Securities • Issues & Advocacy

New rules become focus

Survey respondents also strongly favour a national securities regulator
By DAVE EBNER
Globe and Mail
Wednesday, October 20, 2004 - Page F7

CALGARY -- New regulations and corporate governance issues are having by far the biggest impact on businesses in Canada today, according to a new survey of investor relations professionals.

The Ipsos-Reid poll also found tremendous support for creation of a national securities regulator.

But the key finding, according to the groups the survey was conducted for, is that regulations and governance was cited by 48 per cent of respondents as having the most important impact on their business, far greater than the 11 per cent that chose financial matters, such as earnings growth, or the 8 per cent that pointed to economic concerns.

Under Sarbanes-Oxley legislation in the United States and similar rules in Canada, businesses now have to adhere to higher standards, including filing financial information more quickly. This is "having a huge impact on business operations," said Roxanna Benoit, president and chief executive officer of the Canadian Investor Relations Institute.

Thirty-eight per cent said their workload has increased, due in large part to additional paper work, and 25 per cent said shorter filing deadlines were having an extreme effect on their time. A third of respondents said they completely agreed that the new rules have made the IR role more important.

The survey, to determine the state of IR and corporate governance in Canada, was conducted in July for CIRI, law firm Blake Cassels & Graydon LLP, the Institute of Corporate Directors and the Toronto Stock Exchange.

A 20-minute on-line survey was given to 688 people with investor relations responsibilities. About a third of them were in IR, another third were directors and the rest were responsible for their company's disclosure, such as chief financial officers. Half of the respondents were at companies headquartered in British Columbia or Alberta while most of the rest were from Ontario and Quebec.

Ross McKee, a partner at Blakes in Toronto, pointed to the strong support for a national securities regulator as a particularly interesting result.

A federally appointed committee recommended in December that Canada replace its 13 provincial and territorial regulators with a single agency based in Ottawa. In the annual budget tabled in March, the federal government said it would push for creation of a national securities regulator.

In the IR poll, 60 per cent of respondents said they completely supported such a regulator, while 75 per cent in total were in support. Only seven per cent were opposed.

Support in B.C. and Quebec was roughly the same as the national results, which Mr. McKee said was significant because business leaders in those provinces often speak out against a national regulator.
The provinces have recently failed to agree on a national regulator, instead choosing a heavily watered-down version known as the passport system, in which Ontario won't participate because it is insistent on an actual national regulator.

Among other items discussed in the survey, two-thirds of respondents see changes coming in the composition of boards of directors. Forty-one per cent say it will happen in order to bring on directors who are specialists with particular skills. One-third think change will come as board membership changes to meet new regulatory requirements. About a quarter think boards will be changed to improve a company's reputation.

The direct connection between IR executives and the board is somewhat tenuous, something that people in the IR business say needs to change. Only 9 per cent completely agreed that their company had a formal communication policy between IR and the board.

Regardless of a formal policy, 26 per cent completely agreed that IR access to the board was already significant. Still, 43 per cent of respondents said IR workers only provide the board written reports on an as-required basis. Twenty-three per cent said IR never writes reports for the board.

Of issues that will have the most important impact on the conduct of public companies in the future, 63 per cent said the board's general oversight of IR and its interaction with IR was among the three most important factors.

Other issues mentioned included the issuance of forward-looking statements and financial guidance, as well as shareholder relations, filing deadlines and analyst coverage.

The survey is considered accurate within 3.7 percentage points, 95 per cent of the time.

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