New diversity disclosure requirements will be effective for annual meetings of public CBCA corporations beginning on January 1, 2020. Consistent with global trends, the federal government is aiming to increase diversity on boards of directors and among senior management. The CBCA now aligns with Canadian securities laws that prescribe disclosure about women on boards and in senior management positions—but the CBCA goes further by also requiring disclosure regarding the representation of visible minorities, Indigenous peoples and people with disabilities.1 Unlike securities laws, the CBCA grants no exemption for venture issuers.
Diversity information at annual meetings
Public CBCA corporations will have to place before their shareholders at every annual meeting the following information.
- The number and proportion (expressed as a percentage) of women, visible minorities, Indigenous peoples and people with disabilities:
- on the corporation’s board of directors; and
- among senior management2 of the corporation, including its major subsidiaries.
- Whether or not the corporation has adopted a written policy in respect of board diversity relating to the four designated groups and, if not, why not.
- If a board diversity policy has been adopted:
- a short summary of its objectives and key provisions;
- the measures taken to ensure effective implementation;
- the annual and cumulative progress by the corporation in achieving the policy’s objectives; and
- whether or not the board measures the policy’s effectiveness and, if so, how this is done.
- Whether or not the board or nominating committee considers the representation of the four designated groups in identifying and nominating board candidates, and either an explanation of how this is done or the reasons why it is not done.
- Whether or not the corporation considers the representation of the four designated groups in appointing members of senior management, and either an explanation of how this is done or the reasons why it is not done.
- Whether or not the corporation has adopted target numbers or percentages of board positions or senior management positions to be held by members of any of the four designated groups by a specific date and:
- if any target has been adopted, the corporation’s annual and cumulative progress in achieving it; and
- for each designated group for which a target has not been adopted, the reasons for not adopting a target.
- Whether or not the corporation has adopted term limits for directors or other mechanisms of board renewal, and either a description of such mechanisms or the reasons for not adopting them.
The foregoing information about diversity must be provided separately, not just on an aggregated basis, for women, visible minorities, Indigenous peoples and people with disabilities. CBCA corporations may also choose to disclose aggregated diversity information, including additional groups, if any, identified in their diversity policies.
Diversity policies and self-identification
Many corporations’ existing diversity policies address race, religion, ethnicity, sexual orientation and other diversity categories. The CBCA does not mandate that public corporations amend their policies, but their disclosures will have to cover the four designated groups.
To assess levels of diversity required to comply with the disclosure requirements, corporations should rely on self-identification by members of the designated groups. For example, questions, which should be expressed as voluntary, could be added to the customary annual D&O questionnaire. The Regulatory Impact Analysis Statement accompanying the CBCA amendments indicated that individuals may be comfortable self-identifying given that only overall statistics will be disclosed by the corporation, not individuals’ personal information.
Other CBCA reforms
As a reminder, the following CBCA reforms are still pending and their timing of implementation has not yet been established:
- majority voting requirements, under which shareholders could vote for or against each director and a director would not be elected if he or she failed to receive majority support at an uncontested meeting;3
- say-on-pay, under which shareholders would have a non-binding vote at annual meetings on the corporation’s approach to remuneration of directors and senior management;
- disclosure about clawbacks from directors or senior management of incentive or other forms of compensation; and
- disclosure about the well-being of employees, retirees and pensioners.
1 The designated groups are defined by reference to Canada’s Employment Equity Act.
2 “Senior management” for these purposes is the equivalent of “executive officers” as defined under Canadian securities laws.
3 See “CBCA Reforms Receive Royal Assent”.
To discuss these issues, please contact the author(s).
This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.
For permission to republish this or any other publication, contact Janelle Weed.
© 2020 by Torys LLP.
All rights reserved.