I Corporate Governance in Canadian Federal Crown
Total Page:16
File Type:pdf, Size:1020Kb
i Corporate Governance in Canadian Federal Crown Corporations: An Analysis of the Implementation of 31 Measures Announced by the Government in 2005 By Kelly Cooper University of Prince Edward Island A Thesis Submitted to the University of Prince Edward Island, Charlottetown, P.E.I. in Partial Fulfillment of the Requirements for the Masters in Business Administration February, 2012, Charlottetown, P.E.I. ©Kelly Cooper Advisor: Gary Evans Associate Professor Second Reader: Don Wagner Associate Professor PERMISSION TO USE SIGNATURE PROJECT REPORT Title of Signature Project: Corporate Governance in Canadian Federal Crown Corporations: An Analysis of the Implementation of 31 Measures Announced by the Government in 2005 Name of Author: Kelly Cooper Department: School of Business Degree: Master of Business Administration Year: 2012 Name of Supervisor(s): Gary Evans In presenting this signature project report in partial fulfilment of the requirements for a Master of Business Administration degree from the University of Prince Edward Island, the author has agreed that the Robertson Library, University of Prince Edward Island, may make this signature project freely available for inspection and gives permission to add an electronic version of the signature project to the Digital Repository at the University of Prince Edward Island. Moreover the author further agrees that permission for extensive copying of this signature project report for scholarly purposes may be granted by the professor qt"rtqhguuqtu"yjq"uwrgtxkugf"vjg"cwvjqtÓu project work, or, in their absence, by the Dean of the School of Business. It is understood that any copying or publication or use of this signature project report or parts thereof for financial gain shcnn"pqv"dg"cnnqygf"ykvjqwv"vjg"cwvjqtÓu written permission. It is also understood that due recognition shall be given to the author and to the University of Prince Edward Island in any scholarly use which may dg"ocfg"qh"cp{"ocvgtkcn"kp"vjg"cwvjqtÓu report. Address: UPEI School of Business 550 University Avenue Charlottetown, PE C1A 4P3 - ii - Abstract Corporate Governance in Canadian Federal Crown Corporations: An analysis of the implementation of 31 Measures announced by the Government in 2005 By: Kelly Cooper The corporate governance of Crown Corporations first became a topic of common discussion in 2003 with the Sponsorship scandal whereby Government institutions were implicated in failing to respect the parliamentary appropriations process and in failing to comply with Government contracting policies and regulations leading to a misuse of public funds. As a result, in 2005 the Government announced thirty-one measures Crown Corporations were required to implement to improve their governance and alleviate citizens concerns. This paper is a comprehensive analysis of the implementation of these thirty-one measures in all forty-six Federal Crown Corporations. Since the definitions of some of the measures the Government announced are unclear, rendering their measurement problematical, this paper both defines and clarifies the definitions of the thirty-one measures. Given that these measures were announced five years prior to this study, it could reasonably be expected that all Crown Corporations would by now have implemented all of them and felt obliged to report on their implementation. This paper demonstrates that this is not the case. There is a wide range of disparity on the number of measures implemented, ranging from one Crown Corporation implementing all of the measures to two Crown Corporations implementing only three of them. - iii - Acknowledgements I would like to thank my advisor, Gary Evans, and my employer, The Department of Veterans Affairs, for their support. - iv - Table of Contents Abstract............................................................................................................................... ii! Acknowledgements............................................................................................................ iii! List of Tables ..................................................................................................................... vi! List of Figures................................................................................................................... vii! CHAPTER 1: INTRODUCTION....................................................................................... 1! Background ..................................................................................................................... 1! Research Overview ......................................................................................................... 3! Organization of This Thesis............................................................................................ 4! CHAPTER 2: LITERATURE REVIEW............................................................................ 5! Background ..................................................................................................................... 5! Gaps and Future Research ............................................................................................ 11! Summary....................................................................................................................... 12! CHAPTER 3: METHODOLOGY .................................................................................... 14! Analysis Framework ..................................................................................................... 15! Research Summary ....................................................................................................... 23! CHAPTER 4: FINDINGS................................................................................................. 25! Method .......................................................................................................................... 25! Findings......................................................................................................................... 27! Results........................................................................................................................... 44! CHAPTER 5: DISCUSSION AND CONCLUSION ....................................................... 58! Research Implications................................................................................................... 60! Limitations and Future Research .................................................................................. 60! - v - Conclusions................................................................................................................... 61! Appendix A: Data Reference Material............................................................................. 63! Appendix B: Website Copyright or Intellectual Property Permissions............................ 71! Appendix C: Measures Data Dictionary .......................................................................... 74! References......................................................................................................................... 82! - vi - List of Tables Table 1. List of 46 Crown Corporations 16 Table 2. Seven Themes for 31 Measures 18 Table 3. Measures Requiring Legislation Change 21 Table 4. Measures Requiring Government Implementation That Could Not Be Verified 25 Table 5. Measures Requiring Government Implementation That Could Be Verified 27 Table 6. Data on Legislative Amendments 30 Table 7. Data on 8 Crown Corporation Measures for Accountability, Independence and Effectiveness 37 Table 8. Data on 8 Crown Corporation Measures for Audit Committee, Appointment Process and Transparency 40 Table 9. Crown Corporations Not Subject to Government Appropriations 50 Table 10. Diversity and Remuneration Information Gathered on Crown Corporation 53 - vii - List of Figures Figure 1. Number of Legislative Changes Implemented by Crown Corporations 34 Figure 2. Percentage of Crown Corporations Implementing the Legislative Change 35 Figure 3. Legislative Changes - Percentage of Crown Corporations Reporting As Having Met the Requirement 36 Figure 4. Number of 21 Measures Implemented by Number of Crown Corporations 44 Figure 5. Accountability - Number and Percentage of Crown Corporations Reporting As Having Met the Requirement 45 Figure 6. Independence - Number and Percentage of Crown Corporations Reporting As Having Met the Requirement 46 Figure 7. Board Member Effectiveness - Percentage of Crown Corporations Reporting As Having Met the Requirement 47 Figure 8. Audit Committee Effectiveness - Number and Percentage of Crown Corporations Reporting As Having Met the Requirement 48 Figure 9. Appointment Process - Number and Percentage of Crown Corporations Reporting As Having Met the Requirement 49 Figure 10. Transparency - Number and Percentage of Crown Corporations Reporting As having Met the Requirement 51 1 CHAPTER 1: INTRODUCTION Background Like publically traded companies, Federal Crown Corporations are distinct legal entities. However, unlike publically traded companies, Crown Corporations are wholly owned by the Government. Crown Corporations have been created to deliver important public programs, with more autonomy than other Government entities, so that they can operate in a more commercial environment, generating revenue and exposed to potential financial losses and risks. In Canada there are forty-six Crown Corporations ranging in size from less than five to 45,000 employees and operating in many sectors of the economy including the financial sector,