Corporate Purpose: Towards a New Governance Practice for Canadian Publicly-listed Companies

Abstract

Corporate purpose has emerged as an instrument meant to reorient governance from maximizing shareholder value toward broader societal goals. In addition to fostering businesses’ success, commentators see corporate purpose as supporting the emergence of a more inclusive and interconnected form of capitalism. Backed by academic work, both institutional investors and executives recognize the corporate purpose’s contribution to good governance. In the last few years, corporate purpose has made its way in the United Kingdom with the U.K. Corporate Governance Code, in France through the adoption of the Loi relative à la croissance et la transformation des entreprises, as well as in the United States with the Business Roundtable Statement on the Purpose of a Corporation. Corporate purpose is just as relevant for Canadian corporations. However, provincial and federal business corporation legislations do not specifically refer to this concept. Securities regulators’ corporate governance instruments are also silent on the matter. From this perspective, this paper explores the place of corporate purpose in Canadian law. It examines the integration of corporate purpose under the current framework. In doing so, it highlights the barriers hindering the corporate purpose’s articulation and effectiveness and explores avenues to remedy them. The discussion is supported by an empirical analysis of the purpose statements of the companies forming the S&P/TSX 60 Index of the Toronto Stock Exchange. Against this backdrop, the paper proposes that corporate purpose by integrated in the governance practices recommended by the Canadian Securities Administrators.

Keywords: Governance, Corporations, Purpose, Regulation, ESG