January 17, 2018

Liberals launch a fresh attack on corporations. They may not win

The government is fighting to impose ‘diversity’ on boards and management

Terence Corcoran | Financial Post

As a longtime member of the Association of Correspondents Tracking the War On Corporations, I have embedded with troops of lawyers, activists and corporate officials through the great battles of the last several decades. From the failure to ward off the stakeholder invasion of the 1990s to the great executive retreat at the Battle of Corporate Social Responsibility, on through the managerial collapse on the fields of the sustainability movement and the ongoing assault from green climatists, it has been one corporate defeat after another.

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Introduced by Navdeep Bains, federal minister of innovation, science and economic development, the bill stages two destructive attacks on the corporate model. The first storms straight up through the shareholder-democracy ranks by forcing companies to hold annual elections of individual directors. The second attack swoops in from the top. The government, through Bill C-25, is fighting to impose “diversity” on boards of directors and top corporate management.

The idea that corporations are democracies and should be reformulated along the lines of condo corporations has been around for some time. In the U.S. in the 1970s, Ralph Nader led an early campaign to turn boards into elected governments in charge of legislating businesses, which would also have to submit all “major transactions” to shareholder plebiscites. In Nader’s model, the shareholders are electors who choose directors who in turn select the executives who then submit major decisions to a shareholder vote.

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Montreal governance consultant Yvan Allaire recently outlined in FP Comment the risks of turning corporations into electoral circuses. Allaire noted, among many other things, that the rush to extreme democratization of corporations amounts to a partial outside takeover, via state intervention, of responsibilities that are now assumed by boards of directors.

He warns that managers and directors of major corporations are unlikely to take a stand against the expansion of shareholder powers because, he implies, they have already surrendered to Canadian’s big institutional investors.

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