The above recommendations go further than the recent CBCA amendments by proposing targets in relation to the representation of women and BIPOC on boards and in executive positions. In Davies Governance Insights 2019 , 155 we outlined that one concern with the CBCA amendments was the creation of inconsistent disclosure standards among Canadian reporting issuers. Although changes to securities laws may create further inconsistencies in disclosure standards among Canadian reporting issuers, we expect that change may be forthcoming in the future, especially in light of the growing demands to address systemic racism and discrimination in the Canadian business community. Inconsistent disclosure standards, which can in turn compromise confidence in and the competitiveness of our capital markets, may not suffice to preclude changes to Canadian securities laws. The “comply or explain” regime under NI 58-101 has resulted in a notable increase in both the nature and the extent of public disclosure on gender diversity and in the number of women holding director and senior executive positions. There has also been a significant decline in the number of boards without female directors. These and other related developments are discussed in detail in Davies Governance Insights 2019 . However, there is still significant progress to be made, and both the current legislative framework and the level of disclosure with respect to diversity are far from perfect from the perspective of many market participants. In particular, the concept of mandating targets for women, Black people and other under-represented groups is gaining momentum. There is a wealth of empirical data that suggest that companies with formal diversity targets are generally doing better at enhancing the overall diversity of their boards and executive teams, and doing so faster. This was certainly the case for women – in 2019, issuers that adopted board targets had an average of 27% of their board seats held by women, compared with issuers without targets, which had an average of 22%.
While potential regulatory amendments and the recent responses from companies regarding diversity are means that may effect meaningful change, it will also be important for companies to truly embrace diversity if real progress is to be made. Having a more diverse board and executive team is only part of the solution. The real work for Canadian companies is to pay more than lip- service to diversity. Doing so may require companies to consider implementing a range of new diversity initiatives throughout their organizations – for example, committing to specific employment goals, changing recruitment practices and establishing more diverse director, executive and employee teams. As recently stated by Meryl Afrika, president of the Canadian Association of Urban Financial Professionals, “You need to have regulations to get people to comply, but there also has to be that buy-in.” 156 The latest diversity initiatives announced by Royal Bank of Canada (RBC) are but one example of a public company that is trying to improve its diversity and eliminate systemic racism issues. Notably, RBC announced the following company changes in July 2020: 157 – voluntarily increasing its target for visible minorities in executive positions to 30%; – requiring anti-racism and anti-bias training for all staff; – making $100 million in loans available to Black entrepreneurs over the course of the next five years; Having a more diverse board and executive team is only part of the solution. The real work for Canadian companies is to pay more than lip-service to diversity.
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Governance Insights 2020
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