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FCNB/NSSC Consultation Paper – Diversity in the Capital Markets

Letter Summary:

The Nova Scotia Securities Commission and the New Brunswick Financial and Consumer Services Commission have asked for responses to specific questions about the disclosure regime regarding diversity. The consultation seeks feedback on how practices and disclosure needs have evolved since the “women on boards” disclosure requirements were first adopted and in particular, whether additional disclosure requirements are needed, how investors may use such information, and the impact on public companies in disclosing the data.

Overview of the Council’s Comments:

The CAC is supportive of the FCNB’s and NSSC’s intent to continue to consult on diversity in the capital markets, and particularly how the disclosure needs of Canadian investors have changed since the existing gender diversity disclosure requirements for issuer boards were adopted. We are of the view that regulatory efforts to encourage gender diversity in Canadian capital markets should evolve to become more overtly supportive of diversity, equity, and inclusion across a wider range of participants in the Canadian capital markets. We believe that investors and other stakeholders see diversity as multi-faceted, extending beyond just gender.

Research has shown the benefits of diversity in decision-making across a range of corporate and investment decision structures, and we believe that policy should be more overtly supportive of progress to this end. For example, Boards with diverse backgrounds are more likely to act independent of management and are better equipped to debate the merits of complex governance matters such as managerial oversight or financial transactions. To achieve and maintain targets, it is critical for the firm to create an inclusive culture to attract both underrepresented individuals to the firm and also create an environment where they are more likely to stay. Indigenous reconciliation also dictates greater inclusion of Indigenous people in corporate Canada.

We believe that regulators can be leaders through their example and encourage progress throughout the Canadian capital markets through education, policy, and regulatory efforts. We believe there is a broad body of research that demonstrates the benefits to all of investors, issuers, and the broader stakeholder community, and an emerging societal consensus that demands further action.