Beginning in 2020, the Canada Business Corporation Act (CBCA) requires federal distributing companies to disclose annually the diversity in their boards and senior management. (CBCA s. 172.1). Disclosures are made to shareholders at annual meetings, and in filings with Corporations Canada. Corporations Canada has now published its review of filings covering calendar year 2021, citing the latest information and comparing with 2020 reports to assess initial progress.
What disclosures are required?
CBCA and Corporation Canada regulations define these disclosure requirements.
Which companies must disclose?
The disclosure requirement applies to “distributing corporations,” which Corporations Canada’s Canada Business Corporations Regulations (CBCR) defines for purposes of CBCA as:
(a) a corporation that is a reporting issuer under any legislation that is set out in [specified securities laws]; or
(b) in the case of a corporation that is not a reporting issuer referred to in paragraph (a), a corporation:
• that has filed a prospectus or registration statement under provincial legislation or under the laws of a jurisdiction outside Canada,
• any of the securities of which are listed and posted for trading on a stock exchange in or outside Canada, or
• that is involved in, formed for, resulting from or continued after an amalgamation, a reorganization, an arrangement or a statutory procedure, if one of the participating bodies corporate is a corporation to which subparagraph (i) or (ii) applies.
What must be disclosed?
Distributing companies must disclose information to their shareholders and Corporations Canada on the diversity of their boards of directors and senior management teams. A corporation’s senior management team includes any of the following:
- chair and vice-chair of the board of directors,
- president of the corporation,
- chief executive officer and chief financial officer,
- vice-president in charge of a principal business unit, division or function, including sales, finance or production, and
- anyone who performs a policy-making function within the corporation.
The CBCR defines “designated groups” to be itemized by using those in Section 3 of the federal Employment Equity Act:
- Aboriginal peoples,
- persons with disabilities, and
- members of visible minorities.
CBCR requires disclosure of the following information:
- Whether the corporation has adopted term limits or other mechanisms of board renewal;
- Whether it has a written policy relating to the identification and nomination of directors from the designated groups, and if so, a description of the policy; - Whether, and if so, how the board or nominating committee considers diversity on the board in identifying and nominating candidates for election or re-election to the board;
- Whether, and if so, how the corporation considers diversity when making senior management appointments;
- Whether the corporation has targets for representation on the board and among senior management for each of the designated groups and, if so, its progress in achieving those targets; and
- The number and percentage of directors from each of the designated groups on the board and among senior management.
What information has Corporations Canada distilled from company reports?
Corporations Canada has now reported 2021 information (reviewing reports by 475 companies), which can be compared to 2020 reports (reviewing reports by 469 companies). According to these reports, in 2021 (compared to 202 in parentheses):
- 55% of distributing corporations have at least 1 woman on the board of directors (was 50%).
- 23% have at least 1 member of a visible minority on the board (was 16%).
- 2% have at least 1 Indigenous person on the board (was 1.7%).
- 2% have at least 1 person with disabilities on the board (was 1.7%).
Of total board seats:
- Women hold 20% of board seats (was 17%).
- Members of visible minorities hold 7% of board seats (was 4%).
- Persons with disabilities hold 0.4% of board seats (was 0.3%).
- Indigenous peoples hold 0.4% of board seats (was 0.3%).
Among senior management positions:
- Women hold 25% of senior management positions (unchanged).
- Members of visible minorities hold 9% of senior management positions (unchanged).
- Persons with disabilities hold 0.7% of senior management positions (was 0.6%).
- Indigenous peoples hold 0.4% of senior management positions (was 0.2%).
Setting formal targets for diversity:
- 18% have set targets for the representation of women on their boards (was 14%).
- 4% have set targets for visible minorities (was 1.2%).
- 2% have set targets for Indigenous peoples (was 1%).
- 2% have set targets for persons with disabilities (was 1%).
- 38% have adopted written policies relating to the identification and nomination of women to boards (was 32%).
- An average of 32% have written policies relating to Indigenous peoples, members of visible minorities and persons with disabilities (was 26%).
Corporations Canada observed that an average of 13% of company reports included incomplete or non-standardized information, and that the agency continues to work to ensure that distributing companies are aware of their reporting responsibilities. In February 2021 the agency issued revised informational guidelines to clarify terms and responsibilities.
What happens now?
The numbers summarized above show that public company boards are far from representative, and suggest that changes are underway. I don’t know of any analogous disclosure requirements, and note that the U.S. state of California has enacted laws to require public companies to meet state diversity standards (SB 826 and AB 979) but that these laws have been invalidated by court action. Management consultants and advocacy groups publish regular survey results covering a host of jurisdictions, which tend to show slow changes from local baselines. It seems logical to expect that disclosure efforts will continue to spread, and that social changes and the search for positive publicity will continue to lead to additional diversity on corporate boards.
Has the organization evaluated the diversity of its board of directors and senior management (and/ or at other levels within the organization)?
Has the organization adopted a formal policy with targets for diversity?
Does the organization report this information?
- To shareholders;
- To the public; and
- To governmental and other entities.
Where can I go for more information?
About the Author
Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years.
Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).
Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).
You may contact Mr. Elliott directly at: firstname.lastname@example.org