Corporate Governance is defined as the mechanisms, processes and relations by which organizations are controlled and directed. Corporate Governance has become an indispensable element for modern day organizations in order to accomplish their goals and objectives. This report focuses on the corporate governance practices which are being followed at SNC-Lavalin, which has helped the company to become one of the most reputed companies in the world in terms of corporate governance.
Strong corporate governance at SNC-Lavalin begins with the Board of Directors of the firm and its members who supervise administration of the enterprises corporate purposes and proceedings. The main duties and areas of responsibilities of the Board of Director of the company is overseeing the board and senior management, maintaining analytical administration and control, risk assessment, maintaining corporate governance, ethics, norms and process, declaration to shareholders and other stakeholders of the company, maintaining collateral affairs and internal administration, health and safety, safeguard and surveillance and common level liabilities applicable to company and process and governing conduct. As stated by Todorovic (2013) the governance and ethics committee support the Board of Directors in framing approach of the firm towards corporate governance, ethical and compliant concerns by suggesting new Board representatives and analysing efficaciousness of board and its various councils, their concerned chair and specific directors. The House of Policies of the company strengthens the corporate governance of the company by overseeing the standardization of policies and processes in terms of their issuance, approval and application. The Policy Oversight committee of the company helps in establishing good practices in policy governance and it meets on a monthly basis in order to review any new and revised policies and procedures.
As opined by Cosneanu et al. (2013) the company strives to embed its culture and vales in everything what it does which consist of proposition of strong governance. As a part of the HR governance of company, the Executive Vice-President of HR get involved in executive council, ethics and accession council and Human Resource Council of Board of Directors of the company. The above mentioned committees help in aligning and continuously improving the corporate governance, HR strategy, approach and initiatives of the company. In order to ensure effective corporate governance, the veteran representatives of HR team regularly connect with their internal clients and also guide their individual section based summit. As representative of HR committee, the senior members of the HR team of the company also meet on a monthly basis with the Executive Vice President of HR so as to explore primary concerns influencing employees of company and the HR functions globally in order to help promote Corporate Governance of the company.
According to Aytekin, Miles and Esen (2013) one of the most largely acceptable corporate governance principle which is observed at SNC-Lavalin is transparent classification of responsibility of the board members from that of the management. In SNC-Lavalin, corporate culture, the board of directors of the company select the management of the company, examine strategic plans, reviews budget and also oversee suitable control and compliance system are in place and the role of the management in SNC-Lavalin is to run the company in a smooth and effective manner. As stated by Bota-Avram and Rachisan (2013) another corporate governance principle which is being followed in SNC-Lavalin is that the non-executive directors of firm are not engaged in regular operations of firm. The non-executive directors depend on the information obtained from the person internal to organization. The corporate governance policies of SNC-Lavalin mandate compliance with various laws such as anti-bribery laws and firm’s controls, procedures and conduct which are framed to insure internal and external complacence with the above mentioned legislations.
The corporate governance theory which is being followed by SNC-Lavalin is stewardship theory in which a steward safeguards and enhance shareholders collateral through organisation’s performance because in doing this, the steward’s viability role gets enlarged. According to Keay (2017) in this context the stewards are the enterprise key leaders and managers who work for shareholders and safeguard and generate earnings on their behalf. In contrast to the agency theory, the stewardship theory focuses not on perspectives of individualism instead focuses on the role of top management, who being as stewards combine their goal as part of firm. In context of SNC-Lavalin, it can be said that Board of Directors and executives work as stewards who are responsible for protecting and maximizing the wealth of the shareholders of firm.
Despite possessing a strong corporate governance framework, SNC-Lavalin found itself in the middle of a bribery scandal and fraud controversy which disrupted the image of the company and legal actions were taken against the company. The RCMP has laid corruption and fraud charges against the company and two of its subsidiaries over alleged criminal acts which occurred during doing business in Libya. There is one count of corruption related to at least $47.7 million in alleged bribes to Libyan public and other officials whereas the second count is for fraud of about $130 million related to construction projects in Libya, which also includes the Great Man Made River Project.
As a result of the internal investigations, the then CEO of the company was removed from his post as he was found guilty of signing off payments, to undisclosed agents breaching the code of ethics of the company. As a result of the scandal, the Audit Committee of the company hired independent counsel to in order to conduct an extensive internal review whose results were made public to the company. The report which was prepared by the independent counsel was handed over to the concerned authorities and the company collaborated with their efforts in order to bring wrong-doers to justice. Several previous employees of the company face charges currently and the comments by the investigators in this case indicate that the company might be a victim of embezzlement by two trusted long time executives of the company. The company appointed a new interim CEO who was highly responsible for stabilizing the company in the troubled times by re-enforcing standards of conduct and implanted better internal control. In the meantime, the company appointed a new CEO after extensive searching who has a zero-tolerance red line and was responsible for developing highest level of ethical values among all the levels of the company which would help in preventing such scandals. In order to prevent such scandals the company highly stressed on strengthening and diversifying their communication channel in order to ensure that the non-executive directors of the company receive full and accurate information from the people within the company. Another step taken by the company was to ensure that all members of the company, from the top level to the bottom level follow practices such as financial control, operational compliance and codes of conduct diligently and consistently.
From the above report it is clear and evident that strong focus on corporate governance at SNC-Lavalin has helped the company in becoming one of the most reputed global companies in the world in terms of corporate governance which has helped the company to achieve to achieve its goals and objectives.
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Bota-Avram, C., and Rachisan, P. R. (2013). ANALYSING THE SIMILARITIES BETWEEN OECD PRINCIPLES VERSUS EUROPEAN CORPORATE GOVERNANCE CODES - AN INTERNAL AUDIT PERSPECTIVE. Annales Universitatis Apulensis : Series Oeconomica,[Online] 15(2), 493-502. Available at- https://search.proquest.com/docview/1494056851?accountid=30552 Accessed as on 15/11/2018
Cosneanu, S., Russu, C., Chiritescu, V., and Badea, L. (2013). Foundations and principles of corporate governance. Valahian Journal of Economic Studies,[Online] 4(2), 31-38. Available at- https://search.proquest.com/docview/1541965698?accountid=30552 Accessed as on 15/11/2018
Keay, A. (2017). Stewardship theory: Is board accountability necessary? International Journal of Law and Management, [Online]59(6), 1292-1314. Available at- doi:https://dx.doi.org/10.1108/IJLMA-11-2016-0118 Accessed as on 15/11/2018
Todorovic, I. (2013). IMPACT OF CORPORATE GOVERNANCE ON PERFORMANCE OF COMPANIES. Montenegrin Journal of Economics,[Online] 9(2), 47-53. Available at- https://search.proquest.com/docview/1792768415?accountid=30552 Accessed as on 15/11/2018