Complex American-style laws to help restore public confidence in corporate accountability won’t necessarily force those companies to become more honest or transparent, says the head of the Alberta Securities Commission.

The recently passed Sarbanes-Oxley Act (SOX) in the U.S., which has introduced a number of securities regulatory reforms, simply defines what is and what is not acceptable behaviour, says ASC chair Stephen Sibold.

The ASC has been studying the U.S. initiative, and Sibold says he believes there are two emerging “solitudes” – a made-in-Canada approach to corporate behaviour or one favouring a tough rules-based regimen similar to that being adopted in the U.S.

“They mandate verification procedures and levels of independence in the hope that this will ensure that what is spewed out at the end of the process can be relied upon. But procedures don’t make people honest, and procedures don’t make people competent, either,” Sibold told a luncheon audience Friday at the Calgary Chamber of Commerce.

Stephen Sibold

You can’t have a checklist for every aspect of corporate governance, he added. The high-profile case of Enron illustrates that detailed procedural rules can’t always trump greed, fraud and deceit.

Sibold says there is no rule that can cover every scenario a board might be faced with, but there can be guidelines for common situations.

“Detailed procedural rules make it clear and simple – too simple,” he said. “When faced with a bunch of detailed prescriptive rules and processes, people can lose sight of the purpose of the rule.”

Earlier this fall, the ASC circulated a survey to more than 3,000 market participants, and held several focus group meetings with stakeholders – which includes public companies registered in Alberta, accountants, money managers and investment dealers – to gain more input on the issue.

Sibold says most agreed there was no serious problem with current Canadian corporate governance, and that a “made-in-Canada” solution for Canadian issuers was preferable to the “one-size-fits-all” requirements imposed for New York Stock Exchange-listed companies.

The ASC is proposing several steps, including introducing broad-based corporate governance principles, not procedural rules, into securities law.

Other recommendations include:

* Securities law corporate governance requirements should include many of those currently contained in corporate law, so these requirements are applicable to all reporting issuers and can be enforced by securities commissions. * A CEO and CFO certification requirement similar to SOX should be introduced, but – for now – should not require management’s assessment of internal controls or the auditor’s assessment of internal controls. This issue needs further consideration, the ASC says. * Introduce mandatory courses to educate directors and management about corporate governance. * Boards need to disclose to shareholders how their actions are in the corporations’ best interests. * Securities commissions, stock exchanges and investors need to be more vigilant in monitoring these corporate governance standards.

“We need boards to be thinking,” said Sibold. “We need them to be comprised of knowledgeable people, each of whom is prepared to ask tough questions and exercise good sound judgement. That is the only way to provide an effective verification tool.”

The ASC is the industry-funded regulatory agency responsible for administering the Alberta Securities Act, and fostering a fair and efficient capital market in Alberta.