Madam Speaker, I would first like to congratulate my colleague on her speech. She was here back when we started talking about this bill to modernize Canadian companies.
I am very pleased to see this bill because this matter was important to the previous government, our government. It is the product of the work done by my colleagues who were here at the time, along with the other members of that Parliament. It stems from a legislative review that a House of Commons committee conducted in 2010, which led to more in-depth consultations in 2014 and the solutions we saw in budget 2015.
I had to laugh when I heard the Minister of Economic Development promote diversity on corporate boards and talk about the importance of considering viewpoints from a variety of perspectives, from all kinds of people and cultures, considering that he advocated for a single economic development minister for the whole country. Seriously.
Back in the day, we were lucky because each region of Canada had its own economic development minister. I am sure that brought some diversity and some interesting debate to the table during cabinet meetings. Unfortunately, this government decided to get rid of that diversity in cabinet by not appointing ministers responsible for regional economic development agencies.
Now, let us return to the matter we are debating today. An American president once said that he liked the noise of democracy. Unfortunately, the same cannot be said of corporate boards in Canada, because the democratic process used by many Canadian companies is much more silent. At present, shareholders can vote for directors, but their vote is largely meaningless and has little to no influence on the outcome, as surprising as that may seem.
Some will even say that the election of corporate board members in Canada is more dictatorial than it is democratic. The current process only gives shareholders one option, and that is to vote for a candidate for a board position, or to abstain. In other words, if no one can vote against a board member, it only takes one vote for a candidate to be elected.
For years now, shareholders big and small have expressed frustration with the way corporate boards are voted in. They can clearly see that these boards have no accountability, because shareholders have little to no voice when it comes to electing them. When board members become inflexible or too tied to the opinions of management and they no longer represent shareholders' interests, in a way, shareholders no longer have any flexibility to remove individual board members or the entire board.
About 10 years ago, Canadian shareholders began working with the Canadian Coalition for Good Governance to call on Canadian businesses to voluntarily adopt a majority voting policy, which means that when a board member gets less than the majority of votes, he or she must step down from the board of directors, which must accept the resignation, unless there are exceptional circumstances.
The coalition's efforts are definitely starting to pay off, given that, over the past few years, more and more Canadian firms have adopted such a policy. Nearly everywhere, particularly in the United Kingdom, Europe, and Australia, and in most developed counties and markets, boards are elected by shareholders through a majority vote, that is, they must obtain a majority of the votes cast and not simply a plurality of votes, as is presently the case in Canada.
It is a bit embarrassing to see that Canada is still out of step with the rest of the world on such a fundamental issue as corporate governance. Whatever the historic reasons, the time has come to adopt a majority voting system in Canada to allow shareholders to have a say in how their corporation is run.
Jean-Philippe Décarie said the following in La Presse: “Large pension funds and institutional investors have been calling for this fundamental rule of democracy to be applied for years. They want boards of directors to do more to defend the rights of shareholders.”
The bill before us today is essential and it is what stakeholders have been calling for.
What is more, it requires some corporations to present shareholders with information on the diversity among board members and senior management. The purpose of this requirement is to make boardrooms more diverse.
In June 2014, the minister of labour and status of women at the time tabled a reported entitled “Good for Business: A Plan to Promote the Participation of More Women on Canadian Boards”. This report set out the methods that the public and private sectors could use to increase the representation of women on boards. Even at that time, there was talk of making changes to boards.
In October 2014, women held nearly 20.8% of seats on boards of registered companies. That number is now 30.1%, according to what the minister said today.
The previous government's 2015 budget proposed:
...to modernize Canada’s federal corporate governance framework to increase women’s participation in corporate leadership....
[by] using the...“comply or explain” model....
Amendments will also be proposed to modernize director election processes and communications with shareholders...
Many activities were initiated to promote greater gender parity on Canadian boards. The resulting momentum will help increase the representation of women on boards to over 30% by 2019, as recommended in the report entitled “Good for Business: A Plan to Promote the Participation of More Women on Canadian Boards”, which was tabled in 2014.
Quebec is one province that took a step in that direction by passing a law on crown corporation governance. That law came into effect in 2006, and women now make up 52.4% of those board members.
However, the law does force boards and crown corporations to recruit women and ensure proportional female representation. Those who were listening to what my colleague was saying earlier will know that the idea is for women to become board members because of their skills and what they can contribute, not because corporations are forced to fill a quota. I think that is important.
With respect to diversity on corporate boards, we should also talk about the age of board members. I think we need incentives related to that, too. In 2013, a Quebec organization called Force Jeunesse surveyed board members of 22 large crown corporations in Quebec, and the results were disappointing. Only 0.07% of all board members were under the age of 35. The Régie des rentes du Québec was one of the very few crown corporations with a board member under the age of 35. At the time of the survey, the average age of board members was 51.
If we want boards to be more diverse and more innovative, as the minister mentioned earlier, boards of directors must also take the age of their administrators into account.
The law is no longer up to date if we want to remain competitive in an increasingly globalized world. Good corporate governance is one of the mechanisms that help support economic efficiency and growth. I believe that the proposed legislation will act as a critical foundation upon which Canadian companies can innovate and grow to scale in the modern economy.
Given that the last comprehensive amendments to the Canada Business Corporations Act were made in 2001, the act has not kept pace with certain international best practices and the rules governing publicly traded companies.
Improving the director election process and supporting diversity on boards will bring different views to the table and help foster innovation. Modernizing shareholder communications, improving corporate transparency, and clarifying competition rules will help ensure that Canada's marketplace frameworks reflect the new economic realities.
In order to grow and thrive in the global economy, Canada needs a strong corporate governance framework that both reflects and facilitates the best practices of Canadian corporations. I will therefore be voting in favour of this bill, which the previous government worked so hard on, while the current government is reaping the benefits of that work today.