Review of diversity of Canadian boards and management teams

New reports from the Canadian securities regulators and Corporations Canada reveal some interesting trends on the diversity of Canadian boards and management teams, with larger public issuers clearly leading the way when it comes to diverse representation.

The Canadian Securities Administrators (CSA) have released their seventh annual report on their review of disclosure regarding women on boards and in executive officer positions of TSX-listed issuers. Corporations Canada has published its inaugural report of diversity of boards and senior management of public Canada Business Corporations Act (CBCA) issuers. 

The scope of the two reports – consistent with their underlying regulatory frameworks – is somewhat different. The CSA’s focus is on gender diversity and limited to TSX-listed issuers. Corporations Canada, on the other hand, has taken a more expansive view of diversity, which also includes Indigenous peoples, persons with disabilities and members of visible minorities. However, its purview is limited to publicly listed issuers that are incorporated or otherwise existing pursuant to the CBCA. Both regulatory regimes have in common that they follow the “comply or explain” model, meaning issuers must indicate whether or not they have a policy on diversity. If they do, they provide a summary of the policy; if not, they explain why not.

The purpose of the CSA report is to identify key trends over time since the securities regulators first introduced their comply-or-explain requirements in 2014. As this is Corporations Canada’s first report since the amendments to the CBCA came into force in January 2020, the report’s findings will be used as a baseline to measure progress over the years.

Findings

In their reports, the regulators note the following for gender diversity:

• Board representation. The CSA reports that the percentage of board seats occupied by women has grown from 11% in 2015 to 22% in 2021, while only 6% of board chairs are women. The number of TSX-listed issuers with at least one woman on the board grew from 49% in 2015 to 82% in 2021. Yet that number drops to 19% when looking at CBCA venture issuers that have at least one woman on the board as disclosed in the report by Corporations Canada.

In a similar vein, it is interesting to note from the CSA report the large differences in representation depending on the size of the issuer, with women holding 30% of board seats of issuers with a market cap of over $10 billion, but only 16% of board seats of issuers with a market cap of less than $1 billion.

• Executive Officer Positions.  According to the CSA report, 67% of TSX-listed issuers had at least one woman in an executive officer position in 2021, up only somewhat from 60% in 2015. Few TSX-listed issuers have a woman chief executive officer or chief financial officer (5% and 17%, respectively). Here the regulators diverge in what they are tracking, with Corporations Canada reporting that women hold 25% of senior management positions among public CBCA issuers.
• Targets. The CSA and Corporations Canada reports alike reveal that the majority of issuers have not adopted targets for the representation of women on their boards or executive teams. Likewise, both reveal that adopting targets for board membership is more common than adopting targets for executive officer positions.
• Policies. In reviewing CSA reports over the past seven years, the biggest change has been in the number of issuers that have adopted a policy relating to the representation of women on their boards, which is currently at 60%, up from only 15% in 2015. The Corporations Canada report shows that 32% of public CBCA issuers have adopted written policies relating to the identification and nomination of women on their boards. This appears to support the regulators’ objective to “enhance the conversation between management and shareholders about the benefits of diversity.”

The disclosure report from Corporations Canada, being its first report, provides baseline diversity statistics of public CBCA issuers rather than trends and developments in corporate governance practice. That said, it is striking how low some of the figures are.  For example, only 1% of public CBCA issuers have set targets for the representation of Indigenous peoples, members of visible minorities and persons with disabilities. That number slips to less than 1% when looking at targets for the representation of such groups among senior management. Given that only 16% of public CBCA issuers have at least one member of a visible minority on their board, it looks like there is nowhere to go but up.

Format of disclosure

Beyond the statistics and other findings of the CSA and Corporations Canada, it is important to note that the regulators have asked issuers to consider presenting their diversity-related data in a common format to improve consistency from year to year and comparability between issuers.  They both suggest that issuers present their data in a table format, and have included samples in their reports. The CSA guidance begins at page 10 here and the Corporations Canada guidance is here.

That said, since the scope of diversity is different under the CSA and Corporations Canada requirements, CBCA issuers listed on the TSX will have to be somewhat creative to merge or otherwise meet both sets of requirements.

Additional information

For a look at our analysis of the diversity disclosure of CBCA-incorporated issuers that are members of TSX 60 Index, click here.