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.

[The Chair, Liberal, Dan Ruimy]

The amendment seeks to amend subsection 20(6) of the Canada Business Corporations Act. The House of Commons Procedure and Practice, second edition, states on pages 766 to 767:

...an amendment is inadmissible if if proposes to amend a statute that is not before the committee or a section of the parent Act, unless the latter is specifically amended by a clause of the bill.

Since subsection 20(6) of the Canada Business Corporations Act is not being amended by Bill C-25, it is therefore the opinion of the chair that the amendment is inadmissible.

We're going to go to PV-2.

Ms. May.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you, Mr. Chair.

Having put on the record my objections to the process, I can proceed right to my amendment. As members may know, these are deemed to have been moved, because I can't move these or vote on them as I'm not a member of the committee.

Going over the evidence, there are a lot of opportunities to really avoid tax evasion schemes and money laundering schemes that were missed in Bill C-25. Relying on the evidence of Publish What You Pay and Transparency International, this amendment, PV-1, moves to increase the level of fine as a sanction in order to encourage them to maintain the records and disclose securities information. The current penalty is too low to do that, in our view.

[The Chair, Liberal, Dan Ruimy]

I'm going to read out a bit of what's going to happen today on clause-by-clause consideration of a bill in committee.

I'd like to provide members of the committee with a few comments on how committees proceed with the clause-by-clause consideration of a bill.

As the name indicates, this is an examination of all the clauses in the order in which they appear in the bill. I will call each clause successively, and each clause is subject to debate and a vote. If there are amendments to the clause in question, I will recognize the member proposing it, who may explain it. The amendment will then be open for debate. When no further members wish to intervene, the amendment will be voted on.

Amendments will be considered in the order in which they appear in the package each member received from the clerk. If there are amendments that are consequential to each other, they will be voted on together.

In addition, to be properly drafted in a legal sense, amendments must be procedurally admissible. The chair may be called upon to rule amendments inadmissible if they go against the principle of the bill or beyond the scope of the bill, both of which were adopted by the House when it agreed to the bill at second reading, or if they offend the financial prerogative of the crown.

If you wish to eliminate a clause of the bill altogether, the proper course of action is to vote against that clause when the time comes, not to propose an amendment to delete it.

Since this is the first exercise for many of us in this room, the chair will go slowly to allow all members to follow the proceedings properly. If, during the process, the committee decides not to vote on a clause, that clause can be put aside by the committee so we may revisit it later in the process.

As indicated earlier, the committee will go through the package of amendments in the order in which they appear and vote on them one at a time unless some are consequential and dealt with together. Amendments have been given a number in the top right corner to indicate which party submitted them. There is no need for a seconder to move an amendment. Once moved, you will need unanimous consent to withdraw it.

During debate on an amendment, members are permitted to move subamendments. These subamendments do not require the approval of the mover of the amendment. Only one subamendment may be considered at a time and that subamendment cannot be amended. When a subamendment is moved to an amendment it is voted on first, then another subamendment may be moved in a committee, or the committee may consider the main amendment and vote on it.

Once every clause has been voted on, the committee will vote on the title and the bill itself, and an order to reprint the bill will be required so that the House has a proper copy for use at report stage.

Finally, the committee will have to order the chair to report the bill to the House. That report contains only the text of any adopted amendments as well as an indication of any deleted clauses.

I thank the members for their attention and wish everyone a productive, happy clause-by-clause consideration of Bill C-25.

Thank you.

I would also like to point out that we have Elizabeth May here today.

[The Chair, Liberal, Dan Ruimy]

Welcome, everybody, to meeting number 50 of the Standing Committee on Industry, Science and Technology, pursuant to the order of reference of Friday, December 9, 2016, 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.

Today we are in clause-by-clause and we will be joined by Mark Schaan, director general, marketplace framework policy branch, strategic policy sector, who will offer his expert guidance.

[Clare Beckton, Executive Director, Centre for Women in Politics and Public Leadership, Carleton University]

Thank you. I will be very brief on this.

I'm coming at this from a totally different part of the bill and from a totally different perspective as I was asked to do. Just to let you know, the centre works on advancing women's leadership in all sectors through research programs for advancing women, looking at barriers and opportunities, and creating awareness and partnerships. We are not an advocacy group. We will not put forward positions but look at what the possibilities are in different circumstances given what's being presented.

We have done a number of pieces of research, including recently “A Force to Reckon With: Women, Entrepreneurship and Risk“, looking at how women entrepreneurs look at risk, which is very important for the advancement of women in entrepreneurship, and I would also say, in terms of advancing women on boards, because these are a feeder group for potential participation on boards. We will now be looking at how women entrepreneurs look at innovation, because this is key to the Canadian economy.

One of the things we also did in 2012 was a benchmark study of women's leadership in Canada, and this looked at where women were across the various sectors in terms of senior leadership. When we looked at it, it came out that there was 29% of women, but only when you added in the public sector. When you looked at the private sector, it was 26%, and when you looked across the public sector, it varied from very low percentages in mining, resources, and construction to much higher in the financial sectors and the service industries. That continues to be the case as we look at what's happening in terms of board participation.

I've also been part of the Canadian Board Diversity Council, assisting with its founding through a grant from Status of Women, and I've also been part of their advisory board. One of the things the Canadian Board Diversity Council has been doing is mapping the changes in board representation. We know that we have a comply or explain regime in Ontario, and in a number of other provinces now, 10 other provinces, I believe they're now looking at whether that's been successful.

Just as an example, in 2015, looking at the Financial Post 500, there was 19.5% female representation on boards, and in 2016, 21.6%. Progress is slow at this rate. It will take quite a long time to reach that goal of 30% to 50%, which is what most people would say is appropriate representation.

When I was asked to come here, I took a look at Bill C-25, and this kind of legislation is designed to be a nudge to nudge corporate boards forward, as I'm reading it, without the imposition of quotas. I know that this committee has looked at various options, including quotas. There will be some who say quotas don't work. I think that we have evidence that quotas do work in some countries, depending on the length of time those quotas are given. If you have only a short period of time and corporate boards don't turn over very quickly, then it's not likely to be successful.

Whenever there's talk about there not being adequate feeder groups, we know that is not the case. There are more than enough very highly qualified women to serve on the boards that have positions in Canada. That is something that has been looked at through the Canadian Board Diversity Council, through Catalyst, and through other organizations that have ongoing lists of already pre-qualified women who have gone through.

When I looked at the bill, I looked at how it was put forward. It was put forward as a bill with, as one of its objectives, increasing gender participation on corporate boards that are under the Canadian Corporations Act. But when I looked at the actual legislation, there is no mention of the word “gender” in it. The word is “diversity”, and diversity is not defined as it stands in the current legislation; it's left to regulations.

I tell corporations and others all the time that lumping diversity and gender together without articulating the need to have the larger participation of women on boards does not always work, because we know that women are not a diversity group; they are 50% of the population. As for diversity, yes, bringing women on boards will bring diversity, but if it's left only under the rubric of diversity, you may not get the numbers you're attempting to get.

One of the things the Canadian Board Diversity Council has advocated is aspirational targets. I'm not sure if there have been discussions at this table, but I think aspirational targets are very useful.

I'm not sure the legislation, as I read it, really requires an explanation. Did you actually look at diversity candidates? Did you actually look at women when you were choosing your board members? If you didn't, why didn't you?

Just to put it on the table, I am a lawyer. I practised law with the federal government for many years, and taught it, so I come at the bill from a lawyer's perspective as well. There are some things in the existing legislation that I see as challenges that may not achieve the goals of the legislation, which I think are very positive goals that we need to be moving forward with.

I'll leave it at that. I know you have lots of questions, and we can have a good discussion as a result.

[Claire Woodside, Director, Publish What You Pay Canada]

Thank you.

Good morning, members of Parliament. Thank you for the opportunity to participate in today's hearing.

My name is Claire Woodside, and I'm the director of Publish What You Pay Canada. With me is Mora Johnson, barrister and solicitor, who has been providing us with some legal advice.

Publish What You Pay Canada is part of an international coalition of more than 800 civil society organizations working to increase transparency and accountability in the resource extraction sector.

The public disclosure of beneficial ownership is critical to the global fight against corruption. It will provide governments, citizens, journalists, law authorities, financial institutions, and businesses with information that will help them detect and avoid corruption. It is the first step Canada must take to eliminate the practice of “snow washing”, discussed by Transparency International Canada at a previous hearing.

In the brief circulated this morning, Publish What You Pay Canada makes five recommendations for amendments and additions to Bill C-25. Here I will highlight three of those recommendations.

Firstly, Publish What You Pay Canada recommends that the CBCA be amended to require that non-distributing corporations submit a form to the federal corporate registrar with details of their registered shareholders and beneficial owners. This information should then be included within Corporations Canada's online database.

Secondly, Publish What You Pay Canada recommends amending Bill C-25 to prevent the misuse of bearer shares. The elimination of bearer shares has been identified domestically and internationally as a key step in efforts to increase beneficial ownership transparency.

Regrettably, the current drafting of Bill C-25 will not prevent the misuse of existing bearer shares; nor will it eliminate the shares, as has been stated within government. The current text of the bill prohibits the issuance of new bearer shares and allows for the voluntary conversion of existing bearer shares but does not require that individuals who hold bearer shares register those shares before exercising the rights attached to them.

To prevent misuse of such shares, Bill C-25 should be amended to require that all bearer shares be registered in advance of exercising rights associated with those shares, such as selling or pledging shares. Please see page three of the briefing note provided to you for proposed wording of the amendment. This change will ensure that criminals are prevented from using existing bearer shares for nefarious purposes.

Publish What You Pay Canada's third recommendation proposes amending the CBCA to include higher sanctions for companies that wilfully fail to maintain records and disclose securities information. The current penalty of $5,000 is not sufficiently dissuasive to incentivize companies evading these requirements for tax evasion or criminal purposes.

We recommend increasing the penalty to a maximum of $1 million for companies acting in bad faith in not maintaining or disclosing adequate corporate records. A higher maximum fine will be an important tool in the hands of law enforcement. “Good faith” errors in reporting would not attract the maximum penalty. The higher penalty would be applied in those cases in which the controlling mind of the corporation intended to hide, destroy, or simply not collect legally mandated information.

The proposed amendments will have four important impacts. First, they will enable Canada to fulfill its international obligations. Second, they will help law enforcement detect and investigate crime. Third, they will help banks and other professions, such as real estate agents, comply with Canadian anti-money laundering requirements. Fourth, they will improve the business climate in Canada.

There is mounting global recognition of the critical role that beneficial ownership transparency plays in the fight against corruption and tax evasion. Simply put, beneficial ownership transparency makes it more difficult for individuals to use anonymous companies to commit crimes.

In June 2013, G8 leaders agreed to a set of principles on beneficial ownership transparency. These principles were then reflected in the G20 “High-Level Principles on Beneficial Ownership Transparency”, agreed upon in 2014.

Despite these commitments, a 2016 evaluation by the Financial Action Task Force found that Canada is only partly compliant, or non-compliant, with beneficial ownership transparency recommendations.

While improving beneficial ownership transparency in Canada will require action by both provincial and federal governments, the onus is on the federal government to lead by example and create a public, centralized register of beneficial owners for federally registered companies. The amendment proposed by Publish What You Pay Canada will allow Canada to meet its international commitments and join its peers, including the U.K. and the EU, who have implemented or are implementing public beneficial ownership registries.

Second, increased beneficial ownership transparency will help law enforcement agencies detect crime and pursue criminals. In 2016, the Financial Action Task Force wrote:

Despite corporate vehicles and trusts posing a major [money laundering] and [terrorist financing] risk in Canada, [law enforcement agencies] do not investigate many cases in which legal entities or trusts played a prominent role or that involved complex corporate elements or foreign ownership or control aspects.

Determining the beneficial owner behind a corporation often poses an insurmountable problem for law enforcement agencies, yet anonymous companies are frequently at the heart of corruption and money-laundering schemes. A World Bank study of over 200 cases of grand corruption found that 70% included an anonymous shell company. Furthermore, the UN Office on Drugs and Crime estimates that between $800 billion and $2 trillion U.S. is laundered each year. Improved beneficial ownership transparency is critical to effective investigations involving corporations. This is likely why beneficial ownership transparency has, internationally, been supported by law enforcement bodies.

Third, under Canadian anti-money laundering laws, financial institutions, and other professions such as real estate agents, casinos, and accountants are required to exercise “know your customer” due diligence and report suspicious transactions to authorities. They are not just on the front lines of crime detection, but in many transactions, represent the best, or only, opportunity available for the state to detect suspicious activity. Banks and others are required to ask companies if they are representing third parties, but currently, there is no mechanism for them to verify beneficial ownership information and properly fulfill their due diligence obligations.

For banks and other professions, failing to fulfill anti-money-laundering obligations can result in regulatory fines and reputational costs. This has been seen in other markets, with HSBC, BNP Paribas, Raymond James, and others facing steep fines for violating anti-money laundering rules. Just recently, closer to home, FINTRAC fined an unknown bank $1.1 million for failing to report a suspicious transaction.

A central registry will allow financial institutions and other professions to fulfill their anti-money laundering obligations in a more efficient and less costly manner.

Fourth, beneficial ownership transparency will help mitigate business risk and create a better business climate by enabling those transacting with corporations to know with whom they are really doing business, who the real person is behind the corporation. The CBCA, in allowing for the creation of limited liability companies with separate legal personalities has the benefit of encouraging people to create businesses. At the same time, it actually increases business risks.

While limited liability protects shareholders and business owners from risking their personal assets, it also limits the pool of money available to creditors, employees, and others if the business should run into trouble. In 2015, there were over 4,000 insolvencies filed by Canadian businesses, amounting to net liabilities of over $5 billion, which have to be borne by unpaid creditors and unpaid employees. Creating public access to legal and beneficial owners of corporations will allow companies and financial institutions to know with whom they are really doing business, thus allowing them to reduce risk and make better business decisions.

Despite the numerous benefits, Canada has not joined the global efforts to address beneficial ownership. Instead, we have accepted the risks posed by an opaque system. This must change.

By accepting the amendments proposed by Publish What You Pay Canada, the federal government will demonstrate international and domestic leadership and ensure that Canada is not a magnet for tax evaders, money launderers, and those who finance terrorism.

Thank you.

[The Chair, Liberal, Dan Ruimy]

We have witnesses here, and we're going into the realm of debate while we have witnesses here. I still fail to see the relevance to Bill C-25, which is why we're here and why we have witnesses here.

After we're done with our witnesses, we do have time later on to have a debate about it. In so far as relevance to Bill C-25 and the fact that we have witnesses here, I'm failing to understand where we are with this today right now at this point.

[The Chair, Liberal, Dan Ruimy]

Does this have something to do with Bill C-25?

[The Chair, Liberal, Dan Ruimy]

Welcome everybody to meeting number 48 of the Standing Committee on Industry, Science and Technology. We are continuing our fine work on Bill C-25.

Today we have with us Claire Woodside, director of Publish What You Pay Canada, and Mora Johnson, barrister and solicitor. From the centre for women in politics and public leadership, we have Clare Beckton, executive director.

We're just going to move right into it. You each have 10 minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you.

Bill C-25 makes three key reforms to the process of electing corporate directors. Shareholder participation is more than just voting. How will shareholders benefit from increased clarity and transparency?

Matthew.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much to all the presenters today. It was very informative.

My first question is a question that I've asked of staff, I've asked of the minister, and I'm going to ask you. How will Bill C-25 support young Canadians' getting engaged in the boards and in the entire work process?

Would anyone care to start?

[Catherine McCall, Director of Policy Development, Canadian Coalition for Good Governance]

Thank you, Stephen.

Thank you, Mr. Chair, and thank you to the members of the committee for asking us to appear before you.

CCGG strongly urges this committee to support and endorse the CBCA amendments proposed in Bill C-25 and to recommend to the House that those amendments be adopted, keeping intact four key governance enhancements.

First is the requirement to hold individual elections for directors. Not long ago it was common for companies to circulate a form of proxy to shareholders where the options presented were to vote for or withhold from voting for a slate of directors rather than for individual nominees. Individual elections for directors are now a listing requirement on the Toronto Stock Exchange; however, nothing prevents this TSX rule from being reversed in the future. Individual director elections are a fundamental matter of good governance and this rule should be set out in statute.

Second is the requirement that a director's term shall end at each annual meeting of shareholders following that director's election. Again, though such a provision is now a listing requirement of the TSX, nothing prevents this TSX rule from being reversed, and we believe annual elections should be set in statute.

The third governance enhancement to be preserved is the majority voting system for uncontested director elections. We consider this to be one of the key reforms of this bill. The CBCA, as you know, currently provides for a plurality voting system. Under such a system, it is not possible to vote against a director. Rather, a shareholder can either vote for or withhold from voting for a director nominee. Withhold votes are, in effect, an abstention, and they do not count. By way of example, a nominee who owns just one share could vote for him or herself and still be elected. We know of no principled reason why this system should remain. The election of directors is a fundamental right of shareholders, and as such, they should have the ability to cast a meaningful vote either for or against a nominee.

Earlier, Matthew referred to the current TSX listing requirements that companies adopt a majority voting policy. We believe this is an inadequate workaround for a number of reasons. First, again, it could be reversed by the TSX, and second, it only applies to TSX-listed companies and not to the approximately 1,500 venture companies that have access to the public markets. Access to those markets comes with accountability, and the requirement that directors be able to be voted against is not an onerous requirement. I think that even venture companies should be accountable to shareholders.

There have been examples. Even companies with this majority voting policy have ended up in the situation of what are known as zombie directors, where directors that have not received a majority of the votes in favour are kept on by the board. We think that is unacceptable.

Finally, Bill C-25 should retain the comply or explain regime for board diversity, both the gender diversity and the forms of diversity other than gender, as proposed in the regulations. CCGG supports efforts to improve diversity. We have stated for many years that public companies should be composed of directors with a wide variety of experiences, views, backgrounds, and expertise that, to the extent practical, reflect the gender, the culture, the ethnicity, and other characteristics of the communities in which they operate.

Thank you.

[Stephen Erlichman, Executive Director, Canadian Coalition for Good Governance]

Thank you very much.

Mr. Chair, members of the committee, thank you for inviting the Canadian Coalition for Good Governance, colloquially referred to CCGG, to present to you on the topic of Bill C-25. My name is Stephen Erlichman. I'm the executive director of CCGG. With me is Catherine McCall, CCGG's director of policy development.

Before I provide my remarks, let me say a few words to introduce CCGG.

The coalition was founded in 2002 to promote good governance practices in Canadian public companies whose shares are owned by our members. CCGG's members include a wide range of institutional investors, primarily pension funds and third-party money managers, that have an aggregate of approximately $3 trillion in assets under management. Millions of Canadians rely on returns from these investments to fund their retirements. A full list of CCGG's members is available on our website at ccgg.ca.

The coalition is widely recognized in Canada as a thought leader in corporate governance. We are regularly consulted by governments, regulators, and stakeholders for our views. Just yesterday, we intervened at the Supreme Court of Canada in the Livent case because of certain issues we believed were very important in the corporate governance context.

When we last appeared before this committee in 2009, we recommended many of the changes that are in Bill C-25 relating to the governance of public companies under the Canada Business Corporations Act, colloquially referred to the CBCA. We are pleased to return today to offer further comments and suggestions. At the outset, I note that all our recommendations relate to part 1 of Bill C-25, which concerns amendments to the CBCA. In particular, we are concerned with provisions that apply to distributing corporations, the term used in the CBCA for public companies.

To begin, my colleague, Catherine, will address the key provisions of C-25 that should be maintained going forward. Later, I will review recommendations for further improvements to corporate governance under the CBCA.

Catherine.

[Professor Aaron Dhir, Associate Professor, Osgoode Hall Law School, York University]

Thank you, Mr. Chair.

I'm grateful to the committee for the invitation to join you this morning. It's an honour to appear and to share my thoughts on the bill, in particular on the aspects that relate to diversity in the boardroom and the executive suite.

By way of background, I am a law professor at Osgoode Hall Law School and currently a visiting professor at Columbia Law School. I teach and research in the areas of corporate law and corporate governance. Over the last several years, I have focused my scholarly work on the topic of regulatory approaches to diversifying corporate governance.

In my recent book, titled Challenging Boardroom Homogeneity, I study the two main forms of regulation that have been adopted internationally: quotas, which require specific degrees of gender balance in boardrooms, and disclosure regimes, which ask firms to report on diversity levels and practices.

Bill C-25, as we know, proposes the latter, a disclosure-based approach. The need for government intervention in this space is pressing. Using gender as an example, as both Matthew and Tanya have mentioned, the CSA released a report just last year after surveying 677 issuers listed on the TSX. They found that women hold only 12% of these companies' board seats, and that was an increase of just 1% from the previous year. Strikingly, 45% of issuers had no women at all on their boards.

The reality is that in Canada we currently trail a number of other developed economies. With that context in mind, I'd like to offer thoughts on what, in my view, the bill does well and what can be improved.

What does the bill do well? The bill and the draft regulations, as we know, import into the CBCA disclosure requirements that have already been in place for just over two years in most jurisdictions under provincial securities regulation. The bill would require all CBCA distributing companies to report on the gender composition of their boards and their management teams, and on the details of their diversity policies and considerations. All of this would be done on a comply or explain basis. This is certainly a positive development.

In the course of writing my book, I reviewed every diversity-related disclosure provision that exists internationally. In my view, the current rule is certainly among the best, both in terms of the level of information that it requires and in terms of its focus, which is the entire governance ecosystem of the board and the executive suite, not just the board in isolation.

The proposed regulations then go a step further than the existing rule by also requiring companies to report on forms of diversity other than gender. This development has the potential to be an improvement on the rule currently in effect, and that leads me to how the bill can be improved. I have two suggestions.

First, I'd like to return to the conversation that took place in the committee on Tuesday when Minister Bains appeared. During a very thoughtful set of exchanges, both Mr. Masse and Mr. Arya emphasized the importance of defining “diversity”. In Mr. Masse's comments, there was a skepticism that “market forces” alone can be relied on to reach the legislation's goals. I support these sentiments.

As it stands, the draft regulations do not define the term “diversity” other than gender, and that, in my view, is a serious omission.

Why do I say that? In 2010 a diversity disclosure rule went into effect in the United States. Under it, the U.S. Securities and Exchange Commission requires publicly traded companies to report on whether they consider diversity in director appointments, and if so, how, but the SEC made the conscious decision not to define the term “diversity”. Similar to Minister Bains' comments on Tuesday, the SEC reasoned that diversity can mean many different things and that companies should be given maximum flexibility to express their commitment to diversity in the broadest sense possible.

How did corporate America respond? In my book, I analyzed the disclosures that the S&P 100 submitted to the SEC during the first four years of the rule. My most striking finding is this. While almost all companies complied with the rule by disclosing that they do consider diversity, only about half actually define diversity in terms of gender, race, or ethnicity. Firms, when defining diversity without sufficient regulatory guidance, prefer to focus on a director's prior experience or skills, rather than his or her socio-demographic characteristics.

Minister Bains expressed the view that diversity isn't about checking a set of boxes, that it goes beyond traditional identity-based factors. I understand this view, but I would also like to invite the committee to think about it another way. It need not be an either-or situation. It's entirely feasible to allow companies to discuss diversity in the broadest sense, while at the same time making it clear that disclosures must also include information on identity-based characteristics, such as race, ethnicity, indigeneity, and so on.

A definition of diversity could be drawn from existing federal sources, such as the Employment Equity Act or human rights legislation.

Of course, gender equality is of the utmost importance, and we must move beyond Canada's male-dominated leadership structures. At the same time we have an opportunity to consider the importance of a more holistic diversity, a diversity that includes other characteristics, and this is particularly important given current demographic trends. For example, the city of Toronto is home to more head offices of the leading 500 revenue-generating firms than any other large Canadian metropolitan area.

To use the term of current federal legislation, Toronto is comprised of almost 50% visible minorities, and Statistics Canada projects that groups falling into this category will make up to 63% of Toronto's population by 2031. Yet a recent study by the Canadian Board Diversity Council suggests that the percentage of directors from racialized groups is actually decreasing as compared with previous years, with these persons occupying just 4.5 % of board seats in the FP 500. Can it really be that in a population the size of Toronto's there is such a dearth of qualified racialized candidates?

My second suggestion relates to the importance of data collection and monitoring. If a goal of C-25 is to diversify corporate leadership, we cannot assume that the passage of a disclosure rule, in and of itself, will necessarily achieve this objective. If the provision passes, we should think of it as more of a working hypothesis than a foregone conclusion.

On that front, it is essential that the federal government monitor the disclosures and the explanations, and that it work with other agencies, such as the provincial securities commissions, to track levels of representation year over year.

I want to return to that CSA study from last fall. As we've heard, the number of women on boards increased from 11% to 12%, and only 21% of issuers reported having a policy on the nomination of women directors. At first, those numbers didn't surprise me. I thought to myself that issuers reasonably need time to adjust to the new rule and the information that it requires, and also, there's a waiting game. Since only about 20% of firms have director term limits, women won't have the opportunity to join boards until existing directors retire.

But then, the chair of the OSC announced that in fact 521 board seats had become available in the previous year, and just 15% of those vacancies, i.e., 76 seats, were filled by women. That is a troubling statistic, and we have to ask ourselves why the numbers are as they are.

Social science research tells us that we all have a tendency toward unconscious bias, in particular the assumption that men are more effective leaders than women. The work that we're asking the law to do here is really to help shift existing social norms and biases, but the law's ability to do this depends on how strong the existing norms and biases are. In this case, they are deeply entrenched, and it may be the case that for the law to be effective in shifting norms, the law itself has to be equally potent.

That is why, while I certainly support tracking the data, and allowing the comply or explain regime the time to work, I also think that the government has to at least begin a conversation on the potential use of more prescriptive forms of regulation, while being mindful of the fact that they may soon become necessary.

Those are my thoughts, and I really look forward to your questions. Thanks so much.

[Tanya van Biesen, Executive Director, Catalyst Canada Inc.]

Thank you, Mr. Chair and committee members. It's a distinct honour for me to be here today to represent Catalyst Canada.

Our goal as a non-profit organization is to help businesses around the world to build workplaces in which women and men of all backgrounds have equal opportunities to succeed. I'll be focusing my remarks from the perspective of working with organizations to close the worldwide gender gap in leadership, wages, and opportunity. I do so in the hopes of providing further context for your deliberations on Bill C-25 and specifically addressing the section of part 1, requiring corporations to provide information respecting diversity among directors and their members of senior management as it pertains to women's representation on boards and in senior leadership.

Let me start with a very simple point. What's good for women is good for business. I say this because the issue of gender parity on boards is driven not simply by questions of fairness and equity. This is an issue that speaks directly to Canada's ability to compete and flourish in a global economy. How effectively Canadian businesses leverage diverse talent, starting with women, will be critical to our long-term competitiveness. Achieving gender balance on boards and throughout the executive ranks is widely recognized as a global economic imperative. Furthermore, there's a strong business case for having more women on boards and in senior leadership. Study after study has shown that having more women on boards and in senior leadership on average improves organizations' overall financial performance, enables them to better serve their customers, and allows innovation to flourish. Research from Catalyst and the Harvard Business School has found that companies with more women in leadership also tend to have a stronger commitment to corporate social responsibility.

There's some good news around the issue of women's representation on boards. It's fair to say that the conversation about women on boards in Canada has shifted in an encouraging direction in recent years. The dialogue no longer focuses on why we need more women at the table, but rather how we can accelerate progress. Furthermore, the introduction of “comply or explain” securities law rule amendments, which have now been adopted by almost all jurisdictions across Canada, and the introduction of the legislation we are discussing today are positive, encouraging, and exciting steps forward.

The issue is firmly on the radar. However, the reality is that we are still a long way from reaching parity, which is the ultimate goal. Unfortunately, the pace of change continues to be frustratingly slow. For example, the Canadian Securities Administrators' recent review of comply or explain showed little or no progress for women on boards and in senior leadership positions. It found that only a small percentage of companies had adopted written policies for improving diversity on boards, and it showed that almost half, 47% to be specific, of all TSX-listed issuers have zero women on their boards.

Additionally, as recently as last October the Washington-based Peterson Institute for International Economics reported that men still hold 86% of executive positions in Canada and 93% of board seats. Clearly work remains to be done.

Turning to the “how” with regard to advancing women into leadership positions, the central question to consider is what instruments will most effectively bring about change? Catalyst Canada research suggests that more than a decade of raising awareness, leadership for many prominent business leaders and organizations, and women knocking on the doors of boardrooms have had little impact. Bold action is required to accelerate progress for women on boards. Governments and businesses continue to engage in discussions about the best way to increase women's representation on boards. Around the world there are numerous efforts taking place, from legislative quotas to regulatory actions to voluntary pledges or targets initiated by companies.

Our recent report entitled “Gender Diversity On Boards In Canada: Recommendations For Accelerating Progress”, which was commissioned by the Government of Ontario, looked at the various approaches and their effectiveness. The experience of Norway, which implemented gender quotas for board directors in 2003, tells us that legislative quotas have definitely moved the needle in that country. Other countries, including the United Kingdom and Australia, have chosen mandatory disclosure and transparency in diversity policies for public companies similar to what the bill we are discussing today puts in play. In Australia women's representation shot up from 10.7% in 2010 to 22.7% in 2016, and women comprised 34% of new appointments to ASX 200 boards in 2015.

In the U.K. women's representation on FTSE 100 boards has more than doubled from 12.5% in 2011 to 26.1% in 2015. Thus, these types of policies are certainly an option or interim step for Canada to consider, eliminating protracted debates about the issue of quotas and focusing instead on the policies, practices, and outcomes of the board selection process.

Ultimately, Catalyst believes there's no one right way to accelerate progress for women on boards. What matters is intentional action and the commitment to setting goals and making change. That's why in the same report I just cited, we made 11 recommendations for companies, business leaders, and governments to drive change.

Among these are that TSX-listed issuers set 30% targets for women board directors by 2017 and achieve them within three to five years, that they use at least one mechanism to facilitate board renewal, and that they establish written policies to increase the representation of women on boards. Also, we recommend that governments reinforce the setting of the targets, renewal mechanisms, and written policies; that they track and publish progress; and that they set a minimum goal of 40% for their own agencies, boards, commissions, and crown corporations. In addition, Catalyst recommends that more stringent legislative or regulatory approaches be considered if progress is not made, particularly toward the 30% target.

These recommendations are based on the following. First is the new five-year historical trend data conducted in partnership with the Rotman School of Management, which shows that issuers with more board renewal—be it board term limits or written policies stating they are considering women when recruiting for new board positions—have more gender-diverse boards than those that don't. Second is a review of best practices, learnings, and key models adopted by governments around the world. Third is Catalyst's expertise, which has been gained over 50 years of conducting groundbreaking research to measure and diagnose talent management gaps and developing programs for organizations to leverage top talent and accelerate the advancement of women and inclusive workplaces.

Government policies mandating companies to report the types of actions they are taking to address board and senior management, as well as explaining why they may not have policies in place, force companies to address the issue. They can also provide best practices or proof points for other organizations to implement.

One proven solution is sponsorship, the act of support by someone appropriately placed in an organization who has significant influence on decision-making processes and advocates and fights for the advancement of an individual. The Catalyst women on board program demonstrates the impact of sponsorship. The program pairs a CEO or board chair with a senior executive woman who aspires to board service, for a two-year partnership. The mentor sponsors provide valuable advice and counsel, and critically, introduce the women candidates to their network of sitting directors. Since the program began almost 10 years ago, almost 60% of program alumni have been appointed to corporate boards, and over 130 Canadian companies have appointed “women on board” participants to their boards.

Another proof point can be found in the Catalyst accord. The accord is a call to action for Canadian companies to increase the overall proportion of the FP 500 board seats held by women to 25%. Since the launch in 2012, 86% of the accord's signatories are at or above the 25% goal, including several at 30% or higher.

At the end of the day, while the means to increase women's representation may vary, the key is that it gets done and gets done quickly. Until women achieve parity in business leadership roles in Canada, they will be marginalized in every other area.

Thank you for your attention.