Evidence of meeting #45 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was board.
A recording is available from Parliament.
President and Chair of the Board of Directors, Transparency International Canada
Okay, the privacy element on beneficial ownership on corporate shares, to our mind, is a red herring. We're not asking people to divulge how much they make or how much things are worth or what their net value is. It's very basic tombstone information. People who own 25% or more—that's the U.K. standard—divulge their interest in a company. That's it. Then there's very basic identifying information about the individual so it can be known who is behind a company. It's not SIN numbers or driver's licence numbers.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
I understand that, but I'm asking you to give me one instance of something technical that will be beneficial because you've divulged it to the public and not to the government. I understand that, but give me something specific that's going to come out of that.
President and Chair of the Board of Directors, Transparency International Canada
Sure. I talked about it in my remarks, due diligence and “know your client” obligations that are incumbent upon, among others, financial institutions that under our anti-money-laundering legislation have all kinds of obligations to know who they're doing business with.
Having a registry of that nature will enormously facilitate doing that due diligence, doing those “know your client” exercises, and will allow financial institutions with that kind of regulatory obligation to carry out those exercises and validate what's being told them by their new customers. There are others, but I'll give you that example.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
That's fine. We're going to move on to Mr. Schneider, but they already have those forms so that you can divulge that when you're going to do business with them, and again, it's done in private.
Mr. Schneider, the teachers' pension has a different view on that question of ownership transparency. You're satisfied with where it's at right now. Could you explain that?
Head of Corporate Governance, Public Equities, Ontario Teachers' Pension Plan Board
From our perspective, we have the option in Ontario to be what they call an “objecting beneficial owner” and can remain private from the company. That's something that is offered in the Statutes of Ontario.
As long as we have that available to us, we will take advantage of it, for the simple reason that we are sensitive about any strategic investments that we're making. We may jump into a company because our analysis states that maybe we think it's not doing well now, but it has set up a lot of things that others are missing, so we can get in at a lower cost, and then hopefully work with management—
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
Therefore, divulging it to the general public might have an impact on the shares. It could have secondary impacts in other ways.
Head of Corporate Governance, Public Equities, Ontario Teachers' Pension Plan Board
Yes. From our perspective right now, it could have a lot of people jumping in as we get in, and then—
Liberal
Head of Corporate Governance, Public Equities, Ontario Teachers' Pension Plan Board
On the price of it, yes. People will think that if Ontario Teachers' is doing it, then why shouldn't they?
Head of Corporate Governance, Public Equities, Ontario Teachers' Pension Plan Board
It's our competitors as well. Investing is a bit of a competitive game.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
I understand that, and if you had to divulge it privately to government, would you have a problem with that?
February 9th, 2017 / 9:50 a.m.
Head of Corporate Governance, Public Equities, Ontario Teachers' Pension Plan Board
I can't comment on that. I'd have to talk to our legal people.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
Fair enough.
I would just put out on the record that if you're serious about dealing with corporate crimes, you don't need to divulge it publicly. You're trying to surmount a mountain that's not necessary, and moving into people's privacy. Everything that you've mentioned today can be done in private to divulge it to the government, and I think that's something that Transparency International Canada should consider.
Liberal
The Chair Liberal Dan Ruimy
Thank you very much.
We're going to move to Mr. Lobb. You have five minutes, please.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Thank you very much, Mr. Chair.
With the sounds of this today, maybe some of these Liberal members will be voting against their own government's bill. I don't know. We'll have to wait and see.
My first question is for Mr. Schneider.
I understand and respect what Mr. Masse has to say, and I'm sure you'll have a lot of comments for Minister Bains when he appears, as will I. I understand your job isn't to defend or promote the Liberal bill. You're here to give your thoughts on it.
There is one question I wanted to ask you regarding the rules around the voting for boards of directors. Let's forget about diversity and all that just for a second, and let's just focus on the mechanics of it. I'm curious about one of the unintended consequences that could be in this. For example, a lot of what the Ontario Teachers' Pension Plan and the Canada Pension Plan Investment Board and Borealis would invest in, such as small start-up software companies or high-tech companies, will eventually go public in whatever market they decide to go public in. Could an unintended consequence of this structure be the election of the boards and board takeovers for these companies as soon as they go public? Could this be an unintended consequence of this bill?
Head of Corporate Governance, Public Equities, Ontario Teachers' Pension Plan Board
Looking into the future, I guess that's possible. I'm not sure.
I can only speak for Ontario Teachers' as to how we exercise a director vote. We take a lot of care when we do that vote. We voted against directors, I think, around 3% to 5% of the time in 2016. There are a lot of steps that go in before that as well. There's engagement with the company, as I mentioned. As I say, we don't take the vote lightly.
There may be some mechanisms put in place to protect against that. I'll admit it's not out of the impossible. I would say it's more improbable, because if you look at the majority voting around the world—you look at the U.K., Germany, France—they don't have these problems of failed boards of small companies, and they have had majority voting for years and years.
Conservative
Conservative
Ben Lobb Conservative Huron—Bruce, ON
I have a question for you. I think maybe it was previously answered that these are targets or aspirational goals, so I wanted to ask you.
The area I represent is very rural. I would say probably 99% of the people are white. This area I represent wants to be diversified too, but what do the rural boards for small corporations in my area do? Is this an aspirational thing that they should pursue as time goes by? They are not going to be criticized because they can't meet a certain mandate, but you're saying as long as they are open and not rejecting a qualified candidate, you would support a company such as that.
Prof. Wendy Cukier
Absolutely. There is such an important distinction between quotas and targets. I think a lot of the discussion around this has been fuelled by European examples.
You have probably heard from some women's organizations that are very keen on having quotas based on European experience. The problem with the European experience is that they have no indigenous populations to speak of, except in a few countries, and immigration is a relatively recent phenomenon, especially from racialized countries, so I don't think using the European experience is helpful.
To your point—please tell me what community you're from.
Prof. Wendy Cukier
One of the things that has come up in work that I've done in eastern Ontario is that there are small communities there that want to attract immigrants, for example, in order to drive economic development. They are looking at ways to set up succession planning in small local businesses because there aren't enough people to take over the local plumbing company, restaurant, bed and breakfast, or whatever, so there are arguments to be made even in rural communities.
There are also some big success stories on the east coast, where if you can attract more immigrants and therefore probably more racialized people, you will actually drive more economic growth.
I don't think the issue of racial diversity is necessarily irrelevant. However, we are talking about targets, and we're talking about setting targets in contexts that make sense. If you're in Winnipeg, for example, indigenous representation on boards is likely to be more important than in other areas. We have to be sensitive to this, but I really feel that the conditions in Canada have advanced very quickly in ways that were perhaps not anticipated by some of the groups that have been advocating for gender diversity.
I want to defend my friend a little bit, I think.