The Corporate Governance of Multinationals
Corporate Decision-Making in Canada, R. Daniels & R. Morck (eds.) Industry Canada & the University of Calgary Press, Calgary, 1995
Posted: 11 Jun 2013
Date Written: April 27, 1994
Globalization is a result of an increasing need for companies to access larger markets to recoup the costs associated with an increased pace of innovation in many industries. This chapter argues that globalization and multinational firms are likely to be even more important to Canada's competitive position in coming years than they have been in the past. This global competitive pressure may make many contemporary public policy concerns about corporate governance moot. In a global economy, customers, investment capital and highly skilled employees need not tolerate poor management. They can simply do business with better run rivals. Canadian firms will have to deal with their governance problems not because they are legally required to do so, but because their survival will depend on it. In this context, government's best option for improving Canadian corporate governance may well be simply to foster competition and openness while providing good legal and educational infrastructure. This entails weaning firms from subsidies and captive markets, and providing sound basic public services like education, health care and law. Some specific issues as to the governance of multinational subsidiaries in Canada do arise, especially with regard to minority Canadian shareholders. We argue that the boards of foreign subsidiaries with Canadian minority public shareholders should have conduct committees charged with approving non-arms length transactions with the parent or other related companies. Indeed, requiring this of all firms with controlling blockholders and publicly traded minority shares might solve many of Canada's corporate governance problems in one blow.
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