"Hopeful To Come Together" – Key Takeaways From The OSC Roundtable On Diversity Disclosure

Overview

On September 14, 2023, a panel of thirteen speakers presented their views on the proposed diversity disclosure regime in Canada. At the national level, there is a lack of consensus as to the appropriate approach to such disclosure. In contrast to this, most of the panelists appeared to unite in favour of adopting a broader disclosure approach. Given the differing interests of the panelists, perhaps this is an indication of the potential for a harmonized disclosure regime across Canada. Or, perhaps, it may simply be representative of the Ontario viewpoint. Nonetheless, Grant Vingoe, the CEO of the OSC, was hopeful that a unified approach to such an issue could be achieved. Only time will tell.

The Panel and Its Focus

Hosted by the Ontario Securities Commission (the "OSC"), the roundtable "Strengthening Diversity in our Capital Markets" explored the appropriate approach to diversity disclosure in Canada.

The panel discussed proposed amendments put forth by the Canadian Securities Administrators ("CSA") in April 2023 to Form 58-101F1 and changes to National Policy 58-201 (the "CSA Proposals"), which seek to expand on current corporate governance disclosure requirements. The panelists were asked for their views on the choice between what is known as "Form A" and "Form B" in the CSA Proposals or whether a third, potential "Form C" hybrid option is more appropriate. Form A focuses on gender and is closer to the current disclosure regime across most of Canada. The latter, Form B, encompasses a broader range of mandated diversity disclosure across several diversity measures. Across Canada, Canadian provinces and territories are divided on this issue. British Columbia, Alberta, Saskatchewan and the Northwest Territories support Form A. Ontario, similar to the majority of the panelists, supports Form B. The rest of Canada, including Quebec, has remained neutral.

The viewpoints discussed herein are those of the panelists and not of Fasken.

The Panelists

Apart from representatives from the OSC, the panelists consisted of a broad range of stakeholders, including representatives from issuers, institutional and retail investors, non-profit organizations and academic professionals.

Specifically, the panelists included:

• Melanie Adams, VP & Head, Responsible Investment, RBC Global Asset Management
• Joseph Bastien, Associate Director, Inclusive Economy, SHARE
• Jean-Paul Bureaud, Executive Director, FAIR Canada
• Roger Casgrain (Executive Vice President, Casgrain & Company Limited)
• Gigi Dawe, VP Policy and Research, Institute of Corporate Directors
• Peter Dey, Chairman, Paradigm Capital
• Nils F. Engelstad, Senior Vice President, General Counsel, Alamos Gold Inc.
• Rhonda Goldberg, Executive Vice-President and General Counsel, IGM Financial Inc.
• Kelly Gorman, Executive Vice President, Governance Advisory, Kingsdale Advisors
• Michela Gregory, Director, Responsible Investing and ESG Services, NEI Investments
• Michael Holder, Managing Partner, North Star Legal Professional Corporation and Managing Director, North Star Consultants Inc.
• Geordie Hungerford, CEO, First Nations Financial Management Board
• Sarah Kaplan, Distinguished Professor, Founding Director, Institute for Gender and the Economy, Rotman School of Management, University of Toronto

After an introduction by Jo-Anne Matear, Special Advisor to the Executive on Sustainable Finance, OSC, the panel was moderated by Grant Vingoe, Chief Executive Officer, OSC and Naizam Kanji, General Counsel, OSC.

Convergent Views on Diversity Disclosure Among Attendees

The majority of the panelists had convergent views on diversity disclosure and all appeared to agree that increasing diversity on boards and in management was a desirable outcome.

As to the utility of diversity data, some questioned whether the current Canada Business Corporations Act, which already requires certain companies to disclose their board and management across a variety of diversity metrics (e.g., women, Aboriginal peoples, persons with disabilities and members of visible minorities), has really moved the needle or not.

Accordingly, the general consensus was that the focus should go beyond a check-the-box regime. Instead, the focus should be on how such disclosure would make an impact.

For instance, for Adams, diversity disclosure is a risk management tool intended to reduce potential liability exposure that investors are exposed to. For Kaplan, beyond a reporting mechanism, issuers should view the exercise as a tool to help organizations internally assess where they are and where they need to be in respect of their talent pool. Engelstad explained that it could also be used as a benchmarking tool against peers. Casgrain pointed to examples in our modern history of individuals, including Richard Branson and Steve Jobs, leading successful careers despite learning disabilities such as dyslexia.

Dey summarized it as follows – it is not simply about strengthening diversity in our capital markets, but rather, strengthening capital markets through diversity.

Hungerford similarly noted that representation by Indigenous peoples should be viewed as a driver for better informed decision-making. Particularly in Canada, Indigenous peoples are not just stakeholders – they are rights holders in accordance with constitutional principles and UNDRIP. Consequently, their voice matters. Having better representation would promote corporate governance efforts, and avoid potential issues that previously companies have faced such as failed pipelines.

Spotlight on the Difficulties in Diversity Data Collection

Despite the benefits outlined during the panel, some panelists highlighted the difficulties some issuers face in collecting the required data. Holder explained that the decision to self-identify is a decision personal to an employee and protected by privacy laws. Without voluntary disclosure, companies are unable to accurately assess the profile of their workforce.

To alleviate this, Goldberg suggested companies foster an atmosphere of trust. This goes beyond one-off employee surveys – it instead consists of continuous engagement with their workforce to demonstrate why this information is important and adds long-term value to the company. Dawe emphasized the importance of focusing on the narrative.

Desire for More Consistent and Structured Diversity Data Reporting

Many panelists expressed a need for better data reporting. Currently, according to Gorman, investors must sift through scattered information from a variety of sources to obtain diversity-related information on organizations, including proxy circulars, company websites, board and management biographies, ISS and GlassLewis reports, and the Globe & Mail's diversity reports. Some investors, mainly institutional investors, supplement these sources with direct engagement with companies. Consequently, Bureaud stressed the importance of prioritizing investors' needs by providing a more consistent data reporting system to enable a more reliable and more comprehensive basis for diversity-related decision-making.

Furthermore, regardless of the adopted approach, both Gregory and Bastien stressed that prescribed requirements are a floor and not a ceiling. Organizations always remain free to voluntarily go beyond such requirements to provide additional information useful to their stakeholders.

What About Smaller Issuers?

While the panel was focused on the dichotomy of the two CSA Proposals, audience questions drew attention toward possible challenges of the new disclosure requirements for smaller issuers whose resources are more limited. In response, Vingoe expressed the OSC's receptivity to consider a different set of requirements for smaller issuers that incorporate a more tailored approach. The panel also highlighted that while fulfilling the new requirements for smaller companies would be more challenging, this is an area where the new disclosure rules are most needed if the goal is to aim for more diversity since many larger companies already show strong performance on incorporating diversity in their policies and structure.

Special thanks to Amirali Alavi, Articling Student, for his assistance on this article.

Looking Forward & Further Reading

As to next steps, the CSA has extended the comment period for the CSA Proposals and is accepting feedback from interested parties until September 29, 2023.

To learn more about the CSA Proposals, check out our related bulletins, ESG 2023 Update: While Diversity and Social Awareness Are on the Rise, Canadian Regulators Remain Divided on Diversity Disclosure Approach and A Look Into the CSA's New Diversity Disclosure & Related Corporate Governance Proposals.

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