CannTrust Directors’ Independence Questioned for ‘Awkward Dynamics’

Article by David George-Cosh, BNN Bloomberg

CannTrust Holdings Inc.’s (TRST.TO 4.53%) board of directors is comprised of a number of family and other pre-existing relationships that are raising questions about independence as the embattled cannabis producer seeks to clean house and return to regulatory compliance.

Mark Dawber, who became chair of the company’s independent committee last week, also serves on the board of Gencan Capital Inc., an investment firm focused on solar energy that trades on the Canadian Securities Exchange. Mark Litwin, CannTrust’s vice-chairman, serves as Gencan’s president and his father Fred is chairman of the firm. Also, Litwin’s wife Beth is the niece of Robert Marcovitch, the interim CannTrust chief executive officer and former chair of the company’s independent committee.

Richard Leblanc, a professor of governance, law, and ethics at York University, described Dawber’s relationship with CannTrust and Gencan Capital board members as well as Marcovitch’s family ties to Litwin as an interlock which needs to be remedied immediately.

“If a family member or an affiliate of a director has any pre-existing relationship to another director or officer, that director is not properly regarded as independent from a best practice perspective,” Leblanc told BNN Bloomberg via email. “Their ability to oversee any such director has been compromised. This lack of independence heightens the capacity for risk governance failure.”

A spokesperson for CannTrust acknowledged the family ties between Litwin and Marcovitch, and stated the company’s interim CEO was first asked to join the board due to his experience with public companies in regulated industries of similar size and stages of development.

“The board believed that Marcovitch would make a valuable contribution to the oversight of CannTrust and, for that reason, he was asked to chair the Special Committee, which includes an investigation by independent advisors. More recently, because of his operating experience, the board asked Marcovitch to become interim CEO of the company,” spokesperson Jane Shapiro wrote in an email to BNN Bloomberg.

Shapiro added that Dawber’s pre-existing board relationship with Litwin was disclosed to CannTrust’s general counsel and that business relationship did not violate the company’s code of conduct. She declined to comment on whether these family and pre-existing relationships are in line with governance experts’ expectations for independence.

Marcovitch declined to comment when reached by BNN Bloomberg. Litwin and Dawber didn’t return phone calls or messages sent to them by BNN Bloomberg.

Leblanc added that CannTrust should have policies or a code of conduct in place that prohibits nepotism and conflicts of interest among directors and management.

Read the full article here.

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