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Executives play pivotal role in determining good governance
Tuesday, April 01, 2003
Ask the top executives of some of Canada's best-run companies for their good governance tips and you'll hear variations on a theme.
Commitment to excellence, honesty and good communication with senior executives and -- perhaps most important -- an open and candid relationship with the board of directors are cited as key to good leadership.
"The CEO plays a pivotal role," says Harold Kvisle, president and CEO of TransCanada PipeLines Ltd., a Calgary-based natural-gas pipeline and power company that placed third in The Globe and Mail's corporate governance survey last October ranking 270 Canadian public companies.
"If he has a strong, unwavering commitment to business excellence, he will end up with a company that runs differently than one where the concern is only an increase of profits. If the CEO really genuinely believes [in excellence], that attitude will prevail throughout the company."
The CEO is also "the key interface between the organization and the board," Mr. Kvisle says. "If he has a relationship of honesty, trust, straightforwardness, simplicity, clarity in everything he discusses with board, that leads to good governance."
Doug Whitehead concurs. "I think good corporate governance really comes down to the integrity of the relationship between the CEO and the board," says Mr. Whitehead, president and CEO of Finning International Inc., the Vancouver-based equipment dealer.
"You can put in a lot of processes and regulations, but unless there's a high-integrity, candid, open relationship between the CEO and board, they won't be effective."
Finning ranked fifth in The Globe and Mail's corporate governance survey, and also took third place in Canadian Business magazine's "Best Boards in Canada" survey in August.
"I think that every CEO has to be humble enough to talk about what's going well, but also, with the board, what's not going so well," Mr. Whitehead says. "I think a candid assessment of major projects [with the board] is critical," not just reports on costs and assessments.
"The CEO needs to tell the board what keeps him awake at night. It's just a question of being candid about how the business is going."
Transparent communication with the board of directors is essential, agrees Bill Acton, president of Canada Life Financial Corp., which tied for third place in The Globe's corporate governance rankings. "I don't think it's a recipe or a rule, it's a mindset. You don't sugar-coat reports; you put it forward, and if there's a problem, you say what you're doing about it. So it's that co-operative approach; we're not playing cops and robbers."
Good governance means being open to discussion and different points of view, Mr. Acton says, taking the time to give directors open and frank briefings and access to advisers, and presenting directors with both sides of a story. "So directors feel valued and involved, and that encourages good-quality directors to be there and bring along other quality directors."
Stephen Snyder, president and CEO of Calgary-based TransAlta Corp., says a CEO should be providing "openness of communication, no surprises, and keeping the board well-educated on the industry," which includes bringing in experts to meetings.
As well, "we like to always plan well ahead, so the board isn't forced into instant decision-making," says Mr. Snyder, whose company, a non-regulated power generation and wholesale marketing firm, took second place in The Globe's corporate governance survey in October. "They have time to ask questions and get answers."
The board also sets the "ethical tone" for the company. "It's up to them to set the standard for the management team," which is then distilled down through the company ranks. The tone set by the board also assures shareholders of the good governance of the company, he notes. The CEO, in turn, must "get an alignment" between board and management, and keep things energized.
Those executives who also sat on the board of directors said they exempted themselves from a portion of every board meeting to allow the non-executive directors some private discussion time.
"I don't serve on committees," Mr. Snyder says. "I view my role as presenting management's thoughts and opinions to the board. My main priority is to keep the board informed. At every single board meeting, there is a discussion without management, and without me."
A CEO's other key relationship is with the senior executive team and broader employee group. "Honest discussion of the performance of key executives is critical, and also succession planning," Mr. Whitehead says.
Like the relationship with directors, the CEO's relationship with staff also needs be "based on simple, clear, honest communication," says Mr. Kvisle. "That's a key challenge for the CEO, to be able to boil complicated things down to concepts that everyone in the company can understand and buy in to. Clarity is very important to me."
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