Osler lawyers say new report on first year of mandatory disclosure shows diversity wanting
A Corporations Canada report on the results of the first year of mandatory diversity disclosure on corporate boards highlights the underrepresentation of women and visible minorities in public companies and the absence of any significant representation of Indigenous peoples and those with disabilities in public company leadership positions.
However, despite the sobering results, Andrew MacDougall, partner at Osler Hoskin & Harcourt LLP, says the very fact that mandate is being undertaken is a positive. It allows the opportunity to obtain meaningful data previously unavailable, making it easier to rectify the situation.
This type of information “should force a stronger examination of recruitment processes, and a more diligent approach to recruitment of directors than historically has been in place,” he says. “It could have a big impact on making boards better with a focus on diversity.”
The Corporations Canada figures show that women hold only 17 per cent of board seats, visible minorities have four per cent, and only 0.3 per cent of board seats are held by Indigenous peoples or those with disabilities.
Corporations Canada’s report analyzes disclosure in proxy circulars filed by 403 companies governed by the Canadian Business Corporations Act during the entire 2020 calendar year. The organization started with 669 distributing corporations required to disclose diversity information, an approximate number derived by cross-referencing its database with the list of issuers provided by the Canadian Securities Administrators.
Of 469 proxy circulars reviews, 85.9 per cent, or 403, included information on diversity. Of the 66 that did not, 13 were filed by non-venture issuers, and venture exchange issuers filed 53. The latter is not subject to gender disclosure rules under provincial regulation, so these CBCA requirements are the first to apply.
The organization notes that according to figures from the report, “Employment Equity in the Public Service of Canada for Fiscal Year 2018 to 2019,” the Canadian population available to work consists of 52.7 per cent women, 15.3 per cent visible minorities, four per cent Indigenous and nine per cent are persons with disabilities. MacDougall says it is clear that these groups are substantially underrepresented in leadership roles of Canadian public corporations.
Still, MacDougall adds that considerable effort is required if publicly traded CBCA corporations are to achieve the aspirational goals of the federal government’s 50 – 30 Challenge.
That challenge looks for gender parity on Canadian boards and senior management of 50 per cent and 30 per cent representation on Canadian boards and senior management of other under-represented groups. The latter includes racialized persons, people living with disabilities, members of the LGBTQ2 community, Canada’s First Nations, Inuit, and Métis peoples.
Jennifer Jeffrey, an associate with Osler, says she believes companies “should really strive” to deal with any impediments in advancing women and other underrepresented groups on corporate boards and senior management. “It’s just good for companies, from many perspectives, but perhaps one of the more important ones is changing the internal corporate culture of organizations,” she says. “It should be top of mind when it comes to developing corporate governance policies.”
Jeffrey says she has a particular interest in research in this area, having spent time at the Ontario Securities Commission involved in studying these corporate governance disclosure rules. While the disclosure rules will help “move the dial,” especially with more institutional investors weighing in on the topic, it may become necessary to implement some quota system if a change is to come more quickly.
She adds that it’s not a matter of bad faith. Indeed, companies are turning their minds far more often to the issue of board diversity. However, it is perhaps a matter of removing the blinders, which would allow companies to look beyond their regular Rolodex of contacts. It is also a matter of providing more “gender intelligence and unconscious bias” training. Also, looking to outside recruiters to find candidates for board seats and senior positions is another strategy that could be very helpful.
MacDougall agrees, adding that quotas and mandates do not mean that the quality of board members decreases. Looking beyond what a corporate board member “is supposed to be” opens up the possibility to make it even stronger.
Historically, there has been a focus on recruiting CEOs or retired CEOs for board positions, he says, and most of this pool of candidates are male and white. MacDougall thinks expanding the search parameters for board candidates would do a lot to help increase diversity. “Maybe CEO of a smaller company, maybe a direct report to the CEO, someone who has a different but important set of skills – these could all be used in looking for board members beyond the obvious places.”
He also agrees that quotas could speed up the process, noting that “often, when you set a mandate to find certain people, and you put your mind to it, lo and behold, you find them.”
Osler recently prepared its 2020 Diversity Disclosure Practices Report – Diversity and leadership at Canadian public companies. It also a link to an Institute of Corporate Directors template for a board diversity policy statement.
