Institute for Governance of Private and Public Organizations (IGOPP)

Institute for Governance of Private and Public Organizations (IGOPP)

June 08, 2017 13:00 ET

Are our State-owned enterprises well governed?

IGOPP grades them on their governance

MONTREAL, QUÉBEC--(Marketwired - June 8, 2017) - The Institute for Governance (IGOPP) is unveiling today the results of a study about the quality of governance at 46 Quebec State-owned enterprises, which collectively have revenues of $63 billion, employ some 65,000 people, receive more than $4 billion in subsidies and generate more than $4 billion in dividends for the government.

Given their economic and fiscal role, it is important to assess the overall governance of these organizations, the make-up of their boards, their transparency, their adherence to best practices.

The governance score given to each State-owned enterprise is based on 47 variables selected to assess four different aspects of governance: (1) Board composition and structure (26% of total score); (2) Dynamic of board meetings (14%); (3) Qualifications of board members and their appointment/selection process (31%); and (4) Transparency, disclosure and accountability (29%).

These are summary findings:

  • Quebec State-owned enterprises achieved grades for governance ranging from 25% to 87%;
  • A significant difference is noted between those organizations which are subjected to the Quebec law on governance of State-owned enterprises enacted in 2006 versus those which are not;
  • Only half of the 46 State-owned enterprises in this study achieved a passing grade (60% and up).

These results lead to specific recommendations addressed in part to the Quebec government and in part to the boards of directors of State-owned enterprises.

The Quebec government should review and amend the outdated statutes governing several corporations so that all are required to implement best governance practices.

All boards of directors should adopt high-level governance principles and processes, even if not called for by their legal statute, provided that they do not thereby infringe the statute's requirements.

All boards should review their governance score and take measures to swiftly improve their score.

It is noteworthy that, with few exceptions, State-owned enterprises do not divulge the profile of expertise and experience they have set for their board, do not, in many cases, provide complete biographies of their board members, and rarely make public the relationship between the profile of expertise set for the board and the individual biographies of board members. Such disclosure has now become inescapable for any corporation listed on an exchange.

Finally, the information on the compensation of executive officers is often incomplete and, too often, their websites are not user-friendly making it difficult to access information on their governance, their financial results, their strategic plan and whatever performance indicators they use to monitor management.

Full text of the report (French only).

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