Skip Navigation

Dey-Kaplan Report Aims to Update Canadian Corporate Governance Standards

April 14, 2021

With the release of a report entitled “360º Governance: Where Are The Directors In A World In Crisis?” (Report), Peter Dey and Sarah Kaplan examine modern good governance from a practical and scholarly standpoint, establishing a new set of governance guidelines for the 21st century (Guidelines). Akin to the influential 1994 report to the TSX by a committee chaired by Mr. Dey entitled “Where Were The Directors?”, which focused on board independence and oversight, these Guidelines reflect the current context of issues identified in the Report, such as climate change, rising economic inequality, systemic racism and COVID-19.

The stated aim of the Guidelines is to give clarity on how boards can effectively consider the interests of all stakeholders and the rights of Indigenous peoples in their decision making. In preparing the Report, Dey and Kaplan consulted with an advisory panel of more than 50 prominent directors, industry leaders and academic and practicing governance experts. The Report contains 13 recommendations, ranging from threshold concepts like corporate purpose, board duties and stakeholder identification, to matters concerning compensation, diversity and board refreshment, climate change and corporate activism. Many issuers will recognize elements of their existing corporate governance practices reflected in some of the Report’s recommendations, but can also be expected to be challenged by the Report to consider how other recommendations can be implemented within their particular context.


The Report contains a number of governance guidelines intended to help directors identify, and consider the interests of, stakeholders. This includes adopting a purpose for the corporation, defining relevant stakeholder groups, identifying and articulating the corporation’s best interests in every decision taken by the board, establishing board-level responsibility for stakeholder analysis and engagement and managing conflicts among stakeholder groups to ensure that stakeholder interests are not unfairly disregarded.

Corporate Purpose

Dey and Kaplan’s first recommendation is that the board of directors specify, in writing, a purpose for the corporation that is “rooted in the fundamental value proposition of the corporation”. The statement of a corporation’s purpose should recognize the stakeholders who make the existence of the corporation possible, define which goals the corporation will measure and prioritize, acknowledge the potential for conflicts between competing objectives and ultimately frame directors’ understanding of the long-term interests of the corporation by placing boards in a better position to exercise business judgment and to defend their decision making.

Stakeholder Identification

The Report recommends that boards take the time to identify the relevant stakeholders in their corporation. Dey and Kaplan articulate a broad definition of stakeholder, proposing that it include any “actor or group that is associated with the creation or destruction of value by the firm at any stage of the lifecycle”. It is to be expected that the stakeholders relevant to a corporation will vary across time and across decision types.

The Report also highlights the special status of Indigenous peoples in Canada, recognizing that they are not simply one set among many stakeholder groups and that many Indigenous people reject the designation of “stakeholder” as it implies that their interests might be balanced with other interests, rather than affirming their inherent rights. See “Overarching Risks/Interests – Indigenous Peoples” below.

Best Interests

Directors of Canadian corporations owe a fiduciary duty to the corporation and must act with a view to its best interests. The Report provides that every board should be able to identify and articulate the best interests of the corporation in every decision the board makes and should be able to align these interests with the corporation’s purpose. Dey and Kaplan state that such duty includes considering the long-term sustainability of the corporation’s business and note that knowledge about diverse stakeholders and the impact of corporate operations on them is fast becoming an essential competency of any board of directors.

Consistent with, but preceding, this recommendation of the Report, the Canada Business Corporations Act (CBCA) was amended in 2019 to clarify that, when considering what is in the best interests of a corporation, directors may consider the interests of shareholders, employees, retirees and pensioners, creditors, consumers and governments, the environment and the long-term interests of the corporation.

Stakeholder Committee

The Report suggests that boards establish a Stakeholder Committee to have responsibility for identifying, analyzing and overseeing reporting on stakeholder interests and engaging directly with key groups of stakeholders. Recognizing the resource constraints within which the boards of many smaller issuers operate, Dey and Kaplan indicate that identifying an existing committee or a lead director to take on responsibility for such matters, rather than establishing a committee, could be sufficient.

Stakeholder Conflicts

The Report also recommends that boards develop a framework for assessing conflicts between stakeholders’ interests, with the corporation’s statement of purpose serving to provide guidance on how to address conflicts both across and within stakeholder groups, in order to ensure that such interests are not unfairly disregarded. Dey and Kaplan note that while such conflicts offer opportunities to innovate in ways that could create value for everyone involved, it is also true that these conflicts are sometimes irreconcilable.

Stakeholder Impact Assessments

In order for the board and stakeholders to understand how a corporation manages and engages with its stakeholders, the Report suggests that corporations integrate reporting on stakeholder impacts into their annual reports, with stakeholder impact assessments (which might be conducted in a manner similar to environmental impact assessments) being conducted for major projects. Such reports should reflect the status of and changes in the corporation’s relationship with its stakeholders and enable benchmarking and accountability. To track progress over time, the Report suggests that boards may want to adopt an existing social accounting standard for such integrated reporting.


Layering on the Report’s principles concerning corporate purposes, board duties and stakeholder interests, Dey and Kaplan also propose that corporations should recognize their special relationship with Indigenous peoples, and their impacts on climate change, and follow best practices with respect to corporate activism.

Indigenous Peoples

The Report provides that boards should develop, implement and maintain a process for fostering a corporation’s relationship with Indigenous peoples which recognizes the unique historical circumstances under which the relationship has been created and the constitutional rights that elevate Indigenous peoples beyond being mere stakeholders. Particularly in light of the recent steps by the Canadian federal government to ratify the United Nations Declaration on the Rights of Indigenous People (UNDRIP), Dey and Kaplan recommend that corporations should provide risk reporting to shareholders on whether the corporation’s projects have received the “free, prior and informed consent” of affected Indigenous peoples.

Climate Change

The Report proposes that corporations adopt and disclose a policy for addressing climate change risks and opportunities and provide disclosure of board oversight of climate-related issues, the process for consideration of climate-related issues in strategic choices and the procedures for monitoring progress on achievement of related goals and targets. Dey and Kaplan forcefully note that “[a]ny board that is not actively overseeing the threats and opportunities associated with climate change will be remiss in its duty of loyalty”.

The Report echoes statements made in recent years by Canadian securities regulators to the effect that climate change risks are increasingly likely to be material for all companies. Such risks can be physical, arising from bad weather or other disruptions caused by climate change, and transitional, arising from the move to a lower-carbon economy and government action to promote such a transition.

Corporate Activism

The Report also recommends that when corporations take stances on political and social issues, such stances should be developed and articulated through a process led by the corporation’s chief executive officer and should involve consultation with the corporation’s directors on whether, when and how to take a stand.


The Report also contains a number of recommendations within the realm of corporate governance and disclosure, including on matters of diversity, board renewal and executive compensation.


Two of the Report’s recommendations focus on diversity. The first relates to diversity at the board and senior management level, where Dey and Kaplan recommend that boards adopt targets for diversity among directors and senior management. This recommendation echoes the report of the Ontario Capital Markets Modernization Taskforce (Ontario Taskforce), which was released earlier this year.

The second recommendation on diversity, which relates to diversity across an organization, is that a corporation’s diversity policy should not relate just to senior positions but should cover the entire organization and contain targets, timelines and reporting requirements.

Board Renewal

Linked to the Report’s diversity recommendations is its recommendation that boards adopt term and/or age limits to ensure regular turnover among board members. Dey and Kaplan also suggest that a rigorous board evaluation process can help ensure board renewal occurs on a regular basis. In connection with board renewal, Dey and Kaplan recommend that any skills matrix used to assess a board’s needs include knowledge of relevant stakeholder groups and expertise in environmental, social and governance matters.

Executive Compensation

In order to ensure that a corporation’s purpose has teeth, Dey and Kaplan suggest that executive compensation should be tied to the realization of the corporation’s purpose and long-term sustainability, with disclosure provided on how performance against these targets will be assessed and rewarded. For example, the Report proposes that executive compensation be tied to a select number of metrics that are captured in the corporation’s stakeholder report (see “Identification and Consideration of Stakeholder Interests – Stakeholder Impact Assessments” above), not to general achievement of “social responsibility.”


The Report’s recommendations can be expected to provide additional structure and expanded content to conversations already happening at (virtual) boardroom tables. Directors of Canadian corporations should familiarize themselves with the Guidelines and be mindful of current and emerging trends and voluntary practices that are gaining further traction. They will also want to monitor potential changes to corporate governance practices or disclosure requirements that may be adopted by Canadian securities regulators or through changes to corporate legislation (such as the recent CBCA changes).

For more information, please contact:

Stacy McLean                          416-863-4325
Matthew Merkley                   416-863-3328
Liam Churchill                        416-863-3057

or any other member of our Capital Markets or Corporate Governance groups.