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Nov 29, 2021

Rethinking Diversity in Canada’s Capital Markets: Beyond Gender

By Melanie Cole, Amy Marcen-Gaudaur, Meredith McCann and Angela Oh

Almost seven years following the adoption of the gender focused corporate governance disclosure rules set out in National Instrument 58-101 Disclosure of Corporate Governance Practices (“NI 58-101”), recent data published by the Canadian Securities Administrators (“CSA”) in Multilateral Staff Notice 58-313 Review of Disclosure Regarding Women on Boards and in Executive Officer Positions indicates that the progress in implementing and maintaining meaningful diversity in Canadian capital markets remains slow. The revised corporate governance disclosure rules set out in NI 58-101 require non-venture issuers to disclose, on an annual basis, director term limits and information regarding the representation of women in board and executive positions.

Since 2014, the proportion of women on boards has almost doubled to 22% (an increase of 2% compared to the prior year).1 This steady upward trend is encouraging, but it is clear that progress remains slow. While progress for gender representation in leadership positions has been gradual, progress for other underrepresented groups in Canada – Indigenous peoples, persons with disabilities and visible minorities, to name a few – has not experienced the same positive trend in a meaningful way.

At the federal level, Canada has implemented new disclosure requirements under the Canadian Business Corporations Act (“CBCA”), requiring public companies existing under the CBCA to make certain disclosures about the diversity of their boards and executive officers. The disclosure requirements centre on representation of four designated groups: women, Indigenous peoples, persons with disabilities and visible minorities. Among other things, CBCA companies must annually disclose whether or not they have targets in place to enhance representation by these four groups and, if not, to provide an explanation for the lack of such targets.

The above-noted disclosure requirements, often referred to as “comply or explain” rules, however, do not require that companies adopt policies to promote diversity within their company, or that they set specific targets to reach diversity goals. The Capital Markets Modernization Taskforce (the “Taskforce”), charged with reviewing Ontario’s securities regime, has recommended an overhaul of the “comply or explain” system that would require companies listed on Canada’s senior exchange to set diversity targets and provide annual data on their progress. The report also recommends expanding the system beyond gender, to include diversity targets for Black, Indigenous and people of colour (BIPOC).  In addition to targets, the Taskforce is recommending term limits for directors and that companies be required to adopt written board nomination policies that specifically address how women and candidates from underrepresented groups are identified.

Similar initiatives have been implemented internationally. In the United Kingdom, the Financial Conduct Authority launched a consultation on proposed rules to enhance diversity disclosure and require listed companies to explain their performance against specified board targets and data on gender and ethnic make up of senior management. In the United States, NASDAQ now requires most listed companies to disclose board level statistics, and have at least two directors from diverse groups, or explain why they do not.

Recent events, globally and locally, caused the lack of diversity on boards and in executive officers to come under increased scrutiny. The conversation has shifted from the “why” to the “how” – how do we actually increase diversity and representation and what steps need to be taken to do so? The Taskforce recommendations go beyond the required disclosure in both NI 58-101 and the CBCA, neither of which require targets to be met. Proponents of term limits and diversity targets argue that it would facilitate representation changes at both the executive and board level, potentially leading to more meaningful diversity changes. These requirements would aim to move Canadian public companies beyond gender diversity and towards a more intentional, intersectional approach to diversity within companies.

In addition to the Taskforce recommendations, the Government of Canada launched the 50-30 Challenge, which invites Canadian organizations to increase the representation and inclusion of diverse groups within their workplace, while highlighting the benefits of giving all Canadians a seat at the table. The 50-30 Challenge aspires to two goals: (i) gender parity (50%) on Canadian boards and senior management; and (ii) significant representation (30%) on Canadian boards and senior management of other under-represented groups: racialized persons including Black Canadians, persons living with disabilities (including invisible and episodic disabilities), Canadians who identify as LGBTQ2, and First Nations, Inuit and Métis peoples as founding peoples of Canada, who are under-represented in positions of economic influence and leadership.

Changes to approaches in diversity are also being made by boards of directors and shareholders of Canadian public companies. Earlier this year, TMX Group Ltd., Canada’s largest stock exchange operator, recommended that its shareholders vote in favour of a resolution on Indigenous inclusion and reconciliation. The original proposal was put forward by an investor advocate, with the final version of that resolution being approved by a near unanimous vote of TMX’s shareholders. The resolution that was approved requires TMX’s board of directors to report to shareholders on TMX’s work to develop internal programs and policies that foster equity and inclusion for Indigenous employees and govern its relationships with Indigenous communities.

Although significant challenges to addressing diversity in Canada’s capital markets remain, including challenges relating to disclosure requirements, inconsistency in diversity requirements across provinces, and identifying appropriate and attainable targets, we anticipate that regulators will begin to require Canadian public companies to start showing additional action in these areas.

The Capital Markets Group at Aird & Berlis will continue to monitor developments in diversity. We are ready to assist with any matter or question related to securities legislation, including diversity and disclosure requirements. If you require any assistance with the foregoing, please contact us.


1 CSA Multilateral Staff Notice 58-313 – Review of Disclosure Regarding Women on Boards and in Executive Officer Positions: Year 7 Report (4 November, 2021).

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