CHAPTER 07 Beyond Gender: Diversity and Inclusiveness Now and Going Forward
Current State of Diversity in Canada
CURRENT IMPACT OF THE CBCA AMENDMENTS With 2020 being the first year for the expanded disclosure requirements for CBCA public companies, we reviewed data based on the proxy circulars from the 2020 proxy season for 338 issuers on the TSX Composite and SmallCap indices (192 of which are CBCA public companies). Our review indicates that CBCA issuers have generally satisfied their enhanced disclosure obligations under the CBCA. However, CBCA issuers’ disclosure regarding diversity and their associated initiatives or targets to increase diversity still primarily focus on gender. From a disclosure perspective, both CBCA and non- CBCA issuers on the Composite and SmallCap indices typically include fairly general statements regarding their diversity and associated initiatives or targets, while referencing specific diversity characteristics that they consider as part of their diversity practices. Issuers that do not have diversity policies or targets in place commonly cite the principles of meritocracy and the negative implications of arbitrary targets as their justification for not having these measures. We found that a similar disclosure approach was followed by CBCA issuers on those indices with correspondingly broad references to the consideration (or lack thereof) of the four designated groups. CBCA issuers’ disclosure regarding diversity and their associated initiatives or targets to increase diversity still primarily focus on gender.
OVERVIEW OF REGULATORY FRAMEWORK As a result of the amendments to the Canada Business Corporations Act (CBCA) that came into effect on January 1, 2020, all CBCA public companies are required to annually disclose information on their policies, practices and metrics related to the diversity of their boards and senior management teams, subject to limited exceptions. In Davies Governance Insights 2019 , 135 we outlined the evolving legal framework for diversity disclosure in Canada. The CBCA amendments specifically expanded the diversity disclosure requirements for CBCA public companies relative to other issuers listed on the Toronto Stock Exchange (TSX) that are incorporated under other corporate statutes. CBCA public companies are now required to provide disclosure regarding four “designated groups” (which takes its meaning from the federal Employment Equity Act ) – namely, “women,” “Aboriginal peoples,” “persons with disabilities” and “members of visible minorities.” All other Canadian public companies, however, are currently required only to comply with Canadian securities laws – namely, National Instrument 58-101 – Disclosure of Corporate Governance Practices (NI 58-101) – which limits disclosure to an issuer’s approach to gender diversity, including data regarding the representation of women on boards and in executive positions. NI 58-101 follows a “comply or explain” regime (like the CBCA amendments) and does not mandate any specific diversity practices or require disclosure beyond gender diversity; nor does it require issuers to adopt any specific gender diversity policies and practices or targets or quotas. However, current trends and debate over the lack of diversity among companies’ leadership may lead to significant changes.
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