moved that Bill S-11, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other acts, be read the second time and referred to a committee.

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12:05 p.m.

Scarborough Centre Ontario

Liberal

John Cannis LiberalParliamentary Secretary to Minister of Industry

Mr. Speaker, I am very pleased today to have this opportunity to begin second reading debate on Bill S-11, the Canada Business Corporations Act and the Canada Cooperatives Act, and to say a few words about this piece of legislation. I am sure all members of the House will agree this is a fundamental issue to the continued success of Canadian federally incorporated companies.

The amendments and improvements found in Bill S-11 would further the ability of businesses, investors, shareholders and co-operative members to be in a position to respond quickly and creatively to rapid developments in the global marketplace. They would be better positioned, if parliament provided them with the legal rules of the game that are sound, fair, efficient, consistent and, just as important, flexible.

Each Canadian business, no matter how small, should be given the right legal tools and legal framework to fully develop its marketplace opportunities. Bill S-11 intends to provide for federally incorporated businesses.

In a ranking of just the top 500 companies in Canada, federally incorporated companies account for revenues in excess of half a trillion dollars. The stakes, as we can see, are high, high for these companies and indeed high for our country.

It is important that hon. members be aware of the lengths to which the government has gone over the past seven years to make sure that Bill S-11 is the result of the widest possible consultation and scrutiny. As a result of this, we have before us legislation that will meet the current and evolving needs of business for many years to come.

Let me point out that in 1994 Industry Canada held initial consultations on corporate law reform and subsequently issued nine discussion papers. This was followed by cross country consultations to discuss the policy recommendations contained in those discussion papers. At the same time, the Senate banking, trade and commerce committee held its own hearings in cities right across Canada.

Bill S-11 was originally introduced in the other place as Bill S-19. During the last parliament its banking, trade and commerce committee heard from numerous witnesses. When the bill was reintroduced as Bill S-11, the committee held further meetings and heard from additional witnesses. More recently in its studies of Bill S-19 and Bill S-11, the Senate committee held two rounds of hearings as well, one in the year 2000 and one this year. The testimony of the expert witnesses resulted in a number of amendments that have significantly improved the legislation. The Senate study stage was taken into account and, based on this, a number of amendments to the original draft legislation were adopted.

I want to take this opportunity right now to thank all the interveners who have assisted the government over the years and the members of the committee, particularly Senator Kirby, who was the former chair of the committee and Senator Kolber, the current chair of the committee.

The Canada Business Corporations Act is the principal federal corporate law in Canada. It and the Canada Cooperatives Act are framework laws that establish basic rules for corporate governance, setting out the rights and obligations of directors, officers, shareholders and co-operative members.

These acts are not overly regulatory. They allow business corporations and co-operatives the flexibility to organize their affairs within a sound legislative structure. They establish the recourse available to parties in the event of unlawful conduct. They are also self-enforcing, since disputes are largely settled through civil action rather than through regulatory enforcement.

At this point I would also like to emphasize that although most of my remarks today will refer specifically to the CBCA, many of the provisions in the bill would also apply to the Canada Cooperatives Act, which governs federally incorporated co-operatives.

Hon. members may recall that a new Canada Cooperatives Act was passed by parliament in 1998 and came into force on December 31, 1999. The bill would ensure that modifications to the CBCA, where they were equally valid for co-operatives, would be reflected in the Canada Cooperatives Act.

The Canada Business Corporations Act, which is the main focus of Bill S-11, has not been amended for the last 26 years. The amendments in Bill S-11 would update and modernize four core elements of the existing legislation.

First, the bill would expand the rights of shareholders to communicate with one another and would encourage more shareholder participation in corporate decisions.

Second, the bill would help eliminate barriers to competitiveness, so that Canadian corporations could become more effective global players. At the same time, it would help to attract international companies to establish a base in Canada for their international operations.

Third, Bill S-11 would more reasonably define corporate responsibilities for the liabilities of directors, officers and shareholders. This would promote fairness and reasonable risk taking, which is a necessity for growth and productivity in the global economic environment that we have today.

Finally, the bill would eliminate duplication of regulation. We have reason to be proud of the Canada Business Corporations Act. It is not just that it serves the country well. Canada is already recognized by countries around the world as having a leading edge corporate statute, one that links prosperity with sound, balanced rules for corporate governance.

It also helps set standards of legal, predictable, fair and accountable business practices in other countries that have come here for advice on setting up their own corporate governance frameworks.

The Canada Business Corporations Act is very sound legislation that has provided the legal framework for conducting business over the last quarter century. The reforms to the existing act would modernize and strengthen this legal framework.

The opportunities out there are great for our country. However one thing we have to do is equip our fellow Canadians with the ground rules that only government can provide. The Canadian entrepreneurs will provide the tools, the savvy and the entrepreneurial spirit and skills to reach out for it.

In my closing remarks, the provisions in the bill are once again representative of the fulfilment of many commitments we have made in our red book. They go beyond the pledges of the red book, in the economic statement last fall and in the Speech from the Throne. In each of these government initiatives a commitment was made to foster innovation and enhance the competitive advantages of Canadian enterprises.

I urge all the members of the House to give speedy assent and passage to this most important piece of legislation, this marketplace framework legislation which, as I said earlier in my remarks, will help position Canadian companies to compete strongly internationally.

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12:10 p.m.

Canadian Alliance

James Rajotte Canadian Alliance Edmonton Southwest, AB

Mr. Speaker, at the beginning of my speech, I ask the House for unanimous consent to split my time with the hon. member for Esquimalt—Juan de Fuca.

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12:10 p.m.

The Deputy Speaker

In this case of the Canadian Alliance, the official opposition, it would have 40 minutes. Is there unanimous consent that the 40 minutes will be split into two blocks of 20 minutes evenly, give or take, but that it would be a maximum of 40 minutes?

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12:10 p.m.

Some hon. members

Agreed.

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12:10 p.m.

Canadian Alliance

James Rajotte Canadian Alliance Edmonton Southwest, AB

Mr. Speaker, I love it when the House gives unanimous consent. It gives me a warm feeling inside. I rise today to speak on Bill S-11, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act. This is the first time since 1975 that the Canada Business Corporations Act, otherwise known as CBCA, has been amended. Many of these changes are long overdue.

Bill S-11 also contains amendments to the Canada Cooperatives Act. It continues the reform process that recently led to a new statute governing co-operatives, which came into force on December 31, 1999.

At that time, however, some issues required further consultation and are now addressed in Bill S-11. For the most part the changes to the CCA closely follow the amendments to the CBCA and harmonize the rules governing co-operatives with key elements of corporate law.

The CBCA is the main federal law governing corporations in Canada, including large, medium and small enterprises. This act sets out the legal and regulatory framework for more than 155,000 federally incorporated businesses. In Canada corporations have the option of incorporating at the federal or the provincial level. Almost half of the largest companies in Canada are incorporated under the CBCA.

The previous act to amend the CBCA was tabled in the Senate during the last session of parliament and was known as Bill S-19. The bill was before the Senate committee on banking, trade and commerce when it died on the order paper due to the federal election. Nonetheless, the members of the Senate committee heard from 35 witnesses between April and the end of June 2000 and they should be commended for their work.

Bill S-11 is substantially the same as Bill S-19 but incorporates recommendations suggested by stakeholders such as the Canadian Bar Association, the coalition for CBCA reform, the Canadian Co-operative Association and the task force of the churches on corporate responsibility.

The amendments seek to modernize the Canada Business Corporations Act in four areas by: first, recognizing the global nature of the marketplace; second, clarifying the responsibility of corporate directors and officers; third, reducing federal-provincial duplication; and fourth, expanding shareholder rights.

It is an immense understatement to say that business has changed fundamentally since the mid-1970s and it is high time that the Canada Business Corporations Act reflected the transformation to the global economy. We support these changes in principle.

The CBCA currently requires that a majority of directors on a federally incorporated board and on each committee be resident Canadians. Canada is the only G-7 country that imposes such antiquated residency requirements on its businesses.

Bill S-11 would reduce the residency requirement to 25% for boards and entirely eliminate the requirement for board committees. This change is long overdue and should help Canadian companies compete as global players. However, I must say it is characteristic of the Liberal government that sacred cow sectors such as book publishing, telecommunications, transportation and Petro-Canada would be exempt from this reduction. We question the rationale as to why these businesses are not permitted to enjoy the flexibility to appoint directors based on their qualifications and not on where they live.

Another welcome change is the amendment that would allow foreign subsidiaries of Canadian corporations to acquire shares in their parent corporations under limited and clearly defined circumstances. This is mainly for the purpose of acquiring or merging with foreign corporations. These amendments will allow Canadian federally incorporated companies to compete with foreign multinationals while expanding globally.

With an eye to allowing directors to take appropriate risks in their decision making, Bill S-11 would replace the good faith reliance defence for directors with a due diligence one and would allow corporations to pay for defence investigation costs.

To clarify responsibilities of corporate officers and directors, Bill S-11 replaces the current joint and several liability regime with one of modified proportionate liability. This change would mean that every defendant found responsible for a financial loss stemming from an error, omission or misstatement in financial information would be liable only for the portion of the damages that corresponds with his or her degree of responsibility. However, joint and several liability would continue to apply in cases of fraud and to designated categories of plaintiffs such as the crown, charitable organizations, unsecured creditors and small investors.

Bill S-11 also clarifies that when the directors' powers are transferred to shareholders under a unanimous shareholders' agreement, the associated liability and defences are also transferred to shareholders. New shareholders who are not informed that a unanimous shareholders' agreement was in place at the time of their acquisition would be allowed to cancel the transaction.

Bill S-11 seeks to end costly time consuming administrative and legal burdens on federally incorporated businesses by limiting conflicts between federal and provincial statutes and regulations. Amendments would also modernize the wording of the legislation to bring the CBCA up to date with technological and other developments.

With respect to insider trading, Bill S-11 would repeal the federal duplication of provincial insider filing requirements, impose civil liability on persons who disclose insider information, even if those persons did not participate in the transaction, and increase the maximum fine from the current $5,000 to $1 million.

Bill S-11 would repeal the CBCA provisions for takeover bids and would allow the comprehensive codes for the takeover bid regulations under provincial securities laws to prevail.

The provisions restricting financial assistance to directors, officers, employees and shareholders would be eliminated because they have proven to be difficult to apply in practice. Since directors approving financial assistance transactions are already required to act in the best interests of the corporation, they can be sued for failing to do so. This is safeguard enough.

Bill S-11 would allow for greater participation by small shareholders in corporate decision making. It would do so by relaxing the rules under which shareholders communicate among themselves and allowing proxy solicitation to be done through public broadcast or newspaper advertisement instead of by direct mailings. The amendments would encourage corporations to employ new technologies such as e-mail when communicating with shareholders and when conducting shareholder meetings.

The legislation would also liberalize mechanisms for individual shareholders to submit proposals as well as set minimum share ownership and length of ownership thresholds required to submit a proposal. The bill also aims to restrain management's ability to block or refuse proposals from being considered.

Bill S-11 reflects the transformation of business since 1975 with respect to the global marketplace, the electronic revolution and the rise of shareholder rights, as well as the necessity of reducing federal-provincial regulatory redundancies.

The Canadian Alliance therefore supports in principle this legislation. However we will be consulting with interested parties to ensure that the changes in the bill are indeed beneficial to Canadian business.

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12:20 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Mr. Speaker, I thank the House for its tolerance in allowing me to share the time with my colleague. Bill S-11, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other acts, is a good bill. It is a bill that we support.

As my friend and colleague just mentioned, the CBCA has not been amended since 1975. After consultation the government put together a plan that will amend it in this bill. The CBCA is the main federal law that governs corporations in Canada, including large and small to medium sized businesses. In fact it governs more than 155,000 businesses in total.

However, I wonder why the government has not taken it upon itself to be more innovative and aggressive in trying to improve the business climate in our country. We have heard over the past week and a half that productivity in Canada has been declining for years. That hits every single person in our country. Our nation and the people in it are reliant on an environment in which businesses can thrive in an effort to improve the health and welfare of all Canadians and so we can also have jobs.

In our globalized economy we are laggards. We are falling further behind. Why do we accept the fact that countries such as New Zealand, Singapore, the United States, the United Kingdom and Ireland have grown, prospered and thrived and have been more productive than Canada? Canada is a nation and a country that has overwhelming resources and a good workforce, a competent and intelligent workforce, people who are willing to put their backs into the country. As well, relatively speaking we have an enormous amount of wealth in and above ground. Yet despite these natural assets we are falling further behind.

Why do we accept the fact that our dollar has plummeted from the 70 cent range to 65 cents today? I believe it was at 73 cents when the government took over in 1993. There is no end in sight as analysts view our dollar as continuing to slide. Some make the glib comment that this is okay because it strengthens our ability to sell products abroad.

That is true, but what does it do for those companies that are reliant and dependent on the ability to import products? How can they function properly and make their products? What does it do for Canadians who travel abroad? It severely hamstrings them, reduces their productivity and reduces their competitiveness.

We have to create a nimble, aggressive economy in Canada. The government's responsibility is to enable Canadian companies to do that. Its responsibility is to provide a climate of ingenuity where Canadian companies can prosper, where they can compete with and beat other countries from around the world.

We need strong fiscal and monetary policy. Why do we not have a debt reduction strategy? Why do we accept that our national debt sits at $560 billion? Perhaps the public watching today would be very interested to know that the debt we are all saddled with exceeds $1 trillion when we take in the debts accrued by the provinces and crown corporations. That is $1 trillion that we owe as a nation.

Why has the government not taken it upon itself to flatten the tax system? Our complex and onerous tax system makes it very difficult for most people to even do their own taxes. They have to get a professional to do them. Why do we not simplify the tax system?

Over the years my colleagues in the Alliance have repeatedly put forth suggestions to flatten the tax system, to simplify the tax system and to lower the tax structure so that individual Canadians and businesses can have more money in their pockets. Why does the government not have the same zeal for this as it has for Bill S-11? Why does it not apply that zeal to improving the structural aspects of our economy? Why does the government not drop the GST to 5%? Why not make it comprehensive and have single, one year reporting? Why have a system where private companies must hire people to do their GST returns? It adds costs to the ability of those firms to function properly.

Why do we not reduce payroll taxes, which in effect put just another cost on top of the costs to do business and the costs to Canadian consumers? Why do we not reduce personal taxes? When personal and business taxes are reduced, what happens? The economy improves, unemployment rates go down and, interestingly enough, moneys coming into the public coffers increase.

I want to draw to the attention of the House the tale of two provinces. I will compare my province of British Columbia to the province of Ontario. The NDP has ruled in my province for the last eight years or so. Thankfully its life will soon be shortened. With the upcoming election on May 16 there will be a new provincial government in my province, which I am sure will do a much better job than the NDP has done.

Let us look at the objective statistics in a province that has had high taxes, crushing rules and regulations and an environment that basically told the private sector to go somewhere else because it was not welcome in that province. Real per capita GDP when the NDP was elected in my province was $367 greater than the national average. After eight years of NDP rule, with its high taxes, complex rules and regulations and choking union rules, the actual decade ended with the real per capita GDP $3,471 lower, while the rest of the country, in particular Ontario and Alberta, experienced tremendous growth in real per capita GDP, 16.7% and 26% respectively. In regard to disposable income, which really hits the individual consumer, when the NDP came into power the real per capita disposable income was $743 greater than the national average. Now it is $768 below the national average.

It has plummeted nearly $1,500 during the period of high taxes, complex rules and regulations, and an oppressive environment for the private sector. That is what has happened to the money in the pockets of citizens in my province.

The Conservative Party in Ontario on the other hand took over from the regime of Bob Rae the mess of high taxes, complex rules and regulations, and an oppressive environment in the private sector. Since that time, with the lowering of taxes and the removal of rules and regulations, 822,000 jobs were created; tax revenues were up $15 billion; and Ontario's economy is expected to grow 2.3% this year and 3.6% next year.

Interestingly the left wing tries to lambaste the so-called heartless PCs in Ontario, but the fact is that 622,000 people in the lowest socioeconomic group are not paying taxes now. The same number of people in British Columbia find life more difficult. They have less chance of being employed and a greater chance of being on welfare. The amount of moneys and opportunities accessible to them are less. Is that fair? Is that a good environment to be in?

Everybody in the House, including the NDP, must see that having high taxes and complex rules and regulations chokes off the private sector. It harms people who are on welfare but who want to work. It harms the people who are underemployed as well as those who have talents and skills and want to use them to help their families and be able to contribute to society. These are the people who are hurt by left wing, socialist economic policies that have choked the life out of the province of British Columbia and out of Ontario prior to the PCs getting in.

Although education is a provincial responsibility, why does the federal government not work with the provinces to develop national standards? With people being forced to move, and sometimes quite rapidly, why do their children not have the same educational opportunities in all provinces? If national standards were established children could be slotted in and have similar educational opportunities.

We also have to expand and improve educational opportunities. Why not look at private-public partnerships? Germany has taken it upon itself to have a very innovative private-public partnership. People are given apprenticeships in high school. It has enabled people in high school and in university to develop experience and skills that will benefit them and enable them to be employable in high paying jobs. That is innovation. I urge the federal government to sit down with its provincial counterparts to accomplish that goal. They could have a very useful and innovative meeting which would benefit all Canadians.

The government also needs to tackle the issue of loans. At the present time access to post-secondary education is becoming the purview of the rich. I would not be able to go to medical school today. Statistics demonstrate that at the University of Western Ontario the average family income has increased dramatically to $80,000. Very few Canadian families make $80,000 a year. That means that children of people making less money have far less opportunity to gain access to professional faculties. Canadians do not want that. They want to ensure equal opportunities based on skill level, not based on the amount of money in their pockets.

We should also look at ways to decrease red tape. Red tape chokes the living daylights out of the private sector. It is easier for people to trade between Athens, Greece and London, England than it is to trade between Halifax and Victoria. Members should think about that. That is absolutely absurd. Why is it easier for a business person in Europe to have trade facilitated between two cities in Europe, which are separated by a considerable amount of space, than it is within our own country?

The government has attempted in the past, and I do not know why it has failed, to bring down trade barriers. It has simply nibbled around the edges. The barriers to trade in our country are a very real problem. It is very difficult to export the very fine wines that are made in my province of British Columbia to the rest of the country.

Why is it so difficult? Why do we have so many barriers for individual producers and business people engaged in trade and commerce within our own borders? We certainly pursue free trade with vigour. Why does the government not pursue the elimination of internal barriers to trade with as much zeal? That is something the government should bring forth in this term. I know it would find a great deal of support and constructive input if it were to do that.

My colleagues have raised the issue of transportation and the fact that our transportation arteries are falling apart. With the benefit of our surplus a good investment would be for the government to invest wisely in those structures which the private sector cannot invest in. An investment in improving transportation arteries within the country would be a wise investment that would help commerce within our borders.

Good environmental policies are also required. We do not have them. There are many good environmental policies, though, that are not followed by the government. Time after time the environment commissioner puts forth good, constructive solutions and points the government in a direction that would improve our environment. There are many good scientists and people with very good ideas on how we can improve the environmental behaviour of businesses. I encourage the government to use some of those ideas.

The government needs to look at how our businesses operate abroad. I encourage people to look at how the Export Development Corporation, using taxpayer dollars, is funding companies that are pillaging other countries through mining processes. They are dumping tailings and poisoning rivers or engaging in the rapacious destruction of hardwood forests in places like Papua New Guinea, Borneo and Central America.

Why are we tolerating environmental destruction abroad when we would never tolerate it in Canada? What is worse is that we are using Canadian taxpayer money to fund corporations and companies to do that.

The Canadian public would be appalled. I have been to the island of Borneo and have seen pristine jungles being decimated for palm oil plantation. I have driven for dozens and dozens of kilometres through what was formerly jungle to get to the interface between jungle and palm oil plantation. We have recently discovered that a lot of large primates such as orangutans are being decimated as a result of this destruction and that Canadian companies supported by the government are funding this behaviour. That is absolutely appalling.

I encourage the government to look at our aging population with as much zeal as it is looking at Bill S-11, which would be very beneficial. The population is aging. As a result, the relative numbers of people working compared to those retiring will produce a grave imbalance. No one is looking at that. This will have an impact on our workforce, tax structure, government revenues, social programs and health care system.

We know that we have a pension system. The public would be interested to know that our pension system, the CPP, is unsustainable. When it was put together the CPP architects knew very clearly that decades from now it would collapse under its own weight. There would be demands placed on it that could not be met by the number of people in the workforce.

Why does the government not look at something innovative such as increasing the minimum age of retirement to age 70. This would enable people to have a somewhat graded ability to access CPP. It would also encourage them to be in the workforce, earn money, pay taxes, be productive and be less of a drain on a CPP that would otherwise collapse.

The government had to raise CPP premiums quite significantly through a payroll tax. We see the imbalance in what is happening. We have an aging population and an unsustainable CPP, which forced the government to raise payroll taxes, depressed productivity, put people out of work, and reduced government revenues.

If the government were to look at what happened in Ontario where taxes were lowered, it would see that revenues went up by $15 billion. Wherever taxes were lowered, whether in New Zealand, Singapore or Europe, economies thrived and more money, not less, went into the public coffers. This is not elemental; it is a fact of life.

On the issue of immigration as it relates to the workforce situation, we have a workforce crisis that will be exacerbated. We need to take a critical look at our immigration policy. We need to encourage and expand the number of independent immigrants coming into the country as well as review the people who are on the list and the skills required in our country.

This is Nursing Week in Canada. We have a crisis in nursing. We will have a shortage of 112,000 nurses in the next 10 years as our population ages and the demands on our health care system increase. Nursing is not a required profession on the list of professions that we are seeking. It is unimaginable that it is not. We need nurses. That is just one of a number of professions that we need which are not on the list of professions required. I strongly encourage the Minister of Citizenship and Immigration to look at the list, revamp it and make it reflective of the needs of the economy and industry today.

I would like to deal with the issue of right to work legislation. It is a very contentious issue in the House and it should not be. We need to look at the impact of right to work legislation, at the international experience. Right to work legislation gives the individual worker the right to be part of a union or not. I strongly encourage the government to work with its provincial counterparts to introduce right to work legislation. It helps the worker and makes labour laws more flexible. It unleashes and unshackles the private sector.

What has happened in countries where right to work legislation has been in place is extraordinary. In the United States, in those states where they have right to work legislation, the per capita income of the worker has improved dramatically. It has gone up about $3,000 per worker. Unemployment has dropped by 50% and productivity is at 157%, whereas in areas where there has not been right to work legislation it is hovering around 0%.

These extraordinary statistics demonstrate the need for right to work legislation in our country today. If we bring it in workers would have a greater chance of being employed and would have more money in their pockets. The provinces would have more money coming in. It would be a much healthier environment.

I encourage the government not to dismiss this out of hand but to look at the facts. It should look at areas where the right to work legislation has been put in place: the U.S., New Zealand, Ireland and the United Kingdom. The facts support the notion that right to work legislation improves the health and welfare of the worker.

Not having right to work legislation harms the most vulnerable in our society. It gives them fewer opportunities to work, less money in their pockets and worse working conditions. I would encourage the government to work with the provinces on that.

In closing, I would encourage the government to look at having tax free zones, tax free zones that have worked in Subick Bay in the Philippines; in Raleigh, South Carolina; and in areas of Ireland. If we had employer centres in Canada that were tax free havens, they would be a major attraction for investment, employment would go up and they would be magnets for innovation and research and development.

In my speech I, as have many of my colleagues, have given the government numerous innovative solutions. We support Bill S-11 but I would encourage the government to look at other more complex issues it can actually tackle, issues that must be addressed today if Canada is to become a nimble, aggressive player on the world stage.

The failure of the government to address issues on taxes, education, trade, barriers to trade, rules and regulations and others, will result in a country that is punching far below the belt. We do not need to do that. We can do better. I plead with the government to follow our advice.

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12:45 p.m.

Bloc

Stéphan Tremblay Bloc Lac-Saint-Jean—Saguenay, QC

Mr. Speaker, I will put my remarks in a context of globalization and then speak about the data pertaining to this bill, one element in particular that has a personal interest for me, that is, clause 137.

Parliamentarians and society in general are speaking more and more about the social impacts of globalization. I applaud this, because for many years now I have been hoping we would give more thought to making globalization more human and to finding possible solutions.

One of the results of increased interaction among states is that trade is increasing, which means that competition among corporations is also increasing. We have to remember that corporations are profit oriented.

It is important to remember what kind of impact increasing competition among corporations can have. In the past, a corporation competed on local markets, with other Canadian corporations. Nowadays, competition involves other countries. Very often, the best companies in the world are competing against one another. We see that this whole process does have an impact.

We see in the media, in the newspapers, how corporate reactions are irrational. I would even go so far as to say that corporations overreact, that they lose track of what they are doing. Given this increased competition, companies must act recklessly, which is not the word that I want to use but the one that comes to mind, and understandably so.

In the context of competition, having the best minds is a critical advantage. In some areas, including in the new economy, as it is called, one must have the brightest minds. A company like Nortel or Microsoft will have a definite competitive edge if it attracts the brightest minds.

Other companies in other sectors will lower their production costs to make profits. It is interesting to look at the elements that have an impact on production costs.

The first one is labour. If a company has more employees than its competitor, it will tend to lay off some of these employees, to streamline operations so as to be more competitive. This has a huge impact on the workers who find themselves out of work.

A competitive environment may also make companies exert pressure to prevent salaries from increasing too much, if not to lower them.

A solution for a company that is based in North America is to build a plant in South America, or in countries where labour is cheap. While the minimum wage in Canada is around $7 per hour, in some countries that same $7 is the salary for one week or one day of work.

One of the measures taken by businesses in this competitive environment is to reduce production costs and, by the same token, labour costs. Such a decision has an impact on society.

The environment and natural resources make up the other element I want to mention. In order to increase their profits, some companies may overexploit natural resources or have a tendency to not respect environmental protection rules. If they do not respect these rules, they may also be tempted to move part of their production to countries where these rules are not as strict.

I often give the example of a cheese producer in my riding who recently told me that he had had to spend several hundreds of thousands of dollars because he could no longer dump production residues into the river behind his factory. Protecting the environment costs money. However, I think that this is entirely reasonable, because we must meet the goal of protecting the environment.

Another advantage of competition is that certain companies will try to pay as little tax as possible in order to lower their production costs, thus putting pressure on western, and now world, governments. These companies will lobby governments in order to pay as little tax as possible, once again to lower production costs.

This has repercussions. I think that one of the major effects of global competition is tax competitiveness. In order to attract investors, governments must lower their taxes so that companies see an advantage in locating in a particular place and, if they do not pay high taxes, their production costs will go down and they will be more competitive.

Once again, this has repercussions, because governments will forgo huge amounts of money. I give the following example: 50 years ago, 50% of federal government tax revenues came from large corporations; today this has dropped to 13%. It is no surprise that citizens have had it up to here with taxes. The tax burden has shifted away from large corporations to individual citizens. This is another repercussion.

Another thing we have seen recently is corporate mergers. If you cannot beat your competitor, swallow it, buy it or sell your own assets. Now we are witnessing an unprecedented concentration of economic power through corporate mergers, hence my concern. I wonder where this will end.

Is it like in Monopoly, where all players begin with the same amount of money, then one player buys another and the game stops when one of the players has the monopoly? I am not saying that it will go that far, but for the time being I am concerned about corporations becoming larger than countries and having sales assets bigger than the national GNP of some countries.

My reason for explaining these things, the impact of globalization—while not being against globalization, of course, except that I have some concerns which I am voicing here—is that this bill may provide the means to humanize the behaviour of corporations.

In facing the challenges that we have to face, we must strive to achieve the objective of democratizing globalization. I believe we should do it on two levels. We must absolutely undertake to democratize the decision processes of globalization, that is, international bodies, the role of parliamentarians in international agreements and in environmental agreements. This is a great challenge, but this is not the subject of today's debate.

Another element is the democratization of capital. At the present time, there is a major change taking place in the role big business plays in our economy. Take the pulp and paper companies for instance.

In the past these were often owned by major financiers, rich company owners who owned several plants and made sure, year in and year out, that their plants remained functional and cost effective, thereby maintaining and creating employment.

Today, we see that ownership has changed. Now we are the ones owning these major multinational companies, not the major financiers. How so? Through our pension and mutual funds.

I hope everyone will be able to enjoy a comfortable retirement one day, with enough income to live on. Today it is the investment funds that are financing retirement. Everyone invests, ourselves included. Those who work for governments and those who work in industry see part of their salary withheld for a pension fund. The important thing is what happens to the money in the pension funds. It is given to a portfolio manager mandated to invest in businesses, here and elsewhere, whose performance will add to the retirement fund so that we can have a peaceful retirement at the end of our career, as I said.

This is a very worthy objective, but what has to be noted is the fact that sometimes managers of pension funds invest in the world's most competitive businesses. Why are they the most competitive? They have what it takes to compete, which I mentioned earlier.

The people here or watching, or we who are building up a pension, may have their money invested perhaps in businesses that do not reflect their values, businesses that perhaps do not respect the environment or social rights. This is why pension fund owners, like us, must pay attention, so we can say “No this is not the way we want our money invested, since this is not in keeping with our values”.

If all we can see is the objective of financial performance—God knows that many people, when they pick up the paper, look immediately to see how their stocks or mutual funds are doing, and we can naturally hope for yields of 15%, 20%, 30% or even 40%—we should look to see how these businesses manage to have such returns.

Sometimes, not always, but sometimes, the yield may be the result of a highly productive business, because they do business with the sweatshops in developing countries where children are paid a dollar a day. This kind of yield can also be produced by businesses that do not respect the environment.

Therefore, it is absolutely necessary that an awareness, that what I call a democratization of capital can emerge, so that we can decide where our money will go, even though the return may not be as good. If we put too much emphasis on competitiveness, plant workers may be laid off. There will be economic and social consequences locally, because our pension plan requires a higher return than that which the company located next door can give. This is not without consequences.

For this democratization of capital that we need, there is an appropriate tool called shareholding activism. As I said, since many of us have pension funds and these funds are invested in companies, we are in effect the owners of these companies.

This means that we have a say in the direction and the decisions of these businesses. Of course we may wish that their sole objective is the highest possible return. But if I find out that my money is invested in a business that does not reflect my values, I must be able to attend the annual shareholders meeting. Shareholders must be able to make proposals to change the company's focus and tell it “We think that you are headed in the wrong direction. This is why we are submitting a proposal of a social or environmental nature”.

I now come to the subject matter of the bill. Before this bill, subsection 135(5) of the Canada Business Corporations Act said that a corporation was not required to comply with a shareholder proposal if, and I quote:

—it clearly appears that the proposal is submitted by the shareholder primarily ... for the purpose of promoting general economic, political, racial, religious, social or similar causes;—

So it is environmental, but the corporation's board of directors may reject this proposal.

As a stakeholder, through my pension fund, the mutual fund, I should be able to do this. If a union, for example, decides to attend the annual meeting of shareholders to say that the business in which it has invested is cutting down too many trees, is not respecting the environment, and is not respecting social rights, it is the right of this union or of any other shareholder to make a proposal to the annual meeting of shareholders calling on the board of directors to change the behaviour of this company.

Let us take the case of a company which we have heard about recently, that of Talisman, which invests in the Sudan. Many people say that the fact that Talisman is in the Sudan encourages the civil war. If Talisman's shareholders go to the shareholders' meeting and propose that the company get out of the Sudan, because its presence benefits the military government, this represents an important tool.

In the existing legislation, the board of directors is entitled to reject this proposal of a social nature. The new legislation, Bill S-11, does not contain this provision. This opens the door to shareholder activism and means that we, as shareholders, would be able to assume our responsibilities and do something about the excesses of certain companies.

I see this as a hope for humanizing globalization, for humanizing the behaviour of certain companies, but this should be done only if there is a greater awareness. Workers who own pension funds and invest in certain companies whose economic behaviour is sometimes questionable need to be more aware. Otherwise, the amendment in this bill will have been for nought.

That is why workers must absolutely make conscious choices concerning their investments. This is like fair trade. A good example of this is fair trade coffee. That coffee was first marketed because people thought it was totally wrong to do business with coffee companies which took advantage of farmers down south.

A fair trade coffee network was established. It ensures that producers get their fair share of the profits and that every link in the economic chain benefits. Of course, that coffee is a bit more expensive, but at least the consumer is making a political choice when buying coffee that will not result in coffee producers being exploited.

For consumers, the act of buying is a political choice. Instead of buying shoes from Nike, for example, a company that used to take advantage of children, making them work for $1 a day—although I am not sure whether it still does—if we decide not to buy those shoes but rather to buy a different brand from a company that abides by the international labour rules we are making a political choice.

I think it is possible, through the choices we make as consumers, to humanize globalization. That is one thing. However, if you are alone, as one single consumer, you have very little weight.

The manager of a retirement fund does not have $50 but rather billions of dollars to manage. These billions of dollars will be invested in corporations, some of which will meet social standards and others not, hence the need to raise awareness among workers and retirement fund owners.

Of course, this bill is not perfect. Compared to what is going on in the United States in terms of shareholders' activism, Canada is still living in the stone age. Fortunately, we are heading in the right direction.

Why I am talking about the United States? Because, for several years now, it has been much easier to make shareholder proposals in the States than in Canada. In the U.S., 200 to 300 shareholder proposals are made every year in annual shareholder meetings, compared to only about 10 here in Canada.

Although this bill is not perfect, it opens a door. As I was saying, in the United States, shareholders have a lot more power. The Varity Corp. case is a clear example of the difference in the degree of power in terms of the eligibility requirements for making shareholder proposals for companies incorporated under federal jurisdiction in Canada and for companies incorporated in the U.S.

The Varity Corp. case deals with a proposal of a social nature that the Jesuits presented in Canada at the annual meeting of Massey Ferguson shareholders in 1987. The Jesuits wanted Massey Ferguson to withdraw from South Africa. They submitted a proposal to the corporation, which was able to reject it because of its social nature. The Jesuits turned to the Canadian courts, which ruled in favour of the corporation.

However, Massey Ferguson shares were also traded on the American stock exchange. Following a ruling by the SEC, the Security Exchange Commission, the company had to accept to circulate the proposal to withdraw from South Africa. The possibility of circulating that proposal at the annual meeting was rejected in Canada, but it was accepted in the United States.

In fact, several other similar proposals were accepted in the United States. A recent example of a shareholders proposal in Canada is the proposal submitted by various large Canadian investors, including the FTQ, through its Fonds de solidarité, to the three largest retailers in this country, namely Hudson's Bay, Sears Canada and Wal-Mart. The proposal calls upon the companies to improve their codes of conduct and their monitoring methods to ensure that their suppliers meet International Labour Organization standards.

Under the existing law, the companies may reject that proposal. With the new law, it will be more difficult. I now want to move on to the improvements that must be made to the bill or, at least, about the proposals my colleague from Témiscamingue and I will put forward in committee because, as I said, although the bill goes in the right direction it may be to vague in some regards.

In fact, there are too many references to regulations. What I want to say is that in the United States there is a special tribunal to settle disputes between shareholders and companies, the Securities and Exchange Commission, or SEC.

The SEC is an effective mechanism, but the bill does not provide for any dispute settlement mechanism. It is said in the bill that the minister will see to it later. I think that we have an opportunity to make constructive suggestions.

Personally, I suggest that we set up a dispute settlement mechanism that can be triggered rapidly. For example, the company could choose an arbitrator, the shareholder could choose another, and a third could be appointed by the minister. Of course, this third arbitrator would be impartial. Such a mechanism would not be costly, it would be fast and it could set precedents.

Unfortunately, the bill says this will be set out in the regulations. This will not be included in the bill. The minister will be able to decide how the dispute settlement mechanism will be set up.

My concern is that shareholders might be at a disadvantage with a mechanism established by the minister. Of course, I am speculating, because I do not know what will happen.

Another point is that the bill does not include the amount of shares a shareholder must hold to make a proposal. This would be set out in the regulations.

Perhaps it will be said that, to make a proposal at the annual shareholders' meeting, a shareholder would have to hold $2,000 or $500 in shares, or whatever. I would a specific amount included in the bill. If it is not included in the bill, it would be set out in the regulations and could be changed whenever the minister wanted to do so.

My concern is that the minimum amount or percentage of shares held by a shareholder could be increased. Thus, the shareholders' power to make proposals would become a power only for the rich, for those holding many shares in the company. This is a threat that we see in the bill, as it now stands.

Another point is the possibility for a shareholder to come back the following year if his proposal has been refused. I suggest that if, in the first year, the shareholder's proposal has been refused, but he has received at least 3% of the vote of shareholders, he could come back the following year to make his proposal once again. The following year, if he has received 6%, he could come back the next year; the third year, if he has received 9%, he could come back the year after that, and so on. At least he could promote his cause within the company.

Some might say that this is some sort of political interference in companies. This is not political interference, but just shareholders taking their responsibilities. This would be excellent for companies, I believe.

It could make companies more responsible. It could bring about sustainable development, as we say in Saguenay—Lac-Saint-Jean, development that respects social and environmental rights.

A company, whose name escapes me, made an investment in the Philippines, and shareholders suggested that it should get out of this investment because of the catastrophic environmental impact mining could have on people. The company kept mining there, and the environmental impact was indeed serious. The company incurred heavy losses.

Although the tone of my remarks is admittedly social, I must recognize that this empowerment of shareholders can also have a positive impact on companies in the long term. Companies should have a long term vision of their business. Like the governments, they must respect the environment and social standards.

There is another positive element for companies and even for Canada. If the president of an U.S. union that has a pension fund wants to invest in a business headquartered in Canada but cannot issue shareholder proposals, he could very well say “I will not invest in Canada, because my rights as an investor and shareholder are infringed upon”.

It can limit investment in Canada. If the bill is amended properly and allows for a healthy dose of shareholder activism, I think it would be good for investment in Canada because, as I was saying, the rights of shareholders would be respected.

I recognize that this is not simple, but it gives me hope. I only talked about section 137 of the bill. There is a lot more in this bill, which is quite voluminous and on which bureaucrats have been working for several years.

The Bloc Quebecois and myself have several reservations, particularly with regard to securities. We will try to express these reservations in committee. What I wanted to focus on today was really that part of the bill that opens the door to what is called shareholder activism.

One of the pioneers of shareholder activism in Canada—there are several—who is better known in Quebec and who has been dubbed the Robin Hood of the banking industry is Yves Michaud. As a shareholder dissatisfied with the behaviour of our voracious banks, he attended a shareholders' meeting to submit proposals for increased transparency on the part of the bank and for more reasonable salaries for bank executives.

One of Mr. Michaud's proposals was aimed at ensuring that a bank executive's salary was not more than 40 times higher than the salary of an employee in one of its branches. This would have introduced a social component in the behaviour of banks.

The Shareholder Association for Research and Education, in Vancouver, of which Peter Chapman is the director, does a lot of work in this regard. The Interchurch Committee on Corporate Responsibility and the Social Investment Organization, for which Tessa Hebb, a professor at the University of Ottawa, works, have been working on this for a number of years.

There is the Fonds de solidarité des travailleurs du Québec. This represents the largest union in Quebec that is interested in these issues. I am also thinking of François Rebello, who is presently working on these issues, saying to unions and pension funds managers “Listen, give me the mandate to go to shareholders' meetings, and I will report back to you on them. Give me the right to vote for you”.

All this is shareholders putting democracy to work. All this is the democratization of capital. I am not saying that this will change the world. All I am saying is that this can be a useful tool when businesses with a very high global productivity are tempted to do things like laying off workers, polluting the environment, overexploiting natural resources. If we act responsively as owners of pension funds, it could make a difference. One out of every two dollars on the financial market is owned by workers. This is important.

That is about all I wanted to say, and I hope that my remarks will have an impact on the decisions of the standing committee on industry. I hope the committee will be receptive to our proposal to include in the bill elements that could help create a culture of shareholder activism.

Canada Business Corporations ActGovernment Orders

1:15 p.m.

NDP

Bev Desjarlais NDP Churchill, MB

Mr. Speaker, the bill is the first major overhaul of the Canada Business Corporations Act since 1975. It also overhauls the Canada Cooperatives Act and seeks to harmonize the Canada Cooperatives Act with the Canada Business Corporations Act.

Shortly after it was elected in 1993 the Liberal government began a lengthy consultation process on overhauling the Canada Business Corporations Act, a process which has led to the introduction of the bill. The government consulted over 1,700 corporations, corporate associations and corporate law firms but only 41 citizens groups. It appears to have largely ignored the contributions of citizens groups.

Although the consultation process was drawn out over a long period it was not a fair process and the government clearly did not consult as broadly as it should have.

To add insult to injury, after waiting 25 years to overhaul the Canada Business Corporations Act the Liberal government is all of a sudden in a big rush to push the bill through the House as quickly as possible. Why is there such a rush to pass it after 25 years?

After 25 years of overhauling the act we have the Broadbent commission, chaired by Ed Broadbent, whose panel includes representatives from business and labour. The panel is going across the country holding consultations on the issue of corporate responsibility. Those two words, corporate responsibility, probably shock the heck out of the governing party.

The Liberal government is clearly rushing to get the bill passed before the Broadbent commission finishes its work next month. After waiting 25 years the government will rush the bill through within the next 30 days. It wants to avoid addressing the issues the Broadbent commission is dealing with.

The Minister of Industry has assured Mr. Broadbent he will take the commission's findings into account. If that is so, why is the government in such a rush to pass the bill after 25 years?

The minister is taking a similar approach to another bill, Bill S-17, which overhauls the Patent Act. He says there is no time to deal with the problems of the Patent Act which have caused the price of medicine to rise by 87% in the last 10 years. One in ten Canadians cannot afford the prescription medicines they need. There has been an 87% increase in prescription drug costs. This is a serious problem. However the Liberal government does not want to deal with it so it says there is no time.

The real issue is that the Liberal government is putting big corporations ahead of the sick and elderly in Canada who are struggling to pay for their medicine.

It is the same issue here. The government does not want to deal with the findings of the Broadbent commission. The Broadbent commission, unlike the government, is talking to ordinary citizens who are concerned about democracy and corporate responsibility. The Liberal government consulted only with corporations and after 25 years it is suddenly in a rush to pass the bill.

The bill has a lot of technical amendments to bring the act up to date with our current legal system and allow corporations to make better use of electronic communications. That is not a problem.

The three parts of the bill of most concern deal with director liability, shareholder rights and Canadian residency requirements. The words shareholder rights and director liability are probably not well enforced on the other side.

The bill makes it easier for corporate directors to defend themselves from lawsuits if they break their fiduciary responsibilities. Canadian governments have a long history of breaking fiduciary responsibility. They have been doing it to first nations people for decades.

At present corporate directors can use the defence of good faith reliance. They can defend themselves from lawsuits by showing they have acted in good faith and relied on reasonable information from experts like accountants, economists and engineers. Bill S-17 would replace the defence of good faith reliance with a new defence called due diligence.

The Liberal government is trying to make corporate directors even less accountable by removing the obligation to show that they base their actions on facts and expert opinions. Bill S-17 would switch to the more vague language of due diligence which could mean anything and be interpreted in almost any way by the courts.

Why is the government making the language clearer in the rest of the bill but less clear in the section dealing with director liability?

If anyone thinks corporate directors need to be less accountable, as the bill would ensure, they need only look at the Westray tragedy. The bill deals with civil and not criminal liability. However the two are related because the managers of the Westray mine avoided both criminal and civil liability for the deaths of 26 coal miners. Today one of the Westray managers manages a Canadian owned mine in Central America.

I want every member of the House to recognize that it was Justice Richard's inquiry, a long, drawn out inquiry into the Westray tragedy, and its recommendations that prompted the government to put in place criminal liability for corporate directors and executives who knowingly put lives at risk. It was Justice Richard who asked the government to respond.

What has the government done? Nothing. To this day, nine years after the tragedy, nine years yesterday, the government has done nothing. It has already been a number of years since Justice Richard's recommendations were made.

Prior to the election the government made a big show of how it would come forth with legislation to deal with the issue. What are we now hearing? The government will consult industry. After Justice Richard's lengthy inquiry that is its biggest concern. It would rather not deal with the issue at all.

We need to put the bill before committee and have public hearings on it. Let us listen to what industry has to say because a lot of corporations live by the rules and have ethics. They are not the ones for which we bring in laws. It is for the ones which do not have ethics and do not care about workers that we have laws. Not all citizens will commit criminal acts but we want to be able to charge those who do and hold them accountable. The corporate manslaughter issue is about holding corporations responsible.

We have been waiting for the bill for how many years? How many years has the issue been dragging on? Since 1993 the government has had lengthy discussions. We are rushing the bill through now, but where is the legislation on corporate manslaughter? Why is it not being rushed through the House? Why do we not have it on our plates to deal with? It is because the government is not concerned about it.

Hon. members might gather that I am very passionate about the Westray tragedy. I come from a mining community and have seen numerous deaths over the years. Some were accidental and unavoidable, but for a number of others there should have been accountability. When workers go into those places they do not have the same rights as each of us. If we get killed in the House, if someone gets us at the door coming in, they will be liable for murder. It is not the same for ordinary workers going into their workplaces. We are protected. Other workers are not, and that is because the government has failed to bring in legislation.

To give credit where it is due, the bill makes progressive changes on the issue of shareholder rights. My colleague from the Bloc mentioned a number of them. Although the bill does not go far enough in giving shareholders real influence over corporations, it is an improvement.

Bill S-11 would allow shareholders to submit resolutions at annual meetings on any issue pertaining to the business of the corporation. At present, shareholder resolutions pertaining to social or other issues not related to the profitability of the company are not allowed.

However in my view social issues are related to profitability. I do not buy from companies which have substandard labour legislation or take part in human rights violations. For years I made a point of boycotting grapes because of the treatment of farm workers in California and throughout the world. I make a point of making a statement. If a product's country of origin is not marked I take it to the grocery store till and ask. If they cannot tell me I do not buy the product. If it comes from a country with a poor human rights record I do not buy it.

I am not the only one who does that. A lot of responsible, principled people do that because they genuinely care about the people in their country and those throughout the world. I am proud and happy to say that I believe the majority of people would do that if they knew those violations were taking place.

I do not buy rugs that come from certain countries unless they have a tag that says they are not made by child labour. I do not buy certain running shoes. I and a lot of other people do not wear the hats or the logo of certain companies. Many people want to know where products come from and they will make a point of asking.

I prefer to buy Canadian made items because, at least for the most part we are not as bad as other countries. Bad practices do take place in the workplace in Canada but for the most part we are doing a good job. Canada should not lower its labour standards nor diminish workers' rights or its treatment of children. We need to promote Canada's good practices throughout the world.

I would like to return to the issue of profitability of a company. If shareholders find out that the company they partly own is polluting the environment, today they cannot propose a resolution calling on the corporation to put a stop to it. Bill S-11 would make this shareholder resolution possible, and that is a good move.

Another improvement to shareholders' rights that our party supports is the ease with which shareholders would be able to communicate with each other. Under the current Canada Business Corporations Act, it is illegal today for shareholders to solicit proxy votes from other shareholders unless they go to the great expense of sending out a circular to all shareholders. Bill S-11 would allow shareholders to communicate in other less expensive ways, including websites.

We agree with the changes because they would make it easier for groups of small shareholders to band together at shareholders' meetings. It is sad to say that shareholders have to fight to have a say in a corporation that they invest in.

It is important to note that the Liberal government is hardly breaking new ground with these improvements to shareholders' rights. Canada is just playing catch up with the United States which has some of the most progressive laws in the world regarding shareholders' rights. It shows how Canada, under the Liberal government, has fallen behind on some progressive issues.

There are two specific areas where the bill does not go far enough in expanding and improving shareholders' rights.

First, shareholders should have the right to obtain information about a corporation's compliance with the law. It is hard to believe but today corporations do not have to disclose their non-compliance with the law. It can be very hard for shareholders or other people to find out if a corporation is violating labour laws or laws to protect the environment. It is even harder to find out if these violations occur in other countries. Corporations should have to be completely open and transparent with their shareholders about these issues.

Many people want to be ethical investors. They want to know that when they buy shares in a company they are not contributing to the destruction of the environment or violating human rights. Shareholders should have the right to know these things. We emphasize that Canadians do not want to see their Canada pension plan dollars invested in unethical funds, such as in tobacco companies or in mining companies, that are literally wiping out villages in other countries. I know the issue of Talisman oil has come up in these discussions already today.

Shareholders' rights could also be improved by creating a shareholders' rights watchdog group. Many states in the U.S. have created these sorts of groups and they are working out very well. Corporations get shareholders to sign up to the shareholders' rights group. This costs the government and the corporations nothing. All the corporation is doing is inserting a form in a mailing that it has to send out anyway. A shareholders' rights watchdog group is funded and run by its members. There should be no objection to putting it in.

I would like to speak about the issue of Canadian residency. Bill S-11 reduces the requirement for directors of chartered corporations to be residents of Canada. At the present time a majority of the board of directors of a corporation chartered under the Canada Business Corporations Act must be Canadian residents. The current CBCA also requires that a majority of the members of any committees of the board be Canadian residents. Bill S-11 reduces the Canadian residency requirement to 25% of the board of directors and completely eliminates the Canadian residency requirement for committees of the board. There are good arguments for and against the Canadian residency requirement.

On the one hand the argument in favour of the Canadian residency requirement is that in theory if the directors of Canadian corporations live in Canada, they would be closer to the consequences of the corporations' actions and the corporations would therefore be more socially responsible.

On the other hand the existence of these rules has not done much to turn Canadian corporations into good corporate citizens. Many corporate directors live in places such as Toronto and Calgary while their corporations do business in other parts of the country or even abroad. This has not stopped Canadian corporations based in the financial capitals of countries from closing mines and mills in the hinterlands, breaking labour laws, polluting or even violating human rights.

The Canadian residency requirement is a disincentive for corporations to charter in Canada. Canada is the only G-7 country that imposes residency requirements. There are four provinces that do not impose residency requirements: New Brunswick, Nova Scotia, Prince Edward Island and Quebec. Corporations that want to get around the residency requirement can already do so by chartering at the provincial level.

Since it has not done much good to make corporations into good citizens, reducing the Canadian residency requirement may help make Canadian corporations more internationally competitive at little cost. However the issue does seem to warrant more consideration and discussion. It would be nice to hear, for example, what the Broadbent commission has to say on the issue but unfortunately the Liberal government is rushing headlong into the bill before the commission finishes its work.

In conclusion, there has been much discussion over the last few years about corporate responsibility, ethical corporations and good corporate citizens. For the most part corporations are good business operators and good managers that abide by the rules. However it is the same as with anything. We need legislation to take to task those corporations that do not do so, those corporations that finagle, manipulate, and are not upfront and honest with their shareholders. Those are the ones we are dealing with. We need to give shareholders the right to check things out in the same way that corporations have the right to check things out. Shareholders need to have the same rights.

It is crucially important that the government move forward on the whole issue of corporate criminal liability. Under absolutely no circumstances whatsoever should one more worker in Canada die with a corporate executive or director getting away with it if he or she knowingly put that life in jeopardy.

I will once again mention that as of yesterday over the past nine years there were 26 deaths and no one has been held criminally responsible. What have we done to address that? Nothing. It will not go away this time. We will not let it be put to rest.

Week after week we will continue to remind the government that it made a commitment to the people of Canada prior to the election last year that it would deal with the issue of corporate responsibility and criminal liability. We will make sure that it keeps its promise and, if it does not, we will make sure that Canadians hear over and over again that it has failed to do what it promised.

Canada Business Corporations ActGovernment Orders

1:35 p.m.

NDP

Libby Davies NDP Vancouver East, BC

Mr. Speaker, I thank the member for Churchill for her very eloquent remarks. She outlined very well some of the real problems that Canadian consumers, citizens and active participants in society face when it comes to dealing with megacorporations. A lot of people feel powerless. They feel like they are individuals taking on a massive structure which by its very nature is very undemocratic.

The hon. member for Churchill has provided some very good evidence of some of the problems facing us in terms of dealing with these very undemocratic structures.

The member gave the example of the Westray disaster and the tragic deaths that occurred there nine years ago. The fact that the government has not taken any action is regrettable and again another indication of how this part of our society, these corporations and massive institutions, has been allowed to get off scot-free. They operate in a realm where most of us feel like we have very little recourse to deal with them. We could go through the judicial system, which is hugely expensive, but we would be up against a corporation that has very deep pockets.

I would like the member to comment further on the growing movement of consumers who are taking action into their own hands. Consumers say that they will make choices about what they do. They will not use their hard earned dollars to purchase goods or services from corporations that are blatant in terms of their disregard of human rights, the environment or the way they treat women or minorities. This movement is growing very strong in Canada. Would the member agree with that?

Canada Business Corporations ActGovernment Orders

1:40 p.m.

NDP

Bev Desjarlais NDP Churchill, MB

Mr. Speaker, there is no question that a majority of people would agree with that. My colleague and I and the rest of our caucus went to Quebec City to the people's summit because there were concerns over trade issues and the way huge corporations were starting to control the political agenda and the legislation in numerous countries.

The legislation would protect people and give them information. Our party believes that individuals should be allowed to decide. They should be given the information on which to decide about an issue such as genetically modified foods.

If there is nothing to fear, the information should be put on the label and individuals should be allowed to decide whether or not they want to take that chance. The same applies to buying products made in other countries where maybe the labour standards are not up to snuff.

We know there is a problem in Indonesia so we do not make a decision to stop buying coffee there. However we will not buy coffee from Indonesia if we know that its farmers are not being treated fairly or that someone is running roughshod over the people and violating human rights.

We are not jeopardizing the rights of Canadian citizens by saying they cannot do something. We are saying that individuals should be given the information. Information is what it is about. Everyone has the right to ask those questions. We should not have legislation in place, either through this piece of legislation or any other, that says it might jeopardize corporate profitability.

Is corporate profitability more important than knowing that a four year old is sitting at a loom making a rug we are going to walk on so that we can get it for some $20 less? How many of us, if we knew that a four or five or six year old was working on a loom day after day to put a rug under our feet, would buy the darn thing? We would not.

However let us go a step further, have some principles and say that people have a right to know where something is made. They have a right to know if a company is using child labour or if it is paying wages below the standards that it is supposed to. We have a right to know these things.

The legislation should be about the rights of shareholders to control what their corporation is doing. If they are investing they have a right to know where the corporation is investing and if it is breaking laws. That is what we are asking. We are not saying that shareholders cannot do it. We are saying they have a right to know and the right to get information in order to make decisions.

Canada Business Corporations ActGovernment Orders

1:40 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Mr. Speaker, I commend the member for Churchill on her impassioned speech and her reference to the Westray disaster in Nova Scotia. As a Nova Scotian it means a great deal to have members of parliament from other parts of the country recognize the call for action that is represented by what happened in Westray.

I learned a great deal about consumer power and the power of consumer advocacy from the hon. member for Churchill, even about ethically raised grapes. I would suggest that any farmer or jurisdiction which allows grapes to be raised in an unethical manner will be subject to the wrath of grapes from the hon. member. Further to that I will also recognize that we have global leadership provided by some companies, for instance, on issues of the treatment of animals and animal testing and that sort of thing.

An interesting question dawned on me the other day. There are companies that for years have marketed against animal testing. I think the Body Shop was probably the first company. The other day I was in a pet supply store buying shampoo for my dog. I looked at the label of the dog shampoo and was shocked and appalled because there was no warning against human testing. Perhaps that is another issue for another day in this place and for now we can move forward, but right now my dog is using shampoo that may have been tested on humans. That is clearly a loophole we should seek to fill.

Bill S-11, an act to amend the Canada Business Corporations Act, is a very important and long overdue act. The bill comes to us from the Senate, where it should be noted that a very important amendment was put forth by my colleague, Senator Oliver, and adopted by that House.

Senator Oliver's amendment corrected a major flaw in the act. Before the amendment there was no statutory review of the act, an act that has a major impact on Canada's business framework and indeed on our competitiveness. The amendment was proposed because it is recognized that in a global, hypercompetitive, ever changing economy we cannot leave legislation or a regulatory framework like this untouched for 25 years, as was the case in this instance.

When we are looking at the types of policy frameworks that companies or investors look at when determining where to invest in the world, not only is tax policy important, and it is, or regulatory burden important, and it is, but increasingly issues of corporate governance are moving to the forefront as being extremely important in every country in the world. We need to ensure that we have clear, consistent, up to date policies in that regard that are reflective of those that exist in other countries.

While I am glad to see the government finally move forward on this issue, the fact that it has been 25 years since we have had major updates is unfortunate. I heartily commend the initiative and the amendment of Senator Oliver which will ensure that this does not happen again.

Canadians are battling on a daily basis to attract investment and capital to our country. If we look at the secular decline of the Canadian dollar over the last 30 years, much of that has to do with declining levels of productivity. Productivity is closely related to levels of investment, and when we fail to attract investment usually the consequence is that we fail to develop greater levels of productivity in our country.

Of course that is reflected in our limp loonie, our falling dollar, which continues to be a source of concern if not embarrassment for many Canadians as Canadians see their standard of living decline with the declining dollar. In fact, Canadians are taking a pay cut every time our dollar drops relative to that of the U.S. These are some of the issues we have to consider.

Certainly corporate law administration in Canada has been consistently quite good. On the issue of corporate governance addressed by the legislation, Canada has not had a bad record, but we have failed in many ways to keep up to some of the trends that have occurred in other countries and with our trading partners.

In researching our response to the legislation, I was shocked to find that a 1996 recommendation by the Senate banking, trade and commerce committee to institute a review within 10 years was actually rejected by the industry department. The government's reasoning at the time was this:

The increased recognition of corporate law and corporate governance issues as factors affecting the competitiveness of corporations will likely ensure the continued improvement of corporate laws.

That is a great leap of faith coming from the government. I would argue that where government does have a responsibility in a market driven economy is to set in place the framework within which the private sector and in fact the public sector can work and develop. In not rigorously maintaining and updating its regulations relative to corporate governance issues, the government has clearly abdicated its responsibility in this regard.

This is just one part of competitiveness and one part of the framework required to ensure to investors looking to make investments anywhere in the world that Canada is a good place to do business and that in fact, along with tax policy and regulatory policy, along with these other issues, corporate governance is increasingly important. I would hope that the government would become much more vigilant in evaluating the threats and opportunities in this competitive global environment and would move more proactively in addressing them with legislation in the House.

Again this legislation came to us from the Senate and again it is reflective of some of the very positive benefits of our Senate and of some of the forward thinking and visionary approaches taken by our members in the upper House. I would commend them for their input on this initiative and for their amendments, which in fact have improved the legislation.

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An hon. member

Senator Brison.

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Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

One of my hon. colleagues has referred to me as Senator Brison. That is not the case, but we are still waiting.

We need to impress on the government that its policies relative to an industrial policy for the country and relative to a framework for growth and competitiveness have been sadly lacking. That the legislation is coming to us after such delays and dilly-dallying is unfortunate. We need to ensure on an ongoing basis that we are updating our corporate governance rules and that not only are we keeping up with global trends but perhaps actually seeking to set some global trends in this and in other areas.

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Progressive Conservative

Rick Borotsik Progressive Conservative Brandon—Souris, MB

Mr. Speaker, once again I congratulate my friend and colleague from Kings—Hants who certainly has spent an awful lot of time in the House this morning.

There was a comment made suggesting that perhaps he was a senator from Kings—Hants. Knowing full well that it is the hon. member's birthday today, does that have anything to do with the fact that his age is the reason he was referred to as senator?