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OGGO Committee Report

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HOUSE OF COMMONS
OTTAWA, CANADA
K1A 0A6
 

38th Parliament, 1st Session

The Standing Committee on Government Operations and Estimates has the honour to present its

THIRD REPORT

The Process Used in Appointing Mr. Gordon Feeney as
Chairman of the Board, Canada Post


INTRODUCTION

This report provides the House with a statement of the findings of the Standing Committee on Government Operations and Estimates relating to the process used in appointing Mr. Gordon Feeney as Chairman of the Board of Directors of the Canada Post Corporation, dated 30 September 2004 (P.C. 2004-1124).

Under Standing Order 111, a committee may call an Order-in-Council appointee to appear before it during a period not to exceed thirty sitting days from the date on which the appointment is tabled in Parliament, in order to examine the qualifications and competence of the appointee to perform the duties of the post to which he or she has been appointed. Within the 30 day time period established by Standing Order 111, this Committee has devoted several meetings to the Feeney appointment. On Tuesday, 26 October 2004, it met with Mr. Feeney and the Minister responsible, the Hon. John McCallum. On Thursday, 28 October, a follow-up meeting with Mr. Ritchie, the Chair of the Canada Post Nominating Committee, was held.

In the course of these meetings, the Committee identified a series of concerns about the selection process that was followed in appointing Mr. Feeney. While these concerns fall outside the scope of Standing Order 111, the Committee has addressed them under the general authority provided in Standing Order 108(2), which empowers all standing committees “…to study and report on all matters relating to the mandate, management and operation of the department or departments of government which are assigned to them from time to time by the House.” In order to explore these concerns, a meeting with the Hon. Reg Alcock, President of Treasury Board, was held on 2 December 2004.

BACKGROUND

In August of this year, Ms. Vivian Albo announced her intention to resign as Chair of the Board of Canada Post, thus triggering a search for a replacement chairperson. An immediate responsibility of the new Chairperson and the Board of Directors would be the search for a new President and Chief Executive Officer, necessitated by the 12 August 2004, resignation of the Hon. André Ouellette as President and CEO of Canada Post.

The search for a Chairperson of the Board of Directors was conducted by the Governance and Nominating Committee of the Board, chaired by Canada Post Director Mr. Cedric Ritchie. The Minister had requested that names be provided by 30 September 2004, reflecting a sense of urgency that, according to Mr. Ritchie, was shared by the Board of Directors. The responsibilities of President and CEO had been carried out on a temporary acting basis since the February suspension with pay of the incumbent, but a search for a replacement had been precluded until Mr. Ouellette’s status became clear.

Appearing before the Committee, Mr. Ritchie indicated that the deliberations of the nominating committee resulted in a shortlist containing two names that was presented to the Minister, following its review and endorsement by the Board of Directors. Minister McCallum indicated that he contacted the designated opposition party critics for Canada Post to advise them of his intention to appoint Mr. Feeney. Following this, on 30 September 2004, the appointment was publicly announced.

Order-in-Council P.C. 2004-1124, appointing Mr. Feeney to hold office during pleasure, on a part-time basis, for a term of three years, was tabled in the House of Commons by the Minister of National Revenue and Minister Responsible for Canada Post, the Hon. John McCallum, and referred to the Committee on 13 October 2004, pursuant to Standing Order 110(1).

THE APPOINTMENT PROCESS

A new merit-based appointment process applying to the recruitment of all chief executive officers, directors and board chairpersons of Crown Corporations was announced by the President of the Treasury Board on 15 March 2004 in Vancouver, B.C. (See Appendix 1). The announcement directed boards of directors of Crown Corporations to:

establish the following new appointment process:

  • A permanent nominating committee will be struck by the board of each corporation. If the board so chooses, this committee may include outside eminent persons to support the work of the board. Among other things, the nominating committee will establish appropriate criteria for candidate selection.

  • A professional recruitment firm will be engaged to assist these nominating committees in the search for meritorious candidates. In addition, public advertisements will be posted in newspapers and in the Canada Gazette for all openings for the positions of chief executive officer and chair of corporations.

  • The nominating committee will make recommendations to the board of directors, and the board will provide a short list of candidates to the minister responsible for the corporation. Based on this list, the minister will make a recommendation for appointment.

  • The appropriate parliamentary committee will then review the candidate recommended by the minister.

A letter dated 23 April 2004 and signed by the Hon. Reg Alcock, President of Treasury Board was sent to Ms. Anne Joynt, Acting President and CEO of Canada Post, for the stated purpose of confirming that Canada Post would be required to follow the process announced on 15 March 2004, unless its enabling legislation provided otherwise (see Appendix 2).

The letter contained the following statement, substantially repeating the 15 March 2004 announcement: “In undertaking its work, the nominating committee will need to rely on rigorous processes involving the use of a professional recruitment firm as well as public advertisements for the selection of the CEO and chairperson.” It then requested that Canada Post provide details concerning its nominating committee and the selection criteria to be employed, and referred the reader to an “attached overview” for details concerning the new appointment process.

The attachment makes several important changes to the process requirements stated in the letter and the 15 March announcement, by permitting exceptions to be made to key requirements. Key requirements as stated in the overview, with the new language that permits exceptions identified by bold type, are as follows:

  1. “(T)he nominating committee will need to rely on rigorous processes involving the use of a professional recruitment firm, where appropriate, as well as public advertisements…”.

  2. “In the case of the CEO and chairperson, the positions would normally be advertised in the Canada Gazette and national newspapers.”

  3. “For all positions, including those of directors, the nominating committee will normally seek the assistance of an executive search firm.”

OUR HEARINGS

A.  A. The Process

In their appearances before the committee, both the Minister of National Revenue and the Chairman of the Canada Post Nominating Committee affirmed that the requirements of the new appointment process, as stated in the letter from the President of the Treasury Board, were followed in nomination of Mr. Feeney. Mr. Ritchie, the Chairman of the Nominating Committee, drew attention specifically to the degree of discretion given to nominating committees by the language of the attachment, and indicated that it had been necessary to avoid taking what were understood to be optional steps in order to meet the nomination timeframes requested by the Minister:

It would not have been possible to deliver suggested names to the minister within the timeframe that the minister suggested while also completing all elements of the process generally applicable including advertising the positions and engaging a search firm. I discussed this conclusion with Ms. Albo (Acting President and CEO), then with the corporate governance and nominating committee, and then with the board, who agreed. (1203:28/10)

Mr. Ritchie also identified some elements of the guidelines that had not been followed: a recruitment firm was not used, and advertisements were not placed in national newspapers or the Canada Gazette.

In his 2 December appearance before the Committee, the President of the Treasury Board described the process established by the March announcement and the letter sent to Canada Post in April as an “interim process,” because a broader review of Crown Corporation governance announced on 10 February 2004 had been expected to result in further changes. Mr. Alcock indicated that the review is nearing completion, and that it may result in a “completely new process.”(1235: 12/02) He claimed that the appointment had been “held open” until it could be examined by a parliamentary committee, thus fulfilling government commitments about transparency and parliamentary involvement, and argued strongly that the intent of the interim process – finding the best possible candidate – had been met.

Apparent inconsistencies between the requirements announced in March and those detailed in the April letter were addressed specifically. Mr. Alcock indicated that the April letter had allowed for exceptions to the March requirement for use of a professional recruitment firm in response to concerns expressed by some corporations about the need for this step in all cases, and the costs. He argued that this change introduced needed flexibility, rather than backtracking on the March commitment, and in response to questioning added that it reflected advice received from officials following the March announcement:

Parliamentarians have questioned whether the process announced by the government in March was circumvented with regard to the appointment of Mr. Feeney as chairman of the board of Canada Post. The answer is no. The appointment of Mr. Feeney was made on a recommendation submitted by the nominating committee to the responsible minister, and Parliamentarians reviewed his nomination as requested by the interim process.
…The purpose of the process announced in March is to find individuals with the competencies and attributes to lead Crown corporations. In the case of Mr. Gordon Feeney, the process delivered! (Statement, p. 3)

In the course of the discussion, Mr. Alcock affirmed that the challenges of modern public sector governance require the constructive engagement of all parliamentarians, on a non-partisan basis, based on a broadly shared recognition of the need for progress. Committee members noted his receptive response to several concerns that remain unaddressed by the appointment process as it operated in the Feeney appointment. Notable among these are the need for senior appointments to reflect the existence of two official languages and the bilingual character of federal institutions, including organizations such as Canada Post, and the need for the executive cadre in federal institutions to better reflect the diversity of Canadian society and to equitably represent the populations of all of Canada’s regions.

B.  The Role of Personal Connections

During his appearance before the Committee, Mr. Feeney readily acknowledged that he had worked with Minister McCallum for five years at the Royal Bank of Canada; the Minister in his capacity as chief economist, Mr. Feeney as head of retail operations. Mr. Feeney added that while they were work colleagues, they had little day-to-day interaction. Mr. Feeney also told the Committee that they did not have a close friendship and that he has seen the Minister on only two occasions in the four years since the Minister left the Royal Bank. This account was substantially reflected in the testimony of Minister McCallum.

Mr. Cedric Ritchie indicated that he had made the initial recommendation that Mr. Feeney’s name be put forward for consideration. Following an examination of the requirements and qualifications of the position, he mentioned to the Minister that an individual such as Mr. Feeney would be suitable and could be considered. Mr. Feeney’s name was subsequently included on the list of two possible candidates provided by the Governance and Nomination Committee to the Board of Directors of Canada Post, which endorsed it and submitted it to the Minister. Like Mr. Feeney, the other recommended candidate was someone identified by members of the nominating committee, on the basis of their “knowledge of the individuals and their past performances.”(1240: 28/10)

Mr. Feeney was known to Mr. Ritchie both in his capacity as a banking industry competitor (Mr. Ritchie is the former Chairman of Scotia Bank) and because both men had served on the board of directors of the Business Development Bank of Canada. Mr. Ritchie is currently the Chairman of the Board of the BDC and Mr. Feeney continues to serve as a director. According to Mr. Ritchie, “I have a great respect for Mr. Feeney, but I am not a buddy of Mr. Feeney. …while we can at least be civil …he was a competitor, and I still would take as much business as I could from him.”(1245: 28/10)

OBSERVATIONS AND RECOMMENDATION

The observations and recommendation provided below are this Committee’s contribution to the global review of Crown Corporation governance that is presently in its final stages. Committee members look forward to their reflection, especially in the revised appointment process that the President of the Treasury Board has indicated will be one of the products of this review.

  1. In order to be useful, the requirements that need to be met by recruitment processes need to be clear. In the case of the Feeney appointment they were not.

  2. The appointment process overview attached to the 23 April 2004, letter from the President of Treasury Board is unclear, taken by itself. Its description of some elements of the prescribed process as “normally” required, or required “where appropriate,” implies that exceptions may be made. However, no guidance is provided as to what kinds of circumstances might justify a departure from normal practice. The requirements prescribe a process and simultaneously give organizations open-ended discretion not to comply with it.

  3. The unclarity internal to the overview is increased when the overview is read in combination with the 23 April letter to which it was attached. The letter states unconditional requirements for the use of professional recruitment firms and public advertising while, as just noted, the attachment makes these requirements subject to important qualifications. Any organization examining the overview in combination with the letter might reasonably be confused about whether it was actually required to use a professional recruitment firm and public advertising, or retained the discretion to decide whether or not this was appropriate.

  4. The March press release and April statements, when taken together, create further ambiguity and also foster public confusion. The March press release encourages the public expectation that new standards of conduct will be adhered to rigorously, but what is actually required by the April letter and overview is more modest. In addition to introducing the possibility of exceptions to the use of professional recruitment and advertising, the April letter requires these steps for CEO’s and board chairpersons only, rather than the “chief executive officers (CEO’s), directors and chairpersons” referred to in the March press release.

  5. The President of the Treasury Board has argued that the March commitment to transparency and an expanded role for Parliament was kept, because “…Parliamentarians reviewed the nomination,” as required by the interim process. However, what this Committee was given to review in October was not Mr. Feeney’s nomination but his appointment, and it was described as an appointment in both the Order in Council (P.C. 2004-1124 dated 30 September 2004) referred to the Committee and Minister McCallum’s Press Release of the same date (“Canada Post Chair Appointed,” Ottawa, Ontario).

  6. More broadly, the President of Treasury Board has stated his awareness that government requirements for the Crown Corporation appointment processes would not be finalized until the completion of the broad review of Crown corporation governance launched in February 2004. Nevertheless, new requirements were announced only a month after the launch of the review, with no clear indication that they were seen as merely interim measures. Furthermore, corporate stakeholders and the President’s own advisors appear not to have been fully consulted since, according to Mr. Alcock’s statement to the Committee, the revisions incorporated in the April letter reflected their reaction to what had already been announced in March. Excessive haste may also explain the more specific deficiencies discussed above, such as the absence in the April requirements of guidance about the circumstances that might justify exceptions.

  7. The Committee applauds the apparent determination of the President of the Treasury Board to make needed improvements to the appointment process of Crown Corporations. However, it believes that the more deliberate pace being followed by the review of Crown Corporation governance that is occurring under the President’s direction provides a better basis for progress than press releases and hasty guidelines that permit appointments to be made in a way not significantly different from earlier practices.

  8. While the Committee accepts testimony it has received relating to the character of the relationships among Minister McCallum, Mr. Ritchie and Mr. Feeney, complete transparency concerning the key relationships in this appointment process was not achieved until this Committee explored them. A more consistent way to ensure that personal or business relationships do not undermine the credibility of appointment processes is needed.

In the light of these observations and the findings obtained during the course of its hearings on the process used to appoint Mr. Feeney, the Committee recommends:

  1. That the President of the Treasury Board:

    1. develop a set of unambiguous requirements for the potentially differing appointment processes appropriate for chief executive officers, board chairpersons and directors of Crown Corporations, as well as federal foundations, agencies and commissions, and ensure that these requirements reflect the standards of transparency, merit and Parliamentary involvement affirmed in his March 2004 press release;

    2. ensure, through these requirements, that Crown Corporation executive appointments reflect:

      • the existence of two official languages in Canada,
      • the bilingual character of federal institutions,
      • the diversity of Canadian society, and
      • the need for equitable regional representation in federal institutions;

    3. include, in these requirements, a requirement that each party involved in a nomination process declare to the nomination committee any relationship to another party involved in the process that could affect public perceptions of the propriety of the appointment process;

    4. include clearly defined exceptions, where exceptions will provide needed flexibility, and a process that requires organizations to seek and obtain approval from the President of Treasury Board before making an exception to a normal requirement;

    5. require the following information to be provided to Parliament along with any nomination or appointment:

      1. the selection criteria employed in selecting the nominee or appointee,
      2. a justification of the nomination or appointment, specifically referring to the selection criteria,
      3. all disclosure statements concerning personal or business relationships (as required at (c) above), and
      4. any request for authorization to make an exception to an appointment, including rationales provided and, where a request has been accepted by the President of the Treasury Board, a statement of the reasons for its acceptance;

    6. forward the revised appointment process requirements to this Committee by February 15, 2005, for review and, at the invitation of this Committee, appear before it for a discussion of the requirements and their application; and

    7. publicly withdraw the overview appended to the April letter to Canada Post, and by letter inform all organizations to which it has been sent of its withdrawal and replacement with the requirements recommended above.

CONCLUDING REMARKS

Committee members recognize that networks of acquaintances sharing perceptions of an individual based on accumulated observation and experience can provide insights not available through more formalized recruitment processes. However, unless the perceptions of informal networks are counter-balanced by more inclusive, transparent and competitive selection processes, senior executive communities can readily degenerate into comfortable clubs that perpetuate themselves on the basis of cronyism and complacent indifference to the potential contribution of those outside their walls.

The process that resulted in Mr. Feeney’s appointment was not significantly different from the traditional processes that the appointments policy announced by the President of the Treasury Board was intended to replace. The fact that the Chairman of the nominating committee, the nominee and the Minister who made the final selection are all acquaintances, and share lengthy experience as senior executives in the banking industry, does nothing to dispel the kinds of concern that the new appointment process was intended to address.

Committee members believe that Mr. Feeney will make a significant contribution to Canada Post. It is unfortunate that the manner of his appointment has created additional challenges for him as he assumes his position as Chairman of the Board of Directors. Committee members wish him every success. We also look forward to action by the President of the Treasury Board in response to the recommendations set out above, so that the issues addressed in this Report do not arise again.