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"The confidence dividend in monetary policy" by David Dodge A stable and predictable rate of inflation at around the central bank’s target rate of 2 percent creates a climate of confidence in monetary policy, Bank of Canada Governor David Dodge told the Vancouver Board of Trade in September. “Canadians,” he says, “now expect that inflation will stay near the target not just for the near term, but into the future.” There is now, he says, a confidence dividend in Canadian monetary policy. As for the crisis in corporate governance, the thematic of this issue of Policy Options, Dodge says “Only by reaffirming the integrity of individuals, corporations, and public institutions can we restore and maintain the confidence dividend.” "Windows of opportunity: social reform under Lester B. Pearson" by Jim Coutts The arrival of Lester B. Pearson as prime minister in 1963 opened a window of opportunity on the most creative and significant era of social policy in modern Canadian history. This was no accident of history, writes Jim Coutts, who had a front row seat as Pearson’s appointments secretary. Pearson came to office with a fully developed agenda for economic and social policy, the determination to carry it out, and the means to finance it during a time of plenty. As Coutts writes in this exclusive for Policy Options, in only five years of two minority governments Pearson enacted the Canada-Quebec Pension Plan, the Canada Assistance Plan, the Guaranteed Income Supplement and Medicare, all keystones of the modern social security system. “What took King and other prime ministers more than 40 years to achieve,” writes Coutts, “was expanded at least two fold” during the Pearson years. None of his successors has even come close as an innovator of social policy, notes Coutts (who later became principal secretary to Prime Minister Trudeau) because none had a coherent agenda for progressive social policy. On the eve of the Liberal leadership convention, Coutts’s reflections serve as a timely missive to Paul Martin from a lifelong party activist with unique insider credentials on the development and management of a prime ministerial agenda. "A call for a culture of values, not just rules - from the corner office to the boardroom" by Donald J. Johnston From the Enron scandal in 2001 to the uproar over NYSE Chairman Dick Grasso’s pay package in the fall of 2003, markets have been roiled and confidence shaken by portraits of corporate greed. From Paris, in this exclusive for Policy Options, OECD Secretary-General Don Johnston considers means of improving corporate governance among his 30 member countries, notably in North America and the European Union (EU). Executive compensation is the tail of the dog, not the dog, he reminds us, adding that improvements lie beyond legislation and regulation, and even beyond eliminating egregious conflicts of interest and bolstering the independence of outside directors. At the end of the day, there is no substitute for a culture of values, nor for professional and ethical management of corporations. "From carrots to sticks: restoring investor confidence in Canada" by E. Leo Kolber and Kelly J. Bourassa Conflicts of interests, accounting standards and executive compensation are all part of the larger issue of corporate governance. The question for the Senate Banking Committee, during a year-long inquiry into the wave of corporate scandals, was how to strike a balance between the carrot of encouraging appropriate corporate behaviour and the stick of punishing illegal actions by CEOs and other insiders. In its concluding report, Navigating through “The Perfect Storm,” issued in June 2003, the Senate Banking Committee recommended that CEO and chairperson roles be split in large, widely held corporations, and that accounting firms no longer be eligible for nonauditing consulting contracts. As for excesses in executive greed, it urged that compensation committees be entirely independent of management. Leo Kolber, then chairman of the Senate Banking Committee, and Kelly Bourassa, policy advisor to the chairman, explain the background of the committee’s work and the context of its recommendations. "A road too far - compliance at the expense of performance?" by Guylaine Saucier While some of the new regulatory and legislative frameworks are welcome improvements to corporate governance, they are no substitute for a culture of governance. Guylaine Saucier, chair of the joint committee of the Chartered Acccountants of Canada and the Toronto Stock Exchange, says we need boards to do the right thing, not just follow the right rules. She points out that many of the most egregious violations in the wave of corporate scandals already constituted illegal behaviour according to law as it then existed. There is no substitute, she writes, for independent boards who have the information they need to make the right decisions. A culture of governance is equally built on the integrity of management and the board. "The importance of good governance for confidence in Canadian capital markets" by Purdy Crawford In the wave of corporate scandals that followed the burst of the bubble on the stock market, confidence in the business community has been badly shaken across North America. And in the subsequent wave of recriminations, business has been confronted with unprecedented scrutiny from government and regulators. Business leaders have been forced to ask about the nature, purpose and value of their enterprises beyond their bottom lines. Purdy Crawford, former chairman of Imasco and Canada Trust, was an advocate of corporate governance long before it became a flavour of the month. He looks beyond the recommendations of the Bennett- Broadbent Report and the Saucier Report in Canada, as well as the Higgs Report in the UK, and offers some simple rules for corporate governance, particularly for enhancing the independence of corporate chairs and directors. "Une saine gouvernance pour préserver nos avoirs collectives" by L. Jacques Ménard In spite of recent initiatives by the two levels of government, and in some cases by Crown corporations themselves, the quality of governance of organizations reporting to the State is uneven, says L. Jacques Ménard, Chairman of the Board at BMO Nesbitt Burns and former chairman of the board of Hydro-Québec. Considering the economic and social importance of these organizations and the enormous sums managed by some of them, it is imperative that they be closely monitored and that more rigorous governance be required of them. These organizations experience the same financial market fluctuations as do private companies, and they operate in an environment that is increasingly competitive and complex, confronting challenges such that only boards of directors of the highest quality can enable them to meet. He summarizes here the principal rules that would allow this goal to be achieved, whether with respect to the composition of boards of directors or the nomination, compensation, evaluation and accountability of their members. "The new private-sector ombudsmen" by Donald C. Rowat One of the ways of dealing with complaints against corporations, while avoiding lengthy and costly litigation, is through private-sector ombudsmen. This is a growing trend in self-regulation, using the governmental ombudsman model of an independent official who does not charge for his services, and whose rulings are usually binding. Placing the Canadian experience in a global context, Donald Rowat finds that corporate Canada, especially the financial services industry, is increasingly looking to ombudsmen as a means of improving corporate governance. "From the blame game to accountability in health care" by Bruce Harber and Ted Ball In Canada’s $100 billion health care system, the provinces blame Ottawa for a lack of funding, Ottawa blames the provinces for mismanagement, hospitals and regional health boards blame both, while health practitioners and patients blame them all. We need to move beyond the “blame game” to an adult culture of accountability and best practices in delivering high quality health care, suggest Bruce Harber and Ted Ball. Acknowledging that this requires moving to a new mind set, they propose six principles for a new system of accountability and a transformation of corporate governance in health care. They sound a note of urgency, suggesting that the current health care system is “a burning platform” that threatens the quality of life of hard pressed frontline workers. "Multinational governance and worker rights in the global village" by Ed Broadbent A critical aspect of corporate governance is the manner in which domestic and multinational corporations treat their workers, from compensation and job safety to issues such as child labour and the right of employees to organize unions. Former NDP Leader Ed Broadbent, also a former president of the International Centre for Human Rights and Democratic Development, examines globalization and international trade from the perspective of worker rights and concludes there is much to do in the developed world to improve the treatment and the simple human dignity of workers in the developing world. And if exploiting a child, either sexually or for labour, is unacceptable at home, it is no less unacceptable abroad. "Loving the market or supporting business" by Joseph Heath [summary not available] "Socrates does Canadian electrical policy" by John S. McCallum The massive power failure in Ontario and the US Northeast last August 14 left 50 million people without electricity. It also left them with a powerful reminder that everything in the new economy, from battery-charged cell phones to the Internet, runs on an old economy commodity — electricity. The summer blackout was equally a reminder that the North American power grid is interconnected, interdependent and inadequate. This is not only a matter of inadequate infrastructure, writes the former chairman of Manitoba Hydro, but a question of inadequate policy. Fortunately, Canada, already the world’s largest producer of hydroelectricity and with enviable undeveloped capacity, is in a position to do something about it. John McCallum proposes the Socratic method as a way of working through the policy issues on electricity. "Symbolism vs. economics: the loonie vs. the greenback" by Patrick Leblond Canadians go up and down on the value of the loonie in terms of maintaining an independent currency. Americans, for their part, see the greenback, in addition to being the world’s leading reserve and exchange currency, as an important symbolic element of their world hegemony. Neither country is likely to abandon its sovereign currency in favour of a North American monetary union anytime soon, argues IRPP Visiting Scholar Patrick Leblond. While Canadians can identify with North America because it reduces the importance of the United States, Americans cannot. For them, the US is North America. Even if economics argued clearly in favour of a monetary union, it’s unlikely to happen as long as Canadians and Americans remain emotionally, and symbolically, attached to their own currencies. "National missile defence: it is rocket science" by Robert P. Harrison Writing on the US National Missile Defence initiative in our August issue, military analyst Scot Robertson of the Royal Military College suggested Canada had two choices — participation or irrelevance. Since Ottawa was not being asked to contribute to NMD development, only to support it, Ottawa’s decision could determine whether NMD would be under the command of NORAD, in which Canada as the junior partner would at least have a say. That’s the politics of NMD, also known as the Missile Defence Shield. But what about the science of it, asks Robert Harrison, a doctoral candidate in engineering. More precisely, it is rocket science, largely untested and unproven rocket science. The challenge is to hit a “small unpredictable warhead whizzing through the upper atmosphere at 10 times the speed of sound.” Canada would certainly be in the path, if not in the way, of any incoming missile launched by terrorists or a rogue state. Leaving politics aside, Harrison writes, it’s time for some answers on the feasibility of NMD. "À propos du financement des universités et des droits de scolarité au Québec" by Stéphane Turcotte Quebec students enjoy a unique position in Canada and North America when it comes to tuition fees. Frozen at just under $2,000, these fees only account for 10.9 percent of universities’ revenues, compared with 19.7 percent, on average, in the rest of the country. With enrolment still increasing and institutions in need of adequate financing to meet the demand and remain competitive next to their Ontario and US counterparts, it is essential that we re-examine the proportion of the bill we require each of the key players — that is, the State, students and the private sector — to pay. Because the question of financing universities cannot be separated from that of tuition fees, it is urgent that any general university policy take into account the proportion of the real cost of education that students themselves should assume. "Performing the news - not the facts, but the story" by Richard Nielsen The jingoistic television coverage of the Iraq war by American television networks was not only biased, it revealed the inherent flaws of television news, which is presented rather than conveyed to viewers. Television journalists are not reporters so much as performers, in a sense more important than the news they are covering. It isn’t news so much as entertainment. When the shock and awe phase of the war ended, and the statue of Saddam Hussein was pulled down in Baghdad, television news crews largely pulled out, even as the US occupation began. Richard Nielsen, a former executive producer of a CBC flagship current affairs program, offers some provocative views on TV news seen through the prism of a televised war. "Ranking prime ministers of the last 50 years: IRPP's Web visitors speak" by Jeremy A. Leonard [summary not available] Book Excerpt: Understanding Canadian Defence by Desmond Morton Historians can only get a grip on the future if they understand deep continuities, writes Desmond Morton in this excerpt from Understanding Canadian Defence. While generals often prepare for the last war rather than the next one, it is also true that the policy and procurement choices of peacetime determine the military’s readiness and fitness for combat. In this regard, the Department of National Defence has an historically poor record of forecasting, from one decade and one century to the next. Whether Canada likes it or not, its defence policy and preparations increasingly rely on “interoperability” with the United States, which is pursuing the doctrine of RMA — Revolution in Military Affairs, relying on technological advantage and the rapid deployment of highly mobile troops. A highly centralized US command-and-control structure also erodes the autonomy of Canadian field commanders in an allied force. The choices Canada makes for its defence in this generation will determine the shape of the Canadian Armed Forces in the next one. “Get with it, say the futurists,” Morton writes, “Get it right, say the rest of us.” Book Review: Geoffrey Kelley reviews Understanding Canadian Defence by Desmond Morton [summary not available] "Will Martin touch our new economic Constitution?" by William Watson [summary not available] |
