Securities regulators in nine jurisdictions took a significant step forward for board diversity last month, with the finalization of rule amendments on disclosure of women on corporate boards.
The changes will officially take effect on Dec. 31, 2014 — as long as all necessary approvals are obtained, according to the Ontario Securities Commission (OSC).
Ontario, Quebec, Manitoba, Saskatchewan, Nova Scotia, New Brunswick, Newfoundland and Labrador, Northwest Territories and Nunavut are the nine jurisdictions participating in the rule amendments.
The changes were designed to increase transparency around the representation of women on boards, and also in senior executive positions. They will apply to all non-venture issuers reporting in the nine participating jurisdictions.
The rule amendments take a “comply or explain” approach to board diversity — not a quota approach, said Pamela Jeffery, Toronto-based founder of the Canadian Board Diversity Council.
“We’re really happy to see comply or explain because we’ve been advocating (for that) for quite a long time now,” she said.
The amendments will require issuers to disclose information such as policies around representation of women on the board, the number of women on the board and in executive positions and targets around appointing women into such positions, among other things (see sidebar).
The rule amendments had been in development for some time and on Jan. 16, 2014, the OSC opened up a 90-day comment period on the amendments to gather feedback. On Jul. 3, 2014, all nine jurisdictions opened a 60-day comment period for the amendments.
The changes are a really strong step but they also create the right balance, said Alex Johnston, executive director of Catalyst Canada in Toronto.
“The Ontario Securities Commission hit the sweet spot in giving people sort of a push, but also flexibility in setting goals that are the appropriate goals for their organization and relevant to the sector,” she said.
The amendments reflect the increasing recognition of the importance of diversity, said Lisa Wilkins, CHRO at the OSC in Toronto.
“There is increasing recognition of the value of having diverse perspectives in the boardroom. We certainly benefit from that diversity at the Ontario Securities Commission, where 38 per cent of our board and 61 per cent of our executive management team are women,” she said.
“Strong executive-level support is key to implementing leadership programs that create opportunity and develop talented women throughout their careers, preparing them for senior management and, ultimately, board roles.”
It’s very important that the amendments include requirements to report on women in executive roles as well as board positions, said Jeffery.
“It covers boards and it covers executive officer appointments, which you have to have in order to have the pipeline of women who will be qualified to sit on boards,” she said. “And, it includes a written diversity policy piece — so we had advocated to the OSC that it needed to go further than a company disclosing whether they had a board diversity policy; it needed to go further to say a board needed to have a written board diversity policy.”
That means less opportunity for a board to simply say they have a policy, and more opportunity for a board to think the policy through because it will be shared with the public, she said.
Moving forward, companies are going to need key individuals such as HR leaders to drive the conversation internally about goal-setting for boards, said Johnston.
“What companies will be looking to from those key people is really supporting the conversation effectively and helping the board and the executive committee wrap their heads around what this means for them,” she said.
The amendments are an excellent opportunity for organizations to bring fresh perspectives to their boards and the C-suite, said Jeffery.
“Corporate Canada (has) the chance to take the opportunity to diversify boards and bring in directors who so far have been pretty much overlooked.”
The CBDC has resources in place to help employers do so, such as the Diversity 50, a group of 50 qualified, board-ready individuals identified each year. It also has a corporate governance education program called “Get on Board.”
“It addresses the fact that it’s so important for men and women... to get board experience, so there’s a pipeline for corporate board seats,” she said.
What will organizations have to do?
When the amendments take effect, non-venture issuers will have to disclose the following annually:
• director term limits and other mechanisms of renewal of the board
• policies regarding the representation of women on the board
• the board’s or nominating committee’s consideration of the representation of women in the director identification and selection process
• the issuer’s consideration of the representation of women in executive officer positions when making executive officer appointments
• targets regarding the representation of women on the board and in executive officer positions
• the number of women on the board and in executive officer positions.
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