4) Stakeholder Approach in Theory, Shareholder Primacy in Practice

account other considerations such as the environment; the long-term best interest of the corporation; and the interests of shareholders, employees, retirees and pensioners, creditors, consumers, and governments24. The wording of the amendment not only explicitly places other stakeholders and considerations on the same footing as shareholders; it also leaves the door open to an even larger list of stakeholders to be considered.

As a result, the interest of different stakeholders may now be considered on the same level as profits for shareholders as corporate leaders in Canada decide what is best for the corporations they lead. Despite this newfound latitude, not all corporate leaders are living the stakeholder-centric model.

4) Stakeholder Approach in Theory, Shareholder Primacy in Practice

“I see that shareholders and corporate structures trump societal values. We do have some companies out there that care, but they’re a minority.” – Jerry Dias, National President of Unifor

With the latest string of developments stemming from statements made and steps taken by business leaders, the courts, and decision-makers, it appears that shareholder primacy has officially died. Be that as it may, this does not seem to be the case in practice.

Even if there has been considerable movement in talk and action regarding the rebuking of the Friedman doctrine, there is still work to be done for other stakeholders’ interests to be considered with the same importance as shareholders. Several of the Survey Participants believe that still to this day, the overwhelming majority of corporate leaders are utilizing a model based on shareholder primacy.

It is pointed out by a couple of Survey Participants that even the businesses which are signatories to the much-publicized BRT statement have not been adhering to the principles contained therein – and most likely will not be moving forward either.

Eric Posner explained in The Atlantic, “While the statement is a welcome repudiation of a highly influential but spurious theory of corporate responsibility, this new philosophy will not likely change the way corporations behave.”25 In fact, Lucian Bebchuk and Roberto Tallarita of Harvard Law School have analyzed businesses that were signatories of the BRT statement of 2019 - only to find “little evidence (so far) that the declaration has altered corporate behaviour”.26

Despite the concept of a stakeholder model fermenting for decades, being supported by a large number of Canadian business leaders, and even being confirmed to some extent by Canadian courts and legislators, numerous Survey Participants exclaim it is still being ignored – or at least not fully implemented - by a large majority of business leaders in Canada.

Walied Soliman, Canadian Chair of Norton Rose Fulbright, admits, “Ultimately, I think every CEO thinks about ownership first. And when they’re making a concession to customers, or a concession to employees, it’s with a view to this is going to make ownership happy.”

It may be frustrating and even confusing for some to be told there is still much work to be done to have the role of business in society evolve when there is legislation in place which allows for Canadian corporate leaders to employ a more stakeholder model. Even so, it is the case.

Some Survey Participants offer a potential answer as to why it is so. They are of the view that due to the lack of comprehension or adoption of the concepts of the stakeholder model which are under the guise of the ‘best interest of the corporation’, that a great number of businesses in Canada are still without question concentrated almost solely on the interest of shareholders.

It is the view of Walied Soliman that the public and even many business leaders are not aware of the state of the legal framework for corporate leaders. Robert Yalden, who is a professor in Corporate Law and Finance at Queen’s University and while working in private practice, worked on some of Canada’s most ground-breaking corporate transactions, agrees, “One layer of this is just education. Educating people to understand that under Canadian law your fiduciary duty is not in fact to maximize shareholder value, that’s been a misconception for quite some time. The reality of your obligation is that it is to act with a view to the best interests of the corporation, and what that means is becoming a richer conversation.”

Defining how to approach the concept of deciding what is best for the corporation is certainly becoming a richer conversation. Be that as it may, it is an incredibly slow-moving one. It was approximately 70 years ago when Peter Drucker, a consultant, educator and author – considered by many to be the founder of modern management27, argued that corporate leadership is responsible to the corporation “rather than to any one group: owners, workers, or consumers.”28 Carl Kaysen, a Harvard economist, even suggested as early as the middle of the 20th century, that in addition to a responsibility to shareholders and the corporation itself, corporate leadership should feel responsible to a wide range of stakeholders including the general public stating that a corporate management’s mentality should be that it has responsibilities towards, “stockholders, employees, customers, the general public, and, perhaps most important, the firm itself as an institution.”29

There is most likely a list of reasons for the continued resistance to change, namely the simple concept of inertia coupled with the fact the pressures stemming from the financial markets have not necessarily followed the legislative changes’ evolution.

There are several moral and economic reasons voiced by Survey Participants as to why the business community should prioritize positively contributing to society and their organizations’ stakeholders as much as they do shareholders and the generation of profits. Nonetheless, the financial structure in place and the culture it embodies lead to business leaders placing immense emphasis on the classic elements of the Friedman doctrine. An important segment of the Survey Participants is not surprised that in some corners corporate leaders still view their sole role as being to create profits for shareholders above all else. Kevin Sitka, President & CEO of Assiniboine Credit Union, remarks, “Maximizing shareholder value runs pretty deep.”