Tightening the Rules

The legislators in the Canadian province in which I live recently charged the Ontario Securities Commission with reviewing corporate reporting standards in order to establish best practices for disclosure of environmental, social and governance practices. The commission has been asked to report back to the House by January 1st of this year. The announcement warranted only about 125 words in Canada's national newspaper which means it can easily die a languid death.

Behind the order to review disclosure practices (other than the standard opportunism of politicians looking to take personal advantage of a crisis in trust), is acknowledgment that the public and minority shareholders have this indistinct but genuine feeling no one in corporate boardrooms is championing good behaviour.

Never having sat on a corporate board (I have been a director on a hospital foundation board) I have no idea how discussions about things like executive compensation, minority shareholder rights, and environmental and social commitments are raised and debated. Having read Dickens, Marx, Althusser and Levy, and being ready to believe anything Gretchen Morgenson writes about boardroom mischief, I do feel a sort of native mistrust that the impact of a decision or policy on ordinary shareholders or a community ever factors into the colloquy. Worse, I end up silently cheering regulators (although seldom legislators) when they study corporate reporting standards and insist on more transparency, even though I know I shouldn't given the nasty stuff they can foist on business.

By all appearances, I'm not alone in mistrust.

But I also know that many corporate directors are honest and ethical people. They work hard to balance conflicting interests and to do what is right for the company, its shareholders and the community. So let's hope that out of the OSC's review the government doesn't default to punitive regulation. Rather it should encourage board-lead custody of ethical, inclusive and open behaviour. A good start would be to put forward suggestions for ways boards can collect and aggregate meaningful contributions (not just by shareholder resolutions and voting proxies)from people who deserve to have a say in crucial (not all) decisions -- in particular minority shareholders and 'communities of interest'.

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