Governance Definition

Transcription

1 GOOD CORPORATE GOVERNANCE OF ECONOMIC AND BUSINESS DEVELOPMENT INSITUTIONS Summary of Policy Brief Métis Economic Development Symposium II Vancouver, January 19-21, 2011 Paul Hanley Consulting Governance Definition 1 In its broadest sense, corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interest of individuals, of corporations and of society. The incentives to corporations and those who own and manage them to adopt internationally accepted governance standards is that these standards will assist them to achieve their aims and to attract investment. The incentive for their adoption by states is that these standards will strengthen their economies and encourage business probity. (Foreword to Corporate Governance and Development, Global Corporate Governance Forum, Focus 1, 2003) 1

2 Governance Overview 2 Literature review attests to the value of best principles and practices. Governance principles should include provisions to ensure that: Harvard Business Review Written code of conduct for directors/executives that promotes ethical/responsible decision-making. The board includes independent members; represents a range of skills; is able to review and challenge management performance; of sufficient size; and shows integrity/commitment. Responsibilities for accountability are clear and publicly known. Shareholders are provided with regular information and opportunities to exercise their rights Governance Overview 3 Ethical, responsible decision-making is in place to limit risk and ensure good public relations. Independent verification and safeguards of the integrity of the company's financial reporting are in place. Internal controls and auditors are in place. The entity's external auditors are qualified and independent. Compensation policy is fair and transparent. The way in which individuals are nominated for positions on the board is fair and transparent. 2

3 Good Results 4 In one study business performance data on more than 2000 companies was correlated with 51 governance provisions. firms with relatively poor governance are relatively less profitable, less valuable, and pay out less cash to their shareholders. Specific governance factors that contribute most to business performance: all directors attended 75% of board meetings or had a valid excuse, board is controlled by more than 50% independent outside directors, board has outside advisors. board guidelines are in each proxy statement, mandatory retirement age for directors, performance of the board is reviewed regularly, Good Benefits 5 Benefits of sound corporate governance include: Increased access to external financing can lead to larger investment, higher growth, and more jobs. Lower costs of capital and higher value for the firm making investments more attractive, which can lead to growth and employment. Better operational performance through better allocation of resources and better management creating wealth more generally. Reduced risk of financial crises. Better relationships with all stakeholders 3

4 Good Métis Institutions 6 Good governance can be articulated in a variety of ways in response to culture. Good corporate governance practices have become accepted Métis values, recognized as consistent with Métis culture. Métis economic institutions have in general adopted governance principles/practices consistent with North American norms. Métis capital corporations have a history of good governance resulting in effective and efficient operation for stakeholders. (arms length/professionally managed) Métis economic institutions will benefit from continuous enhancements of governance practices as they grow in complexity and sophistication. Guiding Principles 7 Meyers Norris Penny (MNP) business plan for a Métis Entrepreneurship Fund developed with Métis stakeholders. proposed guiding principles that reflect Métis values, culture and core ideologies Guiding Principles Funding provided by the institution used to stimulate and encourage economic development in Métis communities. Institutions create opportunities for employment and promote wealth creation within Métis communities Close the income gap between Métis and non-aboriginals. Institutions should be managed with an emphasis on achieving long-term, sustainable operations. 4

5 Guiding Principles 8 MNP MEF guiding principles (cont.): Improved access to capital creates opportunities for Métis business ownership/strengthens Métis entrepreneurship. Institutions work to expand current market reach, allowing them to leverage capital for loans where they were previously restricted by lending limits. Management proactively explores opportunities for partnerships with lending institutions to enhance the sustainability of the institution. Institutions strive to be leaders and innovators in the business and economic development field. Board and Executive 9 A key to good governance is the proper functioning of the board/executive. Strong board is a prerequisite to an effective executive. As Métis business and economic development institutions multiply, a key challenge is finding qualified board members Ensure sufficient training. Adequate support for professional development initiatives Aboriginal Financial Officers Association of Canada Council for the Advancement of Native Development Officers. Non-Métis members 5

6 Planning and Evaluation 10 Effective planning and evaluation functions responsibilities of the Board of Directors built into the governance structure Challenges include measurement of results against the broader mandate of the organization: contribute to the economic development of the Métis community, not just individual entrepreneurs. to what extent do the successes and failures of clients contribute or detract from overall social goals? Sustainability 11 Strategic planning and risk assessment are keys to sustainability. Ensuring corporate sustainability is a key role of the board of directors. Ensure that Métis economic development institutions have sufficient funds For long term operation To respond to the challenges/opportunities of Métis economic development. Opportunities in resource/energy industries Duty to consult/accommodate opportunities Procurement opportunities 6

7 Federal/Provincial Roles 12 Federal/provincial governments can facilitate good governance in Métis economic institutions by: Require good governance principles and practices. Arms length institutions, professional management Contribute to the sustainability of the institutions Adequate support is needed for professional development initiatives Aboriginal Financial Officers Association of Canada Council for the Advancement of Native Development Officers. Canadian Executive Services Organization (CESO) 7