A review of issuers’ disclosure of their corporate governance practices by securities regulators found widespread deficiencies.

The Canadian Securities Administrators report that staff of the securities regulatory authorities in BC, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick conducted a review of compliance with the requirements of the national rule regarding disclosure of corporate governance practices, which came into force on June 30, 2005.

The review looked at a sample of 100 reporting issuers, including 65 TSX issuers and 35 venture issuers. As a result of the review, the CSA required 27 TSX issuers to address deficiencies in their next management information circular or annual information form.

The CSA report that disclosure of compensation practices is particularly weak, describing the disclosure in this area as “often vague and uninformative”. “For directors, several issuers disclosed the amount of their compensation but not the process by which it is determined. Where issuers did not have a fully independent compensation committee, there was often either no disclosure or only a very general description of how the board determines compensation that did not focus on the objectivity of the compensation setting process,” it observed.

It also found problems with firms disclosing whether or not the board, its committees and individual directors are regularly assessed regarding their effectiveness. “Where issuers included disclosure of this nature, it was often vague and uninformative,” it noted.

Additionally, the CSA found disclosure of the director nomination process was “vague and uninformative” in “several instances”.

The disclosure requirements for venture issuers included in are less extensive than those that apply to TSX issuers. However, the CSA still found “significant deficiencies in the quality of the disclosure that was filed”. Notably, eight issuers, representing 23% of the 35 venture issuers reviewed, did not provide any corporate governance disclosure.

Similar to the disclosure for TSX issuers, there were instances where the nature of a practice was not adequately described, where it was unclear how a practice achieved its purpose, or both, the CSA said. This was particularly evident in the following three areas: board supervision over management, nomination of directors, and assessments of board effectiveness.

As a result of the review, the CSA required two venture issuers that did not provide any corporate governance disclosure to restate and refile their management information circulars. The other six that did not provide any corporate governance disclosure were required to include the relevant disclosure in their imminent management information circular filing. The regulators also required three other venture issuers to address significant deficiencies identified in the review in their next management information circular, annual information form, or annual management discussion and analysis.

“We are concerned about those issuers that did not comply with all of the instrument’s disclosure requirements. We are equally concerned about the qualitative deficiencies in the disclosure that was provided by both TSX and venture issuers, in particular, the extent to which issuers failed to provide clear or complete accounts of their governance practices in their disclosures,” the CSA said.

“To comply with the requirements of the instrument, issuers must provide meaningful, informative disclosure of their corporate governance practices. Avoiding the use of boiler-plate language would help issuers to provide investors with more specific information about their corporate governance practices,” it added.

The CSA indicated that it intends to selectively review issuers’ compliance with these requirements as part of its ongoing continuous disclosure review program, and will take appropriate regulatory action for non-compliance.