Thank you very much, Mr. Chair. It really is an honour and privilege to be back here before the committee and to have an opportunity to talk about and address a very important piece of legislation, Bill C-25.
I am here with my deputy minister, John Knubley, and Mark Schaan, director general, marketplace framework policy branch, strategic policy sector, so I am surrounded by some very intelligent individuals who can address any specific and difficult questions.
Bill C-25 covers a lot of important ground. The bill will support efforts to improve diversity on corporate boards and in the senior management ranks of publicly traded companies. It will improve corporate governance. I am delighted that both official opposition parties have expressed support for this legislation.
We have already heard some thoughtful commentary on second reading. Many of you have also heard witnesses who have come before the committee as well, and I look forward to discussing this bill with the honourable members of this committee.
I'd like to begin with a reminder of the context in which we are bringing forward this bill.
Our government is committed to innovation for a better Canada—innovation that will create jobs, strengthen the middle class, and prepare Canadians with the skills they need for the jobs of the future.
As legislators, we have a responsibility to set the ground rules for doing business, and we can create the winning conditions for people and companies to innovate.
Our country is at its most prosperous when everyone has a fair chance at success. Bill C-25 addresses this goal by making important adjustments to the framework laws that govern the Canadian marketplace. These laws set out how corporations are organized, and they also promote investor confidence and a competitive marketplace.
The amendments in this bill will provide the foundation for how Canadian businesses operate in the 21st century, and they will align Canada's framework laws with best practices in jurisdictions around the world. If there is one key objective or message that I could convey about what this bill is trying to accomplish, it is that we truly want to promote best practices in Canada.
The first set of amendments contained in Bill C-25 aims to promote greater shareholder democracy. First, the bill will require corporations and co-operatives to hold annual votes to elect directors. Currently, the law permits directors to hold office for up to three years before a vote is required. Second, directors under the Canada Business Corporations Act will be elected individually, not as a slate or group of candidates. Third, the bill will permit shareholders to vote explicitly against a candidate in uncontested elections. The goal is to ensure that the voting process allows shareholders to have their voices heard in a meaningful way. Additionally, Bill C-25 will improve corporate transparency, eliminate outdated instruments of commerce, and modernize shareholder communications.
These changes will reflect the new norms and practices of a digital economy—I often tell people that now it's no longer the economy; it's the digital economy. The bill increases business certainty and flexibility. It will allow Canadian businesses to focus on what makes them most productive, efficient, and innovative.
Allow me to elaborate on the elements of the bill that address diversity in corporate Canada, because there has been a lot of debate and discussion around this aspect. It's not simply the right thing to do, but it's also good for business. Under-representation of different segments of our population in business is a drag on Canada's bottom line.
Our government places a high priority on innovation to create better skills, jobs, and opportunity for all Canadians. Regardless of one's gender, age, faith, background, orientation, or ability, we want to see every Canadian work to their full potential. In the boardroom, as in life, multiple perspectives can lead to innovative thinking and better performance. As I tell people, good ideas can come from anywhere and anyone. Innovation requires fresh ideas, and research shows that leaders who embrace diversity are more likely to have employees who contribute to their full potential.
Our government is committed to encouraging the full participation of those Canadians who are currently under-represented in the economy. To that end, Bill C-25 will require corporations to disclose to their shareholders the gender composition of their boards and senior management.
They will also be required to make public their diversity policies. Those corporations without diversity policies will have to explain why they don't have one, and that's a key component of this bill as well.
This amendment is aligned with measures that have already been adopted by most provincial security regulators, and it will apply to all publicly traded corporations incorporated under the Canada Business Corporations Act, regardless of which securities regulator they report to.
Some have commented that Bill C-25 does not provide an explicit definition of diversity—I've heard that from individuals, and I look forward to that conversation this morning. That's because our government has made a clear and deliberate choice to understand diversity in the broadest and most inclusive terms possible. Diversity can include a broad range of skills and experience. It can encompass people from all genders, geography, cultural backgrounds, and faiths, or even people with disabilities. Achieving greater diversity on boards and in senior management is an achievable and realistic goal. Take the Canadian Board Diversity Council, for example. It has established an annual list of qualified candidates who are “board-ready”. These candidates have a variety of skill sets, experience, gender, and cultural backgrounds that could be of great benefit to any board of directors.
The objective of this bill is not to be prescriptive or punitive. Rather, the objective is to mandate an open conversation about good corporate governance between companies and their shareholders. It also allows shareholders to hold the board accountable for how it promotes diversity in leadership positions, so it truly also provides an accountability mechanism. Bill C-25 is being introduced at a time when many organizations are already looking to recruit more under-represented groups to the highest levels of corporate leadership, and they're finding plenty of talent to choose from.
If I may digress for a moment, I've had an opportunity to travel internationally and within Canada. I can tell you right now that diversity is our strength. The fact that we have people from different backgrounds available and able to put forward their ideas in a meaningful way, in senior management positions at the board level, is a source of competitive advantage for Canada. For example, the Institute of Corporate Directors, along those lines, has a registry of more than 3,500 who have the skills, qualifications, and training to serve on corporate boards. To make it easier for companies to find the right people, the institute provides a referral service and offers to match companies with suitable candidates. We commend this effort. The story of “Oh, we're trying to promote diversity, but we can't find people with diverse backgrounds” I don't think applies in this day and age.
Some commentators have suggested that Bill C-25 should include gender-based quotas. Our government prefers, as a starting point, to adopt the approach taken by the U.K. and Australia. These countries have been successful in promoting diversity by adopting an approach called “comply or explain”. It requires publicly traded corporations to disclose their gender composition and diversity policies among their executive ranks. If they do not have a policy in place, they are called upon to explain why. That's the concept behind comply or explain. In fact, Bill C-25 is similar to the provisions in the U.K. corporate code, which does not define diversity but specifically includes gender diversity.
Some organizations have proposed voluntary targets to increase the participation of under-represented groups on corporate boards. These organizations include Catalyst Canada and the 30% Club, which promote the advancement of women in the workplace. These organizations are part of a broader movement that includes shareholders, provincial security commissions, and civil society.
In fact, support for this bill has come from the Canadian Coalition for Good Governance, the Ontario Teachers' Pension Plan, and the Ontario Securities Commission, just to name a few. With such broad-based consensus, I'm confident that corporate Canada will rise to the challenge of promoting diversity.
That said, our government's work does not stop with the passage of Bill C-25.
Once the bill becomes law, we are committed to monitoring the level of progress achieved by corporate Canada to promote diversity at the senior-leadership level.
In the event there's no meaningful change in the composition of corporate boards and executive ranks, our government is prepared to review Bill C-25. I've said this in the House and I want to repeat this again this morning as well. We're willing to re-examine the tools we have to be able to see meaningful progress. If appropriate we will consider additional action.
Finally I'd like to address a suggestion raised by some of my honourable colleagues. They suggest that Bill C-25 should address the issue of limiting executive compensation. I heard this again in the debate in the House as well. In 2014 the department held extensive public consultations on the Canada Business Corporations Act to ensure that its governance framework remains effective, fosters competitiveness, and supports confident investment. Over 80 submissions were received from a variety of businesses and legal stakeholders, and a wide set of perspectives was given on the issue of executive compensation, raising a number of complex issues that require further study.
As Bill C-25 covers the items from these consultations where views were most consistent—that was the objective, we wanted to find where there was common ground—the question of executive compensation may be dealt with on a future occasion.
This will allow for a more considered view as best practices and early pilots in other jurisdictions emerge and mature.
My honourable colleagues, our government is committed to growing the economy, creating jobs, and strengthening the middle class. As such we are building the right foundation for an inclusive and innovative Canada. We want to foster new thinking by harnessing the full talent and experience of all Canadians, and we recognize, as I said before, that diversity is our strength.
Bill C-25 ensures that we create the right conditions to keep Canada at the forefront of a global economy, and it will provide a transparent and predictable business environment for firms to innovate and grow.
I look forward to discussing this legislation with you.
Thank you.
