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 mike@volker.org.