Member Viewpoint: Informed leadership, hard data & good communication are a regulator’s best friends

Jan 08, 2017
Peter Klohn is the first independent chair of New Brunswick’s Financial and Consumer Services Commission (FCNB), where he has overseen the integration of several regulatory service groups into a single regulator.

He was recently appointed as a director of the Capital Markets
Authority Implementation Organization, which is responsible for
implementing the securities regulatory body for provinces participating in a collaborative capital markets regulatory system for Canada.

Previously, he was a senior corporate partner at the Atlantic regional law firm Stewart McKelvey, where he advised on corporate finance, exempt markets, mergers and acquisitions, and entrepreneurship.

Klohn was responsible for a report to government that resulted in the establishment of the New Brunswick Securities Commission in 2004 and was a member of the advisory committee to the Canadian Securities Transition Office, which was responsible for reviewing proposals for federal regulation of securities in Canada.

Klohn has served on numerous private business advisory boards. He was chair of the Harbour Station Commission, a governor and executive member of the Rothesay Netherwood School and has served on the boards of a variety of legal, arts and community

Klohn received a BBA from the University of New Brunswick and an
LL.B from York University.

Serving an independent Crown corporation, the FCNB board is responsible for setting policy and recommending changes to legislation. That sounds like a very different mandate than for a board overseeing a business. How is your role different, and does it require different skills?

FCNB is an integrated financial and consumer services regulator responsible for a wide portfolio of legislation, which covers provincial financial institutions, securities, pensions, insurance and consumer affairs. Portions of its legislative mandate include rule-making authority, which facilitates informed and responsive regulatory change. Proposed rules are subject to both stakeholder and ministerial review.

As a result, our board members have to consider regulatory policy matters which are often outside of the experience of many directors. An emphasis at FCNB on continuing regulatory education and policy briefings helps bridge this gap and blends the expertise of staff with the experience of our board members. As chair, I am responsible for overseeing our relationships and meeting regularly with our stakeholders, government
officials and our staff to advance the shared regulatory agenda. I don’t think that my role is necessarily different than other chairs (since dealing with a wide group of stakeholders is always a big part of the job) but the variety and mix of stakeholders may be a little bit different because of the significant policy and regulatory elements.

How does the board make sure that it remains up to date with the knowledge, skills and insights to carry out its duties?

In addition to continuing regulatory education, FCNB has an education policy that encourages members to constantly upgrade their skills (including providing ICD membership and resources to all board members). The diversity of FCNB’s mandate compels reliance on the skills and experience of board members who have unique expertise in specific regulated areas. Board recruitment is intended to ensure that a wide range of expertise is represented to permit members to lead debate in their area of experience.

What are some of the major challenges your board faces in the financial and consumer services sector, and how is it addressing them?

All regulatory organizations in Canada are facing the seemingly irreconcilable demands of increased expectations by stakeholders and shrinking budgets. Our board is working with management to implement what we believe will be the most cost effective and integrated regulatory information technology system of its
type in Canada. In addition, we are pursuing an internal reorganization which will reduce regulatory silos, allow us to deploy our people more efficiently, and permit us to assume additional regulatory responsibility. Finally, we are collaborating with other organizations wherever possible to improve our effectiveness.

What steps are taken on the board to ensure there is sufficient debate and diversity of ideas during key discussions?

FCNB is committed to diversity in all its forms, including, consistent with our location in Canada’s only bilingual province, linguistic diversity. Thoughtful recruiting efforts, regular private sessions of the board, sufficient time on agendas for canvassing all views, and reminding ourselves often that we can disagree without being disagreeable, are all elements of our efforts to encourage open debate and diversity.

One issue which we are currently reviewing is the impact of technology on board discussion and “buy in.”
Although virtual meetings may help stretch budgets, they arguably inhibit easy participation and may diminish the board’s ability to have a full and frank debate among engaged participants. We have not come to any
resolution on this topic, but I believe it is an important consideration as we seek to implement efficiencies in our board practices and utilize the latest technology platforms.

The FCNB mandate is to protect consumers and enhance public confidence. How does the board measure how well that mandate is being met?

FCNB believes in data-driven and evidence-based regulation and spends significant time and money canvassing the communities and stakeholders we serve through surveys, public consultations and community outreach.

We also take a leadership position in sharing data and reviewing best practices with regulatory organizations
throughout North America to baseline our efforts. The reality of regulation is that any initiative will attract strongly held opinions on many sides and that there is no single measurable outcome that will satisfy all points of view. However, transparency, effective communication, thoughtful data collection and good processes will
permit an informed and intelligent consideration of outcomes by both the board and stakeholders.

Can you offer an example of how you have been able to apply your training from the Directors Education Program to your work on a board?

DEP made me a better board member and a better chair by providing further undeniable evidence of the
power of collaboration and diverse opinions. There is no substitute for being in a confined space for extended periods with really smart and accomplished people. The breadth of knowledge and expertise I saw at DEP
convinced me once and for all that an open and thoughtful process in the boardroom invariably leads to much
better results. It helped me distinguish “process without purpose” from real governance process, which enhances board oversight and meaningfully advances organizational objectives. This perspective has fundamentally influenced all of my board interactions since completing the DEP.

Source: Director Journal (January/February 2017)