Textbook- CH 11

• Owners


  Also referred to as investors or shareholders, key stakeholders in a capitalist system as they provide a major portion of the capital to finance corporations
• Types of owners of Canadian businesses

  • Investors
  • Entrepreneurs
  • Employees and managers
  • Customers or consumers
  • Producers
  • Ownership through mutual funds
  • Ownership interest through pension funds
  • Corporate ownership
  • Private equity firms
  • Venture capital companies
  • Not-for-profit organization ownership
  • Government ownership
• Corporations with a dominant shareholder

  • Must be sensitive to treating minority shareholders with respect and fairness
• Dual-class stock


  More than one type of share or stock with different voting rights and dividend payments issued by a single corporation
• Non-voting shares


  Common shares without voting privileges
• Restricted shares


  Shares involving some limit on voting, e.g. only one vote for every 10 or 100 shares owned
• The creation of non-voting and restricted shares allows management or majority owners to control the corporation by concentrating voting power in the hands of a few friendly shareholders</b>
• Passive shareholders


  Do not attempt to influence the affairs of the corporation even though they have a legal right to do so
• Active shareholders


  Participate in the governance to the full extent allowed by the law
• Employee ownership


  • Increases morale and company loyalty, motivating employees to greater effort
  • Productivity rises, and higher profitability results
• Employee ownership is not without difficulties
• Investor owners have limited influence in making the corporation more socially responsible, but some do attempt it through presenting shareholder resolutions to annual meetings
• Social responsibility shareholder resolutions

  • Prepare a report on respecting Indigenous Peoples' rights (TransCanada Corporation)
  • Publish a report on climate risk and transition to low-carbon economy (Royal Bank of Canada)
  • Require executives to sign statement on compliance with principles of loyalty, integrity, and honesty (CIBC)
  • Review and report on feasibility of implementing a Living Wage policy (Loblaw Companies Ltd.)
  • Disclose operations in low tax rate territories (Manulife Group)
• Mutual funds and pension plans have revised their investment policies to focus on corporations considered to have a social, ethical and environmental focus or objective
• Assuring sound commercial practices regarding the sale of financial products and services by requiring executives to sign a statement confirming they will comply with principles of loyalty, integrity, and honesty in their customer relations, with disciplinary measures for failure to comply
• Requiring the board undertake a review and report to shareholders on the feasibility, cost, and benefits of implementing a Living Wage policy covering employees, suppliers, and contractors
• Disclosure of company operations in Bermuda and other "low tax rate territories"
• Responsible investment (RI)


  An approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns
• Other terms for responsible investment

  • Socially responsible investing
  • Ethical investing
  • Sustainable investing
  • Community investing
  • Mission-based investing
  • Impact investing
  • Social conscience investment
  • Green investing
  • Environmentally friendly investing
• Principles for Responsible Investment (PRI)

  • Formulated in partnership with the UNEP Finance Initiative and the UN Global Compact by investors, for investors, with the objective of contributing to the development of a more sustainable global financial system
  • Signatories represent a majority of the world's professionally managed investments and adoption is voluntary
• PRI Principles


  • Incorporate ESG issues into investment analysis and decision-making processes
  • Be active owners and incorporate ESG issues into ownership policies and practices
  • Seek appropriate disclosure on ESG issues by the entities in which we invest
  • Promote acceptance and implementation of the Principles within the investment industry
  • Work together to enhance effectiveness in implementing the Principles
  • Report on activities and progress towards implementing the Principles
• Responsible Investment Association (RIA) in Canada

  • Comprises 100 organizational members and 250 individual members
  • Originally focused on socially responsible investing, now encompasses the broader scope of responsible investing, incorporating environmental, social, and governance (ESG) issues
  • Over $2 billion of investments were made using some form of responsible investing strategies
• RIA strategic priorities


  • Market Education—Driving awareness and demand for responsible investments
  • Integration—Developing RI capacity in investment professionals
  • Advocacy—Shifting public policy and regulation to support RI
  • Brand and Reputation—Strengthening the RIA's reputation as the leading voice for RI in Canada
  • Capacity Building—Building the RIA's financial and human capital resources
• Responsible investment criteria/screens


  • Poor employee/labour relations
  • Failure to promote racial and sexual equality and affirmative action programs
  • Manufacture of controversial weapons
  • Involvement in the nuclear industry
  • Use of fossil fuels, especially coal
  • Manufacture of "sin" products such as alcohol or tobacco
  • Conducting of business in repressive regimes
  • Violation of human rights
  • Failure to involve Indigenous Peoples
  • Environmentally damaging operations
  • Unsafe goods and services, questionable marketing practices, and exploitive marketing in developing countries
  • Use of animals in product testing
  • Involvement in gambling and pornography
  • Factory farm production of animals
  • Genetically modified product
  • Child or forced labour
• Best-of-sector approach


  Compares and ranks corporations within an industry, identifying the corporations best in an industry to invest in and attempt to influence them in improving their social responsibility
• Boycotting, or not buying a stock, seldom works in that the corporation is not influenced</b>
• Responsible investment stock market indices

  • Sustainalytics/Jantzi Social Index (JSI) (Canada)
  • S&P/TSX Renewable Energy and Clean Technology Index (Canada)
  • Dow Jones Sustainability Indices (U.S.)
  • FTSE4Good Index Series (U.K.)
• Investors should learn about the cultures and histories of Indigenous Peoples to understand how corporate projects would affect Indigenous rights resulting in better relations with Indigenous organizations
• The Canadian Council for Aboriginal Business has a certification program, Progressive Aboriginal Relations (PAR), that allows for self-assessment of corporate performance in Aboriginal relations
• The National Aboriginal Trust Officers Association (NATOA) has a Responsible Investment Committee that formulates the direction the association will take in providing information to the membership in the area of responsible investment
• NATOA and the Shareholders Association for Research and Education (SHARE) has published a report, Advancing Reconciliation in Canada: A Guide for Investors, to provide information that investors can use in making reconciliation a part of decision making when doing business with Indigenous peoples
• One researcher claimed that social investing was a myth, critiquing that the data relied upon are sketchy, the ratings are not completely objective, the screenings are tainted by anachronistic, contradictory, idiosyncratic, and ideologically constructed notions of social responsibility, claims of the growing financial impact are questionable, and no coherent case has been made for why the criteria used for social responsibility are appropriate
• There are challenges to ascertaining what a socially responsible investment is
• One researcher claimed that social investing was a myth
• Critique of social investing

  • The data relied upon are sketchy and the research is highly selective
  • The ratings are not completely objective and misrepresent the complexity of the modern corporation
  • The screenings are tainted by anachronistic, contradictory, idiosyncratic, and ideologically constructed notions of social responsibility
  • Claims of the growing financial impact are questionable
  • No coherent case has been made for why the criteria used for social responsibility are better at effecting social change
  • The general approach of social investment advocates is one of vindication of the true believer, not investigation
• It is not always easy to be socially responsible, but corporations are making the efforts
• The concept of responsible investing is being taught in universities and colleges and centres to study it are being established
• Investors or shareholders own the corporation and many efforts are made to ensure they are responsible stakeholders
• Investors' influence includes the corporation's approach to corporate social responsibility, and the most direct way to accomplish this is through responsible investing, a trend that is increasing
• Whether investors are concerned about responsible investing or not, there is still a need to protect their interests