"First in Good Governance": Eyes on accountability, ethics, transparency and integrity

Charlie Coffey, O.C.
Executive Vice President
Government Affairs & Business Development
RBC Financial Group
Association of Fundraising Professionals (AFP)
Annual Congress
Metro Toronto Convention Centre
Toronto, Ontario

Tuesday, November 29, 2005

Louise, what a special treat to be introduced by the Royal Winnipeg Ballet's Director of Development. Given your recent return from the trip of a lifetime to India (which must mean a backlog of priorities on your desk), it's great that you managed to attend the AFP Congress. I've heard of your work with Communications Canada (while I was in Winnipeg), Canadian Heritage and the Winnipeg Symphony Orchestra, not to mention your fundraising experience and various community leadership associations…and now, you're a "development" asset to the RWB team. I hope to catch up with the Company in Ottawa this January, as I'm told the performance of Dracula is literally "bloody good ballet"! Thanks very much for bringing back some marvelous memories…

Welcome to this management academy called First in Good Governance - with eyes on accountability, ethics, transparency and integrity. Since this is the last session of the day, there's no way I'll hold your captive attention for 90 minutes. Besides, an interactive approach is infinitely more enjoyable. So here's the plan…my remarks are designed to offer a stimulus to the topic and discussion - afterwards, I invite you to share some of your stories about first in good governance. We want to hear from Louise Pujo (RWB), Heather Ferguson (The Hearing Foundation of Canada), Kenneth Aucoin (University College), Sheree Allison (Big Brothers Big Sisters/Boys & Girls Club), Hailee Morrison (Pathways to Education) and others. By the way, my remarks will be posted on the RBC web site this week (www.rbc.com)....and I did bring a few copies with me.

Let's get started…as many of you are aware, the Institute on Governance (IOG) "is a Canadian, non-profit think tank founded in 1990 to explore, share and promote responsible and responsive governance in Canada and abroad." Here's an excerpt from its October 2005 newsletter:

"Since Enron, we've had one corporate scandal after another, including WorldCom, Parmalat, Hollinger and Nortel. As a result, good governance has become a priority item for many business boards of directors. The public sector has followed suit, showing a new zeal for governance. Auditor generals have taken to reporting on the governance of their audit 'clients'. Ministers have been called to account for perceived failures of governance in Crown corporations. Non-profit Board chairs and executive directors have headed in droves to seminars by governance 'experts'. The Gomery Commission's activities have drawn further attention to flaws in public governance."

The message from the President in the IOG newsletter goes on to state: "Business remedies are not always relevant to 'public purpose organizations', organizations which embrace both governmental agencies and the non-profit sector. In business, the focus of recent governance discourse has included director independence; the need to separate the role of the CEO and the board chair; the need for a robust audit committee; and, for corporations doing business in the USA, the provisions of the Sarbanes-Oxley Act (SOX). However, 'director independence' is of little concern to organizations whose ownership is in public hands. In most Crown agencies, the role of chair and CEO are already separate. Most public (and non-profit) organizations have no interest in the provisions of SOX. Moreover, what one doesn't see in the business literature on good governance is much attention to issues such as the legitimacy of board members, their ability to represent their constituency effectively, or the challenge of improving governance where an organization has multiple accountabilities. It's time we started defining standards and principles for sound governance in a public (and non-profit) setting."

I, for one, couldn't agree more. While there's learning to be shared among all sectors, it's time to hear and read more about Canada's top 25 non-profit and public boards, not just the top 25 corporate boards in Canada, as listed recently in Canadian Business Magazine (August 2005). With that preamble, I want to share some insights and stories about First in Good Governance - with a focus on accountability, ethics, transparency and integrity. When referring to integrity, especially in the context of governance, I'm often reminded of what Warren Buffet, likely the world's most successful investor, said: "In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you."

Listen to this quote from Ann Florini, Senior Fellow, The Brookings Institution and ask yourself if it applies to your organization: "NGOs are a bunch of people whose currency of power is information and the ability to make arguments and persuade people to change how things are done…to have that kind of power you have to have access to information." I'm pleased that Renae Addis and Neil Uttamsingh of RBC Community Investment in Ontario have joined us this afternoon, as it will be added value to hear a corporate perspective on the question of access to information - for example, is RBC perceived to be approachable - willing to share information?

There's a terrific new book entitled The Source: Twelve Principles of Governance That Power Exceptional Boards, which defines governance "not as dry, obligatory compliance, but as a creative and collaborative process that supports chief executives, engages board members, and furthers the causes they all serve - (enabling) non-profit boards to operate at the highest and best use of their collective capacity." It suggests that "the difference between responsible and exceptional boards lies in thoughtfulness and intentionality, action and engagement, knowledge and communication." I couldn't help but reflect on RBC's commitment to cultivating a strong governance culture and creating shareholder value through our Code of Conduct, Charter of the Board of Directors, our annual Corporate Responsibility Report and Public Accountability Statement.

As I describe the twelve principles, determine which ones your board is leveraging and watch for the words accountability, ethics, transparency and integrity that are used throughout:

  1. Constructive Partnership: Exceptional boards govern in partnership with the chief executive, recognizing that the effectiveness of the board and chief executive are interdependent. They build this partnership through trust, candor, respect, and honest communication.

  2. Mission Driven: Exceptional boards shape and uphold the mission, articulate a compelling vision, and ensure the congruence between decisions and core values.

  3. Strategic Thinking: Exceptional boards not only align agendas and goals with strategic priorities, but also use them for assessing the chief executive, driving meeting agendas and shaping board recruitment.

  4. Culture of Inquiry: Exceptional boards institutionalize a culture of inquiry, mutual respect, and constructive debate that leads to sound and shared decision making.

  5. Independent-mindedness: Exceptional boards apply rigorous conflict-of-interest procedures, and board members put the interests of the organization above all else when making decisions.

  6. Ethos of Transparency: Exceptional boards ensure that donors, stakeholders, and interested members of the public have access to appropriate and accurate information regarding finances, operations and results.

  7. Compliance with Integrity: Exceptional boards promote strong ethical values and disciplined compliance by establishing appropriate mechanisms for active oversight. They use these mechanisms, such as independent audits, to ensure accountability and sufficient controls; and to reduce the risk of waste, fraud, and abuse.

  8. Sustaining Resources: Exceptional boards link bold visions and ambitious plans to financial support, expertise, and networks of influence, while ensuring that the organization has the infrastructure and internal capacity it needs.

  9. Results-oriented: Exceptional boards measure the organization's progress towards mission and evaluate the performance of major programs and services. They gauge efficiency, effectiveness, and impact, while simultaneously assessing the quality of service delivery, integrating benchmarks against peers, and calculating return on investment.

  10. Intentional Board Practices: Exceptional boards purposefully structure themselves to fulfill essential governance duties and to support organizational priorities.

  11. Continuous Learning: Exceptional boards evaluate their own performance and assess the value they add to the organization. They embed learning opportunities into routine governance work and in activities outside of the boardroom.

  12. Revitalization: Exceptional boards energize themselves through planned turnover, thoughtful recruitment and inclusiveness. They see the correlation between mission, strategy, and board composition…they understand the importance of fresh perspectives and risks of closed groups.*

Speaking of continuous learning or as the Japanese say "kaizan", here's more research and some stories that should convince us all to take a closer look at being first in good governance, with eyes on accountability, ethics, transparency and integrity.

In 2003, a fascinating study was released entitled Transparency in the Networked Economy. The study examined the experience of 28 companies such as Wal-Mart, British Airways, Sony and the World Trade Organization. In his speech to the Western Frontier International Group Governance Reform in Canada Conference on November 9, 2004 in Winnipeg, Minister Reg Alcock, President of the Treasury Board referred to the study and some of the key drivers that make the world a more transparent place - key drivers that include:

  • "The speed, flexibility and reach of communications, driven by the accelerating power and pervasiveness of information technologies;
  • The insatiable public appetite for information - the desire to see better value for money;
  • And, the increasingly important role of knowledge, trust and reputation in driving success."

The Minister also stated that "one of the conclusions in the study is that more transparent and participatory forms of governance will enable organizations to become better attuned to stakeholder concerns and more broadly accountable to these expectations." This is first in good governance at work…and with the federal election campaign in full swing, it will be interesting to see how good governance plays in the minds of the public and in the casting of votes across the country.

On November 3, 2005, Peter Burrows of BusinessWeek magazine wrote: "Today's Good Governance Award goes to…the board of Hewlett-Packard. That's not a sentence I would have foreseen myself writing…but yesterday, HP announced that board members from now on would need to win a majority of shareholder votes to be re-elected to the board. If they don't, they're required to submit their resignation. OK, we're not talking about a perfect democracy here; the board retains the right to refuse that resignation, and thereby keep Mr. or Mrs. Unpopular on board. But either way, this is a bold step towards making directors more accountable. If more companies followed suit, it could help corporations finally get out of the doghouse of public opinion they built for themselves thanks to the scandals of the late 1990s. This is first in good governance at work…

As published in the January/February 2005 edition of Atlantic Business Magazine: "A truly effective Board needs to be as competent in dealing with adversity as it is in handling growth and success, Rex Anthony says, the chairman of FPI Limited, a Newfoundland and Labrador-based seafood company. The corporate governance committee regularly reviews directors' performances with bi-annual surveys, which ask for direct, 'brutally frank' evaluations of the Board. Anthony says this kind of honesty is the cornerstone of good governance. "We've had some challenges, and we might not always agree…but it's easy to deal with when you have a Board that's not afraid to speak its mind." This is first in good governance at work…

And finally, here's an example of the impact of governance with a unique twist. Professor Sylvia Bashevkin, Principal of University College in Toronto, wrote a compelling paper this year, "Assessing Urban Citizenship in the Context of Municipal Restructuring: The Case of Women in London and Toronto. "This paper is among the first to assess the urban citizenship implications of disparate metropolitan governance changes. Using the concept of citizen representation as its main conceptual anchor, the study examines longitudinal patterns in two cities that underwent divergent institutional and political leadership experiences during the late 1990s and following. The study concludes that institutional and leadership shifts can hold immediate and meaningful consequences for urban citizenship." This is also first in good governance at work…

When I consider Sylvia Bashevkin's paper, plus the other research and stories, print headlines pop into my mind: "Women still missing at the table", "Governance: One size doesn't fit all", "Everybody is in a state of self-examination" and "Board diversity - the need to embrace it." And I may as well tell you what I often encourage people to do. Check out a company or organization web site to find out if a link to governance is on the home page. This speaks volumes about leadership in good governance. In addition or alternatively, do a Google search on a company or organization to see what's been said and done about its commitment to governance. Commitment and communication of that commitment makes a significant difference.

In closing, you may be familiar with the article, Six ways to put Canada first. It was part of a national call to action on June 28, 2005 entitled "Canada First: Taking the Lead in a Transforming Global Economy." It begins like this:

"To build consensus around a national strategy, we must do more than put the interests of the country ahead of those of individual citizens, businesses, interest groups and governments. We must agree to be bold in our vision for the country, to seek to put Canada first among nations in areas that are key drivers of national prosperity." Not surprisingly, the first of the six ways is first in good governance.

Although the authors — Richard L. George, Thomas d'Aquino, Dominic D'Alessandro, Paul Desmarais, Jr., Jacques Lamarre, Gwyn Morgan and Gordon Nixon - are the chief executives respectively of Suncor Energy Inc., the Canadian Council of Chief Executives, Manulife Financial, Power Corporation of Canada, SNC-Lavalin Group Inc., EnCana Corporation and RBC Financial Group, my reason for referring to this piece has more to do with each and every one of you. At the end of the day, good governance is much more than the sum of it parts - it's about breaking the mould in leadership - the brand of leadership that the seven CEOs display in the article and in business. A first in good governance call to action article could also be written by seven women CEOs, seven heads of Crown corporations, seven heads of hospitals or universities or seven CEOs of non-profit organizations. I say, why not?

When you return to the office after the conference, think about the leadership possibilities in your organization, in terms of what you can do to push the envelope on good governance. And remember that "people often rise to great heights the same way kites do. Against the wind. Not with it."

Special thanks to Jill Palmer for inviting me to share part of this AFP Congress day with you…now let's hear what you have to say about first in good governance!

*Excerpted from The Source: Twelve Principles of Governance That Power Exceptional Boards. Washington, DC: BoardSource 2005, www.boardsource.org

Governance and Non-profit Board Links:
Transparency in the Networked Economy: Rise of the Transparency Network was produced for the Digital 4Sight's Leadership in the Networked Economy (LNE) research program.
http://www.developmentgateway.org/node/133831/sdm/blob?pid=4591

Institute on Governance
http://www.iog.ca/news/oct2005.pdf

BOARDSOURCE: Building effective non-profit boards
http://www.boardsource.org/default.asp?ID=1

Charity Village.com - Canada's supersite for the non-profit sector http://www.charityvillage.com/cv/guides/guide4.asp

Charity Channel - Connecting non-profit professionals worldwide http://charitychannel.com/enewsletters/nbgr/

Ivey Business Journal, November/December 2005 http://www.iveybusinessjournal.com/topics.asp?intTopic_ID=7

Assessing Urban Citizenship in the Context of Municipal. Restructuring: The Case of Women in London and Toronto
www.cpsa-acsp.ca/papers-2005/Bashevkin.pdf

Canada First! Taking the Lead in a Transforming Global Economy. A Statement of the Executive Committee Canadian Council of Chief Executives
http://www.ceocouncil.ca/en/view/?document_id=429&area_id=1