Thursday, November 26, 2009

The four Ps of governance

I am getting really excited about this weekend and Reboot Alberta. I'm looking forward to a meeting of progressive thought leaders that will focus on the future of this province. Most of all, I'm looking forward to meeting so many of the people that I have come to know online.

In advance on this meeting, I have decided to finally write this post on governance that I have been thinking about for some time.

In order to have effective governance, the stakeholders must have a strong model for collaboration. Effective collaboration relies upon a good understanding where the commonalities and differences lie amongst the stakeholders and an open acknowledgement of those differences.

Governance comes down to a hierarchy of four levels of opinion: Philosophies, Principles, Policies and Practices.

The model is an inverted pyramid because the practices of government need to be based upon the policies set forth by the policy makers, which in-turn are based upon their principles which are based on a set of fundamental philosophies. It is a pyramid because there are a fewer number of philosophies that guide an increasing number of principles and a larger number of policies and practices.

A collaborative decision-making group, whether it is a political party or a school board, must start from a basic set of agreed upon philosophies. These should be broad and general statements for which everyone can easily agree on. If a philosophy is to be stated, then little attention should be paid to the specific wording as it is the idea that is of fundamental importance. A philosophy should describe the general purpose of the group.

Once the group is clear on their collective philosophy, then they need to be open about their individual principles. Principles are those individual beliefs that change little over time that guide one's decision making. In a group, even those with high levels of homogeneity, individuals will have differing principles. An effective collaborative group should have a large number of common principles, yet will still have some differing principles. The ability to collaborate will depend directly on the group's understanding of where their principles differ and a respect for those differences.

The first two levels are preliminary to the decision making process, they relate to the biasses that the group or individuals within the group hold. The next level is the decision making level. Policies are the set of directions that the legislators give to their administrators as to how programs are to be delivered. It is a given that legislators will differ in opinion on individual policies, so it is essential that open, honest and respectful debate occur in the setting of policy. Unfortunately, too often, political trade-offs are used to set policy resulting in inappropriate policy. As a result of the debate there will be, for lack of better words, winners and losers. There must be no problem with this - it is a result of the process and there should be no shame in it.

Finally, there is a subtle but important difference between policy and best practices. The realm of policies should be constrained to those matters for which clear answers do not exist, whereas those matters for which best practices exist should be left to the hired experts. The policy should guide the bureaucracy, but the execution (practice) should be entrusted to those people hired to do it.

With that mind, good luck Rebooters!

4 comments:

Dave Hancock said...

Very much enjoyed this post. As president of the PC Assoc of Alberta I guided the development of our Statement of Principles, which renewed and updated the Guideposts which had been published by Peter Lougheed as Leader. Those Principles have been reviewed several times since then but remain essentially as drafted. The only thing I would caution is being too disdainful of "political tradeoffs" Each individual brings his or her principles and passions to the process but no one can be effective acting alone. The best one can do is align with those who are the most like minded and work from there. One can never leave behind their principles, but there is often a clash of values in life.

Dave Hancock said...
This comment has been removed by the author.
djkelly.ca said...

I know I've thanked you in person, but I wanted to thank you here too for this post. I found it very helpful and even brought it up a couple times at Reboot Alberta. I think it helped steer some good discussions.

larry said...

What do these institutions have in common?
Goldman Sachs. The Catholic Church. Alberta Finance.

They each have proven that they will “protect their own interests” before protecting the public.

I have now heard from Alberta Finance Minister Ted Morton.   He will not answer questions on the practice of letting investment firms violate our laws.  It is strange to see a public servant stand on the side of financially abusive practices and secrecy.

Despite $32 billion missing from the Canadian economy using legal tricks. (ABCP toxic investments)  Despite mutual fund companies which put billions into their own pockets at the expense of the public.  Despite several investor suicides, by people who have been damaged by illegal investments “approved” by our securities commissioners.

Provincial securities commissions have done thousands of back-room deals without notice to the public.  Deals that give investment sellers “permission” to ignore our laws that protect investors. Strange to think that this is how our securities commissioners get paid. Can you imagine a police force that got paid by selling permission slips to skirt the law?

The finance minister refuses to answer.  This speaks volumes about what he is hiding. Or who he is taking his “advice” from.  I suspect he gets his advice from persons earning $500,000 salaries at the Securities Commission.   The Ontario Legislature recently chastised it's securities commission for failing to protect the public interest.  Alberta Finance is years behind in protecting the public. But they are fine at protecting themselves.

The questions are:

“What public interest is served by giving investment firms permission to sell products that do not meet our laws?”

“If there is a legitimate public interest, then why are the deals done in secret, without notice to consumers of the investments, and without public disclosure?”

If there are legitimate reasons then the questions are easy.  If there is something to hide, then they become more difficult.  Mr. Morton, why are you hiding?

With no explanation, I conclude that our investment industry is getting away with the financial murder of our economy. Some prefer to call it financial rape. I call it legalized financial abuse and it is in the order of billions. They are riding on a perfect wave of self regulation, corruption, connections and cronyism. Mr. Finance Minister, what are you gaining by supporting these practices?

For Alberta Finance to hide this is a breach of public trust.  Write a note and see if they can answer.  Then write me a note and myself and Citizens For Better Governance will track the answers. lelford@shaw.ca
Larry Elford (former CFP, CIM, FCSI, Associate Portfolio Manager, retired)

Founder of www.investoradvocates.ca