Realigning the Corporate Building Blocks: Shareholder Proposals as a Vehicle for Achieving Corporate Social and Human Rights Accountability
Aaron A. Dhir
Osgoode Hall Law School ; Yale Law School
American Business Law Journal, Vol. 43, No. 2, 2006
In this piece, I explore the use of traditional, domestic corporate law tools to raise the level of human rights discourse and awareness within corporations and to influence corporate operations. I specifically focus on the shareholder proposal mechanism, which, subject to certain exceptions, empowers shareholders with the ability to compel corporate management to hold a shareholder vote on a proposed issue. My discussion takes place within the context of recent amendments to the Canada Business Corporations Act (CBCA), which are predicated on the U.S. system. On paper, these amendments remove a barrier previously facing socially conscious shareholders by making it seemingly more difficult for corporate management to exclude proposals. Unlike the prior legislation, management can no longer bar a proposal on the grounds that it was submitted by the shareholder primarily for the purpose of ... promoting general economic, political, racial, religious, social or similar causes.
Drawing on corporate law theory, including shareholder primacy vs. communitarian model constructions of the proper corporate purpose, I ask the question of whether the CBCA amendments will be effective or prove to be devoid of any real meaning. I generally agree with the proposition that the amendments will enhance shareholders' ability to stimulate dialogue within the corporation on human rights issues, a position that to date seems to resonate with the statistics. However, noteworthy limitations still exist, which are canvassed. Further, although the levels of shareholder engagement on social policy/human rights-related issues have begun to increase in the post-amendment period, I contend that the amendments will actually do little to facilitate considered jurisprudential guidance on these issues. Such guidance will be necessary given that eventual conflict between proposing advocates and corporate management, and thus the need for external recourse, is inevitable.
In advancing this argument, and making particular recommendations on how the corporate building blocks might be realigned, I focus on three factors that stand in contrast to the U.S. situation: first, the approach taken by Canadian courts thus far on social policy/human rights-related proposals; second, the procedural foundation that underlies the proposal mechanism; and third, the ability of corporate management to exclude proposals for reasons related to publicity. In so doing, I attempt to put forth a more comprehensive analysis which suggests that a closer examination of the U.S. system could assist in remedying the Canadian system's current deficiencies.
Number of Pages in PDF File: 49
Keywords: Corporate law, corporate social responsibility, human rights
JEL Classification: K22
Date posted: November 8, 2005