Background

6.1	Our Office has performed five governance reviews over the past 
number of years. These have included:

•	A general review of various Province of New Brunswick Crown 
agencies (1996)

•	The Atlantic Lottery Corporation Inc. (1997)

•	The eight regional hospital corporations (1998)

•	The New Brunswick Liquor Corporation (1999)

•	The Department of Finance - Pension Funds (2000)

6.2	At 31 March 2002 major New Brunswick Crown agencies held 
over $4.7 billion of government assets. Related liabilities were over 
$4.3 billion. Some $904.2 million in provincial funding was provided to 
those Crown agencies during the year ended 31 March 2002. During 
that year major Crown agencies generated an additional $1.9 billion in 
external revenues and their total expenditures exceeded $2.7 billion. The 
financial significance of New Brunswick Crown agencies, combined 
with many recent changes in best practices associated with good 
governance, and the lack of any overall support or guidance being 
provided to New Brunswick Crown agencies or their boards, led us to 
become heavily involved in the area. 

What is effective governance?

6.3	Governance can be defined as the process and structure used to 
direct the business and affairs of a corporation with the objective of 
achieving the corporate mission. The process and structure define the 
division of power between the board and management. They also 
establish mechanisms for achieving accountability between management, 
the board of directors, and corporate shareholders. Putting it simply, 
governors (i.e. boards of directors) are to look out for the interests of 
the corporate shareholder (i.e. the Province of New Brunswick).

6.4	CCAF/FCVI Inc., a research organization focussing on public 
sector governance and accountability, has developed a list of the 
characteristics of effective boards. If a board truly exemplifies these 
characteristics, it will be providing effective governance and 
accountability. According to CCAF/FCVI, effective boards:

•	are comprised of people with the necessary knowledge, ability and 
commitment to fulfil their responsibilities;

•	understand their purposes and whose interests they represent;

•	understand the objectives and strategies of the organization they 
govern;

•	understand what constitutes reasonable information for good 
governance and obtain it;

•	once informed, are prepared to act to ensure that the organization’s 
objectives are met and that performance is satisfactory; and

•	fulfil their accountability obligations to those whose interests they 
represent by reporting on their organization’s performance.

6.5	We feel that effective Crown agency boards, as defined above, 
are best able to look out for the interests of the Province of New 
Brunswick and its citizens and act as major contributors to the success of 
their corporation. 

Why is it important that 
governance be effective?

6.6	Ultimately governance is about performance. Boards of directors 
are set up in legislation to improve, in all respects, the performance of 
the Crown agencies they govern. Consequently, their activities as 
directors must be geared towards promoting appropriate corporate 
activities (i.e. those that move the Crown agency towards achieving its 
mission). If they are not achieving this goal, there is no reason for a 
board to exist. 

6.7	The Conference Board of Canada made the following statement 
in their September 1997 Members’ Briefing.

There is a widely held perception that good corporate 
governance leads to good corporate results. … This subject 
has now taken on a much higher profile as shareholders … and 
directors alike are putting the governance practices of our 
corporations under close scrutiny.

6.8	The Canada Deposit Insurance Corporation included the 
following comments in the preamble to its own governance guidelines 
for financial institutions.

… The care, diligence, skill and prudence exhibited by … 
directors has a critical influence on the institution’s viability, 
safety and soundness, its ability to execute its business strategy 
and achieve its business objectives and its ability to engender 
confidence …

Good governance is not only essential to the operating 
effectiveness of any organization – it is good business. Studies 
show not only that … institutions with good governance 
processes operate more effectively and respond more quickly 
to changes in the marketplace, but also that stakeholders 
increasingly recognize the relationship between governance 
and performance …

6.9	The following comments came from a study of seventy-nine 
major U.S. and Canadian pension funds, and a Dutch pension fund, as 
previously quoted in our 2000 Report chapter on pension plan 
governance.

We were able to find a statistically significant link between 
organizational performance and organizational design. 
Interestingly, and more specifically, we found the most 
important driver of organization performance … to be the 
quality of the board…

6.10	Conversely, there can be significant negative impacts when a 
Crown agency board is not governing effectively. These include: 

•	A lack of board strategic leadership in ensuring that the mandate for 
which the organization was created is being carried out.

•	The losses and related political fallout that may occur because 
significant risks are not being managed appropriately due to lack of 
board scrutiny in this area.

•	The loss of opportunity to improve services and/or financial 
performance because the board is not involved in an ongoing 
discussion of corporate strategy and ways to advance the corporate 
mission, and is therefore not encouraging management to constantly 
look for ways to improve performance.

•	The failure of the board to provide a full accountability link between 
the Crown agency and the responsible Minister. 

•	The failure of the board to adequately monitor the performance of 
senior management and hold it to account for that performance.

•	A lack of value for money from the direct corporate administrative 
costs associated with operating and supporting a board of directors if 
the board is not fulfilling its roles and responsibilities. 

6.11	In our opinion, the Legislative Assembly, which is a forum 
composed of representatives of the citizens of New Brunswick, needs to 
ensure that New Brunswick Crown agencies are governed effectively.

Objective and scope 

6.12	Our objective for this project was:

To summarize the results of our governance reviews over the 
past five years, review practices in other jurisdictions, and 
make major overall recommendations on steps the Province 
can take to improve Crown agency governance.

6.13	In completing this work, we reviewed findings and 
documentation from our previous governance reviews and followed up 
where necessary. We also completed extensive research on best 
practices in governance in the private and public sectors both inside and 
outside New Brunswick. Additionally, we interviewed representatives of 
selected New Brunswick Crown agencies and the New Brunswick 
Executive Council Office. Finally, we reviewed various Crown agency 
documents and did some limited testing of recent appointments to New 
Brunswick Crown agency boards.

6.14	Recommendations in this chapter are directed to two distinct 
groups: central government (Executive Council, departments, and/or 
other organizations as applicable); and Crown agency boards of 
directors. The recommendations directed towards Crown agency boards 
of directors are primarily applicable to boards that have been assigned at 
least some responsibility for decision-making and therefore have some 
commensurate accountability for results achieved (i.e. Governing or 
Administrative Management boards as described in paragraph 10.12 of 
our 1996 Report). Where a board’s activities are entirely advisory in 
nature, recommended practices may not be of value.

Summary of 
recommendations

Recommendations for 
central government 
(Executive Council, 
departments, and/or other 
organizations as applicable)

Appointments

6.15	Processes should be established to ensure that the expiry 
dates of board appointments are staggered to ensure continuity on 
Crown agency boards. 

6.16	The level of compensation currently provided to board 
members should be reviewed to ensure it is sufficient to attract the 
best candidates to directorial positions and to adequately reward 
board members for their efforts.

6.17	Selection of a Crown agency board member should be 
primarily based on the demonstrated ability of a candidate to 
contribute to improved outcomes for the organization, and not their 
membership in a particular stakeholder or demographic group.

Corporate mandates and 
performance expectations

6.18	Responsible departments should develop memoranda of 
understanding with Crown agencies to ensure that there are common 
understandings of the mandate and performance expectations 
government has set for the Crown agencies.

6.19	As a minimum, government (represented by Board of 
Management, the Policy and Priorities Committee, or a similar 
body) should review all Crown agency strategic and business plans 
on a regular basis to ensure that Crown agency interpretations of 
legislation, mandate and government expectations are consistent 
with its own understanding.

6.20	Responsible departments should monitor Crown agency 
compliance with their own enabling legislation and other pertinent 
acts to reduce the risk of inappropriate actions being taken.

6.21	All Crown agency boards should be given responsibility for 
recruiting and hiring the CEOs for their agencies.

Guidance and support for 
Crown agencies

6.22	The Executive Council Office’s  coordinating role should be 
expanded to include providing guidance and support to Crown 
agencies in some or all of the following areas:

•	setting and periodically updating governance standards for use 
by all New Brunswick Crown agencies;

•	monitoring compliance with those governance standards;

•	providing guidance to Crown agencies in the application of those 
governance standards;

•	providing governance training opportunities for Crown agency 
directors;

•	communicating the shareholder’s perspective, government 
priorities, and emerging issues to Crown agencies;

•	providing independent advice to Cabinet, Ministers, Boards and/
or CEOs on Crown agency mandates, direction, plans, and 
performance, as requested; and

•	identifying and coordinating major Crown agency policy issues 
and projects as required.

Accountability reporting

6.23	The Executive Council Office should be monitoring Crown 
agency annual reports to ensure that the government annual report 
policy is being complied with.

6.24	The government annual report policy should be amended to 
include the following two additional requirements.

•	That Crown agency annual reports include, where applicable, 
reference to the Crown agency’s involvement in supporting the 
success of current government priorities and initiatives.

•	That Crown agency annual reports include a statement of 
governance practices similar to that shown in the 2002 NB Power 
Corporation annual report.

Recommendations for 
Crown agency boards of 
directors
  
Appointments

6.25	Crown agency boards of directors should be providing the 
responsible departments with selection criteria against which to 
evaluate candidates for board appointments.

Best practices for boards of 
directors

6.26	All Crown agency boards should ensure that ethical 
standards have been established for their agency and that there is a 
system in place to monitor compliance with those standards.

6.27	All Crown agency boards should seriously consider 
establishing an audit committee to provide additional focus to the 
board’s review of the integrity of the agency’s internal control and 
management information systems.

6.28	All Crown agency boards should prepare a governance 
statement for their agency that describes:

•	the governance and accountability structure of the Crown 
agency;

•	governance processes and standards that are being followed, 
including the requirements made of individual board members; 
and

•	the roles and responsibilities of government, the board of 
directors, and management.

6.29	The governance statement should be reviewed regularly and 
updated as necessary.

6.30	All Crown agency boards should negotiate and document a 
memorandum of understanding between their Crown agency and the 
responsible Minister as to how important aspects of governance are 
to be handled, the relative responsibilities of key governance players, 
etc.

6.31	All Crown agency boards should conduct regular
self-evaluations of their board’s effectiveness. They should also 
consider conducting regular reviews of the performance of 
individual board members.

6.32	Periodically, all New Brunswick Crown agency boards of 
directors should look critically at reporting they receive regularly 
from management. Specifically, each board should ensure:

•	that reports presented are useful and sufficient to allow the 
effective discharge of all of the board’s roles and responsibilities 
as Crown agency governors (For example, information used by 
the board to monitor corporate performance should address both 
financial and service goals and be clearly linked to approved 
plans.); 

•	that information that is not used by the board is deleted from 
management reporting; and

•	that reports are organized for ease of reference by board 
members in their deliberations.

6.33	All Crown agency boards should review the performance of 
their CEO on a regular basis.

Keys to effective 
governance

6.34	From the start, the goal of our work on Crown agency 
governance has been to try to improve the effectiveness of governance 
provided by the boards of New Brunswick Crown agencies. Based on 
five years of work in the area, we believe that there are a few key 
priorities that must be considered to ensure that governance is effective. 
They are:

•	Ensure that members appointed to the board have the necessary 
skills to contribute to effective governance.

•	Ensure that boards are renewed regularly while at the same time 
maintaining sufficient continuity of membership to allow a consistent 
knowledge base to be maintained.

•	Ensure that the mandate of each Crown agency is clearly 
documented and agreed upon by both central government and the 
Crown agency.

•	Ensure that the relative roles and responsibilities of Executive 
Council, Board of Management, responsible departments, Crown 
agency boards, and Crown agency management are clearly 
documented and agreed upon by appropriate parties.

•	Ensure that board members get sufficient, appropriate training and 
guidance to understand and be able to apply current best practices of 
governance.

•	Ensure that board members get sufficient information about the 
operation of their Crown agency to allow them to fulfil their roles 
and responsibilities.

•	Ensure that board members understand to whom they are 
accountable and how that accountability obligation is to be 
discharged.

6.35	Central government (i.e. responsible departments, Executive 
Council and Board of Management), Crown agency boards, and 
corporate management all have important roles to play in the 
achievement of these seven priorities. We feel that if these key players 
keep the seven listed priorities in mind on an ongoing basis, it will result 
in Crown agencies that have well-qualified boards, armed with the right 
knowledge to be effective. It is then up to the boards to make the 
necessary efforts to govern effectively. Once this has been 
accomplished, central government’s primary role becomes one of 
monitoring Crown agency boards to ensure that they are adequately 
discharging their accountability obligations.

Board appointments 

6.36	“They say the best companies have board members who ask the 
tough questions. In Crown corporations this is especially important 
because balancing public policy and commercial objectives is the 
toughest part of the job.” (Annette Verschuren, former member of the 
Board of Directors of Cape Breton Development Corporation and 
President, Home Depot Canada.)

6.37	It is well recognized in current governance thinking that to have 
effective governance, you must have the right people in place, people 
who are willing and able to ask the right “tough questions”. This means 
that you must have a group of directors in place that can provide strong 
strategic leadership. However, the way in which appointments are made 
in both the public and private sectors is often not effective in appointing 
the best people to boards. John Carver, author of the key governance 
reference book “Boards That Make a Difference” said:

In twenty years’ experience working closely with boards, my 
impression is that we are pretty sloppy about filling board 
seats, often putting people on boards for all the wrong 
reasons. Let’s face it. The reasons board members are 
selected often come down to who has time, who fits some preset 
demographic description, or - in the case of politically 
appointed boards – who is owed a favor. Sometimes the only 
requirement is that a potential board member care about the 
organizational mission. Often the persons chosen are very 
accomplished in their fields but skilled in ways that may have 
little to do with proper board behavior. Most boards would 
fire their CEOs for filling staff positions as haphazardly as … 
recruits for board positions….

6.38	He goes on to say,

It has become politically correct to maintain that everyone is 
equally capable of discharging board responsibilities, but that 
is simply not true.

6.39	The Conference Board of Canada, a leader in promoting 
effective corporate governance, has stated:

There ought to be a clear understanding of the corporation’s 
and board’s needs, then a proactive search for the right fit. 
Recruiters should be testing for independence of mind, 
common sense, collegial working, diversity and depth of 
experience.

What happens in New 
Brunswick

6.40	The vast majority of directorial appointments to New Brunswick 
Crown agency boards are made by the Lieutenant-Governor in Council 
as specified in the legislation of individual Crown agencies. In practice, 
such appointments generally follow the following process. 

1.  The department responsible for a specific Crown agency identifies and 
approaches a candidate to fill a vacant position. The department may 
or may not consult with the current board of the Crown agency, 
stakeholder groups, or other interested parties when identifying and 
evaluating that candidate. 

2.  The department then prepares a Memorandum to the Executive 
Council as specified in the Procedures Manual for Executive Council 
Documents. It requires that departments include:

•	   The address and qualifications of the individual(s).

•	   The circumstances under which the position(s) became vacant... 
(e.g., resignation, death, dismissal, expiration of term.)

•	   The names, addresses and dates of expiration of the terms of all 
other members of the board or commission.

•	   A statement that the person(s) proposed for appointment meets all 
statutory requirements for the position.

3.   Executive Council uses the information provided and other relevant 
input from members of Cabinet to determine whether the person being 
recommended is suitable for the position to be filled. 

4.   Once the appointment has been approved by Executive Council, as 
signified by the issuance of an Order in Council, the department is 
responsible for notifying the candidate of their appointment and 
providing them with any other necessary information.

6.41	There are no specific documented requirements provided by 
Executive Council to departments covering how to identify or evaluate 
potential directors, nor is there any requirement to identify the needs of 
the board in question. However, a representative of Executive Council 
indicated that it is understood by all departments that appointments 
should consider quality of the people, gender, linguistic balance, and 
geographic balance.

6.42	Each piece of enabling legislation provides a slightly different 
framework for recruiting new directors. It may specify the groups from 
which candidates are to be chosen, the terms for which individuals may 
be appointed, etc. 

Best practices in appointing 
board members

6.43	A report prepared in 1998 by the Public Policy Forum entitled 
Protecting the Shareholder – A Review of the Governance Structure of 
Canadian Crown Corporations noted:

One place to improve Crown corporation governance is the 
process through which directors are appointed to serve on 
Crown boards. The issue is not whether the government should 
exercise the right to appoint individuals to these boards. …. 
Nor is the real issue the political affiliation of individuals 
appointed …. Competence and relevant experience must be 
the over-riding criteria for appointments to Crown 
corporation boards. … Crown boards should communicate to 
their responsible ministers ... the areas of expertise lacking 
on the existing board.

6.44	Based upon our governance work, we believe there should be 
three distinct steps in selecting candidates for board membership: 

•	identify the skills required of new appointees (i.e. prepare selection 
criteria);

•	identify the available individual(s) who best meet the requirements 
laid out in the selection criteria; and

•	recommend their appointment to Executive Council. 

6.45	The first step in selecting board members is to define and 
document exactly what general and specific skills are needed in new 
board members. Not surprisingly, individual Crown agency boards are 
in the best position to do this for their own board. 

6.46	The second step is the identification of candidates who can 
provide the needed skills. Stakeholders, Crown boards, senior Crown 
agency management, and central government can all potentially take part 
in the identification of candidates. However, it is critically important 
that there be a process in which candidates are evaluated against 
selection criteria before they are recommended for appointment. 

6.47	Having Crown agency boards prepare written selection criteria 
and then evaluating candidates against those criteria seems a logical way 
to select new board members. A Crown agency would not hire an 
employee without having some idea what skills they are looking to add. 
But perhaps more importantly, responsible departments should not 
recommend the appointment of a particular person to a board without 
knowing in advance that the person will provide the skill sets needed to 
be an effective member of the board in question. However, based on our 
previous work, our opinion is that Crown agency boards in New 
Brunswick have not been proactive in providing such selection criteria to 
decision-makers, nor have they been asked to do so by decision-makers.

6.48	We did note one case where a Crown agency board is providing 
useful information to aid in the selection of new board members. Most 
new appointees to the Workplace Health, Safety and Compensation 
Commission (WHSCC) board are recommended by stakeholder groups 
and automatically approved by central government. To aid stakeholder 
groups in selecting good candidates, the directors of WHSCC have 
developed a document covering the duties and responsibilities of board 
members. The board does not provide selection criteria to the 
Department of Training and Employment Development at present but 
may do so in the future.

Remuneration

6.49	In general, serving on the board of directors of a New 
Brunswick Crown agency is seen as a public service. Remuneration is 
nominal and not an inducement to accept a board appointment, while 
duties are not dissimilar to those in the private sector, where directors 
are typically paid. We have been told by various representatives of 
Crown agencies that the lack of remuneration paid to directors does 
make it somewhat more difficult to attract people. It must be recognized 
that there is a trade-off between remuneration and the ability to attract 
the best available people to serve on Crown agency boards.

Representational appointments

6.50	As previously noted, one of the principles of selecting 
appointees for Crown agency boards in New Brunswick is that there be 
adequate regional, linguistic and gender representation on boards. This 
principle seems to be common in many jurisdictions we looked at during 
our work. However, we would caution that there is a trade-off in 
adopting this principle. Consider the following statement from John 
Carver.

… While gender, color, and ethnicity have a role to play in 
selection of members, choosing the “best” people has less to 
do with our ways of dividing up the human race than with the 
skills, personality and life experience that qualify a person for 
board leadership.

6.51	We feel that the primary reason for appointing an individual to 
the board of a Crown agency must be because it is believed that 
individual will contribute to improved outcomes for the organization. 
New Brunswick citizens should expect no less. Inclusion for the sake of 
inclusion should not be a priority. Limiting particular appointments to 
specific groups of New Brunswick residents means limiting the field of 
potential appointees, thereby decreasing the chance that you will get the 
best person for the position being filled. 

6.52	On the other hand, the inclusion of board members who 
represent particular stakeholder groups does bring important 
perspectives to the board table and may help boards better understand 
the needs of those groups. But this approach also means that the groups 
represented on the board are being given special status in comparison 
with other corporate stakeholders. In such a situation, boards must be 
careful to actively seek out the perspectives of unrepresented 
stakeholders, and not just assume that all important perspectives are 
already represented at the board table. 

6.53	A related concern is created by the stipulation in certain enabling 
acts that some board members be selected by particular interest or 
stakeholder groups. The difficulty arises at the board table. Is the board 
member representing the best interests of the Crown agency 
(i.e. accountable to the responsible Minister) or the best interests of the 
group that appointed them (i.e. accountable to the appointing group)? 
Further, how can these conflicting accountabilities be reconciled? Board 
members might feel obliged to represent stakeholder interests rather than 
the best interests of the organization they serve. Consequently, these 
boards of directors may not be acting in the best interests of New 
Brunswick taxpayers.

6.54	A more qualifications-based, less representational, approach to 
selecting board members would put the onus on the board to get input 
from all stakeholder groups in governing the Crown agency. And indeed 
one of the key roles of any board of directors is developing a 
communication strategy for its organization, including strategies for 
getting feedback from stakeholders. In other words, a board that is 
governing effectively, no matter how its members are selected, will be 
reflecting stakeholder perspectives in the decisions it makes.

Recommendations - 
appointment of directors

6.55	We make the following recommendations related to the 
appointment of directors to Crown agency boards in New 
Brunswick:

•	Crown agency boards of directors should be providing 
responsible departments with selection criteria against which to 
evaluate candidates for board appointments.

•	The level of compensation currently provided to board members 
should be reviewed to ensure it is sufficient to attract the best 
candidates to directorial positions and to adequately reward 
board members for their efforts.

•	Selection of a Crown agency board member should be primarily 
based on the demonstrated ability of a candidate to contribute to 
improved outcomes for the organization, and not their 
membership in a particular stakeholder or demographic group.

Timeliness and continuity 
of appointments in New 
Brunswick

6.56	As previously discussed, there is no central agency in New 
Brunswick that initiates Crown agency board renewal. Rather, 
individual departments must monitor the status of Crown agency boards 
for which they are responsible and take steps to fill board positions when 
necessary.

6.57	In our 2001 Report, paragraph 1.25, we noted that:

there were four government agencies that did not have a 
properly constituted Board of Directors. We found that the 
terms for the Directors of the New Brunswick Crop Insurance 
Commission and Kings Landing Corporation had expired. 
The Kings Landing Corporation Board however continued to 
operate. And the Boards of the Youth Council of New 
Brunswick and the New Brunswick Public Libraries 
Foundation did not have sufficient members to constitute a 
quorum.

6.58	With so many departments involved in the appointment process, 
and in light of our previous observation, we decided to check to see 
whether current board appointments were up to date and whether the 
expiry dates of current directors’ terms had been staggered to ensure 
continuity on the boards. In effect, we were checking for consistency 
between departments. We selected nine of the largest Crown agency 
boards for testing and were able to make a number of observations.

6.59	On a positive note, we found four Crown agency boards for 
which appointments were completely up-to-date and for which expiry 
dates had been adequately staggered to ensure continuity at the board 
table. (New Brunswick Investment Management Corporation, NB Power 
Corporation, the Workplace Health, Safety and Compensation 
Commission, and Service New Brunswick).

6.60	However, two of the nine Crown agencies had members sitting 
on their boards whose terms had expired. In one case, a member’s term 
had expired in 2002. In a second, more serious case, there were only 
seven up-to-date appointments. Full complement for that board was 
fifteen members. Of the additional eight board positions, three were 
being covered by members whose terms had expired (one in 2000 and 
two in 1998). The other five positions were vacant. 

6.61	The enabling legislation for one of the Crown agencies stated, “a 
member of the Board shall remain in office, notwithstanding the expiry 
of the member’s term, until the member resigns or is reappointed or 
replaced.” The other Crown agency had an equivalent clause. However, 
we feel that it is important to ensure board appointments are up to date, 
even where current members are willing to be re-appointed. Board 
renewal gives Executive Council the opportunity to review appointments 
to consider whether they continue to be appropriate. 

6.62	In relation to board continuity, we noted that four of the nine 
Crown agencies will have all board members’ terms expiring at or near 
the same time. Establishing a continuity of process and knowledge base 
within these boards will likely be difficult in the circumstances. The 
wholesale turnover of boards tends to reduce the effectiveness of 
governance, for instance through a loss of continuity where best 
practices have been established, and is a situation to be avoided if 
possible.

6.63	Our understanding is that the results we found actually represent 
an improvement over the situation in the past. There has been a 
conscious effort on the part of the Executive Council Office and 
responsible departments to improve the timeliness of board 
appointments. We also note that the Executive Council Office is in the 
process of developing an enhanced tracking system for board 
appointments that, among other things, will provide reminders to 
departments when expiry dates are approaching.

Recommendation – timeliness 
and continuity of board 
appointments

6.64	We make the following recommendation related to the 
timeliness and continuity of Crown agency board appointments in 
New Brunswick:

•	Processes should be established to ensure that the expiry dates of 
board appointments are staggered to ensure continuity on Crown 
agency boards. 

Corporate mandate and 
performance expectations

6.65	Regardless of how well qualified the members of a board of 
directors are, they cannot be effective if they do not have a thorough 
understanding of the mandate of their organization, the expectations of 
those to whom they are ultimately accountable (i.e. the corporate 
shareholder), and the enabling legislation that established their Crown 
agency in the first place. In particular, organizational mandate and 
shareholder expectations will be the basis for strategic leadership 
provided by the board of directors. In approving corporate strategies and 
priorities, boards of directors of Crown agencies must strike a balance 
between public policy and business objectives. Without a clear 
understanding of what they are being asked to achieve, selecting 
strategies and priorities can easily become an exercise in guesswork. 

Shareholder’s role in 
establishing mandate and 
performance expectations

6.66	So who are the shareholders for Crown agencies? Ultimately, 
they are the citizens of New Brunswick. The citizens of New Brunswick 
are represented by the Legislative Assembly. Ministers of the Crown are 
assigned responsibility for holding specific Crown agencies to account 
for their performance. Those Ministers, who are also representatives of 
the government of which they are a part, are in turn accountable to the 
Legislative Assembly for that performance. 

Enabling legislation

6.67	Enabling legislation sets general guidelines for a Crown agency 
as well as detailing what services it is to provide and in some cases how 
it is to provide them. It also establishes some parameters around how the 
Crown agency is to be governed including the relationship between the 
Crown agency and central government. It also assigns responsibilities, 
and identifies the means through which accountability obligations are to 
be discharged.

Corporate mandate

6.68	The mandate of an organization is quite simply its reason for 
being. What business is it in? What products and services must it 
provide? Who are its customers? What level of performance is expected 
from it? What limitations are imposed on it? We feel that government 
should ensure that a clear statement of corporate mandate has been 
developed for each Crown agency, ensuring that the needs and interests 
of New Brunswick citizens are adequately reflected in each case.  

6.69	Some would argue that enabling legislation provides sufficient 
guidance to Crown agency boards relating to mandate. However, we 
feel that enabling legislation cannot provide a comprehensive guide in 
this area. For example, enabling legislation: 

•	is typically quite general;

•	in many cases was drafted a number of years ago and so may not be 
completely up to date;

•	makes no mention of key requirements from other provincial 
legislation; and

•	usually does not contain an explicit purpose statement.

6.70	We therefore feel that additional direction is needed to ensure 
that the mandate statement is current and sufficiently detailed. 

6.71	For example the New Brunswick Liquor Corporation Act states: 

The purposes of the Corporation are to carry on the general 
business of manufacturing, buying, importing and selling 
liquor of every kind and description.

6.72	It goes on to say:

The Board shall administer the affairs of the Corporation on 
a commercial basis and all decisions and actions of the Board 
are to be based on sound business practices.

6.73	So, while the enabling legislation clearly states what the 
corporation is to do, it is lacking in some areas. For instance, it doesn’t 
specify limitations on New Brunswick Liquor Corporation’s (NBLC) 
ability to accomplish its purposes as defined in its enabling legislation 
even though some such limitations may be appropriate (e.g. acceptable 
promotional activities or marketing techniques). Also, the enabling 
legislation does not specify the performance expected. (e.g. Is NBLC 
intended to provide a net return to the Province from its operations?) We 
would also note that despite the purposes section of the Act quoted 
above, NBLC is not involved in the manufacture of liquor. The board of 
directors needs a thorough understanding of what the government 
expects of it in order to develop appropriate strategies. We feel that this 
understanding is best obtained from a single, comprehensive mandate 
document.

6.74	We feel that government has another responsibility in terms of 
mandate. Specifically, government should ensure that Crown agency 
mandates are regularly reviewed for continued relevance, including their 
public policy and financial objectives. In our opinion, there must be a 
strong rationale for why a program or group of programs is being 
managed separately by a Crown agency. For example, there is no clear 
language in the New Brunswick Liquor Corporation Act explaining why 
the four activities listed must be performed by the public sector. For 
instance, one might question why a Crown agency needs to be involved 
in the manufacture of liquor, a business in which there are many private-
sector participants.

6.75	We are pleased to note that the current government of New 
Brunswick recently conducted a review of the mandates of all existing 
agencies, boards and commissions in the Province (i.e. the Agencies, 
Boards and Commissions (ABC) Review). The ABC review led to the 
windup of certain Crown agencies whose mandates were no longer 
considered relevant or did not fit into the framework established by 
current government strategies and priorities. However, we understand 
that it was a one time review and there are no plans to conduct regular, 
periodic reviews of the mandates of established New Brunswick Crown 
agencies in future. This creates the risk that some Crown agencies that 
have no relevance to public priorities will again be operating and using 
scarce public resources.

Government expectations

6.76	When we refer to government expectations, we are referring to 
the outcomes government expects Crown agencies to achieve. 
Government expectations may reflect such factors as government 
policies and priorities, service levels to be achieved and financial 
performance targets. Again, if government is to fulfil its role as the 
representative of New Brunswick citizens, it should regularly specify 
what outcomes are expected of Crown agencies. Setting performance 
targets cannot be left to the Crown agencies alone and it is not covered 
in any enabling legislation that we reviewed. For example, the 
government of New Brunswick has created a Prosperity Plan. One of the 
pillars of that plan is innovation, an area in which the New Brunswick 
Research and Productivity Council (RPC) has been involved since it was 
set up in the 1960s. So, an important step for the government to consider 
in order to ensure the successful implementation of that plan would be to 
provide organizations like RPC with the government’s specific 
expectations relating to their involvement in achieving that Plan.

	Ensuring compliance with 
legislation 

6.77	We feel that government, and in particular responsible 
departments, has a responsibility for ensuring compliance with Crown 
agency enabling legislation. However, to the best of our knowledge, no 
one in government is monitoring compliance with Crown agency 
enabling legislation at present. Therefore, there is a risk that 
inappropriate actions could be taken by Crown agencies and not picked 
up by government. We believe that government should take steps to 
manage this risk.

Board of directors’ 
understanding of mandate and 
government expectations

6.78	It is very important for the central government to ensure that 
Crown agency boards of directors understand and accept the mandate 
and performance expectations that have been developed for their Crown 
agency. A practical way to do this, and one that has been utilized by a 
number of public sector organizations across Canada including the New 
Brunswick Workplace Health, Safety and Compensation Commission 
(WHSCC), is to develop a memorandum of understanding between the 
Crown agency and the department responsible for that Crown agency. 

6.79	Despite the WHSCC example, the Province of New Brunswick 
has traditionally not done particularly well in communicating its 
understanding of the corporate mandate and performance expectations. 
Many representatives of Crown agencies we talked to indicated that 
communication with central government for purpose of determining 
government priorities has long been a problem area. In one case, a 
Crown agency representative indicated that they try to “read the tea 
leaves” to determine what government expects of them both in terms of 
mandate and performance.

Review of strategic and 
business plans

6.80	The development of a common understanding of mandate and 
government expectations by itself may not be effective in ensuring that 
government wishes are carried out by Crown agencies. Government 
should also ensure that Crown agency interpretations of legislation, 
mandate and government expectations are consistent with its own 
understanding. This may be done by reviewing and approving corporate 
strategic and business plans. 

6.81	We feel that a review of Crown agency plans should include at 
least thorough consideration of the answers to the following questions:

•	How has the agency interpreted its mandate and is it consistent with 
central government’s understanding?

•	Are the agency’s objectives, strategies and targets appropriate?

•	Have the agency’s plans adequately reflected government policies 
and priorities?

•	Does the agency’s mandate still appear to be relevant in light of 
current government plans and priorities?

•	Does the plan comply with Crown agency enabling legislation and 
other pertinent Acts?

6.82	There are a number of advantages to reviewing Crown agency 
plans on a regular basis.

•	It allows government to have an ongoing dialogue with Crown 
agencies, thereby reducing the risk that a Crown agency will 
misinterpret government priorities. A representative of the 
Executive Council Office indicated that the government advocates a 
top down approach to strategic planning within government. In other 
words departmental, and by extension Crown agency, strategic plans 
are to be based on provincial strategic priorities. The Executive 
Council Office also believes that performance measurement should 
primarily address government priorities like the Prosperity Plan. 
Therefore, it makes good sense for government to review Crown 
agency plans to ensure they reflect government priorities.

•	It gives government an opportunity to revisit Crown agency 
mandates periodically to determine if they are still relevant. 

•	It may encourage Crown agencies, led by their boards of directors, 
to do a better job of corporate planning. In our governance work 
over the past number of years, we noted that some Crown agencies 
had strategic and business plans that were out of date and/or 
inadequate to meet their needs. 

6.83	In our governance work, we have noted that while some Crown 
agency business plans were reviewed by the Board of Management, 
many were not. Crown agency strategic plans are not reviewed by Board 
of Management nor anyone else in central government. 

6.84	Other governments are more proactive in reviewing the plans of 
their Crown agencies. For example, the federal Financial Administration 
Act includes the following requirement:

Each … Crown corporation shall annually submit a corporate 
plan to the appropriate Minister for the approval of the 
Governor in Council. ... The corporate plan … shall include 
a statement of 

•	  the objects or purposes for which the corporation is 
incorporated, …

•	  the corporation’s objectives for the period to which the plan 
relates …

6.85	We feel that government review of Crown agency plans is a 
necessary step in order to ensure that Crown agencies have properly 
interpreted government priorities, and have therefore planned activities 
that will adequately address current public policy and financial 
objectives.

Recommendations - corporate 
mandate and government 
performance expectations

6.86	We make the following recommendations related to mandate 
and government performance expectations for Crown agencies:

•	Responsible departments should develop memoranda of 
understanding with Crown agencies to ensure that there are 
common understandings of the mandate and performance 
expectations government has set for the Crown agencies.

•	As a minimum, government (represented by Board of 
Management, the Policy and Priorities Committee, or a similar 
body) should review all Crown agency strategic and business 
plans on a regular basis to ensure that Crown agency 
interpretations of legislation, mandate and government 
expectations are consistent with its own understanding.

•	Responsible departments should monitor Crown agency 
compliance with their own enabling legislation and other 
pertinent Acts to reduce the risk of inappropriate actions being 
taken.

Governance roles and 
responsibilities

6.87	In order to have effective Crown agency governance, it is 
important that key governance players clearly understand their roles and 
responsibilities, as well as other aspects of the governance regime within 
which they are working.

Roles and responsibilities of 
government

6.88	The following is a list of the key duties of the shareholder of 
Crown agencies (i.e. the government of New Brunswick as represented 
by responsible Ministers) based upon best practices observed in other 
jurisdictions. 

•	Passing enabling legislation to set up Crown agencies and establish 
their mandates.

•	Ensuring that appropriate Crown agency governance structures are 
in place.

•	Recruiting and appointing board members.

•	Maintaining ongoing dialogue with Crown agencies with regards to 
government policies, priorities and performance expectations.

•	Ensuring that enabling legislation is being complied with.

•	Ensuring that Crown agency boards and management are 
appropriately interpreting government direction in their plans and 
strategies.

•	Ensuring that the directors of Crown boards understand the 
government’s expectations of them.

•	Ensuring that directors are given the training, guidance, and support 
to be effective Crown agency governors.

•	Ensuring that accountability obligations of Crown boards of 
directors are being adequately discharged.

6.89	These roles and responsibilities are discussed in greater detail 
elsewhere in this chapter.

Roles and responsibilities of 
Crown agency boards of 
directors

6.90	We feel that effective boards of directors will have a clear sense 
of what they are trying to accomplish. An important step in focusing 
their efforts is to establish their roles and responsibilities as a board and 
clearly document them.

6.91	The following list is a summary of what we believe should be the 
key roles and responsibilities of Crown agency boards of directors in 
New Brunswick. This list was developed by referring to related 
documents prepared by organizations such as the Toronto Stock 
Exchange (TSX), the Canada Deposit Insurance Corporation, the 
Conference Board of Canada, CCAF/FCVI, and others, along with our 
knowledge of New Brunswick Crown agencies. 

•	To approve corporate strategic and business plans and monitor 
management’s progress in achieving them.

•	To ensure that principal risks to the Crown agency have been 
identified and are being adequately managed.

•	To recruit, hire, monitor, and evaluate the performance of the CEO.

•	To approve and monitor compliance with the organization’s ethical 
standards.

•	To ensure the integrity of the corporation’s internal control and 
management information systems.

•	To measure Crown agency performance and report regularly to the 
government and other stakeholders on that performance.

•	To prepare and maintain documents that explain key aspects of 
governance for their Crown agency.

•	To continuously strive to improve the effectiveness of governance 
being provided by their board.

Best practices in corporate 
governance

6.92	Performance of Crown agency boards of directors in New 
Brunswick in fulfilling the roles and responsibilities listed above has 
been somewhat mixed. There are some improvements that we feel are 
warranted. 

6.93	In the sections that follow we discuss a number of best practices 
that we feel should be followed by all New Brunswick Crown agencies. 

Crown agency boards’ 
relationship with CEOs 

6.94	The recruiting and hiring of CEOs for Crown agencies is a bone 
of contention in most jurisdictions in Canada, and New Brunswick is no 
exception. Many of the CEOs for New Brunswick Crown agencies are 
recruited and hired by central government.

6.95	The appointment of Crown agency CEOs by central government 
makes establishing normal accountability relationships very difficult. If 
a board cannot hire or fire their CEO, is the CEO really accountable to 
the board, or is that person accountable directly to government? And, if 
a board of directors is excluded from the accountability chain, does it 
really have any relevance in the decision-making process? We believe 
that all Crown agency boards should be responsible for hiring and, if 
necessary, firing their CEO.

6.96	Further, we do not feel that CEOs should be voting members of 
Crown agency boards of directors, as currently occurs in some cases. 
CEOs with voting rights at the board table are essentially being asked to 
be both managers and directors, effectively putting them in a conflict of 
interest situation. If CEOs are to be truly accountable to their board of 
directors, they must be entirely separate from that board.

6.97	We also feel that, to ensure management accountability, Crown 
agency boards should be evaluating the performance of their CEO 
against preset performance objectives on a regular (e.g. annual) basis. 
Again, this is not the case for all Crown agencies in the Province.

Crown agency ethical standards

6.98	One of the recognized responsibilities of boards of directors is to 
ensure that ethical standards (e.g. conflict of interest) are in place and 
being complied with. Typically, this means the approval of a code of 
ethics and the ongoing monitoring of compliance with that code. In our 
reviews of various Crown agencies, we noted that not all boards of 
directors had approved ethical standards for their agency.

Audit committees

6.99	One of the key responsibilities of Crown agency boards of 
directors that we identified above is ensuring the integrity of the 
corporation’s internal control and management information systems. 
This responsibility has also been described as a board’s stewardship 
responsibility. In other words, Crown agency boards of directors have 
been entrusted by government with valuable assets for which they must 
be good stewards. 

6.100	In order to act as good stewards, boards of directors need to 
assure themselves that management controls effectively reduce key risks 
(e.g. loss of assets) to an acceptable level. They must also assure 
themselves that the management information systems that produce the 
information on which they base their decisions are reliable. Finally, they 
must assure themselves that the third-party information and assurances 
on which they are relying are truly being developed independent of 
management.

6.101	A tool used by many boards of directors in both the public and 
private sectors is the audit committee. In fact, the federal Financial 
Administration Act requires that most federal Crown agencies have an 
audit committee. Also, TSX listing standards require that all publicly-
traded companies have an audit committee in place, and further that all 
members of that committee be “financially literate.” An audit committee 
allows for a more in-depth review of the effectiveness of controls in 
place than is possible at meetings of the full board. 

6.102	There are a few New Brunswick Crown agencies that have audit 
committees including NB Power and Kings Landing Corporation. There 
may also be other Crown agencies with alternately-named committees 
that fulfil the same function. Most New Brunswick Crown agencies are 
required to have annual financial audits performed by independent 
auditors, and it is our belief that most Crown agency boards of directors 
in the Province rely heavily, and in many cases exclusively, on the 
assurances of their financial auditor in attempting to fulfil their 
stewardship responsibility. However, because of the limited 
effectiveness of external audits in identifying control weaknesses and 
other serious problems such as fraud and exposure to risk, additional 
steps should be taken.

6.103	Some Crown agencies, for example the New Brunswick Liquor 
Corporation, do have internal auditors that report directly to boards of 
directors, providing a more in depth look at control systems than would 
otherwise be the case. However, many Crown agencies do not have 
internal auditors on staff.

6.104	Consequently, we feel that Crown agency boards of directors 
should seriously consider establishing audit committees to provide 
additional focus on the boards’ stewardship role. The initial focus of 
those audit committees might well be to find solutions to deal with the 
lack of stewardship information currently being provided to New 
Brunswick Crown agency boards, as discussed in the “Governance and 
Accountability Information” section later in this chapter. 

Governance documentation

6.105	Most of the Crown agencies we examined in our governance 
work over the past number of years shared a common weakness: 
corporate documentation describing the following key aspects of Crown 
agency governance was weak or did not exist.

•	The governance and accountability structure of the Crown agency.

•	Governance processes and standards to be followed, including the 
performance requirements set for individual board members.

•	The relative roles and responsibilities of government, the board of 
directors, and management.

•	An agreement between the Crown agency and the responsible 
Minister as to how important aspects of governance are to be 
handled.

6.106	We feel that documenting these key aspects of governance is 
critical to the effectiveness of the board, as well as that of government 
and management in carrying out their respective roles and 
responsibilities for the Crown agency. There are several reasons for our 
opinion. First, there is constant and often rapid turnover of board 
members, government representatives and management of Crown 
agencies. Consequently, it is very important for continuity purposes to 
document understandings that have been achieved for the reference of 
newly appointed individuals. Second, the documents provide clarity to 
all key governance players. Third, documented understandings can 
become de facto performance contracts against which responsible parties 
can be held accountable.

6.107	We are aware of at least one Crown agency within the Province, 
the Workplace Health, Safety and Compensation Commission 
(WHSCC), that has created a comprehensive governance document. 
WHSCC also has a two-part agreement with the Department of Training 
and Employment Development that establishes the division of roles, 
responsibilities, and accountabilities between WHSCC and central 
government. However, to the best of our knowledge, most New 
Brunswick Crown agency boards have not developed such 
documentation. 

Ongoing dialogue on 
governance issues

6.108	It is very important that boards of directors have an ongoing 
focus on governance issues at the board table. Further, we feel that it is 
critical that directors be very familiar with the documents on which 
board governance is based and consider their continued applicability 
often. The Bank of Montreal has provided the following advice:

Ensure frequent dialogue on governance with the full board. 
Continuously recognize that governance must constantly 
evolve, as the corporation changes and new stakeholder 
expectations arise.

6.109	A WHSCC representative also advised that it is not enough to 
create governance documents. A board has to “live” the documents and 
review them regularly to ensure they still meet the needs of the board. 
We would note that there appears to have been more attention paid to 
governance practices at some New Brunswick Crown agencies over the 
past few years. However, it is our belief that few boards focus on 
governance issues as part of their regular deliberations.

Board evaluation

6.110	An area in which best practices have evolved significantly in 
recent years is in the area of board evaluation. Not only are boards of 
directors starting to perform regular self-evaluations of their 
effectiveness, but they are also starting to perform regular evaluations of 
the performance of individual board members, i.e. peer reviews. The 
Conference Board of Canada recently indicated that “evaluating the 
performance of boards as a whole and the contribution of individual 
directors” is an emerging issue in the roles and responsibilities of 
directors.

6.111	We were pleased to note that the WHSCC is currently doing 
board effectiveness evaluations. However, most Crown agency boards 
have not yet begun to self-assess the performance of either their board as 
a whole or individual board members.

Recommendations - 
governance roles and 
responsibilities

6.112	We make the following recommendations related to 
governance roles and responsibilities:

•	All Crown agency boards should negotiate and document a 
memorandum of understanding between their Crown agency and 
the responsible Minister as to how important aspects of 
governance are to be handled, the relative responsibilities of key 
governance players, etc.

•	All Crown agency boards should be given responsibility for 
recruiting and hiring the CEOs for their agencies. They should 
also review the performance of their CEO on a regular basis.

•	All Crown agency boards should ensure that ethical standards 
have been established for their agency and that there is a system 
in place to monitor compliance with those standards.

•	All Crown agency boards should seriously consider establishing 
an audit committee to provide additional focus to the board’s 
review of the integrity of the agency’s internal control and 
management information systems.

•	All Crown agency boards should prepare a governance statement 
for the reference of board members that describes:

•	   the governance and accountability structure of the Crown 
agency;

•	   governance processes and standards that are being followed, 
including the requirements made of individual board 
members; and

•	   the roles and responsibilities of government, the board of 
directors, and management.

•	The governance statement should be reviewed regularly and 
updated as necessary.

•	All Crown agency boards should conduct, as a minimum, 
regular self-evaluations of their board’s effectiveness. They 
should also consider conducting regular reviews of the 
performance of individual board members.

Guidance and support for 
Crown agency boards of 
directors 

6.113	David Golden, the former Chairman of the Board of Telesat 
Canada, has related the following story about the difficulties that can be 
encountered by new board members: 

One major shareholder asked a very experienced, very 
capable engineer who was part-owner and senior manager of 
a very successful privately owned construction company to 
become a director of a corporation. As an engineer and a 
successful businessman, everything was going just great. He 
came up to me after the first meeting and said, “I haven’t the 
faintest idea of what is expected of me as a director of a 
company, and I am either going to have to brush up on it or 
maybe you will tell me what is expected of me. I am lost.”

6.114	We suspect that for many new appointees to New Brunswick 
Crown agency boards, this is also the case. It is not that they are not 
competent. It is simply the case that most people do not have any 
knowledge about what is required to be an effective director.

6.115	Serving as a member of a board of directors is not something 
that most appointees are prepared for by their previous experiences. As 
Crown agency directors, they must have a good understanding of their 
organization’s mandate, business, and the needs of its shareholder, 
customers and stakeholders. They must clearly understand their roles, 
responsibilities, and accountabilities as directors. And they must have a 
good working knowledge of the principles of good governance, an area 
where many of the recognized best practices have changed a lot in recent 
years. If directors do not have adequate knowledge in all three areas, the 
effectiveness of governance they can provide is likely to be 
compromised. Appropriate knowledge of these three areas provides a 
basis for everything else that they will be doing as governors of the 
organization.

6.116	We have covered the ways in which directors inform themselves 
about the needs of their shareholders and their roles and responsibilities 
as directors. In the following sections, we cover the other types of 
knowledge they need.

Governance standards

6.117	Boards that have developed a comprehensive governance 
statement have often set most of the governance standards their board 
members need to know about. However, few New Brunswick Crown 
agency boards have governance statements. The situation is the same in 
many other jurisdictions.

6.118	In a number of cases outside of New Brunswick, governments 
and other organizations have tried to fill the void by establishing multi-
organizational governance standards upon which board governance 
practices are to be based. Their goal is to provide a higher overall 
standard of governance by setting standards based upon accepted best 
practices. It is perhaps also an attempt to do some of the development 
work for boards of directors, thereby making it easier for them to adopt 
appropriate governance standards. 

6.119	The Treasury Board of Canada recently published a document, 
Directors of Crown Corporations: An Introductory Guide to Their Roles 
and Responsibilities. This document was specifically developed for the 
benefit of new directors. It states:

This Guide addresses an important aspect of corporate 
governance – the roles and responsibilities of the Crown 
corporations director. As a Guide, it presents an introductory 
overview of a director’s role and other general information 
primarily intended to meet the needs of new appointees to the 
boards of federal Crown corporations.

Instead of addressing all of the director’s roles and 
responsibilities, the Guide focuses on four primary 
responsibilities: establishing the corporation’s strategic 
direction, safeguarding the corporation’s resources, 
monitoring corporate performance, and reporting to the 
Crown.

6.120	In 2002, the Treasury Board of the Government of 
Newfoundland and Labrador issued Excellence in Governance – A 
Handbook for Public Sector Bodies. Opening comments in that 
handbook included the following.

This handbook is designed to assist members of public bodies 
understand some of the key aspects of their role and the vital 
contribution boards, in general, make in all sectors of 
Newfoundland and Labrador society. For those who are 
contemplating accepting an appointment to a public body or 
running for election I believe this handbook will support you 
as you make your decision. For those who are already 
members this handbook should clarify the expectations of the 
role.

6.121	The handbook covers the following key governance areas:

•	governing body - provincial government relationships;

•	overview of governance;

•	orientation of board members;

•	roles and responsibilities of board members;

•	board decision-making;

•	strategic planning;

•	evaluation of the board and CEO; and

•	board reporting.

6.122	Other organizations that have created governance standards 
include:

•	the Toronto Stock Exchange (TSX);

•	the Department of Health of the Province of Alberta;

•	the Canada Deposit Insurance Corporation (CDIC); and

•	the Crown Investments Corporation of Saskatchewan (CIC).

Crown agency coordinating 
organizations

6.123	Creation of a governance policy or framework is a good first 
step. However, unless the creator of the policy has some way to ensure 
compliance (e.g. as a final measure, TSX may de-list companies that do 
not comply with its guidelines) it may not result in improved governance 
practices. Certain jurisdictions have assigned Crown agency 
coordinating organizations the responsibility for overseeing the 
governance function at Crown agencies. Examples and some information 
on their roles follow.

The Crown Agencies 
Secretariat - Office of the 
Premier - Government of 
British Columbia

6.124	The Crown Agencies Secretariat (CAS) has been charged, “with 
responsibility for strategically overseeing the system of Crown agencies 
(Crown corporations and agencies, boards and commissions) in British 
Columbia and proactively providing government and Crown agencies 
with the advice, information, and support necessary to promote good 
governance, continuous improvement and accountability for results. 
CAS’s goal is to develop (and maintain) a highly accountable, efficient 
and effective system of Crown agencies in British Columbia.”

The Crown Investments 
Corporation of Saskatchewan

6.125	The current mandate of the Crown Investments Corporation 
(CIC) was established in 1993 by the Crown Corporations Act.

6.126	The main duties of the corporation are to:

•	establish the strategic direction for subsidiary Crown corporations 
through effective governance and performance management;

•	manage prudently its diversified portfolio of commercially viable 
investments; and

•	enhance Saskatchewan’s long term economic growth and 
diversification through investments and Crown corporations.

6.127	In meeting its objects and purposes, CIC is responsible to the 
Lieutenant-Governor in Council for all matters relating to the following:

•	the review and evaluation of the objectives, goals, revenues, 
expenses, expenditures, investments and operating results of 
subsidiary Crown corporations;

•	the administrative policy and management practices and systems of 
subsidiary Crown corporations;

•	the accounting policies and practices of subsidiary Crown 
corporations; and

•	the financial relationships between subsidiary Crown corporations 
and the Government of Saskatchewan.

Training – knowledge of 
governance best practices

6.128	In our work on New Brunswick Crown agency governance, we 
noted that many directors were not familiar with a lot of the new 
governance literature available or the best practices of modern 
governance. Also, in general, they were not being provided with any 
developmental opportunities that would have allowed them to increase 
their knowledge in this area. We understand that the NB Healthcare 
Association does provide governance training to the boards of NB 
Healthcare Association members (i.e. Regional Health Authorities). 
Also, the board of the WHSCC has access to governance training 
through the Association of Workers’ Compensation Boards of Canada. 
However, in general, we feel that Crown agency board members in New 
Brunswick need better access to appropriate governance training 
opportunities and guidance to fulfil their potential as effective board 
members. Representatives of various Crown agency boards we have 
talked to have supported this opinion. In our opinion attendance at 
training sessions should be made a mandatory part of accepting a board 
appointment.

Guidance and support in the 
Province of New Brunswick

6.129	In New Brunswick, there is currently no central government 
organization providing support to, monitoring, or otherwise concerning 
itself with governance and accountability at provincial Crown agencies. 
Instead, individual Ministers and their departments are given 
responsibility for the governance and accountability of specific Crown 
agencies. As a result, consistency between Crown agencies in these 
areas is lacking.  

6.130	The Executive Council Office has taken a coordinating role on 
initiatives relating to departments; for example, they recently sponsored 
a clinic on strategic planning that was open to all departments. They feel 
that this is in keeping with their role of serving ministers of the Crown. 
They plan to do more such sessions in the future, particularly as a 
communication tool for government policies and priorities.

6.131	In our opinion, given their stated responsibility of serving 
ministers, we feel that a strong argument could be made for extending 
the Executive Council Office’s coordinating role to include guidance and 
support for Crown agencies. Some of the valuable functions they could 
provide might include:

•	setting and periodically updating governance standards for use by all 
New Brunswick Crown agencies;

•	monitoring compliance with those governance standards;

•	providing guidance to Crown agencies in the application of those 
governance standards;

•	providing governance training opportunities for Crown agency 
directors;

•	communicating the shareholder’s perspective, government priorities 
(e.g. the Prosperity Plan), and emerging issues to Crown agencies; 
and 

•	providing independent advice to Cabinet, Ministers, boards and/or 
CEOs on Crown agency mandates, direction, plans, and 
performance, as requested.

Recommendations - guidance 
and support for Crown agency 
boards of directors

6.132	We make the following recommendation related to guidance 
and support for Crown agency boards of directors:

•	The Executive Council Office’s coordinating role should be 
expanded to include providing guidance and support to Crown 
agencies in some or all of the following areas:

•	   setting and periodically updating governance standards for 
use by all New Brunswick Crown agencies;

•	   monitoring compliance with those governance standards;

•	   providing guidance to Crown agencies in the application of 
those governance standards;

•	   providing governance training opportunities for Crown 
agency directors;

•	   communicating the shareholder’s perspective, government 
priorities, and emerging issues to Crown agencies;

•	   providing independent advice to Cabinet, Ministers, boards 
and/or CEOs on Crown agency mandates, direction, plans, 
and performance, as requested; and

•	   identifying and coordinating major Crown agency policy 
issues and projects as required.

Information about Crown 
agency operations

6.133	In general, we have found that directors of New Brunswick 
Crown agencies are getting sufficient information about how their 
Crown agencies operate. Consequently, we will make no further 
comments in this area. However, we do have concerns about the clarity 
of Crown agency mandates as previously discussed. Additionally, 
weaknesses in the governance information provided by management to 
boards of directors relating to ongoing operations of Crown agencies is 
discussed in the next section of this chapter.

Governance and 
accountability information

6.134	Evaluating the quality of board members, and the resulting 
effectiveness of the governance they provide, is difficult. However, we 
feel that one good indicator of the effectiveness of governance is the 
quality of annual reporting. 

Accountability reporting in 
New Brunswick

6.135	Effective June 1991, the Province of New Brunswick adopted an 
annual report policy for government departments and Crown agencies. It 
establishes certain requirements regarding the form and content of 
annual reports. The policy defines the prime function of an annual report 
to be “the major accountability document by departments and agencies 
for the Legislative Assembly and the general public. It serves as the key 
public link between the objectives and plans of a government entity and 
the results obtained.”

6.136	It goes on to state:

To the degree possible, departments and agencies should give 
a clear account of goals, objectives and performance 
indicators. The report should show the extent to which a 
program continues to be relevant, how well the organization 
performed in achieving its plans and how well a program was 
accepted by its client groups.

6.137	Consequently, boards of directors may discharge their 
accountability obligation by providing an annual report to the 
responsible Minister. This seems to be well understood by all parties, as 
demonstrated by the fact that Crown agency annual reports are signed by 
the board chair and addressed to the responsible Minister. Annual 
reports are forwarded to legislators and made available to the public. 

6.138	We feel that if Crown boards do not take ownership of the 
corporate annual report and ensure that it does serve as a comprehensive 
performance report, they are not adequately discharging their 
accountability obligation. This in turn can lead to a perception that the 
board may have little relevance in the success of its Crown agency.

6.139	Some of the best practices in annual reporting among New 
Brunswick Crown agencies are discussed later in this chapter. It is 
reasonable to assume that Crown agencies like the Workplace Health, 
Safety and Compensation Commission (WHSCC), NB Power, and the 
New Brunswick Research and Productivity Council (RPC), that have 
developed annual reports that serve as good accountability documents, 
also have reasonably effective board governance. However, that is not to 
say that other New Brunswick Crown agency boards do not govern 
effectively. They may just not be putting their best foot forward with the 
annual reports they are currently presenting.

6.140	The Crown Corporations Committee, representing all legislators 
in their role as reviewer of Crown agency annual reports and financial 
statements, needs to scrutinize the information presented by a Crown 
agency thoroughly and compare it with previously presented strategic 
plans, business plans, and performance targets. Where accountability for 
performance against plans cannot be clearly established with the 
information provided, Committee members should request that 
additional information be provided. And in fact, they have done this. 

6.141	Our Office has conducted a number of reviews of annual reports 
prepared by Crown agencies since the annual report policy was adopted. 
In our experience, the quality of annual reporting by Crown agencies in 
comparison with the requirements of the policy has been mixed. Some 
Crown agencies have attempted to comply with the spirit of the policy, 
but many have not. 

6.142	The Executive Council Office has been assigned responsibility 
for monitoring compliance with the policy. However, it only checks to 
ensure that annual reports have been tabled in the Legislative Assembly. 
It does not review the contents of those reports or otherwise enforce 
compliance.

6.143	We feel that Crown agency boards could improve the value of 
their annual reports as accountability documents by ensuring that they 
are fully complying with the annual report policy. We also feel that there 
should be better linkage between annual reporting by Crown agencies 
and government priorities and initiatives. Among other things, this 
would speak to the continued relevance of programs and services 
provided by the Crown agency. For example, a Crown agency board 
would go a long way to establishing its continued relevance by reporting 
the successes of its agency in supporting the achievement of the 
government’s Prosperity Plan.

Description of corporate 
governance practices

6.144	Providing information on corporate governance practices gives 
the reader of an annual report a better understanding of what the board 
of directors has committed to do, thereby increasing the value of the 
annual report as an accountability document. There is currently no 
requirement in the New Brunswick annual report policy that such a 
statement of corporate governance practices be included in Crown 
agency annual reports. By comparison, federal Department of Finance 
and Treasury Board Guidelines do require that:

Each Crown corporation should include a description and 
assessment of its corporate governance policies and practices 
in its annual report.

Best practices in performance 
reporting in New Brunswick

6.145	There are a few examples of New Brunswick Crown agencies 
that provide good models for other Crowns agency boards wishing to 
improve the value of their annual reports as accountability documents.

Workplace Health, Safety and 
Compensation Commission 
(WHSCC)

6.146	The most recent WHSCC annual report appears to capture the 
spirit of the annual report policy as well as any Crown agency in New 
Brunswick. The body of the report is divided up by strategic goal, rather 
than the typical functional area layout, and describes performance 
indicators, targets and actual results within that framework. This allows 
the reader to assess the success of the Commission in achieving 
individual strategic goals and in evaluating actual versus planned 
performance. In fact, a Commission representative indicated that they 
see their current annual report as fully satisfying their responsibility to 
be accountable to government. 

New Brunswick Research and 
Productivity Council (RPC)

6.147	RPC was the first New Brunswick Crown agency to adopt the 
annual report policy in a comprehensive manner. As with WHSCC, the 
reporting focuses on performance measures and success in achieving 
strategic goals. Of note is the honesty of the reporting. Where targets 
have not been achieved, this is acknowledged openly. An often-cited 
concern of senior Crown agency officials that is that reporting bad 
results will only lead to sanctions from central government. However, 
we are not aware of negative repercussions to RPC as a result of this 
honesty.

NB Power Corporation

6.148	Again, this report is quite well laid out. What is refreshingly 
unique is that the annual report includes an entire section detailing the 
board’s approach to corporate governance. This section provides a good 
summary of many of the current “best practices” in corporate 
governance that we have discussed in this chapter.

Information provided to boards 
by Crown agency management 
(CEO)

6.149	Information presented in annual reports is not created by boards 
of directors. It is typically a summary of information captured by 
corporate information systems under the control of management. A 
somewhat broader summary of that information is provided to boards of 
directors by management for their use in fulfilling their role as corporate 
governors. So, in general it can be assumed that the board of directors of 
a Crown agency with a good annual report will have access to good 
governance information as well.  However, they do have to ask for it. 
They cannot assume that management will necessarily know the right 
information to provide. And, at the board table, having access to the 
right information is critical in allowing boards of directors to effectively 
carry out their roles and responsibilities. 

6.150	We have noted a number of problems with governance 
information being provided to New Brunswick Crown agency boards of 
directors by management. For example:

•	Information provided by management is often purely financial. 
Service-related information is rarely reported regularly, even though 
most Crown agencies have service-related and not financial or 
business mandates.

•	There is typically little or no linkage between corporate goals, 
objectives and targets created in strategic and business planning 
exercises, and what is reported to the board.

•	There is typically little or no regular reporting relating to 
management compliance with board policies.

•	Superfluous information is often provided to boards, sometimes 
drawing them into decision-making that should be left to 
management.

•	Too much information is provided to boards to allow them to easily 
identify and focus in on that which should be considered “key.”

Recommendations re 
governance and accountability 
reporting

6.151	We make the following recommendations related to 
governance and accountability reporting:

•	The Executive Council Office should be monitoring Crown 
agency annual reports to ensure that the government annual 
report policy is being complied with.

•	The government annual report policy should be amended to 
include the following two additional requirements:

•	   that Crown agency annual reports include, where applicable, 
reference to the Crown agency’s involvement in supporting 
the success of current government priorities and initiatives; 
and

•	   that Crown agency annual reports should include a statement 
of governance practices similar to that shown in the 2002 NB 
Power Corporation annual report.

•	Periodically, all New Brunswick Crown agency boards of 
directors should look critically at reporting they receive 
regularly from management. Specifically, each board should 
ensure:

•	   that reports presented are useful and sufficient to allow the 
effective discharge of all of the board’s roles and 
responsibilities as Crown agency governors. For example, 
information used by the board to monitor corporate 
performance should address both financial and service goals 
and be clearly linked to approved plans;

•	   that information that is not used by the board  is deleted from 
management reporting; and

•	   that reports are organized for ease of reference by board 
members in their deliberations.

Comments from the Executive 
Council Office

6.152	We provided a copy of our summary report on Crown agency 
governance to the Executive Council Office. They provided a detailed 
response to our observations and recommendations. In addition, they 
made the following general comments:

We find that the report provides a thorough discussion of the 
characteristics and principles of good governance. We agree, 
fundamentally, with the conclusions drawn respecting the 
importance of good governance in the context of Crown 
agencies, and with the principles underlying many of the 
report’s recommendations. In support of such principles, the 
Government has, already in place, a number of mechanisms 
intended to encourage good governance practices in Crown 
agencies. And, as resources allow, we continue to pursue 
improvements in the areas of accountability and effective 
board performance.

We find that some of the report’s recommendations make 
suggestions about how certain principles of good 
governmance might be operationalized. While we are able to 
support most of the objectives, we have concerns with respect 
to some of the recommended administrative or organizational 
methods for achieving the objectives. This is particularly the 
case as it related to recommendations for Executive Council 
Office to assume a more direct role in guiding and supporting 
Crown agency boards.

We appreciate the report’s value in identifying gaps and will 
consider how this information can be used to continue the 
Government’s movement towards greater accountability, 
effective Crown agency performance, and the protection of the 
public interest.