Pursuant to the Canada Business Corporations Act (CBCA), all federally incorporated distributing corporations (ones that issue securities to the public and are subject to continuous disclosure rules under provincial or territorial legislation or laws of a jurisdiction outside of Canada), including venture issuers, must provide a report to shareholders and Corporations Canada on the representation of women, Indigenous peoples (First Nations, Inuit and Métis), members of visible minorities and persons with disabilities (together, the Designated Groups) among the directors and members of senior management.

The Corporations Canada annual report for 2022 (Report) presents findings from their third-year review of the levels of diversity on corporate boards of directors and among senior management in federal distributing corporations. Compared to 2021, the review found a slight progress in levels of diversity on senior management. However, among board of directors, the percentage of overall board seats filled by women and members of visible minorities decreased slightly.

Key findings

Corporations Canada identified 536 distributing corporations required to disclose diversity information and reviewed 498 proxy circulars filed for shareholder meetings held in 2022. Key findings from this review are summarized below:

Boards of directors

• 57% of distributing corporations have at least one woman on the board of directors;
• 3% have at least one Indigenous person;
• 23% have at least one member of a visible minority; and
• 3% have at least one person with disabilities.

The results for women, Indigenous peoples and persons with disabilities represent a slight increase from 2021, when they were 55%, 2% and 2%, respectively. The percentage for visible minorities has not changed.

Senior management positions

• Women hold 27% of all senior management positions;
• Indigenous peoples hold 0.4%;
• Members of visible minorities hold 12%; and
• Persons with disabilities hold 1.2%.

With the exception of the numbers for Indigenous  peoples, which remains unchanged (0.4%), these numbers are up from 2021, when they were 25%, 9% and 0.7%, respectively.

Written policies

• 34% of distributing corporations have adopted written policies relating to the identification and nomination of women on their boards.
• An average of 28% of distributing corporations have adopted similar policies relating to Indigenous peoples, members of visible minorities and persons with disabilities.

These numbers have slightly decreased from 2021, when they were 38% and 32%, respectively.

Board seats

• Women hold 19% of board seats;
• Indigenous peoples hold 0.6%;
• Members of visible minorities hold 6%; and
• Persons with disabilities hold 0.4%.

These results represent a slight decrease for women and members of visible minorities from 2021, when they were 20% and 7%, respectively. The results for Indigenous  peoples have increased slightly (from 0.4% to 0.6%), while the percentage for persons with disabilities has not changed.

Targets

• 23% of distributing corporations have set targets for the representation of women on their boards;
• 3% have set targets for Indigenous peoples;
• 5% have set targets for visible minorities; and
• 3% have set targets for persons with disabilities.

These numbers are all up from 2021, when they were 18%, 2%, 4% and 2%, respectively.

Guidelines

Corporation Canada has published guidelines to assist in standardizing the format for disclosure and clarifying required disclosure with respect to the following:

• Term limits or other mechanisms of board renewal;
• Written policies relating to the identification and nomination of directors from Designated Groups;
• Consideration of levels of representation from Designated Groups for the board and senior management; and
• Targets and recommended formats for representation of Designated Groups.

Awareness

One of the challenges identified in the Report is the fact that many distributing corporations may not recognize the need to file their proxy circular with Corporations Canada, even if they have filed it with the System for Electronic Document Analysis and Retrieval (SEDAR). As a result of various campaigns launched by Corporations Canada, the number of distributing corporations who filed their proxy circulars with Corporations Canada has increased to 82% (versus 80% in 2021). It is important that federally incorporated distributing corporations understand that the exemption from the filing of certain documents does not exempt them from filing their proxy circular with Corporations Canada if they have filed it with SEDAR.

For 2023, Corporations Canada is aiming to continue reaching out to distributing corporations to increase awareness of diversity-related disclosure requirements and promote standardization of disclosure.

Trends

There has been an increased focus among market participants on diversity on boards and executive positions, together with an expectation for action with an increase in shareholder activism in this area. For example, proxy advisory firms such as the Institutional Shareholder Services and Glass, Lewis & Co increasingly recommend that shareholders vote for issuers who promote representation and diversity on their boards of directors, committees and in executive officer positions.

The importance of diversity has also been highlighted by the Canadian Securities Administrators (CSA). On October 27, 2022, the CSA published its year eight report on women on boards and in executive positions and indicated a modest uptick in the overall percentage of women on boards and in executive positions. Also, as discussed in our recent insight, the CSA has proposed certain amendments to Form 58 – 101F1 – Corporate Governance Disclosure and National Policy 58–201 – Corporate Governance Guidelines pertaining to diversity, board renewal and board nominations of non-venture issuers.  

For more information on the Proposed Amendments, please contact co-authors Bill Gilliland, Kiana Mozaffari and Diana Nakka, or any other member of our Securities and Corporate Finance group.