Canada: Key Issues For Boards Of Directors In 2019

Last Updated: January 31 2019
Article by Cornell Wright and James C. Tory

The role of directors is more challenging than ever given increased volatility and competitive pressures in the business environment coupled with a legal framework that is imperfectly aligned with demands made by increasingly active shareholders and other stakeholders.

Here are eight issues that directors should keep in mind in 2019:

1. Shareholder Engagement

Boards and management have to engage with shareholders and be responsive to their concerns, both because their tenure depends on maintaining the confidence of shareholders and because shareholders have been empowered through greater voting rights as a result of recent corporate governance reforms (e.g., majority voting, say-on-pay). Those concerns are often driven by short-term shareholder value maximization imperatives. Engagement with the shareholder base is appropriate and beneficial: it provides valuable input and protects against distracting and expensive fights. However, under Canadian law, boards, in discharging their obligations to act “with a view to the best interests of the corporation”, are not permitted to equate the corporation’s interests with the interests, short-term or otherwise, of shareholders alone. Directors therefore must be careful to consider the interests of all affected stakeholders and not simply accede to the demands of activist investors.

2. Environmental, Social and Governance (ESG)

The need to consider stakeholder interests is heightened in the current ESG landscape. ESG matters are an increasing focus for investors, including those with specific ESG mandates, and other stakeholders. This creates a difficult dynamic for Boards which are required to balance potentially competing and conflicting interests, such as short-term shareholder value maximization versus long-term sustainability, having regard to impacts on employees, customers, the community and the environment. The Board should ensure that these considerations are factored into the corporation’s strategy and business plan. The Board should also work with management to identify relevant ESG risks (including reputational), and ensure those risks are monitored and managed through the implementation of appropriate policies and regular reporting to the Board or Board committees. Disclosure of ESG risks and the measures in place to manage those risks are an area of focus for regulators and must be carefully calibrated to avoid liability.

3. Oversight of Corporate Conduct

Recent “#MeToo” events and securities regulatory whistleblower programs highlight the need for Boards to be vigilant in the exercise of their oversight responsibilities. Boards must ensure that systems are in place to inform the Board of internal misconduct that could result in legal or reputational exposure for the corporation. In addition, Boards must ensure that such issues are investigated thoroughly and independently. This requires active engagement by the Board given the unavoidable conflict that management has in dealing with internal conduct issues. Boards should assume that their handling of these issues will be scrutinized and have to be satisfied that it will meet the reasonable expectations of stakeholders. There are many examples of situations that have been exacerbated by inadequate Board oversight and have left the directors looking derelict.

4. Cybersecurity

Given the centrality to modern business of electronic data storage and transmission, it is critical that Boards provide careful oversight of cybersecurity risk. The Board must ensure that the corporation’s risks in this area have been clearly identified, the corporation’s risk tolerance determined and appropriate resources dedicated to the management of those risks. There should be a protocol to ensure appropriate escalation of incidents so that the Board can properly discharge its oversight responsibility, including with respect to disclosure. Incidents can have significant negative legal and reputational implications for the corporation. The Board’s oversight will be scrutinized from hindsight by investors and regulators.

5. Short Attacks and Disclosure

Short sellers are active and have been recognized by securities regulators as playing a legitimate role in the capital markets. They can be expected to exploit vulnerabilities in the disclosure records of issuers, whether fairly or unfairly, and regulators are likely to remain reluctant to intervene when they do. Boards, in their oversight, should ensure that disclosure decisions are made on a basis that includes an assessment of the risk that the disclosure could be attacked. Second, there must be a good record of the process followed in making disclosure decisions so that the decisions can be defended if attacked by shorts or second-guessed by regulators. Finally, if attacked, the Board should ensure that a multidisciplinary team is mobilized with a coordinated strategy that addresses both legal and investor relations concerns, with regular reporting to the Board.

6. Insider Trading

Securities regulators continue to be focused on insider trading as an enforcement priority. They have sanctioned trading by insiders relying on their “public interest jurisdiction” in circumstances where the trading was not technically in breach of the statutory prohibition. Boards must recognize the risk that all trading by insiders will be judged from hindsight and from a broader perspective that goes beyond technical legality. Decisions regarding trading blackouts should not be left to management alone. The Board must be engaged, have all of the relevant facts and receive appropriate advice.

7. M&A Decision-Making

In the M&A context, Boards must rely on advice from external advisors (legal and financial) to discharge their obligation to make fully informed decisions about key issues such as available strategic alternatives and relative value. There is no invariable need for the Board to establish a special committee or to have separate advisors from those working with management to advise the corporation. However, in every situation, the Board must ask itself whether establishing a special committee or having separate advice would meaningfully contribute to fully informed decision-making by the Board.

  • Special committees of independent directors are legally required in transactions involving conflicts; but in complex and time-intensive matters, a special committee may be advisable to enable deeper and timely engagement with the issues and the appropriate level of oversight by the Board.
  • On high-stakes issues, a Board is well-advised to consider getting a second view from separate advisors. It is the norm for financial advisors – and a growing practice for legal advisors -- to have fee arrangements that include a contingent success component. That raises a conflict concern which may make it necessary or desirable for the Board to have separate advice which it can be confident is free from any conflict, including relationship pressures. In any event, given the Board’s oversight responsibilities, directors should have direct access to the corporation’s advisors and should engage directly with them on the key issues on which the directors must decide.

8. Uncertain Economic Conditions

Economic indicators and political developments in major economic centres suggest that 2019 will be a time of increased volatility and business uncertainty. These conditions, which preclude “business as usual” and for which simply cost-cutting is not necessarily the answer, exacerbate the challenges faced by directors in providing effective oversight. To discharge its responsibilities, the Board must ensure that:

  • the corporation has management in place with the skills and experience to deal with a changing business environment in which a recession is a real possibility;
  • management is factoring these business risks and concomitant opportunities into the corporation’s business plan and stress-testing against realistic scenarios; and
  • management’s incentives are properly aligned with the long-term best interests of the corporation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions