Senate Committee to report back in fall on shareholder rights legislation

The Senate Committee reviewing new shareholder rights legislation will write its report over the summer -- putting the issue into the House of Commons this fall.

In March the federal government introduced Bill S-19, an act to amend the Canada Business Corporations Act. According to the Social Investment Organization and shareholder rights groups, the bill continues to discriminate against investors making shareholder proposals to companies on social and environmental matters. This is the result of wording in the act that continues to enable management to reject shareholder proposals for “general economic, political, racial, religious, social or similar causes" unless the shareholder can prove that the proposal substantially affects the business or affairs of the corporation.

This wording gives management the right to reject proposals and force shareholders to defend their proposals in court, said SIO Executive Director Eugene Ellmen. "Because of the costs of such action, the wording effectively gives management arbitrary power to exclude proposals," he said.

A similar clause has been used several times as grounds for refusing to circulate a shareholder proposal, particularly since 1987 when the Ontario Court of Appeal, in Re Varity Corp. and Jesuit Fathers of Upper Canada et al upheld Varity's decision not to circulate a shareholder proposal on disinvestment from South Africa. This decision has had a major dampening effect on the shareholder process in Canada. This is particularly striking when you look at the flowering of active shareholdership in the US. Most recently, the clause was used to reject a resolution filed last year with Talisman Energy asking for information on Talisman’s activities in Sudan.

Ellmen said the issue likely will move to the House of Commons in the fall when the Senate Banking Trade and Commerce Committee reports on hearings it held this spring on the Bill.

"At that time we'll ask our members to once again step up their efforts to contact local MPs and cabinet ministers to show their support for a more open shareholder process," he said.

For information, see SIO’s brief to the Senate

Back to news and archives