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Canadian boards boast better governance than Europeans: study

A new study says Canadian boards of directors boast better governance practices than their European counterparts.

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Canadian boards of directors follow better corporate governance practices than many of their counterparts in Europe, having more directors with industry expertise who operate more independently from management, a new survey suggests.

A joint study of directors by the University of Toronto's Rotman School of Management and the INSEAD business school in France said surveys of directors in both regions show greater concerns in Europe that directors lack up-to-date industry knowledge, while Canadians expressed more concern about directors' lack of board experience.

European directors also expressed strong concerns that directors act too much like managers rather than board members, which was not an issue cited in the Canadian study.

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"Europe lags in governance practice behind the Canadian benchmark, and provides a number of improvement opportunities," the survey concludes.

The survey involved 294 corporate directors from 20 countries in Europe, and compared the results to Canadian surveys of directors conducted by the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto.

Canadian directors said their boards were far more likely to hold independent sessions of directors without management present, allowing candid discussions among board members, and put a greater emphasis on value of director education. They also were more likely to do board and director performance evaluations.

The study said the lack of evaluation at many European companies means poorer practices "are inadequately corrected and improvement is either absent or too slow."

In both regions, however, directors said they were very concerned that board members are too busy with outside matters to devote themselves to their board work.

In the area of board diversity, the authors concluded European boards show a greater commitment and less "tokenism." While 48 per cent of European boards in the survey have no female directors -- compared to 38 per cent in Canada -- the study found those boards in Europe that are interested in diversity have gone further.

It said 46 per cent of Canadian companies have just one woman on the board, compared to 25 per cent in Europe, where boards are more likely to have multiple female directors.

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Countries such as France and Norway have imposed quotas for women on boards, while other countries such as Britain and Germany have introduced disclosure rules to encourage more women on boards.

Boards in both regions still rely overwhelmingly on personal connections to find new directors, with 83 per cent of directors in Canada and 65 per cent in Europe saying they rely on informal sources to find candidates.

In Canada, however, directors said their boards are more likely to identify longer lists of potential candidates and "bolster" their informal practices with formal processes such as creating skills matrices to figure out who best fits skills gaps on the board before they make their final choice.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More

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