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Good Governance group set
Coalition members mandate to contact firms, lobby boards to make changes

By JANET McFARLAND
Saturday, April 12, 2003 - Page B3

A group founded by some of Canada's largest institutional shareholders has formalized its corporate governance lobbying work with a new permanent office in Toronto and a mandate to approach individual companies to urge changes.

Former federal finance minister Michael Wilson has been appointed as the first chairman of the Canadian Coalition for Good Governance (CCGG), whose members include major investors such as the Ontario Teachers Pension Plan Board and Jarislowsky Fraser Ltd.

"There are a number of organizations that talk about good corporate governance," Mr. Wilson said in an interview yesterday.

"What is different here is we have 19 members with $350-billion of assets. That adds bite to our opinions. If we go and talk to management about certain concerns we have about their corporate governance practices, we're not talking as idle observers; we're talking as active participants."

The coalition first came together last year as a loosely affiliated group of investors interested in improving corporate governance in Canada. Mr. Wilson, who is chief executive officer of UBS Asset Management, said the CCGG has decided to "make a significant move into a permanent structure" by incorporating, appointing an eight-member board of directors and setting up an office with staff in Toronto.

David Beatty, a corporate director and the director of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto, has been hired as the group's new managing director, overseeing a small staff.

Mr. Wilson and Mr. Beatty said yesterday that the coalition will actively lobby individual companies to make changes to their corporate governance practices. They said the group's initial goals will include ensuring companies fully comply with the disclosure requirements of the Toronto Stock Exchange, and promoting the importance of fully independent directors on boards.

"These are the kind of minimum standards that we're going to want to make sure that the publicly traded companies in Canada are complying with," Mr. Beatty said yesterday.

He said the CCGG will urge companies to have fully independent audit, nominating and compensation committees. It will also lobby for boards to at least have a majority of independent directors, and even encourage two-thirds independence on boards.

"We're trying to encourage most boards to move up at least to a minimum threshold and perhaps to the higher threshold," he said.

Mr. Beatty said he considers a director to be related if he or she is a member of management, has a business relationship with the company, or has a family relationship to management.

But Mr. Wilson said the CCGG is also "sensitive" to the situation of majority-owned companies, which often have more related directors, and said the coalition will pick its spots when challenging these companies.

"There are some cases where there's been a great attempt at good governance on the part of family owners or dominant shareholders. And in other cases, people take advantage of it. We have to be careful how we do this, so that we put our efforts in a place where it's going to make a difference."

He said the diverse members of the coalition may not always agree on corporate governance issues for Canadian companies, and are not obligated to join campaigns against individual companies or to vote their shares the same way as other members.

"If there's consensus among a meaningful number of members, we would be able to move ahead," Mr. Wilson said. "And if some member doesn't agree with that and would just as soon take a pass, that's certainly a prerogative. That's been made very clear to our members; they're not bound by a majority."

Along with Mr. Beatty and Mr. Wilson, the other members of the new CCGG board are Tony Arrell, CEO of Burgundy Asset Management; Morgan Eastman, chief investment officer of OPSEU Trust; Emilian Groch, executive director of the Alberta Teachers Retirement Fund; Stephen Jarislowsky, chairman of Jarislowsky Fraser; Claude Lamoureux, CEO of the Ontario Teachers Pension Plan Board; and Don Reed, CEO of Franklin Templeton Investments.

Governance goals

The newly formed Canadian Coalition for Good Governance is lobbying for key changes in corporate governance practices:

• See that companies comply with the disclosure requirements of the Toronto Stock Exchange.
• Promote the importance of fully independent directors on boards.
• Develop views on compensation, including stock option terms and grants.
• Represent shareholder views on such public policy issues as accounting, regulatory and tax changes.