BCE v. 1976 Debentureholders: The Supreme Court's Hits and Misses in its Most Important Corporate Law Decision Since Peoples
University of British Columbia Law Review, Vol. 43, p. 205, 2009
54 Pages Posted: 19 Oct 2010 Last revised: 28 Jun 2013
Date Written: August 31, 2009
BCE Inc. v. 1976 Debentureholders is one of the relatively rare occasions on which Canada’s top court has pronounced on fundamental issues of corporate law and policy. The decision provides useful clarification and guidance on several points, including how to determine when relief from oppression is available under the Canada Business Corporations Act. Other aspects of the Court’s decision, however, raise concerns. The Court endorsed a vague conception of the basic standard for management behaviour established by the fiduciary duty. Expanding on the approach that it first set out in 2004 in Peoples, the Court held that directors and officers should take into account the interests of all corporate stakeholders, including “shareholders, employees, suppliers, creditors, consumers, governments and the environment” and where conflicts arise between the interests of stakeholders, they must treat each stakeholder fairly in seeking “to resolve [conflicts] in accordance with their fiduciary duty to act in the best interests of the corporation, viewed as a good corporate citizen.” At the same time, the Court strongly endorsed for the first time the “business judgment rule,” requiring a high level of judicial deference to management decision-making. This paper argues that the Supreme Court’s decision in BCE has significantly recast the standards of conduct to be met by directors and officers in Canada without sufficient regard to the legal and policy issues at stake. Partly as a result of this failure, the decision provides insufficient guidance for directors and officers, who now face substantial challenges in determining what is required of them. Even more significant, by combining the deference to decisions of directors and officers that is required under the business judgment rule with a vague and unpredictable fiduciary standard, the effect of the decision in BCE may be to reduce the accountability of directors and officers for their actions.
Keywords: Corporate, Fiduciary, Canada
JEL Classification: K22
Suggested Citation: Suggested Citation