Strong boards of directors are essential to effective
governance of Crown corporations. Strong boards are built by recruiting
individuals with the necessary knowledge and skills to oversee the operations
of the corporation, and are sustained through appropriate orientation and
training and by the necessary support from within the corporations and from
the central agencies.
6.1 Appointments by the Governor in Council to Crown Corporations
There are 45 Crown corporations to which directors(8) are
appointed under the authority of the Governor in Council. The authority for
appointments is contained in the FAA for corporations subject to Part X of
that Act; for others it is found in the enabling statute for the corporation.
Depending on the statutory provisions, directors may be
appointed either by the responsible Minister with the approval of the Governor
in Council, or by the Governor in Council. Directors appointed under the FAA
hold office for such term, not exceeding three years, as will ensure, as far
as possible, the expiration in any one year of the terms of office of not more
than one-half of the directors. Directors continue in office until replaced,
and they are eligible for reappointment.
Directors appointed under other statutes may be appointed for
a fixed term as determined by statute or for a term set by the Governor in
Council. They may or may not continue in office until replaced, and there may
be reappointment restrictions. For example, in the case of directors of the
Canadian Museum of Civilization, a director who has served three consecutive
terms is not eligible to be reappointed during the year following the
expiration of the third term.
Depending on the statutory provisions, chairs may be appointed
by the Governor in Council or designated by it from among the directors of the
corporation. Chairs appointed under the FAA hold office for a term set by the
Governor in Council. Appointment provisions under other statutes specify that
chairs serve for a term not to exceed a certain number of years or for such
term as the Governor in Council may determine. The FAA and most other statutes
require the responsible Minister to consult the Board of Directors with
respect to the appointment of a chair.
Chairs and directors normally serve during pleasure and may be
removed or replaced at the discretion of the Governor in Council. However,
there are four corporations in which chairs and directors serve during good
behaviour and may be removed by the Governor in Council only for cause. These
corporations are: the Canadian Broadcasting Corporation, the Bank of Canada,
the Canada Pension Plan Investment Board and the Public Sector Pension
Investment Board.
Depending on the statutory provisions, CEOs may be appointed
by the Governor in Council, by the Board of Directors with the approval of the
Governor in Council, by the Governor in Council on the recommendation of the
Board of Directors or by the Board of Directors itself. The seven corporations
where the CEO is appointed by the Board of Directors are: the National Arts
Centre, the Canada Pension Plan Investment Board, the Pacific Pilotage
Authority, the Great Lakes Pilotage Authority, the Laurentian Pilotage
Authority, the Atlantic Pilotage Authority and the Public Sector Pension
Investment Board. One CEO is ex-officio: the CEO of the Enterprise Cape Breton
Corporation is the President of the Atlantic Canada Opportunities Agency.
CEOs appointed under the FAA hold office for such term as the
Governor in Council may determine. Appointment provisions under other statutes
specify that CEOs serve for a term not to exceed a certain number of years or
for such term as the Governor in Council may determine. There is normally a
requirement for the responsible Minister to consult the Board of Directors
with respect to the appointment of a CEO.
CEOs normally serve during pleasure. However, there are three
corporations in which CEOs serve during good behaviour: the Canadian
Broadcasting Corporation, the Bank of Canada and the Business Development Bank
of Canada.
6.2 The Appointment Process
In March 2004, the government announced an interim appointment
process for Governor in Council appointments to Crown corporations, in the
broader context of its comprehensive review of Crown corporation governance.
The interim process served as an initial measure to help ensure a
competency-based, professional and transparent appointment process.
Roles and Responsibilities
Over the past several months the government has studied the
issue of Crown corporation governance and consulted with interested parties.
This, together with the government's experience with the interim process,
has led it to conclude that the appointment process needs to be further
refined in order to achieve the correct balance.
As the owner and shareholder, the government has the
responsibility of ensuring that the governance standards of its Crown
corporations meet the highest level, and the appointment process is not only
competency-based, professional and transparent, but is also consistent with
the ability of the government to exercise its responsibilities as owner. The
shareholder must be able to provide appropriate direction to Crown
corporations, and Boards of Directors need to be responsive to the
shareholder.
Within the framework of authorities establishing the
corporation and directing the conduct of its activities, the chairs and the
directors represent the interests of the owner, that is, the government as
represented by the responsible Minister. The government must, therefore, have
an appropriate role in the appointment of directors and chairs.
In the case of CEOs, the government, like the Board of
Directors, wishes to ensure the appointment of individuals who can
successfully lead a Crown corporation. The CEO, as an officer-director, is an
office-holder in the employ of the corporation and responsible to the Board of
Directors. Therefore, the Board of Directors should have primary
responsibility for the selection of CEOs.
Appointment Principles
The government reaffirms its ultimate responsibility for the
quality of Governor in Council appointments. The government's goals for the
selection process remain as they were in March 2004: the process should be
competency-based, professional and transparent. The government is also firmly
committed to ensuring that its appointments are representative of Canada's
regions and official languages, as well as of women, Aboriginal peoples,
disabled persons and visible minorities. The government also recognizes the
need for the selection process to identify candidates in a timely and
cost-effective manner.
Selection Criteria and Competency Profile
Boards of Directors will advise the government on appropriate
selection criteria for chairs, as well as competency profiles and future needs
for directors. The government will make the final determination on the
selection criteria and Board profiles, in consultation with Boards of
Directors. The government will ensure that individuals appointed as chairs
meet the selection criteria and that the directors appointed meet the needs of
Crown corporations. In the case of CEOs, Boards of Directors will develop
selection criteria, in consultation with the government. Selection criteria
for chairs and board profiles will be made public by the government;
similarly, Crown corporations will make CEO selection criteria available to
the public.
The selection criteria for the CEO and chair will normally
include a description of the education, experience, knowledge, abilities and
personal suitability sought for the position. For directors, the Board profile
will include a description of the experience, attributes and skills that
should be possessed by the Board as a whole. This profile is based on the role
and responsibilities of the Board, and will include a set of generic
qualifications that all Board members must have, as well as specific
qualifications that should be possessed by one or more members of the Board.
Measure #16
Selection criteria for chairs and Board profiles will be made
public by the government. Similarly, Crown corporations will make CEO
selection criteria available to the public.
|
Directors and Chairs
The government will identify candidates from a variety of
sources. The government will develop a central Web site to solicit candidates
for director and chair positions. In the interim, the government will
advertise appointment opportunities in the Canada Gazette, as required.
The government will look to Boards of Directors for any names they wish to
submit for the government's consideration. In addition, the government will
consider how best to use executive search services as a source of
highly-qualified candidates.
Measure #17
The government will develop a central Web site to solicit
potential candidates for director and chair positions.
|
CEOs
The selection process for the CEO will be determined by the
Board of Directors. Each Board of Directors will establish a nominating
committee to identify candidates for the position of CEO appointed by the
Governor in Council. This committee may include outside eminent persons.
As a minimum, the process will include advertisements in
either or both the Canada Gazette and the corporation's Web site. If
the Board considers it appropriate, taking into account relevant factors such
as timeliness and cost-effectiveness, the process may also include advertising
in national newspapers and the use of an executive search firm. The Board's
nominating committee will screen potential candidates and will then submit its
preferred candidate to the government for final approval or veto.
Measure #18
The selection process for the CEO will be determined by the
Board of Directors and will include, at minimum, advertising in either or both
the Canada Gazette and the corporation's Web site.
|
Due Diligence
The government needs to ensure that individuals appointed as
director, chair or CEO of its Crown corporations meet the highest standards of
integrity.
Measure #19
The government will obtain references on all candidates for
appointment as director or chair. In the case of CEOs, the Board's
nominating committee will be required to do the same for any candidate it
submits to the government for appointment. In addition, the government will
continue to conduct background checks and ensure that candidates are not in a
conflict of interest, prior to making any appointment.
|
Reappointments
The nominating committee and the Board of Directors should
ensure that CEOs recommended for reappointment meet the current and
future needs of the corporation as identified in the selection criteria. It is
not necessary for other candidates to be brought forward by the Board when
reappointment is recommended. Director and chair reappointments will be
determined by the government, taking into account the Board profile, the needs
of the corporation and the views of the Board of Directors.
Prior review of appointments by standing committees
The Government Leader in the House of Commons has provided
parliamentary committees with a list of appointments, including those made to
Crown Corporations, and asked the committees to determine which key
appointments they wish to review prior to these appointments being finalized.
The Procedure and House Affairs Committee has been asked to determine how the
reviews would be conducted, and to consult with parliamentarians from both
Chambers on how these reviews should be implemented. The government is of the
view that individuals nominated for reappointment would not be subject to
prior review by a standing committee if their initial appointment received
prior review.
Measure #20
The government will work closely with parliamentary committees
to ensure a workable appointment review process that will not unduly delay
necessary appointments.
|
6.3 Succession Planning
For those corporations subject to Part X of the FAA, directors
may be appointed for a term not to exceed three years. This is also true for
some corporations exempt from Part X. This is a relatively short period and
requires decisions on reappointments on a frequent basis. If the decision to
reappoint is not made in a timely fashion, directors continue in office until
reappointed or replaced. While this allows the directors to continue to
perform their functions it creates uncertainty and is not conducive to the
proper functioning of the Board.
The government proposes to amend the FAA and other enabling
statutes to permit the appointment of directors for up to four years to help
ensure the maintenance and continuity of expertise on Boards of Directors.
Measure #21
The government will amend the FAA and enabling statutes to
provide for appointments for up to four years.
|
|