Walied Soliman and Orestes Pasparakis, co-chairs of our Canadian Special Situations Team, recently authored an opinion piece in the National Post's FP Comment section on "good" corporate governance. They argue that the emphasis Canadian companies place on good corporate governance is being misconstrued as an end in itself. The focus of the corporation is, or should be, long-term value creation for the benefit of its shareholders. "Good corporate governance can serve this primary purpose, but it should never supplant it."

Walied and Orestes point to the fact that in this year's Globe and Mail Board Games rankings, "companies with lower corporate governance scores outperformed those with higher scores. The top 20 ranked companies had together an average five-year return of 24.99%, while the middle 20 and bottom 20 had average returns of 53.58% and 92.25% respectively." So companies who are getting "A's" in corporate governance may be doing so at the expense of their shareholders. Walied and Orestes suggest adopting a "pass-fail" scale as the more appropriate way to grade corporate governance.

Walied and Orestes also argue that companies should be cognizant of the fact that the tools of good corporate governance, such as transparency, accountability, and participatory governance, are being used by opportunistic investors who "whose primary aim is to maximize short-term profits, even at the expense of the long-term viability of the company." As such, companies should really consider whether conventional forms of "good corporate governance" are the best way to protect and sustain long term value creation.

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