Industry Committee on Feb. 9th, 2017

[Prof. Wendy Cukier]

Sorry.

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

I think I should say, just for full disclosure and just so you know, that both counties I represent do have an immigration task force with their economic development.

[Prof. Wendy Cukier]

Perfect.

Thanks.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move on to Mr. Jowhari. You have five minutes, please.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Good morning, Mr. Chair.

Thank you to the witnesses for coming.

Before I start, I'd like to go on the record by saying that having spirited discussions in the committee is part of our job. I thank you for coming and for the detail provided and for allowing us to be able to ask the questions that we may not be able to ask once we are reading the bill. By no means does that mean that we will opposed this bill. When it comes to the House, I personally will be supporting this bill.

I'd actually like to borrow some of the comments from both Mr. Schneider and Wendy. That will frame the question that I'm about to ask.

Mr Schneider, I heard you talking about the availability of a “broader and deeper” selection pool of board members, which lends itself, I think, to the broader definition of “diversity” that we've been discussing.

Wendy, I heard from you that it's not a question of the pool anymore, but a question of intention, which is great. It gives us a way forward, which means that, based on well-defined selection criteria, there is enough talent in the pool for us to really expand the base of diversity.

Those are great. You also talked about targets versus quotas. As a former engineer and an alumnus of Ryerson, again, I welcome you. It's great to see that Ryerson is representing itself in many other aspects in our government.

You also talked about the criteria of the director qualification and developing the pool. Now, once again as a former engineer, I believe that we set targets or quotas; we also put robust tracking, rigorous evaluation, and transparency in place. One of the concerns that I have was the fact that there is no mechanism in place to be able to assess the impact of this legislation, and this is one of the concerns that you raised in the article you wrote called “In Montreal, leadership diversity remains a work in progress”.

Can you please give us some idea of what mechanism you would suggest? Also, you had indicated there is no penalty regime. What would you recommend as a penalty regime?

[Prof. Wendy Cukier]

I want to first say that I appreciate your comments, and absolutely, evaluation and accountability are critically important.

I want to quote from the minister. He said, “We want to send a clear signal that diversity is important, but in a few years, if we don't see progress...if we don't see meaningful results—then we will re-evaluate our position and look at all other options at that time.”

To me that signalled the intention to ensure that there was evaluation built in. The only amendment that we were proposing was to proposed subsection 172.1(2). We suggested that in addition to saying that the corporation shall concurrently send the information to the director at the same time they send it to the board, we add “and it will be published on an annual basis”. I'm a big believer in transparency driving accountability and action. They often say “What gets measured gets done.” I believe that companies are concerned about their reputation, but more importantly they're concerned about their markets. If you look at the changing markets in Canada, these issues are becoming more important beyond gender—

[Majid Jowhari, Liberal, Richmond Hill, ON]

Sorry, but I'm going to interrupt you.

My focus is on evaluation. We are leaving the concept of diversity open, which is great. We are also not putting criteria. We are proposing a target that is arbitrary for different organizations. How do you evaluate that they're progressing to where we want them to progress? In three years, when we come back, we say, “Have they progressed well, or not?” I'm talking about that evaluation.

[Prof. Wendy Cukier]

Compare plan to actual is one of the simplest ways to do it. Again, to some of your colleagues' points, we're not talking about all companies hitting 40% or 25% or whatever.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Then you're saying to set a target, and then measure and evaluate based on that?

[Prof. Wendy Cukier]

You look at the numbers, but you look at the qualitative issues as well—which for engineers sometimes are not on the list—around the kinds of policies that they have in place. If you publish that information, organizations like mine will identify the leaders and the laggards.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We are going to move on to Mr. Nuttall.

You have five minutes.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here today.

My first question is for Wendy.

One of the things you outlined—I believe it was in a back-and-forth with one of our colleagues across the way—was regarding targets. On Tuesday, I actually brought up this exact item.

I come from the private sector. Everything I do in the private sector has targets. You set something that's reasonable, rational, and attainable, and you set a path forward to your board of directors, etc., yet in government, it never, ever happens. Can you outline what types of targets you would like to see set with regard to diversity?

I think there are two pieces to diversity. I may be oversimplifying it, but for the sake of my intelligence, I'll do that. The first one is diversity in terms of the participation of women on boards, and the second one is diversity outside of what I'll refer to as the WASPy Bay Street that exists. For those two, could you set what you believe would be fair and rational targets for me at this point?

[Prof. Wendy Cukier]

Sure. Again, the way the employment equity legislation works in forcing federally regulated companies and contractors to set targets is reasonable.

You look at the pool. If you're a university, you're going to be looking at one pool—your students, or the pool of people with Ph.D.s—and you're going to think about entry-level positions, administrative positions, and so on.

The same applies in the corporate sector. If you're a smallish private company in Chatham, you're going to have one labour market pool if you're an engineering firm and a different pool if you're an agricultural products company or a retailer.

Looking at the pool is critically important, in terms of both your customer base and your employee base, to establish what you should reasonably be seeing at the most senior levels. Boards of directors are supposed to provide external input to companies, so you have to have boards of directors that represent the outside world as well as the inside world.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Looking at it from a macro level, there are going to be different labour markets, different places. There are going to be all of those issues. From a macro level in Canada, we would say.... We're at a certain percentage today. I'm not even sure we got an answer on Tuesday on that, but I think roughly 10% of the positions in publicly traded companies are held by women, for instance. What is the target, through this legislation, that you would put on it? Obviously you can't set the target in it, but what would you want to see the government set as a target through this legislation?

This legislation is not going to go from 10% to 50%—we know that—but what is a rational target that we should be putting in place to measure its success? If we aren't measuring the success of it and putting a practical plan in place, then I'm not sure why we're sitting here doing these hearings.

[Prof. Wendy Cukier]

Thank you very much for that question.

I think target setting has to be consultative, so you're going to have to talk to some of the key stakeholders.

If you look at the legislation in Europe around women, for example, where they have quotas, it's typically between 30% and 40%. Over a period of time, it seems to me.... We know that some companies have hit those targets, and we know that some have.... The stat I remember is that half of the largest publicly traded corporations in Canada have no women on their boards. It seems to me that overall, a target somewhere over 30% and under 40% over the next five years probably makes good sense, off the top of my head.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We are now going to move to Mr. Longfield. You have five minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks, Mr. Chair.

Thanks to everyone who has joined us in person and on screen.

I have a question in regard to distinguishing governance through laws versus regulations. On comply or explain, I think we'd have some explaining to do in terms of our own governance. It's great to have MP O'Connell sitting beside me. Finally we have a woman sitting on our committee. This committee itself doesn't have diversity in terms of gender—or age, when it comes right down to it.

The legislation is being set up to give some very firm direction, and then regulations are more nimble in terms of the pool and so on. Could you talk to us a bit about governance and what role legislation should play, versus regulations?

[Prof. Wendy Cukier]

Thanks very much.

You know, it really depends. In some laws, for a whole variety of reasons, a great deal of specificity is built into the legislation itself, and there are lots of reasons people do that. When you distinguish between the legislation as a framework and the regulations, you do build yourself more flexibility around adapting and adjusting and so on.

I read the comments of the minister as saying that we're going with a rather flexible model at this point in time. We believe in the good faith and intelligence of our corporations to let them see where their best interests lie, and their best interests lie in embracing diversity. We are looking at the strategy of comply and explain, but make no mistake about it: if we don't see progress, we may look at something else.

I do think that because this is a very broad piece of legislation, it does make sense to try to provide a framework. The risk, of course, is that if you have changes in government, it's really easy to change regulations and move in a different direction. The way the legislation is written—as I said, with some language I would like to see around transparency, accountability, and reporting baked in—does allow the flexibility and the time that is needed to get this right. I know you have a lot of people very anxious to get this through, for a whole variety of reasons.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

Mr. Schneider, I'll go over to you.

I've sat on the boards of multinationals. The first one I sat on was a U.K.-based company. I was the managing director in Canada. They reported on a variety of things, including environmental practices and diversity practices. They had regulations that I had never seen in Canadian companies, but they weren't legislated to do so; it just made good business sense. Could you comment on the success of businesses operating as B corporations, or extended reporting that isn't required in legislation but is just good business practice, versus what's in legislation?

[Paul Schneider]

We've always taken a view that regulations really form the minimum standards. If you look at our proxy voting guidelines and our corporate governance principles, which are available on our website, and look at what we're doing there, you'll see that we're asking for things beyond the regulations.

One focus for the upcoming year and for the past number of years is asking companies more about their approach to climate change and other environmental and social issues. How is the board managing that? What sort of oversight is in place? How do things get percolated up to the boards? We're asking a lot of questions around things that are not necessarily in the regulations, but they're becoming more.... And we're not the only ones asking. It's not necessarily a regulation, but it's an expectation.

[Lloyd Longfield, Liberal, Guelph, ON]

You mentioned the voting down of a director. I was on a board on which we forced diversity onto the board. It turned out the person didn't show up for meetings and really wasn't participating, and we couldn't get rid of the person. Could you make an extended comment on that?

[Paul Schneider]

Are you saying that the person was...?

[Lloyd Longfield, Liberal, Guelph, ON]

The person wasn't fulfilling the role of a director, but we couldn't get rid of them.