From the Regulators

Many issues need to improve the level and detail of disclosure that’s necessary to adhere to new requirements

By James Langton |

Canadian securities regulators have issued additional guidance on Monday designed to beef up companies' disclosure efforts to ensure gender diversity among their senior management and directors after conducting a review on the matter.

At the end of last year, several provincial securities regulators — including Ontario, Quebec, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Newfoundland and Labrador and the territories — adopted new disclosure requirements requiring non-venture companies to report, among other things: the number of women on their boards and in senior executive positions; and their policies for addressing gender representation in these high-level positions. On Monday, the various members of the Canadian Securities Administrators (CSA) that have these rules in place released the results of a review of issuer disclosure in the wake of the new rules, along with guidance designed to improve that disclosure.   

In a staff notice setting out the results of the review, the CSA finds that many issuers "require additional guidance concerning the level and detail of disclosure that is necessary" to adhere to the new disclosure requirements in this area. The guidance also aims to improve issuer disclosure "to better inform investment and voting decisions."

The review of 722 issuers listed on the Toronto Stock Exchange (TSX) found that, overall, almost half (49%) have at least one woman on their board, 60% have at least one woman in an executive officer position and 15% have added at least one women to their board in the past year. In addition, the CSA found that 19% of companies have adopted director term limits and 56% have adopted other mechanisms of board renewal. 

The CSA review found that very few issuers have set explicit targets for appointing women to their boards or to executive officer positions. Only 7% have set a board target and a scant 2% have target for executive representation. Of issuers with board targets, 39% had already achieved their stated target, the review notes. The primary reason for not adopting targets is that firms say they select candidates based purely on merit.

The notice calls on firms to be more explicit in certain aspects of their disclosure. For example, although firms aren't required to report comparative year-over-year numbers, the CSA's notice indicates that "reporting current and prior year numbers together in a table may increase the clarity of disclosure for investors and other stakeholders and also simplify ongoing reporting for issuers on annual and cumulative progress towards targets."

Furthermore, the report notes although 60% of issuers disclosed that they considered the representation of women as part of their director identification and nominating process, only 42% of these firms specifically explained how this was considered. Similarly, although just over half of the issuers disclosed that they considered the representation of women when making executive officer appointments, only 38% explained how this is considered.

The number of women on boards and in executive officer positions varies significantly by industry and by the size of the issuer, the CSA review found. The utilities and retail industries have the most women on their boards, with 57% and 43% of issuers, respectively, having two or more female directors; as well, these industries also have the fewest boards with no women on them. Conversely, the mining, oil and gas and technology industries had the most issuers with no women on their board of directors, at 60% or more each. Approximately 50% of issuers in the biotech, mining, oil and gas and technology industries do not have any female executive officers.

The CSA report also states significant differences based on the size of firms, noting that: 30% of issuers with a market capitalization of more than $2 billion have adopted a written policy for identifying and nominating women directors; 48% of these policies were adopted, or updated, this year; and 60% of these firms have two or more female directors. Conversely, 62% of issuers with a market cap under $1 billion had no women on their boards and 48% reported having no women in executive officer positions.

The rate of written policy adoption concerning the representation of women also varies considerably by industry, the report notes. Higher rates were found in the insurance, utility, communications and entertainment industries, whereas the oil and gas, technology, biotech, hospitality and environmental industries had the lowest rates.

The CSA will continue to evaluate corporate governance disclosure "to ensure that meaningful disclosure is provided regarding the representation of women on boards and in executive officer positions and to measure if the disclosure ultimately achieves its intended purpose of increasing transparency."