On October 5, 2017, the Canadian Securities Administrators (CSA) released Staff Notice 58-309 (Staff Notice) reporting findings of a review carried out by various Canadian securities regulators of disclosure regarding women on boards and in executive officer positions by TSX issuers, as prescribed in National Instrument 58-101 Disclosure of Corporate Governance Practices. We previously reported on the introduction of disclosure requirements in 2014.

The findings are generally positive, and have shown that gender diversity of boards is improving. The review has found that the total board seats occupied by women has increased from 11% in 2015 to 14% in 2017. The highest representation of women on boards was disclosed by issuers with over $10 Billion in market capitalization, who had 24% of their board seats occupied by women. Issuers with at least one woman on their board has increased from 29% in 2015 to 61% in 2017. Issuers with at least one woman in executive officer positions has increased from 60% in 2015 to 62% in 2017.

Despite the positive findings of the Staff Notice, the Ontario Securities Chair, Maureen Jensen, expressed disappointment at the lack of progress in the representation of women on boards at a recent panel held in Toronto. Ms. Jensen noted that there has not been a large increase in the three years since the introduction of the disclosure rules, and at the current rate of increase of female representation on boards, it would take thirty years for women to reach parity with men. Due to the lack of progress, Jensen suggested that there may need to be more drastic measures taken, such as supplementing the rules with guidelines meant to push issuers to set targets for female representation. Interesting to note is that the Staff Notice review also found that issuers have been reluctant to adopt targets for representation of women, with only 11% adopting targets for representation of women on their board in 2017 and only 3% adopting targets for executive officer positions.

Following the release of the Staff Notice, Aaron Dhir, an associate professor at Osgoode Hall Law School, has echoed Ms. Jensen’s sentiment and has called for more drastic action to ensure more women are elected to corporate boards, including getting provincial governments to institute mandatory quotas for corporate boards, similar to quotas that have been instituted in a number of European countries, including Norway, France, the Netherlands, Italy, and Germany. Recent research by Nima Sanandaji on the effects of mandatory quotas in Norway suggests that mandatory quotas may lead to negative consequences for businesses. Sanandaji’s research found that the introduction of mandatory quotas for public companies requiring 40% of board members to be women led to a 3.5% decline in share prices as companies were forced to promote less experienced women in order to meet the short compliance time frame. The quotas also failed to positively impact women’s roles in business generally, with the gender wage gap remaining unchanged and no evidence of greater enrollment of women in business programs following their introduction. Despite the appeal of a simple solution of mandatory quotas for corporate boards to promote gender parity, reality experienced in Norway suggests that they may do more harm than good in the long run.

It remains to be seen whether more drastic measures will be taken by the securities regulators. However, setting up quotas and targets may not be the ideal solution to improve gender diversity of corporate boards.

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The author would like to thank Olga Lenova, articling student, for her assistance in preparing this legal update.