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MARK YOUR CALENDARS!
Give youself a new year resolution treat and register for
MAXIMIZE YOUR BOARD POTENTIAL 2019!
June 3-6, 2019
Harvard Faculty Club
Nine years running, this invigorating program addresses the challenges of global governance.
For more information, go to:
Changing the Scope of Diversity
Canada is changing the shape of diversity, both in definition and transparency.
In 2017, Scott Stringer and the New York City Pension Funds called for major companies globally to create more diverse, independent boards. They launched the
Boardroom Accountability Project 2.0 and sent letters to boards of 151 US companies, asking them to disclose the race, gender and skills for each director.
This advocacy for diversity has gained traction in Canada.
Amendments to the
Canada Business Corporations Act (the CBCA Amendments) will require public corporations to annually disclose their diversity policies, targets and statistics regarding representation of "designated groups" for both board directors and executive officers and senior management. For this, "designated groups" is defined in the federal
Employment Equity Act, includes more than women (currently covered by CSA policies for gender diversity). Diversity will now expand to include Aboriginal peoples, persons with disabilities and members of visible minorities. A visible minority is defined by the Government of Canadaas "persons, other than aboriginal peoples, who are non-Caucasian in race or non-white in color". In 2017, visible minorities grew from 19 to 23 % of the population (6.3 to 8.5 million).
“The policy driver behind these rules is to nudge corporate Canada in the direction of improving diversity at the board and senior management level,” says Rima Ramchandani, co-head of capital markets practice at Torys, LLP.
The new amendment goes live in 2020, once regulations are enacted. *
Similar to the comply or explain policies of the US and Hong Kong, the amendments introduce a "comply or explain" protocol following Canadian securities regulations., This change does not oblige companies to adopt policies or targets related to diversity, but they must disclose if they have done so and, if not, why not.
At this stage, it is about transparency and advocacy for change. Corporations are not mandated to make their boards or C-suites more diverse. They must disclose how many of the total directors and executive officers are members of designated groups.
Expanding the definition of diversity is does not discount the value of gender diversity, which has been a focus for change globally as well as in Canada, especially with advocates in the real estate industry. While the total percentage of board seats held by women increased to 15% in 2018 from 11% in 2015, these new amendments will create momentum to widen diversity even more.
These amendments to the CBCA are responses to growing legislative, regulatory and investor scrutiny of diversity in boards and executive leadership. While some argue the CBCA amendments alone do not go far enough, other organizations are pushing as well. Proxy advisory firms, such as Institutional Shareholder Services (ISS) and Glass Lewis, recently recommended withholding votes for the chair of a nominating committee or a board chair if a company does not meet their diversity “standards”. Moreover, major institutional investors are demanding more diversity on public company boards directly.
While we continue to study the impact and results of diversity, we strongly recommend all directors commit seriously to continuing governance education. Changes in governance around the globe makes staying current vital.
Board certification and continuing education for all directors, coupled with diversity of ideas capability, makes for the strongest value at the board table.