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opinion

What timing. Just when a volatile stock market makes effective boards more important than ever, a blue-ribbon panel comes out with a report on corporate governance. The problem is that the committee failed to come up with a single new idea that will significantly improve the quality of corporate governance in Canada. It is the predictable result of a process conceived behind closed doors that reflects the disturbingly myopic state of many of the country's boardrooms.

The committee was formed last year by the Toronto Stock Exchange, the Canadian Venture Exchange and the Canadian Institute of Chartered Accountants in the aftermath of disasters involving Bre-X, Livent, Cinar, YBM Magnex and the scandal at RT Capital. Previous efforts by the TSE to improve the effectiveness of boards failed to rouse directors to their duties. Canada's reputation abroad was beginning to suffer. Strikingly, the attributes of boardroom folly that have been so costly to Canadians have been mirrored in the very committee formed to eliminate them.

Cronyism: The committee is headed by former CBC chair Guylaine Saucier, who also sits on the boards of Bank of Montreal, Nortel and Petro-Canada. Directors from those boards feature prominently on the committee. Nortel alone has four current or former directors, including CEO John Roth, on the committee. In fact, a majority of the group is linked by board memberships with Ms. Saucier. Without other important viewpoints being represented, such as the average investor's, it is hard to view the report as anything more than an effort to preserve the status quo.

The glass ceiling: Another problem with the old boys' club is that directors often sit on too many boards at once. With only three members of the committee collectively holding positions on 17 boards, for instance, it is obvious that the current pool of directors is overstretched. Opening up the boardroom to greater numbers of qualified women would allow directors to concentrate more time on fewer companies. But the progress of women in the boardroom has remained painfully slow, and requires a sea change in attitude and commitment. Unfortunately, that is not to be found in this report, which, like its TSE and Senate banking committee predecessors, fails to address what has been a glaring boardroom omission by corporate Canada for too long.

Transparency: The committee was conceived in secret and its report was produced behind closed doors. It provided for no open process to arrive at its recommendations. It held no hearings. It offered no useful or interactive information on its Web site, which, until the posting of its report this week, had not changed since last October. How the committee arrived at its conclusions is a matter of speculation, which is seldom a reliable guide when important economic and public policy matters are at stake.

New ideas: The committee's report is little more than a rehash of ideas long accepted as minimum corporate governance practice. It ignores how investors might be empowered in their dealings with companies. It fails to address director attendance problems or the need for mandatory reporting. Astonishingly, given all the scandals that can be traced to inattentive boards, the report suggests no enforcement mechanism for its recommendations beyond the existing system of disclosure and voluntary compliance. But in one of its few recommendations for legislative change, the committee wants to make it harder for shareholders to sue directors. What a surprise.

Unasked and unanswered by the committee: Why are there so many boardroom disasters? And why are so many blue-ribbon committees formed only to recommend the obvious without bringing about real change? It is a telling omission, and one that reveals an unspoken rule of the club. When it comes to directors prodding directors, a culture of compliance is studiously avoided. A culture of accommodation, which inevitably leads to further abuse and scandal, is always preferred. In this respect, the Saucier committee is following the standard script.

While many of Canada's boards work admirably on behalf of the millions who depend on them, far too many underperform or fail at even minimum tasks. If Canada's competitiveness depends on the quality of its corporate governance, then the unimaginative recommendations of this committee are an unsettling augur of what is to come. An important opportunity to protect investors and avoid future mishaps has been lost again. It serves as a reminder that the cozy club is not the solution. It is the problem. J. Richard Finlay heads the Centre for Corporate & Public Governance.

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