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	<title>IGOPPRegulation &#8211; IGOPP</title>
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		<title>Changes to capital gains taxation: insidious consequences for the intergenerational transfer of Canadian controlled companies?</title>
		<link>https://igopp.org/en/changes-to-capital-gains-taxation/</link>
		<comments>https://igopp.org/en/changes-to-capital-gains-taxation/#respond</comments>
		<pubDate>Tue, 21 May 2024 19:41:45 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[Commentary]]></category>
		<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/la-fiscalite-et-le-risque-de-transformer-nos-fleurons-en-etoiles-filantes/</guid>
		<description><![CDATA[Two weeks after the budget was tabled, Finance Minister Chrystia Freeland now intends to ask Parliament to approve proposed changes to capital gains taxation in a stand-alone bill. This measure has met with an abundance of reactions. The people affected are an assorted group with very high incomes, of course, but these incomes often reflect, [&#8230;]]]></description>
		<content><![CDATA[Two weeks after the budget was tabled, Finance Minister Chrystia Freeland now intends to ask Parliament to approve proposed changes to capital gains taxation in a stand-alone bill.

This measure has met with an abundance of reactions. The people affected are an assorted group with very high incomes, of course, but these incomes often reflect, among other things, a unique situation: a significant capital gain arising from the sale of a business, a revenue property, a family cottage, etc. Few comments have been heard about the taxpayers who are by far the most affected, and for good reason: these are people who die and are taxed on their capital gains, calculated as if they had sold all their assets at the time of their death and for which payment must be made immediately, often forcing the estate to sell the assets to raise the necessary cash.

Even before the increase in the inclusion rate, capital gains taxation was already a major issue of concern for many entrepreneurs and families who control their businesses, and it's one that should be of concern to governments as well.

Indeed, how is it possible to transfer the company to one's estate, when the calculation of the tax payable on the transfer is based on the value of the shares used to maintain control? And, as is also often the case, the family that holds this control—although appearing to be wealthy on paper—does not have the liquidity to pay this tax bill, as the family fortune is largely tied up in the value of the shares. So, to settle the tax bill, the choices are limited and disconcerting to say the least: sell shares and reduce the stake below the threshold of control (and thereby make the company vulnerable to hostile takeover bids) or sell the company.

Of course, there are ways to ensure a temporary deferral, notably by setting up trusts. Some tax experts will suggest schemes to prolong this deferral somewhat. But all in all, these solutions are highly imperfect since they involve sophisticated planning and extremely restrictive choices.

More than 35% of the companies making up the S&#38;P/TSX Composite Index are controlled companies, including many of the major companies often referred to as flagships in different provinces or regions of Canada. At a time when a review of tax measures associated with capital gains taxation is underway, our governments have an opportunity to act by adjusting the tax system to allow tax
deferral on the transfer of a controlled company: this is a lever that our governments must explore.

Why take action?

The tax collected by the government at the time of transfer can be a seemingly large amount that helps make up for deficits. But the risk of seeing a company sold for the purpose of paying tax is an ill-advised gamble for our governments. Numerous studies have demonstrated the essential role played by the head offices of large—and not-so-large—companies in provincial or regional economic ecosystems. Indeed, these companies are deeply rooted in the social and financial fabric of their communities, helping maintain well-paid jobs in addition to providing a significant revenue source for numerous direct and indirect suppliers, including services provided by professionals of all kinds.

The amount of the taxes collected by governments on all the employment income associated with these companies, not to mention the direct tax revenues from the companies themselves, represents much more attractive annual and sustainable revenue than a one-off collection from the transfer to the estate.

Offering a tax deferral to families who control a company is therefore an investment. And a deferral means that, unless these families maintain control, any sale will eventually result in the payment of the amounts owing to the government.

However, an investment is not a gift. Several G7 countries have introduced rules to facilitate such transfers by allowing a form of tax rollover, conditional on preserving employment thresholds and maintaining activities locally. The ideas and solutions proposed by these countries to help maintain local businesses should be considered.

In the absence of any other mechanism for deferring the tax owing on the transfer of shares, it may seem preferable—all the more so since the announced increase in the inclusion rate—for the controlling shareholder to sell the company before their departure; in this way, they will potentially obtain a 30-40% premium for their shares, which, after the tax bill is paid, will leave them (and any heirs) with a net after-tax value equivalent to their current value, but without any increased wealth for the stakeholders and the community.

For those entrepreneurs who can still maintain control and transfer it, let's hope we don't, one day, have to announce the sale of their company to foreign interests for tax reasons. It's not too late to act. The long-term control of our economy is at stake.
]]></content>
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		<title>No clear consensus on diversity disclosures</title>
		<link>https://igopp.org/en/no-clear-consensus-on-diversity-disclosures/</link>
		<comments>https://igopp.org/en/no-clear-consensus-on-diversity-disclosures/#respond</comments>
		<pubDate>Mon, 28 Aug 2023 14:29:01 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Diversity]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/no-clear-consensus-on-diversity-disclosures/</guid>
		<description><![CDATA[Securities regulators may agree on the need to improve issuers’ diversity disclosure, but they can’t agree on how to achieve it. A public consultation on the issue so far isn’t building consensus. In April, the Canadian Securities Administrators (CSA) proposed changes to corporate governance requirements, publishing two approaches for expanding diversity disclosures beyond gender. The Ontario [&#8230;]]]></description>
		<content><![CDATA[


Securities regulators may agree on the need to improve issuers’ diversity disclosure, but they can’t agree on how to achieve it. A public consultation on the issue so far isn’t building consensus.






In April, the Canadian Securities Administrators (CSA) proposed changes to corporate governance requirements, publishing two approaches for expanding diversity disclosures beyond gender [1].

The Ontario Securities Commission’s (OSC) approach would require issuers to report on the representation of five groups (including women) on their boards and in executive positions.

The securities regulators for Alberta, British Columbia, Saskatchewan and the Northwest Territories favoured requirements that would require companies to disclose their approach to diversity without mandating disclosure on specific groups.

The remaining eight CSA members, including Quebec’s Autorité des marchés financiers, declined to pick a side.

[...]

The Canadian Investor Relations Institute (CIRI) found in a survey that many of its members are concerned about collecting information that would be required by the OSC proposal, including sexual orientation and identity, and visible-minority status.

“These concerns stem mostly from privacy but some feel there are too many categories, not the right categories and/or issues with the collection process,” CIRI’s submission stated.

Meanwhile, the Institute for Governance of Private and Public Organizations (IGOPP) highlighted the risks of relying on self-identification for diversity reporting.

“Some prefer to exclude themselves from a group to avoid being labeled, categorized or even simply out of embarrassment or a desire to keep these characteristics confidential. Others will want to ensure that their application is not selected to meet diversity ratios,” the IGOPP said in its submission. “On the other hand, some may see [false] disclosure as a career opportunity.”

These risks also were acknowledged by proponents of the OSC’s approach, such as SHARE. Yet, SHARE argued that enhanced disclosure will ultimately help lower barriers.

“Increasing disclosure helps to make the presence of individuals from traditionally under-represented groups more visible at senior levels of the organization, encourages a more inclusive culture generally, and thus should improve the accuracy of disclosures over time,” SHARE’s submission stated. “[A]cknowledging imperfection is no reason to abdicate the responsibility to regulate clearly and fairly.”

Read more [2]




[1] https://www.investmentexecutive.com/news/csa-ponders-mandating-wider-diversity-disclosure/
[2] https://igopp.org/wp-content/uploads/2023/08/Investment-Executive_No-clear-consensus-on-diversity-disclosures_August-2023.pdf]]></content>
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		<title>The quest for diversity of boards of directors and in senior management of public corporations</title>
		<link>https://igopp.org/en/the-quest-for-diversity-of-boards-of-directors-and-in-senior-management-of-public-corporations/</link>
		<comments>https://igopp.org/en/the-quest-for-diversity-of-boards-of-directors-and-in-senior-management-of-public-corporations/#respond</comments>
		<pubDate>Fri, 12 Feb 2021 20:28:40 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[Reports & Studies]]></category>
		<category><![CDATA[Diversity]]></category>
		<category><![CDATA[Private governance]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/les-enjeux-de-la-diversite-a-la-direction-et-aux-conseils-dadministration-des-societes-ouvertes-2/</guid>
		<description><![CDATA[In June 2009, IGOPP published a Policy Paper on “The Status of Women on Boards of Directors in Canada: Calling for Change”. Almost 12 years later, the issue of diversity on boards of directors still remains partly unresolved. Indeed, women’s representation on boards of directors has doubled during this period [from 15% in 2008 to [&#8230;]]]></description>
		<content><![CDATA[In June 2009, IGOPP published a Policy Paper on “The Status of Women on Boards of Directors in Canada: Calling for Change”. Almost 12 years later, the issue of diversity on boards of directors still remains partly unresolved. Indeed, women’s representation on boards of directors has doubled during this period [from 15% in 2008 to 29.58% in 2020] but the target of 40% gender diversity set in the IGOPP Policy Paper has not yet been achieved.

But by now a broader definition of diversity is proposed, a definition which targets an adequate representation of several groups making up the general population of the society where an organization is domiciled.

Responding to this emerging trend, the government of Canada amended the Canada Business Corporations Act (CBCA) to foster an increased diversity on boards of directors as well as in the senior management of public corporations. These changes, which came into effect on January 1, 2020, aimed at increasing the representation of women but also of Aboriginal people, persons with disabilities and members of visible minorities. These new legal stipulations apply to federally incorporated corporations listed on a stock exchange. Thus 78 of Canada’s largest corporations, drawn from the S&#38;P/TSX index were subjected to these new requirements.

The following table captures, in raw form, the source of disquiet about representation:



This report begins with a brief comparison of the Canadian law with that of other countries. Then we sketch an overview of the representation of designated groups on boards and senior management of the companies subjected to the new legal stipulations. We collected the information which these 78 companies disclosed in 2020 and compiled the above table. We then carried out further analyses factoring in educational variables and age.

Several observations emerge from this analysis; the most significant ones are as follows:

 	Canada is at the forefront of this quest for diversity beyond the representation of women on boards of directors to include diversity in the senior management of companies, as well as the representation of Aboriginal peoples, persons with disabilities and persons belonging to visible minorities. The Canadian government has opted for a flexible approach, emphasizing disclosure, rather than a quota approach, as advocated in some other jurisdictions.
 	The subject companies have interpreted very freely the regulation concerning the number of members of senior management who must be considered for disclosure. The definition in the regulations provides for 5 to 7 senior management members. However, the subject companies defined senior management as made up of some 16 members on average. More than half of the companies seem to have interpreted the regulation incorrectly (but that probably reflects their own internal definition of senior management).
 	Although the gains made over the past decade are notable, much remains to be done in terms of the representation of women on boards of directors as well as in the senior management of companies.
 	Taking into account the variables of age and education, although these two factors are not exhaustive of all factors influencing selection and promotion, we see a clear under-representation of members of visible minorities within the boards of directors
and senior management of publicly traded Canadian companies.

The rate of renewal of board members and senior management is rather slow. Some measures (for instance, quotas, tenure and/or age limit) would accelerate the turnover of board membership but these must be carefully assessed. Absent coercive measures, social systems change over relatively long periods of time.

The laudable goal of increasing the diversity of representation on corporate boards and in the senior management of large corporations will not be achieved without much management goodwill, as well as investors and government prodding, particularly so when that goal includes not only the representation of women but also that of various other groups making up a society.
]]></content>
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		<title>The Angels of Market Efficiency</title>
		<link>https://igopp.org/en/the-angels-of-market-efficiency/</link>
		<comments>https://igopp.org/en/the-angels-of-market-efficiency/#respond</comments>
		<pubDate>Fri, 10 Jan 2020 15:02:22 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[American governance]]></category>
		<category><![CDATA[Hedge funds]]></category>
		<category><![CDATA[Institutional investors]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/the-angels-of-market-efficiency/</guid>
		<description><![CDATA[Mr. Ben Axler, Chief Investment Officer and founder of Spruce Point Capital responds (Financial Post, December 17th, 2019) to my article on short sellers of his kind (Financial Post, December 13th, 2019). He trots out the worn-out argument that short sellers only reveal the sordid truths hidden in the bosom of corporations. In short, “professional” [&#8230;]]]></description>
		<content><![CDATA[Mr. Ben Axler, Chief Investment Officer and founder of Spruce Point Capital responds [1] (Financial Post, December 17th, 2019) to my article [2] on short sellers of his kind (Financial Post, December 13th, 2019). He trots out the worn-out argument that short sellers only reveal the sordid truths hidden in the bosom of corporations.

In short, “professional” short sellers are sort of the guardian angels of market efficiency acting as a countervailing force to the fawning, relentlessly positive and often corrupted recommendations of sell-side analysts! Indeed, sell-side analysts tend to see glasses as half-full; for short sellers, glasses are always empty and… dirty.

The consequences of short-sellers’ actions may be dramatic. The near collapse of the financial system in 2008 owed a good deal to the savage, incendiary role of short selling (particularly of the “naked” sort). The book “On the Brink”, written by Hank Paulson, U.S. Treasury Secretary at the time of the financial crisis, makes clear the noxious role played by short sellers during that frightening period. That’s what angels of market efficiency do!

Mr. Asler invites me to share with him what I find wrong in their report on Canadian Tire. Much, too much for a short article but an overarching theme would be the relative ignorance of the Canadian retail market that pervades their report. Spruce Point Capital assumes the competitive and buying behavior of Canadians are identical to Americans. That assumption has proven costly in a number of instances (Think Target, Kmart, Sam’s Club, Best Buy, Sears). Similarly, Canadian retailers which crossed over to the US market were often taught a painful lesson about the differences between the two markets.

So, Spruce Point Capital’s report on Canadian Tire (CT) is insensitive to the particular nature of the Canadian retail and financial markets. It keeps comparing CT unfavourably to Amazon and Walmart as the be-all, end-all of retailing. That myopic American perspective may explain the case of Dollarama.

Barely a year ago in October 2018, Spruce Point Capital launched a virulent campaign against Dollarama producing a long negative report to buttress its claim that the stock price of Dollarama should or would drop from $46 to $28; the stock price actually leveled off briefly at $31 in December 2018 from which level it soared back to above $45.

I made two basic points in my earlier piece, which bear repeating.

1. Canada is a benign place to practice financial/casino capitalism as our regulators never adopted either of the two following measures put in place in the USA. As a consequence of the financial crisis, the SEC has clamped down on “naked” short selling, the practice of selling shares but delaying the delivery of the shares for as long as possible in the hope of buying back the shares at a much lower price without incurring the cost of borrowing shares from other holders. Also, in 2010, the SEC introduced a measure whereby if the price of a security falls by more than 10 per cent, transactions in the stock are stopped for the remainder of the day and all of the following day.

2. Large institutional investors with a significant position in a company have, or should have, the analytical wherewithal to assess public claims made by short sellers against this company. If they find those claims to be illfounded or even false, they should state so publicly instead of, as is the case now, letting the company fend off the attack by itself. And these large institutional funds should not lend their shares to short sellers of the Spruce Point Capital ilk.

Should Canada let American short sellers roam free and wreak havoc in our financial markets? To ask the question is to answer it.

&#160;

The author is solely responsible for the opinions expressed in this article.

[1] https://business.financialpost.com/opinion/counterpoint-short-sellers-like-us-create-real-value-for-public-markets-by-telling-canadian-investors-the-truth
[2] https://igopp.org/limiting-the-damage-of-short-sellers/]]></content>
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		<title>Carried Interest Warning From Court May Be Trouble for Treasury</title>
		<link>https://igopp.org/en/carried-interest-warning-from-court-may-be-trouble-for-treasury/</link>
		<comments>https://igopp.org/en/carried-interest-warning-from-court-may-be-trouble-for-treasury/#respond</comments>
		<pubDate>Thu, 07 Nov 2019 14:43:38 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[American governance]]></category>
		<category><![CDATA[Hedge funds]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=12033/</guid>
		<description><![CDATA[A recent court case meant to clarify the definition of a corporation intensifies questions about the tax treatment of carried interest, a prized perk for private equity and hedge fund managers. The IRS argued for a broad definition of the term “corporation” in the case. But the legal issue that could come up in the [&#8230;]]]></description>
		<content><![CDATA[A recent court case meant to clarify the definition of a corporation intensifies questions about the tax treatment of carried interest, a prized perk for private equity and hedge fund managers.

The IRS argued for a broad definition of the term “corporation” in the case. But the legal issue that could come up in the future is whether it’s reasonable for Treasury regulations to interpret the term more narrowly in the carried interest context, affecting who can qualify for the treatment.

That question is even more relevant because Treasury is planning guidance that could close what some see as an error created in the 2017 tax law’s treatment of carried interest. The carried interest perk lets fund managers have much of their income taxed at 23.8% rather than at the top tax rate of 37%.

The tax law exempted corporations from having to hold assets for a longer time period before qualifying for the preferential tax rate. Treasury’s forthcoming rules are expected [1] to shut down the possibility that an S corporation could qualify for the exception. (An S corporation is an entity that isn’t taxed at the corporate level, instead passing income through to shareholders for tax purposes.)

But the U.S. Court of Appeals for the Federal Circuit suggested it isn’t so simple: it said the IRS may struggle to defend the rules in future legal fights.

“I don’t think the IRS is going to win on this one,” said Steve Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center.

If future regulations are challenged and invalidated by a court, it could leave open the potential for some private equity and hedge fund managers to take on S corporation status and get the preferential tax rate after just one year. To block that strategy, Congress would have to rewrite the provision in the tax law.

[ ... ]

Looking Ahead

The exact impact of future carried interest regulations getting struck down in court is tricky to pinpoint, because of the nature of private equity and hedge funds.

Private equity funds typically hold assets for between four and seven years, although that can vary, according to Jason Mulvihill, COO and general counsel at the American Investment Council, a private equity advocacy group.

Hedge funds have traditionally had much shorter investment holding periods. One exception is activist hedge funds, which acquire stakes in companies and push for change.

Activist hedge funds that targeted companies in 2010 and 2011, for example, had a median holding period of 458 days, according to an article [2] published in the International Journal of Disclosure and Governance.

Even some activist funds that hold assets for shorter periods may end up altering investment behavior to lock in tax benefits, said Yvan Allaire, one of the article’s authors and executive chair of the Board of Directors for the Institute for Governance of Private and Public Organizations.

If future regulations are struck down in court, those hedge funds may decide to put carried interest into an LLC, which could elect S corporation status.

But being an S corporation comes with a lot of requirements.

“S corporations are just sort of a pain generally,” said Scott Dolson, who heads the Private Equity Industry Team at Frost Brown Todd LLC. “I think you’d probably want to just set it up so that you would not have to convert everything.”

Read more [3]

[1] https://src.bna.com/Mkp
[2] https://igopp.org/wp-content/uploads/2016/01/jdg201518a.pdf
[3] https://igopp.org/wp-content/uploads/2019/11/Bloomberg-Tax_Carried-Interest-Warning-From-Court-May-Be-Trouble-for-Treasury_Novembre-2019.pdf]]></content>
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		<title>Securities regulator to review share sale plans in wake of Bombardier controversy</title>
		<link>https://igopp.org/en/securities-regulator-to-review-share-sale-plans-in-wake-of-bombardier-controversy/</link>
		<comments>https://igopp.org/en/securities-regulator-to-review-share-sale-plans-in-wake-of-bombardier-controversy/#respond</comments>
		<pubDate>Thu, 24 Oct 2019 20:36:42 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[National securities regulator]]></category>
		<category><![CDATA[Regulation]]></category>
		<category><![CDATA[Shareholders]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=12003/</guid>
		<description><![CDATA[Canada’s securities regulators are launching a review of automatic share sale programs after controversial trading last year at Bombardier Inc. led to calls for reform by investor rights advocates. The Canadian Securities Administrators (CSA), an umbrella organization for provincial securities watchdogs, said on Thursday it will examine whether automatic securities disposition plans place “appropriate constraints” [&#8230;]]]></description>
		<content><![CDATA[Canada’s securities regulators are launching a review of automatic share sale programs after controversial trading last year at Bombardier Inc. led to calls for reform by investor rights advocates.
The Canadian Securities Administrators (CSA), an umbrella organization for provincial securities watchdogs, said on Thursday it will examine whether automatic securities disposition plans place “appropriate constraints” on the trading activities of senior executives and other insiders, and whether the rules governing them should be changed and harmonized across the country.
“The CSA’s review aims to ensure that [such plans] remain a legitimate mechanism of trading by corporate insiders and do not undermine the fairness of our capital markets,” Louis Morisset, CSA chairman and president of Quebec’s Autorité des marchés financiers, said in a statement.
Automatic share sales plans allow senior executives to exercise options and sell stock without running afoul of Canadian insider-trading regulations, which forbid them to trade shares while they have material information that has not been disclosed to shareholders. The trades are to be made according to prearranged instructions given to arms-length brokers, who carry out the transactions following agreed-on parameters on things such as price and volume limits without any further influence from the executives.
The benefit of such plans is that they allow executives and other participants to cash in some of their equity compensation and sell a portion of their stock without having to do it during open trading windows under the company’s insider-trading or black-out policies.
Insider trading rules usually require securities trades by insiders to be reported within five days. But companies that establish automatic share sales plans can seek an exemption from their provincial regulator that allows them to report all such sales just once a year.
[ ... ]
Quebec’s securities regulator launched a probe and cleared the company of wrongdoing in April of this year, but recommended Bombardier consider scrapping the arrangement.



Bombardier voluntarily ended the program shortly afterward. The company has said the plan was created at a time when trading was permitted under its internal guidelines and under applicable securities laws.



Insider trading filings reviewed by The Globe and Mail earlier this year show that 52 per cent of the shares Bombardier chief executive officer Alain Bellemare put into the company’s 24-month share disposition plan were sold during the first two months of trading. He had total gains of $10.6-million on the transactions.
Considering that Mr. Bellemare’s shares were sold at an average price of $4.55, and Bombardier’s share price was as low as $1.67 after the restructuring was publicly disclosed, “there is an appearance of prejudice to the balance of the shareholders,” said the Canadian Foundation for Advancement of Investors Rights (FAIR), an advocacy group. This undermines investor confidence in the company, the market and the regulators, FAIR said.
[ ... ]
Michel Magnan, a business professor at Concordia University, said in a recent interview that the reporting exemptions are problematic, and the optics of the share disposition programs are not consistent with modern governance.
Ms. Keleman said securities regulators are unlikely to approve new exemption requests until the review is complete. She said companies can still set up new plans, but insider trading reports will have to be filed within five days.
Such exemptions, while not requested by all issuers setting up the plans, have been granted several times over the past decade, the CSA said.
Yvan Allaire of the Montreal-based Institute for Governance of Private and Public Organizations, said the CSA review is “timely and critical," and without changes, more controversies similar to the one that hit Bombardier are possible.
"There is a likelihood of controversy in all cases if the stock price drops some time after the beginning of the trading period,” he said.
Read more [1]

[1] https://igopp.org/wp-content/uploads/2019/10/Nicolas-Van-Praet_Securities-regulator-to-review-share-sale-plans-in-wake-of-Bombardier-controversy-The-Globe-and-Mail_October-2019.pdf]]></content>
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		<title>Judge rules SNC-Lavalin to stand trial on fraud, bribery charges</title>
		<link>https://igopp.org/en/judge-rules-snc-lavalin-to-stand-trial-on-fraud-bribery-charges/</link>
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		<pubDate>Wed, 29 May 2019 15:02:19 +0000</pubDate>
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		<description><![CDATA[A Quebec judge has ruled that SNC-Lavalin Group Inc. can stand trial on bribery and fraud charges, prolonging the Canadian engineering giant’s legal pain and keeping the case in the public eye in the run-up to this fall’s federal election. Justice Claude Leblond of the Quebec Court ruled Wednesday that there is enough evidence to [&#8230;]]]></description>
		<content><![CDATA[A Quebec judge has ruled that SNC-Lavalin Group Inc. can stand trial on bribery and fraud charges, prolonging the Canadian engineering giant’s legal pain and keeping the case in the public eye in the run-up to this fall’s federal election.

Justice Claude Leblond of the Quebec Court ruled Wednesday that there is enough evidence to move ahead with a trial.

The SNC case has sparked a prolonged political controversy for the federal Liberal government, which has come under fire over accusations Prime Minster Justin Trudeau’s staff applied inappropriate pressure to have then attorney-general Jody Wilson-Raybould overturn a decision by prosecutors not to reach a settlement – called a deferred prosecution agreement (DPA) – with the company.

Ms. Wilson-Raybould was eventually demoted, and then resigned from cabinet altogether. Her successor, David Lametti, told reporters Wednesday that a DPA was still “a legal possibility,” while declining to comment on the case.

Mr. Trudeau has denied applying inappropriate pressure for a settlement, and has said his only concern was with preserving thousands of jobs at risk if the company is found guilty.

“One of the things that is very clear is that we respect the independence of our judiciary and we’re not going to comment on an ongoing court case,” Mr. Trudeau told reporters in Ottawa on Wednesday. “But as I’ve said many times, we’re always going to try and fight for Canadian jobs in ways that uphold the rules.”

Legal experts, as well as the company itself, had predicted this outcome because the threshold required to move past a preliminary inquiry in Canada’s justice system is low. While the judge has sole authority over whether to order a trial or dismiss a case after the evidence is heard at this stage, the prosecution has discretion over whether to continue with a case or drop it.

[ ... ]

But Michel Nadeau, executive director of the Institute for Governance of Private and Public Organizations in Montreal, says the Prime Minister is unlikely to risk striking a deal unless he wins another mandate. “I think it’s dead,” he told Radio-Canada on Wednesday.

The fallout of the government’s handling of the SNC file led to the resignations of the country’s top bureaucrat and Mr. Trudeau’s principal secretary, and saw Ms. Wilson-Raybould and former cabinet minister Jane Philpott ousted from the Liberal caucus.

Read more [1]

[1] https://igopp.org/wp-content/uploads/2019/05/Nicolas-Van-Praet_Judge-rules-SNC-Lavalin-to-stand-trial-on-fraud-bribery-charges-The-Globe-and-Mail_June-2019.pdf]]></content>
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		<title>What was the story behind SNC-Lavalin&#8217;s supposedly &#8216;excellent&#8217; corporate governance regime?</title>
		<link>https://igopp.org/en/nota-bene-what-was-the-story-behind-snc-lavalins-supposedly-excellent-corporate-governance-regime/</link>
		<comments>https://igopp.org/en/nota-bene-what-was-the-story-behind-snc-lavalins-supposedly-excellent-corporate-governance-regime/#respond</comments>
		<pubDate>Thu, 21 Mar 2019 23:16:18 +0000</pubDate>
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		<description><![CDATA[Excerpted and translated from “Le fiasco SNC-Lavalin: crime, culture, governance?” by Yvan Allaire, executive chairman of the Institute for Governance of Private and Public Organizations, published in Policy Options March 18, 2019.  The tragedy of SNC-Lavalin was in the making between 2000 and 2012. To outside observers, these were years of quiet profitability for the [&#8230;]]]></description>
		<content><![CDATA[Excerpted and translated from “Le fiasco SNC-Lavalin: crime, culture, governance?” by Yvan Allaire, executive chairman of the Institute for Governance of Private and Public Organizations, published in Policy Options March 18, 2019. 

The tragedy of SNC-Lavalin was in the making between 2000 and 2012. To outside observers, these were years of quiet profitability for the company. And yet, these years were teeming with fraudulent and corrupt activities carried out by some managers and executives of SNC-Lavalin. For reasons that are little understood (but should be), a culture of duplicity, greed, and flouting of ethical norms had taken root in the management of the company — with the board of directors totally unaware, it seems.

Yet at the time, SNC-Lavalin was highly rated for the quality of its governance. According to the annual ranking of some 250 Canadian companies for the quality of their governance published by The Globe and Mail, SNC-Lavalin got top ranks: 1st in 2005 and 2009, 2nd in 2006, 3rd in 2008, 7th in 2003, 2011 and 2012. How could it be that such “excellent” corporate governance did not detect any sign of malfeasance nor trigger any alarm?

All boards of directors rely on the information that is passed on to them by management, which is assumed to be honest and reliable. That is the Achilles heel of governance.

So, if management lies to the board or provides false information, how can the board be blamed? This argument, although legally valid, is not fully satisfactory. What could SNC-Lavalin’s board of directors have known? What questions should have been asked of management of the company at the time?


For instance:



— Who decides, and on what basis, to seek contracts in countries with exotic political mores?

— Who has the authority to approve sales agent contracts and assess that the amounts paid to them are appropriate?

— How does the company manage to be so successful in these countries?

— What is the opinion on these matters of the seven (out of 12) board members who indicated on the Skills Matrix that they “are familiar with the geographic areas where the company operates”?

The board of directors at the time may have raised these issues and management might not have been forthcoming. Except for its somewhat limited curiosity, the board observed all the rules of “good” governance (according to The Globe and Mail). Boards of directors, in the traditional form of governance, are always a bit like skaters making arabesques on a frozen lake, unaware of the teeming activities under the ice. This form of governance must be changed…

Has the company sacked or sued all the managers responsible for this corrupt culture in the years 2000 to 2012? The Canadian anti-corruption law makes that a key factor in deciding whether to come to a deferred prosecution agreement with an indicted company.

If no such factors can be invoked, it is difficult to understand why the prosecutors of the Canadian justice department refuse to come to an agreement with SNC-Lavalin.

Indeed, the Canadian anti-bribery legislation should be modified and stipulate that a corporation is liable to criminal charges if its board of directors has authorized or endorsed criminal acts or failed to put in place all necessary safeguards and exercise appropriate oversight of management. However, this argument has not been raised so far in the present case.

Read more [1]

[1] https://business.financialpost.com/opinion/nota-bene-what-was-the-story-behind-snc-lavalins-supposedly-excellent-corporate-governance-regime]]></content>
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		<title>Why Quebec sees SNC-Lavalin as an asset, not a liability</title>
		<link>https://igopp.org/en/why-quebec-sees-snc-lavalin-as-an-asset-not-a-liability/</link>
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		<pubDate>Thu, 14 Feb 2019 18:44:16 +0000</pubDate>
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		<description><![CDATA[In Ottawa, there appears to be little sympathy these days for SNC-Lavalin, the giant engineering corporation facing prosecution for bribery schemes in Libya. The company was hoping to strike a deal with federal prosecutors in order to avoid a trial. If guilty, it would be cut off from lucrative Canadian government contracts for a decade. [&#8230;]]]></description>
		<content><![CDATA[In Ottawa, there appears to be little sympathy these days for SNC-Lavalin, the giant engineering corporation facing prosecution for bribery schemes in Libya.

The company was hoping to strike a deal with federal prosecutors in order to avoid a trial. If guilty, it would be cut off from lucrative Canadian government contracts for a decade.

But since it was alleged last week that the Prime Minister's Office had pressured then attorney general Jody Wilson-Raybould [1] to allow SNC-Lavalin to sidestep prosecution, few federal politicians have been willing to stick their necks out for the company.

In Quebec, however, where it has operated for more than 100 years, SNC-Lavalin has a chorus of defenders that include the premier, the Opposition and pundits.

[ ... ]

Too big to fail?

Once the undisputed king of the province's engineering firms, SNC was overtaken in market capitalization last year by Montreal rival WSP.

The company's involvement in a number of corruption cases has been the longest-running cause for its loss of lustre.

"The reputation of SNC-Lavalin is much weaker today than it was 10 years ago because of the poor policies of its board [of directors]," said Michel Nadeau, head of the Institute of Governance.
Along with the allegations of bribery in Libya, SNC executives were implicated in a 2009 bid-rigging scheme to build a Montreal hospital [2].
The company is also serving a 10-year ban on World Bank contracts for its involvement in corruption in Bangladesh.

And the RCMP is currently investigating [3] the possibility executives were aware of bribes paid between 2001 and 2003 to secure a $127 million contract to refurbish the Jacques Cartier Bridge in Montreal.

But Nadeau said the company has moved on since then under the leadership of current CEO Neil Bruce and a new board that is more committed to governance oversight.

He said he was puzzled at the unwillingness of federal prosecutors to use the deferred prosecution agreement, which would have allowed SNC to pay a fine in exchange for avoiding a trial.


 'When you have that critical mass you should be able to weather storms,' Economy Minister Pierre Fitzgibbon said when asked if SNC-Lavalin was too big to fail. (Jacques Boissinot/Canadian Press)


"Many countries in the world have these types of agreements for companies involved in foreign bribery," said Nadeau, a former executive at the Caisse de dépôt.

"Unfortunately, the corporation is being punished, and it is its 50,000 employees — many of them Canadians — who are being penalized."

Read more [4]

[1] https://www.cbc.ca/news/politics/jody-wilson-raybould-timeline-1.5016755
[2] https://www.cbc.ca/news/canada/montreal/pierre-duhaime-snc-lavalin-1.5000518
[3] https://www.cbc.ca/news/canada/montreal/snc-lavalin-still-under-investigation-from-rcmp-in-quebec-1.5016315
[4] https://igopp.org/wp-content/uploads/2019/02/Why-Quebec-sees-SNC-Lavalin-as-an-asset-not-a-liability-_-CBC-News_Février-2019.pdf]]></content>
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		<title>&#8216;It’s sad&#8217; no one asked questions while SNC profits soared: Ex-Caisse exec</title>
		<link>https://igopp.org/en/its-sad-no-one-asked-questions-while-snc-profits-soared/</link>
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		<pubDate>Thu, 14 Feb 2019 16:19:39 +0000</pubDate>
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		<description><![CDATA[The long series of scandals ensnaring SNC-Lavalin Group Inc.  has one former executive of the Caisse de dépôt et placement du Québec calling for more accountability when it comes to corporate bribes for global contracts. Michel Nadeau, a former deputy chief executive of Caisse – the largest shareholder in SNC – told BNN Bloomberg on [&#8230;]]]></description>
		<content><![CDATA[The long series of scandals ensnaring SNC-Lavalin Group Inc.  has one former executive of the Caisse de dépôt et placement du Québec calling for more accountability when it comes to corporate bribes for global contracts.

Michel Nadeau, a former deputy chief executive of Caisse – the largest shareholder in SNC – told BNN Bloomberg on Wednesday that when he left his role in 2003, the Quebec pension fund was not aware of any corruption or fraud activity related to SNC’s construction projects in Libya at the time.

Nadeau noted that under former SNC chief executive Pierre Duhaime, who pleaded guilty Feb. 1 for his role in a bribery scandal [1] around the construction of a Montreal hospital, the company’s average profit rose substantially.

“When you double your profits, shareholders, directors – they will never ask, ‘Why are you doubling the profits? What is the secret?’” said Nadeau, now executive manager with the Institute for Governance of Private and Public Organizations in Montreal.

“It’s because you have contracts which are much more profitable than your usual activity. Nobody is raising questions on how you’re making much more profits. And it’s sad, but we should be aware.”

SNC’s average profit from 2006 to 2008, three years prior to Duhaime becoming president and CEO in 2009, was $208 million. Between 2009 to 2011, with Duhaime at the helm, the company’s average annual profit nearly doubled to $404.95 million.

In February 2015, SNC and two of its subsidiaries were charged with paying nearly $48 million to public officials in Libya between 2001 and 2011 to influence government decisions. The RCMP has also charged the company, its construction division and a subsidiary with one charge each of fraud and corruption for allegedly defrauding various Libyan organizations of roughly $130 million. If found guilty, SNC could be barred from bidding on federal contracts for a decade.

Nadeau added that SNC’s past practices followed many other large engineering firms that pay bribes, which has led some Canadian companies like WSP Global Inc. to focus its business in developed countries.

“Unfortunately, it is a reality,” he said.  “I think if you look at large French, German, American corporations, you have to do this if you want to have access to contracts.”

“So that’s why if you want to go into emerging countries, unfortunately in some of them – not all of them – you have to give bribes.”

To access this interview, please click here. [2]

[1] https://www.bnnbloomberg.ca/former-snc-lavalin-ceo-pierre-duhaime-pleads-guilty-in-bribery-case-1.1207899
[2] https://www.bnnbloomberg.ca/it-s-sad-no-one-asked-questions-while-snc-profits-soared-ex-caisse-exec-1.1214272]]></content>
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