The last week of August. A time for making the most of the dog days of summer by hitting the beach, escaping to a cottage, or…reviewing the second consultation paper of the federal government’s financial sector legislative and regulatory framework review. The review covers the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, and the Trust and Loan Companies Act.
The second consultation paper asks for comments on broad themes, such as the role of innovation and fintech in improving services for consumers, and also on a number of more specific legislative amendments, including a number of proposals with respect to corporate governance matters. The corporate governance amendments under consideration are intended to bring provisions of the Bank Act and the statutes of other federally-regulated financial institutions in line with proposed changes to the Canada Business Corporations Act.
The changes would
- require federally-regulated financial institutions to disclose to shareholders information on gender diversity among directors and officers using a “comply or explain” model.
- eliminate staggered boards and require annual elections of all directors.
- prohibit 'slate voting' in which shareholders vote for a slate rather than for individual directors.
- require ‘majority voting’ in uncontested director elections so that each director must get at least 50% of the votes cast to take their seat on the board.
Gender diversity disclosure already is required of publicly-listed companies under securities laws of all of the provinces except British Columbia. Overall, the disclosure requirement does not appear to have had a significant impact on the number of women board members or senior officers of most public companies. The ‘Big 6’ banks, however, all disclose that they have a written diversity policy and a target of at least 30% of each gender on the board of directors (or "one-third" in the case of BMO and National Bank). All six have met this target.
The other three proposals are already requirements under the TSX listing rules, and so would not change the corporate governance practices of these listed companies. The second consultation paper recognizes that enacting these amendments may require “small institutions” to change their existing practices, and so the Department of Finance is considering a two-year transition period for these institutions, as well as seeking comment specifically on the “unique implications” of these proposals for small institutions.
The comment period on these proposals and the others outlined in the second consultation paper closes on September 29, 2017.