Industry Committee on Feb. 9th, 2017

[Paul Schneider]

The diversity policies typically—and they're more in the western countries, such as a number of countries in Europe—are really focused on the gender issue. For example, you have Norway with a policy of 40% women on boards, and in other countries I believe Germany's putting one in—

[Chandra Arya, Liberal, Nepean, ON]

So basically our aim is to go beyond what has been achieved in the European countries.

[Paul Schneider]

Yes. If you go beyond gender, you will be....

[Chandra Arya, Liberal, Nepean, ON]

Do you believe that diversity has to be defined in the regulations so that it is easier for the corporate sector?

[Paul Schneider]

I think, yes, they would be looking for our direction. I hesitate to define it too narrowly, because my experience is that a lot of times they will say, “This is what you say; this is what I'm going to do; I'm not going to do anything else.”

[Chandra Arya, Liberal, Nepean, ON]

Basically, if it is not defined, at least a direction has to be shown in the regulation for the corporate sector.

[Paul Schneider]

From my experience in looking at corporate disclosures and rules and regulations, my recommendation would be to make it broader. Yes.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move on to Mr. Dreeshen. You have seven minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair, and thank you so much to the witnesses.

These are very interesting discussions and perhaps, Wendy, if you don't mind, I will go through some of the things you said.

I spent some time formerly with the committee on aboriginal affairs in northern Canada and had opportunities to meet with aboriginal leaders, and that certainly was an eye-opening experience. Spending some time sitting around the table with them, you realize that the rest of the country could be choosing their CEOs from there, let alone picking folks for boards.

I think that's really where I want to come from, because when we look at what is happening south of 60, we don't see the diverse groups, the aboriginal groups, going into the pool so that they get the leadership training and can go from there, and I think it's important that we work on that first if the overall focus is to try to get more people there. I think that's where a lot of people might say, “Oh well, you have to have a quota. You have to make sure that you've got people trained up so that they understand.”

I believe as well what you indicated—that once people look at your operation and they see that you have that diversity, the way in which they perceive you changes as well, so I think that's one of the first things. Can you see a way that leadership training could be expanded so that everybody gets that opportunity? If there are some groups that simply say, “You know what? That isn't my thing. We don't do that. We've got four or five people”, that isn't fair either. Could you expand on that for a bit?

[Prof. Wendy Cukier]

Thank you very much for the question.

That's the beauty of setting targets rather than quotas; targets are aspirational.

I think the point you make is so important. One of the challenges—and this applies to women as well as other groups—in the private sector is that a lot of the criteria for leadership, whether it's on boards or within the organizations, are largely based on historical attributes of leaders in the past. If you look at who the leaders were and you think that's what the leaders of the future need to be like, you get stuck in a bubble. One of things that I think is really important is to make sure that you are looking at what the criteria are for effective leadership rather than at images of leaders, which are often defined historically. That's one point.

Your point about developing the pool is hugely important. With respect to aboriginal communities, one of the key things that has to be a fundamental area of focus is improved educational outcomes to build that pipeline into employment, leadership, and so on. That said, if we look at the results around employment equity, we are seeing increasing numbers of aboriginal people making considerable progress. We are seeing evidence in many companies, especially in the west. I was at a conference recently where Husky was presenting, and some of the oil patch companies have been doing an amazing job of setting targets and deliberately reaching out to aboriginal communities in order to build those steps to leadership.

Thank you.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much.

Again, on aboriginal leadership, they own companies, and when you mentioned the word “pipeline” you got me thinking about how many aboriginal communities and businesses are engaged in that, and they aren't part of some other company. They are the companies and they are the ones who are pushing for some major changes in business.

Mr. Schneider, I'll go to you. I'd probably call you by your first name, but we have two Pauls.

I'm somewhat interested in what happens with foreign companies that are operating in Canada when they have their board structure here. Are there Canadian actors who are part of that board? Are they coming in from other countries? If you have a Chinese or German company and they're setting up a structure here in Canada, are we suggesting to them that they have better have diversity on their boards? How does that work?

[Paul Schneider]

From my understanding of the legislation—and I too am not a lawyer—I think the provisions of Bill C-25 would apply to public company boards. If a company comes in and sets up a subsidiary in Canada and the parent company is offshore, my understanding is that they're not a public company in Canada. They're not trading on the TSX and not registered under the CBCA or the provincial BCAs, so I'm not sure that the law would apply to them.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Okay.

To Paul at Transparency International, it's very interesting, and I really want somebody to explain bearer shares and how that works. One of the things you mentioned as well is that it would be important to get the provinces on side and to work with them. I'm wondering if there are any particular pitfalls that we should be aware of when we're trying to coordinate federal regulations with the provinces.

[The Chair, Liberal, Dan Ruimy]

You have about 30 seconds. Sorry.

[Paul Lalonde]

I don't know about pitfalls, but the challenge, of course, is our wonderful federal structure, our Constitution, which provides exclusive jurisdiction to the provinces to do what they want with their companies acts. The federal government doesn't have the authority to force the provinces to change their corporate acts to provide for beneficial ownership transparency, but certainly the federal government could take a leadership role by amending its act and then coordinate with the provinces to see what progress could be made to ensure beneficial ownership transparency at the provincial act level.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We will move to Mr. Masse for seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for being here.

Mr. Lalonde, I view this legislation as nothing more than a tumbleweed. For the last 40 years, it's been kicking around, with only two stops. We have an opportunity here to revise it, look at it, and come up with something pretty significant, especially as the international community, as you well noted, has really moved forward a lot on this and we haven't done so.

How important do you believe this is in terms of being an opportunity to dissuade organized crime from benefiting in Canada?

[Paul Lalonde]

It's difficult to get very hard data on exactly how much dirty money is being funnelled through Canadian anonymous corporations. Most of the evidence is indirect, but if you look at our report, there are a lot of indications that a lot of money is being laundered through Canada through anonymous corporations.

There are enormously valuable real estate assets in Canada whose beneficial owners are unknown and unknowable in our current system. That breeds an environment that is a welcome mat to bad actors, corrupt officials, people who are engaging in money laundering, and drug traffickers who want to park money in a place that's isolated from public scrutiny and regulatory scrutiny. Canada has become a wonderful oasis for those organizations, given the incredibly opaque corporate registry system that we have.

Exactly what the measure of the problem is or exactly how many dollars are represented is unknowable, but all the evidence indicates that it's a big problem.

[Brian Masse, NDP, Windsor West, ON]

I had a bill that would look at the sports betting industry. There's estimated to be a minimum of $10 billion involved with what is taking place in Canada and also in offshore accounts controlled by Canada.

In your best judgment, would there be an impact if we numbered our companies publicly? Would there be either greater law enforcement availability for further follow-ups and further activity or perhaps fewer resources required to track it down, or at least the opportunity to target the worst of the lot that are in Canada?

[Paul Lalonde]

I will say something very quick about that, and then I'm going to ask Monsieur Meunier to chime in as well.

To put it very simply, if you are an RCMP investigator trying to understand who is behind a company or a transaction because you have some evidence that indicates that a numbered company registered, for example, in New Brunswick is involved in some activity that you suspect is improper, getting to who is behind that company for the investigator is extremely difficult. It may even require that investigator to get a court order to compel disclosure by the people who filed forms with the corporate registry.

All of that takes enormous time, takes enormous effort, slows down the investigation, and costs the public purse quite a lot, and the reality is that a lot of investigations die on the vine because it's so hard to get the beneficial ownership's information behind numbered companies.

That's just an initial comment.

[Brian Masse, NDP, Windsor West, ON]

I'm going to have to move on because I'm going to run out of time, but I do want to follow up with more later if I have time.

Mr. Schneider, it is important that I say this. I never miss an opportunity to do so in public. I'm absolutely disgusted by the Canada teachers' pension plan coming before us on diversity on women only. My wife has been contributing to the plan. She's been in Canada for 47 years. She's a teacher. She's a visible minority. Our children have received hate mail at different times because we have a problem in our country.

I'd like to give you an opportunity to explain why it is that diversity would be limited to just women by one of the most significant progressive funds, which has resources from predominantly women, and would not actually include other diversity, especially when we have a statute in law on diversity employment equity that could be the benchmark for this. Is it because we're not capable of further diversity? Why is it limited? I've never had an organization come before us and say diversity is with regard to gender only. I'd like you to be able to explain to your members something that I think is important at this time.

[Paul Schneider]

Thank you for the question.

I think my comments were that gender diversity is a good place to start. We embrace all forms of diversity. We do not limit it to gender diversity, but we think that to get companies and boards and senior leaders to start thinking about diversity, let's talk gender. It is the most evident in a lot of ways.

[Brian Masse, NDP, Windsor West, ON]

It's not. We've heard other testimony, and I'm surprised at your coming in front of us here with the great resources that the teachers' pension plan has. We've heard clear evidence here today. It's not a mystery that visible minorities and persons with disabilities are under-represented by far as well, and that's a fact.

[Paul Schneider]

We support diversity in all its forms. When I talk to a company, I ask them about diversity. When I assess a board of directors for a corporate governance vote, I look at diversity.