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Abstract
When the Sarbanes-Oxley Act (Sox) was enacted, Canada began to question whether its approach to governance would have to change. Some argued that the reputation of the Canadian capital markets could only be protected and promoted by being able to tell the world that its corporate governance laws were no less rigorous than those in the US. The rules-based versus the comply-or-disclose approach has been the subject of debate since Sarbanes-Oxley was enacted. Securities regulators in most Canadian provinces have adopted regulations to mirror those introduced by Sarbanes-Oxley in two areas of financial reporting: the mandate and composition of the audit committee; and chief executive officer (CEO)/chief financial officer certification of the financial statements. Canada's securities regulators are not proposing to regulate in most other areas of corporate governance, however. They will instead continue to rely on a disclosure regime that gives investors detailed information about an issuer's governance practices and allows investors to make their own choices. Canadian securities regulators released National Policy 58-201 in October 2004. The proposed governance policy sets out 18 best practices drawn from existing Canadian standards and US regulatory standards (including the Sarbanes-Oxley Act and the listing standards of the NYSE and Nasdaq). The governance policy recommends best practices in the following areas: 1. board governance, 2. role of the board, 3. role of the board in the issuer's integrity, 4. board effectiveness, 5. nominating directors, and 6. executive compensation.