New diversity disclosure requirements could be coming soon

by Mujir A. Muneeruddin

The Canadian Securities Administrators (CSA), an umbrella organisation of Canada’s securities regulators, has proposed amending corporate governance disclosure rules and policies pertaining to director nomination and board renewal processes.

Recognising “the importance of providing investors with transparency on issuers’ practices with respect to board and executive-level diversity”, the objective of the proposed amendments is to increase transparency about diversity beyond the representation of women.

The CSA is seeking comments on the proposed amendments, which pertain to Form 58-101F1 and National Policy 58-201.

Stakeholders are invited to provide written comments up until 12 July 2023. The proposals involve two approaches to address the issues, with CSA seeking feedback as to which of the two is more favourable.

Objectives of the changes

In the proposal, the CSA focused on the importance of providing investors with transparency regarding issuers’ practices on diversity at executive and board levels. The administration wants “meaningful disclosure” about the identification and evaluation of both new and renewal board candidates and how diversity plays into the process. Specifically, the intent is to show whether (and how) diversity is an integral part of the nomination and renewal processes.

The stated objectives of the proposals are to:

Increase transparency about diversity in executive officer and board positions, including “diversity beyond women”;
Provide investors with information that allows them to better understand how diversity connects with an issuer’s strategic decisions; and
Provide “guidance” to issuers on corporate governance practices related to diversity, board nominations, and board renewals.

Two potential approaches to diversity disclosure

The CSA has presented two versions of Form 58-101F1 for comment, and these forms each reflect different options for diversity-related disclosure. In the Form A version, issuers would be required to disclose their approach to diversity for board members and officers, but would not need to be specific about groups other than women. Issuers would have to describe “chosen diversity objectives”, and explain how they would measure progress, as well as the mechanisms appropriate to achieve diversity goals. The Form A option, which CSA indicated the Alberta Securities Commission and British Columbia (among others) have expressed support for, is designed to give issuers flexibility to design policies and practices, and to keep securities regulators from having to dictate to issuers who they must address with diversity policies (other than women).

The other option, Form B – which CSA noted the Ontario Securities Commission, a key provincial regulator, supports – would involve mandated reporting on the representation of five specific groups on boards and in officer positions: