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ARCHIVED - Review of the Governance Framework for Canada's Crown Corporations - Meeting the Expectations of Canadians

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1. Introduction

Good governance requires transparency and accountability. Together, transparency and accountability build trust. No institution, no matter its size or mandate, can remain viable for very long if the bonds of trust are broken by the failure or perceived unwillingness to disclose information, explain decisions, and justify actions. Indeed, transparency is what makes accountability possible—not least because trust depends as much on being seen to be accountable by operating in a transparent manner as it does on meeting specific accountability requirements—whatever form they may take. In democratic societies, the people—whose interests institutions have been created to serve—possess not only the right but also the responsibility to access institutions, to analyze their information responsibly, and to participate in purposeful processes with these institutions.

What Canadians are Saying About Accountability

 Canadians are seeking the same assurances from all levels of government: that governments will

  • spend taxpayers' money as though it were their own;
  • provide better and more accessible information on how public funds are being used and what outcomes result from public expenditures;
  • keep the promises that they make; and
  • provide independent, non-political oversight to monitor whether governments are fulfilling their responsibilities and provide citizens with trustworthy information especially with respect to health, safety, the environment and the sound management of resources.

– J. Abelson, Ph.D., and F. Gauvin, M.A., Canadian Policy Research Networks Inc., for Treasury Board of Canada Secretariat (May 2004)

Recently, the attention of Parliament, the news media, and Canadians has been focussed on the findings of the Auditor General's Report of November 2003 on Government-Wide Audit of Sponsorship, Advertising, and Public Opinion Research. In this report, the governance and activities of six of Canada's Crown corporations came under scrutiny. These organizations are correcting the deficiencies highlighted by the Auditor General. Nevertheless, as announced on February 10, 2004, as part of a package of initiatives to strengthen transparency, oversight, accountability, and management across the entire federal public sector, the Government of Canada made a commitment to take a thorough look at the governance and accountability framework for all of its Crown corporations, and to report to Parliament on its findings.

No comprehensive public review(1) of the governance and accountability framework under which federal Crown corporations operate has been conducted in this country in 20 years. In 2004, the Government of Canada believed that the time had come for such a review, particularly in light of the fact that improvements to corporate governance including transparency and accountability are being implemented in the private sector, in other jurisdictions in Canada, and in other countries. Ideally, the Government of Canada's Crown corporations should be leaders as opposed to followers in adopting new and innovative best practices for effective governance, transparency, and accountability suited to the challenges of the 21st century. Furthermore, the government should be enabling its Crown corporations to excel as models of good governance by removing impediments to innovation and by reforming the ways in which the federal government performs its oversight role.

At the heart of this review exercise is the following question: How can the Government of Canada improve the effectiveness of the current governance framework so that the programs and services delivered by Crown corporations respond to Canadians' interests and needs as well as meet Canadians' standards and expectations for ethical conduct and operations for all public institutions?

The government firmly believes it can and this document is the start. Its primary purpose is to announce a series of measures addressing the pillars of good governance, including transparency and accountability, that the government intends to take. The document is also meant to educate and stimulate an informed dialogue with parliamentarians and Canadians about these measures and others that may be needed. It provides explanatory and, in some cases, historical information aligned with the main findings from a comprehensive literature review and consultations with experts outside government(2) about what is needed to improve Crown corporation governance.

The six main findings discussed in this document are as follows:

  1. There is a need to reassert the role of Crown corporations as instruments of public policy. (Chapter 3)
  2. The accountability regimes for Crown corporations require clarification and strengthening as do the stewardship roles of Boards of Directors. (Chapters 4 and 5)
  3. The appointment process for chairs, CEOs, and directors of Crown corporations needs to reflect appropriate governance standards. (Chapter 6)
  4. Boards of Directors need to be better equipped to fulfill their responsibilities. (Chapters 5 and 6)
  5. The governance regime for Crown corporations should keep pace with best practices, including private sector reforms where applicable, while accommodating the differences between public and private sector corporations. (Chapter 5)
  6. A greater degree of transparency should be brought to the activities and operations of Crown corporations. (Chapters 7 and 8)

The underpinnings of good governance—legitimacy, transparency, and accountability—are explained in Chapter 2.

It should be noted that, although a federal Crown corporation, the Canada Pension Plan Investment Board (CPPIB) is unique because it—like the Canada Pension Plan (CPP) itself—is jointly governed by federal and provincial governments. Any legislative and regulatory changes affecting the CPPIB must be approved by two-thirds of the provinces representing two-thirds of Canada's population before they can take effect. The CPP has in place a policy review process that requires federal and provincial governments to review the plan every three years. During the current triennial review, expected to be completed by the end of 2005, federal and provincial governments will review the measures of this report in a CPPIB context. The Bank of Canada also has a governance framework that reflects its unique mandate and role. The measures contained in this report will not be applied to the Bank of Canada.

The government has not yet addressed all the issues pertaining to the governance of Crown corporations. Chapter 9 provides an overview of those areas that require further examination, including compensation and indemnification of directors. Moreover, this report does not cover issues related to the operations of Crown corporations such as contracting practices or financial management and restricted transactions.

The entire list of measures is provided in the last chapter of the report. For more information on individuals consulted for this review, please see Appendix A.