The Way I See It… by Michael C. Volker
Good Corporate Governance means Good Business
The term “corporate governance” is one that we hear quite often these days. It usually comes up in the context of public companies because shareholders like to be assured that their companies are not only well run and professionally managed but are also well governed.
A company’s board of directors (some organizations call them “governors”) is its conscience and soul. The directors are personally liable for the actions of a company and, unlike shareholders, cannot hide behind the veil of limited liability. The buck stops with them. Directors are appointed by, and accountable to, all stakeholders to ensure that competent management is in place and that the company complies with all applicable laws and regulations.
Emerging technology ventures strive to engage accomplished and experienced business people as board members. They add credibility and they help in attracting investors and business partners. All too often, company founders believe that this is the only role of the board. They tend to use directors as advisors and often ignore their directives. On the other hand, some directors view their role as a cheerleading one and may be kept in the dark on company matters.
As growing companies expand their shareholder base, many make the transition from private to public company. Public companies that trade on an established stock exchange must agree to abide by various policies prescribed by that exchange as a condition of maintaining their listing. Many of these additional rules relate to matters affecting shareholders, e.g. the public disclosure of timely information, accurate reporting, and fair dealing. In responding to public pressure following questionable corporate practices, stock exchanges are asking themselves just how far they should go in their own rule-setting.
The Joint Committee on Corporate Governance was established in mid-2000 by the Toronto Stock Exchange (TSE), the Canadian Venture Exchange (CDNX), and the Canadian Institute of Chartered Accountants (CICA) as a response to this question. Its mandate is “to review the current state of corporate governance in Canada, compare Canadian and international best practices, and make recommendations for changes that will ensure Canadian corporate governance is among the best in the world.”
The Committee, is chaired by Guylaine Saucier, Chair of the Canadian Broadcasting Corporation and a director of many corporate boards. Its fourteen members include John A. Roth, CEO of Nortel, and David Sutcliffe, CEO of Sierra Wireless, from the technology sector.
In March, 2001 the Committee produced an interim report on which it sought feedback on its various policy recommendations. The report, along with feedback from the business community can be found at the Committee’s Web site, www.jointcomgov.com.
While there are few disagreements with these recommendations, there’s considerable debate as to whether companies should be obligated to adopt them or voluntarily decide on how far they should go with respect to compliance. For small companies in particular, the additional overhead burden (red tape?) to comply may be very onerous. Should there be mandatory directors’ education and certification? Indeed, the CDNX and its issuers are also concerned about being over-regulated. Many wonder how the emphasis on structure and governance will impact productivity.
While a major advantage of being a private company is the ability to maintain secrecy – no need to expose financial information, news, or material changes to the general public, and no requirement to comply with anything suggested by the Committee, I believe that, in the minimum, all boards should define a board “charter” which tells shareholders exactly what the board’s role, reach and modus operandus will be. In this charter companies can tell investors what they can expect from their boards.
Regardless of which of the Committee’s recommendations become part of the compliance rule book, a company’s shareholders are best served by a board of directors which, as articulated by the Committee, “views corporate governance as good business, as contrasted with a compliance exercise". It behooves all company directors to study these recommendations and then decide, on a proactive basis, which ones to integrate into their corporate culture.
The way I see it, all companies – regardless of size and stage of development – can make a good start towards this goal by producing a “board charter”. Having a clear mandate at the top makes for a good business.
Michael Volker is a high technology entrepreneur and director of Simon Fraser U's University/Industry Liaison Office. He oversees Vancouver’s Angel Technology Network and is a director of the BC Advanced Systems Institute and the Vancouver Enterprise Forum. He may be reached at firstname.lastname@example.org.