Industry Committee on Feb. 7th, 2017

[Mark Schaan]

The corporations in Canada have a number of choices, and there are a couple of distinctions.

One is that they can choose to incorporate provincially or federally, because the commercial power is split between the provinces and the national government. Moreover, there is then, in addition to the securities commissions, a separate power, securities law, which applies to those that are publicly traded and wish to participate in the stock exchange. Incorporation happens either provincially or federally, and then trading of shares happens separately under securities law, under the securities commissions.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thank you for your time.

I just want to let you guys know that I heard the minister is transferring you guys. With all this democratic work, you're now going to the ministry of democratic reform after this bill passes, so congratulations.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move on to Mr. Baylis. You have five minutes.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Good to see you again, Mark, gentlemen, Mitch.

I'd like to understand stuff we didn't look at, which was on insolvency and arrangements. Can you talk a little about that and why you chose not to address anything?

[Mitch Davies]

In particular, using the CBCA to conduct a restructuring of a company was one area where comments were received in the consultation, but there was no clear consensus on whether this should be changed in any way at this point. We're trying to figure out what we would embark upon now, and I think this comes back to the point of what keeps you moving ahead versus leaving the bill static. I think the way you move ahead is you pick up what—

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Okay. You didn't have a consensus on what to do.

Did you do any comparisons with how the Americans do insolvency?

[Mark Schaan]

Obviously our insolvency statutes, the Companies' Creditors Arrangement Act and the Bankruptcy and Insolvency Act, are the primary mechanisms by which insolvency law plays out in Canada, so those laws were also reviewed and a recommendation was sent to this committee, which looked at those recommendations and that overview.

With respect to the relationship between corporate governance and insolvency, by and large our relationship reflects best international practice.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

The Americans have a slightly different tilt on insolvency, in that they're looking to save the company to the detriment, you could almost say, of other stakeholders, such bond holders and shareholders. We don't have that flexibility, which means that our companies are more vulnerable when they're in trouble. That's what I was driving at. We chose not to address that, though.

Say on pay—CEO and executive compensation—was another one. From what I could read, there were arguments on both sides of the coin, but we chose not to deal with it. I'd like to understand why, because from my understanding, many other jurisdictions in the world—the United States, the U.K.—have dealt with some form of say on pay.

[Mitch Davies]

I'll just highlight two considerations among many.

First, yes, there wasn't a consensus, so that was important. Second, where best to address that issue is also important. With respect to what we put forward in this bill, when you look at the comments from the bar, the people who are in this for a living, you see there's a lot of comment about being sensitive to how this works with TSX requirements and securities requirements, being sensitive to how it's playing out at a provincial level, and not creating duplicate or contradictory or different standards, so where and how that issue could best be moved forward is something we have to take into account.

I think a lot of representations are being made to securities commissions with regard to this issue. There are a lot of forceful voices speaking to how this could be evolved. At the moment, that's probably where the debate is playing out.

In this bill the federal government is putting the emphasis on the two matters that I spoke to earlier: first on diversity and—

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Yes, I understand that—

[Mitch Davies]

—its processes, and second—

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

I got that—

[Mitch Davies]

—on the matter of democracy.

Those are the points, I think.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

That leads me to a question about our patchwork of governance, as you just described, Mark.

Is that one reason we didn't tackle some of these problematic issues, such as say on pay? You're saying to me it's a patchwork. We have provincial jurisdictions and different regulators. Would a national regulator have facilitated doing this, if we had that in place?

[Mitch Davies]

I think to get into that would be exceeding my and my colleagues' area of responsibility. It would probably be best to have officials from the Department of Finance come and speak to the federal experience in that significant debate.

I would describe the patchwork as the Constitution, which is not a small matter in the way it was framed. The powers were shared. Commerce power was shared. As a consequence, we have registration at the federal-provincial level and we also have security systems at the provincial level.

I think this is the circumstance we're in. This the country we're in. In each government we try to figure out the areas where we can lead and move forward, each in our own turns, when we look to a decision as to how to proceed.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

When we look to our trading partners—France, the U.K., Switzerland, the United States—they've moved forward with these things. We've been silent on them.

[Mitch Davies]

I would only say that the United Kingdom is a unitary government. It's a much different set-up in terms of the scope at their national level to move forward in those areas. We obviously have a different arrangement in Canada. I wouldn't speak further on it, as it's not in our area of competence.

[The Chair, Liberal, Dan Ruimy]

Thank you.

Mr. Masse, you have three minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Dan Ruimy]

I'm sorry; you have two minutes.

[Brian Masse, NDP, Windsor West, ON]

Oh, jeez, I thought I was going to get away with that.

I'll continue with the say on pay. Canada is actually considered a laggard in that respect. One example is Steinhafel, from Target. I think it was 11 Zellers stores that were operating. They were doing okay, but they weren't exceptional. Zellers was taken over by the owner of a U.S. corporation, a giant that ran them into the ground essentially. He threw out a bunch of workers who had pay and benefits. Zellers was a profitable corporation. It essentially went bankrupt, and he walked away with, I believe, $61 million in compensation from that endeavour.

What is it that makes us different, that we can't have some say in pay with part of this amendment? You were mentioning consensus a lot. Don't they have consensus on gender equity? Some of these boards are in some of the most diverse places in Canada, and they don't actually have diversity on the board, and there's no penalty for it as well. I think that when we're looking at changing a bill only twice in 40-plus years, it's a major opportunity to correct and empower shareholders in a much-changing society. Norway has done it differently from the way we have, as an example. Where do we have an option?

Maybe we don't want absolute consensus on this—I don't know what your definition of consensus is—but what specifically can we do in the immediate and maybe long term to include more say on pay?

[The Chair, Liberal, Dan Ruimy]

We're out of time, but I'll give you a quick reply.

[Brian Masse, NDP, Windsor West, ON]

Sorry.

[The Chair, Liberal, Dan Ruimy]

Give very brief remarks, please.

[Mitch Davies]

My apologies, Mr. Chair, in that a lot of the questions are more of a policy nature and would probably be best addressed to the minister, in terms of the broader question. The space in which this bill is offered.... I think Target, for example, is a provincially registered company, so it's also a question of which company is covered under our statute versus a provincial statute.

I do fully acknowledge that these things need to be updated. I think we need to be current, and it applies to all of our framework laws, so I take that point very well.

Again, as regards the policy question of whether it is going far enough or whether we are doing enough, I would leave that more to the minister.