New report calls for overdue changes to Canada Business Corporations Act
TORONTO | Traditional territories of several First Nations including the Williams Treaties First Nations, Huron-Wendat, the Anishnaabeg, Haudenosaunee, Chippewas and the Mississaugas of the Credit First Nation — To survive in and meaningfully contribute to today’s world, corporations should have a stated purpose. Making this a legal requirement would orient companies toward clearly articulating social and environmental objectives. That’s according to a new report published today, which is calling for legal reform to ensure corporations in Canada are held accountable.
Bringing Corporate Purpose into the Mainstream: Directions for Canadian Law concludes that a more solid legal scaffolding for corporate purpose in Canada is necessary and puts forward five key recommendations to make it happen.
“Right now, it’s up to the discretion of corporate leaders in Canada to decide if they want their companies to have a purpose that sets out why it exists,” says Richard Janda, law professor at McGill University and co-author of the report. “We believe it should be legally required. In addition, corporations should have to comply or explain their approach to stating a social purpose if they want to benefit from corporate status.”
The idea of bringing corporate purpose into the mainstream through legal reform isn’t new. As the report shows, it’s already happening in places like France and the U.K.
“We’re not asking for Canada to step up and be the first country in the world to have a legal framework encouraging a stated corporate purpose,” says Iseoluwa Akintunde, international lawyer and doctoral candidate at McGill University. “We’re asking Canada to catch up with other countries and take the lead in making further reforms. It’s past time to require corporations to state why they exist.”
Among its recommendations, the report calls for the Canada Business Corporations Act to require a statement of purpose by a corporation’s board of directors (excluding small businesses), a “comply or explain” approach to stating that social purpose and broadening the best interests of the corporation to include impacts on the community. It also suggests amending fiduciary duty of directors and officers requiring them to pursue the purpose of the corporation with a view to its best interests.
“Amending director fiduciary duty to stipulate that directors have a duty to pursue the purpose is a game-changing proposal. To put that into effect boards will need to know what the purpose of their corporation is, which arguably is essential for good governance,” says Coro Strandberg, one of the report’s editors and chair of the Canadian Purpose Economy Project.
“Our current economic system prioritizes profit over the well-being of people and nature,” says Tara Campbell, well-being economies specialist at the David Suzuki Foundation, which commissioned the report. “Part of transforming to a society that values our needs, relationships and the natural world is ensuring corporations are held accountable for their actions. Establishing a corporate purpose is one tool to help enable that shift.”
– 30 –
For more information or media interviews, please contact:
Stefanie Carmichael, scarmichael@davidsuzuki.org, 437-221-4692
The David Suzuki Foundation (DavidSuzuki.org | @DavidSuzukiFdn) is a leading Canadian environmental non-profit organization, founded in 1990. We operate in English and French, with offices in Vancouver, Toronto and Montreal. We collaborate with all people in Canada, including First Nations leadership and communities, governments, businesses and individuals to find solutions to create a sustainable Canada through scientific research, traditional ecological knowledge, communications and public engagement, and innovative policy and legal solutions. Our mission is to protect nature’s diversity and the well-being of all life, now and for the future.