Discussion + Information on Governance in Canada
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The Accepting Majority: Wealth and Income Inequalities

President Obama made his pitch for ‘middle-class economics’ in his January 20th State of the Union speech. Delivered before the Republican controlled Congress, his political message was addressed to the nation at large, with an eye to future historians of his presidency. President Obama declared that the shadow of the ‘Great Recession’ has been overpowered by the sunlight of economic recovery and heralded a bright future for the United States.

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Canadian Public Accountability Board’s Inspection Findings Should Be Disclosed to Audit Committees

The critical roles of audit committees in overseeing the external auditor and in contributing to audit quality and integrity of financial reporting have been restrained by the failure of the Canadian Public Accountability Board (CPAB) to permit the disclosure of its inspection findings of external auditors to audit committees. Audit committees should have the legal right to receive CPAB’s inspection findings from their external audit firms in order effectively to oversee their external auditors and to evaluate the quality of the audit of their financial statements.

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The Regulation, Supervision, Accountability And Transparency Of Canada’s Audit Regulator And Audit Firms Require New And Expanded Rules

The Canadian Public Accountability Board (CPAB), Canada’s national audit regulator, and the audit firms the CPAB inspects, enjoy limited supervision by and accountability to the Canadian Securities Administrators. There is an undue lack of transparency of CPAB’s inspection findings of audit firms, which has resulted in a failure to achieve an enhanced degree of public confidence in the integrity of financial reporting in Canada that is fundamental to the effective operation of its capital markets. The supervision, accountability and transparency of the CPAB need to be reviewed by the Canadian Securities Administrators and the Ontario Securities Commission.

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Ethical Leadership and Corrupt Practices

The Chairman of the Board has a duty to lead the board to establish a sound ethical culture. The board is responsible for the governance of the company. With the assistance of the CEO and senior management, the Chairman and the board have the responsibility to see that the ethical culture is infused throughout the organization and becomes operationalized. The Chairman should enhance his/her role to become the “Chairman of the Company”, without assuming a management function. The beacon of ethical leadership in an organization is a pre-condition to the prevention of corruption and bribery.

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LESSONS NOT LEARNED AT SNC-LAVALIN

Gwyn Morgan, Chairman of the Board of SNC-Lavalin from 2007 to 2013, published an article in The Globe and Mail (Report on Business, July 27, 2013) titled “What I learned from SNC-Lavalin’s Woes.” In response to Mr. Morgan’s comments, I wrote a letter published in The Globe and Mail (Letters to the Editor, July 30, 2013). I described Mr. Morgan’s “lessons learned” article as “weak, defensive and unpersuasive” and “unconvincing”. The ‘lesson’ that Mr. Morgan did not learn was that the Chairman of the Board and the board, as the leadership of the company, are responsible for assuring that the company they direct and supervise has established the right corporate culture, and management they appoint practices strong ethical values.

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