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Ontario securities law should require Toronto Stock Exchange-listed companies to set targets for female and minority representation in leadership positions and overhaul how board members are appointed and how long they can serve, a government task force has recommended.

The Capital Markets Modernization Taskforce, charged with reviewing Ontario’s securities regime, made the recommendation on Thursday in a wide-ranging report looking at various ways to improve the province’s capital markets.

Since 2014, TSX-listed companies have had to disclose gender diversity initiatives to shareholders on an annual basis. The so-called “comply or explain” rule, however, does not require that companies adopt policies to promote gender diversity, or that they set targets to reach diversity goals. Since the rules came into force, female representation on boards has only increased from about 11 per cent to 17 per cent, according to a 2019 Ontario Securities Commission report.

The task force, which was formed by the province’s Ministry of Finance in February and is chaired by Toronto lawyer Walied Soliman, is now recommending an overhaul of the “comply or explain” system that would force companies listed on Canada’s senior exchange to set diversity targets and provide data on their progress. The report also recommends expanding the system beyond gender, to include diversity targets for Black people, Indigenous people and people of colour (BIPOC).

“What should be the appropriate target for women and BIPOC’s on TSX-listed company boards? One suggestion we have heard is 40 per cent women and 20 per cent BIPOC,” the report says.

Beyond targets, the task force is recommending 10-year term limits for directors of TSX-listed companies. It also recommends that companies be required to adopt written board nomination policies that specifically address how women and minority candidates are identified.

“If they were able to implement this, I think we would see a material shift,” said Camilla Sutton, president and chief executive of the advocacy group Women in Capital Markets.

“Companies that have adopted targets have been able to achieve much faster representation changes at both the executive and the board level. We know that targets work,” she said.

The lack of diversity in Canadian C-suites has come under increased scrutiny over the past month in the wake of the Black Lives Matter protests across the United States and Canada. Many corporations have made commitments to increase Black representation in leadership positions. In June, a group of high-profile Bay Street executives launched the Canadian Council of Business Leaders Against Anti-Black Systemic Racism to encourage companies set targets for Black executives.

Meryl Afrika, president of the Canadian Association of Urban Financial Professionals, said the new task force proposals are a good place to start. But regulation needs to be accompanied by education, she said, so corporations understand that diverse leadership teams are good for their bottom line.

“That’s how you’re going to get companies on board. You need to have regulations to get people to comply, but there also has to be that buy-in,” Ms. Afrika said.

The task force recommendations go beyond new Canada Business Corporations Act rules, introduced in January, which require companies to disclose data on workforce diversity but do not include targets. They also go beyond what other provinces have in place.

Setting term limits on board members and requiring diversity targets would be a positive move, said Tanya van Biesen, executive director of the advocacy group Catalyst Canada. However, the differences between what is being suggested for Ontario and what is in place in other jurisdictions could become a problem, she said.

“Our challenge in Canada, and you see it across securities regulators and securities regulation … is the more inconsistency we have, the more difficult we make it for organizations to take action, and for individual employees and groups that are in an equity-seeking group to see outcomes,” she said.

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