Kingsdale Advisors Releases CSA Comment Letter: Mandatory Disclosure Regarding Progress for Underrepresented Groups is a Must
Kingsdale Advisors releases its detailed response to the Canadian Securities Administrators'(CSA) Proposed Amendments to Form 58-101F1 Corporate Governance Disclosure of National Instrument 58-101 Disclosure of Corporate Governance Practices and Proposed Changes to National Policy 58-201 Corporate Governance Guidelines in favor of an approach that focuses on mandating disclosure regarding historically underrepresented "designated groups." In addition to women, disclosure would be required for LGBTQ2SI+ persons, racialized persons, persons with disabilities and Indigenous peoples, and presented in a standardized tabular format.
As a strategic advisor that is on the frontline of investor decision-making and governance, Kingsdale Advisors believes that mandatory data reporting offers significant advantages over a less prescriptive approach and will contribute to enhancing transparency and comparability of diversity reporting.
"As the slow pace towards gender diversity has demonstrated, it is only through the transparency of goal and progress reporting that advancements will be made. There is an urgent need for Canadian securities regulators to require the disclosure of this information to support informed decision making and to continue to advance the Canadian principles of diversity and equality of all, "said Ian Robertson, Kingsdale's Chief Executive Officer. "Requiring mandatory disclosure on underrepresented groups is in line with the growing expectations of shareholders. Many institutional investors are developing stricter custom policies in this area and Institutional Shareholder Services Inc. (ISS) has also introduced new requirements."
For meetings on or after February 1, 2024, ISS expects companies that are part of the S&P/TSX Composite Index to have at least one racially or ethnically diverse director to avoid negative voting recommendations against certain directors. Investors may also subscribe to certain other ISS "Specialty Policies" that have even stricter diversity targets for boards, such as 40% gender diversity and 20% racial/ethnic diversity. As well, certain institutional voting policies also consider racial or ethnic diversity in addition to gender diversity in their 2023 voting policies. It remains to be seen what additional policy changes institutional shareholders may make prior to the 2024 proxy season but one thing is for sure, we know they will only be strengthened.
"Presenting data in a standardized format enables investors and other stakeholders to make informed decisions based on consistency and comparability of diversity disclosure," said Kelly Gorman, Executive Vice President, Governance Advisory. "It is essential to recognize that without standardized reporting requirements, issuers may adopt inconsistent and fragmented approaches to diversity disclosure, possibly in an effort to overstate their performance in this area and hinder effective comparisons between companies."
Coming out of the busiest year on record for activism, we expect diversity will be amongst the areas of focus in activist campaigns and play a crucial role in shaping a board's approach to its refreshment process. Failure to deliver on diversity could leave boards vulnerable, as activists look to identify areas where boards are not aligned with the expectations of investors.
Kingsdale Advisors is a proud supporter of the BlackNorth Initiative (BNI), founded by Wes Hall, Executive Chairman and Founder. It spearheaded the BNI CEO Pledge, a public commitment by CEOs that their companies would follow seven specific actions around addressing anti-Black racism. Among the significant goals outlined in the BNI CEO Pledge is the ambitious goal to have 3.5% of executive and board roles held by Black leaders by 2025, and we believe that improved disclosure will promote the achievement of this goal.
Kingsdale thanks the CSA for the opportunity to provide comment on this very important issue. Kingsdale's full submission is available here.
About Kingsdale Advisors
With offices in Toronto, Calgary and New York, Kingsdale Advisors is the leading advisor to public companies on all shareholder, governance, and transaction-related matters, having acted on the largest and highest profile proxy fights, transactions, and other special situations. For 20 years, public companies across North America have looked to the expertise of Kingsdale Advisors to secure the success of transactions or resolutions driven by shareholder votes. Kingsdale Advisors' multidisciplinary team offers an array of specialized services focused on strategic and defensive advisory, governance advisory, compensation advisory, strategic communications, and voting analytics.
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