SNC-Lavalin's Governance: Structure, Effectiveness, and Improvement

This report provides an evaluation of corporate governance practices at SNC-Lavalin, a prominent company in the construction industry. It begins with an introduction to corporate governance and its importance in modern organizations. The report then delves into SNC-Lavalin's governance structure, focusing on the role of the Board of Directors, various committees (Governance and Ethics, Policy Oversight, HR), and the implementation of policies and processes. It highlights the company's adherence to principles such as transparent responsibility classification and the role of non-executive directors. The report identifies SNC-Lavalin's use of stewardship theory, where key leaders act as stewards safeguarding shareholder wealth. Despite a strong framework, the report acknowledges a past bribery scandal and outlines the company's response, including internal investigations, leadership changes, and strengthened communication channels. The conclusion emphasizes that a strong focus on corporate governance has helped SNC-Lavalin become a globally reputed company, aiding in the achievement of its goals.

Corporate Governance
NAME OF STUDENT:
NAME OF COLLEGE:
AUTHORS NOTE:
Running head: CORPORATE GOVERNANCE

CORPORATE GOVERNANCE
Contents
Introduction......................................................................................................................................2
Evaluation........................................................................................................................................2
Conclusion.......................................................................................................................................4
References........................................................................................................................................5
1

CORPORATE GOVERNANCE
Introduction
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.
Evaluation
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
2

CORPORATE GOVERNANCE
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.
3

CORPORATE GOVERNANCE
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.
4

CORPORATE GOVERNANCE
Conclusion
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.
5

CORPORATE GOVERNANCE
References
Aytekin, I., Miles, M., and Esen, S. (2013). Corporate governance: A comparative study of
practices in Turkey and Canada. IUP Journal of Corporate Governance,[Online] 12(2), 7-27
Available at- https://search.proquest.com/docview/1403485661?accountid=30552 Accessed as
on 15/11/2018
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:http://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
6