September 23, 2013
OSC Staff Consultation Paper 58-401 Disclosure Requirements Regarding Women on Boards
This letter is submitted on behalf of the Institute of Corporate Directors (“ICD”) in response to the invitation to participate in the consultation called for in the Staff Consultation Paper 58-401 Disclosure Requirements Regarding Women on Boards and in Senior Management (the “Proposal”) dated July 30, 2013.
The ICD is a not-for-profit, member-based association with more than 7,600 members and 11 chapters across Canada. Our vision is to be the pre-eminent organization in Canada for directors in the for-profit, not-for-profit and Crown sectors. Our mission is to foster excellence in directors to strengthen the governance and performance of Canadian corporations and organizations. This mission is achieved through education, certification and advocacy of best practices in governance.
We commend the Government of Ontario and the Ontario Securities Commission (“OSC”) for their initiative in addressing the advancement of women on boards of directors and in senior management of Canadian publicly-traded companies. We are pleased to set out below our perspectives on the Proposal.
Background to ICD Submission
The ICD is an active proponent of advancing the participation of women in business. Our members strongly believe greater board diversity can contribute to better corporate governance. In December 2011 we published a report entitled Diversity in the Boardroom - Findings and Recommendations of the Institute of Corporate Directors. This report sets out why the ICD believes diversity is important to corporate governance and the ICD’s recommendations for enhancing board diversity. These recommendations are as follows:
- Considering diversity as an important part of the criteria that are used to determine board composition.
- Adopting formal diversity policies that outline the essential criteria and experiential attributes that fulfill the needs of the board.
- Directing search firms, where used, to include diverse candidates in searches whenever possible (and subject to satisfying the qualifications of the position).
- Encouraging search firms to include qualified candidates who are unknown to current board members.
- Facilitating diversity agendas that permeate all levels of an organization, starting at the top with the Board, CEO and senior management ranks.
- Considering limits on the tenure of board members to encourage ongoing board renewal, being mindful of the need for a healthy degree of board continuity and experience.
In preparing this submission, the ICD had the benefit of the views of the following ICD members, each of whom has significant director experience and each of whom concurs with this submission:
- Jalynn Bennett
- Robert Prichard
- Sarah Raiss
- John Thompson
- Martine Turcotte
The ICD also surveyed its members as to their views of the Proposal. The ICD members that responded to the survey were, as a whole, generally supportive of the Proposal, subject to the comment below related to the concept of diversity.
Comments on Proposal
Approach in General - The ICD concurs with issuers disclosing their policies regarding representation of women on the board and in senior management and the consideration given to representation of women in the director selection process. In this respect, the ICD concurs with (i) the “comply or explain” approach of the Proposal (as opposed to mandated diversity policies for issuers), (ii) the application of the proposed disclosure regime at this time to only non-venture reporting issuers (other than investment funds) and (iii) addressing this disclosure by augmenting National Instrument 58-101 Disclosure of Corporate Governance Practices.
The ICD does not support quotas to increase diversity in the boardroom or in management.
Measurement of Gender Diversity - The ICD believes that measurement is important to ensuring progress in diversity remains a focus for organizations and therefore supports the concept of disclosure about diversity measurements. We believe, however, that issuers have the best sense of what measurements are relevant for the purposes of advancing their own diversity policies. For example, gender diversity statistics at every employee level or for each subsidiary may not be a useful or reflective measurement for how a company is advancing gender diversity initiatives, depending on the nature of the company, the relationship of that company with its subsidiaries and similar factors.
Therefore, the ICD recommends that initially issuers disclose their own measurable goals in meeting their diversity policies and how they are doing in comparison to those goals. The OSC could then review this form of disclosure during its periodic reviews of corporate governance disclosure practices. If after a period of, say, three years the OSC is not satisfied that disclosure practices regarding measurable goals are sufficient or meaningful, it could then reconsider the matter.
Board Evaluation Disclosure - The Proposal suggests that disclosure be provided about whether and how adherence to policies regarding the representation of women on the board and in senior management are assessed in connection with the annual evaluation of the board and nominating committee. The ICD does not support mandating this requirement as director evaluation approaches are matters that each board should determine for itself and information about evaluation results is not, in our view, suitable for public disclosure.
Concept of Diversity - While gender dominates the current dialogue on diversity in Canada and is the only category of diversity specifically addressed in the Proposal, the ICD defines diversity along broader lines and considers diversity of ethnicity, age, business experience, functional expertise, personal skills, stakeholder perspectives and geographic background to also be important. We recognize that the reference from the Government of Ontario pertained at this time only to women but would request that the OSC consider disclosure obligations that will also address diversity more generally.
In our survey, members were asked whether diversity related disclosure obligations should relate exclusively to women or to diversity more generally. The members who responded strongly supported disclosure relating to diversity more generally.
The ICD believes the Proposal is meaningful and worthy of pursuit, though our preference would be that the OSC consider diversity disclosure more generally, as supported by our members.
We would encourage the OSC to work with its counterparts in the CSA so that one disclosure regime will prevail across the country.