The OSC regulates Canada's largest stock exchange, the TSX, so it's best suited to lead on mandating diversity disclosure.Cole Burston/The Canadian Press
Jennifer Coulson is the chair of the 30 Percent Club Canada Investor Group and the global head, ESG, at British Columbia Investment Management Corporation (BCI). Kevin Thomas is the chief executive officer of SHARE, a leading Canadian shareholder advocacy organization.
If we had waited for consensus among Canada’s 11 capital markets regulators, Canadian corporate boards might still be an old boys’ club.
Instead, when regulators first considered setting standards for the disclosure of gender diversity on corporate boards, the government of Ontario and the Ontario Securities Commission (OSC) demonstrated leadership by establishing new rules in 2014 that are now widely recognized as critical to improving the representation of women on boards across the country. And they did so even though several other provincial regulators were reluctant to act.
Nine years later, a lot has changed. Investor expectations, corporate laws and leading practices are evolving to include diversity beyond gender, to aim for increased participation in corporate leadership by people with disabilities and LGBTQ and racialized communities.
Unfortunately, the willingness of provincial regulators to update corporate disclosure rules has not evolved.
That’s why it’s time, once again, for the OSC and Queen’s Park to go it alone if necessary.
We know that regulations governing diversity disclosures and targets are already a subject of discussion among the Canadian Securities Administrators, a collaborative body that includes all 11 provincial regulators. Last year, regulators consulted investors and corporate issuers to determine what should be done, and institutional investors overwhelmingly supported enhanced disclosure rules.
That’s no surprise. As institutional investors, we need this data – and we just aren’t getting it voluntarily.
Currently, even Canada’s best corporate actors are only selectively disclosing information about performance on diversity beyond gender. A recent report from law firm Osler, for instance, found only 34 companies that were voluntarily disclosing information on the presence of Indigenous people on their boards and only 16 that extended that disclosure to the C-suite.
And those are the leaders. Who’s to tell how the rest of corporate Canada is faring?
Elevating disclosure requirements to include different types of diversity should be a no-brainer for regulators. There are already requirements in Canadian corporate law governing federally incorporated companies, mandating disclosure of board and executive-level diversity for women, Indigenous peoples, persons with disabilities and racialized individuals, consistent with the federal Employment Equity Act. However, companies incorporated under provincial regimes are unaffected.
Federally incorporated companies comprise 20 per cent of the listings on the Toronto Stock Exchange. New rules are necessary to create a level playing field and to standardize disclosures across the market, setting a minimum floor for required disclosures and allowing investors to compare results consistently, regardless of whether they are incorporated federally or provincially.
Canada’s business community, to be successful in the 21st century and deliver solid, sustainable returns to investors, needs to expand diversity in its ranks. While the exact steps a company takes to adapt and open doors to wider social inclusion will be unique to that company, the success of capital markets as a whole to deliver on economic prosperity depends on a broader regulatory environment that encourages participants to take those steps.
Updating disclosure rules is one small step that regulators can take. That it hasn’t happened yet is astounding.
If provincial securities regulators are not willing to facilitate progress collectively, someone will have to take the lead. Given that the OSC regulates Canada’s largest stock exchange, it is best suited to do so.
And we should not have to wait nine years for that to happen.