In a speech to the Calgary Chamber of Commerce, Bank of Canada Governor David Dodge talked about the efforts currently underway to restore investor confidence in the wake of recent corporate governance and accounting scandals.

“It seems that there have not been exactly the right incentives in place for corporate management, boards and their auditors and investment bankers to disclose all relevant information and to always act in a manner that is fully conducive to fair and open markets,” Dodge noted in his speech. “The market itself will provide some of the solutions to the problems currently undermining investor confidence. But others may best be dealt with by regulation.” Dodge echoed Ontario Securities Commission chair David Brown, who has said that more than market discipline is needed to restore investor confidence.

“It’s important that we continue to work on these issues and, moreover, that we are seen to be working on them. We live in a world where impressions matter and where capital markets are increasingly global. Canadian issuers will be judged not only against our own standards, but also against the worldwide standards for accounting, disclosure and governance,” noted Dodge, while allowing that smaller firms may deserve lighter rules. “Let me be clear: the same principles must apply to all public companies. While all businesses must abide by the spirit of the new standards, it may well be appropriate that larger, more widely held firms should face more detailed requirements than smaller firms whose shares are not as widely held.”

Dodged avoided the question of a national regulator, although he did note that developing an appropriate Canadian response to investor confidence issues is “made more difficult because we do not have a single lead securities regulator, as do the United States, the United Kingdom, and Australia”.

“In sum, the best way to restore investor confidence is to put in place a system of incentives that encourages managers and boards to always act in the best interests of shareholders. Disclosure is key. In every case, shareholders are best protected with full, fair, and accurate disclosure of information,” He said.

Dodge also announced the introduction of a new semi-annual publication from the Bank of Canada, The Financial System Review. It will publish some of the Bank’s ongoing work in monitoring financial system developments and analyzing the direction of financial sector policy.