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

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9. Other Issues

Several issues related to the governance of Crown corporations are not covered in detail within the scope of this report. The intent of this chapter is to provide a general sense of how the government intends to proceed in the future to address the compensation and indemnification of directors.

9.1 Compensation

The increased involvement of boards in the provision of strategic guidance to Crown corporations, and the recognition of their responsibility for the performance and activities of their organizations, raises the question as to whether the compensation currently paid to directors should be reviewed.

Some individuals consulted during the course of this review recognized there is a requirement to adjust the level of compensation for directors in response to increasing responsibilities and workload. This being said, compensation does not seem to be a prime consideration for individuals who accept appointments to boards. They are more attracted by the opportunity to make a contribution to public service and the nature of the work that the appointment involves.

Measure #30 The government will ask the Advisory Committee on Senior Level Retention and Compensation to review the compensation provided to chairs and directors of Crown corporations.

9.2 Indemnification of Directors

The FAA protects directors against all costs that are reasonably incurred in respect of any civil, criminal, or administrative action or proceeding to which they are a party by reason of being or having been such directors, if directors acted honestly and in good faith with a view to the best interests of the Crown corporation, and if, in the case of any criminal or administrative action or proceeding that is enforced by a monetary penalty, the director's conduct is believed, on reasonable grounds, to have been lawful.

The FAA also specifies that the Treasury Board is required to indemnify directors only if the directors were substantially successful on the merits of the defence of the action or proceeding and fulfill the conditions set out above. Although the Act provides the Treasury Board with the authority to make regulations specifying terms and conditions governing indemnification, none have been developed or approved.

At issue is the growing number of Crown corporations purchasing separate indemnification insurance policies for their directors who, in many cases, would not otherwise accept the appointment. These insurance policies typically provide for an advance of costs should an action or proceeding be brought against directors, which the Treasury Board Policy on the Indemnification of and Legal Assistance for Crown Servants does not provide. This would allow a corporation to advance moneys to a director for the costs, charges and expenses of a proceeding. However, directors are required to repay the advance if they are found to have acted dishonestly, in bad faith, not in the best interests of the corporation, or if there are reasonable grounds to believe the directors' conduct was unlawful.

Measure #31 The government intends to develop regulations pursuant to the FAA to provide for an advance of costs to directors in much the same manner as in the Canada Business Corporation Act.

 

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