The Alberta Securities Commission ("ASC") has published a notice and request for comment on proposed amendments (the "Amendments") to National Instrument 58-101 Disclosure of Corporate Governance Practices ("NI 58-101"). The comment period ends on October 14, 2016. If the comment process does not result in any material changes to the Amendments, the changes are expected to be adopted and in place for the 2017 proxy season.
On December 31, 2014, with the exception of securities regulators in Alberta, British Columbia, and Prince Edward Island, all members of the Canadian Securities Administrators (the "CSA") adopted amendments to NI 58-101 which establish requirements for all TSX-listed non-venture issuers to report specific gender diversity practices, policies, statistics and targets in respect of board and executive officer positions ("Diversity Practices").
While the ASC did not adopt the amendments in 2014, it believes that requiring Alberta non-venture issuers to report on Diversity Practices provides investors with information that may be useful in making their investment and voting decisions, and is accordingly seeking to amend NI 58-101.
In Alberta, the Amendments change Alberta Form 58-101F1 Corporate Governance Disclosure ("Form 58-101F1") to specifically require non-venture issuers to report on:
- The issuer's policies regarding representation of women on the board. Issuers with such a written policy must disclose:
- a summary of the key provisions and objectives of the policy;
- steps that have been implemented to ensure effectiveness of the policy;
- annual and cumulative progress in achieving the policy's objectives; and
- how the board measures the policy's effectiveness, if at all.
- How the issuer's board considers the representation of women in identifying and nominating board candidates.
- How the issuer's board considers the representation of women when making executive officer appointments.
- The issuer's target for the representation of women on the board and in executive officer positions. Issuers that have adopted targets for women on the board or in executive officer positions must disclose those targets and the issuer's annual and cumulative progress in achieving them.
- The number and percentage of women on the board and in executive officer positions.
- Information on director term limits and other mechanisms for board renewal.
The Amendments are consistent with the "comply or explain" model whereby an issuer that does not have Diversity Practices in place must disclose the reasons why such policies have not been created.
The information contained in Form 58-101F1 is required where an issuer solicits proxies from security holders for the purpose of electing directors, or as part of its Annual Information Form if the issuer does not solicit proxies.
Effect of the Amendment on Issuers
If the Amendment is adopted, all Canadian reporting issuers, with the exception of those registered only in British Columbia or Prince Edward Island or both, will be required to include information on their Diversity Practices as part of their continuing disclosure obligations. In the absence of having Diversity Practices, the issuer is left to explain to their shareholders why such practices are not in place.
The proposed changes do not change venture issuer reporting obligations and there continues to be no reporting obligations in respect of Diversity Practices for venture issuers.
As the Amendments have already been adopted in the majority of Canadian jurisdictions, and because the Amendments only affect Alberta non-venture issuers who were not already reporting issuers in jurisdictions that had not adopted Diversity Practice disclosure, it is expected that the Amendments will be adopted without significant variation.
Diversity Levels Among Reporting Issuers
On October 6, 2016, the University of Calgary and the ASC announced the results of the second annual Alberta Women on Boards Index (the "Study"). According to the Study, there has been a significant increase in the number of women appointed to the board of Alberta TSX-listed issuers to 32% of new board members, up from 22% in the previous year. The Study also indicates an increase in the number of women holding board positions of Alberta TSX-listed issuers to 11% from 9% in the previous year. While the Study does not attribute the increase directly to disclosure policies on Diversity Practices, the Study's advisory committee agrees that issuers are beginning to recognize the importance of diverse representation on their boards. While the CSA considers this to be a significant increase and a move in the right direction, the CSA has commented that it expects representation of women on boards of Canadian corporations to continue increasing as a result of the Amendments and similar legislation in other provinces.
Reporting issuers, in particular those that are reporting issuers in Alberta, should review the Amendments to determine their impact.
Please call the authors of this Bulletin or your usual lawyer in BLG's Securities and Capital Markets group to discuss the implications of Diversity Practice disclosure requirements to your business.