Thursday, January 24, 2002

OTTAWA - Today, the nation-wide Corporate Responsibility Coalition released the results of a secret consultation conducted by Industry Canada during which the majority of respondents, including several multinational corporations, told the government to change the law to allow corporate directors to consider stakeholder interests when making decisions and undertaking activities.
 

Industry Canada officials have claimed publicly that the 66 respondents were overwhelmingly against corporate directors taking into
account stakeholders's interests and concerns.  In fact, 39 (59%) of respondents offered full or qualified support for allowing corporations to address stakeholder interests, and 7 others were only partially opposed. Of the 39 supporters, 24 were corporations or corporate associations, including Canadian Occidental Petroleum, Canadian Pacific, Dofasco, FedEx, George Weston Ltd., Kellogg's, the Business Council on National Issues and the Canadian Institute of Chartered Accountants. (Please see below for consultation letter and chart summarizing the responses to the letter).

The federal government did not include any measures addressing stakeholder concerns in the changes to the federal Canada Business Corporations Act (CBCA) that were passed in the form of Bill S-11 by Parliament in June 2001.

"We call on Industry Minister Allan Rock and the federal government to respond, finally, to the broad support for changes to the law by passing measures requiring corporations to act responsibly," said Duff Conacher, Coordinator of Democracy Watch and Chair of the Corporate Responsibility Coalition.

A recent poll of 2,000 Canadians conducted by Vector Research found that 75% of shareholders and 80% of the public at large want the government to establish social responsibility standards and to require corporations to report on how they are meeting those standards.  The Canadian Democracy and Corporate Accountability Commission, which commissioned the poll and which undertook nation-wide consultations on corporate responsibility issues last year, will be releasing its full report next week, on Wednesday, January 30th.

The results of the 1998 consultation were obtained under the federal Access to Information Act.

235 Queen Street, room 506-F
Ottawa, Ontario
K1A 0H5
 

July 13, 1998

Dear            :

The preparation of proposed reforms of the Canadian Business Corporations Act (CBCA) is nearing completion and we expect to go to Cabinet with our proposals this fall. Since you have been part of the discussions related to the reform process, I wanted to make you aware of the proposal we have received from the Canadian Centre for Ethics and Corporate Policy relating to setion 122 of the CBCA.

Following the release of the November 1995 discussion paper on Directors' Liability, we received a number of suggestions that section 122 be amended to clarify that directors, in acting in the best interests of the corporation, are not precluded from making decisions that take into account the interests of stakeholders other than shareholders.

In June 1998, we met with a group of stakeholders in Toronto to discuss possible amendments to this effect as proposed by the Canadian Centre for Ethics and Corporate Policy. A copy of the Centre's most recent proposal is attached. I would appreciate receiving your views on this proposal. Please forward your comments, by August 28, 1998, to Ms. Lyne Tasse, Senior Legal Policy Analyst, Industry Canada at (613) 952-2067 (fax) or by e-mail at tasse.lyne@ic.gc.ca

If you have any questions with respect to the proposal, please contact Ms. Tasse at (613) 952-2386.

Thank you for your continued interest in CBCA reform.

Yours Sincerely,

Vinita Watson
Director General
Corporate Governance Brance
 

Addition of a new subsection to the CBCA's section 122:

Section 122 relates to directors' and officers' duties, including their fiduciary duty to the corporation and their duty of care. The proposed amendment expressly permits (but does not require) directors and officers to consider intersts of non-shareholder "stakeholders" during corporate decision-making. The inclusion of this new provision seeks to address the concern expressed by directors in many circumstances that they are uncertain about their entitlement to take the interests of these other stakeholders into account in formulating decisions. The new subsection is set out below:
 

Subject to subsection 122(1), in discharging his or her duties  pursuant to this Act, every director or officer of the  corporation may (but shall not be requied to) give  consideration to the interests of those who are affected by the  corporation's actions (including the corporation's customers,  employees, lenders, suppliers and communities in which it  operates) in assessing any action or proposed action of the  corporation. This provision does not create any duty of any  director or officer to any person and shall not give rise to any  cause of action against any director or officer.

This proposal merely seeks to codify existing common law in order to provide greater certainty to those business persons governed by the Act (who cannot be expected to have much familiarity with the common law) and to reflect the modern reality of managing corporations.  Today's directors are actively concerned about discharging their duties in accordance with all legal requirements but many are uncertain about whether it is permissable to take into account interests of the corporation's stakeholders (subject always to their fiduciary duty).  Similar "stakeholder" provisions already exist in a majority of American corporate statutes.

The amendment in no way modifies the fiduciary duty of directors and officers to the corporation or interferes with the corporate objective of maximizing shareholder value. Shareholder interests are deliberately omitted from the language of the amendment because directors and officers understand their role to include maximizing shareholder value. Further, the proposed provision states explicitly that it does not create any duties to non-shareholders, nor does it give rise to causes of action against directors or officers.