Re Watching The Directors, January
I was astonished to read the assertion that two key areas determine the strength of a board: independence from management and access to detailed and timely reports. No board will be strong unless it is comprised of directors with relevant expertise and integrity, regardless of their independence or the number of reports they receive from management. Unfortunately, expertise is difficult to measure, and integrity even more so, so good governance indices (such as the Board-Shareholder Confidence Index referred to) are of limited value.
It was also disappointing to see controversial guidelines issued by the Canadian Coalition for Good Governance being quoted without comment, such as those urging corporate board members to own a minimum number of shares in the company. While the stated reason is that their own investments will be on the line, in practice this would result in the directors—particularly audit committee members—being motivated to delay or suppress bad news that could drive down the share price.
The related article Is Christ Your Financial Advisor? overstates the role of churches in the beginnings of corporate social responsibility, with reference being made to the establishment of the Task Force on the Churches and Corporate Responsibility in 1975. A considerable amount was written about CSR in the early 1970s, and in 1975 Prof. S. R. Maxwell and I conducted a study of how it had affected Canada's 125 largest corporations. No fewer than 94 per cent of the responding corporations stated that it was the philosophy of the company's officers that had led to the consideration of CSR by the corporation—a very much higher percentage than any other factor, including the 23 per cent who referred to "criticisms by activist groups" (which would include the churches).
