Do you think more information is needed about diversity on boards and in the C-suite? Canadian regulators do. But they can’t decide how much more information is enough. As a result, they have published two proposals. One proposal, supported by the securities regulators in British Columbia, Alberta, Saskatchewan and the Northwest Territories, favours a principles-based approach (Proposal A). The other proposal, supported by the OSC and aligned with the Canada Business Corporations Act, is more prescriptive (Proposal B). But wait, what about the other provinces and territories? They have not expressed a preference. Presumably, they are waiting to hear your comments on the proposals.

On April 13, 2023, the regulators published two proposals for comment (Proposed Amendments to Form 58-101F1 Corporate Governance Disclosure and National Policy 58-201 Corporate Governance Guidelines). A detailed overview of the proposal is published by our friends at BLG in this article. What is the gist of the proposals?

Proposal A – Issuer Specific Information

  • This proposal would require an issuer to disclose its approach to diversity in respect of the board and executive officers, but doesn’t mandate disclosure for specific groups, other than women.
  • Proposal A would require an issuer to describe its (i) chosen diversity objectives, (ii) how it would measure progress and (iii) explain what mechanisms it has determined are appropriate to achieve its diversity objectives.
  • The proposal would only require disclosure of data (other than with respect to women) if an issuer chooses to collect data with respect to specific groups it identifies as being relevant for its diversity objectives.

Proposal B – Standardized Information

  • This proposal, on the other hand, extends the current disclosure framework as it applies to women to historically under-represented groups called “designated groups”.
  • Proposal B would require standardized reporting on the representation on boards and in executive officer positions of five designated groups -women, Indigenous peoples, racialized persons, persons with disabilities and LGBTQ2SI+ persons.
  • This proposal is similar to the approach adopted under the Canada Business Corporations Act, under which approximately 29% of TSX-listed issuers report.

What is common to both proposals?

  • The current “comply or explain” disclosure model would continue to apply with respect to policies for women on boards and targets for women on boards and in executive officer positions.
  • The proposals are both designed to increase transparency about diversity on boards and in executive officer positions and provide investors with decision-useful information that enables them to better understand how diversity is addressed by an issuer.
  • The proposals are aligned on disclosure requirements regarding board nominations and renewal.
  • Neither proposal would apply to investment funds or venture issuers.

How do the proposals differ?

  • The proposals reflect different concepts related to disclosure regarding the representation of members from diverse groups.
  • Proposal A provides issuers with greater flexibility to design practices and policies respecting how they will address diversity, while the other proposal provides investors with greater access to information in a standardized format, which would promote consistency and comparability of disclosures.

Next Steps

The comment period closes on July 12, 2023. Further information about the proposals, including specific questions to which the CSA are seeking feedback, are set out in the CSA Notice and Request for Comments.

If you would like to share your view on which proposal provides you with decision-useful information that enables you to better understand how diversity is addressed by an issuer, we would be happy to assist you in preparing a comment letter.

April 28, 2023