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Aug 31, 2017

Panel eyes diversity and social media rulebook gaps

Canadian regulators take comply-or-explain approach to board diversity policies

Board diversity and social media are among the areas with potential for new rulemaking or regulatory guidance in Canada, industry professionals discussed at the annual Governance Professionals of Canada (GPC) conference in St John’s, Newfoundland last week.

A Canadian Securities Administrators (CSA) review, the results of which were issued last September, finds that progress is being made very slowly in terms of gender diversity on boards. Overall, the percentage of board seats occupied by women increased to 12 percent last year from 11 percent the year before.

Larger issuers tend to perform slightly better, though change among that group is still slow. Among the 215 issuers with a market capitalization of more than C$1 billion ($793 million), 18 percent of board seats were held by women last year, up from 16 percent the year before. Among the 42 issuers with a market capitalization greater than C$10 billion, these numbers were 23 percent and 21 percent, respectively.

Speaking the day before the report’s publication, Ontario Securities Commission chair and CEO Maureen Jensen urged companies to make gender diversity a priority in the boardroom and executive suite.

Under Canadian rules, a company must disclose the following information:

  • The number and percentage of women on the issuer’s board and in executive officer positions
  • Whether it has a policy relating to the identification and nomination of women directors
  • Whether it has director term limits or other mechanisms of board renewal
  • Whether it has targets for women on its board and in its executive officer positions
  • Whether it considers the representation of women in its director identification and selection process and in its executive officer appointments.

If a company does not adopt a policy on identifying and nominating women directors, board renewal mechanisms or targets or does not consider the representation of women, it must explain why it has not done so – but there are no rules mandating diversity policies or quotas.

Blake Cassels & Graydon partner Ross McKee told delegates at the GPC conference that it can be hard to tell whether a company having a diversity policy leads to it having a more diverse board – or whether companies that already have more women on their boards are more inclined to adopt a policy. He said he believed regulators would be happy to see steady progress, but that they may change their minds if the level of female board participation levels off at around 15 percent. There has not been a concerted push for quotas so far, he added.

Fellow panelist Pierre Tellis, senior counsel in TMX Group’s general counsel’s office and chief compliance officer for TSX Trust Company, noted that there has been significant progress in boosting board diversity in European countries where quotas have been enforced. He suggested there might be a change in views on doing the same in Canada if female participation rates stall at around 15 percent.

McKee said the Fearless Girl statue installed earlier this year near Wall Street by State Street Global Advisors has had more of an impact than other measures, adding that shareholder pressure has an effect on companies. Asked how governance professionals can move the ball down the field on the issues, he said: ‘It may sound facile, but [it’s by] having that discussion [about diversity].’

McKee also said Canada lags behind the US on the regulatory front in terms of social media. The issue is a thorny one for compliance and governance teams, with firms wanting to use the new platforms for marketing and client outreach but not wanting to fall foul of rules on advertising and disclosure. US regulators have issued detailed guidance on their expectations for how firms can and cannot use social media. But McKee said he sees no movement on developing a rule in the area for Canadian companies.

Tellis said that, as a compliance official, he preferred to operate with regulators having issued rules or guidance, rather than facing regulation via enforcement.

Earlier this year, CSA issued guidance advising companies against using Twitter, Facebook or other social media platforms when revealing material information for the first time (, 3/20). In the US, companies can post material information on such platforms first, provided they have already told investors which channels they’ll be using.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...