Having completed our annual deep dive into the past year’s corporate governance developments and trends, we have developed a four-part series on what you need to know to prepare for the 2020 proxy season. In this second post in the series, we look at board composition.

The Overview

The first post in the series focused on board accountability (including the increasingly important "ESG" factors: environmental, social and governance).

Looking ahead, the remaining posts in the series will focus on the following issues:

  • compensation matters; and
  • proxy developments and reporting updates.

Board Composition

Board composition continues to be a primary area of focus, particularly as it relates to diversity and gender, as well as tenure, over-boarding and director skills. Canadian reporting issuers have now completed five years following changes adopted by the Canadian Securities Administrators (CSA) to National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101) and Form 58-101F1 Corporate Governance Disclosure which, among other things, require the disclosure of certain information relating to the representation of women on boards of directors and in executive officer positions.

Diversity disclosure in respect of "designated groups" beyond gender is generally required for CBCA-incorporated public companies with the recent amendments to the Canada Business Corporations Act (CBCA).

  • In contrast to NI 58-101, venture issuers are not exempt from the CBCA diversity disclosure requirements which extend to four designated groups as defined under the Employment Equity Act, namely: women, indigenous persons (First Nations, Inuit and Metis), persons with disabilities and members of visible minorities and applies to proxy circular disclosure regarding the board and senior management.

Board tenure and refreshment consider retirement age, term limits and broadening board skill sets to account for broader areas of risk and expertise.

  • NI 58-101, and the new CBCA diversity disclosure provisions require disclosure of director tenure limits and while there are not prescribed limits, there is growing guidance on what some consider to constitute lengthy tenure. Earlier this year, ISS published an expanded version of its Governance QualityScore (ISS QualityScore) which identified lengthy director tenure as 9 years.
  • Compare this to the average tenure limit of Canadian issuers of 13 years as reported in CSA Multilateral Staff Notice 58-311 Report on Fifth Staff Review of Disclosure Regarding Women on Boards and in Executive Officer Positions (the "2019 CSA Study").

Developments in overboarding and interlocking are also areas to watch, particularly given their impact on this past year's US director elections.

  • Overboarding refers to when a director is on an excessively high number of public company boards, while cross-directorships refers to when two or more directors are also fellow directors of another public company. According to the ISS QualityScore, a five-board maximum is emerging as the new standard in 2019 for non-executive directors and a two-board maximum for the CEO, in addition to sitting on the board of the company which he or she is a CEO (three total boards), before being considered overboarded.

Other key findings of the 2019 CSA study

  • 73% of issuers have at least 1 female director (up from 66% in 2018);
  • 33% of issuer board vacancies were filled by women (up from 29% in 2018);
  • 50% of issuers have adopted policies relating to female representation (up from 42% in 2018);
  • 5% of issuers have a female Board Chair (new metric in 2019); and
  • 21% of issuers have adopted term limits (consistent with 2017 and 2018)

Note: The 2019 CSA Study reviewed the annual disclosure of 641 TSX issuers: CSA Multilateral Staff Notice 58-311 Report on Fifth Staff Review of Disclosure Regarding Women on Boards and in Executive Officer Positions, published on October 2, 2019.

Our analysis of the S&P/TSX 60

In our 2019 analysis of the annual proxy circular disclosure of the S&P/TSX 60, we took a closer look at diversity and tenure trends.

We found that the majority of issuers in this group (40%) have between 21-30% of women on their board.


As it relates to setting gender diversity targets for board composition, we found 47% of issuers without a reported target compared to 36% having a target of 30% women board members.


For term limits, we found that while most issuers do not impose term limits (69%), 14% have set term limits of 15 years as reported in 2019.


The Takeaway

Beyond awareness, we encourage you to consider what these trends and developments mean for your organization, specifically how they impact your annual meeting preparation and on-going corporate governance matters. For many issuers, this means a strategic review of stakeholder-focused communication, including continuous disclosure materials as well as board and committee charters, company policies and underlying frameworks to consider whether updates are needed in areas such as the following:

  • Identifying gapsin current disclosure, policies and materials, and determining options for your organization to address;
  • Reviewing the frameworks and processes that support disclosure, charters and policies (especially as they relate to risk management);
  • Simplifying disclosure to focus on quality of disclosure specific to the organization, its business and its risks; and
  • Aligning policies and/or public filings with regulatory and best practice updates and changes, while taking a fresh look to eliminate redundancies or inconsistencies.

For diversity disclosure requirements, our Knowledge and Innovation team has designed an Stikeman Elliott CBCA Annual Diversity Survey Tool to securely collect the required information on a voluntary, confidential and anonymous basis in an user-friendly, online format.

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.