Liberal MPP Laurel Broten’s push to get the Ontario Securities Commission to review its practices around disclosure and report back next year on whether environmental, social, and governance disclosures rules are adequate seemed like a bit of a sleeper at first.
It’s a mom and apple pie thing. Of course, we love mom and though her pie may not be as good as store bought, it’s made with love and that’s why it’s so special. Who’s going to argue?
So it was no surprise the legislature voted unanimously to support her motion directing the OSC to undertake such a review and report back Jan. 1, 2010. It’s been apparent for some time that greed and shareholder value above all else is out and that companies are now being told that there’s more to success than just the bottom line.
Broten and supporters want increased disclosure and that’s not a bad thing because we’ve seen how year-end statements can be founded on a pile of worthless financial derivatives hidden underneath the proverbial walnut shell.
In this economic climate and with the public backlash against two decades of corporate greed and excess, who would argue more scrutiny of publicly traded corporations is not a good thing?
“We can never make investing a fail-safe proposition, but we can ensure that investors have all the information that they need and that information is set out in a way that is easily understandable, readily comparable, and sufficiently complete to allow investors and consumers to make the best decisions possible about what companies they want to invest in or purchase goods from,” Broten said in speaking to the motion.
The latter part raises some issues since consumers wishing to purchase goods or services from a company are ostensibly protected under different legislation. It also suggests public companies bear responsibilities to consumers beyond those faced by privately held companies.
Let’s put that aside, though. First, and to be fair to the much maligned OSC, they were ahead of the curve when just over a year ago they issued a directive to reporting companies reminding them that disclosure also covered environmental liability and required more than standard boilerplate.
That reminder came after a spot check of annual filings found too many companies were too sketchy in their environmental liability disclosures.
So this motion reinforces, in part, what they’re already doing and also says the OSC should look at governance and the social impact of the company’s operations.
Still, I think it’s that third area which is most interesting: “That, the OSC seek to develop and adopt an enhanced standardized reporting framework for both quantitative and qualitative social and environmental information, to ensure corporate disclosures are understandable, comparable, and outcome focused.”
The environmental and governance aspects are clear enough, given past experience, but what is “social?” And how far does a publicly traded company have to go in ascertaining its social responsibilities and putting a price tag on it?
Broten’s own explanation is wide ranging and may already be causing some CEO and CFOs a little discomfort around the collar.
“How does company Y treat their employees?” Broten asked the house. “Who does company B buy their supplies from? How does company X treat our planet? What kind of neighbour is company C to the community in which it operates? How do various companies compare to their competitors in these areas?
What risks are they bearing to their bottom line? According to Industry Canada, corporate social responsibility is ultimately about delivering improved shareholder and debt holder value, providing enhanced goals and services for customers, building trust and credibility in the society in which the business operates and becoming more sustainable over the long term.”
Or as she more succinctly put it in an interview: “Are they a leader or a laggard?”
Those ethical fund managers (also known as green or clean funds) are of course delighted, as it’s something they’ve been pushing for as well for many years.
It’s also a great opportunity for Ontario to take a leadership position in securities regulation by incorporating the best practices of other jurisdictions around the world, she says. Indeed, the OSC, which has been working with Broten and ethical fund managers behind the scenes on this now has a clear mandate to go forward.
And that, my friends, is the real Trojan Horse. Beyond mom and apple pie, it’s also about Ontario staking out its claim as the obvious choice and place to be the single and sole securities regulator in Canada.
That, as we all know, is something many people have demanded for some time and if this gets us there soon, it’s a good thing. Even more of a bonus, annual reports will start to have a little more meat in them for us to chew over.
Ian Harvey has been a journalist for 32 years writing about a diverse range of issues including legal and political affairs. His e-mail address is [email protected].
