ARCHIVE: GOVERNANCE AND CORPORATE SOCIAL RESPONSIBILITY

Crown Directors Take On Expanded Role in Governance

The role of the Crown corporation director is expanding to meet new and high standards of governance. Directors are playing a more prominent role in ensuring that Crown corporations fulfill their mandates and are accountable to their stakeholders.

Financial expertise is now one of the top attributes boards are seeking in potential directors.

Private and public sector corporate governance has changed dramatically in recent years. The Federal Accountability Act, the amended Financial Administration Act, and provincial reforms have set new standards for oversight and accountability for public enterprise boards. Private sector reforms in Canada and the United States have also influenced the governance environment of Crown corporations.

Financial Focus Increases

In response to these new guidelines, directors are more focused on the financial health of their organizations. The amount of financial information being provided to board members is rising, according to the respondents to a Conference Board survey, the results of which are summarized in the report, Board Practices in Canadian Crown Corporations—2008.

The amount of financial information Crown directors receive will continue to increase, due in part to Canada’s imminent adoption of the International Financial Reporting Standards (starting in 2009, with full compliance by 2011). Financial expertise is now one of the top attributes boards are seeking in potential directors.

Directors Want a Wider Perspective

Crown directors stressed during interviews that access to financial information is critical but that they are also looking for a more balanced view of their organization. Directors are increasingly asking management for more information about employee and customer satisfaction, sustainability, diversity, and corporate responsibility. Crown corporation directors expressed a commitment to good governance. They spoke of a desire to move beyond compliance and gain a holistic perspective on their organization.

Crown corporations are striving to maintain a balance between overwhelming directors with too much information and giving them enough material to make informed decisions. Some Crowns are providing special information sessions for directors separate from full board meetings, while others are having fewer—but more involved—board meetings.

Behind on Compensation, Ahead on Diversity

Although Crown boards are holding themselves to the same standards of governance as private firms, their members’ compensation is a fraction of that paid to private sector directors. In 2008, the median (mid-point) potential annual compensation for regular board service for outside directors on federal and provincial Crown boards was $9,800, while the median for board chairs was $15,000. In comparison, the 2006 median for Canadian private sector directors was $46,500 for regular board service. Just under half of the Crowns surveyed had not reassessed compensation for directors in the past five years. In the most extreme example, one Crown had not revised its compensation for 20 years.

Compensation is a fraction of that paid to private sector directors.

The directors whom the Conference Board interviewed are conscious of the need for Crown corporations to set an example in terms of corporate governance. In the survey, they noted repeatedly that these organizations are owned by, and serve, the public. Crown directors are also committed to being leaders on diversity. Twenty-five per cent of Crown directors are women, and almost all boards have at least one female director.

	Anthony Beck Research Associate Goverance and Corporate Social Responsibility 613-526-3090 ext. 231