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.
