Overview
On September 14, 2023, a panel of thirteen speakers presented their views on the proposed diversity disclosure regime in Canada. At the national level, there is a lack of consensus as to the appropriate approach to such disclosure. In contrast, most of the panelists appeared to be united in favour of adopting a broader disclosure approach. Given the differing interests of the panelists, perhaps this is an indication of the potential for a harmonized disclosure regime across Canada. Or, perhaps, it may simply be representative of the Ontario viewpoint. Nonetheless, Grant Vingoe, the CEO of the OSC, was hopeful that a unified approach to such an issue could be achieved. Only time will tell.
The Panel and Its Focus
Hosted by the Ontario Securities Commission (the “OSC”), the roundtable “Strengthening Diversity in our Capital Markets” explored the appropriate approach to diversity disclosure in Canada.
The panel discussed proposed amendments put forth by the Canadian Securities Administrators (“CSA”) in April 2023 to Form 58-101F1 and changes to National Policy 58-201 (the “CSA Proposals”), which seek to expand on current corporate governance disclosure requirements. The panelists were asked for their views on the choice between what is known as "Form A" and "Form B" in the CSA Proposals or whether a third, potential "Form C" hybrid option is more appropriate. Form A focuses on gender and is closer to the current disclosure regime across most of Canada. The latter, Form B, encompasses a broader range of mandated diversity disclosure across several diversity measures. Across Canada, Canadian provinces and territories are divided on this issue. British Columbia, Alberta, Saskatchewan and the Northwest Territories support Form A. Ontario, similar to the majority of the panelists, supports Form B. The rest of Canada, including Quebec, has remained neutral.
The viewpoints discussed herein are those of the panelists and not of Fasken.
The Panelists
Apart from representatives from the OSC, the panelists consisted of a broad range of stakeholders, including representatives from issuers, institutional and retail investors, non-profit organizations and academic professionals.
Specifically, the panelists included:
- Melanie Adams, VP & Head, Responsible Investment, RBC Global Asset Management
- Joseph Bastien, Associate Director, Inclusive Economy, SHARE
- Jean-Paul Bureaud, Executive Director, FAIR Canada
Roger Casgrain (Executive Vice President, Casgrain & Company Limited) - Gigi Dawe, VP Policy and Research, Institute of Corporate Directors
- Peter Dey, Chairman, Paradigm Capital
- Nils F. Engelstad, Senior Vice President, General Counsel, Alamos Gold Inc.
- Rhonda Goldberg, Executive Vice-President and General Counsel, IGM Financial Inc.
- Kelly Gorman, Executive Vice President, Governance Advisory, Kingsdale Advisors
- Michela Gregory, Director, Responsible Investing and ESG Services, NEI Investments
- Michael Holder, Managing Partner, North Star Legal Professional Corporation and Managing Director, North Star Consultants Inc.
- Geordie Hungerford, CEO, First Nations Financial Management Board
- Sarah Kaplan, Distinguished Professor, Founding Director, Institute for Gender and the Economy, Rotman School of Management, University of Toronto
After an introduction by Jo-Anne Matear, Special Advisor to the Executive on Sustainable Finance, OSC, the panel was moderated by Grant Vingoe, Chief Executive Officer, OSC and Naizam Kanji, General Counsel, OSC.
Convergent Views on Diversity Disclosure Among Attendees
The majority of the panelists had converging views on diversity disclosure and all appeared to agree that increasing diversity on boards and in management was a desirable outcome.
As to the utility of diversity data, some panelists questioned whether the current Canada Business Corporations Act, which already requires certain companies to disclose their board and management across a variety of diversity metrics (e.g., women, Aboriginal peoples, persons with disabilities and members of visible minorities), has really moved the needle.
Accordingly, the general consensus was that the focus should go beyond a check-the-box regime. Instead, the focus should be on how such disclosure would make an impact.
As one panelist noted, it is not simply about strengthening diversity in our capital markets, but rather, strengthening capital markets through diversity.
For investors, diversity disclosure is a risk management tool intended to reduce potential liability exposure that investors are exposed to.
For issuers, in addition to a reporting mechanism, the exercise of compiling diversity disclosure is also a tool to help organizations assess internally where they are and where they need to be in respect of their talent pool. Relatedly, it can also be used as a possible benchmarking tool against peers.
How does this disclosure drive impact? Panelists highlighted that it can allow for a better understanding of how to work with individuals with different needs. Richard Branson and Steve Jobs were mentioned as two instances of individuals in contemporary history who overcame learning disabilities like dyslexia to become successful businessmen. Similarly, representation by Indigenous peoples can drive better informed decision-making. Particularly in Canada, Indigenous peoples are not just stakeholders – they are rights-holders in accordance with constitutional principles and UNDRIP (the United Nations Declaration on the Rights of Indigenous Peoples). Consequently, their voice matters. Having better representation would promote corporate governance efforts, and potentially avoid issues that companies may have previously faced (e.g., pipeline obstacles).
Spotlight on the Difficulties in Diversity Data Collection
Notwithstanding the foregoing benefits, some panelists highlighted the difficulties issuers may face in collecting the required data. The decision to self-identify is a decision personal to an employee and protected by privacy laws. However, without this voluntary disclosure, companies are unable to accurately assess the profile of their workforce.
To alleviate this, one panelist suggested that companies foster an atmosphere of trust. This goes beyond one-off employee surveys – it instead consists of continuous engagement with the workforce to demonstrate why this information is important and adds long-term value to the company. The importance of focusing on the narrative was also raised.
Desire for More Consistent and Structured Diversity Data Reporting
Many panelists expressed a need for better data reporting. Currently, investors must sift through scattered information from a variety of sources to obtain diversity-related information on organizations, including proxy circulars, company websites, board and management biographies, ISS and GlassLewis reports, and perhaps even the Globe & Mail’s diversity reports. In addition, some investors, mainly institutional investors, supplement these sources with direct engagement with companies. Consequently, the importance of prioritizing investors’ needs was raised during the roundtable. Investors are looking for a more consistent data reporting system to enable a more reliable and comprehensive basis for diversity-related decision-making.
Furthermore, regardless of the adopted approach (whether Form A, Form B or a hybrid), panelists reiterated that prescribed requirements are a floor and not a ceiling. Organizations always remain free to voluntarily go beyond such requirements to provide other information useful to their stakeholders.
About The Authors
Dyna Zekaoui, JD and LLM-LE (Duke University). Dyna is a member of Fasken’s ESG team and advises clients regularly on corporate governance and other ESG-related issues. Dyna completed the Governance, Stewardship and Sustainability course in February 2023 taught by the International Corporate Governance Network, an organization that promotes investor-led global standards for governance and stewardship.
Karen Yao, JD and BCL (McGill University), MA and BSocSc. Honours (University of Ottawa). Karen is a member of Fasken’s Corporate and Commercial group with a keen interest in ESG matters.
Special thanks to Amirali Alavi, Articling Student, for his assistance on this article.
Looking Forward & Further Reading
As to next steps, the CSA has extended the comment period for the CSA Proposals and is accepting feedback from interested parties until September 29, 2023.
To learn more about the CSA Proposals, check out our related bulletins, ESG 2023 Update: While Diversity and Social Awareness Are on the Rise, Canadian Regulators Remain Divided on Diversity Disclosure Approach and A Look Into the CSA’s New Diversity Disclosure & Related Corporate Governance Proposals.
