Industry Committee on Feb. 21st, 2017

[Chandra Arya, Liberal, Nepean, ON]

Absolutely.

[Mora Johnson]

One of the challenges in the system is that currently there is very little information available about small corporations. There is more information about publicly traded corporations.

[Chandra Arya, Liberal, Nepean, ON]

What are you proposing, again?

[The Chair, Liberal, Dan Ruimy]

Please answer very briefly, because we're out of time.

[Mora Johnson]

Some authors even suggest requiring non-distributing companies, small corporations, to provide audited financial statements, the way big corporations do, but Claire and Publish What You Pay are merely proposing that if you know who the actual owner of the company is, it will help you make better decisions when you enter into those contracts.

[The Chair, Liberal, Dan Ruimy]

Thank you. Maybe we can come back to that again.

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

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

Thank you, Mr. Chair.

Thank you very much for being here today to speak to this very important issue. Ms. Beckton, your centre studies women in politics and public leadership. I go back to something I mentioned earlier in this committee. Being involved with ParlAmericas, we would often have discussions with groups of women in politics about how to encourage more women to get involved. At that particular point in time, it was a snapshot where I believe somewhere between 80% and 90% of Canadians had female premiers.

When I speak with them—and I've known some of them—they definitely got their jobs because of talent. When they look at it, they say, “You don't need quotas; you just need to go with it.” But I understand, certainly on the corporate side, that we haven't seen any kind of real push that is going to encourage more women. Again, we've heard in testimony that there is a certain pool and some people might be on four or five different boards, and when they leave, they just keep recycling the same people.

How do we encourage more women to get involved on the board side in publicly traded companies? The women I know who are engaged in business are busy running them. I've talked to many of them, saying, “Why don't you expand or why don't you look into these things?” They say, “My interest is in the business that I'm starting and the businesses that I'm running.”

How do we encourage more women to be part of this other pool that seems to be recycling the same people?

[Clare Beckton]

I think you're asking it the wrong way around. How do we encourage, push, nudge, shove corporations into changing the way they recruit for their boards?

The onus should not be on women. There are many women who would love to serve on boards.

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

How would we do that change in mindset for corporations? I know that's what this legislation is about, but how do we make sure that is what we get through the legislation we have?

[Clare Beckton]

Obviously, there are a number of choices when you're looking at legislation.

In many of them, like in Australia, they use a combination of reporting and then the legislation to back it up. When you require “comply or explain”—which is not clear in this legislation—you are required to give an explanation if you do not have the diversity on your board. It requires you to explain where you looked, who you looked for, and really put forward the kinds of searches you did in coming forward.

If you don't have that and you simply state the figures in an annual report, it doesn't tell you what's going on behind.... You need to change the way that you recruit. You need to ensure that when you send out your recruiters you're asking them to have women put forward as possible candidates on the boards.

I think another thing that's important is that if you do not have board terms, then it makes it very difficult. The turnover can be very slow, and some members can be there for longer periods of time. I'm a great believer in aspirational targets. I think it sends a message that there is a percentage you should be aiming for. Once you start getting more women on your boards, then it starts to change the dynamic on those boards. I think it's very hard to encourage women if they're not seeing the change. It's no fun if you're the only woman on a board with 11 men. It's nothing to do with the men; it's simply to do with the approaches and the way that business is normally conducted.

I think there are a number of things that governments can do. We look at the Ontario Securities Commission, the comply or explain. I think you look at recommendations around term limits and what you are going to do with your boards. I think it's good governance. The leading practices on good governance now would say that term limits are important. Those are a number of factors.

We can certainly go out of our way, and there are a number of lists of women who would like to get on boards.

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

From the same perspective, then, we're looking at how soon we should review what we have done once this is in place and we start to see what is happening on various boards. When do we then refocus again and do the assessment, whether it comes to legislation, so it comes back here, or to redo regulations?

How long a time frame is it going to take before you really have something to measure versus just having it that, theoretically, we should review it after so many years? What's the right time to—

[Clare Beckton]

I don't know that there's a right time.

For example, if you look at the Canadian Board Diversity Council, it has been doing an annual report looking at what's happening across each different industry. It takes leadership, as well. If you look at the financial sector and at the big banks right now, there's a real push. In leadership at BMO, Bill Downe has been very active with Catalyst. He's been taking a leadership role in advancing women in his own bank and advancing them at the corporate level.

We need to encourage that kind of leadership. You need to challenge the corporate world to exercise that kind of leadership. I think you need to keep an eye on what's happening on an annual basis. You may not want to do a full review, but you should be looking at what's happening through the statistics gathered by organizations like Catalyst and the Canadian Board Diversity Council, and if you're not seeing very much movement....

Also, take a look at the sectors. You will get the movement being increased, for example, by the financial sector, which has been moving much more quickly than other sectors, and then you will see the resource sector dragging at the bottom. You need to see where to put your emphasis, if you really want to make the change. You also have to look at where the largest number of board seats are, and there are a large number of board seats in the mining and resource sectors. That has been very male dominated.

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

Thank you.

Ms. Woodside, I want to talk somewhat about corporate governance.

Based on what you've seen, what kind of tangible progress has been made against money laundering and taxation schemes in countries that require beneficial owners to share the disclosure of their identity? Have we seen results where other countries have gone further than what we may be looking at in this legislation? If so, what have we seen, and what initiatives could we take from that to maybe add to what we have?

[Claire Woodside]

The first public registry is in the U.K. I think the results have been quite positive, but it hasn't been a long enough period to really measure them.

I think one of the ways you can see the differences across countries is through the evaluations conducted by the Financial Action Task Force. Generally, those evaluations find that countries that collect beneficial ownership in a centralized registry perform much better in terms of fighting money laundering and terrorist financing than countries that rely upon financial institutions and other professions to collect that information on their behalf.

This is really a decision by government to delegate a responsibility to other professions and to put it in their hands. It's a burden for those professions, such as financial institutions and others. In some cases, it's one that they really fail to fulfill completely, e.g., real estate agents, or that they struggle to fulfill, e.g., financial institutions. I think that one of the best places to look is through the Financial Action Task Force's evaluations.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Masse, you have seven minutes, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thanks to our witnesses for being here.

I want to touch briefly here, Ms. Beckton, on your comments about gender not being identified in the legislation. How critical do you believe it is to have gender identified in the legislation itself? The minister.... We've heard the discussion here about how it's supposed to be helping.... You can even take their approach of, “Okay, we'll deal with diversity later; we're just going to deal with women.” That seems to be the approach that's being made here. How important is having the definition of gender in the actual legislation?

[Clare Beckton]

I think it would send a much stronger signal if gender was specifically stated in the legislation. It was put out in the announcement of the bill and what the bill was intended to do. I think it sends a very strong signal. If your goal is to increase representation of women on boards, then the message in the legislation should be very clear. You may have a provision that says gender and diversity, but I think it's important because I don't think it sends the right signal if it's only in the regulations. Regulations can be changed more easily than legislation, as we all know.

[Brian Masse, NDP, Windsor West, ON]

In your concept of aspirational targets—I've been pushing this from day one of this bill's being tabled in the House of Commons—there was no review of this legislation. It's only been reviewed twice in 40 years. It's like a tumbleweed that just goes across the legislative landscape.

I'm looking at some potential amendment that would have some softer or maybe lower targets for the actual mandatory target requirements, and then “explain” in that lower percentile. Then there would be aspirational targets after that. If we keep the bill the way it is, the way the minister's tabled the bill, it's likely not going to be reviewed for another eight years, in terms of parliamentary process and so forth—even longer potentially—and there are no powers to the minister.

I'm looking at some other targeted areas, and then going from there. What would be your thoughts on somewhat of a mixed-model approach as a potential?

[Clare Beckton]

I think there are various options and ways that you can outline targets. Sometimes they're called “soft targets” or “aspirational targets”, as we've been talking about. Those are ones that are put out as, “This is the ideal for where we would like you to be by such-and-such a year.” You see the Ontario government put out targets. When Premier Wynne made her announcements last year, she set out targets in terms of provincial government appointees. Certainly, in terms of federal government appointees, there can be those targets. I think in terms of the corporate world, you do have a choice. You can go with aspirational targets or you can go with harder targets.

One of the reasons that the Employment Equity Act was successful in increasing numbers in the federal government is that there were targets. They were not hard targets. They were not targets that required legislation, which you can do. You can put it in legislation, you can put it in regulations, and you can also have the signal sent from the government that this is what they would like. There are various ways you can do it.

[Brian Masse, NDP, Windsor West, ON]

I need to move on, but give me a quick answer on this, if you don't mind.

With regard to this, would a more modest quota model as a base element to build on for aspirational targets be something that might be palatable?

[Clare Beckton]

I think that you as legislators need to decide whether it's palatable. Certainly, quotas have been very effective in many countries in increasing women's representation in Parliament and on boards. Some will say that the northern examples were not good, but I think there the problem was that they didn't give them enough time to achieve those quotas.

[Brian Masse, NDP, Windsor West, ON]

Thank you very much.

To Ms. Woodside and Ms. Johnson, really quickly with regard to Mr. Arya's comments and to follow up on them, my understanding—and correct me if I'm wrong—is that by having a model where there's more transparency for people who are investing, they will have to make better choices. It won't affect the person in terms of the business they have, but there'll be more transparency for the people who might get swindled into something, which is a problem of understanding what the record was in the past. Is that correct?

[Claire Woodside]

Yes. To give a better response, the reason courts do not pierce the corporate veil is not because they don't know who the owner is. It's because that's the legal doctrine. Because they have that information is not going to mean they're going to pierce the corporate veil. In the cases where they do, it's often related to fraud.

This information isn't going to change the way limited liability status works. It simply provides more information when consumers and businesses are entering into transactions. There is a reason the Canada Business Network has a blog entitled “How to verify that a business really exists”. That's because consumers and businesses actually have challenges verifying whether a business really exists.

There is a shift today towards more transparency. Requiring this information is completely in line with the privileges associated with limited liability status. It would not detract from those privileges but provide more information for individuals entering into business arrangements.

[Brian Masse, NDP, Windsor West, ON]

I think this bill is an incredible opportunity. I think it's underestimated in its value and worth on several fronts for Canada. In fact, I think this is probably one of the most important pieces of legislation that we'll deal with in this tenure of Parliament.

With regard to bearer shares as well, that's one of the areas in which we can open up and comply with international law. Can you highlight why you think the bill's language on bearer shares is probably not satisfactory to those who want transparency, anti-corruption, and improvement? Basically, I'm looking at the language of bearer shares and how it could be improved in this bill.