Canadian Chief Executives Commit to Leadership in Improving Corporate Governance

September 26, 2002

The chief executive officers of leading Canadian enterprises have made a commitment to playing a lead role in improving corporate governance practices in Canada. In a 34-page statement from the Canadian Council of Chief Executives (CCCE) entitled Governance, Values and Competitiveness: A Commitment to Leadership, they offer detailed recommendations on a wide range of governance issues.

The initial recommendations deal with issues related to the role of chief executives, including accountability, compensation, insider trading and personal certification of corporate reports as well as leadership in ethical conduct and corporate citizenship. Subsequent recommendations address important issues affecting boards of directors, such as the independence of the board and key committees, board leadership, the audit process, equity compensation, transparency and disclosure.

“We see this not as the final word on good governance practices, but as our initial contribution to a vital national discussion about how best to bolster confidence in Canadian markets and to enhance the competitiveness of Canadian enterprises,” said A. Charles Baillie, Chairman of the Council and Chairman and Chief Executive Officer of TD Bank Financial Group.

“Good corporate governance is increasingly important in enabling Canadian enterprises to attract the investment they need to keep growing in a highly integrated global economy. Canada’s reputation and record are both strong, but there remains considerable room for improvement,” added Thomas d’Aquino, the Council’s President and Chief Executive and Co-Chair with Mr. Baillie of the Corporate Governance Initiative launched by the CCCE in July.

The Council’s statement notes that the United States has responded to major corporate scandals with extensive new rules and regulations that affect many Canadian companies directly and put pressure on Canada to follow suit. It suggests, however, that Canada’s approach should not start by assuming that the United States has all the answers.

“In governance as in other spheres, there may be instances in which regulatory harmonization becomes necessary, but we believe that there remains considerable scope to shape a made-in-Canada approach to today’s challenges,” the chief executives say in their statement. “What matters in the end is not what rules Canada puts in place, but whether Canada in fact achieves the desired outcomes in terms of corporate behaviour, public confidence, international reputation, market efficiency and competitiveness.”

The Council’s statement says that the rule of law is essential for markets to function efficiently and that violations of rules to protect the integrity of markets should be punished severely. At the same time, it notes that no law can prevent bad judgment or stop all criminal acts, and warns that simply adding more rules would not necessarily make markets work better. “Indeed, an excess of rules and regulations can easily suffocate the very spirit of innovation and risk-taking that makes markets so successful in driving human progress.”

Mr. d’Aquino said Canadian chief executives are convinced that much of what needs to be done in this country to restore public confidence in equity markets and in the integrity of business leadership can and should be achieved within the private sector.

“In taking this position, we are not suggesting that the expected standard of practice in Canada should be anything less than the best. Rather, we are saying that Canada’s traditional preference for a combination of strong principles and a high degree of disclosure is at least as effective as the highly litigious rules-based approach favoured in the United States,” he said.

While the Council’s member chief executives recognize their own responsibility to encourage better corporate governance and to set the ethical tone for their enterprises, they acknowledge that the right to decide governance practices within individual corporations belongs to boards of directors and shareholders.

The chief executives add, however, that an effective Canadian strategy for improving governance practices also must involve a broader range of people who influence corporate decision-making. The Council’s statement therefore offers thoughts on how governments, regulators, institutional investors, accountants, analysts, investment dealers and others could reinforce the efforts of boards and chief executives.

“A debate on the future of corporate governance in Canada and throughout the world is well underway,” says the Council’s Executive Committee in an introduction to the statement. “In this debate, Canada and Canadian business leaders can continue to take the lead. It is our hope that this statement will be seen as a constructive contribution both to public confidence in Canada’s financial markets and to our country’s competitiveness and influence within the global economy.”

In addition to Messrs. Baillie and d’Aquino, the Council’s Executive Committee includes Honorary Chairman David P. O’Brien, Chairman of EnCana Corporation, and Vice Chairmen Robert E. Brown, Derek H. Burney, David L. Emerson, Richard L. George and Paul M. Tellier, the chief executives respectively of Bombardier Inc., CAE, Canfor Corporation, Suncor Energy Inc. and Canadian National.

Formerly known as the Business Council on National Issues, the CCCE is a non-profit, non-partisan organization composed of the chief executives of 150 leading Canadian enterprises. The members of the Council head companies that administer in excess of $2.1 trillion in assets, have annual revenues of more than $500 billion and account for a substantial majority of Canada’s private sector investment, exports and research and development.

Contact:

Canadian Council of Chief Executives
Patricia Longino
(613) 238-3727

TD Bank Financial Group
Dianne Salt
(416) 308-6807

Canadian National
Mark Hallman (English)
(416) 217-6390
Louise Filion (French)
(514) 399-5416