Group of cheerful government representatives working on development of society and discussing policy at meeting

Proxy advisory firm Institutional Shareholder Services Inc. (ISS) is proposing to adopt a change to its voting policies that aims to encourage racial and ethnic board diversity at S&P/TSX Composite Index companies.

ISS launched a consultation on proposed changes to its proxy voting policies for 2023. The consultation, which is open to Nov. 16, contemplates changes to its benchmark voting policy in various markets.

For Canada, the firm is proposing to adopt a policy of recommending that shareholders vote against, or withhold votes, for nominating committee chairs at companies that doesn’t have at least one racially, or ethnically diverse director. The proposed policy wouldn’t take effect until 2024.

The proposal follows changes to federal corporate legislation that expanded disclosure requirements on board diversity beyond gender to include visible minorities, Indigenous people, and people with disabilities.

Additionally, ISS reported that its discussions with investor clients generally favoured increased board diversity, including racial/ethnic diversity. And, it said that the change would more closely align its policies for Canadian companies and U.S. companies.

Alongside specific changes for certain markets, ISS is also seeking to expand board accountability for action on climate change globally.

It also proposed changes to its policies on companies with dual-voting share structures; and, in the U.S., it’s seeking to introduce a new policy on shareholder proposals that demands increased transparency on corporate lobbying and political contributions, including lobbying related to climate goals.

The final voting policies will be announced in the first week of December.