And Board Renewal: New Canadian Disclosure Rules For The 2015 Proxy Season

Securities regulators in Ontario, Quebec and a number of other jurisdictions (excluding Alberta and British Columbia) have adopted new disclosure requirements for Canadian issuers relating to (i) gender diversity on boards of directors and in executive officer positions and (ii) board renewal mechanisms, such as director term limits.1 The new rules are meant to increase transparency for investors and other stakeholders about these matters but importantly do not mandate the adoption of formal diversity policies or targets. The rules will be effective as of December 31, 2014, in time for the 2015 proxy season for Canadian issuers with calendar year ends. Venture issuers are excepted.

The new requirements in respect of gender diversity and board renewal mechanisms are consistent with Canada's existing "comply or explain" model of corporate governance, and the disclosure will be required as part of the annual summary of corporate governance practices under National Instrument 58-101 (typically set out in the proxy circular).

Background to the Rules and the Federal Initiative

In developing the new requirements, the Ontario Securities Commission, which led the rule-making initiative, issued a consultation paper for public comment, held a public roundtable, conducted a survey of approximately 1,000 TSX-listed issuers, and reviewed approaches to gender diversity in Australia, the European Union, the United Kingdom and the United States. This represents a significant amount of public outreach and opportunity for input from market participants and others.

At the federal level, in June 2014, the federal Advisory Council for Promoting Women on Boards published a report Good for Business: A Plan to Promote More Women on Canadian Boards. The key recommendation of this report is that the Government of Canada aspire to 30% female representation on boards over the next five years. To promote that objective, Minister Kellie Leitch is proactively reaching out to Canada's largest companies individually to strongly encourage gender diversity on boards. The report also endorses the proposed "comply or explain" approach to gender diversity on boards that is now being implemented by the new rules described in this bulletin.

Changes from the Proposed Rules

The participating regulators received a substantial number of comment letters on the proposed rules, and the final rules incorporate the following modifications in response to those comments:

  • The board renewal disclosure requirements have been modified so as to focus not just on director term limits but on other mechanisms issuers may use to achieve board renewal, as discussed further below.
     
  • The final rules clarify that gender diversity policies are defined as written policies, not informal, unwritten policies.
     
  • If an issuer has adopted gender diversity targets, those targets must be disclosed.
     
  • When disclosing how many women hold executive officer positions, the issuer must take into account its major subsidiaries, not all of its subsidiaries.  

Gender Diversity Disclosure Requirements

The new rules will require the following of Canadian, non-venture issuers:

  • Issuers must disclose whether they have adopted a written policy relating to the identification and nomination of women directors. Issuers without a written policy must disclose why they have not adopted one, while issuers with a written policy must disclose:
     

(i)          a short summary of the policy's objectives and key provisions,

(ii)         the measures taken to ensure effective implementation,

(iii)        annual and cumulative progress in achieving the policy's objectives, and

(iv)        whether and, if so, how the board measures the policy's effectiveness.

  • Issuers must disclose whether and, if so, how the board considers the representation of women in identifying and nominating board candidates. If an issuer does not consider the representation of women in this context, it must disclose why not.
     
  • Issuers must disclose whether and, if so, how they consider the representation of women when making executive officer appointments. If an issuer does not consider the representation of women in this context, it must disclose why not.
     
  • Issuers must disclose whether they have adopted targets for women on the board of directors and/or in executive officer positions. If an issuer has not adopted targets, it must disclose why not.
     
  • Issuers that have adopted targets for women on the board or in executive officer positions must disclose those targets and the issuer's annual and cumulative progress in achieving them.
     
  • Issuers must disclose the number and percentage of their directors who are women and the number and percentage of their executive officers (including at major subsidiaries) who are women.

Board Renewal Disclosure Requirements

Issuers will have to disclose whether or not they have adopted term limits or other mechanisms for board renewal and, if so, those mechanisms must be described. Issuers that have not adopted term limits or other board renewal mechanisms will have to disclose why not. These requirements differ from the original proposed rules in that the proposals focused primarily on term limits. Based on comments from market participants, the participating regulators modified the disclosure requirements, acknowledging that term limits are not the exclusive method by which issuers may strive for effective board renewal. Other methods include board and committee evaluation processes, skills identification and needs assessment, and director retirement policies.

Preparing for the 2015 Proxy Season

In preparation for the 2015 proxy season, boards of directors and management should consider their gender diversity and board renewal policies and practices in light of the new disclosure requirements. We note that to date, only a small minority of Canadian issuers have adopted formal gender diversity or board renewal policies or targets. A subset of that minority has adopted the Catalyst Accord, under which participating companies set the objective of 25% female representation on the board of directors by 2017. The majority of Canadian companies will need to determine, based on their particular circumstances and governance objectives, whether to develop a policy, adopt new practices or maintain the status quo for the time being, keeping in mind the related disclosure that will be required. Nominating Committees may wish to set aside extra time on their agendas to address these matters soon.

Notably, a number of market participants commented that the concept of diversity should encompass not just gender but other aspects of diversity too, such as race, nationality, ethnicity, cultural background, aboriginal status, age and disability. In response to these comments, the participating regulators noted that although not required at this time, issuers are welcome to voluntarily provide information about their approach to diversity more generally. Issuers may wish to consider addressing this in their disclosure.

The new Canadian disclosure requirements are quite different from the SEC's rules. In contrast to the relatively prescriptive "comply or explain" Canadian model, the U.S. regime permits companies to define diversity as they see fit, which leaves them with significant discretion as to the scope of their disclosure. Perhaps due to the open-ended nature of the SEC's rules, SEC Chair Mary Jo White stated in a recent speech that the quality of U.S. companies' diversity disclosure has been disappointing. The participating Canadian regulators have indicated that they plan to assess the effectiveness of the new Canadian rules by conducting a compliance review after three annual reporting periods.

To review the full text of the gender diversity and board renewal disclosure rules, see Multilateral CSA Notice of Amendments to National Instrument 58-101 - Disclosure of Corporate Governance Practices.

We encourage you to contact us if you would like to discuss the new disclosure requirements and their impact on your organization's policies and practices.

Footnote

1 The new requirements will not apply to companies that are reporting issuers exclusively in non-participating jurisdictions, which are currently Alberta, British Columbia, Prince Edward Island, and the Yukon.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions