Thank you, Mr. Chair.
I appreciate the opportunity to come and join you today. This is a very complex piece of legislation, but it's one that's very important as well.
The members of the Canadian Council of Chief Executives, for those who aren't familiar, are basically CEOs of large companies operating in Canada. As such, I think our members understand very well that good governance matters in the public sector and in the private sector alike. Good corporate governance provides a competitive advantage in attracting investors and attracting talented people and thereby drives stronger and more sustainable growth in shareholder value.
Similarly, good public governance provides a competitive advantage to the country, in attracting people in investment within a global marketplace, and also in helping governments deliver better value to citizens and taxpayers. This is why our organization has been involved, deeply engaged, on governance issues for more than three decades. We were active participants in the great national debates involving the Constitution and parliamentary reform. I think we were the only business organization to appear before a committee of this House to support the reform of the financing of political parties, when that bill was in front of the House, and we've certainly been champions of stronger rules and voluntary efforts in improving the standards and practices of corporate governance.
Let me begin, therefore, by congratulating the government for moving quickly and decisively to address what I would describe as a crisis of public confidence. The proposed act before the committee includes a wide range of important measures. I would commend, in particular, the strengthening of the powers of the Auditor General and the role of the Ethics Commissioner, as well as the creation of a parliamentary budget officer, and an independent body to review the public appointments process.
But I want to take you back to 2002, when the response to the corporate governance crisis in the United States was the Sarbanes-Oxley Act. It did reassure investors by providing tough new rules and penalties, but it was highly complex and hastily drafted and it created months of headaches for regulators and a continuing very high cost of compliance for companies.
Canada took a more thoughtful approach and came up with a system that remains fully compatible with the U.S. rules for companies like our members, which are often cross-listed, but at the same time it provided a much more flexible and responsive environment that was better suited to the needs of the smaller cap companies that make up the bulk of our financial markets.
Today, I'd like to suggest we're seeing some important parallels between issues of corporate and public governance. In both cases there are real failures and fundamental issues of lost trust that have to be addressed. But as with Sarbanes-Oxley, we would ask whether the political desire to move quickly may lead to an excess of new rules that may, in time, prove counter-productive. I'd remind you that in the corporate sector, governance rules are aimed at protecting investors. At the same time, they do impose new costs, costs that come right off the bottom line. What's more, if executives spend too much time talking with the lawyers and the accountants instead of growing a business, the end result is not to serve the interests of shareholders.
Now, no one questions the need to repair the flaws in public governance exposed by the sponsorship scandal, but as in the corporate sector, new rules, new internal controls, all will add significant new fixed costs, even as they reduce opportunities for fraud.
I'm also worried about whether these new measures, as a whole, could affect the culture of government. Could they lead to an obsession with obeying the rules and avoiding mistakes that, in turn, could become a serious break on innovation and efficiency? There is more to delivering the best possible value to citizens than simply preventing fraud.
Let me add one final concern. Public servants, however well qualified and well intentioned, do not have a monopoly on good ideas. Effective government involves a healthy exchange of ideas with people outside government. My own organization's experience is that this exchange is often initiated by government officials themselves, who want input on the state of an industry or the likely impact of a policy change that's under consideration. The new act, however, is going to impose much more intrusive record-keeping and reporting, both by anyone who talks to senior officials in government and de facto by officials themselves in order to provide a check.
I want to make it clear that I'm not arguing against the idea of making sure that the process of lobbying government for gain is transparent and above board. We really only have one major concern on that front, and that is the question of whether the level and speed of reporting that will be required could lead to the unfair release of commercially sensitive information.
The new rules, however, also would appear to affect the activities of a vast array of organizations who engage government for the purpose of influencing public policy, and doing it in ways that they believe will be good for the country as a whole. The vast majority of these organizations already maintain a high level of transparency with respect to their public advocacy, and I'm worried that the new compliance burden may prove to be especially daunting--as my colleague here has suggested--for smaller non-governmental organizations. If the compliance procedures are burdensome enough to discourage dialogue, the result could be a government that is more isolated from citizens and less likely to draw on the country's collective wisdom to drive innovative public policy solutions.
This is an important bill. It addresses an urgent need to restore public trust, and Canada's business leaders fully support its goals. At the same time, our own experience with the crisis of corporate governance suggests it is very important to think through all of the implications of complex legislation like this, as you are doing today.
I'll now turn it over to the committee for questions.