Written By Karen Keck, Juliamai L. Giffen and Hind Masri

On October 5, 2017, the Canadian Securities Administrators (CSA) published CSA Multilateral Staff Notice 58-309 – Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices (Notice). The Notice summarizes the findings of the securities regulatory authorities in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec, Saskatchewan and Yukon (Participating Jurisdictions) with respect to the corporate governance disclosure of 660 non-venture issuers with year ends between December 31, 2016, and March 31, 2017. This Notice continues the review, for the third year, of "comply or explain" disclosure following the implementation of rules under National Instrument 58-101 – Disclosure of Corporate Governance Practices (NI 58-101).

Background

Under NI 58-101 a non-venture issuer in Participating Jurisdictions is required, among other things, to annually disclose:

• the number and percentage of women on its board and in executive officer positions;
• whether it has a written policy relating to the identification and nomination of women directors;
• whether it has targets for the number of women directors or executive officers; and
• whether, and if so, how the level of representation of women is considered in its director identification and nomination process and its executive appointment process.

If a non-venture issuer has not adopted the above mechanisms, policies or targets, or does not consider the representation of women, it is required to explain its reasons for not doing so.

These rules were implemented to increase transparency for investors and other stakeholders regarding the representation of women on boards and in executive officer positions in order to assist investors when making investment and voting decisions.

Third Year Review Results

The CSA reported the following findings among the issuer sample.

Boards

• The total percentage of board seats occupied by women has increased to 14% in 2017 from 12% in 2016 and 11% in 2015.¹
• The percentage of issuers that have at least one woman on their boards increased to 61% in 2017 from 55% in 2016 and 49% in 2015.
• The percentages of issuers that had two or more women on boards increased to 16% in 2017 from 14% in 2016 and 12% in 2015.
• The percentage of issuers that had three or more women on boards increased to 11% in 2017 from 10% in 2016 and 8% in 2015.
• The number of women on boards had either increased or stayed the same in each size category of issuers (one category stayed the same between 2016 and 2017), with large issuers still leading the way.
• 26% of board vacancies were filled by women.

Executive Officers

• The percentage of issuers with at least one woman in an executive position increased to 62% in 2017 from 59% in 2016 and 60% in 2015.
• The percentage of issuers with at least two or more and three or more women in an executive position each increased to 16% in 2017 from 15% in 2016 and 2015.

Policies

• 35% of issuers adopted a policy in 2017 relating to the identification and nomination of women directors, representing a significant increase from 21% in 2016 and 15% in 2015.
• Issuers that reported having a policy specifically relating to the representation of women on their board have the highest level of representation with an average representation of 19% (with an average of 18% in 2016 and 2015) compared to issuers with a general policy, no policy or no disclosure, which averaged 10% in 2017 and 2016 and 9% in 2015. The relationship between the adoption of a policy and higher representation of women on an issuer's board has been consistently correlated in the last three years.

Selection Process

• 37% of issuers that disclosed whether they consider the representation of women provided disclosure on how it was considered for their boards, while 34% of issuers did so for their executive positions. The CSA is encouraging issuers to enhance their disclosure to include information on how these considerations are being made.

Targets

• 11% of issuers disclosed that they had adopted targets for the representation of women on their boards in 2017, compared to 9% in 2016 and 7% in 2015. Of the 11% of issuers that adopted such targets in 2017, 86% provided disclosure regarding their progress in achieving their targets, with 57% reporting that they had already achieved their stated targets.
• Issuers that adopted targets had an average of 26% of female representation on their boards, compared to issuers without targets that had an average of 12% of female representation.
• 3% of issuers set a target for the representation of women in executive officer positions, up from 2% in 2016 and 2015.

Industry Differentiation

• The representation of women on boards and in executive positions varied significantly from industry to industry. Of significance to Alberta is that although there was an increase in the percentage of women on boards in the oil and gas industry, it is one of the industries that presented the lowest percentage of issuers with women on their boards. Specifically, 45% of oil and gas issuers reported that they had one or more women on boards in 2017. However, the trend is positive. Since the Alberta Securities Commission (ASC) adopted the policy, the percentage of women on boards grew from 40% in 2016 to 45% in 2017. Prior to the ASC's adoption of the policy, the percentage remained static from 2015 to 2016.

Conclusory Remarks

While there has been a general upward trend in participation and representation of women on boards and in executive officer positions, the ASC has noted the following disclosure deficiencies:

• disclosure of both the number and percentage of women on the issuer’s board and in executive positions;
• if the issuer has adopted a written policy regarding the representation of women on its board, a description of that policy, including a clear explanation of how the policy applies to the identification of women directors should also be disclosed;
• if the issuer discloses that it has adopted targets dealing with the representation of women on its board and in executive positions, the issuer should also disclosure annual and cumulative progress in achieving the targets; and
• if the issuer discloses that it considers the representation of women in the director identification and selection process or when making executive appointments, the issuer should also describe how it does so.

This review leads to the penultimate question: What can issuers do to further move the needle? The ASC's adoption of NI 58-101 has increased the level of representation of women on boards or in executive positions in Alberta. The review also suggests that the issuers who have adopted specific policies related to the representation of women have a higher level of representation. Additionally, issuers who adopted targets for the representation of women on their boards have a higher representation of women. The adoption of these procedures illustrate the mechanisms that could be adopted to enhance and increase the nomination and identification of women on boards and in executive positions in Alberta.

While most Alberta-based companies will already be familiar with the ASC's changes and are already complying with them, issuers should consider the deficiencies noted above when complying with such obligations. Bennett Jones is pleased to assist clients with addressing questions or concerns, and advising on such disclosure.

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¹ The finds from the 2015 and 2016 annual reviews are set out in: (i) CSA Multilateral Staff Notice 58-307 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices  published on September 28, 2015 (2015 review), and  (ii) CSA Multilateral Staff Notice 58-308 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices published on September 28, 2016 (2016 review).