On Feb. 6, 2001, the federal government introduced a new law removing a clause in the Canada Business Corporations Act (CBCA) discriminating against shareholders on social and environmental issues.

“We are very pleased that the federal government has agreed with us that shareholders have a right to be heard on proposals of social and environmental responsibility,” said SIO Executive Director Eugene Ellmen. “Of course we won’t assume everything is a done deal until the Bill is passed, but certainly we appreciate the government’s movement on this matter.”

Last year, SIO launched the Responsible Shareholder Rights campaign, an initiative to bring pressure on the federal government to end discriminatory treatment of investors bringing forward shareholder proposals on social and environmental issues. The campaign involved amendments to the CBCA, which governs corporate law in Canada. Of particular importance for the SIO is the fact that it governs the rights of shareholders to file resolutions with corporate management and the process of circulating those resolutions to other shareholders.

The critical issue for the SIO is contained in a clause that permits corporate management to reject resolutions filed “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes." Companies have used this clause as grounds for refusing to circulate shareholder proposals on social and environmental issues.

Amendments to the legislation were introduced in March, 2000, but, disappointingly, last year’s bill continued to give management the right to reject proposals for “general economic, political, racial, religious, social or similar causes" unless the shareholder could prove that the proposal substantially affected the corporation’s business. In response, SIO appeared before the Senate Banking, Trade and Commerce committee in May along with the Task Force on the Churches and Corporate Responsibility and Democracy Watch.

Last year’s bill died on the order paper when the federal election was called in the Fall. When the bill was re-introduced on Feb. 6, the objectionable wording was eliminated.

“A proposal can be rejected only if the corporation can demonstrate that the proposal does not relate significantly to the business or affairs of the corporation, or if the requirements for minimum shareholdings and for the minimum length of time for owning shares are not met,” states a government background paper on the new bill, S-11. “This represents further improvements for shareholders from the proposed amendments in (the previous bill).”

While SIO has welcomed the government’s move on this issue, it expressed concern about other parts of the new bill, specifically that minimum share requirements, provision to allow pooling of shareholdings and time requirements for filing proposals are written into the regulations rather than the law. In a letter to the government, the SIO said it is important to put these matters in the Bill to prevent erosion of shareholder rights through regulatory change.

In addition, the SIO asked the government to seriously consider establishment of an independent arbitrator to adjudicate disputes over shareholder proposals between management and shareholders. Such an arbitrator would provide for low-cost and timely resolution of disputes. This proposal is contained in a private member’s bill on the CBCA sponsored by Bloc Quebecois MP Stephan Tremblay.

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