CHAPTER 09 Governance in a Nascent Industry: Lessons from Canada’s “Green Rush”
interfere with the exercise of a director’s independent judgment. Factors that may compromise independence include personal or business relationships with other directors and executive officers of the issuer. CSA Notice 51-359 also identified best practices with respect to the separation of the roles of CEO and board chair, consistent with National Policy 58-201 – Corporate Governance Guidelines (NP 58-201). NP 58-201 and most industry experts and proxy advisory firms support separating the roles of board chair and CEO, in light of their different responsibilities and objectives. Not separating these roles can jeopardize the proper checks and balances on management. This may in turn lead to less internal scrutiny on company performance, unless the issuer appoints an independent lead director of the board to mitigate the risks associated with having the same individual serve as chair and CEO. Boards lacking in independence risk undermining not only their effectiveness and the performance of their duties but also investor and market confidence. This is the case whether the relationships are between directors or between the directors and management, or whether the directors lack the requisite skills and experiences necessary to oversee the management of the day-to-day affairs of public companies – especially those operating in nascent industries. In that context, such deficiencies in board composition can become particularly acute and attract heightened scrutiny, which may ultimately thwart the success of a proposed corporate transaction that lacks appropriate board oversight or that has been influenced by conflicts of interest.
Boards lacking in independence risk undermining not only their
effectiveness and the performance of their duties but also investor and market confidence. This is the case whether the relationships are between directors or between the directors and management, or whether the directors lack the requisite skills and experiences
CANNABIS ISSUERS NOW TRENDING TOWARD BEST GOVERNANCE PRACTICES
Many cannabis issuers appear to be heeding the guidance of CSA Notice 51-359 and the broader governance community and are working to implement improved governance practices, at least as they pertain to independence. Our June 2020 review of the available public disclosure of 20 prominent Canadian licensed producers of cannabis (LPs) 202 indicated that as at the later of the date of recreational legalization (October 17, 2018) and the date the issuer first became publicly listed, 40% of those LPs had the same individual acting as CEO and board chair. Of those LPs, 65% had a board chair who was not independent for purposes of NP 58-201. As of September 15, 2020 only 20% of those LPs had the same individual who was both CEO and board chair, and only 30% had a non-independent board chair.
necessary to oversee the
management of the day-to-day affairs of public companies.
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Davies | dwpv.com
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