Abstract
Emerging from the agency theory, corporate governance is the practice of ensuring a corporation conducts itself accountably, fairly and openly in all its dealings. The achievement of corporate performance relies on the mechanism efficiency of Corporate Governance both internally and externally. This study is intended to review the Canadian legal and practical landscape related to corporate governance and its external and internal mechanisms. One of the main goals of corporate governance is to ensure a company’s executives are managing the finances effectively and that they always act in the best interest of stakeholders. Canada passed a law in 2003 to strengthen corporate governance. Based on the U.S. Sarbanes-Oxley Act (SOX), this Canadian law aims to create confidence in the Canadian market and protect investors from corporate scandals. Corporate governance mechanisms can be divided into internal and external mechanisms. The internal mechanism is essentially derived from the board of directors and its committees whereas the external mechanism is derived from laws and regulation, capital market, corporate control market, stock holders (ownership structure), and investor activities. The balance and effectiveness of the corporate governance mechanisms can create a better corporate financial performance.
Highlights
Corporate governance is the set of mechanisms, processes and relations by which corporations are controlled and directed (Shailer, 2004)
Canada’s changes were principally in communication of financial information, audit committees, regulations towards auditors and sanctions (Bédard, 2005). This reform primarily changed how governance, that used to be based on principles that called upon a practitioner’s professional judgment, has changed to our current situation consisting of multiple regulations
Corporate governance mechanisms have been constantly evaluated and reformed by policymakers and market participants to develop a framework of best governance practices that can improve firm performance and avoid such crises
Summary
Corporate governance is the set of mechanisms, processes and relations by which corporations are controlled and directed (Shailer, 2004). Describing Canadas corporate governance situation isn’t complete if we ignore the United States early 21stcentury scandals. These scandals directly impact the Canadian way of regulating governance today. Boards of directors and audit committees were the ones to garner most of the criticism after the scandals This is why the Canadian Securities Administrators (CSA) published their first edition of regulations [58-201] Corporate Governance Guidelines and [58-101] Disclosure of Corporate Governance Practices, both in April of 2005. In Canada, even though a set of developed common law principles regarding corporate law exists, it is a fact well-known to practitioners that the securities commissions occupy a major role in establishing Canadian corporate governance practices (Liao, 2014). The final section reviews the main results, observations and contributions of this study
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