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Call to Action # 92: Business and Reconciliation (92)

Investors need disclosure on Indigenous representation; the CSA should require it

October 12, 2023

NationTalk: The Globe and Mail – Canada’s economic future is dependent, in many ways, on having more Indigenous voices at the table when major development projects are being proposed and planned. That’s because many of these initiatives will involve the traditional territories of Indigenous peoples or impact these territories. And they will have a disproportionately higher impact on Indigenous people and communities. This includes mining, energy (including oil and gas), telecommunications, clean technology and financial services projects.

More than half of Canadian companies are doing business on Indigenous land or impacting Indigenous peoples. Across Canada, projects have failed and shareholder value has been destroyed because of lack of Indigenous engagement. Take Taseko Mines’ New Prosperity project and Enbridge Inc.’s Northern Gateway pipeline. They did not adequately incorporate the rights and interests of Indigenous peoples and both projects ultimately failed. These and other abandoned projects underscore that new resource projects cannot be built in Canada without First Nations’ prior consent.

Conversely, many businesses are now reaping the benefits of building partnerships with Indigenous nations. A prime example is the $1-billion acquisition of Clearwater Seafoods through a landmark partnership between Premium Brands and a coalition of Mi’kmaq First Nations in 2020. The deal is already proving very profitable: Clearwater announced a record $71-million increase in sales in 2022.

So how do companies gain the competency and capacity to engage meaningfully with Indigenous peoples and benefit from their involvement? Having Indigenous people on the board and in senior management is a key element of that success. And investors need to know which companies have achieved this.

Investors want to know about diversity because diverse boards are better able to navigate today’s complex, ever-changing business landscape. When members have a variety of perspectives, boards are better equipped to consider the various implications of decisions. Board diversity can also improve risk management and help build a more innovative company.

An important consultation happening right now will determine whether investors will soon be entitled to this diversity information, with the Canadian Securities Administrators (CSA) currently considering two reporting options.

The option supported by the Ontario Securities Commission would get investors the diversity information they want and deserve. It requires publicly traded companies to disclose specific information about the number of Indigenous people, racialized people, those with disabilities and LGBTQ2S+ people on their boards and executive teams.

The other option lets companies decide what diversity they feel is relevant to their business and to disclose accordingly. Although supported by the British Columbia, Alberta, Saskatchewan, and Northwest Territories securities commissions, there are concerns by many that such discretion could leave crucial reporting gaps.

The outcome of this consultation could mean the start of more robust disclosure about Indigenous representation and other diversity on corporate boards and executive teams. It’s important not only for investors, but for all Canadians.

Similar diversity disclosure requirements for women (introduced in 2014) was followed by increased female representation on boards and in senior managements from 11 per cent to 24 per cent from 2011 to 2024. That’s why we think this proposal is so important: the evidence shows it will increase representation. FMB believes mandatory reporting will lead to similar results for Indigenous people.

Data for federally regulated public companies show us that there is much work to be done. In 2022, despite making up 5 per cent of the Canadian population, Indigenous people made up only 0.9 per cent of directors. Only nine companies had at least one Indigenous executive officer.

Companies must truly understand Indigenous rights if they are to create investor certainty in Canadian projects, which leads to investor confidence.

Indigenous directors and senior managers can make this happen by building better and longer-lasting relationships with Indigenous communities, bringing awareness of Indigenous values to their companies, and ensuring better outcomes for companies and Nations.

Whether an investor is progressive or pragmatic, relationships with Indigenous communities are vital as we all work to advance reconciliation. Mandatory disclosure requirements are a good step in meeting this need, with the promise of positive outcomes for companies, investors and Indigenous peoples.

Influential Indigenous and non-Indigenous voices have added to the call for increased diversity throughout the CSA consultation and can do so until Sept. 29. The story of why this matters is shared by the First Nations Financial Management Board on its website.

Canada can do better when it comes to diversity in corporate decision-making. It’s good business, good for diversity and good for Canada. Let’s not miss this opportunity to get it right.

Geordie Hungerford is the CEO of the First Nations Financial Management Board.

Christie Stephenson is the executive director of the Peter P. Dhillon Centre for Business Ethics at the Sauder School of Business at the University of British Columbia.