Corporate governance is taking a different shape since the onset of COVID-19. Traditionally, governance has revolved around shareholders, with responsible governance and corporate social responsibility (CSR) only gaining an edge because shareholders wanted both in place. In this age, corporate governance is being reinvented from a laser focus on shareholder needs to a more holistic view which has the resilience of the company at its core.
While it can be argued that viewing the company’s financial and reputational health as the central priority is a central tenet of shareholder-centric corporate governance, in the age of COVID-19 there are significant ways in which the financial health of the company runs up against shareholder interests. An example of this would be sustained dividend payments in light of layoffs and diminished profits.
Committee established to reshape Canadian corporate governance
Corporate leaders in Canada are standing up and taking notice of this shift in the sands of the corporate governance model. In early October 2020, the TMX Group and the Institute of Corporate Directors (ICD) announced a new committee that aims to chart the future course of Canadian corporate governance. The official name of the committee is the Committee to Chart the Future of Corporate Governance in Canada.
The last similar committee, which produced a report widely known as the Dey Report, was formed 25 years ago in response to a series of widespread corporate failures. Its recommendations have been largely followed by corporate Canada ever since. The founders of this new committee think it is time for a refresh in light of new and emerging factors such as advanced new technologies, climate change, and the COVID-19 pandemic. The committee’s updated guidance will “focus on areas of oversight where director leadership can contribute to enhanced resiliency and long-term sustainable corporate performance while being mindful of the existing regulatory burden faced by Canadian companies.”
The committee will be publishing an Interim Report in early 2021, at which time it will consult with the general public and a broader group of stakeholders.
The committee will be headed by twelve diverse public company Directors who serve on the boards of some of Canada’s most widely respected companies. Committee members include Colleen Johnston (Director, Shopify, McCain Foods & Q4) and Indira Samarasekera (Director, Scotiabank, Magna International, TC Energy & Stelco). Additional details can be found on the committee’s website.
Changes that may be on the boardroom table
In an article for the Harvard Business Review, Lynn Payne argues that structured attention to stakeholders such as employees, shareholders, suppliers, communities, and customers will be more present on the boardroom table. Practices that were begun at the start of the pandemic, such as reports to the board on each stakeholder group, are likely to be something which continues as they speak to the overall health of the company. Board decisions which take into account input from all stakeholders – without giving primacy to shareholders – is central to responsible governance.
Corporate social responsibility has also proven to be much more than a buzz phrase during the COVID-19 pandemic. The protection of jobs in the face of reduced profits and the role of a corporation as an active participant in social health and change have both been in the spotlight since the pandemic began.
Companies that have not acted as good citizens by availing themselves of government funds that they don’t need and similar actions have taken a significant reputational hit. At this point, even CSR naysayers have to accept that CSR is a central plank of the new responsible governance platform.
The Committee to Chart the Future of Corporate Governance in Canada will be presenting its report in early 2021, and not a moment too soon. Once it is tabled, Canadian companies will be able to move forward together with a playbook that will speak to the new reality of what it means to be a corporate director.
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