On June 7, 2016, the Ontario government announced that it has accepted all 11 recommendations set forth in Catalyst Canada's report, Gender Diversity on Boards in Canada: Recommendations for Accelerating Progress (Report). Catalyst Canada is a non-profit organization whose mission is to accelerate progress for women through workplace inclusion. The Report was commissioned by the Government of Ontario and is intended to advance gender balance on boards through providing recommendations to companies and business leaders as well as the Ontario government.
To provide input on implementation of the Report's recommendations, a steering committee was established and will be co-chaired by Ontario's minister of finance and minister responsible for women's issues and include the chair and chief executive officer of the Ontario Securities Commission (OSC), among others.
The Report notes that while some indications of momentum exist, with 15% of TSX-listed issuers having added one or more women to their boards between the 2014 and 2015 proxy seasons, there is still much progress to be made in terms of gender balance, as women currently comprise 20.8% of the members of such boards and half of TSX-listed issuers do not have any women on their boards (see our October 2015 Blakes Bulletin: CSA Findings from Gender Diversity Disclosure Requirements Review Released).
RECOMMENDATIONS CONCERNING PUBLIC COMPANIES
The Report builds on the "comply or explain" gender diversity regime introduced for the 2015 proxy season (see our October 2014 Blakes Bulletin: Just in Time for 2015 Proxy Season: Disclosure Requirements for Gender Diversity, Director Tenure) by recommending that TSX-listed issuers set specific gender diversity targets by the end of 2017 and achieve them within three to five years. For issuers that currently have at least one woman director, the aim is to have 30% women board directors, and for issuers that currently have no women directors, the aim is to have at least one female board director.
The Report recommends that Ontario issuers establish written policies to describe their specific plans for increasing female board representation and use at least one board renewal mechanism, such as director term or age limits. It also recommends that issuers review board recruitment policies to ensure that women, including women from diverse communities, comprise at least 50% of potential board candidates and at least 50% of the interview pool for each open board position. Beyond executive positions, the Report recommends that issuers address gender equity at all levels of their organizations in specified, tangible ways, such as removing restrictions on external board service, investing in inclusive leadership training and implementing pay transparency policies, among others.
REGULATORY RESPONSE
The Ontario government accepted all of the recommendations in the Report, including establishing a target that, by 2019, women comprise at least 40% of all appointments to every provincial board and agency. The Ontario government has also committed to providing ongoing reinforcement of the Report's recommendations to issuers and business leaders and will be launching an action-oriented public awareness campaign to encourage Ontario businesses to follow the Report's recommendation of appointing 30% women to their boards by the end of 2017. Ultimately, if sufficient progress is not made, particularly toward the 30% target, the Ontario government has pledged to consider more stringent legislative or regulatory approaches.
The OSC has also announced (see OSC Notice 11-775 – Notice of Statement of Priorities for Financial Year to End March 31, 2017) that, as a priority issue, it will review all TSX-listed issuers to assess compliance with disclosure requirements for women on boards and conduct targeted disclosure reviews to monitor the progress and determine the impact of the "comply or explain" gender diversity regime.
INCREASED MOMENTUM FOR INCREASED GENDER DIVERSITY
Although the presence of women on corporate boards has increased over the last decade, Canada lags behind other developed nations. The Report is hopeful that encouraging issuers to set specific targets, implement at least one mechanism to facilitate board renewal, and establish a written policy to increase the representation of women on boards will accelerate the pace of progress toward gender balance on boards and in executive ranks. Ontario public companies (including TSX-listed issuers) should take notice of the Ontario government's initiative in driving this concern forward and expect to see further regulatory developments should the current voluntary, "comply or explain" regime yields unsatisfactory progress.
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