Evidence of meeting #47 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.

On the agenda

MPs speaking

Also speaking

Matthew Fortier  Vice-President, Policy, Institute of Corporate Directors
Tanya van Biesen  Executive Director, Catalyst Canada Inc.
Aaron Dhir  Associate Professor, Osgoode Hall Law School, York University
Stephen Erlichman  Executive Director, Canadian Coalition for Good Governance
Catherine McCall  Director of Policy Development, Canadian Coalition for Good Governance

February 16th, 2017 / 9:55 a.m.

Conservative

Ben Lobb Conservative Huron—Bruce, ON

By the way, these microphones were made by white men, so you can see why there's a problem with them.

I have a number of issues with this bill for a number of different reasons. One of them has to do with what Brian had to say, that this will be it for at least a decade and probably longer. I think this bill doesn't address a number of issues, and it uses one little clause to deal with diversity such that you might as well just forget about it because it doesn't do anything.

Businesses have no problems putting targets on everything. I've worked in business, and everything is targeted, everything is monitored, everything is measured; yet when it comes to this, it seems there's a tremendous amount of apprehension about doing anything.

As far as a diversity policy goes, to my mind, as a committee, we can discuss an amendment as to what it would be and how it would be spelled out, but to say that it's impossible for a company to not have a diversity policy and report it on their annual report by next year is baffling to me. Businesses can turn things around immediately in some cases. I don't want to make it too simple, but you could cut and paste a diversity policy from another business, put it in your report, and report your numbers. That is as much as it would take and you could build it out through your HR department and other things as time moves on. I think that would be a starter.

I think it's also an issue that maybe we're dealing with gender but we're not dealing with visible minorities. I can't understand why we do this. I can't understand why the Liberals in government.... They've put targets on all sorts of things, like targets on the environment. They have a deliverology expert, but yet on this they're not prepared to do it.

I ask the law professor, Mr. Dhir, if you could just make some comments on what the risk is of putting something in here that would get these businesses to get at it.

9:55 a.m.

Prof. Aaron Dhir

Mr. Lobb, thank you so much for those comments. I'm in agreement, and I must say in viewing Tuesday's session I saw you put forth the idea to the minister of mandatory policies as a precondition to listing. I have to say I hadn't actually thought about that. I thought that this was a very interesting and creative idea. I think these are the sorts of ideas that we now need to generate in the conversation I'm suggesting we have as this bill goes forward.

I think you've identified a real frailty of the disclosure-based model; it does, at the end of the day, allow for an explanation as to why the prescribed conduct is not being followed. Now it could be that there is a reasonable explanation, and because of that possibility we then leave it to market forces to come in and enforce, and to shareholders to advocate, for example.

No. It's insufficient that we don't have a policy. We need one, but I think what we're seeing with the OSC and the CSA statistics, so far, is that things are not going as well as we would hope, so your skepticism is certainly warranted.

10 a.m.

Conservative

Ben Lobb Conservative Huron—Bruce, ON

The other point I would make is that we're not talking about saying that 50% of the CEOs of publicly traded companies on the TSX will be women and/or visible minorities. We're saying people on boards. A female who is a certified general accountant, a chartered accountant, or a certified managerial accountant, I would say, is qualified to sit on any board. That's my opinion. They would do a fantastic job. You could work for any accounting firm in this country and you would be qualified.

More to Ms. van Biesen's point, it's the old boys' club. I've worked in the old boys' club. I know how it works. They golf, they drink, and they play hockey together. That's the way it is. Your point about sponsorship over mentorship is exactly correct. The only way you're going to break the old boys' club is to put targets on and to get at it. Maybe the targets won't get met. You said 30% five years from 2017. Okay, but there will be plenty of companies that do make those targets, and the ones that don't should have an explanation.

We have ethical—

10 a.m.

Liberal

The Chair Liberal Dan Ruimy

I hate to cut you off there.

10 a.m.

Conservative

Ben Lobb Conservative Huron—Bruce, ON

Oh, I have 10 more minutes to go here.

We'll carry on another day.

10 a.m.

Liberal

The Chair Liberal Dan Ruimy

Thank you.

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

10 a.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Thank you, Mr. Chair.

Thank you to all the witnesses for coming today.

I'm going to take the conversation in a bit of a different direction. We spent a lot of time on diversity and we spent some time on targets. I'd like to talk about the concept of periodic review of this legislation. I just heard Stephen briefly touch on it, and then he went back to the areas that are missing from this bill. I want to bring the group back and quickly go around the room and ask everyone for their thoughts on the concept of periodic review of the legislation.

What are your thoughts? What time frames do you suggest we include as an amendment? When we do that, what are your thoughts on generating a report and what should the content of this report be, as part of the periodic review?

Stephen, I'm going to start with you because you're the only one who touched on it. Then everyone has a bit of time to think about it.

Mr. Erlichman, could you could start, please? Thank you.

10 a.m.

Executive Director, Canadian Coalition for Good Governance

Stephen Erlichman

Thank you very much.

My thought was that we should have an external stakeholder advisory committee that would look at the legislation and give suggestions for the legislation. I don't see any reason why that should happen any less often than every five years, or at the very most, perhaps 10, but five years is a good number to actually look at it to see if there should be changes.

The key point here is that there have been two major sets of changes in the last 40 years, and that just isn't right. Things happen much more quickly, and they need to be looked at in the context of the legislation. It could be five years or 10 years, but it should be much more often than twice in 40 years.

10 a.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Thank you.

Mr. Dhir.

10 a.m.

Prof. Aaron Dhir

I'm very attracted to the idea of an external stakeholder advisory committee. I think that could produce real value for the government. As I said during my submission, I think it is best to think of regulation in this space as being a working hypothesis, and to think that we constantly have to monitor and test whether or not that hypothesis is bearing fruit. If not, then we need to keep tracking the data and constantly thinking about other possibilities for reform.

10 a.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

You're an academic. My background is as an engineer, and when we look at a report we look at measuring something. I don't want to go back to the concept of targets, but when we look at this legislation in five years—and let's assume you're going to review it in five years—what should be the key components of that review? If you're going to generate a report, what would actually be reported on? This kind of indirectly goes to the concept of the definitions of diversity, targets, etc.

In five years, when this external commission is going to report, what is it going to report on or what would you recommend it report on?

10 a.m.

Prof. Aaron Dhir

I would have to say that I suspect that Mr. Masse is right, that five years with respect to the diversity provision in particular, will be too long. We should keep in mind the fact that because we have this CSA regulation, we have two years of good data, two years of experience with which to work right there.

I think we want to be looking at similar metrics, such as what has been the year-over-year change? How close is that to what we're seeing in comparison to peer economies globally? What percentage of firms are actually identifying themselves as having diversity policies? How do they define “diversity”? Also, it's important to look at not just those numbers but the content of the explanations. It may be that we have something to learn from the explanations.

One of the most striking things I've found under the CSA rules so far is that firms are really sticking to the idea of meritocracy. They don't, for example, set targets, and their explanation generally tends to be that it's because they feel they have a merit-based process.

10:05 a.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

I'm going to interrupt you because I want to give Tanya about 45 seconds to also give her input on this.

10:05 a.m.

Executive Director, Catalyst Canada Inc.

Tanya van Biesen

In terms of time frame, I would say no more than three years. I would agree with Professor Dhir that we need to look at whether they have a stated diversity policy. Do they have board renewal mechanisms and what are they? What is the content of the explanations, if they're not complying? Then count progress. What's the year-over-year change? Count progress in each of the diverse groups that they are being asked to measure. Look at the change. Look at the progress.

10:05 a.m.

Liberal

The Chair Liberal Dan Ruimy

Thank you very much.

We've going to move to Mr. Waugh for five minutes.

10:05 a.m.

Conservative

Kevin Waugh Conservative Saskatoon—Grasswood, SK

This is interesting because I'm from Saskatchewan. About three to five years ago, the Senate.... There was a big uproar in our province about indigenous people not being on boards. The Senate got involved in this study. I'm just looking at our two major corporate headquarters in my city, and there's only one out of 10 on the board.

Another thing that I'm seeing is that we're recycling a lot of the same people. They may sit on one board. They're sitting on two boards. They're sitting on three boards. There's no renewal. We find that there is a champion, let's say from the first nations, and then that person is on every board at the provincial and corporate levels, and we're not developing. I just look at my province, at PotashCorp and Cameco, which both employ a lot of first nations but only have one on their board.

This is a great discussion, because I remember the Senate coming through the city. Everyone was upset with this. Three years later, we have one out of 20. I see a former CEO of Cameco now on PotashCorp. We're just recycling these people, and that is a problem that we're seeing in this country.

Can someone talk about that?

10:05 a.m.

Vice-President, Policy, Institute of Corporate Directors

Matthew Fortier

I'll start. I completely agree. There tends to be and has been for a long time a trend towards getting the same people on the same boards because you know who that person is, and you're friends. As Mr. Lobb suggested, you play hockey together, for instance. That is a problem.

One of the things that we do at the ICD is that we have the directors register and there are a whole bunch of people out there who are prepared to sit on those boards, but it's also about getting people to know each other. We hold networking events across the country. We have 11 chapters across the country and 12,000 people interacting, so that at least you have a name. I think the #GoSponsorHer initiative that Catalyst is involved with is crucial because it introduces new people to people of influence, and that's what's going to drive change.

10:05 a.m.

Conservative

Kevin Waugh Conservative Saskatoon—Grasswood, SK

Tanya.

10:05 a.m.

Executive Director, Catalyst Canada Inc.

Tanya van Biesen

I think you're right. Part of what's going on is that we have to redefine what it means to be qualified for a board. Not that long ago, there was a view that unless you were a sitting CEO or a former CEO, you were not qualified to sit on a board. Therefore, there was a very limited pool of candidates you could go to. That's number one.

Number two is that we have to continue to build the pipeline of executives. Gender-based, race- and ethnicity-based, we have to continue to build that pipeline. This is not just about boards. This is about who holds senior positions of influence in Canada that will ultimately be tapped to sit on boards. If we have a dearth of those executives, whether they're female or otherwise, we're going to continue to have the board problem.

10:05 a.m.

Conservative

Kevin Waugh Conservative Saskatoon—Grasswood, SK

The other problem I think we have is that when we have a female CEO running a company, the scrutiny is a little bit different than for the men. I see that day in and day out on the TSX. I look at it. All of a sudden the share price goes down, and for CEOs responding to the board, I think we're seeing two different rules here. There's a shorter leash certainly on females than on males. I look at some of the companies in this country and it's not fair. I think that also has to change around the board table.

Any comments maybe from Mr. Dhir on that? It's not fair, and then we're surprised when a woman CEO actually turns a company around and it's successful. We're seeing that, which is totally wrong, but we are seeing some of that in this country.

Any comments on that, Aaron?

10:10 a.m.

Prof. Aaron Dhir

I think you hit the nail squarely on the head, Mr. Waugh. It seems that the same gender biases that prevent entry into the boardroom then persist when there is representation, such that you have this enhanced level of scrutiny that wouldn't exist if it was a male CEO. This is one of the complexities of the business case.

When we're talking about traditional financial metrics, certainly there have been studies—as has been mentioned—that establish correlation between board diversity and profitability. It's important, though, to be mindful of the fact that correlation doesn't necessarily mean causation, such that if we put too much emphasis on the business case, we might then be putting unrealistic expectations on the shoulders of diverse directors, diverse CEOs, etc.

10:10 a.m.

Conservative

Kevin Waugh Conservative Saskatoon—Grasswood, SK

What do you think, Stephen?

10:10 a.m.

Liberal

The Chair Liberal Dan Ruimy

Very briefly, you have 10 seconds.

10:10 a.m.

Conservative

Kevin Waugh Conservative Saskatoon—Grasswood, SK

Go ahead, Stephen.

10:10 a.m.

Executive Director, Canadian Coalition for Good Governance

Stephen Erlichman

CCGG's in favour of broad forms of diversity, both at the board as well as in senior management. That's my five seconds' worth.