SECURITIES REGULATION AND IR

On November 4, 2015, Prime Minister Justin Trudeau named 15 women to the new federal Cabinet, thereby fulfilling his earlier promise to promote gender equity. When asked to explain his decision, Prime Minister Trudeau replied, “Because it's 2015”. Some commentators applaud his decision as forward-looking and others criticize it as an act of positive discrimination. The presence of a significant number of women in the new federal Cabinet is a powerful and provocative national symbol, which we suggest is also relevant to recent regulatory initiatives aimed at promoting women on Boards and in senior executive positions.

On December 31, 2014, the securities regulatory authorities in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Quebec, Saskatchewan and Yukon implemented certain amendments (the “Amendments”) to National Instrument 58-101 – Disclosure of Corporate Governance Practices that require non-venture issuers to disclose on an annual basis:

1. the number and percentage of women on the issuer’s Board of directors and in executive officer positions;
2. director term limits or other mechanisms of Board renewal;
3. policies relating to the identification and nomination of women directors;
4. consideration of the representation of women in the director identification and nomination process and in executive officer appointments; and
5. targets for women on Boards and in executive officer positions.

The Amendments state that if non-venture issuers have not adopted the above mechanisms, policies or targets or do not consider the representation of women, they must explain the reasons for not doing so. This is known as a ‘comply or explain’ model, which differs from a ‘quota’ model adopted by other jurisdictions such as Norway. In essence, the comply or explain model does not prescribe targets for women on Boards or in executive officer positions but rather puts the onus on issuers to describe their approach to gender diversity.

On September 28, 2015, less than nine months after the Amendments were implemented, the Canadian Securities Administrators (“CSA”) released Staff Notice 58-307 – Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 – Disclosure of Corporate Governance Practices, whereby the CSA examined the disclosure of 722 issuers related to the Amendments.

The CSA study of the issuers found that:

1. 49% have at least one woman on their Board;
2. 60% have at least one woman in an executive officer position;
3. 15% have added one or more women to their Board in 2015;
4. over 30% with a market capitalization above $2 billion have adopted a written policy for identifying and nominating women directors;
5. of those issuers with written policies, 48% disclosed that the policies were adopted or updated in 2015;
6. 60% with a market capitalization above $2 billion have two or more female directors; and
7. 19% have adopted director term limits, while 56% have adopted other mechanisms of Board renewal. 

The CSA study also showed that the number of women on Boards and in executive positions varies significantly by industry; the utilities and retail industries have more women than the mining, oil and gas, and technology industries. 

The CSA study found that many issuers required additional guidance concerning the level and detail of disclosure that is necessary to comply with the Amendments. The CSA study included examples of corporate governance disclosure that the CSA found to be deficient, as well as guidance for suggested disclosure. In short, the message to issuers is that they need to do better.

The fact that the CSA published its study within nine months of the implementation of the Amendments indicates just how important this initiative is to our regulators and our government.

Tracy MacCharles, Ontario’s Minister Responsible for Women’s Issues, and Charles Sousa, Ontario’s Minister of Finance, issued a statement in response to the CSA report, which included the following: 

“We appreciate today’s report from the Canadian Securities Administrators, and are encouraged by the figures showing an increasing number of women on Boards and in executive leadership positions across the country. Our government acknowledges that 15% of companies have added one or more women to their Boards this past year alone. However, we know that more work needs to be done to see a greater level of equality in corporate boardrooms. 

Women make up half of Ontario’s workforce and more than half of our postsecondary graduates. Yet women are still under-represented in leadership positions in many areas of the private sector...

Increasing the number of women on Boards and senior management positions is good for the economy, good for business and critical for Ontario women seeking full workplace equality. We urge all Ontarians to continue their collective effort to ensure our boardrooms and executive suites reflect a fair and equal society.”

Public issuers that have directors and senior executive officers who are women send a clear message that diversity of thought and experience are valuable components in good corporate decision-making. The challenge for issuers is to identify women who satisfy the particular merit requirements of such issuers. One could conclude from the CSA study that larger issuers within the utilities and retail industries have been able to meet this challenge more easily than smaller issuers in the mining, oil and gas, and technology industries. We suggest that as the number of women role models in Board and senior executive positions escalates over time across all industries, the supply pool of women who possess the necessary skill sets to serve as directors and senior executive officers will expand.

As demonstrated by the CSA study, there has been progress in advancing women on Boards and in senior executive positions but more progress is required. We expect that over time more issuers will increase the representation of women on their Boards and in executive officer positions – or risk being left behind.

Hellen Siwanowicz is a Partner at McMillan LLP.