Bill C-25 (Historical)

An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act

Part 1 amends the Canada Business Corporations Act, the Canada Cooperatives Act and the Canada Not-for-profit Corporations Act to, among other things,
(a) reform some aspects of the process for electing directors of certain corporations and cooperatives;
(b) modernize communications between corporations or cooperatives and their shareholders or members;
(c) clarify that corporations and cooperatives are prohibited from issuing share certificates and warrants, in bearer form; and
(d) require certain corporations to place before the shareholders, at every annual meeting, information respecting diversity among directors and the members of senior management.
Part 2 amends the Competition Act to expand the concept of affiliation to a broader range of business organizations.

Canada Business Corporations Act

[Sheila Malcolmson, NDP, Nanaimo—Ladysmith, BC]

Mr. Speaker, the conversations we are having on getting women into the seats of Parliament are quite equivalent to the conversations we are having on getting women onto corporate and federal commission boards. Once they get there, they do really good work.

On the parliamentary side, once women get onto the ballot, voters tend to choose them maybe a bit more often than they do men. However, we have some systemic barriers in place that prevent women from getting the nomination for their political parties in the same way there are systemic barriers that reduce the likelihood of them being nominated for these senior board appointments. This is why we have stalled on progress.

The House of Commons has only 26% women. We now rank 62nd in the world on gender parity, which is embarrassing. As well, the rate of progress has stalled. The extrapolation is that it will take us 89 years to get gender parity in the House if we just go along with the status quo.

In the previous government, crown appointments were 36% female under the Conservative government. Again, that comes nowhere close to the 51% of the population. We have to recognize that there are networks that reinforce themselves. If we are part of the old boys' club, then we will get the nod.

It is accidental. I do not think it is an intentional oversight. However, we have the power and should show the leadership to make that change. We will make better decisions if our decision-making bodies better reflect our country.

[Tracey Ramsey, NDP, Essex, ON]

Mr. Speaker, this is such an important piece of our culture in Canada. It speaks to who we are as Canadians. It is something that needs to be addressed in a way that will result in people being at those boards. It is not just words or something that will never be implemented. It has to result in action so we see more women being represented.

The member spoke about the “comply and explain” model. Could she speak to the model she feels would best achieve the results we are looking for when we are looking at gender parity on these boards?

[Sheila Malcolmson, NDP, Nanaimo—Ladysmith, BC]

Mr. Speaker, we have a lot of examples around the world of using the “comply and explain” model, which has not really moved us to parity the way we need to be. There is always an explanation, I guess. There is a lot of work on the record here on the evidence of why that has not worked. The fact that we are even having this debate suggests that it has not worked.

The bill that I have proposed, again, was debated many times in the House. I am completely carrying on the work of my former NDP colleagues. It provides a program that would gradually move, within a six-year period, toward gender-balanced appointments. It sets absolutely hard targets for each of those years so if the appointments to federal commissions are not gender balanced along the percentages proposed in the bill each of those years, then that is a failure of leadership and a failure of responsibility.

Therefore, the bureaucrats and recruiters who are identifying candidates for board appointments, if they are not proposing to their minister and senior supervisors candidates who fall in line with the bill, then they are not taking their responsibility. This is a legislative response that would move us as fast as we need to go to get to the final answer.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, we are nearing the end of the year. New Year's Day 2017 falls on a Sunday. The first paid day in 2017 is January 2. By around noon on January 3, Canada's top 100 CEOs will, on average, have made as much as the average full-time employee will earn over the entire year.

In 2013, and again in 2014, Canada's top 100 CEOs made an average of $9 million each. In other words, the average of these top CEOs makes 184 times as much as the average Canadian worker. This inequality is not only large but it is also growing. Figures on the top 100 CEOs only go back to 2008 on a comparable basis. However, if we look at the top 50 CEOs, an even more elite group, in 1995 only about 20 years ago, they made only 85 times as much as the average worker.

Why should Parliament care if private corporations decide to pay their CEOs a lot of money? Because it is a lot of money that is not being used for other purposes. If we consider 100 CEOs each making an average of $9 million, that is almost $1 billion not being used to hire other employees, not being invested in machinery or equipment, not being devoted to necessary research and development.

Corporate Canada as a whole would be better off if companies could pay CEOs less, but individual corporate boards feel the need to keep up with other companies. This produces a circular logic to justify ever-increasing executive compensation. Even for the CEOs themselves, there is no real benefit to these pay increases. For one of the top 100 CEOs, another million dollars does not actually mean a higher material standard of living. It just means a change in the relative ranking.

Our economy would be stronger and even corporate Canada would be better off with government regulation to limit CEO compensation.

Bill C-25 includes some minor improvements to corporate governance, but what it is missing is mandatory and binding “say on pay” provisions as have been adopted in other advanced countries. Canadian companies can put executive compensation to a vote of shareholders but they are not bound to the results. Bill C-25 should require companies to have votes on CEO and executive compensation and be bound by the results.

[The Deputy Speaker, Conservative, Bruce Stanton]

The hon. member for Regina—Lewvan will have seven minutes remaining for his remarks when the House next returns to consideration of the bill.

It being 1:30 p.m. the House will now proceed to the consideration of private members' business as listed on today's Order Paper.

The House resumed from November 25 consideration of the motion that Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act, be read the second time and referred to a committee.

[The Deputy Speaker, Conservative, Bruce Stanton]

When the House last took up debate on the question, the hon. member for Regina—Lewvan had seven minutes remaining in his remarks.

Resuming debate, the hon. member for Regina—Lewvan.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, we are nearing the end of 2016. New Year's Day 2017 falls on a Sunday. The first payday of the new year will be January 2. By around noon on January 3, Canada's top 100 CEOs will, on average, have made as much money as the average full-time employee will earn over the entire year. In 2013, and again in 2014, Canada's top CEOs made an average of $9 million each. That means that the top CEOs made 184 times as much as the average Canadian worker.

This inequality is not only large, but it is growing. Figures on the top 100 CEOs only go back to 2008 on a comparable basis, but if we look at the top 50 CEOs, an even more elite group, in 1995 they made only 85 times as much as the average worker, so there has been an explosion of executive compensation over the past two decades.

Why should we care if private companies choose to pay their CEOs a lot of money? If we take the 100 top CEOs, each making an average of $9 million, that is nearly $1 billion that is not being used to hire other employees, not being invested in machinery and equipment, and not being used for needed research and development. Corporate Canada as a whole would be better off if it could pay CEOs less. However, individual corporate boards feel pressure to keep up with what CEOs of other companies are paid. This leads to a circular logic that justifies ever higher executive compensation.

Even the CEOs themselves do not really benefit from this trend. An extra million dollars does not make a material difference in their standard of living. Really, they are concerned about their relative position compared to other CEOs, so if a CEO gets paid more it increases his or her position on the league tables only by reducing the position of other CEOs. Our economy would be stronger, and even corporate Canada itself would be better off with government regulation to limit CEO compensation.

Bill C-25 includes some minor improvements to corporate governance, but what is missing is the mandatory and binding say on pay provisions that we find in other advanced economies. Currently, Canadian companies can consult shareholders on executive compensation, but they are not bound by the results of those votes. The NDP is going to propose amendments to Bill C-25 to include mandatory and binding say on pay provisions to limit executive compensation.

Beyond the scope of Bill C-25, the federal government can and should also address out-of-control executive compensation through the tax system. I believe in giving credit where it is due, so I want to recognize that this government did modestly increase the top personal income tax rate. However, the government failed to close the loophole that allows half of stock options to be exempt from personal income tax. This stock option loophole delivers the largest benefit to highly paid CEOs and corporate executives, so we need to close that loophole to address executive compensation.

Something else that the federal government could do is to limit the amount of executive compensation that a corporation can deduct in calculating its corporate taxes.

The United States currently limits the amount of CEO compensation that can be deducted in calculating corporate taxes to $1 million. Unfortunately, this limit is not very effective in the United States because it does not apply to performance-based compensation, such as stock options. However, we could easily apply a limit to all forms of executive compensation and ensure that they cannot be deducted in calculating corporate income taxes.

In conclusion, out-of-control executive compensation is a significant source of worsening inequality, and is a substantial drain on our economy. The Government of Canada can and should address this problem by strengthening corporate governance through Bill C-25, and also by implementing progressive tax reforms.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I thank my colleague from Regina—Lewvan for his excellent speech.

I would like him to comment further on what he said at the beginning of his speech about how long it takes for a CEO to earn as much money as an average employee in the same company.

We hear a lot about the day when Canadians have earned enough to cover their taxes. If I remember correctly, that is usually in July or August. Too little is being said about this other extremely important indicator. I think it has gotten worse over the years. In the 1970s, the gap between CEO pay and worker pay was much smaller.

I would like to give my colleague an opportunity to talk more about something that I think is important, even though most Canadians are unaware of it.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, I thank my colleague for his excellent question.

He is right: we make a big deal out of tax freedom day, a day mid-year by which, according to the Fraser Institute, the average Canadian has paid all of his or her taxes. There are a lot of problems with the way this indicator is calculated.

It is important to consider the value of another method, one developed by the Canadian Centre for Policy Alternatives, which looks at how long it takes corporate executives to earn more than the average worker. It happens very early in the year, around noon on January 3, 2017.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I want to thank and congratulate my colleague from Regina—Lewvan for his excellent speech.

Income inequality is at the root of our economic problems in society, in my opinion. When the gap between the rich and everyone else becomes that wide, we end up with economic crises and all sorts of social problems. Addressing income inequality should be one of the top priorities of this House.

My colleague talked about a more technical aspect that the public does not seem so familiar with. In the case of capital gains, only half of net gains are taxable, but when it comes to work-related income, one's entire salary is taxable.

Can my colleague put a simple and concrete figure to this? For example, how much does a person earning $50,000 a year pay in tax? If that amount were a capital gain, how much would the person pay in tax?

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, I thank my colleague from Joliette for his excellent question.

It is true that inequality is a major problem in our society and it spills over into health and crime. Many social problems stem from inequality.

He also mentioned a problem with our tax system, where, unlike other sources of income, only half of capital gains are taxed. This problem is more apparent when we look at how corporate executives are compensated. Often their capital gains are not really investments, but compensation. That money should be taxed in the same way that their employment income is taxed.

[Martin Shields, Conservative, Bow River, AB]

Mr. Speaker, I appreciate the interesting statements that the member has made about this particular issue. I wonder if he might want to respond to a different group of working people who I know he cheers for, like the Regina, Saskatchewan football team, and many hockey players in the National Hockey League, who are paid more than CEOs. What does he think of those people who make a considerable amount of money more than the CEOs, in their profession?

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, as I mentioned in my speech, the average of these top 100 CEOs makes $9 million a year, which is vastly more than the average player for the Saskatchewan Roughriders or in the Canadian Football League generally, so I do not necessarily accept the premise of the question, but I believe that there is a very similar problem with high pay for professional athletes. Part of the solution certainly is to increase the top personal income tax rate as the government has done.

The problem derives from the fact that people are being paid so much they do not really benefit from the additional money, it is all about relative position. We have to pay a hockey player a lot because other hockey players earn a lot, and certainly there are more equitable ways of distributing that money in our society.

[François Choquette, NDP, Drummond, QC]

Mr. Speaker, I am pleased to rise in the House today to take part in the debate on Bill C-25, an act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act.

It is always very important to review our laws in order to improve them, and to ensure that we make them even more fair and that they will foster gender parity. This bill is a first step in the right direction.

The NDP will support enhancing the diversity of boards of directors and democracy for shareholders.

However, once again the Liberals are not walking the talk. Bill C-25 is an attempt to solve the problems of gender parity. That will not happen if we only do what is being proposed. We are going to have to do more, and I know that the NDP member who sits on this committee will make the amendments needed to improve gender-parity in this area. That is what we are proposing.

This is only the second time in 40 years that the Canadian government has looked at corporate governance issues. As I said, this is no small matter, and it is good to review these things once in a while, so this is a step in the right direction.

The government's stated objective in introducing this legislation was this: the bill proposes changes meant to increase shareholder democracy and participation, support efforts to increase women's participation on corporate boards and senior management, and improve corporate transparency and business certainty while reducing the regulatory burden.

As I was saying, generally speaking, in its current form, the bill will increase shareholders' democratic participation in order to ensure greater understanding and, for instance, require annual elections for corporate directors, ensure that shareholders can vote for individual candidates, and require a majority voting standard, which are all interesting reforms. This is all through the lens of increasing representation of women on corporate boards and in senior management.

This might improve because businesses will have to explain why they do not have any female representation on their boards. That is a step in the right direction. However, everyone will agree that it is just a small step in improving gender equality.

Hundreds of people from Drummond have come to see me to request federal pay equity legislation. Unfortunately, as we know, the Liberal government said that it might wait until 2018 before implementing such a law, when pay equity should already be a fait accompli in Canada.

However, that is not yet the case, and unfortunately, the Liberals have put off their commitment to gender equality. That is coming from a government whose Prime Minister claims to be a feminist. It is not enough for the Prime Minister to claim to be a feminist. He and his government also need to take action to show that they are actually committed to gender equality. People have been disappointed in that regard.

This issue is so important that the NPD introduced Bill C-220, an act to amend the Financial Administration Act (balanced representation). The bill's sponsor is the member for Nanaimo—Ladysmith, who is doing an excellent job of promoting gender equality.

Feminism does not only involve women. All men and women must work together to achieve parity.

As I mentioned earlier, hundreds of citizens in my riding have come to see me to talk about this. They have come to demand more action from the government. I have tabled petitions on their behalf. We are looking for more concrete measures from the government on this issue.

I have spoken about Bill C-220 from my colleague from Nanaimo—Ladysmith. This was tabled in various forms by the NDP in the past, notably by former MP Anne-Marie Day. It is clearly a long-standing commitment on our part. Everyone voted in favour of the bill except the Conservatives. I don’t know why, but they were not in agreement.

That bill was aiming for balanced gender representation on the boards of directors of crown corporations. This is an area where the government can take direct action. Unfortunately this has yet to be done. However we continue to move ahead and we will not give up. We hope that this time, in this Parliament, members from all parties in the House will be able to put partisanship aside so that progress can be made on the issue of gender parity.

The member who spoke before me mentioned another very important issue, that of executive compensation. This bill calls for the introduction of a consultative vote on executive compensation, something the investor and shareholder community has been calling for.

Bill C-25 improves the election process for board of director positions by eliminating the list system and requiring that directors be elected on a majority. Indeed, many stakeholders have asked for more of a say on the compensation for executives. The NDP was very active on CEO compensation. Unfortunately, the government did not consider any of that when drafting this bill, which is very disappointing.

Given the situation of Canada’s citizens, the deduction for stock options is a horrible fiscal loophole which must absolutely be eliminated. It serves to give an unfairly high salary to the biggest CEOs, the richest people in our society. These people are taxed on only 50% of these earnings, which is totally unfair, since Canadian citizens doing normal work are taxed on 100% of their wages. This tax loophole exists only for the benefit of CEOs, the richest people in our society. We have to tackle this injustice.

That is why the NDP called for the elimination of the deduction for stock options in its electoral platform. This loophole allows the senior officers of corporations to pay only half the income tax on their compensation paid as stock options, or 50% of the prescribed rate. If a citizen from Drummond were to do that, the Canada Revenue Agency would call him right away and order him to pay his full income tax. Yet for executives this is a legal loophole that exists.

There are certain loopholes that are legal, but are totally unacceptable in our modern society. They are totally unfair, bordering on unethical. Unfortunately, they exist, and they are legal. The government is doing very little, if anything at all, about these tax loopholes. Since it was elected, we have not really seen any strong commitment from this government on closing these unfair loopholes. This is one of the worst examples of what is lacking in this bill.

This is a truly regressive loophole. Over 90% of the benefit goes to 1% of taxpayers, those who earn over $250,000 a year. Truly, it is a minority of the Canadian population that benefits from this. This deduction is bad for the economy, since it encourages CEOs to inflate stock prices in the short term through buybacks instead of investing in the economy. The government is losing close to $750 million a year as a result. Stock option deductions are totally unfair and unacceptable.

I have spoken of my fellow citizens who continue to be very active in Drummond. Hundreds have signed a petition to put an end to tax havens. Somewhat like tax loopholes, there are also tax havens the government needs to address. As the House knows, there are many ways to either facilitate the use of tax havens or curb it. Unfortunately, the steps recently taken only serve to facilitate it.

This situation is depriving the state of the funds it needs to carry out its social mission. According to Statistics Canada, tax avoidance is costing the government from $5 billion to $8 billion every year.

Fortunately, this phenomenon is now leading to some collective soul-searching. As I was saying, hundreds of my fellow citizens have signed a petition demanding that we take more action in this area. I have joined in by tabling that petition here in the House of Commons to signal the importance of combatting tax havens and tax loopholes.

It is extremely important to do this, because the public purse is being denied hundreds of millions of dollars by tax loopholes and billions of dollars by tax havens. Public services suffer as a result.

One need only consider health. In the next 10 years, there will be $36 billion in cuts. The cuts were started by the Conservatives; the Liberals had promised to abolish these unfair cuts affecting the most vulnerable in our society, those who have health problems. Unfortunately, the Liberals want to continue on this unfair path. It is totally unacceptable to continue these sorts of cuts.

It is a way of not investing in health, for the funds diverted from the public purse cannot be used for the well-being of the Canadian population.

In the end, the NDP wants the government to take concrete steps to bring about gender parity on Canadian boards of directors. Many researchers interested in gender equality in companies and in politics feel that the “comply or explain” model of disclosure that is found in Bill C-25 in its current form does not appropriately address the issue of gender parity. Therefore, as I was saying earlier, we are going to do everything we can to ensure that amendments are made to improve this situation.

Furthermore, New Democrats want the government to take advantage of the opportunity presented by Bill C-25 to resolve the issue of executive salaries by assigning shareholders a bigger role in the establishment of compensation. That would be a start.

I will conclude by saying that the bill is a step in the right direction. We are going to make amendments to it in committee. I hope that the Liberal and Conservative members of that committee will work in a collegial fashion to improve this bill for the well-being of our citizens. That is very important, and that is why we were elected.