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A stock photo of a corporate boardroom.Arpad Benedek/Getty Images/iStockphoto

Provincial securities regulators will now require companies to report annually on their plans to improve the proportion of women on their boards of directors and in senior management, toughening earlier proposals with new disclosure requirements.Seven provinces and two territories have signed on to the new standards, requiring companies to disclose their policies for improving the number of women in their senior ranks. Alberta, British Columbia, Prince Edward Island and the Yukon are not participating.

The rule, which takes effect Dec. 31, will cover all companies on the Toronto Stock Exchange, essentially creating a national standard despite the hold-out provinces. The rule is a voluntary "comply or explain" standard, requiring companies to either adopt various practices or explain why they have opted not to comply.

OSC chairman Howard Wetston said Wednesday the goal is to bolster the number of women in senior roles.

"We did not see sufficient leadership from public company boards, and we felt that leadership from government would be necessary to achieve these goals for women on boards and women in business," he said in an interview.

He said the OSC will review the impact of the rules in three years to examine if progress has gone far enough through voluntary standards.

Gerrard Schmid, chief executive officer of TSX-listed DH Corp., which provides technology to financial services companies, said the guidelines are the appropriate route for Canada to take to encourage greater diversity.

"Having more of a principles-based regulatory framework, I personally believe it to be the right answer for the sort of country we are," he said. "The approach that the securities commissions have taken is more along the lines of offering some guidance rather than being too proscriptive around quotas and things of that nature."

Mr. Schmid said DH has not created formal targets for women, but they now fill half the executive roles reporting directly to the CEO and account for four of eight independent directors on the board.

A voluntary rule will be sufficient to compel change without needing to introduce tougher standards such as quotas, argues Stan Magidson, chief executive officer of the Institute of Corporate Directors, which represents 8,700 corporate directors in Canada.

"We think it's healthy to let the market now start to work and see how this evolves," he said. "We do think things are moving in a positive direction, and now it's time to see how the market reacts."

The rule asks companies to report the number of women on their boards and in senior executive positions, and to disclose whether they have internal targets for women. It also asks for disclosure about whether companies have term limits in place to encourage "renewal" of their boards.

The final draft of the rule adds a requirement that companies with targets for women in senior ranks must disclose the details of their targets and their progress toward achieving them. They also clarify that diversity policies must be written, addressing concerns that companies could have reported they had unwritten or informal policies.

Alex Johnston, executive director of advocacy group Catalyst Canada, said the rules are a "fantastic" way to encourage companies to add more women while fitting with Canada's corporate culture.

Women comprised 12.3 per cent of directors in the S&P/TSX composite index last year, and Ms. Johnston said she believes the new guidelines can help raise that proportion to 25 to 30 per cent without the need for the kinds of quotas that have been adopted in Europe and elsewhere.

Ms. Johnston said pushing beyond the 30 per cent level will require work on the "pipeline" of women in management to develop a larger group ready to move into executive roles and join boards.