The stakeholder vision has emerged as an influential stream in corporate governance. In the English-speaking world, Canada was the pioneer in introducing a regulatory stakeholder regime. This article examines the Canada Business Corporations Act (CBCA) for its concern for non-shareholder groups, and, in particular, their inclusion in the remedies provided by the statute. After a critical review of the CBCA stakeholder regime, the article proposes specialised agencies to deal with intra-corporate or stakeholder disputes in business corporations. The stakeholder remedy in the CBCA is egalitarian. It posits a doctrinal equality between shareholders and other constituencies. An issue with the stakeholder remedy, which the CBCA promotes and the stakeholder empowerment attempts to foster in this process, is the ex post principle. The principle is about intervention after conflicts have arisen between corporate actors. The framework is derived, essentially, from private law ideas about disputes and resolving them through litigation. As a result, the stakeholder regime in the CBCA does not sufficiently adopt the institutional approach to law-making. Yet the CBCA regime is a positive beginning which can graduate towards a more wholesome model, one with the stakeholder vision as an informing principle of governance.
The oppression remedy in the CBCA is also available to non-shareholder groups. Yet, the article argues, it has not been applied in an effective manner to resolve disputes raised by corporate stakeholders. The business judgment rule that courts apply to refrain from inquiring into corporate disputes is an important factor in undermining the statutory remedy available to non-shareholder groups. To overcome some of the difficulties posed by the business judgment rule and the courts' lack of business expertise, the article proposes the creation of specialised, interdisciplinary panels to inquire into stakeholder disputes. These panels can help in making the stakeholder vision in Canadian corporate law more real and robust.
La place accordee aux parties interessees a emerge en tant que courant d'influence en matiere de gouvernance d'entreprise. Dans le monde anglophone, le Canada a fait oeuvre de pionnier en instaurant un regime reglementaire en faveur des parties interessees d'une societe. Dans cet article, on examine la Loi canadienne sur les societes par actions (LCSA) sous l'angle de sa preoccupation pour les groupes de non-actionnaires et, en particulier, leur inclusion dans les recours prevus par la loi. Apres avoir procede a un examen critique du regime applicable aux parties interessees integre a la LCSA, l'auteur de l'article recommande d'habiliter des organismes specialises a se saisir des conflits internes ou entre les parties interessees qui surgissent dans les societes par actions. Le recours dont disposent les parties interessees dans la LCSA est de nature egalitaire. Ce faisant, la loi instaure une egalite doctrinale entre les actionnaires et les autres groupes d'interet de la societe. Le recours octroye aux parties interessees, que la LCSA promeut et que l'habilitation des parties interessees tente de mettre de l'avant dans ce processus, pose cependant un probleme lie au principe >. Ce principe est celui de l'intervention a posteriori, c'est-a-dire qui survient apres l'avenement des conflits entre les membres d'une societe. Ce cadre d'analyse decoule, essentiellement, des idees qui prevalent en droit prive au sujet des differends et de la maniere de les resoudre par voie judiciaire. Par consequent, le regime des parties interessees dans la LCSA n'adopte pas suffisamment l'approche institutionnelle envers le processus legislatif. Ce regime demeure toutefois une avancee positive susceptible d'evoluer vers un modele plus sain, un modele au sein duquel la vision des parties interessees serait un principe de fond qui guiderait la gouvernance des entreprises.
Le recours en cas d'abus, prevu par la LCSA, est egalement a la disposition des groupes de nonactionnaires. Dans cet article, cependant, on soutient qu'il n'a pas ete applique de maniere efficace en vue de resoudre les differends souleves par des membres d'une societe. La regle de l'appreciation commerciale, que les tribunaux appliquent pour eviter de s'immiscer dans les conflits d'une societe, vient en quelque sorte contrecarrer l'effet du recours que la loi met a la disposition des parties interessees. Ainsi, afin de surmonter certaines des difficultes posees par la regle de l'appreciation commerciale et le manque d'expertise des tribunaux en matiere commerciale, l'auteur propose de creer des groupes d'experts interdisciplinaires qui seraient charges d'examiner les differends souleves par les parties interessees. Le travail de ces groupes de specialistes permettrait d'integrer la vision des parties interessees au droit canadien des societes de maniere plus tangible et plus solide.
INTRODUCTION II. STAKEHOLDERS IN CANADIAN CORPORATE LAW--AN OVERVIEW A. The Preliminary Steps B. Entry of Stakeholders in the CBCA 1. Derivative Actions 2. The Oppression Remedy III. STAKEHOLDER LITIGATION--A REVIEW OF SOME RECENT CASES A. The Business Judgment Rule B. Framing the Case in Legal Idiom 1. Air Canada Pilots Association v Air Canada ACE Aviation Holdings (2007) 2. BCE Inc v 1976 Debentureholders (2008) 3. Peoples Department Stores Inc (Trustee of) v Wise (2004) C. Stakeholder Interests and Legal Rights D. Legal Rules on Form, Evidence and Procedure IV. CONCLUSION AND A PROPOSAL A. Problems with the Current Stakeholder Remedy B. Specialist Forums for Stakeholder Disputes--A Potential Alternative C. Special Corporate Law Forums in Other Jurisdictions We accept as an accurate statement of law that in determining whether they are acting with a view to the best interests of the corporation it may be legitimate, given all the circumstances of a given case, for the board of directors to consider, inter alia, the interests of shareholders, employees, suppliers, creditors, consumers, governments and the environment.
Supreme Court of Canada (2004) (1)
The stakeholder theme has been live since the 1930s when E. Merrick Dodd argued for a broader vision in corporate governance. (2) Dodd advocated moving beyond the limited "principal-agent" framework that was understood as the governing principle of Anglo-American corporate law. The notion restricted the loyalty of corporate managers, conceived as agents, to shareholders who were assimilated to principals. (3) The stakeholder principle is usually offered as a contrast to the shareholder primacy that is generally associated with common law jurisdictions. (4)
To be clear, Canada has no history of shareholder primacy in its pure or classical form--either in legislation or in judicial decisions. Rather, Canada has traditionally adopted a broader and more nuanced interpretation of business corporations and the relationships among the several groups in corporations, such as shareholders, managers and employees. (5)
Indeed, Canada was the pioneer among the common law jurisdictions to include non-shareholder groups in the framework of corporate law. (6) This was accomplished by including non-shareholders, or the so-called stakeholders, with shareholders in the remedies of derivative actions and oppression actions provided in the Canada Business Corporations Act (CBCA). (7) By extending derivative actions and the oppression remedy to non-shareholder groups, the CBCA recognizes the interest, or "stake," these other groups also have in business corporations. The remedies are designed to increase the number of constituencies who can seek redress for any injury to their "interests". (8)
Canadian corporate law, with its rough-and-ready egalitarian principle, is one thing. Among corporations and in the capital markets, however, there is evidence of the presence of important elements of the Anglo-American conception--that shareholders are the "owners" of business corporations (9) and that the pursuit of shareholder value is the legitimate goal of business corporations. (10) As a result, the position is more complex. In the recent years, the Supreme Court of Canada has also formally accepted the stakeholder principle and this adds a new dimension. (11)
This article provides an overview of the stakeholder idea in Canadian corporate law and examines the efficacy of the remedies provided in the CBCA for non-shareholder groups. To assess the efficacy of the remedies, it reviews three cases involving stakeholders--Peoples Department Stores v Wise (2004) (Peoples), (12) Air Canada Pilots Association v Air Canada ACE Aviation Holdings (2007) (Air Canada), (13) and BCE Inc v 1976 Debentureholders (2008) (BCE). (14) These are important cases decided in recent years that involve the interests of non-shareholder groups, and two of them (Air Canada and BCE) were based on the stakeholder remedy provided in the CBCA.
This article is an effort to assess the efficacy of the stakeholder remedy in the CBCA through an analysis of the important judicial decisions involving non-shareholder groups and the practical effect of the acceptance of the stakeholder vision in Canadian corporate law, at the doctrinal level. It argues that the formal recognition of the stakeholder model of governance has not translated into an effective legal regime that can protect the interests of non-shareholder groups, and identifies the business judgment rule as a major impediment.
Courts generally rely on the business judgment rule to refrain from inquiring into business or policy decisions of corporate enterprises, the reason being their lack of business expertise. This article points out how the stakeholder remedy is weakened because of the tendency of courts to defer to the business judgment of corporate management. To overcome the difficulties that have been experienced, the article proposes the creation of specialist, interdisciplinary...