Regulators consult on two options for enhancing diversity reporting

Canada’s securities regulators are seeking to improve the disclosure that investors get on diversity in corporate boardrooms and executive suites, but they are divided on how to go about it.

The Canadian Securities Administrators (CSA) published a set of proposed enhancements to existing diversity disclosure requirements, offering two competing visions on how to improve the information that shareholders get about corporate diversity.

The existing requirements in this area, which have not been adopted in all provinces (British Columbia and Prince Edward Island are the holdouts), were introduced in 2014 and focus on the representation of women on corporate boards and in executive roles. The regulators are now seeking to expand beyond gender to require companies to provide investors with disclosure about other forms of diversity, such as race and sexual orientation.

The proposals include two options for public consultation that are both intended to provide investors with increased insight on corporate diversity beyond gender.

One approach would require mandatory reporting on board and executive diversity for five specific groups, including women (which is required now) and adding reporting on the representation of Indigenous people, racial minorities, and disabled and LGBTQ people.

The other proposed approach would require companies to report on their policies for addressing diversity but would continue to require specific disclosure on only the representation of women.

According to the CSA’s notice, the Ontario Securities Commission (OSC) favours the more demanding approach, while the regulators in B.C., Alberta, Saskatchewan and the Northwest Territories prefer the second option.

The various other regulators haven’t taken a position on either alternative.

The proposed reforms come in the wake of recent changes to diversity disclosure requirements under federal corporate law (the Canada Business Corporations Act, or CBCA), recommendations from Ontario’s Capital Markets Modernization Taskforce, and calls from institutional investors to improve diversity and disclosure.

The option of mandating wider diversity disclosure (favoured by the OSC) would be more closely aligned with the CBCA’s new corporate governance requirements, and would ensure that this data is comparable between companies by standardizing that reporting.

The other proposed approach is intended to provide companies with more flexibility in designing their diversity policies, and would be less onerous in terms of required disclosure.

Both approaches would apply only to larger companies, not to venture issuers.

“The CSA is seeking comment on two approaches that build upon the current disclosure requirements regarding the representation of women on boards and in executive officer positions, the director nomination process and board renewal,” said Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission, in a release.

“The proposed changes recognize the importance of providing investors with transparency on issuers’ practices with respect to board and executive-level diversity and reflect the CSA’s commitment to providing investors with the information they need to make informed investment and voting decisions,” he said.

The regulators are also proposing to amend the existing guidance for the director nomination process and board renewal.

The proposals are out for comment until July 12.

While B.C. and P.E.I. still haven’t adopted the original 2014 requirements, they are now consulting on the proposals “with a view to adopting them,” the CSA notice said.

“The CSA is issuing this notice to solicit market feedback on the proposed amendments and, in particular, to seek feedback on how the different approaches address the needs of stakeholders,” Magidson said.