Madam Speaker, since it is the first time that I rise in this House while you are in the Chair, let me congratulate you on your appointment.
I am pleased to speak today to Bill C-204, which was introduced by my colleague opposite, the hon. member for Mississauga-South. My colleague began his speech by telling us that he decided to propose this amendment to the bill because he had met a senator who was apparently sitting on 26 boards of directors. My colleague inferred that the senator probably wanted to enhance his reputation, but perhaps there are other premises that are just as valid. Given the nature of a senator's work, he had ample time to sit on 26 boards of directors.
The purpose of the bill introduced by my colleague, an act to amend the Canada Business Corporations Act, is to prohibit any person from holding a directorship in more than 10 companies in which the person holds less than 5 per cent of the voting shares. My colleague seems to base his bill on the premise that a person who is a director in more than 10 companies cannot properly carry out his mandate.
True, as my colleague pointed out, company directors have a number of responsibilities that are very important and very serious. They are required by law to assume many of these responsibilities and to perform very specific duties.
My colleague who introduced this bill is asking the following question: At what point can a director or administrator no longer properly fulfil his responsibilities?
He seems to think that one can no longer properly fulfil one's responsibilities if one holds a directorship in more than 10 companies. I do not know on what basis the hon. member can make that claim. Why would a director of 9 companies be able to perform his duties, but not a director of 12 companies? That question remains unanswered.
When someone is mandated by shareholders to sit on the board of directors of a business corporation, he is required by law to meet certain obligations. He has a duty to do so. He must look after the interests of the company, as he would after those of his own family. By law, he is accountable to shareholders for his actions.
A director may be held personally responsible if, for example, he misuses or embezzles company funds or if he makes the company insolvent.
The director must be honest, loyal, careful and diligent. Of course, his personal interests must not conflict with those of the company he administers. It goes without saying that he must attend meetings of the board of directors. I will not start listing everything a director must do or not do. I think everybody here has a pretty good general idea.
Frankly, I really do not see the use of my hon. colleague's bill. Why propose to amend the Canada Business Corporations Act by amending only one section, namely section 105, by adding a detail that, as far as I am concerned, is basically useless? Why prevent someone from being a director of more than ten corporations? The same person can sit on the board of directors of 13 corporations and do a very fine job, the same way that another individual could be a director of a single corporation and fail in his duties and responsibilities. It all depends. Some people can handle it, others not.
The directors of a corporation are responsible and accountable to the shareholders. If the shareholders are dissatisfied, all they have to do is to remove them from office by a vote of non-confidence.
The Canada Business Corporations Act is also quite clear on that. A director who commits an illegal act or who works against the interests of the company is liable to very harsh penalties and fines. It is definitely not in his best interests to break the law or to commit acts for which he would be held accountable.
Any reasonable person who is sound of mind-maybe some are not-knows what he is able to do and accomplish. A director knows the duties and responsibilities related to his directorship. It would not be in his best interests to fail in his duties, because he knows what the consequences would be. So, I say: Why would he take a chance and sit on several boards if he knows that he not able to do the job?
Let me show you that the arguments used by the hon. member in his memo to support his bill are far from justifying the inclusion of his proposed amendment in the Canada Business Corporations Act.
First, the member says:
"A director is not bound to attend all meetings of the board. He ought to attend as often as possible as he may be held liable for transactions of which he has no knowledge".
An occasion will undoubtedly arise when a director is unable to attend a meeting of the board of directors. However, in any reasonably well organized company, an agenda and minutes are distributed to directors. Normally, when someone takes a decision involving a company, those responsible are informed. I dare say
that anyone unable to attend such a meeting would have the sense to ask his colleagues what was said or done. Directors of companies are aware of that.
The second argument put forward by my colleague is the following:
"A director cannot shirk his responsibilities by leaving everything to others. He relies on other directors at his own risk. The reliance on his co-directors and officers should not be unquestioning".
When you sit on a board of directors, you are part of a team. A director must trust his colleagues. Otherwise, the entire team suffers.
Imagine what it would be like if the directors did not trust each other? Imagine the acrimonious atmosphere. If board members do not agree, the company or corporation will suffer, and this will lead to shareholder dissatisfaction. The shareholders can then dissolve the board of directors. It is therefore not in the best interests of a director to start off by doubting his fellow directors.
Another argument used by my colleague is the following:
Directors rely on officers at their own risk and should not abdicate their duties to manage the corporation.
Usually, the board of directors makes the decisions on the company, and the executive directors or the operational managers effect them on site. The executive director, who looks after the day to day running of the company, sits on the board of directors and must report on company activities to the directors.
Usually someone whom everyone trusts is chosen to head the company. If there are risks involved in relying on the executive director, they are normal risks. People can be dishonest; but that can happen any time and any place. It is impossible to know whether a person is honest at the start. My colleague's argument does not hold.
I could go on at length like this, but it would serve no purpose. None of my colleague's arguments has convinced me of the absolute need to amend the law as he proposes.
I will read you the recommendation that led him to propose this bill, which begins as follows:
In an effort to protect and/or emphasize the importance of director's duties and responsibilities, to minimize the potential for conflict of interest, to protect investors, companies and employees, that no person may be director of more than 10 corporations in which the person holds less than 5 per cent of the voting shares.
The duties and responsibilities of directors are clearly defined in the Canada Business Corporations Act. People who hold directorships know very well what their duties and responsibilities are. They know what are the consequences of their actions or lack of action because this is also provided in the legislation.
I completely fail to see how Bill C-204 will reduce conflicts of interest within a company. Unfortunately, there will always be conflicts of interest. My colleague from Mississauga-South made a worthwhile effort and analyzed the situation carefully before putting this bill forward. I am convinced he spent a lot of time on this, but I must say I do not see the use of amending the Canada Business Corporations Act in a way that would basically have no positive impact.