20 Questions - Canadian Institute of Chartered Accountants

20 Questions 

Directors Should Ask about 

Crown Corporation Governance 

Elizabeth Watson, LLB, ICD.D

How to use this publication 

Each “20 Questions” publication is designed to be a concise, easy-to-read introduction to issues of importance to directors. The question format 

reflects the oversight role of directors which includes asking themselves tough questions. This publication is intended to help directors to 

understand the unique features and issues associated with Crown governance, and then it provides recommended practices to respond to those 

issues. 

The questions are not intended to be a precise checklist, but rather a way to provide insight and stimulate discussion and understanding of 

important topics. The recommended practices summarize current thinking and practices of leading Crown corporations. They may not be the 

best answer for every organization. 

Although the questions apply to any Crown, the answers will vary according to the size, complexity and sophistication of each individual 

organization. The important consideration is not “do we follow these practices?” but “do our practices get the results we want?” 

Written by 

Elizabeth Watson, LLB, ICD.D 

Project direction by 

Gigi Dawe 

Principal, Risk Management and Governance, CICA



Crown Corporation Governance

Library and Archives Canada Cataloguing in Publication 

Watson, Elizabeth 

20 questions directors should ask about crown corporations 

governance/Elizabeth Watson. 

ISBN 978-1-55385-248-3 

1. Corporate governance — Canada. 2. Corporations, Government — 

Canada. 3. Government business enterprises — Canada. 4. Directors 

of corporations — Canada. I. Canadian Institute of Chartered 

Accountants II. Title. 

HD4005.W38 2007 352.2’660971 C2007-901056-3 

Copyright © 2007 

Canadian Institute of Chartered Accountants 

277 Wellington Street West 

Toronto, ON M5V 3H2 

Printed in Canada 

Disponible en français

Preface 

The responsibilities of boards of directors are more demanding 

than ever. Directors live up to these increasing demands by asking 

intelligent, informed questions about directions that they are required 

to approve. 

However, Crown corporations operate within a unique environment. 

Their shareholder is government which, in and of itself, is a multifaceted 

entity that does not always speak consistently. This is just one 

of many factors that may have significant implications for effective 

corporate governance. If directors do not understand the unique 

features of the Crown corporation environment and how they 

influence the board’s role, they will be frustrated and ineffective. 

It is these areas of uniqueness that are the focus of this publication. 

To help members of boards of directors and audit committees in 

discharging their oversight responsibility for governance, the Risk 

Management and Governance Board of the Canadian Institute 

of Chartered Accountants (CICA) provides this publication on 

20 Questions Directors Should Ask about Crown Corporation 

Governance. This publication is one in a series of CICA’s 

“20 Questions” briefings. It provides context and greater explanation 

about unique features of Crown governance. 

This publication is intended to be useful both to individual directors 

and to boards as a whole in their review of their company’s governance 

practices. The ways in which these 20 questions are used by boards 

may therefore also vary among Crown corporations, depending on the 

modus operandi of a board in carrying out its responsibilities and what 

is stated in the charter of the board as a whole. 

The board acknowledges and thanks the members of the Directors 

Advisory Group for their invaluable advice, the author Elizabeth 

Watson, and the CICA staff who provided support to the project. 

Tom Peddie, FCA 

Chair, Risk Management and Governance Board 

Risk Management and Governance Board 

Thomas Peddie, FCA, Chair 

Dan Cornacchia, FCA 

Brian Ferguson, CA 

John Fraser, CA 

Lee Giles, CA 

Michael Harris, CA 

Andrew J. MacDougall, LLB 

Peter W. Roberts, CA, CPA (Illinois) 

Josée Santoni, CA 

Directors Advisory Group 

Giles Meikle, FCA, Chair 

James Arnett, QC 

William Dimma, F.ICD, ICD.D 

John Ferguson, FCA 

Gordon Hall, FSA, ICD.D 

Robin Korthals 

Mary Mogford, F.ICD, ICD.D 

Patrick O’Callaghan 

Ronald Osborne, FCA 

Guylaine Saucier, CM, FCA 

CICA Staff 

William Swirsky, FCA, Vice President, Knowledge Development 

Gigi Dawe, Principal, Risk Management and Governance

Introduction 

Crown corporations are distinct legal entities that are wholly owned 

or controlled by government. In serving the public interest, they are 

expected to operate in a commercial manner and are provided with a 

higher degree of autonomy than the rest of government. They manage 

billions of dollars in assets and liabilities and operate in many sectors 

of the Canadian economy, including transportation, energy and 

resources, agriculture and fisheries, financial services, culture, and 

government services. Crown corporations vary widely in size and in 

the level of financial support they receive from government. 

Today, Crown corporations account for such a significant portion 

of the public sector that they have been called the “other arm of 

government”. The Office of the Auditor General of Canada reported 

that, in fiscal 2003-04, 43 federal Crown corporations (excluding 

the Bank of Canada) managed $78 billion in assets, received 

parliamentary appropriations of $5.2 billion and employed 73,100 

people. To this, one must add the operations of the provincial and 

territorial Crown corporations. For example, in British Columbia, 

Crown corporations manage over $31 billion in assets and employ 

over 23,000 people. 

As in the private sector, boards of directors of Crown corporations 

play an important governance role. The board approves the strategic 

direction for the corporation, ensures that the principal risks of the 

corporation’s business have been identified and that appropriate 

systems to manage those risks have been implemented; approves 

annual operating business plans, capital plans and budgets; oversees 

management; hires the CEO (with some exceptions in some 

jurisdictions); evaluates and determines the CEO’s compensation; 

ensures management succession planning; ensures the corporation has 

appropriate information systems and management practices; ensures 

the corporation complies with financial and other requirements; and 

ensures accurate reporting of the corporation’s finances and operations 

to the shareholder and the public. Good governance practices relating 

to accountability, fair dealing and ethics are just as important in Crown 

corporations as they are for the private sector. 

To be effective, boards of directors of Crown corporations should 

adopt those corporate governance “best practices” that have 

developed over the last decade — such as clearly defined roles and 

responsibilities, efficient use of committees, clear codes of ethical 

conduct, informed approaches to policy and strategic planning, 

risk management, financial oversight, responsible management 

compensation; board composition and succession planning, director 

orientation, ongoing professional development, and board and 

director assessment. For the purposes of this document, it is assumed 

that directors of Crown corporations are familiar with these practices 

and will institute them. 

However, Crown corporations operate within a unique environment. 

Their shareholder is government which, in and of itself, is a multifaceted 

entity that does not always speak consistently. They operate 

within a political context. There are public policy issues that must 

be taken into consideration in decision-making. They are subject to 

public sector legislative and policy requirements. They generally have 

a significant number of active stakeholders. All of these factors have 

significant implications for effective corporate governance. If directors 

do not understand the unique features of the Crown corporation 

environment and how they influence the board’s role, directors will 

be frustrated and ineffective. It is these areas of uniqueness that are 

the focus of this publication. 

This 20 Questions document is intended to provide useful 

information for current and incoming directors of federal and 

provincial Crown corporations and other closely related public 

sector organizations and provides recommended practices that 

directors should consider following. It also will be a useful resource 

for ministers, central agencies and others within government who 

are responsible for the performance of Crown corporations and

oader public sector organizations. Crown corporations operate 

in many different jurisdictions within Canada (federal, provincial, 

territorial). The questions and suggestions for recommended practice 

address common issues and are intended to be broad enough to 

be informative for every jurisdiction; however, directors must make 

sure they understand the specific legislative and policy regime of the 

jurisdiction under which their specific Crown corporation operates. 

Enhancing corporate governance in Crown corporations requires 

leadership from boards of directors, elected officials and public 

servants. This publication is designed to provide a foundation of 

knowledge to assist them in their task. 

1. Who is the shareholder of Crown corporations? 

1.1 Unique features 

• Crown corporations are owned beneficially by the public; 

however, in practice, ownership (shareholder) rights are 

exercised by Parliament/the Legislature and government on 

their behalf. 

• Parliament/the Legislature establishes a Crown corporation 

and its mandate by legislation and, for taxpayer-supported 

corporations, provides funding to the corporation on behalf 

of the public. 

• Government is multi-faceted and operates through various 

entities and individuals: 

— Cabinet communicates broad objectives for the 

corporation, appoints directors to oversee the 

corporation’s affairs and determines the approach to 

governance. 

— The Prime Minister/Premier provides political advice 

on policies and decisions affecting Crown corporations 

(including appointments of directors and, in some 

jurisdictions, chief executive officers (CEOs)). 

— The Privy Council Office/Cabinet Secretary provides public 

service advice to the Prime Minister/Premier on policy and 

operational matters as they affect Crown corporations. 

— The Responsible Minister plays a key role on behalf of the 

corporation with the shareholder including: providing a 

link between the corporation, Cabinet and Parliament/the 

Legislature; tabling legislation relating to the corporation, 

and tabling the corporation’s strategic plan and budget 

requests in Parliament/the Legislature; communicating 

government’s policy direction to the corporation;

— 

— 

— 

communicating the corporation’s policy advice to Cabinet; 

recommending (and sometimes appointing) directors; 

advising government of any corporation issues that may 

impact the government’s plans and projections; advising 

the corporation of any government issues that may impact 

the corporation; and answering for the corporation in 

Parliament/the Legislature and publicly. 

Treasury Board, a committee of Cabinet, is responsible 

for budget and management matters and generally plays 

a role in areas such as financial and accounting practices, 

dividend policies, collective bargaining mandates, financial 

performance goals and approving and recommending 

capital and operating budgets, particularly for taxpayersupported 

corporations. 

The Minister of Finance advises Cabinet on budgetary and 

financial matters as they relate to Crown corporations. 

Senior Government Officials (e.g., Deputy Ministers) and 

Central Agencies (e.g., human resources, Crown oversight, 

director appointments, communications) support and 

provide advice to the Responsible Minister and have 

significant dialogue with the corporation on an ongoing 

basis, particularly when there are significant issues or policy 

changes anticipated that affect the corporation’s operations. 

1.2 Issues 

• In some jurisdictions, there is lack of clarity around the roles 

and responsibilities of the various entities and individuals that 

speak or act on behalf of the shareholder. 

• The various entities and individuals that speak or act on behalf 

of the shareholder may not always give a consistent message as 

to their direction for the corporation. 

• If directors are unfamiliar with the respective roles, decisionmaking 

authorities, and accountabilities of the various entities 

that make up the “shareholder”, they will be less effective in 

governing the corporation and may become frustrated. 

• The shareholder is not organized in the same way in every 

jurisdiction in Canada. For instance, in Saskatchewan, 

all Crown corporations primarily related to financial or 

commercial activities are wholly-owned subsidiaries of the 

Crown Investments Corporation (CIC). CIC exercises many 

responsibilities carried out by the Responsible Minister 

and Treasury Board in other jurisdictions. CIC’s board is a 

committee of Cabinet. 

1.3 Recommended practice 

• Ensure every director (as part of the recruitment process and 

through ongoing professional development) understands: 

— what entities and individuals represent the shareholder on 

behalf of the Crown corporation; 

— the roles and responsibilities of those entities and 

individuals; and 

— the importance of a strong, professional working 

relationship with each such entity and individual. 

• Develop a strong, professional working relationship with key 

individuals whose decisions and advice affect the corporation, 

particularly the Responsible Minister. 

NOTE: Detailed descriptions of typical roles and responsibilities of 

the entities and individuals that represent the shareholder in most 

jurisdictions are set out in Appendix A. 

2. How are strategic plans developed for Crown corporations? 


• Parliament/the Legislature establishes the mandate of each 

Crown corporation, which usually includes financial and 

public policy objectives. 

• Government may set performance expectations or priorities 

for the corporation within the corporation’s mandate. 

• The corporation’s strategic goals and objectives must be 

consistent with, and build on: 

— the corporation’s mandate; and 

— the priorities and accountabilities set by government. 

• The corporation generally requires government approval for 

major strategic initiatives such as:

— 

— 

— 

major new investments; 

material changes in the capital structure; or 

a significant restructuring in response to a major change in 

the business environment. 

• The corporation’s strategic plan is reviewed and, in some 

cases, may be approved by government. 

• The corporation’s strategic objectives and relevant 

performance measures are generally tabled in Parliament/ 

the Legislature and made public except where there may be 

commercial sensitivity. 

2.2 Issues 

• Crown corporation mandates, as defined in legislation, 

are often very broad, and sometimes quite vague, with the 

result that boards and government may each have a different 

understanding of the corporation’s mandate. 

• Often there is a lack of clear communication between 

government and the board, as to the specific direction and 

objectives of the corporation within the stated mandate. 

• Some mandates require the corporation to balance 

profitability or fiscal efficiency with public policy objectives. 

This is a very difficult job and must be approached with great 

thought and sensitivity. 

• There is often no clear direction as to whether boards should 

involve government in strategic planning — e.g., develop a 

strategic plan and show it to the Responsible Minister or a 

central agency for review or approval OR seek direction or 

discuss proposed strategic direction with government before 

developing the strategic plan. 

• The corporation’s strategic plan will generally need to involve 

a balance of achieving economic success and specific policy 

objectives. 

• Corporate performance may be hard to measure or assess 

since Crown corporations often do not operate in a definable 

marketplace with industry benchmarks and a pool of readily 

identifiable competitors. Common performance measures 

such as return on investment or market share may not apply 

and public policy objectives may be difficult to measure. 


• Engage in frequent, effective dialogue with the Responsible 

Minister and other appropriate government officials to 

ensure the corporation and government have a consistent 

understanding of the corporation’s mandate. 

• Ensure the corporation’s strategic plan is consistent with the 

corporation’s mandate. 

• Proactively make recommendations to government on 

mandate or policy issues that could improve the operating 

environment for the corporation. 

• Ensure adequate discussion in advance with the Responsible 

Minister or applicable senior government officials or central 

agencies before finalizing strategic planning around major 

strategic initiatives. 

• Review and approve operating plans and capital and operating 

budgets consistent with the strategic plan. 

• Ensure strategic plans, or equivalents as required, are 

delivered to the Responsible Minister for review, approval, or 

tabling in Parliament/the Legislature as required. 

• In overseeing the development of the strategic plan, establish 

appropriate performance measures to accurately measure the 

corporation’s progress in achieving performance targets in 

financial and public policy areas. 

3. What role should directors play in the director 

appointment process? 


• 

• 

• 

• 

• 

Government appoints and removes directors. 

In most cases, there are no appointment criteria specified in 

the governing legislation. 

Tenure of directors is set by legislation or government policy. 

In some cases, governments appoint public servants or elected 

officials to Crown corporation boards. 

Some corporations have directors on the board who are 

nominated or appointed by constituencies. 

Some jurisdictions have a parliamentary or legislative review 

committee that oversees board appointments. 

•

3.2 Issues 

• Politicians and public servants may not understand the role of 

Crown corporation directors. 

• Many jurisdictions do not have set criteria for director 

appointments. 

• Many jurisdictions do not have in-house expertise advising 

them on recruitment and selection of directors. 

• Directors may be appointed who do not have required skills or 

experience, time or commitment. 

• Directors may be removed (or not renewed) based on an 

arbitrary term limit or in consideration of partisanship issues 

rather than the director’s performance and skills relevant to 

the needs of the corporation. 

• Public servants and elected officials, while bringing knowledge 

of government priorities and processes, may inhibit effective 

functioning of the board (for example, where the public servant 

or elected official becomes a “super director” whom others 

defer to) and, at times, may be in a conflict of interest position 

(where he or she has to provide advice or make decisions 

relating to the Crown corporation based on government 

objectives while, at the same time, participating in board 

discussions on the same issue where the considerations are only 

“the best interests of the corporation”). 

• Directors appointed or nominated by constituencies may have 

a tendency to argue the position of their constituency rather 

than the best interests of the corporation and in some cases 

they may be in a conflict of interest position. 

• Parliamentary or legislative review committees: 

— may not have members who are qualified to assess the 

skills of the individual presented for appointment against 

the strategic needs of the corporation; 

— may inhibit some directors from putting their names 

forward due to the public nature of the review process; and 

— may let partisan politics overwhelm the more appropriate 

debate on substantive issues. 

• Some Crown corporation boards have not clearly defined 

their needs in terms of knowledge, expertise, abilities and 

experience for board members. 

• If a director candidate is recommended by a Crown corporation 

board and not ultimately appointed by government, this can 

cause embarrassment for the candidate and the corporation. 


• Establish a competency matrix and board profile outlining the 

specific skills, experience and background required of board 

members based on the strategic opportunities and challenges 

of the corporation. 

• Undertake a robust director evaluation process to assist in 

recommendations regarding renewal (or not) of directors. 

• In respect of the appointment process generally, confirm 

with government an agreed-upon, transparent appointment 

process for your Crown corporation encompassing: 

— specified skills, experience and background for each vacant 

position based on the corporation’s needs; 

— advertised vacancies; 

— proactive identification of potential candidates; 

— evaluation of candidates against the set criteria; 

— due diligence regarding director’s qualifications, including 

conflict of interest; and 

— publication of director’s qualifications. 

• When vacancies arise, engage with government in a 

collaborative process to: 

— confirm the required skills, experience and background for 

new board members; 

— confirm strengths and weaknesses of current board 

members who may be eligible for re-appointment; 

— identify potential candidates; and 

— evaluate potential candidates. 

• With respect to the role of political affiliation in director 

appointments, when identifying potential candidates consider 

that:

— political party membership should not be a condition or 

prohibition of appointment; 

— however, directors must be aligned with the mandate 

and strategic direction for the corporation and be able 

to engage in a constructive and productive working 

relationship with government. 

• After proactively identifying potential candidates for upcoming 

vacant positions, discuss potential candidates with government 

prior to approaching the candidate to ensure the candidate 

will be acceptable to government. 

• Recommend candidates to government for appointment 

and, where possible, provide government with a choice of 

candidates for each position. 

• Establish a rigorous due diligence process for director 

candidates to ensure appointment of these candidates will 

enhance, and not detract from, the reputation and integrity of 

the corporation. 

• In order to address areas of potential conflict for directors 

appointed or nominated by constituencies, ensure the 

corporation’s position description for directors: 

— 

— 

— 

outlines each director’s fiduciary duty to the organization; 

outlines directors’ responsibilities in the event of a conflict 

of interest; 

provides a clear understanding of what is “public” and what 

is not so that directors who are appointed by constituencies 

know what can be shared outside the corporation. 

• Work proactively with government towards an agreed-upon 

board succession plan that will ensure the orderly replacement 

of directors and optimum continuity for the board. 

4. What are the unique roles of the board chair? 


• As in any corporation, the board chair has special duties and 

responsibilities in connection with managing the work of the 

board and communicating on behalf of the board. In a Crown 

corporation setting the board chair has extra responsibilities 

including: 

— developing and maintaining a strong working relationship 

with government via the Responsible Minister, central 

agencies or other senior government officials; and 

— communicating with government concerning the 

performance, or non-performance, of board members. 

• Usually government, not the board, appoints the board chair. 

• In most cases, the board chair can be appointed and removed 

by the government at pleasure. 

• Government may choose an external person as a new board 

chair without input from the directors. 

• The board chair is the “bridge” between government policy (for 

the corporation) and the corporation’s business objectives. 

• The board chair is often the main liaison with the Responsible 

Minister with respect to director performance and appointments. 

• There can be grey areas between what is “policy” (and the 

domain of government) and what is “operational” (and the 

domain of the corporation). 

4.2 Issues 

• Unless the board chair and the Responsible Minister have a 

productive working relationship, it is possible that: 

— Government will make a decision impacting the corporation 

without consulting or advising the corporation; 

— the corporation will make a decision or move in a strategic 

direction inconsistent with government’s expectations for 

the corporation; or 

— there will be disagreement between the Minister and the 

board as to what decisions are within the government 

domain and what are in the corporation’s domain; 

— unqualified individuals may be appointed to the board, 

hampering its effectiveness. 

• Government expects the board chair to convey government’s 

concerns and priorities to the board and management and 

vice-versa.

• Government expects the board chair to be sensitive to 

government’s political position when the board is making 

decisions. 

• If there has not been adequate consultation with the board, 

board members may not support the government’s choice of 

board chair. 


• Inform government of the board’s views and recommendations 

concerning the skills and experience required for a board chair. 

• When a new board chair is to be chosen, recommend candidates 

to government that the board would like to be considered. 

• Ensure the board chair actively develops a strong and 

productive relationship with the Responsible Minister through 

regular meetings and other opportunities for them to get to 

know each other and build trust. 

• Through the board chair, seek to have government’s priorities 

set out in formal direction or otherwise publicly documented. 

• Ensure the board chair is sensitive to the public sector 

environment and the need to inform the Responsible Minister 

should the corporation be about to make or implement a 

decision that could have political consequences. 

• Ensure the board chair is a proactive, strong advocate to the 

Responsible Minister for director appointments — to inform the 

minister of the needs of the board and the identified candidates. 

5. How does government exercise its directive power 

with respect to Crown corporations? 


• Government has the authority to intervene in the management 

of a Crown corporation by directing the board to follow a 

particular course of action when the government believes it is 

in the public interest to do so. 

5.2 Issues 

• The Responsible Minister, Prime Minister/Premier or a senior 

government official may give the board an “informal” directive. 

• Directives may run contrary to the board’s view of what is in 

the best interests of the corporation which may have legal 

ramifications for directors. 


• As far as possible, provide advice to the Responsible Minister 

in any situation where: 

— a government-initiated directive will materially impact the 

approved strategic or operating plan for the corporation; or 

— other planned government initiatives or legislation 

may have unintended negative consequences for the 

corporation. 

• Ensure directives given by government are formally 

documented (e.g., formal written directives or otherwise 

publicly available documentation prepared either by 

government or the corporation). 

• If the board receives an informal directive, clarify the directive 

and ensure a formal directive is put in place. 

• Request that the Responsible Minister, central agency or senior 

government official consult the board prior to issuing a directive. 

For instance, federal legislation requires the Responsible 

Minister to consult and table such a directive with both Houses 

of Parliament within 15 sitting days and the directors of the 

corporation are required to implement the directive promptly, 

efficiently and with the requisite duty of care. 

• Make the directive public. (In some cases this is required by 

government legislation/policy.) 

• Report the directive in the corporation’s strategic plan and 

annual report if it impacts on successful results for the 

corporation. 

• Obtain protection from liability for directors in connection 

with any directive contrary to the board’s view of what is in the 

best interests of the corporation prior to the board acting on 

such directive. 

• If legal advice is required on director liability, ensure the legal 

advisor is independent from government. 

10

6. How and to whom are Crown corporation directors 

accountable and answerable? 

6.1 Definitions 

• Accountability is the means of enforcing or explaining 

responsibility. It involves rendering of account of how 

responsibilities have been carried out. It also includes taking 

any necessary corrective action if things go wrong and 

explaining how problems have been or will be corrected. 

Depending on the circumstances, it may entail accepting 

personal consequences for problems that the office holder 

caused or that could have been avoided or corrected if the 

office holder had acted properly. 

• Answerability is the duty to inform and explain but does 

not entail the personal consequences associated with 

accountability. 


• The board is accountable to Parliament/the Legislature (through 

the Responsible Minister) for stewardship of the corporation. 

• The Responsible Minister is answerable for the corporation in 

Parliament/the Legislature. 

6.3 Issues 

• There may be confusion: 

— between the board, the CEO and Responsible Minister as 

to whom shall speak on behalf of the corporation; 

— in the mind of the public as to who speaks on behalf of the 

corporation; 

— as to the role of other government representatives in 

providing accountability for the corporation. 

• Because Crown corporations often have a public policy 

element as well as a “bottom line” element, directors may feel 

an accountability or moral obligation to the general public or 

members of a community. 

• There may be no defined process by which government 

evaluates the board’s performance. 


• Acknowledge the Responsible Minister’s answerability in 

respect of the corporation. 

• Establish a protocol in writing with the Responsible Minister 

as to ways the board will support the Responsible Minister’s 

answerability (e.g., with respect to anticipated issues, 

determine who will speak, etc.). 

• Keep the Responsible Minister (and others within government 

as required) fully briefed on significant issues relating to the 

corporation. 

• Follow the “no surprises” philosophy and, when in doubt, 

inform the Responsible Minister of issues that the board thinks 

the minister may be interested in. 

• Understand from government (and help develop if it is not 

already in place) the measures and processes that will be used 

by government to evaluate the board’s effectiveness. 

7. To what degree are directors able to influence the hiring, 

firing, compensation and evaluation of the CEO? 


• For some Crown corporations (including most federal Crowns), 

the board does not have authority to hire, fire or compensate 

the CEO; this is the exclusive authority of government. 

• Even if the legislation gives legal responsibility to the board 

to hire and fire, in practice, government may exert significant 

control over the process to hire and choose the CEO. At a 

minimum, government will usually expect an opportunity to 

review and potentially veto a proposed appointment. 

• Government may wish to work collaboratively with the board 

in the recruitment and selection process. 

• For most corporations, CEO terms of employment (including 

compensation) must be fixed within parameters set for the 

public service executives. 

• There is a public sentiment against paying high salaries or high 

severance packages. 

11

7.2 Issues 

• 

• 

• 

• 

• 

Politicians and public servants may not understand the 

corporation well enough to be able to determine the right 

skills required in a new CEO. 

CEOs who do not have required skills may be appointed. 

Government and the board may have differing perceptions 

about the effectiveness of the CEO. 

If government is responsible for hiring and firing the CEO, the 

CEO may be more responsive to government’s influence and 

less responsive to the role of the board. 

Low compensation, or inflexibility in compensation (and/or 

severance packages), may limit the number and quality of 

candidates for CEO positions and impact retention. 


• Wherever possible, seek to have the board responsible for 

recruiting and appointing the CEO. 

• Regardless of legislative structure, seek agreement from 

government to recruit the CEO in accordance with the general 

process outlined below. 

— The process is led by the board (usually through a board 

committee) in consultation with government. 

— The board sets the search criteria in consultation with 

government. 

— The board manages the executive search process. 

— The Responsible Minister or other designated senior 

government official is given the opportunity to participate 

in the recruitment and hiring process by sitting in on 

interviews and providing the perspective of government 

on potential candidates. 

— The board and government reach consensus on the choice 

of preferred candidate. 

— The terms of employment are negotiated by the board 

within any parameters set by government. 

— The board is the main contact point for candidates 

throughout the recruitment and hiring process. 

• If government formally appoints the CEO, encourage government 

to do this in a timely fashion to ensure professionalism. 

• Include in the CEO evaluation process a consideration of how 

the CEO interacts with government. 

• Ensure a comprehensive evaluation process for the CEO even 

if government appoints the CEO. If the government appoints 

the CEO, share the evaluation results with government. 

8. What authority and/or responsibility do directors have in the areas 

of labour relations, human resources and pensions? 


• Crown corporations are generally subject to some form of 

blanket legislation or government policy that: 

— limits executive compensation; 

— provides parameters around non-union compensation 

practices; and 

— dictates the approach to collective bargaining. 

• 

• 

• 

• 

• 

• 

• 

• 

In some cases compensation is limited for the CEO but not for 

other senior executives. 

Unionized compensation may be managed through 

government “bargaining mandates”. 

Non-union compensation may be managed through 

government “compensation plans”. 

In some cases, collective bargaining for unionized employees 

may be handled by a centralized department of government. 

In some jurisdictions, any changes to the CEO’s terms and 

conditions must be within approved parameters. 

Termination allowances are limited in some jurisdictions. 

Some jurisdictions require disclosure of senior executive 

compensation or all corporation employee compensation over 

a certain threshold. 

In some jurisdictions, corporations must report any changes 

in the employment terms and conditions of executives to a 

central government agency. 

Executive compensation and severance packages are often the 

subject of media attention. 

• 

12

• A high percentage of Crown corporation-sponsored pension 

plans are defined benefit plans. 

• Pension plan benefit promises may not be guaranteed by 

government even though a Crown corporation is the sponsor 

of the plan. 

• In some jurisdictions, government has created single-purpose 

entities to manage the investments of, and to handle the dayto-day 

administrative functions for, a number of public sector 

pension plans. 

8.2 Issues 

• The board’s authority to compensate the CEO is limited by 

government parameters. 

• If government compensation limitations apply only to CEOs, 

there can be situations where the CEO earns less than the 

CEO’s direct reports which can undermine the credibility and 

morale of the CEO. 

• The board may be constrained from entering into compensation 

arrangements for management that are competitive or provide 

for appropriate performance incentives. 

• Labour relations settlements may be beyond the control or 

influence of the board. 

• In cases where a government negotiation covers Crown 

corporation collective agreements, the settlement will typically 

be an “across-the-board” type, making it difficult to recruit 

employees for areas of particular or specialized skill shortages. 

• The board’s forecast of its costs with respect to labour settlements 

may be unknown and depend on government negotiations. 

• The Responsible Minister is answerable in Parliament/the 

Legislature and to the public for the corporation’s decisions 

on executive compensation and termination. 

• As in the private sector, due to maturing demographics and 

developments in the capital markets, pension plans may become 

an under-funded liability of the sponsoring corporation. 

• The Crown corporation, as sponsor, is obliged to fulfill all 

benefit promises under the pension plan. 

• If pension plan assets are not managed independently from 

government, there may be pressure from government to use 

the assets to invest in government priorities even if those 

assets may not be either the highest yielding assets or the most 

appropriate securities to use to secure the benefit promises. 


• Be aware of any limitations on executive compensation and 

other terms and conditions of employment (e.g., severance 

allowances) before the CEO search begins in order to avoid 

complications or embarrassment in the recruitment process. 

• Be aware of potential media attention to high value executive pay 

or severance allowances and communicate with the Responsible 

Minister and other relevant government agencies prior to 

finalizing the terms and releasing the information to the public. 

• Ensure termination arrangements are within government 

parameters or legislation if applicable. 

• Consult the Responsible Minister and other relevant government 

agencies prior to terminating a high profile position. 

• When collective bargaining is done by the corporation, 

ensure the corporation’s approach to collective bargaining 

is consistent with the government’s general framework for 

collective bargaining. 

• When collective bargaining is to be conducted by a third party 

as part of a government-wide initiative, ensure the corporation 

provides government with a clear prioritized statement of the 

corporation’s desired outcomes including a rationale. 

• Ensure the board has the required expertise to fully understand 

the nature of the commitments in the corporation-sponsored 

pension plan(s) as well as the opportunities for mitigating the 

diverse risk exposures for both the plan and the sponsor. 

• Ensure there is a formal protocol for the board to annually 

monitor and evaluate all aspects of the corporation-sponsored 

pension plan(s), including the funded status of the benefit 

obligations (i.e., the benefit security), the health of the 

13

investment portfolio, the current legal exposures related to the 

pension plan obligations and value-for-money considerations. 

9. What unique features of the board’s effectiveness should be 

included in the board and director evaluation process? 


• In addition to the usual elements of board evaluation that 

one would see in the private sector (such as the board’s 

satisfaction with board meetings, information, strategic 

planning process, etc.), factors in Crown corporation board 

effectiveness include: 

— the alignment between government’s and the board’s 

understanding of the corporation’s mandate and general 

government priorities; 

— how the board has incorporated the corporation’s 

mandate and general government priorities into its 

strategic planning; 

— the board’s understanding of the corporation’s role in the 

government budget process; and 

— the quality of the board’s and board chair’s relationship 

with the Responsible Minister and other government 

representatives. 

9.2 Issues 

• If the board and government do not agree on the 

corporation’s mandate, the board may pursue strategic 

objectives contrary to the government’s wishes which will end 

up causing dysfunction in the governance process. 

• A fundamental condition of effective governance of a Crown 

corporation is the board’s relationship with its shareholder. 

Without a robust and effective relationship with government, 

usually through the Responsible Minister, the board will be 

less effective at carrying out its role. 

• Government has an interest in whether the directors are 

effective and may have an interest in seeing the board’s 

evaluation results. 


• As part of the board’s evaluation process, evaluate: 

— the board’s relationship with government (the Responsible 

Minister and other relevant individuals or offices); and 

— the board’s understanding of government’s intended 

strategic direction for the corporation. 

• In addition to input from the board and management, consider 

seeking input from relevant individuals or offices within 

government as to their satisfaction with the board’s effectiveness 

in carrying out its responsibilities vis-à-vis the shareholder. 

10. What special requirements affect the operation 

of the audit committee? 


• The corporation’s financial statements usually form part of 

government’s consolidated financial statements. 

• Some legislation provides that the Office of the Auditor General 

(OAG) or equivalent) is the external auditor for the corporation. 

• Some legislation provides that the OAG may be the auditor for 

the corporation, subject to government direction in individual 

cases. 

• Some Crown corporations are audited jointly by the Auditor 

General and a private sector firm. 

• Some jurisdictions require or permit the Auditor General to 

perform a performance audit on Crown corporations on a 

cyclical basis. 

• Some jurisdictions (e.g., federal) have a legislated requirement 

for an internal audit function. 

• Most Crown corporations are not subject to the governance 

control and reporting requirements set out in securities 

legislation (e.g., rules of the Canadian Securities 

Administrators; rules derived from the U.S. Sarbanes-Oxley 

Act of 2002) — although some adopt the recommended best 

practices on governance and disclosure. 

• Crown corporations are often subject to specific financial 

reporting requirements. 

14

10.2 Issues 

• In some cases, the corporation may be of the view that the 

OAG regular staff does not have specific expertise sought for 

the corporation’s audit engagement. 

• Although the governance and disclosure requirements set out 

in securities related legislation/regulation are not mandatory 

for Crown corporations in most jurisdictions, these standards 

may be used by members of the public to assess the practices 

within a Crown corporation. 


• Ensure the audit committee develops a strong working relationship 

with the external auditor, whether OAG or a private firm. 

• Review the expertise of the external audit team to determine 

whether it has sufficient expertise to conduct the audit 

engagement. 

• Where the OAG is not the external auditor but still has 

responsibility for overseeing the integrity of the process, 

consider inviting a representative from the OAG’s office to sit 

in on audit committee meetings in an advisory capacity. 

• Keep up-to-date with developments in the private sector and 

adopt those aspects of audit committee “best practices” that 

are reasonable for the corporation. 

11. What impact does the government’s budgeting process 

have on directors’ responsibility for the corporation’s 

budget process? 


• Some Crown corporations operate in a market environment 

and charge fees for their products or services (in which case 

they may budget for an annual profit or loss). 

• Some Crown corporations are regulated and their fees and 

rates are set by the regulator. For others, rates and fees are set 

by government. 

• Some Crown corporations depend in whole or in part on 

government funding which is made directly to the corporation 

or as part of the Responsible Minister’s budget. In either case, 

funding is subject to Treasury Board approval and appropriate 

approval by Parliament/the Legislature. 

• Some corporations have limits on the amount of money they 

can borrow without government approval. 

• In order to understand the impact of Crown corporations on 

the government’s fiscal plan, Treasury Board usually asks a 

number of corporations and their Ministers Responsible to 

present their forecasts to Treasury Board on a regular basis. 

• Government incorporates the corporation’s forecasted 

financial performance information into the government’s 

overall budget and fiscal plan over a multi-year period. 

• In many jurisdictions, Crown corporation operating and 

capital budgets need to be approved by government. 

11.2 Issues 

• The corporation’s budgeting process is subject to timing of 

decisions made by government. 

• If the corporation receives appropriations, the amount of 

appropriation depends on government. 

• Government may specify an expected dividend from the 

corporation which may be difficult for the corporation to predict. 

• In most cases, government has ultimate authority with respect 

to significant capital expenditures. 


• Ensure the board understands: 

— the government’s budgeting cycle; and 

— the financial information required by government. 

• Ensure the corporation provides budgeting information to 

government on a timely basis. 

• Where government directs decisions different from those 

planned by the corporation (e.g., rates, expenditures, 

dividends, capital plans), provide government with adequate 

information and documentation to explain the implications of 

such adjustments on the operations and financial projections 

of the corporation. 

15

12. What are the requirements for transparency and reporting 

in the public sector? 


• Most Crown corporations are subject to the requirements 

of Freedom of Information (FOI) legislation which enables 

members of the public to access information regarding 

strategic decisions, decision-making processes, executive 

negotiations and compensation. 

• Some corporations are required to conduct their board 

meetings in public. 

• In some jurisdictions, corporations must publish the salaries 

of their senior executives and compensation paid to board 

members (e.g., in BC corporations must make available the 

contracts of executives paid over $125,000 and director 

compensation; in Saskatchewan corporations must disclose 

where employees earn over $50,000). 

• Many jurisdictions require publication of the corporation’s 

strategic plan (or a summary of) and the corporation’s 

annual report against the strategic plan. Typical reporting 

requirements include: 

— a strategic plan that outlines three-year goals and 

performance measures; and 

— quarterly and annual performance and financial results. 

• The Responsible Minister generally reviews annual reports 

prior to tabling them in Parliament/the Legislature. 

• There may be other specific reporting requirements (e.g., the 

federal Multiculturalism Act requires reporting on efforts taken 

in this area). 

• Financial information provided by a corporation can be used 

by opposition parties to question government. 

12.2 Issues 

• In the public sector, there are not many “private” documents. 

Any person can require a wide range of documents (including 

board minutes, directors’ notes, etc.) to be produced pursuant 

to FOI legislation. 

• Open board meetings inhibit full and frank discussion. 

• Disclosure of the corporation’s strategic plan may undermine 

a competitive advantage for those corporations operating in a 

competitive environment. 

• Government’s reporting requirements may not always 

coincide with the corporation’s natural reporting cycle. 


• 

• 

• 

• 

• 

• 

• 

Understand what information the corporation is required to 

disclose or report. 

Report required information on the corporation’s own website 

as well as through government channels. 

Understand the reporting timelines required by government. 

Obtain the Responsible Minister’s approval of documents that 

must be tabled in Parliament/the Legislature in a timely manner. 

Ensure the corporation has a smooth process to handle FOI 

requests. 

At open board meetings, do not discuss issues properly held in 

camera (e.g., personnel, commercially sensitive issues). 

Regardless of minimum reporting requirements set by 

government, provide maximum reasonable disclosure to build 

public trust in, and recognition of the role of, the corporation. 

13. What are the key aspects of a corporation’s communications 

strategy in the public sector? 


• In addition to any communications strategy led by the 

corporation, the Responsible Minister may communicate to 

the public and key stakeholders on behalf of the corporation. 

• When anything of interest to media occurs within a Crown 

corporation, media often will go directly to the Responsible 

Minister for an explanation. 

• In communicating general government policy, government 

may make announcements that impact the operations or 

decisions of a particular Crown corporation without prior 

notice to the corporation. 

• Although, in theory, there are “clear lines of communication” 

between the board and government, in fact, there are a variety 

16

of formal and informal ways to communicate with government 

and alternative lines of communication may be more or less 

effective depending on the individuals involved and the nature 

of their working relationship. 

• Business issues regarding a Crown corporation often are not 

found in the business section of a newspaper but in the front 

section. 

13.2 Issues 

• Ministers do not like to be taken by surprise by a media or 

opposition question concerning a Crown corporation. 

• A Crown corporation does not like to be taken by surprise by 

government decisions, pronouncements or actions that affect it. 

• The government may wish to make a major announcement 

concerning a corporation (e.g., capital expansion). If done 

without the participation of the Crown corporation, this may 

undermine the leadership position of the CEO and/or the board. 

• When two different parties are communicating on behalf of the 

corporation, there is an increased risk of mixed communication. 

• If government wants to make an announcement that impacts 

the corporation, but does not do so in a way that gives the 

corporation the opportunity to take time to consider the issue 

and respond, this can be detrimental to the reputation and 

operations of the corporation. 

• If the corporation cannot communicate its position and/or 

needs clearly and directly to the decision-makers within 

government (e.g., Prime Minister/Premier, Responsible 

Minister, central agency, senior government official) there is a 

possibility that government will not fully understand (and then 

potentially not support) the corporation’s needs. 

• Government communication wishes or requirements during an 

election campaign may differ from the needs of the corporation. 


• Adopt a “no surprises” policy of communication vis-à-vis the 

Responsible Minister — to ensure the minister is informed 

of any issue about which he or she may be questioned, 

particularly if the issue is likely to become public and reflect 

negatively on the corporation. 

• Establish a protocol with the Responsible Minister as to: 

— what types of things the Responsible Minister wants to be 

informed about in advance (e.g., operating results, firing a 

CEO, etc.); 

— who will speak on behalf of the corporation in relation to 

specific issues; 

— what types of things the Responsible Minister should 

be advised of immediately (e.g., serious health or safety 

infraction or accident); and 

— the Responsible Minister’s obligation to keep the board 

informed when government is contemplating any 

significant government policies or decisions that will 

impact the corporation. 

• If there are important decision-makers within government 

other than the Responsible Minister, ensure that the 

corporation’s issues are also communicated to those 

individuals. 

14. How are directors impacted by the political aspects 

of the public sector environment? 


• In the minds of the general public, the actions of most Crown 

corporations are directly attributable to the government. 

• Governments sometimes will campaign on promises to deal 

with Crown corporations in a certain way (e.g., privatization, 

rate-setting, etc.). 

• Sometimes, opposition parties or key stakeholders criticize 

Crown corporations as part of their attack on government 

performance. 

• Local MPs or MLAs may demand information and attempt to 

exert influence over Crown corporations within their regions 

although they have no direct authority over them. 

• On occasion, an organized key stakeholder group, from 

either inside or outside the corporation or both, may use 

17

an upcoming election to extract promises from government 

regarding the corporation, leak information, or disrupt the 

corporation for political purposes. 

• The pressures of the political system sometimes cause 

politicians to react to situations without time for optimal 

consultation and/or communication with the board. 

14.2 Issues 

• There is an explicit or implicit expectation by government that 

the corporation will not embarrass the government. 

• Directors may feel undermined or discouraged if they hear 

government’s plans for their corporation the first time during 

a political statement. 

• Government’s campaign promises for a corporation may be 

contrary to the directors’ view of what would be in the best 

interest of the corporation or best serve the public interest. 

• The corporation may experience poor morale as a result of 

criticism by opposition parties or key stakeholders. 

• The corporation may experience heightened tensions between 

management and unions during the run up to an election 

campaign. 

• Local MPs or MLAs may try to influence the corporation to 

make certain decisions or act in a certain way. 


• Recruit directors whose vision for the corporation is aligned 

with the corporation’s mandate and government’s policy 

direction for the corporation. This should be determined as 

part of the recruitment process and may be revisited should 

the policy direction to the corporation change. 

• Work out a protocol with the Responsible Minister as to how 

local MPs/MLAs will be kept informed as to the corporation’s 

activities and decisions — and who is the lead communicator 

on this (e.g., the corporation or the Responsible Minister). 

• Resist any pressure to take political stands on issues. 

• When the government is reviewing policy affecting the 

corporation, present government with the board’s view of 

what it believes is in the best interests of the corporation. 

• Once government decides the policy direction for the 

corporation, ensure that the corporation operates within the 

policy mandate and performs the very best it can. 

• If you do not support government’s broad policy direction for 

a corporation, resign. 

• If the corporation is going to make a decision that could 

have political ramifications (e.g., raise automobile insurance 

rates for seniors), discuss it with the Responsible Minister or 

another appropriate senior government official beforehand: 

— to ensure that the decision remains within the parameters 

of the corporation’s mandate and government’s policy 

direction for the corporation; 

— to provide the government with advance notice so that 

government may prepare its communications plan around 

the issue; and 

— to attempt to deal with the issue in a way that is acceptable 

to the government and the board. 

• Keep in mind the difference between: 

— 

— 

policy issues, where government has ultimate authority; and 

operational issues, where the board must exercise the 

required degree of independence to make decisions that are 

in the best interests of the corporation — taking into account 

the corporation’s mandate and government’s policy direction 

for the corporation but resisting political interference. 

15. What is appropriate compensation for public sector directors? 


• Director compensation is set by government. 

• Director compensation is based on historical patterns as much 

as any other criteria. 

• Some director positions are unpaid. 

18

• Serving as a director on a Crown corporation board is seen, at 

least in part, as a public service. 

• Directors do not receive shares or have a similar direct financial 

incentive to align their interests with those of the corporation. 

• Public attitude is against significant compensation to directors, 

particularly if directors were not previously paid. 

• Governments dictate the acceptable level of expense reimbursement 

for senior public servants and generally Crown corporation 

directors are expected to adhere to the same policies. 

15.2 Issues 

• Directors of Crown corporations are paid substantially less 

than their private sector counterparts. This can (but does 

not always) cause difficulty in recruiting and/or the level of 

director engagement. 

• Sometimes, for historical reasons, compensation paid to one 

board seems “unfair” relative to compensation paid to other 

boards with similar responsibilities. 

• Directors who are not paid adequately may feel that government 

places no importance or value on the job they are performing. 

• Directors’ compensation and expense accounts are subject to 

disclosure under FOI legislation. 


• Provide information to government in respect of appropriate 

compensation for directors in recognition of the key role 

directors play in the governance of Crown corporations. 

• When considering appropriate compensation for directors, 

consider such factors as: 

— the size and complexity of the corporation; 

— the degree of responsibility and accountability assigned to 

the corporation’s board; 

— the corporation’s strategic importance to the shareholder; 

— the degree to which the corporation’s operations affect 

public safety; 

— the degree of knowledge and specialized skills required; 

— the degree to which the Crown Agency is subject to a high 

level of stakeholder engagement; and 

— the element of public service inherent in serving on a 

Crown corporation board. 

• Establish well-defined polices for reimbursement of directors’ 

expenses. 

• When incurring expenses in respect of directors’ duties, 

be cognizant of the impact the expenditure might have 

on the corporation, government and public opinion and 

restrict directors to levels of expense reimbursement set by 

government for equivalent public service positions. 

16. What are the special considerations for a code of conduct 

and conflict of interest policy? 


• Directors live in a “glass house”, both personally and 

professionally when they join a Crown corporation board. 

• Crown corporations, and their directors, receive a high degree 

of media attention, particularly if there is an issue that could 

embarrass the government. 

• Government may have minimum standards of conduct that 

must be incorporated into any applicable code of conduct. 

• Crown corporation directors may be subject to an 

investigation by the Auditor General, an ethics commissioner 

or a special committee established by government. 

• Legislation requires some boards to have members who have a 

real or apparent conflict of interest. 

• Some Crown corporation directors or employees may be 

active politically. 

• Some jurisdictions require a security review (e.g., Criminal 

Records check) for individuals seeking appointment. 

16.2 Issues 

• Directors of Crown corporations are judged by the same high 

standards as are politicians and public servants. 

19

• Inappropriate actions by directors embarrass not only the 

corporation but the government. 

• Partisan behaviour by directors or employees of the 

corporation could impact the Crown corporation’s reputation 

and the board’s effectiveness. 

• Where board members have a real or perceived conflict 

of interest, good governance of the corporation may be 

compromised. 


• When drafting a Crown corporation’s code of conduct, 

attempt to identify highly sensitive issues that could embarrass 

the government and prepare in advance as to how such 

situations would be handled. 

• When considering how to handle an ethical issue, use the same 

standard as you expect the public would apply to politicians. 

• If some directors have real or apparent conflicts of interest, 

but are mandated a position on the board by legislation or 

government policy, ensure that the code of conduct addresses 

those areas where conflicts are expected to arise so that the 

board knows how these situations will be addressed prior to a 

specific event arising. 

• Ensure the code of conduct addresses specifically how 

individuals engaged in political activities should conduct 

themselves vis-à-vis the corporation. 

• Ensure the corporation has an appropriate whistleblower 

policy to allow the board to receive appropriate information 

or complaints from employees and the public. 

17. What steps can be taken to enhance the governance 

relationship between the board and government? 


• Some elements of decision-making that are traditionally within 

the exclusive authority of directors in the private sector may be 

shared with, or rest exclusively with, government in the public 

sector. 

• Although, in theory, there may be clear lines of accountability 

and communication between boards and government, in 

practice there are many grey areas. 

• Many politicians and public servants may be unfamiliar with 

the roles and responsibilities of the board of directors of a 

Crown corporation. 

• Under most government structures, the Responsible Minister 

plays a key role as government’s representative vis-à-vis Crown 

corporation boards. 

• When there is a Cabinet shuffle, there may be a new 

Responsible Minister for the corporation. 

17.2 Issues 

• Without a clear understanding of the respective authority of 

government and the board with respect to governance of the 

corporation, and a productive working relationship between 

the board and government, governance of the corporation will 

be less effective. 

• If politicians and public servants do not understand 

and respect the role of a board of directors they can 

unintentionally undermine effective governance and demotivate 

the board. 

• Governance protocols established with one minister may not 

be useful when a new minister becomes responsible for liaison 

with the corporation. 


• Request sufficient information and clarity from government to 

ensure directors have a clear understanding of government’s 

intentions for the corporation. 

• Through the board chair, establish a process for the board to 

maintain close communication with the Responsible Minister, 

relevant senior government officials and central agencies. 

• Establish a protocol with respect to governance of the 

corporation, enter into a memorandum of understanding 

with government (usually through the Responsible Minister 

or his designate) setting out the expectations of the board and 

20

government for the working relationship. The MOU should 

cover such things as: 

— confirmation of the corporation’s mandate, government’s 

performance expectations and any formal directions given; 

— an agreed upon decision-making process or communications 

protocol required in relation to any anticipated matters affecting 

the corporation (e.g., if there are regular customer complaints, 

how are these handled as between the Responsible 

Minister and the corporation); 

— all financial and reporting requirements; 

— a list of anticipated issues on which board would take the lead; 

— a list of anticipated issues on which Responsible Minister 

or some other government or elected official would take 

the lead; 

— the types of actions that should be discussed with and/or 

approved by the government in advance, such as: 

— 

— 

— 

— 

— 

— 

— 

— 

forming an associated corporation; 

participating in or making a change to a significant 

joint venture or other type of partnership relationship; 

acquiring or disposing of a significant asset of the 

corporation; 

commencing or ceasing a significant business activity; or 

other issues as agreed; 

— 

the types of actions that should be communicated to the 

government in advance or as soon as possible; 

the role, if any, the board will play in any anticipated 

review of the corporation’s mandate or government policy 

affecting the corporation; 

the role of the Responsible Minister, the corporation 

or where applicable a central agency, with respect to 

communications concerning the corporation; 

the commitment of the Responsible Minister and the board 

chair to communicate regularly regarding the affairs of the 

corporation; and 

— other issues relevant to the corporation as raised by either 

the board or government. 

• Review (and revise as necessary) the protocol when a new 

minister becomes responsible for the corporation. 

• Ensure the working relationship between senior government 

officials, central agencies and Crown corporation management 

supports but does not usurp the authority of the board and 

the relationship between the board and government. 

• When given the opportunity, engage in education and 

professional development opportunities to help politicians 

and public servants understand the board’s role in the 

governance of Crown corporations. 

18. What is the extent of directors’ liability in the public sector? 


• In addition to director’s liability insurance, and indemnity 

from the corporation, governments generally provide 

contractual indemnity for directors acting in good faith. 

18.2 Issues 

• Government may ask directors to cause the corporation to do 

something that may, in normal circumstances, attract directors’ 

liability for failure to act in the best interests of the corporation. 


• Where government provides a direction to directors to engage 

in an activity that may attract directors’ liability, either: 

— refuse to act; or 

— require a specific direction and a specific indemnity with 

respect to directors’ liability. 

• If an issue arises in respect of directors’ liability, seek legal 

advice independent from that provided by government. 

• If directors’ liability issues are not resolved satisfactorily, resign. 

21

19. What should directors ask before consenting to join 

a Crown corporation board? 


• The board’s ability to be effective and add value is dependent 

to a significant degree on legislative and policy scheme under 

which the corporation operates and the quality of the working 

relationship with government. 

19.2 Issues 

• Directors may not be able to contribute what they hope to 

contribute if the corporation’s governance framework is not 

well-established. 


• Before consenting to put your name forward to be considered 

for a Crown corporation directorship, and in addition to the 

usual questions you would ask prior to joining any board, 

ascertain the following information: 

— What is the director appointment process? Who ultimately 

will choose new directors and what criteria are used? 

— How have directors been recruited and appointed 

in the past and does government respect the board’s 

recommendations? 

— Does government value the role of the board in governance 

of the Crown corporation? 

— Has the government overridden decisions or recommendations 

of the board in the past? 

— Who is the Responsible Minister and what is the Crown 

corporation’s relationship with that minister? 

— What government agencies and individuals have significant 

input into decisions affecting the corporation and what 

is the corporation’s relationship with those agencies and 

individuals? 

— What are the corporation’s short and long-term policy 

objectives and to what extent are those public? 

— Are there any significant policy or other issues that are 

outstanding and waiting upon a decision from government? 

— 

— 

— 

— 

— 

— 

— 

Does the corporation have the opportunity to provide input 

and advice to government in respect of government’s policy 

decisions that impact the corporation? 

What control does the board have over the hiring, firing, 

compensation and evaluation of the CEO? 

What governance processes or protocols are in place to 

manage the relationship between government and the 

board in the governance process? 

What restrictions are there on the board’s traditional areas 

of decision-making authority? 

Has the board and government developed any parameters 

to identify the areas of their respective decision-making? 

How frequent are board meetings and, in addition to 

board meetings, what other time requests are placed on 

board members? 

What ongoing professional development in the area 

of public sector governance is provided for Crown 

corporation directors? 

20. What is an appropriate term for Crown corporation directors? 

20.1 Unique features 

• Directors generally are appointed for renewable terms of 

between one and three years. 

• There are generally no age restrictions on director services. 

However, legislation or government policy may limit the total 

length of time directors may serve. This may range from six to 

12 years. 

• If government is formed by a different political party following 

an election the new government may: 

— terminate the directorships of those directors whom it 

believes are not aligned with the governing party’s political 

views; and/or 

— change the policy direction for the Crown corporation. 

• Director appointments may be terminated mid term by the 

original instrument that was used for the appointment (Orderin-Council 

or Minister’s Order). 

22

• Directors generally are not entitled to compensation for early 

termination. 

• Directors may wish to resign their positions if they do not 

agree with certain decisions imposed on the corporation or a 

change in policy direction. 

20.2 Issues 

• If directors’ terms are too short, directors are not able to 

cultivate the depth of understanding of the business and the 

overall value of the board’s governance role may be weakened. 

• Wholesale change of board membership weakens the board’s 

credibility and governance role. 

• If board members’ service is not staggered appropriately, 

there is an increased risk of losing continuity of expertise and 

corporate memory. 

• When a director resigns from a Crown corporation board, 

the resignation can reflect poorly on the corporation and the 

government. 

20.3 Recommended practice 

• Where the length of director service is not limited by legislation, 

seek to have board members serve for an appropriate length 

of time, taking into consideration the complexity of the Crown 

corporation’s operations and the need for appropriate length of 

service to allow board members to contribute effectively. 

• Consider resigning if: 

— you do not agree with a directive or change in policy 

direction government has set for the corporation; 

— you believe that changes should be made to the corporation’s 

policy direction and government refuses to make 

such changes; 

— the board has lost confidence in the CEO and the board 

has no authority to replace the CEO; 

— the government improperly interferes with the board’s 

proper governance role. 

• If a director resigns, formal notice of the resignation should be 

sent to the Responsible Minister and the board chair. 

23

Appendix A 

Set out below is a general overview of the roles and responsibilities 

of various parties or entities involved in the accountability continuum 

with respect to Crown corporations. 

Parliament/Legislature: 

• approves legislation that creates or dissolves Crown corporations 

and sets their mandates; 

• approves the allocation of public funds (including appropriations 

for some Crown corporations); 

• approves legislation of general application that impacts the 

governance of Crown corporations; and 

• receives plans and reports from Crown corporations. 

Certain officers of Parliament/the Legislature are involved with 

Crown corporations, including: 

• Auditor General 

• Information and Privacy Commissioner 

• Ombudsman 

• Conflict of Interest or Ethics Commissioner 

Select Standing Committees undertake work on behalf of 

Parliament/Legislature. Common committees include: 

• Crown corporations; 

• Public accounts; and 

• in some jurisdictions, committees that review director 

appointments. 

Cabinet: 

• within the legislative framework set by Parliament/the Legislature, 

determines government policy with respect to the Crown 

corporation; 

• ensures Crown corporations’ mandates and activities are 

consistent with the interests and intent of government; 

• subject to legislative requirements set by Parliament/the 

Legislature, approves the establishment/dissolution of Crown 

corporations and determines Crown corporations’ mandates, 

powers and accountability mechanisms; 

• determines any regulatory oversight framework for Crown 

corporations; 

• determines funding/revenue generation capacity for Crown 

corporations, including approval of fees, licenses, etc. where this 

is not done by a regulator; 

• determines the government’s approach to governance (e.g., 

appointments, director compensation, method of hiring the CEO); 

• approves and rescinds board appointments (unless this has been 

delegated to a minister pursuant to legislation); 

• assigns a Responsible Minister for each Crown corporation unless 

it is done through legislation; and 

• determines any dividend or remittance requirements of Crown 

corporations. 

Prime Minister/Premier: 

• provides political advice on policies and decisions affecting Crown 

corporations (including appointments of directors and CEOs 

where applicable); 

Privy Council Office/Cabinet Secretary: 

• provides public service advice to the Prime Minister/Premier on 

policy and operational matters as they affect Crown corporations. 

24

Responsible Minister: 

• is key link between Cabinet, the corporation and Parliament/the 

Legislature; 

• represents government in Parliament/the Legislature by tabling any 

legislation related to the corporation and tabling (if applicable) 

strategic plans, annual reports and responding to any questions in 

Parliamentary/Legislative debate regarding the corporation; 

• communicates Cabinet policy direction to the corporation’s 

board, and provides additional policy direction to the board, 

consistent with Cabinet’s policy direction, as required; 

• receives policy advice and recommendations from Crown 

corporations and seeks Cabinet approval (and Parliamentary/ 

Legislative approval as required) for any change in mandate; 

• ensures that Cabinet-approved policy direction is implemented by 

the corporation; 

• sponsors and seeks Cabinet approval (and Parliamentary/ 

Legislative approval as required) for legislation, regulations, and/ 

or orders necessary for a corporation to fulfill its mandate; 

• approves and seeks Cabinet approval for appointment of directors 

(and in some cases senior executives) or, for corporations where 

board or executive appointments are by ministerial appointment, 

appoints and rescinds board or executive appointments; 

• seeks Treasury Board (and Parliamentary/Legislative) approval for any 

appropriations required to support the corporation’s operations; 

• responds to public enquiries regarding government direction to a 

Crown corporation (corporation is responsible for responding to 

public enquiries regarding its operations and management); 

• advises the board in a timely manner of any government issues 

that materially impact the business of the corporation; 

• advises Cabinet and Treasury Board in a timely manner of 

any corporation issues that materially impact the plans and 

projections of the government; and 

• undertakes any additional roles specified in a Crown corporation’s 

foundation document. 

The Responsible Minister is expected to: 

• be aware of the impact of broader government public policy 

initiatives or issues on the corporation; 

• ensure the Minister of Finance is made aware of any fiscal 

issues relating to the corporation that may materially impact 

government’s financial reporting or planning; 

• act as a liaison with other ministries on matters that affect the 

corporation; 

• as appropriate, discuss in advance with, and seek input from, the 

board, on proposed major new policy directions for the corporation; 

• subject to the strictures of required confidentiality, inform the 

board in advance of policy directions or information requirements 

that may materially impact a corporation’s business; and 

• maintain a productive working relationship with the board and 

executive of the Crown corporation. 

Treasury Board: 

• is the Cabinet committee responsible for budget and management 

matters; 

• ensures the impact of Crown corporations’ activities on the 

government’s fiscal plan are known, acceptable, and consistent 

with government’s fiscal planning framework; 

• in relation to a Crown corporation: 

— may establish financial, accounting policies and practices; 

determine dividend policy; and set mandate for collective 

bargaining; 

— reviews and approves financial performance goals for the 

corporation; 

— recommends voted appropriations that are the basis of 

funding; and 

— receives financial information from the corporation required 

to complete the government’s fiscal plan and ensure that it is 

consistent with government’s fiscal plan. 

25

Minister of Finance: 

• advises Cabinet on government’s budgetary and financial matters 

as they relate to Crown corporations; 

• may have the role as fiscal agent to a Crown corporation (if specified 

in the incorporating statute or authorized by legislation of broader 

application to Crown corporations); 

• manages government’s liability as it relates to Crown corporations; 

• fulfills government’s fiscal reporting to Parliament/the Legislature; 

• obtains financial information from Ministers Responsible and 

Crown corporations for planning and reporting; 

• approves indemnities and guarantees issued by Crown corporations; 

and 

• may serve as chair or be involved in a committee responsible 

for establishing and approving policy with respect to executive 

compensation plans of Crown corporations and collective 

bargaining mandates. 

Government Caucus Committees: 

• created by Cabinet; 

• may review and provide recommendations to Cabinet regarding a 

Crown corporation’s strategic plan or other matters relating to a 

Crown corporation. 

Senior government officials and central agencies: 

• The Deputy Minister, other senior government officials and central 

agencies (e.g., in the areas of Crown corporation oversight, 

human resources, director appointments, communications) 

support the work of the Responsible Minister and in so doing may 

have a great deal of interaction with the board, CEO and other 

senior executives of the Crown corporation. 

26

Where to find more information 

Canadian Institute of Chartered Accountants 

publications 

The 20 Questions series 1 

20 Questions Directors Should Ask about Building a Board 

20 Questions Directors Should Ask about Codes of Conduct 

20 Questions Directors Should Ask about Director Compensation 

20 Questions Directors Should Ask about Executive Compensation 

20 Questions Directors Should Ask about Governance Assessments 

20 Questions Directors Should Ask about IT 

20 Questions Directors Should Ask about Internal Audit 

20 Questions Directors Should Ask about Management’s Discussion 

and Analysis 

20 Questions Directors Should Ask about Privacy 

20 Questions Directors Should Ask about Risk, 2 nd edition 

20 Questions Directors Should Ask about Strategy, 2 nd edition 

20 Questions Directors Should Ask about Their Role in Pension Governance 

Not-for-Profit 

20 Questions Directors of Not-for-Profit Organizations Should Ask 

about Governance 

The CFO series 

Financial Aspects of Governance: What Boards Should Expect 

from CFOs 

How CFOs are Adapting to Today’s Realities 

Risk Management: What Boards Should Expect from CFOs 

Strategic Planning: What Boards Should Expect from CFOs 

The Control Environment series 2 

Understanding Disclosure Controls and Procedures: Helping CEOs and 

CFOs Respond to the Need for Better Disclosure 

Internal Control 2006: The Next Wave of Certification — 

Guidance for Directors 

Internal Control 2006: The Next Wave of Certification — 

Guidance for Management 

Other CICA publications on governance, strategy and risk 

CPR Alert, Issue 1, January 2004; Issue 2, January 2006; Issue 3, April 2006 3 

Crisis Management for Directors 

Guidance for Directors: Governance Processes for Control 

Guidance for Directors: Dealing with Risk in the Boardroom 

Integrity in the Spotlight: Audit Committees in a High Risk World, 2 nd edition 

Additional references 

2005: Best Practice Guidelines: Governance and Disclosure Guidelines for 

Governing Board of British Columbia Public Sector Organizations 

www.fin.gov.bc.ca/oop/brdo/corporateguidelines.pdf 

2005: OECD Guidelines on the Corporate Governance of State-owned 

Enterprises 

www.oecd.org/document/33/0,2340,en_2649_37439_34046561_1_1_ 

1_37439,00.html 

Corporate Governance in Crown Corporations — Canadian Treasury Board 

Secretariat, 1996 

www.tbs-sct.gc.ca/ccpi-pise/cg/index_e.asp 

1 

To order copies of the 20 Questions series or CFO series contact 416-977-0748 (Toronto) or 1-800-268-3793 (rest of Canada) or visit www.knotia.ca/store 

2 

Available for free download from www.rmgb.ca/index.cfm/ci_id/3083/la_id/1.htm 

3 

Available for free download from www.cica.ca/index.cfm/ci_id/247/la_id/1.htm 

27

About the author 

Elizabeth Watson is a specialist in corporate governance, director recruitment and board 

effectiveness. 

Following 20 years in legal practice, she served from 2001 to 2005 as Managing Director of 

Board Resourcing and Development for the Province of British Columbia. Located within 

the Office of the Premier, she acted as chief recruiter and governance consultant for the BC 

government in relation to the more than 250 independent public entities, including all Crown 

corporations. Under Elizabeth’s leadership, British Columbia was recognized nationally and 

internationally for initiating and supporting leading edge corporate governance practices. 

Elizabeth is the author of Governance and Disclosure Guidelines for Governing Boards of 

British Columbia Public Sector Organizations. The Best Practice Guidelines, which were 

published in February 2005, provide provincial standards for governance practices and 

corresponding disclosure requirements and are used as a standard reference by many public 

sector organizations across the country. 

In July 2005 Elizabeth established Governance Advisory Services providing board governance 

and director recruitment services to private, public and not-for-profit entities and advice to 

the national and international corporate governance community, including the private sector, 

government and Crown corporations. 

Elizabeth is a frequent speaker and published author on corporate governance. She is the Chair 

of Choice School for Gifted Children and serves as a director of the Institute of Corporate 

Directors, BC Cancer Foundation and the Forum for Women Entrepreneurs. She is a member of 

Canada’s Top 40 Under 40 Advisory Board and past director of Women in the Lead Inc. 

Elizabeth holds an LLB from the University of British Columbia and completed executive education 

in the areas of governance and finance at Harvard University and Ivey Business School.



Crown Corporation Governance 

277 Wellington Street West 

Toronto, ON Canada 

M5V 3H2 

Tel: 416-977-0748 

1-800-268-3793 

Fax: 416-204-3416 

www.cica.ca

20 Questions - Canadian Institute of Chartered Accountants

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