Corporate governance in Canada

IBGC mission will visit the country in 2021, with support from CCBC, to learn more about the peculiarities of the Canadian model

By Sérgio Siscaro

The theme of governance has become increasingly central to companies around the world, in the most different branches of activity. Since the 1990s, when the concept of economic, social and environmental sustainability started to spread in the corporate world, the theme has become crucial not only for the good image of organizations before society, but mainly for the decision-making process of investors. An example of this are the annual letters in which the president of the global investment management corporation Black Rock, Larry Fink, emphasizes the importance of corporate responsibility.

Canada is one of the countries that has stood out the most in adopting responsible corporate practices, aimed at meeting the needs of the various stakeholders of the organizations, and with a strong participation of regulatory agencies of the capital market. Thus, in order to disseminate in Brazil the corporate governance practices adopted in Canada, the Brazilian Institute of Corporate Governance (IBGC, in Portuguese) is preparing a mission for the country. The initiative, which is part of its program of technical conferences abroad to learn how the topic is addressed in other countries, has the partnership of the Chamber of Commerce Brazil Canada (CCBC) and was scheduled to take place in June 2020. Due to the pandemic of the new coronavirus, the mission was postponed to June next year.

According to the coordinator of the IBGC study group on Canada, Ricardo Lamenza, the intention of these technical conferences is to seek good practices, study them and analyze how they can be adapted to the Brazilian context. “It is a two-way street: we also discussed our positive experiences in these missions,” he says. Launched in 1998, the program to travel to other countries to learn about its corporate governance models has already visited Germany, Australia, Singapore, the United States, Finland, France, Israel, the United Kingdom and Sweden, as well as the territory of Hong Kong, in China. The mission to Canada will involve two groups totalling about 80 participants.


Partnership with CCBC
Lamenza says thanks to the partnership between the two institutions, the CCBC will be structuring the mission’s program of activities in Canada, which will cover the cities of Montreal and Toronto, in addition to identifying the organizations that can be contacted at the time. “CCBC was one of the first institutions which we came in contact to structure this technical conference. We also spoke with Canada’s Consul General in São Paulo, Heather Cameron.”

The head of the CCBC Business Development area, Arminio Calonga Jr., adds that the partnership also includes participation in a study group, together with the IBGC international commission, whose objective is to analyze the good governance practices in Canada – including those related to combating Covid-19. “It is a great way to see how that country was able to improve its governance in a pandemic scenario, and also to study possible applications in Brazil,” he adds.

This group of studies generates part of the content of the series of six online seminars promoted throughout 2020 by the IBGC, bringing together members and market representatives, with the purpose of disseminate in Brazil the characteristics of the Canadian model of corporate governance.


Constant evolution
In order to prepare its members in advance for their trip to Canada, the IBGC promoted, in early August, a webinar entitled Development of Corporate Governance in Canada, which addressed the country’s concern with the adoption of clear corporate governance rules. A peculiar feature of the Canadian model is that, unlike the one adopted in the United States, it seeks to avoid the development of a culture of judicial litigation; instead, it encourages cooperation between public authorities, private sector entities and professional associations. Together, they establish the most appropriate regulation for each sector, taking into account the demands and needs of the various stakeholders.

An important component for improving this stakeholder capitalism system is Canada’s corporate legislation – which was updated last year through the Business Corporations Act. It recommends the active involvement of companies’ boards of directors in addressing important issues to corporate governance – such as human rights and corruption. “Canada’s legislation has become more sophisticated. They rely on the experience of negative cases in the past to continue improving the rules,” says Lamenza. One such example is the 1997 Bre-X mining scandal; the company had a great stock appreciation with the disclosure of the discovery of gold mines in Indonesia, which proved to be false – and led to a series of changes in the regulation of the sector.

This concern is also very present in the Canadian capital market, as society pressure is increasing for companies to disclose their information on Environmental, Social and Governance (ESG) issues. Toronto’s TSX and TSX Venture Exchange stock exchange have also demonstrated progress in this direction, through governance training programs for listed companies and adherence to international groups, such as the United Nations’ (UN) Sustainable Stock Exchange Initiative.

“Canada’s good practices are very interesting for Brazil, and range from cooperation between the public and private spheres to encouraging diversity in companies and valuing aspects related to the environment in governance,” says Calonga. Another important differential that he points out is the presence of the theme of governance not only in established companies, but also in startups. “This is another point that shows how the Canadian model can be a reference for us in Brazil.”

The IBGC coordinator adds that one of the objectives of the IBGC’s technical conference to the country is to see if Canada’s high educational level would be one of the reasons why the country’s corporate governance model is more sustainable. “In addition to standing out in terms of innovation, Canada has a high level of social progress, is open to immigration, has a strong education and has a structure to attract and retain talent”, he concludes.