CANADA Trends and Developments Contributed by: Bill Gilliland, Dentons Canada LLP
Introduction Corporate governance in Canada continues to evolve. Diversity disclosure continues to be a focus of regula - tory and proxy advisory policy change. The introduc - tion of legislation governing the disclosure of benefi - cial ownership of company shares, as well as certain other matters not previously subject to mandatory disclosure, shows a trend towards increased trans - parency. Climate change is another core aspect of ESG concerns at the board level. Proposed climate- related disclosure rules will entail very significant changes to corporate governance that will require boards of directors to undertake a comprehensive review of the corporation’s governance structures and practices. Stakeholders will look for more oversight from the board as the adoption of generative artificial intelligence (AI) continues to grow exponentially, with American proxy advisory services company, Glass, Lewis & Co (Glass Lewis), and The Globe and Mail ‘s ranking of corporate governance practices in “Board Games” signalling an increase in attention to board- level AI governance. Diversity – Boards and Senior Management Diversity on boards and in senior management is being reviewed by corporate regulators and stake - holders, and the legal and “soft law” requirements have and are continuing to evolve. Since 2014, Toron - to Stock Exchange (TSX)-listed corporations have been required to make diversity-related disclosure in their annual disclosure documents on a “comply or explain” basis, including: • on their policies and targets regarding the repre - sentation of women on the board of directors and in executive positions; • how the representation of women is considered in selecting board and executive officer candidates; • gender representation on the board and in execu - tive officer positions; and • term limits. See National Instrument 58-101 of the Canadian Securities Administrators (CSA) – Disclosure of Cor - porate Governance Practices (NI 58-101). Public corporations existing under the Canada Busi - ness Corporations Act (CBCA) have been required to
make diversity-related disclosure regarding women, Indigenous Peoples, people with disabilities and racialised people (designated groups) since 2020 on a “comply or explain” basis. These requirements include: • disclosure of term limits or other board renewal mechanisms, a description of written diversity poli - cies for the identification and nomination of indi - viduals from designated groups as board nominees and a description of progress made in achieving the policy objectives; • whether and how the level of representation of des - ignated groups on the board or in senior manage - ment is defined and considered in identifying and appointing new candidates; • whether targets have been established for repre - sentation of designated groups on the board and in senior management, as well as a description of the progress towards those targets; and • the number and percentage of members of each of the designated groups on the board and in senior management. Enhanced guidelines for making this disclosure were published by Corporations Canada in February 2022. Beyond board-level disclosure, federally incorporated issuers are also required to report on diversity among the “members of senior management” (as defined in the regulations). Increasingly, governance ratings organisations and industry groups developing “best practices” are focusing on gender and other diversity measures as critical elements of measuring/rating corporate gov - ernance. See, for example, the Canadian Coalition for Good Governance (CCGG) and The Globe and Mail ‘s Board Games. Proxy advisory firms are following suit, with both Glass Lewis and Institutional Shareholder Services (ISS) adopting gender diversity policies in respect of Canadian public corporations (regardless of the juris - diction of incorporation). Securities regulators in Canada continue to focus on diversity disclosure requirements. For example, on
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