4 The shareholder primacy model came under further scrutiny, in both Canada and the US, after the burst of the tech bubble in 2002 and the 2008 financial crisis. Many attribute this shift to the hostile takeover wave of the 1980s, which increased shareholder wealth efficiently but left employees scrambling for work and government institutions struggling to respond.
However, at the end of the last century a shift to include non-shareholder interests began to emerge. This shareholder-centric form of corporate governance was known as the shareholder primacy model, a model that would, theoretically, obviate managerial self-dealings. 2 Until a few decades ago, the corporation’s shareholders were often considered its primary beneficiaries. Under the CBCA, directors have a fiduciary duty to act honestly, in good faith and in the corporation’s best interest. From shareholder’s to stakeholder’s primacy? Bill C-97 stipulates that when acting in the best interests of the corporation, directors and officers may consider, but are not limited to the interests of shareholders and certain other stakeholders.Īt first glance, the new provision appears consistent with the Supreme Court’s reasoning in cases on director liability, but, given a heightened climate for director accountability and recent focus on stakeholder interests in Canada and abroad, it is imperative to review the potential implications of these changes for corporate leaders. Canada recently passed Bill C-97, 1 which included changes to the Canada Business Corporations Act (CBCA).