“guilty charged” - exchange magazine · “guilty as charged”...

22 l exchangemagazine.com l NOVEMBER/DECEMBER 2006

David Johnston readily admits he brought a significant biasto his assigned task. And for that, he does not apologize.In September, Johnston, President of the University of

Waterloo, addressed the Greater Kitchener and WaterlooChamber of Commerce. His topic was how to make “WaterlooRegion the Knowledge Capital of Canada.” He suggested “10goals to get us there by 2010”.The full text of his speech was published in the Record, the

local daily newspaper; Exchange Magazine asked Johnston ifhe would elaborate on his speech. He readily agreed to aninterview to re-examine his 10 goals.Exchange suggested to Johnston that his goals could be

sub-divided into two categories; five, which in great detailinvolved enhancing post-secondary education; and the otherhalf, which seemed more general and less well developed.Goals 1, 2, 3, 4 and 7 all seemed to involve direct benefit tolocal universities. We asked Johnston if he brought a bias tohis assignment.“Guilty as charged,” he said, with a smile. “More than a bias,

it‘s a passion. If you get post-secondary education right,” thepositive impact reaches right through society, he argued.Johnston added, “That’s not to say it’s the only thing to do,”

but he expressed real delight that Ontario Premier “DaltonMcGuinty has named himself Minister of Research and Innova-tion.” If society focuses on research, innovation and education,argues the U of W President, other key social and economicbenefits will follow.

BY PAUL KNOWLES

continued on page 24

“Guiltyas Charged”

RE-EXAMINING DAVID JOHNSTON’S TEN GOALS FOR WATERLOO REGION

David Johnston’s TENgoals to make Waterloo

Region Canada’sKnowledge Capital

1. Improve our educationalachievement levels.

2. Ensure our colleges and uni-versities are leaders in theirdisciplines in the country.

3. Build better access to qualityhealth care.

4. Attract transformational publicinvestment in research anddevelopment, and higher edu-cation.

5. Create a tax-free zone inWaterloo Region.

6. Invest in smart and more spe-cialized infrastructure.

7. Encourage immigration.8. Reduce poverty.9. Create a vibrant cultural centre.10.Celebrate our accomplish-ments and use them as aspringboard to greater things.

exchangenovdec06_pgs22-36:exchangesept06_pgs22-48 10/20/06 12:58 PM Page 22

NOVEMBER/DECEMBER 2006 l exchangemagazine.com l 23

FEATURE STORY

Rick Endrulat,Virtual Causeway

PH

OT

OG

RA

PH

Y:

EX

CH

AN

GE

MA

GA

ZIN

E

David Johnston, University ofWaterloo President

exchangenovdec06_pgs22-36:exchangesept06_pgs22-48 10/20/06 12:58 PM 3

This focus explains why Johnston’sfive education-related goals are rolledout in detail in his presentation.In his speech, he said, “For elemen-

tary and secondary education we shouldmove from middle of the pack to the top25% by 2010; reports ... show our stu-dents have made improvements, but areonly average in their achievement lev-els. A top quartile goal is ambitious, butnecessary if we are to create talent inWaterloo Region.“We should have the highest concen-

tration of PhDs per capita in the country –expanding think tanks like the Centre forInternational Governance Innovation andPerimeter Institute for Theoretical Physicswill help us to attract and retain smartpeople. And we must encourage leadingphilanthropists to help us reach this goal.”His second goal is “to ensure our uni-

versities and college are leaders in theirdisciplines... And that leadership shouldbemeasured in a comprehensive way, notjust through an annual ranking exercise.“We can lead in work experience edu-

cation in the country – we should offer thebest of work experience through skilledtrades and co-operative education pro-grams. Already the University of Waterlooand Conestoga College lead the country inwork experience learning.”“We need to build on the complemen-

tarity of our post-secondary institutions ...We should strive to see our local institu-tions be the best supported financially inCanada.”His fourth goal – attracting “transfor-

mational public investment in R&D andhigh education,” has an obvious focuson higher education. Johnston said,“Consider these public-private partner-ships: UW Research and TechnologyPark, Cambridge School of Architec-ture, Downtown Kitchener Health Sci-ences Campus with School of Pharma-cy and medical school satellite. Simplystunning.”And goal seven points to using post-

secondary educational institutions tomore efficiently integrate skilled immi-grants into the Canadian work-force. Heoffered details to Exchange – U of W’sschools of Pharmacy and Optometry arebuilding programs to assess professionalimmigrants, to determine what addition-al education the newcomers need towork in their fields in Canada, and toprovide that education.

Educational focusJohnston is clearly not ashamed that

the focus of his proposals is post-sec-

FEATURE STORY


Specializing in Retail, Commercial &Institutional Millwork & Displays

• Huge Showroom & Inventory• Custom Millwork & Counters• Slatwall & Grid Accessories• Store Planning & Design

11 Henry Street, St. Jacobs, ON N0B 2N0 • Tel (519) 664-2221 • Fax (519) 664-2105

The Store Fixture Company That Does It All

Kraemer Woodcraft Ltd.www.kraemerwoodcraft.com

SINCE 1951

The Store Fixture Company That Does It All

DDeessiiggnn--BBuuiilldd

PPrroojjeecctt MMaannaaggeemmeenntt

CCoonnssttrruuccttiioonn MMaannaaggeemmeenntt

IInndduussttrriiaall

CCoommmmeerrcciiaall

IInnssttiittuuttiioonnaallBBAALLLL CCOONNSSTTRRUUCCTTIIOONN IINNCC..820 Victoria Street NorthP.O. Box 1202 Kitchener ON

Canada N2G 4G8

tel 519 742.5851fax 519 [email protected]

IInndduussttrriiaall AAwwaarrdd ooff EExxcceelllleennccee,, $$22 ttoo $$1100 MMiilllliioonn,, GGrraanndd RRiivveerr FFooooddss

CCoommmmeerrcciiaall AAwwaarrdd ooff MMeerriitt,, OOvveerr $$1100 MMiilllliioonn,, OOppeenn TTeexxtt

CCoommmmeerrcciiaall AAwwaarrdd ooff EExxcceelllleennccee,, UUpp ttoo $$775500,,000000,, TTiimm HHoorrttoonnss,, GGuueellpphh


ondary education. He argues that muchmore can, and must, be done to makethat foundation stronger. He points toweaknesses in the current system, not-ing for example that the faculty-studentratio at MIT is 4 to 1; at the University ofMichigan, it is 9 to 1, while at his ownmuch-praised University of Waterloo, itis 26 to 1. He argues that the initialobjective, related to the first of his 10goals, should be to reduce that localratio to 20 to 1.He also points to funding models. MIT

receives donations of $100,000 per stu-dent; Michigan, $25,000 per student;Waterloo, $10,000. “So I say to my busi-ness friends, we are flattered when peo-ple speak of us as the MIT of the north,but we are doing so on one tenth of theincome, per student. It’s a miracle thatwe manage to produce the graduates wedo with a relatively modest investment.”Johnston takes a unique approach to

the path to improvement – instead of argu-ing that results must suffer because ofwhat he sees as “modest” funding, hewants “to raise expectations... the bestthing our community can do to this univer-sity is to place high expectations on us.”

And that may lie at the root of John-ston’s 10 goals. He calls for higherexpectations at every level of educationin the region. He calls for schools to “bevery focused on the objective testing...identify the problems and deal withthem in an objective fashion.”

He is concerned that Canadian educa-tion is not keeping pace with world-wideadvancement. He suggests that in theprimary and secondary areas, “we areimproving right across the country in anabsolute way, but in a comparative way[compared to countries such as South

Korea, China or the Scandinaviannations], I’m not sure.”At the post-secondary level – his pri-

mary area of expertise – Johnston is evenless positive. he suggests that there hasbeen a slide over the past 15 years, reflect-ed in the worsening faculty to studentratio – from 18 to 1 in the early 1990s to26 to 1 today. Ontario consistently ratesninth or 10th among Ontario provinces infaculty-student ratio, and in the bottomquarter in North American jurisdictions.He also points to “a one-third diminutionof revenues” in the past 10 years.Overall, he says, “The Ontario univer-

sity and college systems are good sys-tems... but they need more attention...we have a long way to go on quality.”Building on expertiseJohnston’s educationally-related goals

include very specific detail. He arguesthat development should be focused onareas of expertise, and contends that thishas been the approach of local universi-ties to date. “The three universities havemade fairly careful choices,” he says,suggesting that the programs offered atWaterloo, Wilfrid Laurier and Guelph are“quite complementary.”


“The best thing our

community can do to

this university is

to place high

expectations on us.”


Those areas of expertise arestrengthened by the presence of signif-icant institutions such as the PerimeterInstitute, which, says Johnston, “for us,is magical.” He argues that “collabora-tion” – among post-secondary institu-tions and between universities andother institutions – “is key.”

Bringing more such organizations tothe region is one of the President’sfocused goals.Health care

Regarding improving health care, inhis speech, Johnston pitched for moreeducational institution funding: “Oureducational institutions are alreadyleaders in health promotion, preven-tion of disease, provision of care,health-related education, manufactur-ing, and business administration; let'sbring these strengths directly to bearon the improvement of health care inthis community, and create a newindustry – the provision of health serv-ices – in our region.

“We should work toward the creationof a tertiary care hospital in this region,building on the success we've alreadyseen by attracting a satellite medicalschool and school of pharmacy.”

He told Exchange that his goalswere not presented in order of impor-tance, and that improving health careis should be priority one for the region.And he argues strongly for a “tertiarycare facility,” saying, “We’re a largeenough community that we should beable to look after our folks, here. It’s abit surprising for me that this hasn’thappened.”

The other fiveJohnston’s goals regarding culture,

poverty and infrastructure may be seenas less well developed in their detail.He admitted, for example, that his pro-posal regarding establishment of a tax-free zone for non-governmental organ-izations was a preliminary suggestion,which would need “more work” beforeit became a practical recommendation.

Concerning cultural development,Johnston called for cultural investmentby local business leaders, pointing toexamples from other Canadian centres,such as the late Ken Thomson’s dona-tions to the Art Gallery of Ontario. Hesaid, “We are becoming a prosperouscommunity, with outstanding examplesof young entrepreneurs who haveshown outstanding generosity.” Hepoints to the example of Stratford’s




Tom Patterson, whose vision sparkedthe Stratford Festival.But he admitted the irony in his

examples of local cultural strengths,which included the K-W Symphony –

which then publicly threatened bank-ruptcy only days after Johnston’s pres-entation to the Chamber of Commerce.He praised the symphony, saying “oursymphony has certainly punched aboveits weight over the last 30 years.”But his overall approach to cultural

development is admittedly lacking indetail. Johnston calls for a wide-sweep-ing approach, which he describes asplanting 100 flowers and seeing whichones bloom.

PovertyJohnston’s comments about poverty

continue in this same, much more gen-eral vein. Although clearly well-intend-ed, his suggestions have none of thespecifics of his educational goals. Infact, asked about his strategy to com-bat poverty, Johnston simply says, “bycoming to recognize it and being thegood Samaritan.” He brings someexperience in this area – in Montreal,he co-chaired the United Way-styleprogram, where “it blew my mind tosee the poverty.” He believes in attack-ing poverty, “one drop at a time.”

The Three TsIn his speech to the Chamber, John-

ston asked, “What does it mean to bethe Knowledge Capital of Canada?” Hecited Richard Florida, author of “Rise ofthe Creative Class:“Florida talks about ‘three Ts’: talent,

technology, and tolerance.“Talent means creating, attracting

and retaining smart people.“Technology means building on our

key strengths by investing in innovation.“Tolerance means being a communi-

ty that welcomes new people andideas, and fosters cultural richness anddiversity.”Johnston said, “These Three Ts are

the umbrella for our 10 goals.” AsExchange’s interview with Johnstonsuggested, he approached the issueconsidering goals for the region, andalso goals for his own institution, theUniversity of Waterloo.What he described as his “passion” –

promotion of the university of which heis President – clearly underlies his visionfor the region. If this area is to be Cana-da’s Knowledge Capital, it might not betoo far-fetched to suggest that Johnstonsees the University of Waterloo as thatCapital’s Parliament Hill.

FEATURE STORY



It is almost common knowledge to anyone who has grown up in either of thecities of Kitchener or Waterloo that Union (Street and/or Blvd.) is the borderlinethat separates the two cities. This has always been my understanding, as some-

one who has grown up and lived in Waterloo for almost all of my life. Even thesigns that welcome you to Kitchener when you’re driving along King St., Weber St.and Westmount Rd., all indicate thatonce you cross Union, you’ve crossedover into another city. In fact, this beliefis so widespread and deeply held in thecommunity that the first question I’masked when people find out that I’ve justmoved to a house along Union is: “Areyou on the Waterloo side or the Kitchen-er side of Union?”So, like many of the folks to whom I’ve

talked in the last little while, I was sur-prised when I discovered that this cher-ished notion of a Waterloo side and a Kitchener side of Union is not completelytrue. It is true for some parts of Union, but not all along Union.It turns out that although it looks like my house is on the “Waterloo side” of

Union, it is actually on a section of Union Blvd. where all of Union is in Kitchener. Iwas so surprised to discover this that I had to actually go to both City Halls and lookat their maps of the municipal boundaries to confirm it for myself. Sure enough, theconcept of the Union divide that I had grown up with – and held even during mytenure at the planning department of the City of Waterloo – was in fact a miscon-ception.We’ve all heard about the strange zig-zagging border between the two cities.

There are stories of residents paying taxes to both municipalities, of front yards inKitchener and back yards in Waterloo, or vice versa, or even in some extremecases, parts of houses and different rooms bisected by the cities’ limits. These sto-ries are interesting; but that’s not what this article is about.No, this is about how, after just a few weeks of living along this Union divide, my

Living Along the Union DivideUnderstanding our regional limits

BY SUNSHINE CHEN

FROM THE GROUND UPthoughts about Regional reform,rationalization of municipal servicesand perhaps even amalgamation arebeing challenged. It’s also about howin the process of making the transfor-mation from being a life-long Water-loo citizen to a newly indoctrinatedKitchener resident, I am beginning towonder about our future as a regionalcommunity. I find myself questioningthe benefits and the pitfalls to ourlocal economy, our politics and evenour collective identities as we stub-bornly cling onto the dividing linesthat separate us as a Region andremain blind to the opportunities andpossibilities that could unite us andallow our Region to be much morecompetitive and prosperous in a globalmarketplace, while at the same timegiving ourselves a greater sense ofidentity in the global village.The first bit of strangeness that

started me thinking about all of thisarose from observing how garbageand recycling pick-up worked alongthe street. While driving home on thefirst night I moved into my house I sawgarbage and recycling being placedout on the street for the next morningand made a note to take out thegarbage when I got home. As I got tothe curb I realized that none of myimmediate neighbours had theirgarbage out. Next morning, I watchedas the garbage and recycling truckscollected up to York St., then stoppedcollecting two doors down. They thendrove by past my house. That wasTuesday morning, and it wouldn’t beuntil Friday that my garbage and recy-

MAILING MACHINES • COLOUR COPYING & PRINTING

(519) 746-0631 (800) 844-2988

PRINT MAIL

CALL

Minolta bizhub: Product of the Year

Switch to digital before it’s too late

We Value Your Mail

SUNSHINE CHEN IS

PRESIDENT OF

URBAN IMAGINATION

& DESIGN CO.

email:

sunshine@ uimagine.ca



cling to the dividing lines that separateour Regional communities.But with challenges such as not hav-

ing enough people or resources tomaintain separate emergency rooms inall of our respective communities, andwith opportunities such as the expan-sion of our colleges and universities –and even some of our companies – intoall the different cities, I believe that weneed to make the effort to look moreclosely at those things that we have in

common, which can bring us closertogether as a regional communityrather differentiate and divide us. Weneed to look at how, collectively, wecan make better use of our localresources, deliver municipal servicesand manage their operations so that wecan tangibly and concretely improve thequality of life in our community, insteadof squandering our community poten-tial on petty bickering, bruised politicalegos and territorial skirmishes.I don’t believe that the adage “Good

fences make good neighbours” trans-lates as “Good borders make goodcities” for our Regional communities.Despite what some of our local politi-cians and civic leaders have to say, wehave much more in common witheach other than we’d like to readilyadmit as a community.I look at my life here in Waterloo

Region and I think: I have neighboursfrom both Kitchener and Waterloo whoshare the same street in common, Ihave friends from all around theRegion, and we all share commonRegional experiences. Now, if we canonly share some more common sense.But perhaps that’s just too much tohope for during a municipal electionyear, and I should just settle for agarbage collection route that makessense to me.

cling would be picked up. It was amus-ing to watch the trucks then drive pastthe neighbouring houses near York St.before they started collecting on mysection of the street.The next episode was at Kitchener-

Wilmot Hydro. I didn’t even knowwhere it was until I called and askedfor directions. I had to provide a secu-rity deposit because I wasn’t a pastcustomer of theirs. I said I had been acustomer with Waterloo North Hydro,but apparently, just because you werea customer of one, your history does-n't really transfer to the other.Parking: the City of Waterloo has no

tolerance for overnight parking any-where in the city without permission.Meanwhile, the City of Kitchener toler-ates overnight parking in some sec-tions of the city during the summer.Lucky for my overnight visitors.Finally, there is the issue of taxes.

My conversations with people aboutliving along the Union divide usuallyend with the remark: “So your house isKitchener, then? How about that? Well,at least your taxes are way cheaper!”Perhaps cheaper taxes and some

hand-me-down notions and biasesabout my identity as a resident of thisor that city is enough to stubbornly

I have friends from all

around the Region,

and we all share

common Regional

experiences. Now, if

we can only share some

more common sense.



What Example are You Setting?When Our Audio and Video Are Out of Sync

BY J IM CLEMMER

PRACTICAL LEADERSHIP

More and more, I hear managers express frustration over the behavior ofthe people they lead. They complain about their failure to take initiativeand responsibility, grumble about lateness to meetings or lousy teamwork.

But it’s so much easier to point fingers elsewhere. For when it comes to theirown behavior, many of those same managers aren’t acting any differently than thepeople they complain about. Too few managers model what they demand fromothers. If you’re a manager, ask yourself:How often do I seem to be saying onething while doing another? How oftenam I practicing what I preach?Managers who want to stop giving out

mixed signals need to hold up the leader-ship mirror and make sure they are satis-fied with what they see being reflectedback.Here are some examples of common

disconnects between what managersmay say they want to see in others and how they actually behave themselves.Teamwork: Most managers want individuals and departments to work together,

yet many of those same managers will gossip about, put down or fail to supportpeers or other departments. They protect turf and build walls around their divisionor department. They openly discuss disagreements with peers or senior manage-ment – sometimes to foster a form of “us” against “them.”Continuous Improvement: Many managers who declare the virtues of continu-

ous improvement slip behind in their own personal growth and development. Theyfeel they are too busy or don’t really need to upgrade themselves. Improvement isfor everyone else.Priority Setting: Harried managers are allowing today’s electronic tools and 24/7

culture to drive and control them. Poorly disciplined and overly busy managers failto harness these powerful tools. Instead, they often model micromanagement byresponding to every little issue and expecting people on their team to do the same.Such behavior leads to short-term urgencies continually crowding out longer-term

strategies and team or organizationdevelopment.Motivation: Workers are more dis-

engaged and less committed to theirorganizations and the clients theyserve. This morale problem is exacer-bated by managers showing little visi-ble passion or commitment to theirown work. They fail to survey anddiagnose what’s turning people off andthen engage them in solving thoseissues. When presented with moralesurveys or other evidence of disen-gagement, these managers will oftendiscount this input as “just their per-ception, not reality.”Taking Ownership: I often hear

managers complain that people intheir organization won’t accept per-sonal responsibility for fixing problemsor dealing with issues. These samemanagers then point fingers upward atmore-senior management or others forpersonal or organizational problems.“We tried that before,” “no one will lis-ten,” “there’s nothing I can do,” “whybother” and other such expressions oflearned helplessness easily roll offtheir lips.

Being a Positive Role ModelYou can’t act one way and expect

others to act another way. Here areways to help set the right example:Be a Team Player: Don’t discuss any

disagreements you may have withpeers, senior managers or otherdepartments. Be careful of making dis-paraging comments about their deci-sions or actions. Address any issueswith those people or groups directly;don’t use critical or negative e-mails or

JIM IS A KITCHENER-

BASED KEYNOTE

SPEAKER, WORKSHOP/

RETREAT LEADER, AND

MANAGEMENT TEAM

DEVELOPER. email:

[email protected]



public meetings to “send them a mes-sage.”Engage Your Team: Brainstorm

issues by asking staff for ideas on the“dumbest things we do around here,”“biggest barriers to reaching ourgoals,” “major implementation issueswe need to address,” “pet peeves,”“dumb rules and forms,” “things thatdrive you crazy,” or the like. Identifythose things you or your team directlycontrol, can influence or don’t controlat all. Discuss ways to fix the thingsyou do control and get ideas and vol-unteers from the team to do the samefor things you can influence. Discusshow you can all accept and let go ofthe things you can’t do anything about.Be Strategic with Your Time: Take a

critical look at your calendar and in-box or keep a time log. What are youso busy doing? There’s a likelihoodthat many of the activities you’reinvolved in don’t need you to dive intosuch a level of detail. Are you solvingthe same problems over and over?Watch for recurring patterns. What arethe root or common causes of issues?You are likely perpetuating thedependence cycle by not delegating ordeveloping others to handle many of

your daily operational issues.Practise What You Preach: Ensure

you arrive for meetings or start themon time, give plenty of notice if you’recancelling or changing times, andshow up prepared. Model the timemanagement and respectful behaviour

that you expect from everyone else.Analyze your calendar and meetingagendas for the past few months. Dothey clearly reflect your top goals andpriorities?Train and Be Trained: Ensure that

you and others are well trained in the“soft” leadership skill areas of coach-ing, communications, leading teams,running meetings and the like. Use theskills in your own meetings, coaching

activities, and team decision makingand planning. Help deliver that skilldevelopment.Bridge We/They Gaps: Search out

and destroy the status symbols, perksor privileges that separate manage-ment from the workers. Find otherways to compensate managers or letthose who need these symbols taketheir elitist insecurities to some otherorganization. Flatten corporate hierar-chy and promote informality.Step Back to Step Ahead: The busier

life gets, the harder it is to keep oureffectiveness in perspective. One of thefirst things to go when we’re pressedfor time is personal development andrenewal. But when we spend less timereflecting on what’s working andwhat’s not, we spend more time spin-ning our wheels. The faster and crazierour day gets, the less we stop andcheck to see that we’re racing downthe right road. That increases thechances that we need to spin ourwheels even faster to keep up.Breakthe cycle. Pause periodically on yourown and with your team to checkprogress. Decide what you shouldkeep, stop, and start doing, and refo-cus your efforts.

Managers who want to

stop giving out mixed

signals need to hold up

the leadership

AUDIO • VIDEO • LIGHTING • STAGING • RENTALS • SALES • INSTALLATION

Calm Beforethe Storm

(519) 745-6154 • 124 Ottawa St. S, Kitchener • www.sherwoodsystems.com

From equipment choices to

transportation to everything

in between, regardless of the

size of your project, we

ensure that your unique

blend of budget and func-

tionality is realized. Tell us

your dreams and we’ll make

them reality.

Whether you are planning a

high-energy sales meeting,

an informative trade show,

or a festive occasion, let

Sherwood Systems enrich

your event with our in-house

knowledge based technical

support. We can advise you

on all aspects of production.

Barenaked Ladies 2006Waterloo, Ontario



Thanks to the movie work of Neville Flynn (Samuel L. Jackson), flyers can safelyboard airplanes without fearing the presence of snakes. Unfortunately, Nevillehas not successfully cleared financial statements of these carnivores of equity.

However, with diligence, users of financial statements can protect themselves fromthese potential constrictors of wealth.Seldom has there been a busier summer

for accounting standard setters on a globalbasis. Many of the resulting standards willhave a direct, immediate impact on thefinancial statements of major corporations.Users of financial statements would bewell advised to assess the impact thesechanges will have on the financial state-ments of companies in their portfolio. Thecontext for these changes must be viewedin the new world of global convergence of accounting standards. While all accountingstandard setters are citing convergence as a pretext for any changes enacted, cautionmust be exercised.As anyone who is married will honestly observe, getting married is entirely different

from being married. Convergence of standards will be entirely different from livingwith converged standards and the resulting interpretations of these global standardsagainst the backdrop of local economic cycles will need further study.Snake One is of the garden variety. Canadian companies have had two years to

prepare for the new standard. It involves the change to Fair Value as the measure-ment metric for Financial Instruments. How is this different that the current account-ing treatment? A cornerstone of accounting has always been the valuation of assetsand liabilities at the lower of cost and net realizable value. Cost in this context hasalways been taken to be historical cost. Going forward, financial instruments will nowbe measured at fair value at the date the financial statements are prepared.Generally, this will not be a problem. However, in instances where a readily avail-

able independent measure of fair value is not determinable, estimates will berequired. Accounting standard setters firmly believe that the resulting enhanced rele-

Snakes in the StatementsNew standards will impact on our investments

BY ALLAN FOERSTER

ON THE MONEY

ALLAN FOERSTER, CA, IS

A PROFESSOR IN THE

ACCOUNTING FACULTY

SCHOOL OF BUSINESS

AND ECONOMICS,

WILFRID LAURIER

UNIVERSITY. email:

[email protected]

vance of fair value measures will morethan offset the loss of reliability of val-ues even if those values need to bedetermined by estimates.As a by-product of the valuation

measurement, certain gains will now beincluded in the determination of incomefor the reporting period, even if thosegains are unrealized. Past recognition ofgains required a transaction to occurthat allowed for the measurement ofany gain. This change may result inincreased volatility of reported earningswhich will require more diligence on thepart of investors to interpret.A financial reporting snake that pos-

sesses sufficient strength to constrictBalance Sheet valuations will surfaceover the next couple of months. Thispast summer, the Financial AccountingStandards Board (FASB) in the USannounced dramatic changes to theaccounting for post-retirement benefits.The standard will be effective for yearends occurring after December 15,2006. Thus, corporations reporting inthe US that have a calendar year endwill be impacted by this new standard.At issue are plans that provide retire-

ment benefits based on a pre-deter-mined formula that assures retirees of aspecific benefit upon retirement.Referred to as “defined benefit” pensionplans, the new standard will move dis-closure of unfunded liabilities from thenotes to the statements to the face ofthe Balance Sheet.The impact of this? According to

research done by Credit Suisse, at theend of 2004 the Balance Sheets meas-ured in the Standard and Poor’s 500index will be burdened with in excess of

Important message to all

Audi, BMW, Mercedes, Porsche, VW & Volvo owners.“The Canadian automotive service industry changes on a daily basis. This is also true for how the consumer expects to be treated.You should expect more.” – Uli Furtmair.

At Furtmair Auto Services we are the service professionals. We meet the highest customer service standards. Our company won theBosch-Jetronic-Cup, finishing first among all service centers in North America. This demonstrates our ability to satisfy our customers.This is what you can expect from us:

Our objectives:• To maintain your Original Factory Warranty• To maintain your car’s authenticity using

Bosch OEM parts

Our features:• International Award-winning expertise• Top-notch servicing using the latest

diagnostic equipment• Helpful advice from professionals with the

most up-to-date skills and training

Our benefits:• A written International Warranty• Reasonable service rates• Customer-focused service

FURTMAIR AUTO SERVICES INC.In Business Since 1987 To Serve YOU

51 Bridge Street East, Kitchener 519 576-9972WEBSITE: www.furtmair.com E-MAIL: [email protected]



standard setters deals with the treat-ment of capital leases. It has become acottage industry to devise schemes tocircumvent the rules that determine theappropriate accounting treatment forleases. Standard & Poor’s estimatesthat in excess of $300 billion of leasescould be impacted by any revision tothe current standard. Over 30 yearsago, the current standard was estab-lished to respond to the propensity forcorporations to lease assets thus avoid-ing the requirement to disclose andrecord any debt associated with theacquisition of capital property. Theanticipated benefit of the standardwhen established was to look beyondthe legal structure of the transactionand focus attention on the economicstructure of the transaction.

Generally, if the cash flows associatedwith the lease payments or the leaseterm relative to the estimated useful lifeof the asset met certain specific thresh-olds, the lease would be capitalized. Theresult of the lease capitalization wouldbe to reflect the leased asset and theassociated debt reflective of the futurelease payments recorded on the BalanceSheet.

The problem with the standard is thatthe thresholds have been applied withundue rigor. It now becomes relativelyeasy to structure a lease that falls belowthe thresholds thus avoiding the capital-ization requirement. The FASB and theInternational Accounting StandardsBoard (IASB) have established a jointtask force to look at revising the stan-dard. The implication of any revision tothe standard would see additional debtreflected on corporate Balance Sheets.

What we are seeing is a determinedmove on the part of accounting stan-dard setters to enhance financial report-ing by ensuring that Balance Sheetsreflect the proper measurement ofassets and liabilities. In the words ofFASB Chairman Robert Herz, “trans-parency and the degree to whichaccounting and disclosure standardsachieve their goals can be greatly dimin-ished by the use of structuring, evenwhen that structuring appears to complywith the standards”.

Users of financial statements cancharm these snakes within financialreporting by arming themselves withknowledge. By knowing the new stan-dards and examining existing financialstatements, investors can begin toascertain the potential impact the newstandards, when enacted, will have ontheir investments.

$165 billion of previously unrecordedliabilities.

What does this mean for investors?Debt covenants that require the mainte-nance of certain minimum levels ofdebt versus equity will obviously haveto be renegotiated. Furthermore, restric-tions on the payment of dividends maybe triggered if this additional debtresults in minimum ratios being offside.

A second step in the process ofrevamping the accounting treatmentfor defined benefit plans will be the“proper” expensing of the costs asso-ciated with providing these plans. Thecurrent standard is considered to err

on the side of minimizing the volatileimpact of pension costs rather thanthe proper measurement of thesecosts. Before Canadian investors relishthe obvious dilemma faced by US cor-porations, remember convergence.The Accounting Standards Board inCanada has already indicated it plansa close study of the new provisionsand will likely move to the introduc-tion of similar provisions for Canadiancompanies.

The King Cobra of financial reportingstandards is coiling and preparing tostrike at the heart of corporate BalanceSheets. A boiling issue for accounting

FULLY LEASED


4355 King St. E, Kitchener519.650.6090 FAX: 519.650.6099

1.800.HAMPTONwww.hamptoninn.com

Complimentary buffet

breakfast with hot items &

wireless internet access.

Salt water pool, spa and fitness centre.

Friendly service, comfortable

surroundings.

We LoveHaving You Here®

Now Open


Corporate Fire FightingFocusing on crises while real work gets lost in the smoke

BY L INDA GREGORIO

WORK / LIFE BALANCE

Have you ever found yourself nearing the end of your work week, and onceagain, like most other weeks, you realize you spent the majority of the weekputting out fires, instead of getting your ‘real’ work done? And when exactly

did you sign up for this never-ending, all-consuming task of “fire fighting”? Can youremember those discussions during your interview? How is it that you missed theextent of this role?

Though many employees will admit they were well aware they were signing upto contribute to the company’s growth by running at break-neck speeds; by beingin and out several meetings every day(perhaps some repetitive, some uselessand some both); as well as possibly hav-ing to travel the globe if and as needed tomeet the demands of key stakeholders,many fewer will tell you that they fullyunderstood the extent to which theywould be called upon to put out theflames on corporate issues that wereburning out of control.

Corporate fire fighting, as I like to callit, has become a commonly agreed-topractise among achievers. As a leader-ship coach, a week doesn’t go by where Idon’t find myself having to remind some-one to step back and assess which of thecorporate problems they are facing aretruly fires, and which are not. Someachievers are always racing with fullcrew on hand to extinguish flames onminor problems, which could otherwisehave been dealt with by expending lessenergy and fewer resources. Others appear to be thriving on the adrenaline high ofconstantly being called upon to manage critical, urgent and important issues, per-haps thriving on the high to such an extent that now they make fire fighting theirpriority, and their ‘real’ work becomes secondary at best. They continue to condi-tion themselves to believe that all problems are critical and all problems need firefighting.

As a leader, have you ever stopped to look at your corporate culture as it relatesto the corporate fire fighting needs and initiative of your teams? Have you everasked yourself the following questions:• Why is it that so many of our achievers are always busy tending to burning issues

day in and day out? Are there that many problems in our business?• How is it that as a management team we continue to expect stellar results on pri-

mary job functions, knowing full well that our star performers are running onempty when it comes to the energy and passion they need to perform their corefunctions?

• Are the members of your team well equipped to assess what is truly a fire, andwhat is not? And, if it is a fire, are they well equipped to manage it effectivelywith the least cost to the organization, and to the individual? Who is helpingthem with this?

• Or better still, have you ever looked at who the people and/or processes mightbe that create the many burning issues that need resolving, and/or that fuel theminor issues so the heightened ‘fire fighting’ method of engagement continuesto take hold of your business? In fact, is that someone you, because you areunclear of what is important, so it has all become important?

Fine CarsFine Care

FINE AUTOMOBILEBODY & PAINT

[email protected]

15 & 125 Centennial Rd., Kitchener

Exclusive autobody & paintrefinishing for investment

and high quality automobiles

Specializing in

BMWLINDA GREGORIO IS

PRESIDENT OF

PRESENTS OF MIND, A

COPORATE CONSULTING

AND LEADERSHIP

DEVELOPMENT

ORGANIZATION. email:

[email protected] or

[email protected].

When exactly did you

sign up for this never-

ending, all-consuming

task of “fire fighting”?



As leaders, we must ask ourselveswhy we have come to automaticallyassume employees are interested in,and capable of, putting out flames onthe burning issues in our business.How have we come to expect our topperformers to be effectively participat-ing in ‘Crisis Management’ in ourorganization, especially since we haveprobably spent very little time, if any,discussing it with them, preparingthem for it, or equipping and support-ing them in it?

In a ‘fire fighting’ culture it is com-mon that people are working longhours as crisis management experts,while still wholeheartedly trying tokeep up with all aspects of their ‘real’

jobs. These people often secretly hopethat if only the fire fighting aspect ofthe job would slow up, then maybethey could make some significantheadway on the rest of their work andget the results they seek. They contin-ue to hope, while they continue to feelthe heat.

How then do we provide ouremployees with less fire fighting timeand more real work time? And is thatimportant? I think it is, and I suspect sowould many of your employees.Though we fully understand that prob-lems will happen and that we will needto respond to burning issues promptly,it is important to minimize the extentto which your employee base is firefighting. At minimum I suggest the fol-lowing:

• Review your existing culture andunderstand the existing “reactive”approaches of your top performers.How are you, as a whole, managingproblems/issues in your organization?Is it working?

• Train your managers to know thedifference between, and to fully under-stand and deploy, both effective crisisprevention and effective crisis man-agement.

In the next issue, I will offer somepractical suggestions in both of theseareas.

Call Chris Cushing direct or email: [email protected]

TOLL FREE 1-888-839-9907

Galt CHRYSLER DODGE JEEPGalt CHRYSLER DODGE JEEP

ALSO AVAILABLEUpfit your Dodge Sprinter– Add a 14’ Dry Freight body ona 3500 Sprinter chassis

The REGIONAL

DEALER

Pick the one right for you.

2440 Eagle Street North, Cambridge

519-650-2440

They continue to

hope, while they

continue to

feel the heat.


Since 1951, Schiedel ConstructionIncorporated has provided Designand Construction for Industrial,Commercial, and Institutionalbuildings. It is our continuedcommitment to work persistentlyand diligently to provide thehighest degree of professionalconstruction services possible. Youcan count on Schiedel Constructionfor Quality, Value and Performanceon your project.

COMMITMENT

405 Queen Street WestCambridge, Ontario N3C 1G6(519) 658-9317www.schiedelconst.com


Models of Good GovernanceA menu of governance options

BY JOHN T. D INNER

GOOD GOVERNANCE

One of the most unusual experiences I’ve had in my career happened overthree days learning the intricacies of the Carver Policy Governance Model. Itwasn’t the model itself that was so intriguing. Indeed, for every follower of

the Atlanta-based Carver, there are legions of board members who have felt short-changed trying to make the model work.

John Carver travels the world lecturingon his model and helping organizationswith its implementation. It’s not unusualto find him in the world’s major capitals.My encounter came in Oshweken, asmall village on the Six Nations of theGrand River Indian reserve near Brant-ford, site of the reserve governmentaloffices and one of the last places I wouldhave expected to find Mr. Carverexpounding on his governance regime. My total lack of understanding of FirstNations governance left me intrigued that native aboriginals would be consumersof his approach.

Aside from Mr. Carver, I was the only participant not from the many band coun-cils represented.

Governance models beg the “what comes first” question: should an organization

adopt a model at the outset and con-form to its parameters? Or should thatorganization’s practices, culture andapproach determine what model fitsbest fit or could be most easily adaptedto form the ideal hybrid? Should amodel drive how the governance func-tion operates? Or is it best for a gover-nance model to evolve over time toreflect and formalize board practicesthat best serve the organization?

I do not favour any particularmodel, but prefer to focus on key gov-ernance principles, allowing a modelto evolve more organically.

This column provides some per-spectives on governance models. Thislist is more complete than many, butnot exhaustive. A useful exercise forany board is to assess their own gov-ernance approach, to identify whichmodel fits most comfortably.

An Operational Board tends to behands-on, doing a lot of an organiza-tion’s operational work, in addition togoverning it. This is common at the“founding” stage of organizations that,like service clubs and other grassrootsorganizations, have no staff and relyon board members and other volun-teers to achieve their aims. As the

JOHN DINNER,

PRESIDENT OF

JOHN T. DINNER

BOARD GOVERNANCE

SERVICES. email:

[email protected]



organization grows, adds staff andother resources, the Board must bequick to evolve and delegate thesemanagement responsibilities in orderto avoid overlap, inefficiencies andconflict between directors and staff.

Other organizations, again predomi-nantly in the not-for-profit sector, forma close partnership between the Boardand Staff, often referred to as a Collec-tive Board where the combined groupsare involved together in decision-mak-ing about governance and the work ofthe organization. It is not uncommonfor directors to be directly involved indelivering services or managing opera-

tional functions.A Management Board manages the

organization’s operations, but mayhave a staff coordinator to provide day-to-day administrative support. Boardmembers actively manage finances,personnel, service delivery, and otherorganizational functions.

In a Traditional Board, the Boardgoverns and oversees operationsthrough committees, but delegatesmanagement functions to the CEO.Committees process information for theBoard and are often delegated fullauthority to make decisions and com-plete work explicitly delegated by the

Board. The CEO, while accountable tothe full Board, will often have a primaryreporting relationship through theChair.

The Policy Governance model devel-oped by John Carver relies on policiesthat the Board uses to establish organi-zational aims, the overall approach toorganizational oversight and to definemanagement limitations and the rela-tionship between the Board and the CEO.This model does not allow for commit-tees and the CEO typically has a formalreporting relationship to the full board.

Most publicly traded companies usea Corporate Governance model. TheCEO is most often a non-voting mem-ber of the Board, while continuing tocarry substantial influence over policy-making. The CEO is viewed as a fullpartner with the Board and should havea relatively free hand to manage insuch a way as to achieve the strategicobjectives established by the Board.Committees are often used extensivelyto assist the Board in conducting itsdue diligence function. In some cases,particularly among early stage compa-nies, directors are selected for theirreputation and their ability to “opendoors”. Individual directors may becalled upon to undertake selected tasksin their particular area of expertise.

Governmental agencies, federationsand other public boards often adopt aConstituent Representational model.This balances the interests of their con-stituents against the best interests ofthe overall organization. In the case ofgovernmental organizations where theBoard oversees the delivery of services,these boards may also perform griev-ance resolution or ombudsman func-tions. In the case of school boards,directors may have to adhere to pre-scribed responsibilities for public con-sultation and human resources.

You have probably identified poten-tial strengths and weaknesses withineach model. None provides a “silverbullet” solution to ensuring good gover-nance. Each can work. Many benefitfrom some modification to address theparticular needs of an organization.

A governance model or structure isonly one of three critical componentsto ensure effective oversight. Often ofgreater importance are the manner bywhich boards do their work and thebehavioural dynamics between boardmembers and management or staff.These must be considered along withstructural matters to ensure success inthe boardroom.

Visit Our Showroom at1373 Victoria Street North, Kitchener

Tel: (519) 742-8501

Visit us today and turn any room into a home theater.Hurry, offer good from Oct. 14 through Dec. 3, 2006


“guilty charged” - exchange magazine · “guilty as charged”...

Documents