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The fact is, many good people -- too many -- fall into the trap of simply accepting that it is appropriate to use technicalities and loopholes to break the principles behind rules when they think they can get away with it or if someone else says they can get away with it. And that's how we lead to scandal upon scandal in the worlds of finance and politics.
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Would you be surprised if I told you that Canadian corporations are contributing to a legal challenge against the U.S. government's foremost program to tackle climate change? That they are helping to fund an army of lawyers and lobbyists aggressively challenging climate regulations south of the border?
I suppose if Toronto weren't the only city in the world where -- at least freely and willingly -- the visible minority has become the visible majority, the picture of an all-white arts board, let alone an all-white anything board, wouldn't be so starkly offensive. But it is.
The essence of good risk management is asking appropriate questions and getting truthful answers. And so, if a CEO doesn't make it clear that he expects unethical behaviour to be outed by managers asking tough questions, then it probably won't be outed. This clearly didn't happen at Volkswagen.
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Do you recognize any of these red flags? On a board or in a company of which you serve? Allegations of wrongdoing can put assets and reputation at risk. Regulators have enormous power, and are focusing their sights much more on the role a board plays, or does not play, in overseeing the affairs of the company.
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Does Canada improperly have a false sense of governance superiority? Perhaps so. But in this rapidly changing field, if you rest, you are left behind. Nine years is sufficient rest.
In my teaching, research and consulting, I no longer use "NP-58201 Corporate Governance Guidelines," June 17, 2005 ("Guidelines"), that apply to publicly traded companies in Canada, as an example of exemplary corporate governance. Here are the ten deficiencies to the guidelines as I see them.
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Here is a top 10 list reflecting 40 recent director and executive interviews and ongoing advice and assessment provided to activist investors and boards. 1 Infuse your board with a shareholder mindse...
Over the past several years, Canada has seen an increasing number of high profile U.S. activist campaigns: Pershing Square's successful action against Canadian Pacific Rail; Jana Partners campaign against Agrium Inc.; Highfields Capital and Scout Capital's pressuring of Tim Hortons; and Orange Capital's campaign against InnVest REIT, among others.
1. Active owners focused on performance. Expect pressure by activists and institutions for boards to control under-performing management to continue unabated. Boards incapable or unwilling to rein in...
Many directors hang on to directorships for far too long. I counted several directors who have been on corporate boards for 10, 15, 20 and 25 years. Many directors hang on to directorships for far too long. I counted several directors who have been on corporate boards for 10, 15, 20 and 25 years.
I recently served on a governance awards judging panel assembled by the Canadian Society of Corporate Secretaries (CSCS). Winners of the awards were announced at this organization's annual conference in Halifax last month. I participated in a plenary discussion to discuss some of the winning practices.
The Ontario Securities Commission (OSC) should be congratulated for addressing gender diversity last week. Other than Quebec, the addressing of boardroom and senior management diversity (beyond gender) has been long overdue in Canada.
Boards should revitalize, as the American economy (and the world) is dependent on it. But they need to do so in a way that puts their own interests and reputations at risk. They need to be ruthless in recreating - and think only of the best interests of their enterprises. They need to "person proof" in other words, which is the theme of the NACD conference.
It is hardly surprising that boards do not focus on value creation, strategic planning, or maximizing company performance, survey after survey, as much as they do on compliance. Their compensation structure does not incent them to. Here is what is needed to align director pay with shareholder interests:
What follows is a series of recommendations that could apply to any public board to: make it more focused on value creation; to strengthen real director independence, including from management; to strengthen management accountability to the board; and to strengthen board accountability to shareholders.
These are disguised but true stories. A director who has never operated a plant or worked in the company's industry chairs the board's health and safety committee. Internal controls are missed and poi...
I am currently interviewing shareholder activists, hedge funds and private equity leaders on changes to public company boards to make them more focused on value creation and company performance. I am...
There is a strong bias for audit committees to oversee many risks, not just financial. No regulation mandates this however. Audit committees should not oversee risks that they are not qualified to oversee. Here are a dozen broader questions to determine whether your Audit Committee needs a reset.
I recently trained a group of directors and CEOs from the banking and agricultural sectors in Texas and Arizona. We discussed mutual expectations on the part of the board and management. The following represents the output of these discussions, which could apply to a variety of boards.
When interests between management and shareholders become adverse, even through the regular course of events, it is important for boards to have their own set of lawyers who are independent from management and seen as objective and willing to act in the interests of directors, not management, and ultimately shareholders.
Only 150 out of 1000 Canadian companies had any diversity on boards. What is the business case for diversity on boards? There is no clear evidence that diverse boards create greater shareholder value. There is, however, evidence that diverse groups make better decisions and mitigate group-think.
the new Securities and Exchange Commission (SEC) "whistle-blowing" rule that permits employees now to go directly to the regulator with a complaint and completely bypass the company's internal processes. The practical effect of this new rule is to put the heat on many companies and corporate boards to reexamine their workplace investigations of potential wrongdoing -- and that is a welcome development. Where do investigations go wrong?
The management of XL Foods Inc., which has been in the news for causing the biggest beef recall in Canadian history, has not figured out the most important issue is how the company governs food safety. Neither XL foods or its parent company appear to have any independent directors, who are essential to ensuring internal management does not cut corners.
No one likes to be controlled, least of which entrepreneurial employees. However, ask yourself if defective internal controls are worth the price, in terms of reputation and financial loss. It can indeed be a run on the bank if consumers don't have confidence, and it can get worse unless governance checks are put in place.
When boards engage law firms, should they use the same firm that management uses? We don't think so. Law students are taught that you cannot act for two clients whose interests are, or could be, adverse, e.g., a husband and wife in a divorce, a purchaser and vendor of a home, and so on.
In the wake of the Penn State child abuse scandal, many in the media were outraged by the NCAA's decision to instantly vacate the university's win record from 1998 through 2011. As two ethicists with a combined 40+ years working in the trenches with organizations and their cultures, we'd like to offer the opposite view: the NCAA got it exactly right. What's needed at Penn State is a complete blood transfusion of good culture for bad.
DAVOS, Switzerland - The federal government announced Thursday that it is abandoning plans to create a national securities regulator in the wake of a stinging courtroom defeat.Finance Minister Jim Fla...