Language selection

Search

Diversity of Boards of Directors and Senior Management of Federal Distributing Corporations

From: Innovation, Science and Economic Development Canada

Table of contents


Executive summary

As of January 1, 2020, Bill C-25 requires that distributing corporationsFootnote 1 governed by the Canada Business Corporations Act (CBCA), including venture issuersFootnote 2 provide their shareholders and Corporations Canada with information about the representation of women, Indigenous peoples (First Nations, Inuit and Métis), persons with disabilities and members of visible minorities on their boards of directors and among senior management.

This measure is to support the push for increased diversity on corporate boards and among senior management. Using a “comply or explain” approach, corporations indicate whether or not they have a policy on diversity. If so, they provide a summary of the policy; if not, they explain why not. This approach, while not prescriptive, enhances the conversation between management and shareholders about the benefits of diversity.

For 2020, we identified 669 distributing corporations required to disclose diversity information, although this number is approximate. We reviewed 469 proxy circularsFootnote 3 filed by distributing corporations between January 1, 2020, and December 31, 2020. This report presents the findings of that review, showing the levels of diversity on corporate boards of directors and senior management teams for the year 2020. It also explores some of the challenges encountered and steps taken to address those issues in the future.

Findings:

These findings establish a baseline that will be used to measure progress over the years.

Background

According to Employment Equity in the Public Service of Canada for Fiscal Year 2018 to 2019, 52.7% of the Canadian population available to work are women, 15.3% are members of visible minorities, 9% are persons with disabilities and 4% are Indigenous.Footnote 4 Several studies conducted over the years have shown that women, Indigenous peoples, people with disabilities and members of visible minorities are significantly under-represented in management positions in Canada.Footnote 5 However, “under-representation of different segments of our population is not only a question of fairness, but it may also have an impact on board quality and corporate performance.”Footnote 6

To address those issues, Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act, received Royal Assent on May 1, 2018. Among other things, the Bill introduced amendments to increase shareholder democracy and participation, improve corporate transparency, and support the push for increased diversity on corporate boards and among senior management. Since January 1, 2020, distributing corporations have been required to disclose information to their shareholders and to Corporations Canada on the diversity on their boards of directors and senior management teams. The Government of Canada's intention is for this disclosure to inform and promote conversations between corporate management and shareholders on this important issue to foster steady progress toward more diverse corporate leadership.

What must be disclosed

Distributing corporations are required to report on the representation of four designated groupsFootnote 7 on their boards of directors and senior management teams. A corporation's senior management team includes any of the following:

Distributing corporations must either disclose information about their policies and targets for the representation of the designated groups or explain why they don't have such policies or targets. Information to be disclosed includes, but is not limited to:

The requirements under the CBCA are broader in scope than those under provincial securities legislation, which address only the representation of women on boards and in executive officer positions.

Challenges in getting a complete picture of diversity in corporate leadership

While the CBCA and related regulations set out the disclosure requirements, they do not specify how distributing corporations should disclose this information. This lack of standardization, combined with other challenges such as incomplete or missing information, non-disclosure of intersectionality (i.e., when an individual is included in more than one group), and the fact that some individuals may be reluctant to self-identify as members of a designated group, make it difficult to compile accurate representation statistics. Some distributing corporations also filed their proxy circulars late. These delays may be related to COVID-19 measures that postponed many annual general meetings, affecting corporations' ability to gather the required diversity information.

To prevent some of these difficulties in future years, we published guidelines to encourage distributing corporations to disclose their diversity information annually in a more consistent manner.

Other initiatives to increase diversity in corporate leadership

Corporations across the country should be continuously encouraged to recognize the benefits of bringing diverse backgrounds, experiences and perspectives into their decision-making processes. A number of initiatives have been put in place to advance and recognize diversity, inclusion and economic prosperity from coast to coast to coast. For example, the 50-30 Challenge incentivizes Canadian organizations to increase the representation and inclusion of equity-deserving groups on their boards of directors, on their senior management teams and within their workplaces. Other measures mentioned in the 2020 Speech from the Throne were also put in place to promote diversity and inclusion, including Canada's Anti-Racism Strategy and funding for the Black Entrepreneurship Program.

Scope of review

Description of the sample size

For 2020, we identified 669 distributing corporations that are required to disclose diversity information. This number is approximate and was derived by cross-referencing our database with the list of issuers provided by the Canadian Securities Administrators (CSA).

We reviewed the proxy circulars of 469 distributing corporations that were filed between January 1, 2020, and December 31, 2020. Of the proxy circulars reviewed, 85.9% included information on diversity. Of the 66 that did not include any diversity information, 53 were filed by venture issuers and 13 by non-venture issuers. It should be noted that venture issuers are not subject to gender disclosure requirements under provincial securities legislation, so the diversity disclosure requirements under the CBCA are the first to apply to them.

In this first year of filing, 289 distributing corporations filed their proxy circulars with Corporations Canada, while 180 filed with the System for Electronic Document Analysis and Retrieval (SEDAR). This is partly the result of technical difficulties some corporations had accessing our Online Filing CentreFootnote 8 and partly because of lack of awareness of the requirements to file with us. Some distributing corporations were under the impression that our exemption from the filing of certain documents exempted them from filing with Corporations Canada if they filed their proxy circulars with SEDAR.

To make sure the process is more effective in 2021, we will continue to reach out to distributing corporations to inform and remind them of their obligations to file diversity information with us, including making them aware that the exemption from the filing of certain documents no longer applies. We have also eliminated the technical difficulties that limited some distributing corporations' ability to file through the Online Filing Centre.

Challenges identifying distributing corporations

One of the challenges related to determining which federal corporations are “distributing” (and therefore required to disclose diversity information) is that corporations are required to self-report to Corporations Canada whether they are distributing or not. This reporting is only done once a year on their annual returns and there is often confusion about what “distributing” means. For example, many corporations self-reported as “distributing” if they were distributing goods or services.

There are also challenges related to determining when a distributing corporation is required to file a proxy circular, as the filing date is related to the annual general meeting date, which is different for every corporation. Distributing corporations are required to send diversity information to their shareholders and to Corporations Canada before their annual meetings; however, we become aware of the annual general meeting date only when the distributing corporation files its annual return, which could be up to a full year after the meeting.

To improve the identification of corporations that are truly “distributing” and to encourage greater compliance with diversity disclosure requirements, we will continue to reach out to all corporations that have identified as “distributing” — especially venture issuers — to ensure they understand the diversity disclosure requirements and know when and how to file their proxy circulars.

Methodology

Most distributing corporations chose to disclose diversity information in a narrative way in their proxy circulars. We reviewed each proxy circular, extracted the required diversity information and compiled it. Corporations Canada considered the information as provided in the proxy circulars. The number of directors on the boards and total number of members of the senior management teams were considered as of the date of disclosure. References to “executive officers” were considered to be equivalent to “senior management”.

The following elements were not considered:

This method of reviewing the proxy circulars allowed us to address the challenges related to the lack of standardization in how the information was reported by ensuring diversity information was analyzed in a consistent way. It also allowed us to generate findings to establish a baseline against which progress can be measured for years to come.

Findings

This section summarizes our findings in each of the following key areas:

Findings are based on the 403 proxy circulars (160 from venture issuers, 243 from non-venture issuers) reviewed that included diversity information. The 66 proxy circulars that did not provide diversity information are not included in the findings. This establishes a baseline of the diversity of boards and among senior management as disclosed in 2020.

Most findings presented in this report are for all distributing corporations (venture issuers and non-venture issuers) that disclosed diversity information. However, for some requirements, the findings distinguish between the two types of distributing corporations. Where there are significant differences between the two, these may be explained by the fact that the diversity disclosure requirements are new to venture issuers.

It should be noted that, within each table, a corporation may be counted in more than one category. For example, in Table 1, a corporation could have a policy related to women, but no policies related to any other designated group.

Term limits and other mechanisms for board renewal

16% of distributing corporations that disclosed diversity information have adopted some form of mechanism for board renewal. Most of these reported age limits, tenure limits or both.

Among those that had not adopted term limits or other mechanisms for board renewal, the top three reasons cited were:

Written policies for identifying and nominating members of designated groups for directors

Table 1. Distributing corporations with written policies on the identification and nomination of members of designated groups for directors
  % of the 403 distributing corporations that: % of the 160 venture issuers that: % of the 243 non-venture issuers that:
Diversity group have adopted a written policy have not adopted a written policy did not discloseFootnote i have adopted a written policy have not adopted a written policy did not disclose have adopted a written policy have not adopted a written policy did not disclose
Women 32% 67.7% 0.3% 8% 92% 0% 47.7% 51.9% 0.4%
Indigenous peoples, members of visible minorities, persons with disabilities 26% 73.7% 0.3% 6% 94% 0% 39.1% 60.5% 0.4%

Approximately one-third (32%) of the distributing corporations that disclosed diversity information have adopted written policies relating to the identification and nomination of women for directors, and 26% have adopted written policies relating to the identification and nomination of Indigenous peoples, members of visible minorities and persons with disabilities for directors.

However, there were substantial differences in the policy adoption rate between venture issuers and non-venture issuers. Non-venture issuers were six times as likely as venture issuers to adopt written policies relating to the identification and nomination of women directors (48% vs. 8%). Non-venture issuers were more than six times as likely as venture issuers to adopt written policies relating to the identification and nomination of Indigenous peoples, members of visible minorities and persons with disabilities for directors (39% vs. 6%).

The main reasons provided for not adopting written policies relating to the identification and nomination of women for directors are similar for all distributing corporations (venture issuers and non-venture issuers):

Consideration of the level of representation of designated groups

Board of directors

Table 2. Distributing corporations that consider the level of representation of designated groups on board of directors when identifying candidates for election or re-election
  % of the 403 distributing corporations that % of the 160 venture issuers that % of the 243 non-venture issuers that
Diversity group consider level of representation of designated groups do not consider level of representation of designated groups did not discloseFootnote i consider level of representation of designated groups do not consider level of representation of designated groups did not disclose consider level of representation of designated groups do not consider level of representation of designated groups did not disclose
Women 44% 56% 0% 31% 69% 0% 53% 47% 0%
Indigenous peoples 34% 66% 0% 28% 72% 0% 38% 62% 0%
Members of visible minorities 35% 65% 0% 29% 71% 0% 39% 61% 0%
Persons with disabilities 34% 66% 0% 28% 72% 0% 38% 62% 0%

44% of distributing corporations that disclosed diversity information consider the level of representation of women on the board of directors when identifying and nominating candidates for election or re-election. 34–35% of distributing corporations consider the level of representation of Indigenous peoples, members of visible minorities and persons with disabilities.

Senior management

Table 3. Distributing corporations that consider the level of representation of designated groups on senior management
  % of the 403 distributing corporations that % of the 160 venture issuers that % of the 243 non-venture issuers that
Diversity group consider level of representation of designated groups do not consider level of representation of designated groups did not discloseFootnote i consider level of representation of designated groups do not consider level of representation of designated groups did not disclose consider level of representation of designated groups do not consider level of representation of designated groups did not disclose
Women 45% 55% 0% 32% 68% 0% 54% 46% 0%
Indigenous peoples 35% 65% 0% 29% 71% 0% 40% 60% 0%
Members of visible minorities 36% 64% 0% 30% 70% 0% 40% 60% 0%
Persons with disabilities 35% 64% 1% 29% 71% 0% 40% 59% 1%

The numbers were similar for senior management: 45% of distributing corporations that disclosed diversity information consider the level of representation of women, while 35–36% consider the level of representation of Indigenous peoples, members of visible minorities and persons with disabilities among senior management when appointing members of senior management.

Targets for representation of designated groups

Board of directors

Table 4. Distributing corporations with targets for representation of designated groups on boards of directors by a specific date
  % of the 403 distributing corporations that: % of the 160 venture issuers that: % of the 243 non-venture issuers that:
Diversity group have set a target have not set a target did not discloseFootnote i have set a target have not set a target did not disclose have set a target have not set a target did not disclose
Women 14% 71% 15% 1% 71% 28% 22.2% 70.4% 7.4%
Indigenous peoples 1% 79% 20% 0% 69% 31% 2% 85% 13%
Members of visible minorities 1.2% 78.4% 20.4% 2% 84% 14%
Persons with disabilities 1% 79% 20% 1% 85% 14%

14% of distributing corporations that disclosed diversity information have set targets for the representation of women on their boards of directors — and 1% have set targets for the representation of Indigenous peoples, members of visible minorities and persons with disabilities.

Among distributing corporations that have not set targets, the main reasons provided were that candidates are selected based on merit and that the corporation or board is too small.

Senior management

Table 5. Distributing corporations with targets for representation of designated groups in senior management by a specific date
  % of the 403 distributing corporations that % of the 160 venture issuers that % of the 243 non-venture issuers that
Diversity group have set a target have not set a target did not discloseFootnote i have set a target have not set a target did not disclose have set a target have not set a target did not disclose
Women 5.5% 78% 16.5% 0.6% 71.3% 28.1% 9% 83% 8%
Indigenous peoples 0.3% 79.4% 20.3% 0% 69% 31%  0.4% 86% 13.6%
Members of visible minorities 1% 79% 20% 1.2% 85.6% 13.2%
Persons with disabilities 0.2% 79.7% 20.1% 0.4% 86.4% 13.2%

5.5% of distributing corporations that disclosed diversity information indicated that they have adopted a target for the representation of women and an average of less than 1% have adopted a target for the representation of the other designated groups among senior management.

Among non-venture issuers, 9% set targets for the representation of women among senior management and 0.4% set targets for any other designated groups. 0.6% of venture issuers set targets for the representation of women and none set targets for any other designated groups.

Among distributing corporations that have not set targets, the main reasons provided were that candidates are selected based on merit, the corporation or its management team is too small, and the corporation wants to select candidates from the broadest possible talent pool.

Representation of designated groups among boards of directors and senior management teams

Table 6. Level of representation of designated groups on boards of directors and senior management teams
  % of the 403 distributing corporations that: % of the 160 venture issuers that: % of the 243 non-venture issuers that:
  do do not did not discloseFootnote i do do not did not disclose do do not did not disclose
Have at least 1 woman on the board of directors 50% 33% 17% 19% 52% 29% 70% 21% 9%
Have at least 1 member of a visible minority on the board of directors 16% 57% 27% 11% 51% 38% 19% 60% 21%
Have at least 1 Indigenous person on the board of directors 1.7% 71% 27.3% 1% 61% 38% 2% 77% 21%
Have at least 1 person with disabilities on the board of directors 1.7% 71% 27.3% 1% 61% 38% 2% 77% 21%
Have at least 1 woman in senior management 47% 33% 20% 25% 41% 34% 61.7% 27.6% 10.7%
Have at least 1 member of a visible minority in senior management 22.8% 49.6% 27.5% 15.6% 46.9% 37.5% 28% 51% 21%
Have at least 1 Indigenous person in senior management 1.2% 71.7% 27.1% 0% 62.5% 37.5% 2% 78% 20%
Have at least 1 person with disabilities in senior management 2.2% 70.7% 27.1% 0.6% 61.9% 37.5% 3% 77% 20%

Composition of distributing corporations' boards of directors and senior management teams

In addition to looking at the broad level of representation among distributing corporations, we also reviewed the composition of their boards and senior management teams to see the proportion of leadership positions held by members of the four designated groups.

The following percentages are based on a total of 2,411 directors for distributing corporations (627 for venture issuers and 1,784 for non-venture issuers). For the senior management positions, the total number of individuals is 2,158 for distributing corporations (320 for venture issuers and 1,838 for non-venture issuers).

Seats held by designated groups on boards of directors

Women

Visible minorities

Persons with disabilities

Indigenous peoples

Positions held by designated groups in senior management teams

Women

Visible minorities

Persons with disabilities

Indigenous peoples

Conclusion

2020 was the first year that distributing corporations, including venture issuers, were required to disclose information to their shareholders and to Corporations Canada about the representation of the four designated groups (women, Indigenous peoples, persons with disabilities, members of visible minorities) on their boards of directors and senior management teams. It should be noted that provincial securities legislation also requires many public corporations to report on the representation of women on their boards of directors and executive officer positions, although venture issuers are not subject to those requirements. The CBCA's new diversity disclosure requirements allow assessment of corporations' current diversity and provide the basis for a discussion on ways to improve it.

The diversity information we received and compiled in 2020 establishes a baseline against which progress toward more diverse corporate leadership will be measured over the years. This first year's findings clearly show a disparity in the representation of designated groups on boards of directors and among senior management. 17% of all board seats are held by women, 4% by members of visible minorities, 0.3% by persons with disabilities and 0.3% by Indigenous peoples. Women hold 25% of all senior management positions, visible minorities hold 9%, persons with disabilities hold 0.6% and Indigenous peoples hold 0.2%. These results are in contrast to the diversity of the Canadian population available to work.

We recognize that the COVID-19 circumstances made it difficult for some distributing corporations to gather the required diversity information to prepare the disclosure. Some individuals may also have been reluctant to self-identify as members of a designated group. In some cases, distributing corporations were not aware of the new diversity disclosure requirements or that they had to send the information to Corporations Canada. The lack of standardization, incomplete or missing information, and non-disclosure of intersectionality made it challenging to compile and report on representation statistics.

Going forward, we will continue to reach out to all distributing corporations, especially venture issuers, to make them aware of the diversity disclosure requirements as well as how to file their proxy circulars with Corporations Canada. The process of filing proxy circulars online will be streamlined and the newly published diversity guidelines will help and encourage distributing corporations disclose their diversity information in a more consistent manner. Consistency in disclosure will:

In 2021, we will continue to review diversity information disclosed by federal distributing corporations. A second-year review will enable us to identify trends and monitor progress on the representation of women, Indigenous peoples, persons with disabilities and members of visible minorities on boards of directors and senior management teams.

Date modified: