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Corporate Governance Framework

Before a private company becomes a public company, it should look like one.

Leading public companies have a management structure with clear lines of authority, a strong and independent board of directors and a committee structure to comply with corporate governance rules and guidelines set out by corporations' acts and securities exchanges.

Early adoption of the many legal and securities exchange requirements can facilitate the transition to a public company.

Preparing a company for the demands of investors, analysts, regulators and the financial press, can even help to obtain a better price for your Initial Public Offering (IPO).

We help companies face the challenges and take advantage of the opportunities of good corporate governance.

We will help your company understand the many details of corporate governance, analyze shortcomings, and map out the steps you should take to implement the requirements of securities exchanges and adopt the best practices of successful companies.

What must be done…
The corporate governance rules and guidelines of the various securities exchanges differ. You must understand those that apply to your company.

The Toronto Stock Exchange (TSE), for example, requires each company to annually disclose a Statement of Corporate Governance Practices. This includes describing the company's system of corporate governance and how it complies with, or varies from, the 14 TSE guidelines.

The TSE guidelines deal with strategic planning, risk management, communications with the public, the integrity of systems of internal control and management information, board composition, board and director effectiveness, the roles of the board and the CEO, objectives for the CEO, independence of the board, and the composition and role of the audit committee.

…and what should be done
Strong corporate governance is important to build confidence in a company and help improve its appeal to investors, enhancing shareholder value.

A recent investor opinion survey¹ clearly linked good corporate governance with shareholder value:

  • 39 percent of respondents said board practices were as important as financial issues in evaluating potential investments, and 25 percent said they were more important; and
  • A large majority of respondents said they would pay more for a company with good governance practices versus one with poor governance, when the companies were going through difficult times.

Even following guidelines to the letter of the law does not ensure a company has the proper relationship between management and the board to operate and govern effectively.

Increasingly, policies and procedures should also be developed to address business and public demand for ethical accountability.

Sound governance from the start
Our corporate governance framework analysis can be a critical first step in the establishment of sound policies and procedures for your IPO and subsequent life as a public company.

Our analysis will identify weaknesses in your company's actual or planned corporate governance practices and provide recommendations for remedial action.

¹McKinsey & Company, Investor Opinion Survey, June 2000