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Guylaine Saucier

Tuesday, April 01, 2003

Good governance promotes strong, viable and competitive corporations. That's why it's critical to explore ways in which directors can enhance shareholder value.

However greater emphasis is now being placed on an individual's attendance record, or on his or her independence from the corporation and other board members. These are necessary but not sufficient criteria in assessing a board.

Ironically, as these items gain prominence, we may foster a compliance culture, where it becomes more important to fulfill a set of conditions rather than serve shareholder interests.

For example, a director may satisfy all criteria to be considered fully independent but come to a board meeting unprepared, ask barren questions and behave in a way that does not challenge management in a constructive manner.

My point is this: many desirable qualities cannot be neatly checked off a list. Nor can they be assessed without being in the boardroom. More work needs to be done in accurately appraising an organization's governance culture.

To be sure, shareholders can assess a board in a number of ways. For example, an effective board adds value, first and foremost, by selecting the right CEO for the company.

Moreover, directors contribute to a company's viability by assessing and approving its strategic direction; ensuring management has appropriate processes for risk assessment; monitoring performance against benchmarks; and, assuring the integrity of financial reports.

Such responsibilities impact a company's performance. As such, any further exploration on corporate governance must not lose sight of a board's raison d'etre: to act as stewards of a corporation's assets and to add value to those assets by working with management to build a successful organization.

Our exploration of good governance now faces two distinct paths: one, where a compliance culture is prized, the other, where boardroom behaviour is most valued.

I argue the latter best serves shareholder interests.

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