Tuesday, April 28, 2009

SIO questions need for new corporate governance rules

The Social Investment Organization (SIO) says the Canadian Securities Administrators’ (CSA) proposed change to Canada’s corporate governance policy does not improve the current regime.

In a letter to the CSA, SIO executive director Eugene Ellmen notes that under the existing “comply or explain” model, Canada has scored consistently at or near the top of international rankings of corporate governance.

“Issuers in Canada have expended significant time, staff resources and compliance costs in meeting the “comply or explain” model,” the letter states. “We believe that the proposed principles-based model would inject unnecessary confusion into the corporate governance framework. Further, companies that are corporate governance laggards would escape the requirement under the current rules to explain their weak corporate governance structures, thereby encouraging lower corporate governance standards, not higher standards. The result would be higher costs for issuers, uncertainty for issuers’ management, and a gradual lowering of Canada’s corporate governance standards.”

However, the SIO does offer up a number of suggestions to the CSA for improved corporate governance, such as further consultations on the issue of shareholder voting practices, and the issuance of an additional National Instrument specifically mandating required voting practices for shareholders.

The SIO also suggests that that CSA consider establishing “one or more permanent consultative bodies to bring forward the views of the public and important stakeholder groups on emerging securities issues, such as corporate governance, continuous disclosure and investor protection. These bodies should have sufficient resources to independently conduct research and gather opinion on their mandates.”

The SIO submission to the CSA is available here.

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