Écrit par William Osler, Lisa Stewart, William Edwards and Kellen Rosenau
The Canadian Securities Administrators (CSA) are currently seeking public comment on proposed amendments and changes to the disclosure requirements for reporting issuers not listed on the TSX Venture Exchange or the Canadian Securities Exchange. The CSA is proposing to amend Form 58-101F1—Corporate Governance Disclosure (Form 58-101F1) of National Instrument 58-101—Disclosure of Corporate Governance Practices (NI 58-101) and to make changes to National Policy 58-201—Corporate Governance Guidelines (NP 58-201)—collectively referred to as the "Proposed Amendments". The Proposed Amendments relate to disclosure regarding board and executive officer diversity, board renewal and director nomination processes.
Since 2014, non-venture issuers in most CSA jurisdictions have been required to provide disclosure regarding diversity-related policies pertaining to the representation of women on their boards and in executive officer positions, including the number of women in these roles, and with respect to the consideration of the representation of women in the director identification and selection process and in executive officer appointments. With the Proposed Amendments, the CSA seeks to expand the scope of diversity disclosure to include other demographics, and to increase the disclosure obligations regarding diversity. The CSA has put forward two alternative approaches to this disclosure for consideration, indicating a divergence of views amongst CSA members.
Both versions of Form 58-101F1 being proposed for comment, Form A and Form B, are intended to increase the reporting transparency of issuers' diversity policies, however the forms contemplate different approaches to the reporting of those policies and associated diversity metrics. Both Form A and Form B would maintain the existing disclosure requirements pertaining to women on boards and in executive officer positions.
Form A (endorsed by the British Columbia Securities Commission, the Alberta Securities Commission, the Financial and Consumer Affairs Authority of Saskatchewan, and the Office of the Superintendent of Securities Northwest Territories) requires that an issuer disclose its approach to board and executive officer diversity, but does not dictate which specific demographics, other than women, must be included. Form A provides the issuer with the discretion to determine and report on its chosen diversity objectives, as well as how to measure progress towards achieving those objectives. This discretion includes the ability to choose the demographics to address in its diversity policies and disclosures, as well as the metrics used to report progress. The CSA has stated that the intent of this framework is to afford issuers the flexibility needed to tailor their policies and disclosures to their specific industry, strategy or corporate circumstances.
In contrast to Form A, Form B (endorsed by the Ontario Securities Commission) is a more prescriptive framework and mandates that five designated groups must be included in diversity disclosures: women, Indigenous peoples, racialized persons, persons with disabilities and LGBTQ2S+ persons. The use of designated groups is consistent with the disclosure requirements currently in place for federally incorporated public companies as a result of the 2020 amendments to the Canada Business Corporations Act (CBCA)—though the groups mandated by the CBCA did not include LGBTQ2S+. It should be noted that the diversity data under this framework would be based on voluntary self-disclosure by directors and executive officers. Issuers can also voluntarily expand their diversity policies and disclosure beyond the five required demographics. Under Form B, issuers would be required to disclose their strategies, policies and objectives for achieving and maintaining diversity throughout its board and executive officer positions. The CSA has stated that this more prescriptive method is intended to promote consistency and comparability between disclosures and issuers.
The remaining members of the CSA have not expressed support for either Form A or Form B.
In addition to the proposed amendments to Form 58-101F1, the CSA is also soliciting public feedback on proposed changes to NP 58-201 to enhance the guidelines related to board nominations and introduce guidelines on board renewal and board diversity. Similar to the existing guidelines, the updated guidelines would not be prescriptive but instead would inform issuers in the development of their corporate governance practices. These proposed changes to the guidelines would integrate with the proposed amendments made to the disclosure requirements in Form 58-101F1. The proposed guidelines would address the following:
- the responsibilities of the board nominating committee;
- the written policies pertaining to the director nomination process;
- the use of a composition matrix, detailing the experience, skills, knowledge, competencies and attributes that the board currently has or is looking to achieve in its membership and candidates;
- effective succession planning and the mechanisms of board renewal, including term limits;
- the written diversity policy of the issuer; and
- targets for achieving diversity on the board and in executive officer positions.
The Proposed Amendments would be applicable only to non-venture issuers, however the CSA has indicated that diversity disclosure for venture issuers will be considered in a second phase.
The public comment period for the Proposed Amendments will expire on July 12, 2023.
The authors, or your Bennett Jones contact, would be pleased to assist your organization with submitting feedback on the Proposed Amendments.