New Study Released On Corporate Governance- Toronto Stock Exchange And ICD Release Corporate Governance Scorecard

The first official follow-up study on how closely corporate Canada follows Toronto Stock Exchange corporate governance guidelines was released today (June 17) by the TSE and Institute of Corporate Directors. The study found that the majority of companies that Canadians invest in take seriously the guidelines released by the TSE in the 1994 Dey Report "Where Were the Directors." The study also found that although progress is being made, not all companies embrace the guidelines aimed at improving the effectiveness of their boards. "This research presents a rather complex picture," said John Carson, Senior Vice President, Market Regulation with the TSE. "On one hand the companies take the TSE guidelines seriously but on the other hand, there are important areas where companies fall short of adopting." While the survey shows widespread adherence to TSE guidelines in certain key areas - notably board size, board composition and involvement in strategic planning - adaptation is lower when it comes to formalizing the roles of board members, measuring board performance and training new directors. Larger cap companies that account for the bulk of Canadian shareholdings are most likely to adopt the guidelines. While not mandatory, TSE-listed companies are encouraged to follow all 14 best practice guidelines originally recommended by the TSE Committee on Corporate Governance, chaired by Peter Dey, in 1994. Recognizing that there is no "one size fits all" solution, the TSE does not require adaptation - but every year, listed companies must disclose and explain any differences between their corporate governance practices and the guidelines. Decision Resources Inc, an independent research consultancy, was selected by the TSE and ICD to conduct the survey of Canadian corporate governance practices and attitudes. The report is based on detailed responses from 635 CEOs of TSE-listed companies, representing a 51 percent response rate. "Progress has definitely been made. This is encouraging, but for the TSE and the Institute, the ultimate goal of a survey like this is to find practical ways to actively promote sound corporate governance and help bridge any gaps," explained Marcelo D. Mackinlay, Chairman of the ICD. "Corporate governance is not merely of academic interest. It's good business. Sound governance is a crucial aspect of delivering better returns to shareholders - and that can only strengthen our capital markets," said Mr. Carson. To help public companies take the next step, work has begun on several fronts: Evaluation of boards and directors: Boards often lack formal processes for evaluating their own effectiveness. To help boards assess their performance, the ICD is designing a scorecard that companies can adapt to their specific needs. Disclosure: The TSE will recommend companies use a table format as a best practice approach to disclosure, which provides a clear picture to investors of a company's approach on each of the guidelines. Training: The impending retirement of many among the current generation of directors suggests that newer board members will have less access to experienced peers. Today, roughly half the companies have no formal orientation programs or reference materials for new board members. The ICD is developing a comprehensive educational program for directors with the TSE's support. Risk management: Many boards have no formal processes to evaluate risk. Later this year, the TSE will pilot a seminar on risk management for mining and exploration companies. The fully automated TSE ranks among the world's top exchanges and is Canada's premier market for senior equities. Accounting for approximately 90% of equity trading in Canada, the TSE handled over 26 billion shares worth more than $490 billion in 1998. With a proud 147-year history, the TSE continues to provide investors with a well-regulated, fair and accessible marketplace. The Institute of Corporate Directors is a professional association dedicated to enhancing the standards of corporate governance in Canada. Decision Resources Inc. is a Toronto-based international business research and consulting company, with a specialty practice in corporate performance measurement and research for litigation and regulatory disputes.