Canadian Heritage Committee on May 8th, 2007

[Sheila Fraser]

We have not compared it with other public broadcasters per se. We have, though, done quite a bit of work on the governance framework for federal crown corporations and what the appointment process is, and we've made recommendations on that. In 2005 the government issued a new framework for appointments, which would involve, for example, much more of a process by the board in identifying potential candidates for the board. It would also involve them in the selection of the president of the corporation. But at the end of the day, it does remain the prerogative of the government to name the boards of directors and the president, because these are Governor in Council appointees.

But the corporations have done a lot of work. We did our first audit on crown corporation governance in about 2000, and we have noted a significant improvement, in which the crown corporations have developed profiles of the competencies they need for their boards of directors. In the recent 2005-2006 appointments, many of the corporations were using head-hunting firms to bring forward possible candidates, and the boards of directors, I would say, were more involved in that selection process than previously.

I'd just like to make a comment on the president becoming the chair. In the CBC there are two distinct positions—which was also a change that was made. There were certain crown corporations that did have a combined position, and that has been changed, I believe, in just about all; there may be one left. But there was also a recommendation brought forward that those two positions should be kept separate. It's only when the chair has resigned or left that the president becomes the chair, and then it's simply a question of the appointment of a new chair. So it's an interim situation.

[Charlie Angus, NDP, Timmins—James Bay, ON]

You said that “CBC needs to continue to revisit its need for in-house production and determine whether to retain its current capacity based on the future direction of the CBC”.

In Toronto, for example, they're shutting down the design team. Questions have been raised about what is going to happen to the value of the props, the stock, the costumes. This is quite a resource in the hands of the CBC right now. If the design team is completely shut down, have you looked at the value of that and how it will be disposed of?

[Sheila Fraser]

No. That would be a decision of the corporation.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay. You talked about the need to make the “historical and cultural legacy available to the people of Canada”.

In our study we're looking at the numerous pressures on the corporation to fulfill its mandate with limited resources and whether there is adequate funding to fully digitalize the back catalogue and put that on new platforms. Have you looked at that issue?

[Sheila Fraser]

I'll ask Mr. Flageole to respond to that.

[Richard Flageole]

Mr. Chair, we talk about this in the report, under section 122. We were very satisfied with what we saw at the CBC in terms of protecting this. They have made a lot of progress since the last examination we did, in 2000. They launched a major archive project and have restored and catalogued thousands of hours of material. They had a backlog at the time we did the examination and they were looking at how to handle that backlog. There were some funding issues on this, but again, they had to make choices and priorities. That was the situation we saw at the time, but I think it has progressed quite well.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

Thank you for appearing before us.

I'd like to follow up on what Mr. Angus talked about at the beginning, the issue of governance. In section 38 of your report your statement is, “Overall, we found the core elements of a good governance framework in place”. As Mr. Angus and also Mr. Kotto have stated, the testimony before this committee doesn't necessarily reflect that. Quite a number of the stakeholders have had differing opinions. I'll refer to three of them.

First of all, the Friends of Canadian Broadcasting suggested that “...the CBC board of directors should be chosen at arm's length from patronage, drawn from the best and the brightest Canadians...”.

We had the Communications, Energy and Paperworkers Union stating, “At present, appointments are political and reflect poorly on government and the CBC/Radio-Canada. The current governance system, in fact, ensures failure.”

Then we had Mr. Manera and Mr. Neville, who I'm sure you're familiar with, who stated:

We propose that while the chair, vice-chair and all other directors would be appointed by the Governor-in-Council, such appointments should be subject to parliamentary confirmation.

They go on to say:

Furthermore, we recommend that the board of directors should be responsible for the appointment of the president.

These are different governance structures from what we currently have at the CBC.

You had a general comment on the appointment of the president, but I didn't hear you say whether you prefer the president to be appointed by the board and accountable to the board, as opposed to being appointed by the Governor in Council.

[Sheila Fraser]

I would start by saying, Mr. Chair, that we have to recognize that CBC is a crown corporation. The Government of Canada is the shareholder of this corporation. People can say it's political or it's not, but that is quite the reality of the environment in which it works.

So the government is the shareholder of CBC, and it is usually the shareholder who appoints the directors of any corporation. The important issue we were trying to get at when we were doing our audits on the framework of how these appointments are made is whether they meet the needs of the corporations. Is there good identification of the skills and competencies that are needed around the table to oversee these and to be members of boards of very large, very complex crown corporations?

We do not question in any way the prerogative of Governor in Council to name the board members. I think the best practice in the private sector, certainly, is that the board would name the president. There are a couple of crown corporations--two, I think--in which that is the case, in which it is the board that names the president. That practice might make the president, instead of the minister, more accountable to the board.

But I'm not sure that we've noted that having the Governor in Council name the president has been particularly problematic, as long as there has been a good rigorous process to select the best person for that position.

[Ed Fast, Conservative, Abbotsford, BC]

What about the issue of confirmation of board appointees by Parliament?

[Sheila Fraser]

That is really, I think, up to government and Parliament to decide how they want to do that.

My only concern would be that we have seen in many past audits that the process is very long, that there are many boards that have vacancies, that people are sitting on boards without actually a mandate or that their mandate has expired. I would be, frankly, quite worried that adding more steps to it would slow the process down even more and in fact, in many of these crown corporations, really impede their ability to function.

[Ed Fast, Conservative, Abbotsford, BC]

Regarding the role of the ombudsman, did you get a chance, in your special examination, to investigate the role of the ombudsman? Or did you deliberately overlook that?

[Sheila Fraser]

We did look at this in the whole issue of quality of journalistic practices. So we note in the report that there are two ombudsmen who act independently and report to the board annually. We looked at their report. I don't believe we would have gone much further than that. We might perhaps have had an interview with them.

Maybe Ms. Charron could elaborate on that.

[Julie Charron, Principal, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

We did indeed look at the role of the ombudsmen. We have interviewed them both, and the ombudsmen report directly to the president and to the board of directors on an annual basis. They do present their report. We talk about that in sections 117 to 121 of our report.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Scott.

[Andy Scott, Liberal, Fredericton, NB]

Thank you very much.

Welcome. I'm certain that your contribution will be helpful to us.

There's an interesting note having to do with the relationship between related entities within the government--the CRTC, the department, the CBC--in a different way. But it did reveal itself even in the context of the discussions we had earlier about the Canadian Television Fund regarding where responsibilities lie and so on, without casting any blame, I think.

Is it clear? Does section 61 reflect some uncertainty on your part as to how that relationship works, or is it simply that you're recommending they have more interaction with each other?

[Sheila Fraser]

Well, as we note in 61--and I'll ask Mr. Flageole if he can elaborate any more--the various entities within that broader portfolio didn't necessarily have the same view of what the role of the public broadcaster was, its funding, or its strategy.

So we said the corporation really needed a process whereby you could bring those different people together and try to at least reach some agreement, or if there were differences of opinion, then better understand them. I think that's essentially what that was about.

[Andy Scott, Liberal, Fredericton, NB]

There may be a role for the committee. We intersect with each of these entities from time to time. It certainly would explain resource questions if the expectations the members of the committee and the Canadian public have of the CBC reflect one sense of the role of the CBC. If the government feels differently, it's going to be very difficult to reconcile those two views.

On the question of your assessment of their capacity or their ability to measure and/or meet their mandate requirements—I guess that's what the audit is about—do you speak to new media? I'm sure you do, but could you tell us what you say about that in the context of it being an emerging place for the CBC? If they're struggling, probably for resource reasons, to deal with broadcast and the sort of present and past in terms of what their mandate would be, it would seem to me that they are going to be particularly challenged to deal with the future.

[Sheila Fraser]

We do talk about some of the challenges they're facing--new media, new technologies, the capital funding that will be required for that, as well as the need to have strategies for new forms of advertising. And as was mentioned earlier, there's a fragmentation of the market. So there are a number of challenges that are facing the corporation, very significant ones.

I will ask Ms. Charron, who has been very helpful in passing me the reference, to talk specifically about new media.

[Julie Charron]

Thank you.

Actually, yes, CBC is involved in new media. They're looking at how they can integrate new media within the current platforms that they have. We have highlighted that in paragraph 27 of the report as a challenge they have to deal with and incorporate within their activities.

[Andy Scott, Liberal, Fredericton, NB]

Finally, on the question of governance, I heard you say that you wouldn't want many more processes involved in appointments, because very often people are waiting and so on. We've had recommendations from the industry and from third parties that perhaps we should have some kind of vetting system that would allow experts to identify potential board members.

I don't think this is intended to reflect on the quality of the people who have been on the board in the past, but it offers a level of quality control or a certain guarantee that there's an external, broad-based interest of experts who would recommend appointment by directors.

Would you see that as, at least potentially, an improvement--to assure that? I'm not saying that there's not quality there now, but just to make assurances of that. And if that were to happen, would the government not be more willing, perhaps, to let the board pick the president? If you have that guarantee, then I think you're less likely to want to make sure you pick the president to make sure that you have the guarantee there.

[Sheila Fraser]

We did an audit of the governance of crown corporations in 2005. We looked at what were best practices at the time in the private sector as well, and in other governments around the world. The real issue comes back to making sure that you have the competencies and the skills around the table to be able to fulfill the role of board of directors for what are very large, very complex organizations.

The process put in place at the time appeared to us to be--on paper, certainly--a good one. The boards would develop profiles. Those would be submitted. There was also discussion about setting up--I believe it has been established, but it may not be actually be functioning--a commission or an independent group that could receive applications from people, that would use search firms to go out and get people. The boards themselves were using search firms to go out and identify possible candidates, then would recommend a certain number of names, two or three names, to the government. Then the government could pick.

As long as there's rigour and you're really looking for people with the right competencies, that appears to us to be a reasonable process. I think there are other ways of doing it as well, but it's important that the board be involved in the selection. They know what they need around the table.

To have the board involved in the selection of the president is, I think, absolutely essential. We have recommended...and we saw several examples of where the board was very actively involved in the search process. Board members, such as the chair, would participate in the interviews and be a very active part of the selection.

I think that system can work well. I'm not saying that the other system, where the board picks, doesn't work; I guess I would just be a little cautious. We have some examples of where the board is largely made up of people from the private sector who may not be fully cognizant of some of the issues of a public sector corporation. If there isn't that kind of accountability back to a minister or to government, the government has to find another way to make sure that those board members and the president are fully cognizant of the issues in working in a public sector environment. We've seen issues as detailed as perks being given to presidents that were inappropriate in a public sector context but that in a private sector context would be absolutely appropriate.

So there's that kind of difference, and that sensitivity to public sector issues. There has to be a way to bring that to the board. Currently it's really through the minister that this happens.

[Andy Scott, Liberal, Fredericton, NB]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you for that.

Madame Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Mr. Chair.

Good morning and welcome, Ms. Fraser, Mr. Flageole and Ms. Charron.

Ms. Fraser, on page 23 of your report, there is a section entitled, “CBC needs to enhance its strategic planning for horizontal issues”. I found this chapter very interesting, because I think it is the key to proper accountability and transparent management. We do not have much time, but I would like to ask you to clearly explain what strategic planning is and what parts of this planning we, as legislators, should focus on.