Speaking to the Standing Senate Committee on Banking, Trade and Commerce, Maurizio Bevilacqua, Secretary of State (International Financial Institutions), spoke of the urgent need to improve investor confidence through enhanced corporate governance measures.
While he stressed developments in the U.S. , Bevilacqua also noted the need for a made-in-Canada solution. “It is a Canadian corporate governance solution that suits our needs, while simultaneously meeting the highest international investor and market standards,” he said.
He listed five elements that the government believes essential to strengthening investor trust and confidence:
- companies must have strong corporate governance including independent boards;
- CEOs and chief financial officers must certify their firm’s financial statements;
- financial reporting must be improved;
- auditors must be independent of the firms they audit, and there must be effective oversight of auditors’ work; and
- there must be stronger enforcement.
Bevilacqua said that progress is being made on various front through the efforts of regulators and other industry players. But, he said, more must be done: including, considering the relevance of the U.S. Sarbanes-Oxley legislation and new stock exchange rules to Canada; the extent to which corporate governance practices should be legislated, regulatory or voluntary; considering whether there should be different rules for big firms and small ones, or for widely-held firms and those with controlling shareholders; and, which laws need to be changed to strengthen enforcement.
“In this context, our government is reviewing the Canada Business Corporations Act and legislation relating to federally regulated financial institutions. As well, we are examining the whole enforcement area, and how we can create as effective a deterrent as possible,” he said.
“We believe a national effort is required to meet this national challenge. To be effective, we need a coordinated approach among the federal government, other governments, regulators and private sector participants,” he concluded. “But let’s be clear – this is an urgent issue. Although much progress has been made, and will continue to be made, all of the participants need to move quickly to strengthen investor confidence. For the Government’s part, we will use all the levers at our disposal whenever necessary to strengthen the confidence of investors in Canadian capital markets.”