I would like to thank the committee for inviting me here today.
The Institute of Corporate Directors is Canada's association for boards and directors from the for-profit, non-profit, and crown sectors. We represent about 12,000 organizational and societal leaders who direct and lead their companies and play a significant role in determining the strategies for many of our country's most important institutions. We train Canada's board leaders and work with stakeholders to socialize the crucial importance of strong governance. The work we do with and on behalf of our members has a positive impact on Canada's economy by reinforcing trust and confidence in our institutions.
We have been working with the department for the past three and a half years to communicate our opinions regarding the review of the CBCA, and to express support for many of the initiatives that have ended up in the proposed legislation, such as the proposal to allow corporations to use notice and access. We would like to commend the government for the measured approach it has taken to this review.
Canada's corporate governance regime is a principles-based one. Our public issuers are subject to an evolutionary and fulsome set of rules and regulations through harmonized provincial securities regulation and stock exchange rules. This is a system that serves us well.
At the end of last year, I ended my term as the chair of the global policy committee of the Global Network of Director Institutes, which includes the major director organizations from 18 countries—from the U.S. and the U.K. to Pakistan and Malaysia. I can tell you that Canada's corporate governance is second to none, and that the common-sense approach we take and have taken is highly respected throughout the world.
In the interest of time, I will focus my remarks on two aspects of the proposed legislation: majority voting and diversity disclosure.
In our 2014 comment letter to Industry Canada, we expressed our support for the modernization of the CBCA but noted that our companies are also subject to a variety of rules, regulations, and legal precedents that inform their operations. Any changes to the legislation should not interfere with the mandates or decisions of those bodies, or add to the regulatory burden of companies by overlaying duplicative requirements. We noted that the TSX introduced a rule in 2014 that mandated majority voting policies at listed companies. This approach provides real consequences for directors who do not receive a majority of “for” votes, but provides boards with flexibility and a proper process to deal with the fallout from failed elections, i.e., when no directors are elected, when an insufficient number of the directors are elected to meet statutory or corporate by-law requirements, or when directors with a particular and necessary skill set are lost.
We support the government's intention to ensure that boards of directors have the confidence of shareholders. However, we continue to believe that the TSX rule is working well and that it may not be optimal to duplicate what has become standard for listed companies. We also note that the TSX rule does not apply to venture companies, which typically have concentrated share ownership and lower shareholder participation at AGMs. Given this, we don't believe that it is appropriate that CBCA amendments apply majority voting standards to venture companies. Moreover, while we know that the government has been attentive to our concerns over failed elections, we believe it is also important to to be mindful of potential similar unintended consequences of these amendments.
In a soon-to-be-released discussion paper, the law firm Hansell LLP—one of Canada's leading authorities on corporate governance matters—has flagged a number of potentially problematic consequences of the proposed amendments. These include uncertainty about the size of the board. That's to say that if a number of directors do not achieve a majority of “for” votes but the board still attains quorum, the board can continue to operate at a much reduced size, say from seven people down to three. Needless to say, a much smaller board may find it very hard to operate effectively. Another potential issue is the inability of shareholders to have a say on the replacement directors. Under the proposal, directors who remain in office can increase the size of the board by one-third. They can appoint whomever they want, and shareholders won't be able to approve or disapprove of them until the next AGM.
A final challenge concerns the potential actions of dissident shareholders. It's plausible that a dissident shareholder with a significant percentage of voting shares may use this change in the legislation to target one or more directors in a self-interested campaign. Without the ability to reject a director's resignation in exceptional circumstances, as is now the case, the board may lose quality directors because they were unfairly targeted.
We would welcome the opportunity to work with the government, and indeed with this committee, to help address these concerns—perhaps simply just through language—and to align the intent of the amendments with the practices that are already in the market.
I would like to spend a few brief minutes on diversity disclosure. First, we would like to congratulate the government for its leadership on this file and for signalling the importance of diversity on boards.
The ICD has been a consistent advocate for greater gender diversity on boards and was an early supporter of diversity disclosure, which eventually became the “comply or explain” rule.
In recent months, we've also been working with our friends at Catalyst Canada, the Canadian Coalition for Good Governance, the 30% Club Canada, Women in Capital Markets, the Business Council of Canada, and others to find new and better ways to socialize how business-critical board diversity is, and to help promote some of the thousands of experienced and effective women up the corporate ladder and into the C-suite and the boardroom.
The ICD believes that the more Canada views diversity as a driver of innovation, the better our boards, companies, and economies will perform. The equation is simple: greater diversity promotes better governance, which in turn promotes more innovation. After all, what is innovation but new thinking translated into the marketplace? In a world of blockchain, artificial intelligence, and market and political disruption, boards have to be more agile, disruptive, and innovative in their own thinking.
In our view, the case for gender diversity has been made. Unfortunately, Canada is a good distance away from where we need to be. In the fall of last year, the OSC reported that only 21% of public companies had adopted a board diversity policy and that only 12% of total board seats are occupied by women.
While disappointing, this isn't necessarily surprising. While many large cap companies have begun focusing on diversity, the Canadian public markets are fuelled by small and mid-cap companies that are often governed by directors who take off their workboots at the boardroom door. These directors are often just trying to keep the company going, maybe help find some more customers, and keep their people employed. Our job is not only to convince them that diversity on their board is good for business but also to make the process easy for them.
Before Christmas, the ICD in collaboration with the law firm Osler, Hoskin & Harcourt launched a board diversity policy template that provides all companies access to a template that allows them to choose how they will diversify their boards in a time frame that makes sense for their business. I believe the clerk has distributed to each of you a copy of this, with some supporting materials. We've had hundreds of downloads of this free tool, and we think it will help provincial regulators and the federal government achieve results that move the dial on gender diversity disclosure.
We're also focused on showing companies that identifying experienced, talented female candidates is not a barrier to board diversification. The ICD maintains a directors register that includes more than 3,500 women, nearly 1,000 of whom have their ICD directors designation, which means that they're not only board-ready but are also innovation-ready.
There are two items regarding the diversity amendments, however, to which we wish to draw the committee's attention.
First, we note that companies would also have to disclose whether they have a policy addressing diversity categories other than gender. While we agree that diversity goes beyond gender, we think it's important to recognize that policy levers regarding diversity really must start with gender. It is simply untenable that more than half of the country's population is so severely under-represented in corporate leadership positions.
The ICD teaches boards how to think broadly and critically. Integral to this is diversity of thought and experience, but we should be cautious to not signal to companies that having three male former CEOs from three different financial institutions constitutes diversity.
Second, we note that these amendments would apply to all distributing CBCA companies. Whereas provincial securities requirements exempt venture companies, federal legislation would mean that small issuers and small boards would be subject to the same reporting requirements as large cap banks or oil and gas companies.
To be clear, we are working to achieve greater diversity across all sectors of the economy, but we have to be realistic and understand that change will be slower in small cap companies—particularly, say, in mining or in IT—than it will be at the big five banks. The objective in the small cap sector is to better socialize the importance of diversity and to help build greater capacity. We look forward to continuing to work with the federal government to this end.
Thanks very much. I'm happy to take your questions.
Thank you, Mr. Chair and committee members. It's a distinct honour for me to be here today to represent Catalyst Canada.
Our goal as a non-profit organization is to help businesses around the world to build workplaces in which women and men of all backgrounds have equal opportunities to succeed. I'll be focusing my remarks from the perspective of working with organizations to close the worldwide gender gap in leadership, wages, and opportunity. I do so in the hopes of providing further context for your deliberations on Bill and specifically addressing the section of part 1, requiring corporations to provide information respecting diversity among directors and their members of senior management as it pertains to women's representation on boards and in senior leadership.
Let me start with a very simple point. What's good for women is good for business. I say this because the issue of gender parity on boards is driven not simply by questions of fairness and equity. This is an issue that speaks directly to Canada's ability to compete and flourish in a global economy. How effectively Canadian businesses leverage diverse talent, starting with women, will be critical to our long-term competitiveness. Achieving gender balance on boards and throughout the executive ranks is widely recognized as a global economic imperative. Furthermore, there's a strong business case for having more women on boards and in senior leadership. Study after study has shown that having more women on boards and in senior leadership on average improves organizations' overall financial performance, enables them to better serve their customers, and allows innovation to flourish. Research from Catalyst and the Harvard Business School has found that companies with more women in leadership also tend to have a stronger commitment to corporate social responsibility.
There's some good news around the issue of women's representation on boards. It's fair to say that the conversation about women on boards in Canada has shifted in an encouraging direction in recent years. The dialogue no longer focuses on why we need more women at the table, but rather how we can accelerate progress. Furthermore, the introduction of “comply or explain” securities law rule amendments, which have now been adopted by almost all jurisdictions across Canada, and the introduction of the legislation we are discussing today are positive, encouraging, and exciting steps forward.
The issue is firmly on the radar. However, the reality is that we are still a long way from reaching parity, which is the ultimate goal. Unfortunately, the pace of change continues to be frustratingly slow. For example, the Canadian Securities Administrators' recent review of comply or explain showed little or no progress for women on boards and in senior leadership positions. It found that only a small percentage of companies had adopted written policies for improving diversity on boards, and it showed that almost half, 47% to be specific, of all TSX-listed issuers have zero women on their boards.
Additionally, as recently as last October the Washington-based Peterson Institute for International Economics reported that men still hold 86% of executive positions in Canada and 93% of board seats. Clearly work remains to be done.
Turning to the “how” with regard to advancing women into leadership positions, the central question to consider is what instruments will most effectively bring about change? Catalyst Canada research suggests that more than a decade of raising awareness, leadership for many prominent business leaders and organizations, and women knocking on the doors of boardrooms have had little impact. Bold action is required to accelerate progress for women on boards. Governments and businesses continue to engage in discussions about the best way to increase women's representation on boards. Around the world there are numerous efforts taking place, from legislative quotas to regulatory actions to voluntary pledges or targets initiated by companies.
Our recent report entitled “Gender Diversity On Boards In Canada: Recommendations For Accelerating Progress”, which was commissioned by the Government of Ontario, looked at the various approaches and their effectiveness. The experience of Norway, which implemented gender quotas for board directors in 2003, tells us that legislative quotas have definitely moved the needle in that country. Other countries, including the United Kingdom and Australia, have chosen mandatory disclosure and transparency in diversity policies for public companies similar to what the bill we are discussing today puts in play. In Australia women's representation shot up from 10.7% in 2010 to 22.7% in 2016, and women comprised 34% of new appointments to ASX 200 boards in 2015.
In the U.K. women's representation on FTSE 100 boards has more than doubled from 12.5% in 2011 to 26.1% in 2015. Thus, these types of policies are certainly an option or interim step for Canada to consider, eliminating protracted debates about the issue of quotas and focusing instead on the policies, practices, and outcomes of the board selection process.
Ultimately, Catalyst believes there's no one right way to accelerate progress for women on boards. What matters is intentional action and the commitment to setting goals and making change. That's why in the same report I just cited, we made 11 recommendations for companies, business leaders, and governments to drive change.
Among these are that TSX-listed issuers set 30% targets for women board directors by 2017 and achieve them within three to five years, that they use at least one mechanism to facilitate board renewal, and that they establish written policies to increase the representation of women on boards. Also, we recommend that governments reinforce the setting of the targets, renewal mechanisms, and written policies; that they track and publish progress; and that they set a minimum goal of 40% for their own agencies, boards, commissions, and crown corporations. In addition, Catalyst recommends that more stringent legislative or regulatory approaches be considered if progress is not made, particularly toward the 30% target.
These recommendations are based on the following. First is the new five-year historical trend data conducted in partnership with the Rotman School of Management, which shows that issuers with more board renewal—be it board term limits or written policies stating they are considering women when recruiting for new board positions—have more gender-diverse boards than those that don't. Second is a review of best practices, learnings, and key models adopted by governments around the world. Third is Catalyst's expertise, which has been gained over 50 years of conducting groundbreaking research to measure and diagnose talent management gaps and developing programs for organizations to leverage top talent and accelerate the advancement of women and inclusive workplaces.
Government policies mandating companies to report the types of actions they are taking to address board and senior management, as well as explaining why they may not have policies in place, force companies to address the issue. They can also provide best practices or proof points for other organizations to implement.
One proven solution is sponsorship, the act of support by someone appropriately placed in an organization who has significant influence on decision-making processes and advocates and fights for the advancement of an individual. The Catalyst women on board program demonstrates the impact of sponsorship. The program pairs a CEO or board chair with a senior executive woman who aspires to board service, for a two-year partnership. The mentor sponsors provide valuable advice and counsel, and critically, introduce the women candidates to their network of sitting directors. Since the program began almost 10 years ago, almost 60% of program alumni have been appointed to corporate boards, and over 130 Canadian companies have appointed “women on board” participants to their boards.
Another proof point can be found in the Catalyst accord. The accord is a call to action for Canadian companies to increase the overall proportion of the FP 500 board seats held by women to 25%. Since the launch in 2012, 86% of the accord's signatories are at or above the 25% goal, including several at 30% or higher.
At the end of the day, while the means to increase women's representation may vary, the key is that it gets done and gets done quickly. Until women achieve parity in business leadership roles in Canada, they will be marginalized in every other area.
Thank you for your attention.
I'm grateful to the committee for the invitation to join you this morning. It's an honour to appear and to share my thoughts on the bill, in particular on the aspects that relate to diversity in the boardroom and the executive suite.
By way of background, I am a law professor at Osgoode Hall Law School and currently a visiting professor at Columbia Law School. I teach and research in the areas of corporate law and corporate governance. Over the last several years, I have focused my scholarly work on the topic of regulatory approaches to diversifying corporate governance.
In my recent book, titled Challenging Boardroom Homogeneity, I study the two main forms of regulation that have been adopted internationally: quotas, which require specific degrees of gender balance in boardrooms, and disclosure regimes, which ask firms to report on diversity levels and practices.
Bill , as we know, proposes the latter, a disclosure-based approach. The need for government intervention in this space is pressing. Using gender as an example, as both Matthew and Tanya have mentioned, the CSA released a report just last year after surveying 677 issuers listed on the TSX. They found that women hold only 12% of these companies' board seats, and that was an increase of just 1% from the previous year. Strikingly, 45% of issuers had no women at all on their boards.
The reality is that in Canada we currently trail a number of other developed economies. With that context in mind, I'd like to offer thoughts on what, in my view, the bill does well and what can be improved.
What does the bill do well? The bill and the draft regulations, as we know, import into the CBCA disclosure requirements that have already been in place for just over two years in most jurisdictions under provincial securities regulation. The bill would require all CBCA distributing companies to report on the gender composition of their boards and their management teams, and on the details of their diversity policies and considerations. All of this would be done on a comply or explain basis. This is certainly a positive development.
In the course of writing my book, I reviewed every diversity-related disclosure provision that exists internationally. In my view, the current rule is certainly among the best, both in terms of the level of information that it requires and in terms of its focus, which is the entire governance ecosystem of the board and the executive suite, not just the board in isolation.
The proposed regulations then go a step further than the existing rule by also requiring companies to report on forms of diversity other than gender. This development has the potential to be an improvement on the rule currently in effect, and that leads me to how the bill can be improved. I have two suggestions.
First, I'd like to return to the conversation that took place in the committee on Tuesday when appeared. During a very thoughtful set of exchanges, both Mr. Masse and Mr. Arya emphasized the importance of defining “diversity”. In Mr. Masse's comments, there was a skepticism that “market forces” alone can be relied on to reach the legislation's goals. I support these sentiments.
As it stands, the draft regulations do not define the term “diversity” other than gender, and that, in my view, is a serious omission.
Why do I say that? In 2010 a diversity disclosure rule went into effect in the United States. Under it, the U.S. Securities and Exchange Commission requires publicly traded companies to report on whether they consider diversity in director appointments, and if so, how, but the SEC made the conscious decision not to define the term “diversity”. Similar to ' comments on Tuesday, the SEC reasoned that diversity can mean many different things and that companies should be given maximum flexibility to express their commitment to diversity in the broadest sense possible.
How did corporate America respond? In my book, I analyzed the disclosures that the S&P 100 submitted to the SEC during the first four years of the rule. My most striking finding is this. While almost all companies complied with the rule by disclosing that they do consider diversity, only about half actually define diversity in terms of gender, race, or ethnicity. Firms, when defining diversity without sufficient regulatory guidance, prefer to focus on a director's prior experience or skills, rather than his or her socio-demographic characteristics.
expressed the view that diversity isn't about checking a set of boxes, that it goes beyond traditional identity-based factors. I understand this view, but I would also like to invite the committee to think about it another way. It need not be an either-or situation. It's entirely feasible to allow companies to discuss diversity in the broadest sense, while at the same time making it clear that disclosures must also include information on identity-based characteristics, such as race, ethnicity, indigeneity, and so on.
A definition of diversity could be drawn from existing federal sources, such as the Employment Equity Act or human rights legislation.
Of course, gender equality is of the utmost importance, and we must move beyond Canada's male-dominated leadership structures. At the same time we have an opportunity to consider the importance of a more holistic diversity, a diversity that includes other characteristics, and this is particularly important given current demographic trends. For example, the city of Toronto is home to more head offices of the leading 500 revenue-generating firms than any other large Canadian metropolitan area.
To use the term of current federal legislation, Toronto is comprised of almost 50% visible minorities, and Statistics Canada projects that groups falling into this category will make up to 63% of Toronto's population by 2031. Yet a recent study by the Canadian Board Diversity Council suggests that the percentage of directors from racialized groups is actually decreasing as compared with previous years, with these persons occupying just 4.5 % of board seats in the FP 500. Can it really be that in a population the size of Toronto's there is such a dearth of qualified racialized candidates?
My second suggestion relates to the importance of data collection and monitoring. If a goal of is to diversify corporate leadership, we cannot assume that the passage of a disclosure rule, in and of itself, will necessarily achieve this objective. If the provision passes, we should think of it as more of a working hypothesis than a foregone conclusion.
On that front, it is essential that the federal government monitor the disclosures and the explanations, and that it work with other agencies, such as the provincial securities commissions, to track levels of representation year over year.
I want to return to that CSA study from last fall. As we've heard, the number of women on boards increased from 11% to 12%, and only 21% of issuers reported having a policy on the nomination of women directors. At first, those numbers didn't surprise me. I thought to myself that issuers reasonably need time to adjust to the new rule and the information that it requires, and also, there's a waiting game. Since only about 20% of firms have director term limits, women won't have the opportunity to join boards until existing directors retire.
But then, the chair of the OSC announced that in fact 521 board seats had become available in the previous year, and just 15% of those vacancies, i.e., 76 seats, were filled by women. That is a troubling statistic, and we have to ask ourselves why the numbers are as they are.
Social science research tells us that we all have a tendency toward unconscious bias, in particular the assumption that men are more effective leaders than women. The work that we're asking the law to do here is really to help shift existing social norms and biases, but the law's ability to do this depends on how strong the existing norms and biases are. In this case, they are deeply entrenched, and it may be the case that for the law to be effective in shifting norms, the law itself has to be equally potent.
That is why, while I certainly support tracking the data, and allowing the comply or explain regime the time to work, I also think that the government has to at least begin a conversation on the potential use of more prescriptive forms of regulation, while being mindful of the fact that they may soon become necessary.
Those are my thoughts, and I really look forward to your questions. Thanks so much.
Mr. Chair, members of the committee, thank you for inviting the Canadian Coalition for Good Governance, colloquially referred to CCGG, to present to you on the topic of Bill . My name is Stephen Erlichman. I'm the executive director of CCGG. With me is Catherine McCall, CCGG's director of policy development.
Before I provide my remarks, let me say a few words to introduce CCGG.
The coalition was founded in 2002 to promote good governance practices in Canadian public companies whose shares are owned by our members. CCGG's members include a wide range of institutional investors, primarily pension funds and third-party money managers, that have an aggregate of approximately $3 trillion in assets under management. Millions of Canadians rely on returns from these investments to fund their retirements. A full list of CCGG's members is available on our website at ccgg.ca.
The coalition is widely recognized in Canada as a thought leader in corporate governance. We are regularly consulted by governments, regulators, and stakeholders for our views. Just yesterday, we intervened at the Supreme Court of Canada in the Livent case because of certain issues we believed were very important in the corporate governance context.
When we last appeared before this committee in 2009, we recommended many of the changes that are in Bill relating to the governance of public companies under the Canada Business Corporations Act, colloquially referred to the CBCA. We are pleased to return today to offer further comments and suggestions. At the outset, I note that all our recommendations relate to part 1 of Bill , which concerns amendments to the CBCA. In particular, we are concerned with provisions that apply to distributing corporations, the term used in the CBCA for public companies.
To begin, my colleague, Catherine, will address the key provisions of that should be maintained going forward. Later, I will review recommendations for further improvements to corporate governance under the CBCA.
Thank you, Mr. Chair, and thank you to the members of the committee for asking us to appear before you.
CCGG strongly urges this committee to support and endorse the CBCA amendments proposed in Bill and to recommend to the House that those amendments be adopted, keeping intact four key governance enhancements.
First is the requirement to hold individual elections for directors. Not long ago it was common for companies to circulate a form of proxy to shareholders where the options presented were to vote for or withhold from voting for a slate of directors rather than for individual nominees. Individual elections for directors are now a listing requirement on the Toronto Stock Exchange; however, nothing prevents this TSX rule from being reversed in the future. Individual director elections are a fundamental matter of good governance and this rule should be set out in statute.
Second is the requirement that a director's term shall end at each annual meeting of shareholders following that director's election. Again, though such a provision is now a listing requirement of the TSX, nothing prevents this TSX rule from being reversed, and we believe annual elections should be set in statute.
The third governance enhancement to be preserved is the majority voting system for uncontested director elections. We consider this to be one of the key reforms of this bill. The CBCA, as you know, currently provides for a plurality voting system. Under such a system, it is not possible to vote against a director. Rather, a shareholder can either vote for or withhold from voting for a director nominee. Withhold votes are, in effect, an abstention, and they do not count. By way of example, a nominee who owns just one share could vote for him or herself and still be elected. We know of no principled reason why this system should remain. The election of directors is a fundamental right of shareholders, and as such, they should have the ability to cast a meaningful vote either for or against a nominee.
Earlier, Matthew referred to the current TSX listing requirements that companies adopt a majority voting policy. We believe this is an inadequate workaround for a number of reasons. First, again, it could be reversed by the TSX, and second, it only applies to TSX-listed companies and not to the approximately 1,500 venture companies that have access to the public markets. Access to those markets comes with accountability, and the requirement that directors be able to be voted against is not an onerous requirement. I think that even venture companies should be accountable to shareholders.
There have been examples. Even companies with this majority voting policy have ended up in the situation of what are known as zombie directors, where directors that have not received a majority of the votes in favour are kept on by the board. We think that is unacceptable.
Finally, Bill should retain the comply or explain regime for board diversity, both the gender diversity and the forms of diversity other than gender, as proposed in the regulations. CCGG supports efforts to improve diversity. We have stated for many years that public companies should be composed of directors with a wide variety of experiences, views, backgrounds, and expertise that, to the extent practical, reflect the gender, the culture, the ethnicity, and other characteristics of the communities in which they operate.
CCGG recognizes that Bill currently reflects changes to the CBCA where there's a perceived consensus among the comments received during the previous round of consultations. However, CCGG has identified the following three additional corporate governance issues that require further consideration. CCGG does not believe Bill should be held up, however, while these additional issues are considered.
First, the CBCA should facilitate the ability of shareholders to nominate directors. Current methods by which shareholders nominate director candidates are quite simply not effective. As a result, director nominees are almost always chosen by the incumbent board or company management.
Further, in our experience, companies very seldom seek input from shareholders when selecting board nominees. Canada is becoming a laggard in this area of governance. In the United States, for example, 39% of the S&P 500 companies have adopted a meaningful method for shareholders to nominate director candidates. We also understand that direct shareholder input into the director nomination process exists in many other countries around the world.
Second, the CBCA should require an advisory “say on pay” vote by means of an ordinary resolution at each annual meeting of shareholders. The area of such advisory votes is one in which Canada is an international outlier. Periodic say on pay votes are mandatory in the United States, Australia, and such western European countries as the United Kingdom, France, Germany, and others.
Third, the CBCA should as a general rule require that the board chair be independent of management. The board chair plays a key role in leading or coordinating the other directors, both during and outside of meetings, in support of the board's obligation to supervise the senior executive team's performance. When the board chair is not independent of management, it results in a serious conflict of interest and obscures the lines of accountability. For example, the oversight of the senior executive team, in particular of the CEO, is one of the board's key responsibilities. A combined board chair and CEO would thus be responsible for leading the body that oversees himself or herself.
Finally, in addition to the three specific issues I've just mentioned, CCGG recommends the creation of a standing external stakeholder advisory body to advise the federal government on corporate governance issues. It's been addressed many times over the past few weeks before this committee that the CBCA has not been substantially amended since 2001, and only twice in the past 40 years. If consensus is what drives this process forward, then we respectfully submit that there is consensus for more regular follow-up.
A standing stakeholder advisory body in corporate governance would support a regular review process. The advisory body could be populated with key government stakeholders and professionals to provide periodic reports on ways to improve the regulatory environment for CBCA public companies as well as federal public financial institutions. Further, such a body could provide helpful feedback regarding the matter in which the provisions in Bill related to diversity are being interpreted and adopted by public companies.
In closing, we thank you for the opportunity to testify before this committee. Catherine and I would be happy to respond to any questions.
The Toronto Stock Exchange majority voting listing rule was adopted in 2014. In effect, it's a majority voting policy that CCGG published in 2006. It took eight years for the TSX to adopt the rule after CCGG published it. The TSX rule applies only to TSX companies, as Catherine said. There are over 1,500 TSX venture companies that are not covered by the rule that should be covered. This is a matter of principle. There is no reason why they shouldn't be covered.
The TSX also is a for-profit company, and the TSX could change this majority voting listing requirement if it wishes.
I was the co-chair of the global network of investor associations until last summer. That's an association of investor organizations around the world, akin to CCGG. I also am a member of the International Corporate Governance Network. Based on my discussions in these various groups, I can tell you that the fact that Canada does not have legislated majority voting is looked at around the world as a huge negative for Canada's corporate governance. Canada is an international outlier in this regard. It's Canada and the U.S., basically, that are these outliers.
In fact, I'll go further. I'll give you an anecdote. I sat beside a senior person in the securities regulator in Chile at a dinner several years ago. Somehow, we started talking about majority voting, and I explained to him that we have a plurality voting system in Canada, not a majority voting system. He started to laugh, and I asked him why he was laughing. He said, “Well, Steve, you're telling me a joke.” I said, “No, I'm sorry, this is not a joke. This is exactly the way it is in Canada and in the U.S. We have plurality voting, not majority voting, for directors.” His response was, “Steve, we are a third-world country in Chile, and yet we have majority voting.”
By the way, these microphones were made by white men, so you can see why there's a problem with them.
I have a number of issues with this bill for a number of different reasons. One of them has to do with what Brian had to say, that this will be it for at least a decade and probably longer. I think this bill doesn't address a number of issues, and it uses one little clause to deal with diversity such that you might as well just forget about it because it doesn't do anything.
Businesses have no problems putting targets on everything. I've worked in business, and everything is targeted, everything is monitored, everything is measured; yet when it comes to this, it seems there's a tremendous amount of apprehension about doing anything.
As far as a diversity policy goes, to my mind, as a committee, we can discuss an amendment as to what it would be and how it would be spelled out, but to say that it's impossible for a company to not have a diversity policy and report it on their annual report by next year is baffling to me. Businesses can turn things around immediately in some cases. I don't want to make it too simple, but you could cut and paste a diversity policy from another business, put it in your report, and report your numbers. That is as much as it would take and you could build it out through your HR department and other things as time moves on. I think that would be a starter.
I think it's also an issue that maybe we're dealing with gender but we're not dealing with visible minorities. I can't understand why we do this. I can't understand why the Liberals in government.... They've put targets on all sorts of things, like targets on the environment. They have a deliverology expert, but yet on this they're not prepared to do it.
I ask the law professor, Mr. Dhir, if you could just make some comments on what the risk is of putting something in here that would get these businesses to get at it.
I want start by noting that the minister has proposed this legislation with no review. Let's be clear on that. I raised this in the House of Commons. He commented on it in his testimony, but there has been no amendment. There is no official proposal in any capacity or a suggestion at this point.
Most legislation that's renewed is often done with a two- to three-year review. I've had many amendments passed by both Conservatives and Liberals on this. It's rather shocking that we don't even have that as part of the tabled legislation, given that this legislation was extremely similar to that of the Conservative legislation prior to it. We've had over a year and a half here.
For those who see this as government intervention, in my nearly 20 years of elected office, I have never had a meeting with a company that didn't ask me about a subsidy they wanted, a tax cut, or some type of state intervention on policy or trade that changed the market forces for themselves. That has been the regular meeting process that they take. The fact that the government now wants to introduce a notion that market forces will not amend to, that should be our responsibility and duty to citizens.
I want to allow the last word to Ms. van Biesen, but I noted the work of the CCGG with great interest and the suggestions you've made for legislation and your responsible comment about Canada as a laggard. I think that's important to note. That's the truth.
Ms. van Biesen, what would you see as a priority for this legislation at the end of the day? There are many, but what would be the top one?