Toronto skyline in financial district
© Elijah Lovkoff / 123RF Stock Photo

Following up on a pledge from the 2021 federal budget, the government is launching a consultation on possible corporate governance reforms for the financial sector — including measures designed to enhance diversity at federally regulated financial firms.

There are no specific diversity disclosure requirements in federal financial sector legislation, although certain companies already must meet requirements set by the Canadian Securities Administrators (CSA) in provincial securities law. Some must also follow requirements that were recently introduced to the Canada Business Corporations Act (CBCA).

The federal Department of Finance is contemplating measures to bring the federal financial institutions statutes in line with the CBCA’s new diversity disclosure requirements.

Among other things, the consultation seeks feedback on whether the requirements now set out in the CBCA — which covers women, visible minorities, indigenous people and disabled people — are also appropriate for the federal financial sector.

Specifically, it asks whether these disclosures are adequate to inform investment and voting decisions for directors at financial sector firms, and whether the requirements should be tailored to the firm’s size or its ownership structure.

The consultation also addresses issues raised as the CSA has contemplated expanding its requirements in this area.

For instance, a roundtable held by the Ontario Securities Commission (OSC) last year considered extending securities disclosure requirements beyond women on boards to other minority groups, and whether tools such as diversity targets and director term limits would encourage greater diversity at public companies.

While the CSA has yet to propose reforms in this area, given its consultation, the federal government is now also seeking feedback on the use of diversity targets for directors and executives — including whether firms should set their own targets, or if they should be set out in guidance.

It also contemplates setting term limits for directors (or asking firms to set them), prescribing the form of diversity disclosure (to ensure that data is consistent and comparable between firms), and asks for input on possible enforcement penalties for firms that fail to comply with these requirements.

The deadline for providing feedback to the consultation is Sept. 23.