Many companies have shown bare "technical compliance" with new gender-diversity reporting rules introduced this year and it is "simply not good enough," Ontario Securities Commission chair Howard Wetston says.
Mr. Wetston said on Wednesday that the OSC has begun reviewing proxy circulars filed this year to see how companies are responding to the rules requiring them to disclose details about their policies to bolster women in senior roles, or else explain why they do not have policies in place.
While some companies have provided excellent disclosure and have a lot of women on their boards of directors, he said, others have been disappointing.
"Even if it may qualify as compliant disclosure, it's at best technical compliance and certainly does not reflect our overall objective or desired outcome," Mr. Wetston said in remarks at the annual meeting of the Canadian Coalition for Good Governance (CCGG) in Toronto. "It's simply not good enough. This type of disclosure leads us to believe that the boards of these companies are not taking the issue as seriously as we had intended."
The rules took effect on Jan. 1 and require companies to report how many of their directors and senior officers are women, as well as provide details of their written policies and internal targets for female directors. The rule is known as a "comply-or-explain" standard, which means companies have the option to instead explain why they do not have policies or targets.
Mr. Wetston told the CCGG members – who represent most of Canada's largest institutional investors – that they must use their clout to push companies to comply with the guidelines and add more women to their boards.
"Where board engagement is lacking, shareholder engagement must help drive the agenda forward – there's shared responsibility," he said.
In the longer term, he said, the OSC will assess whether comply-or-explain rules are having the intended effect of increasing women on boards. He warned that the Ontario government and others in Canada could be willing to go further with tougher rules if there is not enough progress.
"It may very well be that a government may see this is just not good enough. … That may be something that has to occur down the road if we don't see any meaningful change."
Mr. Wetston said the OSC will publish a report in September on how companies are meeting each of six required disclosure elements in the diversity policy, and will also publish all of the underlying data on its website so that researchers can use it for their work.
The OSC has not asked any companies to refile inadequate disclosure statements, but it may as the review progresses, he said. Later in the fall, the OSC will hold a roundtable event to discuss the quality of disclosures and hear views about how to find more women for boards, he added.
Mr. Wetston said the OSC has also looked at the impact of say-on-pay votes on executive compensation, but it has not decided whether to make the advisory votes mandatory in Canada.
Speaking to reporters after his remarks, he said the OSC is reluctant to champion mandatory say-on-pay votes if the issue does not have support from other provincial securities regulators, because it should be done as a national policy.
"The OSC can create a priority in a particular area, but many of our priorities we want to have nationally," he said. "If we decide to proceed with something nationally, that's a lot of work and effort, and then we have to prioritize that in the context of the other national initiatives we're trying to work on. I think it is important to us, but it hasn't reached that level of priority."