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Directors of Crown Corporations: An Introductory Guide to Their Roles and Responsibilities

Crown Corporations and Boards of Directors

Crown corporations play important roles in Canada's development and contribute significantly to the building and maintenance of our national identity. Throughout various periods in our history, they have acted as engines of industrial development, provided key goods and services, and assisted and strengthened the cultural fabric of the country. The varied nature of the current Crown corporation portfolio illustrates their continuing contribution to these objectives.1

The federal government has chosen the Crown corporation form as a means to achieve public policy objectives where there is the need for both a clear separation of the Crown from day-to-day management activities and the use of sound commercial business practices. The pursuit of public policy objectives in a manner normally associated with the efficiency of private sector firms often creates a major challenge for board members of Crown corporations. The balancing of difficult and competing concerns often requires trade-offs of these objectives.

What is a Crown corporation?

Crown corporations are corporations wholly owned by the Crown and most are agents of the Crown.2 Each Crown corporation's enabling legislation, whether by a special Act of Parliament or by articles of incorporation under the Canada Business Corporations Act, sets out in broad terms the Crown corporation's mandate, powers and objectives. Part X of the Financial Administration Act (FAA) outlines the control and accountability framework for Crown corporations. In combination, this framework and the enabling legislation form the government's basic management structure for each Crown corporation.

Each Crown corporation is ultimately accountable, through a minister normally referred to as the responsible minister, to Parliament for the conduct of its affairs.3 The minister, within the collective responsibility of Cabinet, represents the Crown. It is through the responsible minister that the Crown corporation reports to the government and to Parliament on its plans and its performance.

As an integral part of the federal government structure, Crown corporations must be sensitive to the government's broad policy objectives and priorities. These may include such policies as official languages, employment equity and, particularly in times of economic downturn, the priority of fiscal restraint.

How are Crown corporations created?

The majority of parent Crown corporations are created by Parliament through special Acts;4 others have been incorporated under company legislation such as the Canada Business Corporations Act (CBCA).5 The rights, privileges and powers of a Crown corporation may be prescribed or limited by its enabling legislation or by provisions of the FAA.

In order to better understand the context for the creation of a particular Crown corporation, its public policy mandate and the framework within which it operates, board members are advised to read the legislation that created it, any legislative Acts applicable to the corporation,6 the corporation's general by-laws and Part X of the Financial Administration Act.

The different types of Crown corporations

Crown corporations operate in many different sectors of the economy, vary greatly in terms of relative size, often serve different public policy purposes, and place different demands on the Crown for financial support.

The FAA categorizes Crown corporations on the basis of their dependency on appropriations from Parliament for their funding. Corporations operating in commercial and frequently competitive environments are expected to earn profits and provide a return on the public's investment. These corporations are normally not dependent on government appropriations and are listed in Schedule III, Part II of the FAA. Examples include the Canadian National Railway Company and the Canada Post Corporation. Other corporations that depend in part on appropriations for operating purposes, or for equity for lending purposes, are listed in Schedule III, Part I of the FAA. Examples include the Canada Mortgage and Housing Corporation, the National Gallery of Canada, the St. Lawrence Seaway Authority and the Farm Credit Corporation.

In addition, certain other Crown corporations are not scheduled under the Financial Administration Act and are not subject to the control and accountability provisions outlined in Divisions I to IV of Part X. These corporations generally have a public policy mandate of a cultural nature and depend on appropriations from the Crown. These include the Canadian Broadcasting Corporation and the National Arts Centre Corporation. The exempt corporations follow the control and accountability regime outlined in their specific legislation and many of them have chosen to adopt a number of the key accountability provisions of Part X of the FAA.

The role of boards of directors

While many similarities exist among the roles and responsibilities of the boards of directors of all corporations, membership on the board of a federal Crown corporation presents unique challenges. These challenges result from a need for heightened sensitivity to the corporation's public policy objectives and its connection to the Crown.

Effective boards of directors are critical to the good management of corporations. In the public sector, a board of directors helps to separate ownership from day-to-day management by providing a key link between the Crown and the executive officers. A strong board of directors is essential if the corporation is to fulfil the objectives established for it.

Through the power conferred on them, boards of directors oversee the management of the businesses, activities and other affairs of the corporation.7 Directors exercise their powers and fulfil their obligations by becoming familiar with the corporation and its management, by establishing the corporation's strategic direction, by monitoring performance, and by reporting to the Crown. By entrusting operational decisions to the executive officers of the corporation, directors normally do not involve themselves in day-to-day management.

Boards of directors of Crown corporations must be sensitive to the mandate of the corporation as expressed in the authorities granted to it by Parliament and to the fact that the corporation is part of the federal government. In short, boards of directors of Crown corporations oversee the corporation on the Crown's behalf by holding management accountable for the company's performance, its long-term viability and the achievement of its objectives.

1 For an overview of the government's portfolio of Crown corporations, refer to the President of the Treasury Board's Annual Report to Parliament, Crown Corporations and Other Corporate Interests of Canada. [ return ]

2 For implications of Crown agency status, see sections 96 to 101 of the Financial Administration Act (FAA) and the Crown Corporation Borrowing Regulations. [ return ]

3 FAA, Part X, section 88 defines this minister as the "appropriate Minister". [ return ]

4 The FAA defines a parent Crown corporation as a corporation that is wholly owned directly by the Crown, but does not include a departmental corporation. [ return ]

5 In 1992, of the 54 parent Crown corporations, 44 corporations were created by special Acts of Parliament. [ return ]

6 For example, the Canada Mortgage and Housing Corporation exercises and performs all rights, powers, duties, liabilities and functions of the Minister responsible under the National Housing Act (with the exception of the authority of the Minister under the Act to make payments out of the Consolidated Revenue Fund). [ return ]

7 FAA, Part X, section 109 defines the responsibilities of the board of directors. [ return ]

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