TORONTO — If Canada’s corporations don’t voluntarily improve corporate governance, federal legislation may become necessary, a top business leader said Thursday.
“If corporate Canada does not react quickly enough, this will give good reasons for Parliament to intervene and basically to adopt legislation similar to the Sarbanes-Oxley (Act in the U.S.),” Paul Tellier, chief executive of Canadian National Railway Co. , told reporters after a speech to the Empire Club, a group of business and political leaders, according to Dow Jones Newswire.
“I don’t think that corporations are governed badly but I think there is a lot of room to improve governance practices,” Tellier said.
In particular, Tellier told the audience he felt it was essential to split the role of chairman and chief executive. While that is the case in few Canadian companies now, Tellier noted later that Royal Bank of Canada divided the positions in August 2001 and Toronto Dominion Bank will do so on a temporary basis later this year when Charlie Baillie retires as chief executive but remains as chairman until 2004.
Tellier also urged company executives to remove non-performing directors from their boards, and to avoid making board meetings “a series of monologues.”
He also criticized business leaders and the securities industry for being too focused on short-term results rather than look for long-term value.
Tellier said the guidelines for corporate governance recently issued by the Canadian Council of Chief Executives “will be sufficient for everybody to do the right thing.”
However, he said later that market forces will be effective in pushing corporate leaders to improve governance practices.
“Only a fool today would ignore what is happening,” Tellier told the audience, noting that chief executives were now being held to a much higher standard of responsibility.
He also told reporters he had no concerns about the Sarbanes-Oxley Act, which requires chief executives and finance officers of companies publicly traded in the U.S. to personally accept responsibility for annual financial statements.
Canadian National trades on the Toronto and New York stock exchanges.
The Ontario Securities Commission is studying whether to adopt similar governance measures in Canada. It recently created an independent auditor oversight board in conjunction with the Canadian Institute of Chartered Accountants. As well, it has increased staff assigned to review company financial reports.