A non-profit cannabis group announced a set of standards for the industry last week, aiming to be proactive before a scandal sullies the sector.
“This is the first time that I can think of where an industry’s decided to get CSR right out of the gate,” said Rick Petersen, author of the Global Cannabis Partnership’s corporate social responsibility framework. The group includes 45 cannabis companies, government agencies and law firms, representing countries including Canada, the U.K. and Israel.
The fledgling sector could use some clearly defined goalposts.
The highest-profile governance scandal to date was at Aphria Inc., which was accused by short-sellers of paying inflated prices for “largely worthless” assets owned by insiders. A special committee found the company paid an “acceptable” amount for the assets but also found that certain directors had conflicting interests in the deal that weren’t fully disclosed to the board. Aphria is now revamping its board and management team under interim CEO Irwin Simon.
Beleave Inc. recently settled with regulators in British Columbia after it admitted paying C$7.5 million to consultants who didn’t actually do any work for the company. Ascent Industries Corp. filed for bankruptcy protection in May after a host of problems, including having its Canadian license suspended for “unauthorized activities with cannabis.”
Namaste Technologies Inc., meanwhile, fired its CEO in February for “breaches of fiduciary duty” and “evidence of self-dealing.” Namaste also found “irregular online advertising” on its Brazilian website, leading it to suspend sales of all products in that country.
None of this is particularly surprising from an industry that just recently emerged from the shadows of illegality, according to Dan Daviau, CEO of cannabis investment banker Canaccord Genuity Group Inc.
“The industry is maturing incredibly quickly,” Daviau said last month. “I’m not saying you still won’t see the odd company step on a rake and hit their nose, but the propensity for that to happen has slowed down a lot.”
That’s the feeling of Meni Morim, who joined Namaste last year when it acquired his artificial-intelligence platform Findify AB. Morim was named interim CEO in February.
“It was very difficult for everyone, but I think it’s something that we’ve learned a lot from and we’re definitely taking steps to improve communication with our investors and partners,” Morim said.
The Canadian company runs medical cannabis site Cannmart.com as well as an app that uses AI to help patients find the right pot strain for their needs and a site that connects patients with physicians so they can renew their prescriptions online. It’s been revamping its board of directors and management team and has established an advisory board to improve its corporate governance.
Morim said his father was one of the first people in Israel to get a prescription for medical cannabis when he was suffering from cancer, and it made him realize a drug that he’d previously viewed as “horrible” could “actually do a lot of good.” This is why he’s committed to improving the reputation of Namaste and the industry as a whole, he said.
“It’s amazing how quickly this industry moves and it really is coming to a point of maturity,” he said. “We made a conscious decision to be at the forefront of that maturation process. We want to be one of the leading companies when it comes to corporate governance, transparency and compliance.”