Protecting the Shareholder - Public Policy Forum

PUBLIC POLICY FORUM PROTECTING THE SHAREHOLDER 29 PUBLIC POLICY FORUM PROTECTING THE SHAREHOLDER 30operating independently and with freedom from the vagaries ofexcessive political interference. Such freedom and independenceof operation would seem to imply that responsibility for providingbroad policy direction to a Crown corporation rests squarely withthe government which should be held accountable - to Parliamentand ultimately to the Canadian public - for it. This responsibilityshould embrace not only the legislative mandate provided to aCrown, but also the strategies and priorities pursued by the Crownin interpreting that mandate.On the other hand, managerial accountability should rest with theboard of directors and senior management of the Crown agency. Adesignated minister may be the vehicle for reporting to Parliamenton such matters, but the Crown board members and managementshould speak for themselves - and be judged for themselves - beforeParliamentary committees and by interested stakeholders. Thismanagerial responsibility includes financial administration and thespecific programs and activities developed by the Crown pursuantto its legislated mandate and strategies as agreed with thegovernment.Both political and managerial accountability function best whenthere is a frank and open dialogue between the Crown agency andthe government through its responsible minister. Ministers do nothave a right to interfere in the day-to-day operations of a Crown, butthey do have a right not to be politically blindsided by theseoperations.This relationship between the responsible ministers and Crowncorporation(s) reporting to them has taken on an added dimensionwith the current development of the concept of PortfolioManagement. This approach suggests that all of the structures withina minister's assigned area of responsibility - not just the formaldepartment but once-removed Special Operating Agencies (SOAs)and even Crowns - should be coordinated as an integrated wholefor policy planning and priority purposes.If the basic principles of responsibility and accountability as set outabove are clearly understood and respected, there is no reason whyCrowns cannot actively participate in portfolio management. Indeed,it would seem logical that Crowns themselves could benefit from aclear understanding of the broad over-arching policy directionsbeing pursued by their ministers across their portfolios. At the sametime, the process of developing and communicating these directionscould benefit from having the perspective and expertise of a Crownagency. But such participation in portfolio management need notthreaten the ultimate arms length managerial independence ofCrowns.Portfolio management also helps bring into focus the role of theresponsible minister's deputy minister in the relationship withvarious Crowns. The deputy minister is not a gate keeper or a filterin a Crown's relationship with its responsible minister. Crown chairsand senior management have, or should have, direct access to theirrespective ministers. But as the ministers most senior adviser onvirtually all matters within the minister’s portfolio, the deputyshould be informed of and consulted on important issues being putbefore the minister. The result may be differences in the adviceoffered the minister, but these differences will reflect the particularperspectives inherent in each of their roles - and will not necessarilybe the result of unproductive jealousies or simple turf battles.To sum up this complex relationship, Crown corporations are bydefinition closely-held corporations and their dominant shareholder- the government - rightfully should provide strong policy andstrategic direction. What is required are Crown boards of directorswith sufficient competence, authority, and arms-lengthindependence to translate that broad direction into effective andefficiently managed operating plans and programs.The Appointment ProcessOne place to improve Crown corporation governance is the processthrough which directors are appointed to serve on Crown boards.The issue is not whether the government should exercise the rightto appoint individuals to these boards. Appointment of directors isa fundamental shareholder prerogative whether corporations arepublic or private, widely or closely held. (The procedure adoptedin recent years of having appointees to significant federal Crowncorporations examined by the appropriate Parliamentary committee,