RI Americas 2014: Ontario comply-or-explain rule on women on boards comes into force

In 2015 Canadian companies’ annual reports will have to report on percentage of women on boards as well representation targets.

RI Americas 2014: The gender disparity within Canada’s corporate boardrooms is about to get a lot more visible. Last week, the Ontario Securities Commission’s (OSC) “comply or explain” rule requiring companies to disclose the number of women on their boards of directors, along with targets for reaching equal representation, received ministerial approval after having been finalized in October. This amendment to the OSC’s corporate governance guidelines will take effect from December 31, 2014 – just in time to apply to the 2015 crop of Canadian companies’ annual reports.
“This is an economic imperative for our country, and for any country,” said Maureen Jensen, executive director and chief administrative officer at the OSC, in a panel discussion on board diversity at this week’s RI Americas 2014 conference in New York: “If you bifurcate your population, I think you’re discounting an enormous value.”
Jensen said the OSC rejected enforced quotas in favor of the comply or explain approach, which will compel companies to explain their silence on the issue if they fail to report on plans to improve gender balance both within boards and top management. The rule will apply to the roughly 1,600 firms listed on the Toronto Stock Exchange; all provinces and territories have signed on to participate except British Columbia and Alberta. Though it imposes no quotes or penalties, Jensen said the new guidelines have proved contentious within some of Canada’s many commodity companies, many of whom have complained that they can find no qualified women to draw from in making board and executive officer appointments.During the panel discussion, Jensen explained that the conversation around the amendment started a year ago, when the Ontario Minister of Finance approached the OSC, expressing concern over the gender imbalances evident within Canadian corporations’ top brass. A 2013 survey by the OSC, which compiled the responses of roughly 1,000 TSX issuers, revealed that 57 percent of respondents had no women directors, and that a mere 3 percent of companies boasted a woman chair of the board. After the survey, the Canadian Board Diversity Council calculated that at the country’s current rate, Canada would not see gender parity in its boardrooms before 2097. “Our conclusion was that we wouldn’t get anywhere without imposing some rule to push this into the marketplace,” Jensen said.
Specifically, the new rule will require companies to report on the number of women on their boards and in executive officer positions, their policies regarding the representation of women on the board, how they approach board turnover, and their tactics for encouraging the recruitment and advancement of qualified female employees. Jensen added that by next summer, the OSC will commence a review of company disclosures and publish a report on gender-equity progress. She stressed that all of the disclosed information and OSC analysis will be made public and “easy to mine.”
“We think sunshine is the best disinfectant,” she said, “so everyone’s going to be able to see the performance of each company.”

The RI Americas conference took place on 9th and 10th December in New York.