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Canadian Securities Regulatory Monitor News and Insight

The Canadian Securities Administrators are closely monitoring compliance with gender diversity disclosure rules

Posted in Continuous and Timely Disclosure, CSA
Heidi GordonWendi LockeSabrina Lyon

The Canadian Securities Administrators recently released the results of its second review of compliance with the new gender diversity disclosure rules.

Last year new rules came into effect requiring Canadian public companies to disclose, on an annual basis (either in their annual proxy circular or annual information form), certain information regarding women on boards and in executive positions (the Gender Disclosure Rules).

The Gender Disclosure Rules represent some of the most significant changes to the annual disclosure requirements of Canadian public companies that have come into effect in the last few years, and the Canadian Securities Administrators (CSA) are paying careful attention to compliance.

On September 28, 2015, the CSA published a summary of the findings of their review of compliance with the Gender Disclosure Rules by companies that had released their annual proxy circulars or annual information forms by July 31, 2015 (Year 1), and on September 28, 2016, the CSA published an updated set of findings, this time focusing on compliance by companies that had released their annual disclosure by July 31, 2016 (Year 2). The Year 2 findings are based on a sample size of 677 companies.

The Gender Disclosure Rules came into effect for financial years ending December 31, 2014, apply to TSX-listed (and other non-venture) companies and require them to disclose:

  1. The number and percentage of women on the company’s board of directors and in executive officer positions.
  2. Whether the company has (i) a policy relating to the identification and nomination of women directors, (ii) director term limits or other mechanisms of board renewal, and (iii) targets for women on its board and in its executive officer positions. If a company has not adopted such a policy, mechanisms or targets, an explanation as to why it has not done so is required.
  3. Whether the company considers the representation of women in its director identification and selection process and in its executive officer appointments.

Results of the CSA Review

The Year 2 findings reveal the following (with meaningful differences between Year 1 and Year 2 noted):

BOARDS OF DIRECTORS

  • Number of Women. 94% disclosed the number or percentage of women on their boards, with 55% having at least one female director (up 6% over Year 1) and 10% having three or more female directors (up 2% over Year 1).
  • Term Limits. 20% adopted director term limits, with 48% of these companies setting age limits, 23% setting tenure limits and 29% setting both. Less than 3% failed to provide a reason for not adopting board renewal mechanisms.
  • Targets Regarding the Representation of Women. 9% (up 2% over Year 1) set formal targets for the representation of women on their boards. The larger a company, the more likely it was to implement a target for board representation, with 31% of companies with market caps over $10 billion adopting a target, compared to just 5% of companies with market caps under $1 billion.
  • Consideration of the Representation of Women in the Director Identification and Selection Process. 66% (up 6% over Year 1) disclosed that they consider the representation of women on their boards as part of their director identification and nominating process. 70% (up 28% over Year 1) made disclosure of how they consider the representation of female directors on their boards and in their identification and nomination process.
  • Policies Regarding Representation of Women. 21% (up 6% over Year 1) clearly disclosed the adoption of a policy relating to the identification and nomination of women directors, and 59% (down 6% over Year 1) disclosed that they did not adopt a policy. Only 2% (down 6% over Year 1) failed to provide disclosure related to policy adoption.

EXECUTIVE OFFICERS

  • Number of Women. 90% disclosed the number or percentage of women in their executive officer positions, with 59% (up 6% over Year 1) having at least one female executive officer.
  • Targets Regarding the Representation of Women. 2% set formal targets for the representation of women in executive officer positions.
  • Consideration of the Representation of Women. 58% (up 5% over Year 1) disclosed that they consider the representation of women when making executive officer appointments. 38% (up 30% over Year 1) made disclosure of how they consider the level of representation of women in executive officer positions when making executive officer appointments.

The Year 2 findings indicate an overall increase in compliance with the Gender Disclosure Rules. The findings also show that the representation of women on boards is increasing, and that companies that have policies or targets in place have a higher percentage of women on their boards. The CSA intends to publish a comparison of the complete two-year results once all required companies have made the requisite disclosure for two consecutive years.

Want to learn more about the Gender Disclosure Rules? Check out the following additional resources: