GENERAL COMMENTS
PMAC applauds the Amendments to improve diversity disclosure beyond the representation of women, the proposed changes that provide guidelines related to board nominations and the introduction of guidelines on board renewal and board diversity. Not only will enhanced disclosure help investors make more informed decisions, but it is likely to precipitate other outcomes that we believe are beneficial. These include removing barriers and improving diversity on boards of directors and in senior management, which we believe enhances the quality and effectiveness of boards and management teams. Especially in the Canadian social context, we believe that a diverse workforce representing a broad range of experience brings different perspectives, which improves corporate culture, decision-making and encourages innovation. This helps to reduce corporate risk and contributes to superior products and services that better respond to the needs of Canadian clients, which will attract additional capital to the Canadian economy and make Canada more competitive internationally. We believe these outcomes are in the best interest of corporations, our capital markets and society as a whole.
KEY RECOMMENDATIONS
1. Increase diversity disclosure beyond women
PMs require clear, comprehensive, standardized, and comparable information in order to make informed investment decisions and to meet their fiduciary obligations to their clients. This includes information with respect to diversity beyond women. PMAC members’ investment strategies, and their commitments to various environmental, social and governance (ESG) programs and initiatives1 require them to consider factors such as diversity when making investment decisions. We also believe that the
We recommend that the disclosure form include an area for issuers to document the number of individuals that have not made voluntary disclosure (using a “prefer not to say” label, for example). Not only will this improve the integrity of the data, but it may also reflect the issuer’s efforts to obtain the information, the corporate culture and effectiveness of its governance processes. It will help investors better understand the disclosure data and improve decision-making accordingly.
2. Provide information regarding Board nominations, renewal processes and executive officer positions
PMAC supports the disclosure of the skills and competencies used in the board skills matrix. This disclosure allows investors to better understand the relevance of the candidate’s skills to the business and helps to ensure that the nomination process considers relevant factors, thereby avoiding a “tick the box” approach and/or tokenism. Similar disclosure should be provided with respect to board nomination, renewal, executive officer appointments. We agree that this disclosure should be tied to diversity, and should include any written strategy, policies and measurable objectives relating to diversity.
3. Present the information as proposed in Form and Policy B with the addition of information regarding executive officer appointments
While PMAC favours the disclosure approach outlined in Form and Policy B, we believe that information should also be provided with respect to the appointment of executive officers, as is proposed for Form and Policy A. Form B will provide specific, decision-useful information to investors in a tabular format that we believe will improve the consistency and comparability of the information, assisting investors in their investment and proxy-voting decisions. We believe that Form B will also minimize burden for issuers given that the requirements are clear and specific, while maintaining sufficient flexibility for companies to add additional categories and information (such as education, skills and competencies) that may be relevant to their business. We are concerned that Form A will not provide the detailed and consistent information that investors need to make informed decisions and may lead to added uncertainty and costs.
4. Harmonize disclosure requirements across Canada
We stress the importance of the CSA adopting a harmonized approach to diversity disclosure in order to meet the needs of investors and reduce regulatory burden for issuers.
5. Review the disclosure requirements on a regular and frequent basis
As diversity disclosure needs continue to evolve, the enumerated groups in Form B will not always be representative of all groups that issuers and investors will consider important to board and executive officer composition. Moreover, the requirements should be considered in the context of evolving international and other disclosure standards. We therefore recommend that a schedule be established for the regular review of the policy and form, for example every 3-5 years.
6. Consultation and dialogue
We emphasize the importance of continued and on-going consultation and dialogue with stakeholders and organizations representing the enumerated groups, such as Indigenous Peoples, the LGBTQ2SI+ and disabled communities.
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