Shareholder
Advocacy
Federal
government agrees to end discrimination against
socially responsible shareholder proposals
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.
For
further information, see SIO's
letter of response.
