The Canadian Securities Administrators (CSA), an umbrella organization of Canada’s securities regulators, has proposed amending corporate governance disclosure rules and policies pertaining to director nomination and board renewal processes (“Proposed Amendments”).
Recognizing “the importance of providing investors with transparency on issuers’ practices with respect to board and executive-level diversity”, the objective of the Proposed Amendments is to increase transparency about diversity beyond the representation of women.
The CSA is seeking comments on the Proposed Amendments, which pertain to Form 58-101F1 and National Policy 58-201. Stakeholders are invited to provide written comments up until July 12, 2023. The proposals involve two approaches to address the issues, with CSA seeking feedback as to which of the two is more favourable.
Objectives of the Changes
In the proposal, the CSA focused on the importance of giving investors transparency into issuers’ practices regarding diversity at executive and board levels. The Administration wants “meaningful disclosure” about the identification and evaluation of both new and renewal board candidates and how diversity plays into the process. Specifically, the intent is to show whether (and how) diversity is an integral part of the nomination and renewal processes.
In particular, the stated objectives of the proposals are to:
- Increase transparency about diversity in executive officer and board positions, including “diversity beyond women”;
- Provide investors with information that allows them to better understand how diversity connects with an issuer’s strategic decisions; and
- Provide “guidance” to issuers on corporate governance practices related to diversity, board nominations, and board renewals.
Two Potential Approaches to Diversity Disclosure
The CSA has presented two versions of Form 58-101F1 for comment, and these forms each reflect different options for diversity-related disclosure. In the “Form A” version, issuers would be required to disclose their approach to diversity for board members and officers, but would not need to be specific about groups other than women. Issuers would have to describe “chosen diversity objectives”, and explain how they would measure progress, as well as the mechanisms appropriate to achieve diversity goals. The Form A option, which CSA indicated the Alberta Securities Commission and British Columbia (among others) have expressed support for, is designed to give issuers flexibility to design policies and practices and to keep securities regulators from having to dictate to issuers who they must address with diversity policies (other than women).
The other option, “Form B” – which CSA noted the Ontario Securities Commission, a key provincial regulator, supports – would involve mandated reporting on the representation of five specific groups on boards and in officer positions:
- Indigenous peoples
- Racialized persons
- Persons with disabilities
- LGBTQ2SI+ persons
Under this form, issuers would also have the option to disclose information on other groups as well.
Information and Anticipated Impact
The CSA expects the Proposed Amendments to benefit investors by enhancing the quality of information disclosed while projecting a manageable increment in regulatory burden. This is especially the case as they have specifically contemplated how to spare more junior “venture” issuers from the application of at least some of the amendments. However, Issuers are free to disagree with this assessment, particularly during the comment period.
If you would like to discuss the potential implications of the Proposed Amendments on your corporate governance and disclosure requirements, or you would like assistance formulating a comment for the CSA, a member of our business law group would be happy to assist.