This development is the result of a great confluence between incentives and demands. It is obvious, even by my criteria, to note that companies are engaged in intense competition for customers, employees, suppliers and investors who increasingly make choices based on social considerations. This competition motivates attention to ESG factors (environmental, social and governance). Businesses will also have noted that social ills, such as climate change and global pandemics, present dangers and opportunities that are probably best addressed proactively.
Finally, it is not necessary to look very far for studies showing significantly better performance of companies that give higher priority to ESG issues. This is not to say that the responsibility for public welfare should lie with corporations rather than governments, rather that corporations will play a critical role.
Canada is fertile ground for this type of development, given our corporate statutes and our jurisprudence. Corporate laws in Canada generally require that directors, among other things, “act honestly and in good faith in the best interests of the corporation”. The decisions of the Supreme Court of Canada in Peoples Department Stores Inc. (Fiduciaire de) v. Wise and BCE Inc. v. other specific stakeholder.
The proposed new directions can, in my opinion, be broadly divided into three categories.
The first category concerns purpose and identification. In the aftermath of the BCE decision, directors and their advisers grappled with the question of how to weigh the interests of the company’s different stakeholder groups. The guidelines include (i) identification, disclosure and regular review of the company’s purpose, (ii) alignment of all board decisions with that purpose, and (iii) identification of parties stakeholders in society. These guidelines are clearly intended to provide direction to boards of directors.