Corporate Governance

According to the Organisation for Economic Co-operation and Development (OECD), corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.

To be more specific vis-à-vis management oversight expectations, the Office of the Superintendent of Financial Institutions (OSFI) defines corporate governance as referring to oversight mechanisms, including the processes, structures and information used for directing and overseeing the management of a company. It encompasses the means by which members of the board of directors and senior management are held accountable for their actions and for the establishment and implementation of oversight functions and processes.

Banks are leaders in recognizing the importance of ensuring public confidence in capital markets and have a strong record of good corporate governance.

In the wake of corporate failures that began in the United States in 2001, governance issues have been the focus of recent legislative and regulatory developments. The key purpose of the current corporate governance reforms around the world is to restore public confidence in the capital markets. In July 2002, the Sarbanes-Oxley Act of 2002 was enacted in the United States replete with stringent accounting, disclosure and corporate governance reforms.

In January 2004, the Canadian Securities Administrators (CSA) enacted similar measures in Canada to help restore investor confidence in the Canadian capital markets and ensure harmonization as much as possible. These measures, in large part the Canadian response to the U.S. corporate governance initiatives, deal with certification of issuers’ annual and interim filings, audit committees and the new Canadian Public Accountability Board (CPAB) to oversee public auditors.

Governance issues are also a central part of proposals under development by Canadian securities regulators in connection with corporate governance disclosure requirements intended to reflect current best practices in corporate governance across North America. Other corporate governance initiatives include the updated OSFI Guidelines on Corporate Governance and Legislative Compliance Management.

Developments in corporate governance have broad implications for businesses. The objectives of the industry are to advocate for reasonable responses to governance issues that ensure sound governance of businesses, harmonization of governance expectations among jurisdictions, and efficient and focused regulation.