Reflections
Letter from the President and CEO
This is the inaugural note from the President and CEO of CGA-Canada. This column will become a standard feature of CGA Magazine
.
FROM:
JUL-AUG 2004 ISSUE
Hello everyone,
We’ve heard so much recently about the lack of investor confidence in capital markets. But how exactly do we go about rebuilding the trust that’s been eroded by the recent string of corporate failures? How do we create, perpetuate, and safeguard a climate of corporate integrity in Canada, where ethical business practices are the norm? Finding the answers to that question is essential — if we are to secure our economic well-being and our future prosperity.
I’d like to put forward several points for your consideration as corporate Canada embarks on the road to change and recovery in the wake of the recent high-profile accounting scandals and corporate shakeups.
The first element that must be in place is leadership. By that I mean true leadership to manage fundamental change from the top. Real reform of business practices will take leadership, vision, and follow through. There simply has to be a more concerted effort in the boardrooms and in the CEO offices of this country to establish a culture of
values-based corporate behaviour, where doing the right thing comes naturally.
Second, we should all take a long, hard look at the role financial analysts play in the investor confidence equation. And on the other side of the coin, we need to assess how corporate leaders are responding to those expectations established by the financial analysts. Are CEOs feeling the pressure to produce double-digit growth at all costs? And just how realistic is double-digit profit going to be in today’s competitive business environment?
Setting healthy and realistic expectations is important. And in order to restore investor confidence, it’s important that analysts not
over-project. And that CEOs not
over-react.
Third, financial statements must be seen by investors as a true and reliable measure of corporate net worth. These statements must be clear, unambiguous, and transparent. There are a number of positive changes to report in this regard. One is the recent change to the method of accounting for stock options. Another is the implementation of CEO/CFO
sign-off in large, publicly traded entities. These kinds of measures may seem small when taken in isolation. But they can go along way towards addressing the major concerns of the investing public.
And finally, a lot has been written recently about the need to manage investor expectations about what auditors actually do. I believe we need to educate the investing public about the role of the auditor. As professionals in the field, CGAs can help bring clarity to this matter, so investors understand that auditors provide assurance that the financial statements of an organization present fairly the financial position of that entity.
But audited financial statements are only one piece of a much larger picture. They alone cannot guarantee the long-term financial viability of a company.
We in the business community have a lot to do as we move forward in this new environment. But I am supremely confident that within the accounting profession we have the right stuff. We have the ability to learn from the past and to move forward into the future. I look forward to meeting many of you in person in coming months and sharing my perspective on these critical issues of the day.
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