The Ontario Securities Commission has published revised corporate governance rules and guidelines for comment.

Proposed National Instrument 58-101 Disclosure of Corporate Governance Practices will require issuers to disclose their governance practices in their management information circular. However, smaller, so-called “venture issuers” will be allowed to makes less-detailed disclosures.

The proposed rule is also accompanied by revised corporate governance guidelines. The guidelines will apply to all reporting issuers but are not intended to be prescriptive; rather, issuers are encouraged to consider them in developing their own corporate governance practices.

The guidelines include:

  • maintaining a majority of independent directors on the board; appointing an independent chair;
  • holding meetings of independent directors without management;
  • adopting a written board mandate; developing job descriptions for the chair of the board, the chair of each committee, and the CEO;
  • providing each new director with a comprehensive orientation, and providing all directors with continuing education opportunities;
  • adopting a written code of business conduct and ethics;
  • appointing nominating and compensation committees composed entirely of independent directors;
  • adopting a process for determining what skills the board as a whole should have, and applying this result to the recruitment of new directors; and
  • conducting regular assessments of board effectiveness, as well as the effectiveness and contribution of each committee and each individual director.



These recommendations reflect some changes based on the 34 comments the OSC received on its initial publication of these guidelines back in January; and, on the 15 comments received on an alternative plan published by BC, Alberta and Quebec in April.

“We recognized that corporate governance is in a constant state of evolution,” the OSC notes. “Consequently, we intend to review both the proposed policy and the proposed instrument periodically following their implementation to ensure that the guidelines and disclosure requirements continue to be appropriate for issuers in the Canadian marketplace.”

The OSC says that the proposed rules will provide greater transparency for the marketplace regarding the nature and adequacy of issuers’ corporate governance practices. “We anticipate that the benefits of such transparency, including enhanced investor confidence in Canadian capital markets, will exceed the relatively nominal cost for issuers to provide the disclosure required,” it says.

The regulators are also proposing changes to the definition of independence for audit committees. The amendments aim to clarify the definition of independence; and, to update it in accordance with revised definitions introduced by the NYSE in August.

The guidelines are being published for a 45-day comment period. Comments are due by December 13. The audit committee rules are out for a 90-day comment period, until January 27, 2005.

Also, on September 28, the board of the Toronto Stock Exchange approved an amendment of the corporate governance disclosure requirement applicable to TSX listed issuers, in response to the proposed new rules.

It will require TSX issuers to disclose their governance practices in accordance with the proposed instrument. This will allow TSX to continue to monitor TSX issuers’ disclosure in order to ensure that it remains consistent with TSX standards and its participants’ expectations.