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Independence makes big gains in the boardroom

Continued from Page 2

In 2004, for example, 10 per cent of companies received a score of 90 or better in the Report on Business survey, up from 5 per cent in 2003 and just 2.2 per cent in 2002.

At the other extreme, fewer companies scored in the lowest tier below 50 this year. Just 11 per cent of companies scored 50 or worse in the study, down from 15 per cent in 2003 and 27 per cent in 2002.

Despite these gains, there are still areas of broad weakness.

Boards do not appear to be growing noticeably more diverse, for example, with 46 per cent of companies having no women on their boards, a level basically unchanged from last year.

While a handful of Canadian companies have eliminated their subordinate voting share structures in the past year, the use of unequal voting shares remains common in Canada. The Report on Business's 2004 review found 23.4 per cent of S&P/TSX companies have unequal voting shares, compared with 26 per cent 2003.

And another area of weakness continues to be disclosure of compensation policies, with only a few companies providing detailed explanations to shareholders of the procedures used to set CEOs' bonuses. Only 5 per cent of companies earned full marks in the Report on Business ranking for their compensation disclosure practices, while 22 per cent earned a score of zero for providing no information at all about the financial factors that are taken into account when deciding compensation.

Michael Wilson, a corporate director and chairman of the Canadian Coalition for Good Governance, said the CCGG has tried to focus on some of the weakest governance examples, and has lobbied companies to make changes.

He said the standard response from some companies is that they are not interested in governance, and consider the only important factor to be their financial performance.

But he says the two cannot be separated. Companies with poor governance have a higher investment risk, he says.

"Why put my customers' money in them," asks Mr. Wilson, who is also chairman of investment firm UBS Canada.

"If I have a choice between two companies, [poor governance] is the risk element that is going to influence me away from a particular company."

These are the 10 top-rated companies in the Report on Business 2004 survey of corporate governance in Canada. Companies were rated on board composition, compensation features, shareholder rights and disclosure practices.

No. 1: MANULIFE FINANCIAL - Rating 95/100

No. 2: (tied) BANK OF MONTREAL - Rating 94/100

No. 2: (tied) FINING INTERNATIONAL - Rating 94/100

No. 2: (tied) SUNCOR ENERGY - Rating 94/100

No. 5: (tied) BANK OF NOVA SCOTIA - Rating 93/100

No. 5: (tied) CN RAILWAY - Rating 93/100

No. 5: (tied) CANFOR CORP. - Rating 93/100

No. 5: (tied) ENBRIDGE INC. - Rating 93/100

No. 5: (tied) ROYAL BANK OF CANADA - Rating 93/100

No. 5: (tied) SUN LIFE FINANCIAL - Rating 93/100


At the top: Manulife Financial

Chairman Arthur Sawchuk says it is time for boards to focus on value creation, rather than protecting the reputations of management and directors. B9

At the bottom

Some of Canada's biggest companies don't heed investor concerns and regulators' guidelines about buffing up their governance record. B11

The rankings

Canada's definitive ranking of corporate governance and board composition, and a peek inside the Report on Business marking system. B10


The new directors on board

It helps to have a blue-chip background, but the clubby world of directors is getting more diverse. Also: How Harlequin's Donna Hayes got on the TD board.


Winds of change

In an era of increased accountability, investors make public demands for change. And behind the scenes, directors undergo performance reviews.


Tackling turmoil

Boards have handled a range of crises this year, from bankruptcy protection to allegations of shareholder impropriety. They're finding new ways to manage the turmoil.


More data

A full explanation of the ROB governance standards, plus the item-by-item results for each company in the survey at

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