ISS Benchmark Voting Policies updated for 2021– board gender diversity and exclusive forum proposals of key interest.


Institutional Shareholder Services (ISS) recently published its updated 2021 benchmark proxy voting policies. The policies will govern ISS voting recommendations for shareholder meetings held on or after February 1, 2021. The two key changes for TSX-listed Canadian companies concern board gender diversity and exclusive forum policies, as discussed in detail below.

Board Gender Diversity

Effective for meetings held on or after February 2022, under the revised policy, ISS will recommend in respect of companies on the S&P/TSX Composite Index, a withhold vote for the Chair of the Nominating Committee (or committee with nominating responsibilities) where less than 30% of the board of the company is comprised of women, and

  • the company has not disclosed a formal written gender diversity policy; or
  • the company's formal written gender diversity policy does not include a commitment to achieve at least 30% women on the board over a reasonable timeframe.

With respect to targets, ISS will look for an explicit percentage or numerical target for women's representation of at least 30% of the board. ­

For widely-held companies that are not S&P/TSX Composite Index constituents, ISS' policy will remain the same: it will generally recommend a withhold vote for t­he Chair of the Nominating Committee (or committee with nominating responsibilities) where the company has not disclosed a formal written gender diversity policy and there are zero women on the board. Here ISS reminds issuers that the gender diversity policy should include a clear commitment to increase board gender diversity and that boilerplate or contradictory language may result in withhold recommendations for directors. The gender diversity policy should also include measurable goals and/or targets denoting a firm commitment to increasing board gender diversity within a reasonable period of time.

This policy will not apply to:

  • Newly-publicly-listed companies or those having transitioned from the TSXV within the current or prior fiscal year; or
  • Companies with four or fewer directors.


As part of its updated rationale for these policy positions, ISS cites the fact that gender diversity has remained a high-profile corporate governance issue in the Canadian market. ISS also states that as the sentiment supporting representation of women on boards has steadily grown in Canada, it has become clear that a higher standard of representation by women is expected, with S&P/TSX Composite Index constituents playing a vital role in this process as market leaders.

As required by National Instrument 58-101 Disclosure of Corporate Governance Practices  (NI 58-101), TSX-listed issuers must provide proxy disclosures concerning whether and how the board or nominating committee consider female representation levels when identifying and nominating candidates to the board. Disclosure of any policies or targets concerning representation of women on the board is also required. According to ISS this disclosure requirement has catalyzed female representation on boards of widely held TSX-listed reporting issuers, with boards lacking policy commitments or having no female directors considered outliers.  As previously discussed and noted by ISS, in 2020 the Capital Markets Modernization Task Force recommended an overhaul to the "comply or explain" regime and would instead require TSX-listed companies to set diversity targets and provide data on the progress being made.

We note that in January 2020, Canadian federal legislation echoed the need to "foster diversity at the highest levels of corporate leadership in Canada" by amending the Canada Business Corporations Act  (CBCA) to require all distributing corporations (including venture issuers) to report on the representation of women, Aboriginal peoples, persons with disabilities, and members of visible minorities on boards of directors and within senior management. For more information on NI 58-101 and the CBCA as it relates to board composition, see  here.

In updating its policy, ISS has also stated that it received feedback from institutional investor clients, including from many who are signatories of the 30% Club Canadian Investor Group: Statement of Intent (the Statement), which aims to achieve a minimum of 30% women on the boards and at the executive management level of S&P/TSX composite index companies by 2022. The Statement suggests that 30% was chosen because this "is the level at which critical mass is achieved and contributions of a minority group cease being representative of that particular group and begin to be judged on their own merits." In addition, several Composite Index issuers are signatories of the 2022 Catalyst Accord, seeking objectives similar to the 30% Club.

While these policy positions are new, we note that existing ISS' Governance QualityScore (GQS) factors also highlight the importance of female representation. The number of women on the board is a factor scored in all regions. The GQS suggests that better long-term financial performance is correlated with increases in the number of women on boards. Full credit of this factor is earned when three or more women are on the board. As of November 2017, nine board members is the average number of members across all GQS coverage companies – this equates to the typical company receiving full credit with one-third of the board comprised of women. The percentage of women is another factor that is scored in all regions. Full credit is received when women hold at least 50% of board seats. Lastly, in considering the number of women in leadership roles, including board chair, the majority of relevant ISS policy survey respondents indicated that they considered overall diversity when evaluating boards.

Canadian Securities Administrators (CSA) and Stikeman Elliott LLP Analysis

In 2019, the CSA published Multilateral Staff Notice 58-311 Report of Fifth Staff Review of Disclosure Regarding Women on Boards and in Executive Officer Positions, representing the 5th full year of data being published regarding women on boards and in executive positions since the comply and explain rules came into force, and in 2019 covering 641 TSX listed issuers. The results for board representation indicate:

  • 5% of issuers had a female board chair;
  • 17% of issuers had board seats held by women, however this number typically increased with the size of the issuer and varied by industry;
  • the average percentage of women on boards was 17%;
  • 33% of board vacancies were filled by women;
  • 50% adopted policies related to female representation, but only 22% adopted targets for female board representation; and
  • 73% of issuers had at least one female director, however, 170 issuers had no women on their board.

Similarly, our 2020 Stikeman Elliott analysis of TSX/S&P 60 issuers revealed that:

  • the average percentage of women on boards was 30.36%;
  • 31 issuers (51.67%) had implemented targets for women on boards, with the average target set at 30%; and
  • 34% of boards were comprised of 21% to 30% women.

These figures suggest that the new ISS policy will impact a significant component of the S&P/TSX Composite Index.

ISS' policy change will be effective for meetings held on or after February 2022, allowing a one-year transition period for companies to meet or exceed the 30% threshold or implement new diversity policies that include a 30% target.

Exclusive Forum Proposals

The new ISS policy also recommends a vote on a case-by-case basis on proposals to adopt an exclusive forum by-law or to amend by-laws to add an exclusive forum provision, taking into account a number of considerations, including:

  • jurisdiction of incorporation;
  • rational for adoption;
  • legal actions subject to the provision;
  • evidence of past harm from shareholder legal action against the company outside the jurisdiction of incorporation;
  • corporate governance provisions and shareholder rights; and
  • any other provisions that raise concerns regarding shareholder rights.


In comparison with practice in the United States, exclusive forum by-laws remain relatively new to the Canadian market. Nonetheless, companies continue to increasingly adopt such provisions as by-laws requiring shareholder approval.

Proponents of exclusive forum by-laws argue the notion that courts in a corporation's jurisdiction of incorporation are better positioned to adjudicate matters brought by shareholders against the corporation. Further, these provisions attempt to reduce the high legal costs associated with litigation outside the jurisdiction of incorporation. On the other hands, others note that the drawbacks include restrains on the right of shareholder plaintiffs to select any proper forum for their proceeding.

As a result, the acceptability of a proposed exclusive forum jurisdiction will primarily depend upon the details of the extent and types of legal actions that would be subject to the exclusive forum by-law and the board of directors' rationale in adopting such a provision. Other considerations include company-specific history concerning out-of-jurisdiction shareholder litigation and a company's corporate governance and shareholder rights track record.

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