TSX boss talks up Canada’s corporate governance record

(April 2, 2003) Canadian stock exchanges continue to outperform on corporate governance issues, according to Barbara Stymiest, chief executive officer of the TSX Group. In a Toronto speech this morning, Stymiest suggested that the TSX Group’s two main operations — the Toronto Stock Exchange and the TSX Venture Exchange — enjoy great fiscal health and have a better tradition of supervising the corporate governance of exchange members than their American counterparts.

Trumpeting the TSX Group’s fiscal health, Stymiest opened with a gentle swipe at what she termed “naysayers… commentators who still talk about our losing listings to U.S. markets, about losing market share.” The truth, she said, is that American exchanges have lost some of their Canadian presence and with it some revenues. “Five years ago 53 Canadian companies were listed only on U.S. exchanges. Today that is down to 25 companies.”

Stymiest went on to say that the number of interlisted Canadian companies has decreased during the same period from 212 to 175 and that in October 2000, U.S. exchanges accounted for 60% of trading by value in interlisted Canadian companies while the TSX Group now accounts for 65% of the same total.

Stymiest then turned to current concerns about trust and corporate governance, again drawing a comparison favouring Canadian exchanges over their American counterparts. She listed U.S. Securities and Exchange Commission statistics detailing fraud and other corporate governance charges during the five years before the passing of the Sarbanes-Oxley Act of 2002, including fraud charges against 63 company chairs, 99 chief executive officers, 96 company presidents, 79 chief financial officers and 24 auditors.

While acknowledging the damage of earlier made-in-Canada scandals such as Livent and Bre-X, Stymiest insisted that “we do not have a massive web of collusion between Canadian companies and their assorted executives, attorneys, advisors and auditors.” Instead, she maintained, “even a market of the highest integrity cannot make itself completely crime-proof.”

Underscoring the made-in-Canada integrity theme, Stymiest noted that a recent Ontario Securities Commission study found no serious evidence of wrongdoing by Canada’s largest companies.

Stymiest told Advisor.ca that good corporate governance by TSX members increases investor confidence which, in turn, increases their participation, making it more attractive for those with capital and those seeking it. Moreover, corporate governance issues combined with the current market tumult have increased pressures on financial advisors, she said. “The job of advisors becomes more difficult as the world is becoming more complex.”

As with other arguments the devil lurks in the statistics, according to a Toronto corporate lawyer present during Stymiest’s recounting of Canadian governance purity. Asking not to be named, the lawyer suggested that absence of prosecution might reflect other differences between the two countries. “That could be as much reflective of the different power of our regulators and the manner in which they use their powers,” he said.

“One weakness in our system is a huge reluctance to take these things to court, as a preference for private settlements,” he explained. “Our system may be better but I wouldn’t want to count on that,” he said. “Regulators here traditionally have not been willing to get in there and prosecute.”

Art Melo is a Toronto-based investment writer.

(04/02/03)