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Full rankings and methodology

Globe and Mail Update

The Report on Business marking system rates Canada's corporate boards against a demanding set of criteria designed to go far beyond the minimum mandatory requirements imposed by regulators. These best practices are based on the recommendations of major institutional investors, academics and industry associations, and are revised each year to ensure they keep pace with shifting standards of excellence as governance improves and matures.

The data is based on information published in the most recent annual shareholder proxy circulars of 218 companies that comprised Canada's benchmark S&P/TSX composite index as of June 15 this year. Nortel Networks Corp. was not included because it has not yet issued a proxy circular in 2004. Some companies did not receive marks in 2003 or 2002, because they were not members of the S&P/TSX index group at that time.

The criteria for 2004 are broadly similar to the marking system used in 2003, with some differences in the number of marks awarded in some categories.

One major change is the addition of a new category in 2004, assessing whether companies allow shareholders to vote for each director nominee individually, or for the entire board as a slate.

This question was added because investors are increasingly asking for the right to approve or reject individual directors, allowing them to send a clear message about which board nominees are unsuitable without having to withhold their votes for all the others.

Some investors routinely reject any directors whose attendance records or share ownership levels are considered inadequate, and want to ensure their message is clearly heard by those specific directors. Slate voting does not give them that flexibility.

Two questions were dropped in 2004 that were included in past years because they were thought to no longer be useful measures. One marked whether a company had annual elections for each director or had staggered director terms.

The other looked at whether companies included full statements of corporate governance practices in their shareholder proxy circulars. Most companies received full marks last year for both these questions because the practices are almost universally adopted.

For several other questions, Report on Business increased or decreased the maximum possible marks available. For example, Report on Business awards more marks in 2004 to companies that do not have dual-class shares to recognize the growing emphasis that major investors are putting on equal voting rights for all shareholders.

Because of these changes to the marking system, this year's marks are not precisely comparable with previous years' scores.

But because most of the marks and most of the categories remain the same, Report on Business has included previous marks to provide a basis for comparison.

We have also included the total five-year returns for each company -- as of Aug. 31 this year -- to address concerns from some low-scoring companies that it is more important to consider their history of strong financial performance. The data were prepared with the assistance of the Clarkson Centre for Business Ethics & Board Effectiveness at the University of Toronto.

The chart published here shows the total scores for each of four broad categories assessed in the study: Board Composition, Shareholding and Compensation, Shareholder Rights, and Disclosure.

Each of these broad categories is composed of a series of detailed questions. Full marks for each individual question for each company are published on our website at

The website also contains a detailed methodology, explaining how each question is scored, and how the scoring was changed in 2004 compared with 2003.

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