Special Contribution : Moving Forward with Corporate Environmental, Social and Governance Disclosure

Whether the issue is climate change, biodiversity, labour and supply chains, or international human rights, corporate sustainability disclosure is of increasing relevance to shareholders.  In a recent report submitted to Ontario, Canada’s minister of finance, the Ontario Securities Commission (OSC) made various recommendations regarding corporate reporting that may be controversial to some, but are a step in the right direction.

The report follows the Ontario Legislature’s unanimous approval of a private member’s resolution calling on the province to review existing reporting requirements and issuers’ compliance.

The resolution asked the OSC to undertake a broad consultation in order to “establish best practice corporate social responsibility…and environmental, social and governance…reporting standards”. In response, the OSC – supported by the Hennick Centre for Business and Law at York University – convened a multi-stakeholder roundtable and held various consultations with interested parties.

The reporting of material environmental, social and governance (ESG) information should be viewed as an integral part of a businesses’ overall risk management strategy. With this information, shareholders are in a better position to assess financial risks and to allocate capital to firms best suited to mitigate these risks. Disclosure also encourages stakeholder dialogue. This dialogue, over time, informs internal decision-making and provides a critical framework for identifying both risks and opportunities. This, in turn, can drive performance, enhance an organization’s reputation and strengthen the core elements of its…

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Global financial tax – taxation in the next generation?

The hot topic on the minds of world leaders is the potential for a global tax on financial transactions.  The idea seems to have emerged from the French, who saw the tax as a potential way to generate financial development aid. The tax would be a form of Tobin tax, although instead of being at stabilization of a currency, the primary goal would be to raise international funds to deal with crises.

The idea was subsequently picked up by UK PM Gordon Brown and presented to the G20 at their meeting in St Andrews, Scotland on Nov 7th.  Brown presented the tax as an instrument to fund future bank bailouts.  Moreover, he sees the tax as increasing accountability in the financial sector.   However, the idea was not received as well as had been hoped.  The USA has rejected the idea, and Canadian Finance Minister Jim Flaherty also came out against the tax.

While things looked dismal for the tax proposal following the G20, it seems that at least as far as the US is concerned, the idea in principle may still be kicking around Congress.  U.S. House of Representatives Speaker Nancy Pelosi has spoken out in favor of a similar proposal, affectionately named the Wall Street tax, from which funds would be used for job-creating legislation sought to be passed in December.  The Democratic proposals…

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International Competition Regime: New Game. New Rules?

In a recent judgment given by the Australian Federal Court, Singapore Airlines Ltd v Australian Competition and Consumer Commission ([2009] FCAFC 136 (2 October 2009)), once again the tension between increasingly globalised commercial practices on the one hand and domestic antitrust laws on the other is becoming evident. The Australian Court was required to decide whether the alleged unlawful price fixing which took place in the international markets – outside of the physical boundaries of Australia – violated Australian antitrust laws, and if so, whether the parties could be prosecuted by Australian authorities.

The Australian Court decided that international anti-competitive activity which takes place wholly outside of Australia may still influence the Australian market, and thus Australian law may possibly apply. It should be noted that this approach is by no means unique or new, as other domestic antitrust authorities are empowered by law to prosecute international anti-competitive activity.[1] But when examining the above-mentioned tension between the two conflicting forces, domestic regulation and an international problem, a more complex picture is revealed.

On the one hand, it is true that due to the lack of an international governing body or antitrust prosecution authority, the Australian authorities do not have much choice but to try and regulate international anti-competitive activity which affects Australian markets.  On the other hand, such an approach is not without…

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Bill C-300 – A National Law with International Ramifications

Scarborough-Guildwood Liberal MP John McKay has introduced a private members bill to Parliament that has been stirring up controversy in the global mining and natural resource sector. Bill C-300 asks mining companies that seek financing from Canadian markets to disclose to Export Development Canada (EDC) a wide array of information having to do with their human rights practices, labour standards, and environmental policies. If they fail to meet this requirement, or if their standards do not conform with pre-established norms, these companies will not be eligible to receive public pension plan investment dollars and other public monies from EDC. Perhaps this does not sound like a major deal, but 85% of international extractive projects seek financing at the Vancouver and Toronto stock exchanges. This is a case where a domestic law could have a very international reach.

McKay has brought the bill forward in the hopes that it will alter what he sees as an inexcusable state of affairs concerning the global mining industry’s effects on the populations of developing nations.[1] Detractors of the bill note that the extractive sector of Canada has already enacted very stringent Corporate Social Responsibility (CSR) guidelines after the National Roundtables on Corporate Social Responsibility of 2006. For them, more regulation simply re-invents the wheel.[2]…

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The Beginning of an Offshore End?

On October 27, 2009, a bill to amend the Internal Revenue Code was introduced to both chambers of Congress entitled: Foreign Account Tax Compliance Act of 2009.  The act could stir up some serious trouble for investors who have been using legal and accounting gymnastics to spread wealth to offshore bank accounts where reporting, accountability and taxation is at a much lower standard.

As the text of the bill currently stands, the following serious cooperative and punitive measures would be in store for foreign financial institutions and individual investors:

• 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts;
• Reporting of offshore accounts with values of USD50,000 or more  by individuals and entities on their tax returns;
• Increasing the statute of limitations from 3 to 6 years specifically when offshore accounts are unreported or misreported;
• Requiring advisors who help set up offshore accounts to disclose their activities or suffer a monetary penalty;
• Requiring electronic filing of information reports about withholding on transfers to foreign accounts; these reports will be matched with IRS tax returns;
• Strengthening rules and penalties with regard to foreign trusts, including rules to expose payouts from foreign trusts to US beneficiaries as well as US transfers

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