Ottawa wants accountability measures
Manley mandate: Late summer deadline
Wednesday, July 17, 2002
OTTAWA -The private sector must put in place clear measures to improve investor confidence and show corporate leadership in coming weeks or the government will impose new rules, the federal government said yesterday.
The warning comes in the wake of U.S. corporate accounting scandals that include Enron Corp. and WorldCom Inc., which have weakened investors' faith in the system, John Manley, the Minister of Finance, said after a Cabinet meeting yesterday.
"We're looking at both the Enron and WorldCom situations to see whether there are any lessons to be learned for Canadian regulators or legislators, and I hope to be able to report on that later this summer."
Finance officials have been meeting with provincial securities regulators and with such self-regulating bodies as the Investment Dealers Association and the Canadian Institute of Chartered Accountants to give them the message the government is prepared to act to restore confidence if they don't do the job themselves.
The accountants' group has scheduled a news conference for today to announce what it says will be more rigorous inspection and quality control requirements for auditors of public companies.
The move is intended to "strengthen investor confidence in capital markets and the credibility of financial statements," the CICA said yesterday.
The Finance Department will evaluate the proposal, and others such as the Canadian Council of Chief Executives' code of ethics for executives, which is being formulated. Then it will decide whether they go far enough, said Jean-Michel Catta, a spokesman for the department.
"We'll see what the private sector comes up with," said Mr. Catta. "Based on that we'll decide if actions are necessary and if they are, what actions might be required."
"Actions are required [from business]," he warned. "If the private sector doesn't act, then the government and regulators will."
Just what the federal government might do is unclear, since securities regulation is a provincial responsibility and so is governance of many professional groups.
"We don't want to prejudge what kind of action the government might be prepared to take," said Mr. Catta. But Ottawa is determined to reinforce public confidence, and it expects the private sector to take the lead.
"We're looking at the various action plans the private sector might propose through that particular point of view, which is how these various actions could impact or help restore investor confidence," he said.
The government is also looking for leadership from chief executives in the form of public statements, said Mr. Catta.
"Corporate leaders need to exhibit the kinds of ethics and values that will inspire confidence in capital markets. We're talking about a kind of behaviour that has to come from the top down," he said.
The private-sector timeline for making public its proposals is quite tight, given Mr. Manley's public commitment to evaluate and comment on them by the end of summer.
Mr. Manley said it is impossible to write laws to protect against those who do not respect them, reiterating the message that leadership must come from the corporate sector itself.
"Some of the problems that have arisen in recent U.S. incidents are not so much the product of a lack of law but of people breaking the law. There's no law that ensures you have CEOs that are honourable and trustworthy and do the right thing."
He said the government's interest in the issue is clear: "Confidence in the markets is an important element of maintaining economic growth."
Mr. Manley had talked after his appointment as finance minister of reviving the idea of a national securities regulator, which has been on the back burner for years. It would replace the patchwork of provincial regulators that oversee the investment business. Mr. Manley does have control over financial institutions, all of which own brokerages, both through the Bank Act and because the Superintendent of Financial Institutions reports to him.