Big investors offer guidelines for corporate boardrooms

(September 16, 2003) The Canadian Coalition for Good Governance (CCGG) has released a set of 12 guidelines it hopes to see adopted by Canada’s largest publicly traded companies.

“The guidelines issued by the coalition raise the bar for good governance standards in Canada,” said chair and former federal finance minister Michael Wilson. “And as shareholders — the coalition represents 23 leading Canadian institutional investors with more than $400 billion in assets — we have the voting influence to help encourage boards to follow the best practices of good governance.”

The guidelines include recommendations on how corporations select board members, the structure and role of the board and how the board should function.

The coalition guidelines recommend that the majority of board members have no relationship to the company than that of shareholder, eliminating competing interests from the decision-making process. It also says that all directors should in fact be shareholders to ensure their interest is aligned with that of other shareholders. The group also calls for the separation of the roles of CEO and chair of the board.

Guidelines on board processes include ensuring a smooth transition between CEOs and evaluation and review processes for both the board and its individual members. The coalition also wants the board to have stronger powers of oversight and evaluation of corporate management. Finally, the group wants a report on a corporation’s governance policies available to all its shareholders.

“Many of our governance standards and best practices are aimed at boardroom behaviour,” said David Beatty, managing director of CCGG. “For example, succession planning for directors will yield a richer diversity of board candidates; share ownership by directors may stimulate more creative discussion; and performance evaluations of boards, committees and individual directors will definitely lead to improved performance inside the board.”

Are the fund companies overstepping their bounds? Or do they have every right to dictate how a company is run, if they hold a stake? Share your thoughts about this topic in the Talvest Town Hall on Advisor.ca.

Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca