This fall, one of our lawyers, Diana Nicholls Mutter was invited to provide a guest lecture for a securities law course at Western Law. The lecture focused on corporate governance disclosure, in particular the underrepresentation of women on boards and the securities regulation that we have in Canada aimed at addressing this issue. The content of the presentation was primarily based on the research that Diana conducted while completing her thesis for her LLM. We have included the slides of this presentation here.

1. Girls, Who Run the World?
Not Yet: Board Gender
Diversity in Canada
Diana Nicholls Mutter
Corporate and Securities Lawyer at SkyLaw

2. Why the Board?
• Why does composition of the board matter?
• Scholars disagree about importance of board
• But at very least, directors are given power and responsibility under corporate law
• Why is the board a good starting place for diversity efforts generally?
• Studies that show “gender spillover”
• A Canadian Conference Board study found that corporations with more women on their boards in
1995, had 30% more women in executive roles by 2001 as compared to corporations with all-male
boards in 1995 (see David Brown, Debra L Brown & Vanessa Anastasopoulos, Women on boards:
not just the right thing ... but the “bright” thing (Ottawa, ON: Conference Board of Canada, 2002)).
• Matsa & Miller found that each 10 percentage point increase in women on boards increased the
likelihood of having women among the top five executives in the next year by 0.9 percentage points
(David A Matsa & Amalia R Miller, “Chipping away at the Glass Ceiling: Gender Spillovers in
Corporate Leadership” (2011) 101:3 The American Economic Review 635).
• Tinsley and Purmal more recently found that as female representation on boards increases, females
are much more likely to be appointed as CEOs of large, US companies (Catherine H Tinsley & Kate
Purmal, “Research: Board Experience Is Helping More Women Get CEO Jobs”, Harvard Business
Review (29 July 2019), online: <https://hbr.org/2019/07/research-board-experience-is-helping-more-
women-get-ceo-jobs>).

3. The Numbers: Pre-Policy
In 2014 women represented 11% of directors on Canadian public
company boards

4. The Policy
National Instrument 58-101F1 (“NI 58-101F1”)
Reporting issuers in every jurisdiction but PEI and BC must:
• Item 11 Policies Regarding the Representation of Women on the Board:
a) Disclose whether the issuer has adopted a written policy relating to the identification and nomination of
women directors. If the issuer has not adopted such a policy, disclose why it has not done so.
b) If an issuer has adopted a policy referred to in (a), disclose the following in respect of the policy: (i) a short
summary of its objectives and key provisions, (ii) the measures taken to ensure that the policy has been
effectively implemented, (iii) annual and cumulative progress by the issuer in achieving the objectives of the
policy, and (iv) whether and, if so, how the board or its nominating committee measures the effectiveness of
the policy.
• Item 12 Consideration of the Representation of Women in the Director Identification and Selection Process:
Disclose whether and, if so, how the board or nominating committee considers the level of representation of
women on the board in identifying and nominating candidates for election or re-election to the board. If the
issuer does not consider the level of representation of women on the board in identifying and nominating
candidates for election or re-election to the board, disclose the issuer's reasons for not doing so.

5. The Policy – Continued
• Item 14 Issuer’s Targets Regarding the Representation of Women on the Board and in Executive Officer
Positions:
(a) For purposes of this Item, a "target" means a number or percentage, or a range of numbers or percentages, adopted
by the issuer of women on the issuer's board or in executive officer positions of the issuer by a specific date.
(b) Disclose whether the issuer has adopted a target regarding women on the issuer's board. If the issuer has not
adopted a target, disclose why it has not done so.
(c) Disclose whether the issuer has adopted a target regarding women in executive officer positions of the issuer. If
the issuer has not adopted a target, disclose why it has not done so.
(d) If the issuer has adopted a target referred to in either (b) or (c), disclose: (i) the target, and (ii) the annual and
cumulative progress of the issuer in achieving the target.
• Item 15 Number of Women on Board and in Executive Officer Positions: (a) Disclose the number and
proportion (in percentage terms) of directors on the issuer's board who are women.

6. When is Gender Diversity Disclosure Required?
• Section 2.1 of National Instrument 58-101 Disclosure of
Corporate Governance Practices requires that issuers (other
than venture issuers) include information required by NI 58-
101F1 in management information circular if they are soliciting
proxies
• Issuers who do not send a management information circular to
security holders must include this disclosure in AIF

7. The Numbers: Post-Policy
• Women’s representation on reporting issuer boards has increased about 1-2
percentage points a year since policy
• The latest numbers from the CSA (October 2019):
• Women represented 17% of directors of reporting issuers
• See Report on Fifth Staff Review of Disclosure Regarding Women on Boards and in Executive
Officer Positions online: https://www.osc.gov.on.ca/documents/en/Securities-
Category5/sn_20191002_58-311_staff-review-women-on-boards.pdf
• Osler’s 2020 Diversity Disclosure Practices report provides mid-year 2020
percentage of women on boards at 21.5%
• “However, year-to-date results for 2020 are based on fewer reporting companies as a result of
a significant number of issuers taking advantage of permitted extensions of normal annual
meeting and filing deadlines to delay filing their disclosure until later in 2020.”

8. Amendments to the
Canada Business Corporations Act (the “CBCA”)
• In 2020 Bill C-25 came into force which had the effect of amending the
CBCA by adding section 172.1
• Section 172.1 requires directors of “prescribed” (public) corporations to
provide shareholders at every annual meeting the prescribed information
• The prescribed information is provided at section 72.2(4) of the CBCA Regulations
• For the most part this information mimics that which is provided for in NI 58-101
with one difference: This section replaces women with “designated groups” as
defined in the Employment Equity Act (S.C. 1995, c. 44)

9. CBCA Amendments Continued
• These amendments therefore broaden diversity disclosure for CBCA
companies
• Osler’s 2020 Diversity Disclosure Practices:
• “Based on our review of the disclosure provided 270 publicly traded corporations
governed by the CBCA, directors who are members of visible minorities, Aboriginal
peoples and persons with disabilities are surprisingly rare for a country with as diverse a
population as Canada.”
• “And there was significant non-compliance with the requirement.”
• See here for full report: https://www.osler.com/en/reports/diversity-disclosure-practices-
2020?gclid=CjwKCAjwoc_8BRAcEiwAzJevtVZewP02XIa5v3IRmi6eHKVHAouM76b
sEOF6vbXXBNcNPmzIdFfC3RoCXH4QAvD_BwE

10. Theories Underlying Regulation
•The Business Case
•The Normative Case

11. The Business Case
•3 iterations
• financial performance case
• governance case
• talent case

12. The Business Case:
Financial Performance
• Studies showing positive relationship between enhanced board gender diversity
and financial performance:
• Tobin’s Q: 1998-2002, Carter et al found evidence of a causal relationship between board gender diversity and
financial performance as measured by Tobin’s Q; 2000-2001 Nguyen and Faff found on average, if two firms are the
same in every way except that one has female directors and one does not, the former’s Tobin’s Q will be higher than
the latter’s. Further, as the number of female directors increases, so will Tobin’s Q; Conyon and He, using data from
over 3,000 US public companies from 2007-2014 found a positive relationship between gender diversity on boards
and Tobin’s Q.
• ROE: Schwartz-Ziv’s 2013 study demonstrated that board gender diversity, particularly where a critical mass of
female directors is present, was positively correlated with ROE and profit margins; Eastman, Rallis and Mazzuchelli’s
study, which used data from 2011 to 2016 of company boards from the MSCI All Country World Index, similarly
concluded that companies with a critical mass of women on boards far outperformed those with all male boards using
ROE as a measurement of firm performance
• Studies showing no relationship or negative relationship:
• Adams and Ferreira, using data from 1996-2003 results suggested that diversity was positively related to firm
financial performance when the company had weaker governance policies, but negatively related to financial
performance when the corporation had strong governance and monitoring policies in place
• Conyon and He, as cited above, found that increased board gender diversity was significantly, negatively related to
ROA, gender diversity seems to have a much more positive impact on firms already performing well and a negative
impact on lower performing firms.
• In a subsequent study published in 2010, but using data from 1998-2002, Carter et al concluded that gender diversity
had no impact on firm performance

13. • “Most knowledgeable scholars, those who do business and corporate
finance rather than race and gender subjects, deny (and many lament
their finding) that any correlation exists … empirical work on the
subject conclusively finds that no correlation can be found between the
composition of boards of directors and the value or profitability of
publicly held corporations”
- Douglas M Branson, No seat at the table: how corporate governance and law
keep women out of the boardroom, Critical America (New York: New York
University Press, 2007) at 176
• This quote may put it a little strongly and is a tad out of date, but to
say the least, the empirical evidence is mixed

14. Governance Case
•Board gender diversification leads to better corporate
governance:
• Improved decisions making
• Reduced groupthink
• Better attendance
• Better monitoring of management
• Studies that show that boards with more women tend to be stricter
monitors of management (e.g. Renée B Adams & Daniel Ferreira, “Women
in the boardroom and their impact on governance and performance” (2009)
94:2 Journal of Financial Economics 291).

15. Talent Case
• By ignoring 50% of the population, we must be missing out on talent

16. Weaknesses of Governance and
Talent Cases
• Governance Case:
• Similar weaknesses as financial performance – mixed empirical evidence
• Stronger monitoring of management can sometimes be a good thing, but for
those companies who already have tougher monitoring, “overmonitoring” can
hinder communication between management and the board and may
negatively impact financial performance (see Adams & Ferreira at 306)
• Talent Case:
• Pool problem

17. The Normative Case
•Increased board gender diversity and regulation aimed
at increasing board gender diversity is the morally
right thing to do
•Common arguments against stronger regulation and
the normative case:
• Merit
• Free choice/free market
• Role of board is to maximize shareholder wealth

18. Merit
• Qutoas referred to as the “antithesis of merit”
• (see Get On Board Corporate Canada: Greater Transparency Needed for
Gender Diversity on Canadian Boards, TD Economics (March 7, 2013),
https://www.td.com/document/PDF/economics/special/GetOnBoardCorporate
Canada.pdf)
• In Dhir's study, participants feared and expected that there would be
stigma surrounding female directors nominated as a result of the
Norwegian quota, but after its implementation, board members found
that there was little to no stigma attached to those female directors
• “Crisis of the mediocre man”

19. Free Choice/Free Market
• Free choice: maybe there aren’t enough qualified women to fill board
seats because women make different career choices from men
• Evidence suggests that women leave management jobs not because of free
choice but because they feel under valued and as if they have limited choices
• Free market: the board gender underrepresentation problem is a
market inefficiency which will be corrected on its own over time
• Statistics Canada data- long-term trend in which female graduates outnumber
male counterparts at every level except doctorate
(https://www150.statcan.gc.ca/n1/pub/81-599-x/81-599-x2011006-eng.htm)
• But men maintain leadership positions disproportionately

20. Board as Shareholder Wealth Maximizer
• Director’s duties in Canada go beyond maximizing shareholder wealth and
are to the corporation itself at all times
• Boards encouraged to approach decisions in stakeholder friendly manner
(see BCE and the CBCA amendments)
• Not much guidance on how to balance the interests of stakeholders and
likely no penalty for favouring the interests of shareholders
• Generally directors given broad discretion under business judgement rule:
• “Courts are ill-suited and should be reluctant to second-guess the application of
business expertise to the considerations that are involved in corporate decision
making” (Peoples Department Stores Inc. (Trustee of) v. Wise, [2004] 3 S.C.R. 461,
2004 SCC 68 at para 67.)

21. Theories Underlying our Regulation
• “Business case”, but really normative case.
• “[B]oard diversity is not about quotas or tokenism. Board diversity is about better
corporate decisions, better responses to market demographics, and better financial
performance. It is also about the future, and having more women in key leadership
positions to serve as role models for young women and girls.”- OSC’s Consultation
Paper quoting the Minister for the Status of Women.
• Stated objective of the policy itself: “intended to encourage more effective boards and
better corporate decision making by requiring greater transparency for investors and
other stakeholders regarding the representation of women on boards and in senior
management of TSX-listed and other non-venture issuers. This transparency is
intended to assist investors when making investment and voting decisions.”

22. Where do we go from here?
• If we want to see real change – will need stronger regulation
• While the normative case may be impetus for diversity efforts and may still
be crucial in justifying stronger regulation, business case may also still be
relevant
• Possibility that it is missing data e.g. “critical mass data”
• Across jurisdictions
• No regulation: very slow to diversify at the board level (e.g. China, Hong Kong, and
Japan, for instance, have no regulation and respectively have rates of 11.2%, 4.5%
and 13.9% women on boards)
• Weak policies: still fairly slow to diversify at board level (e.g. Canada and US)
• Quotas with harsh penalties: boards diversify almost overnight (e.g. in Norway 41.8%
of board representatives in public limited companies are women)

23. Thank you
• If you have any questions, please feel free to reach out:
Diana Nicholls Mutter
Tel: 416 364 7658
Email: diana.nicholls.mutter@skylaw.ca