Notions de gouvernance 101 | Que font les administrateurs ?

Vous trouverez ci-dessous un article de Lucy P. Marcus*, experte en gouvernance, qui présente, de manière vulgarisée, en quoi consiste le travail des administrateurs de sociétés aujourd’hui.

On y trouvera une bonne définition des responsabilités des administrateurs ainsi qu’une métaphore intéressante qui montre comment le travail des administrateurs a considérablement changé au cours des vingt dernières années.

L’auteure distingue entre les activités qui sont de nature « grounding » (connaissances de bases de la performance et des obligations de conformité) et celles, toujours plus importantes, qui sont de l’ordre du « stargazing » (la vision à long terme et la stratégie).

Je vous invite à lire ce bref article qui tient lieu de notions de gouvernance 101 !

Bonne lecture !

Boardroom 101: What, exactly, do directors do?


The boardroom is changing at a fast pace. The agenda items we discuss, the expectations of board directors and the responsibility we hold are all areas that are going through a much needed, and, in my experience, a very welcome, transition.

When my son was around 5 years old, I was preparing for a board meeting and he asked what that was and what I was going to do there.

Lucy P. Marcus
Lucy P. Marcus*, experte en gouvernance

That’s a question many adults have, too. What, exactly, is a board and what does a board director do?

Searching for an explanation, I finally went with this: « You know about King Arthur and the Round Table? Well, like King Arthur and the Round Table, a group of wise people gather together every month or so. We sit around a table and talk about what the people we are helping have been doing and what they are planning to do next. We try to make sure they are acting honourably and following the law and doing what is best for everyone. »

He seemed fairly satisfied with that answer, but it got me thinking — was the metaphor apt? Is that really what directors are doing in practice?

It does seem sometimes like the board is an arcane and distant body. A caricature would be one where the doors open with a whoosh to reveal suited people sitting around a table in an oak panelled room, having confidential discussions in hushed tones, drawing on deep expertise and thinking big thoughts. And of course, those discussions would be spoken in a special « thee and thou » language.

There are parts of that caricature which do ring true. We board directors generally do sit around a table, and I’d like to think we generally have robust discussions. Strangely, we do often speak in formal ways, referring to “Mr Chairman” and the like. As for the “deep expertise” and “big thoughts” part, I’m not sure we are always well equipped with enough information to make decisions.

Changes afoot

The boardroom is changing at a fast pace. The agenda items we discuss, the expectations of board directors and the responsibility we hold are all areas that are going through a much needed, and, in my experience, a very welcome, transition.

Board agendas used to be rigid and mostly focused on traditional oversight topics such as compensation and compliance. That mandate has grown to include a great deal more.

To better understand the changes and how they affect our job as directors, it is useful to think of the tasks and the agenda items of the board as being broadly divided into a balance of what I call “grounding” and “stargazing”.

The “grounding” side consists of what you might think of as the tick-boxing items: questions around the structure and performance of the organisation in the “here and now”. Is it behaving legally and responsibly? Is it following the rules and regulations? Are its financial accounts in good order? Does it meet to the expectations not just of its shareholders but also of other stakeholders in the broader ecosystem in which it operates?

The “stargazing” side is about strategy. This is the essence of what and where the organisation wants to be in the future. It is about asking questions about how the sector is changing and how the organisation plans to grow. It is also about challenging it to make the necessary changes as the world around it changes too, and to be a driver of positive change. It is about building innovation and a sense of excitement about the future into the DNA.

The old agendas were heavily weighted towards the “grounding” side of the equation, but today, a good balance of “grounding” and “stargazing” is vital to preparing the organisation for the future. The board must look closely at the here and now, making sure everything is working correctly; otherwise we run the risk of missing signs of everything from neglect to malfeasance. We must also look into the next 10 to 15 years to make sure that the organisation has a robust future to look forward to.

Responsibilities increase

The world around us has changed at an exponential pace. Companies are seen as having a greater responsibility for the role they play in the health and well-being of society. They also bear some responsibility for the individuals that they touch, be it employees, partners, or people who live in the community. At the same time, social media and niche publications amplify the voices of shareholders, communities and consumers. Also, boards and companies no longer operate in a black box — with the advent of everything from Twitter to Google Earth, there is more transparency than ever before.

Partly as a consequence of these changes in the boardroom and beyond, the responsibilities and expectations of directors, particularly independent directors, have increased exponentially. It is not sufficient to skim the board papers, ask a couple of superficial questions, eat the lovely meal, and be on your merry way home.

Board directors are now, rightly, expected to read the papers, come prepared, and ask the tough questions. Though the boardroom has traditionally been a black box room, much has changed. Individual directors will increasingly find themselves being held to account for the choices that they have made in the boardroom in many areas, be it around executive compensation or “innovative” tax strategies.

It means that we as directors must be more diligent and make sure we are only voting ‘yes’ for things when we have a thorough understanding of what the implications of the ‘yes’ is — both now and in the longer term. We must take into account those whose lives are impacted directly, such as people who work for the company and those who live in the area where the company sits, as well as the people who use the company’s products and services. It also about those who are impacted indirectly, such as shareholders whose life savings may be at stake. Those are all positives, in my view.

In the end, if we are to live up to the ideal of King Arthur and the Round Table, chivalrous knights who are guided by the ideals of courtesy, courage, and honour, we must ask ourselves every time we gather, “Why are we here and who do we serve?” so that the decisions we take are made wisely and judiciously, not only to serve the needs of the few, but to ensure that we help the organisation to live up to its potential, and do so in an honourable way.


*, CEO, Non-Exec Board Director, Prof IE Biz School, Project Syndicate & BBC columnist.

L’audit interne au cœur d’une grande bataille !

Je partage avec vous un récent article que Denis Lefort, expert conseil en gouvernance et audit interne, m’a fait parvenir, accompagné de ses commentaires.

Cet article de Mike Jacka* est paru dans Internal Auditor Magazine​​​​​​​. Toute personne préoccupée par l’importance de cette fonction devrait prendre connaissance de cette mise en garde.

« En lisant ce bref article, vous saisirez rapidement que son auteur est d’avis que l’audit interne et les autres fonctions d’assurance des organisations (gestion des risques, conformité, sécurité et autres) sont entrées dans une guerre de juridiction… Et que l’audit interne ne peut agir comme si elle était comme la Suisse, neutre et inattaquable…!!!

L’auteur est ainsi d’avis que l’audit interne doit préparer à la fois sa stratégie de défense et d’attaque pour contrer les coups durs présents et à venir… »

Bonne lecture !

Internal Audit Is in the Midst of a Great War


The Harvard Law School Forum on Corporate Governance and Financial Regulation recently posted an interesting piece titled « Compliance or Legal? The Board’s Duty to Assure Compliance. » I know it all sounds a little boring, but trust me on this one — there is interesting information here. Take some time to read through it before we dive in.

(One very quick, very important aside. I came across this article as a part of The IIA’s SmartBrief — a weekly « snapshot » of news and issues internal auditors might care about. To receive the newsletter you must « opt in. » I cannot urge you enough to opt in. No puffery here. Seldom does a week go by where I don’t find at least one nugget I can use. If you aren’t receiving it, you can opt in here.)

Ia Online Home

If you have been paying attention to the discussions that are going on regarding internal audit’s evolving role you were probably gobsmacked by the similarities between those discussions and what is being said in this article. Take the opening sentence: « A series of developments threaten to blur the important distinction between the corporation’s legal and compliance functions. » Make a few changes and you are talking about the dilemma internal audit is facing. « A series of developments threaten to blur the important distinction between the organization’s internal audit department and [insert your favorite assurance provider’s name here]. »

There it is in a nutshell, the crux of the battle currently being waged over the role of internal audit and others within the organization.

Wait, let’s back up a second. Did you miss that there is a war going on? Let’s take a quick look.

I have a good friend who is a CAE. In that role he is also in charge of risk management. We often talk about the potential conflict that exists with those dual roles. He is not alone. I have talked with other audit leaders who are being approached about audit taking on the role of risk. Not a bad fit. We are risk experts, we have the communication and relationship skills, and there should be a definite meshing of gears between audit and risk.

On the other hand, I have also heard from others who face the opposite issue; they are under pressure to have internal audit placed under the jurisdiction of the risk officer. « Wait a minute, » you say, « That is a very bad idea: a serious problem, a conflict of interests, a subversion of our objectivity, an invasion on our independence. » Our list of reasons why this shouldn’t happen is quite long.

When the shoe is on the other foot the bunions become just a tad more obvious.

And it is not just the risk function. While not as common, I am hearing similar discussions around such functions as compliance, corporate security, finance, quality assurance, and, yes, even legal. In some cases the discussion is around audit taking on part of the role; in others it is about audit becoming a part of the other function.

Why are we suddenly seeing this land grab?

Governance has become an important topic at the executive and board level. (Definitely a good thing.) Assurance providers (compliance, legal, risk, et al) realize the way to raise the esteem with which the board and executives hold them is to take on a greater piece of the governance pie. The pushing and shoving starts. Escalation ensues. And we find ourselves in the midst of a jurisdictional war.

And while internal audit would like to believe we are above the fray (we are independent, we are objective, we are internal audit, hear us roar), unless we recognize the existence of this war — unless we are willing to take up arms and join in the fray — we will find ourselves trivialized, the core values we provide handed off to the victors.

We think we are Switzerland. But there is no such thing as neutrality in this battle.

So, with that background, let’s return to the article previously referenced. The contents provide a good indication of the type of arguments internal audit will encounter. Two examples:

  1. The author states that a forced separation of compliance from under legal would jeopardize the ability of the organization to preserve attorney-client privilege. Cold chills went up my spine as I read this. I still vividly recall similar debates from 20 years ago when the legal department argued they should have more direct control over internal audit in order to preserve attorney-client privilege. We won. But it is obvious that the ugly head of that particular argument continues to rise again and again.
  2. The article quotes compliance thought leaders as saying that the role of « guardian of corporate reputation » is exclusively reserved for the corporate compliance officer; that the compliance officer is the organizational « subject matter expert » for ethics and culture. The author of the article states that this is « contrary to long standing public discourse that frames the lawyer’s role as a primary guardian of the organizational reputation. » My first, knee-jerk reaction is that internal audit should be the guardian of reputation and the subject matter expert. But once I put my knee back where it belongs, I realize it is probably more true that the attempt to define any one department as guardian or expert is a fool’s game. Everyone with any governance role should have the protection of reputation, ethics, and culture as their No. 1 responsibility.

There is much more in the article and many more thoughtful and reasoned arguments. And it would be quite easy to say « Let them duke it out. Their arguments are not important to us. » However, that is exactly why we should be paying attention. The article contains the points that will be used in the battle — points to be used against us and points we can use in our defense.

We are in a war. And audit cannot sit back and say, « We have independence; we are safe and above the fray. » No. They will have an eye on our « turf, » also. And who’s to say that some of their turf shouldn’t be ours. I’m not saying we break out the bayonets and start going after some of the unwounded, but I am saying we have to recognize the existence of a battle and be willing to take a stand — be willing to say what it is we do, why it is important, and why we should have those responsibilities.

What are your thoughts? What is internal audit’s role regarding the organization’s approach to risk, governance, compliance, legal, etc.? If we are more involved, is there a conflict? If the lines blur, does it have a negative impact on the company? Is there really a war brewing? And what might this have to do with the future (if there is going to be a future) of internal audit?​


*Mike Jacka, CIA, CPA, CPCU, CLU, worked in internal audit for nearly 30 years at Farmers Insurance Group.

Candidature à un poste d’administrateur de sociétés | Sept défis à considérer

Tracy E. Houston* est présidente de Board Resources Services; elle possède une solide expérience des conseils d’administration et de de la consultation en gouvernance.

Dans le cadre de ses activités de consultation, elle a souvent l’occasion d’orienter les candidats vers des postes de membres de conseils d’administration d’organisation publiques (cotées). Dans ses fonctions, elle est en mesure de fournir certaines recommandations aux futurs administrateurs.

Voici donc, selon elle, les sept principaux défis que les administrateurs de sociétés potentiels doivent envisager. Bonne lecture !

Top 7 Challenges for Public Company Director Candidates

Over the last few years, I have heard from a number of board candidates about their biggest challenges. I have dug through my notes to share these. My hope is that the definitions and tips will bring further insights that will leverage and prioritize your time and efforts to gain a board seat.

1. Time

Boards move slowly. This makes keeping in touch essential for director candidates. Some become discouraged, lose momentum, or completely stop networking. Those who remain consistent in their networking and communication efforts have an advantage.

2. A Clear Focus

The board world is large and mysterious. Without a well-defined board-level value proposition of what you bring to a board—one that provides focus and definition—then, time and energy is spent in a mud-on-the-wall approach and drains any sense of confidence that could be used to capitalize on potential opportunities. This is not just about having a good resume, you need to know how you can bring value, to what size company boards, and in what industry.

3. Priorities that Have Impact

There is a diverse set of stakeholders that are a part of the networking to gain a board seat. This is a complex business ecosystem in which to execute and can cause indecisiveness. Stakeholders, once defined, must be weighted for level of importance and leveraged to help you gain visibility.

4. Relearn

Boards are in a time of transition in defining who will be the next director. For the transformations happening now and in the future, your talents need to be closely aligned with the agendas and priorities with the boards on your target list. Build a strategic message about why you should be their next director.

5. Fragmentation

The market is producing a number of new ways to identify the next generation candidate. This makes it hard to know where you need to be and to stay on top of the trends. Ensure your reading and networking time gains key information in this area.

6. Foundational Changes

There are three foundational changes needed for a 21st century director candidate:

(1) Develop the skills, routines, and tools to truly leverage your potential from social media.

(2) Create and champion your brand or value proposition—it must be grounded in tangible differences.

(3) Deeply understand the boards you have targeted and create insights that naturally engage those to whom you present yourself as a board candidate. Be thoughtful so that the assumptions you make are not ones locked in the past.

7. Breaking Through the Clutter

Once on a short list for a director seat, be on your “A” game. Ask the right questions before the interviewing process to help shape your contributions in the interviews. Be consistent and have a few themes or main points developed.


*Tracy E. Houston is the president of Board Resources Services, LLC. She is a refined specialist in board consulting and executive coaching with a heartfelt passion for rethinking performance, teams and the boardroom.

Les failles du benchmarking dans l’établissement des rémunérations !

Voici le point de vue de l’auteure Claire Linton-Evans*, paru dans le  Sydney Morning Herald récemment, à propos des pratiques de benchmarking, largement utilisées dans le domaine de la sélection et de la rémunération.

Ces méthodes ont du succès parce qu’elles sont utiles, autant aux employés qui tentent de se situer parmi leurs pairs, qu’aux entreprises qui comptent sur ces mesures pour recruter et rémunérer les employés-cadres.

L’auteure montre que cette approche peut conduire à toute sorte d’aberrations et d’iniquités car les titres des emplois et leurs salaires peuvent varier considérablement selon les situations. Elle donne également lieu à une inflation des rémunérations car aucune entreprise ne souhaite recruter un employé « moyen » !

Mme Linton-Evans affirme que l’approche peut cependant être utile au niveau gouvernemental car les emplois sont spécifiés très rigoureusement et ils jouissent de descriptions uniformes d’un secteur à un autre, permettant ainsi de faire des comparaisons sensées.  

Dans tous les cas, les organisations devraient considérer d’autres facteurs pour établir la rémunération.

Je vous invite à prendre connaissance de ce cours article. Quelles sont vos expériences avec le benchmarking ? Bonne lecture !

The death of salary benchmarking


For decades benchmarking has been the private sector’s employment solution, forcing candidates into salary bands the way square pegs fit into round holes – often by shaving off some sides. Published by industry bodies and recruitment firms after surveying multiple companies, these annual benchmarking studies attempt to explain what salary range a role (usually by job title) is paid within each industry.

Cleverly marketed, they have been popular for so long because the data « benefits » two client segments: the employees and companies. Employees are told to use the range to ascertain their market value, while firms use the data to budget for new roles, with a level of comfort that they are in step with what the market is paying. However, as anyone who has interviewed or recruited recently knows, benchmarking is becoming increasingly unreliable.


Using salary benchmarks is dangerous for both the companies that rely on it to recruit and for executives who expect to be paid within a range. Some companies give benchmarking a cursory glance at budget time. Other companies absurdly state publicly and proudly that they pay only « up to the 75th percentile » of the industry’s benchmark, a declaration that rarely attracts top talent (nor motivates their existing employees).

By evaluating a candidate and their eligibility for a role on salary rather than experience, these businesses often remove the most qualified candidates from the process, and it’s these companies that employees should be wary of. The tip-off? The « What is your current salary/salary expectation? » question which will be often one of the first questions in the screening interview.

I was reminded of this recently when an old colleague shared his dismay after commencing a senior role in the software industry. It had been a delicate  hiring process because the previous manager of the division had held the title of executive general manager…and  before   this had been the executive assistant!  It was a classic and all too common case of a company that used a job title to reward an under-skilled employee, who didn’t have the experience of an EGM and wasn’t being paid the salary of a senior manager either. Obviously, this person couldn’t perform the role and my colleague was hired to fix the problem. So, if this company was involved with a salary benchmarking survey, what did their figures do to pull the average salary of a software EGM down?

And that’s exactly where the concept of benchmarking becomes redundant – job titles and salaries can vary wildly from employee to employee, company to company and situation to situation. Benchmarking them on the criteria of industry, title and salary is not enough for companies to use as a mandatory remuneration guide. The best and most in demand employees will expect to be paid well above a salary band they know has been derived from a motley crew of industry peers. They will know what their value is and wait for an educated employer to offer them an attractive salary. Moreover, successful companies are more aware than ever that their people create their competitive advantage and by offering a salary that is not competitive, they can’t expect their people to stick around.

Where salary benchmarking is successful is within the Government. Generally departments work on strict salary bands aligned to job codes. This works well because they are limited by budgets set annually, and they vigilantly hire employees into strict bands and titles.  Given the  number of variables in the private sector, the concept isn’t vaguely relatable, which is why salary benchmarking should be an interesting, but never a deciding factor these days in the hiring process.


*Claire Linton-Evans is a senior executive and author of the career bible for modern women, Climbing the Ladder in Heels – How to Succeed in the Career Game of Snakes and Ladders. 

Nouvelles capsules vidéos en gouvernance – La diversité et la gestion des risques

Le Collège des administrateurs de sociétés est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéo.

Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance. Une capsule est dévoilée chaque semaine.

Aujourd’hui, je vous propose le visionnement des deux plus récentes capsules d’experts qui sont maintenant en ligne. Elles ont pour thèmes « La diversité » par Mme Nicolle Forget, administratrice de sociétés, et « La gestion des risques » par M. Martin Leblanc, CA, CMC, Associé, Services-conseils – Management et Gestion des risques, KPMG.

Visionnez ces deux capsules d’experts :

La diversité, par Nicolle Forget [+]



Comment les principaux intéressés peuvent-ils évaluer la qualité d’un conseil d’administration ?

Que peut faire un actionnaire ou un investisseur pour évaluer la compétence d’un conseil d’administration et se former une opinion sur l’efficacité de son rôle de fiduciaire ?

Voici un article, publié par la rédaction d’Investopedia, qui présente un checklist en cinq points, simple mais fort utile, pour mieux savoir quoi regarder dans la documentation publique.

Bien sûr, votre évaluation ne sera pas nécessairement concluante mais je suis assuré que si vous portez une attention spéciale aux 5 éléments présentés ci-dessous, vous aurez une bien meilleure appréciation des qualités du conseil et de ses administrateurs.

Quels autres facteurs considérez-vous dans l’évaluation des compétences d’un Board ? Bonne lecture !

Evaluating The Board Of Directors

You can learn a lot from looking at the disclosures made about a company’s board of directors in its annual report, but it takes time and knowledge to pick up clues on the level of quality of a company’s governance as reflected in its board’s composition and responsibilities. (For related reading, see An Investor’s Checklist To Financial Footnotes and Footnotes: Early Warning Signs For Investors.)


In theory, the board is responsible to the shareholders and is supposed to govern a company’s management. But in many instances, the board has become a servant of the chief executive officer (CEO), who is typically also the chairman of the board. The role of the board of directors has increasingly come under scrutiny in light of corporate scandals such as those at Enron, WorldCom and HealthSouth, in which the board of directors failed to act in investors’ best interests. Although the Sarbanes-Oxley Act of 2002 made corporations more accountable, investors should still pay attention to what a corporation’s board of directors is up to. Here we’ll show you what the board of directors can tell you about how a company is being run.

The Checklist
According to an October 27, 2003, Wall Street Journal article, a checklist was developed by the Corporate Library to help investors evaluate the objectivity and effectiveness of a board. According to this checklist, investors should examine:

1. Size of the Board
There is no universal agreement on the optimum size of a board of directors. A large number of members represents a challenge in terms of using them effectively and/or having any kind of meaningful individual participation. According to the Corporate Library’s study, the average board size is 9.2 members, and most boards range from 3 to 31 members. Some analysts think the ideal size is seven.

In addition, there are two critical board committees that must be made up of independent members:

  1. The compensation committee
  2. The audit committee

The minimum number for each committee is three. This means that a minimum of six board members is needed so that no one is on more than one committee. Having members doing double duty may compromise the important wall between audit and compensation, which helps avoid any conflicts of interest. Members serving on a number of other boards may not devote adequate time to their responsibilities.

The seventh member is the chairperson of the board. It’s the responsibility of the chairperson to make sure the board is functioning properly and the CEO is fulfilling his or her duty and following the directives of the board. A conflict of interest is created if the CEO is also the chairperson of the board.

To staff any additional committees, such as nominating or governance, additional people may be necessary. However, having more than nine members may make the board too big to function effectively. (For background reading, see The Basics Of Corporate Structure.)

2. The Degree of Independence: Insiders and Outsiders
A key attribute of an effective board is that it is comprised of a majority of independent outsiders. While not necessarily true, a board with a majority of insiders is often viewed as being stacked with sycophants, especially in cases where the CEO is also the chairman of the board.

An outsider is someone who has never worked at the company, is not related to any of the key employees and has never worked for a major supplier, customer or service provider, such as lawyers, accountants, consultants, investment bankers, etc. While this definition of independent outsiders is clear, you’d be surprised at the number of times it is misapplied. Too often, the « outsider » label is given to the retired CEO or a relative when that person is actually an insider with conflicts of interest.The Wall Street Journal article found that independent outsiders made up 66% of all boards and 72% of Standard & Poor’s (S&P) boards. The larger the number of outside board members the better. This makes the board more independent and allows it to provide a higher level of corporate governance to shareholders, particularly if the position of chairman of the board is separated from the CEO and is held by an outsider.

3. Committees
There are four important board committees: executive, audit, compensation and nominating. There may be more committees depending on corporate philosophy, which is determined by an ethics committee and special circumstances relating to a particular company’s line of business. Let’s take a closer look at the four main committees:

  1. The Executive Committee
    The executive committee, is made up of a small number of board members that are readily accessible and easily convened, to decide on matters subject to board consideration but must be decided on expeditiously, such as a quarterly meeting. Executive committee proceedings are always reported to and reviewed by the full board. Just as with the full board, investors should prefer that independent directors make up the majority of an executive committee.
  2. The Audit Committee
    The audit committee works with the auditors to make sure that the books are correct and that there are no conflicts of interest between the auditors and the other consulting firms employed by the company. Ideally, the chair of the audit committee is a Certified Public Accountant (CPA). Often, a CPA is not on the audit committee, let alone on the board. The New York Stock Exchange (NYSE) requires that the audit committee include a financial expert, but this qualification is typically met by a retired banker, even though that person’s ability to catch fraud may be questionable. The audit committee should meet at least four times a year in order to review the most recent audit. An additional meeting should be held if there are other issues that need to be addressed
  3. The Compensation Committee.
    The compensation committee is responsible for setting the pay of top executives. It seems obvious that the CEO or other people with conflicts of interest should not be on this committee, but you’d be surprised at the number of companies that allow just that. It is important to check if the members of the compensation board are also on the compensation committees of other firms because of the potential conflict of interest. The compensation committee should meet at least twice a year. Having only one meeting may be a sign that the committee meets just to approve a pay package that was created by the CEO or a consultant without much debate. (To learn more, read Evaluating Executive Compensation.)
  4. The Nominating Committee
    This committee is responsible for nominating people to the board. The nomination process should aim to bring on people with independence and a skill set currently lacking on the board.M

4. Other Commitments and Time Constraints
The number of boards and committees a board member is on is a key consideration when judging the effectiveness of a member.

The following chart from the survey shows the time commitments of board members of the 1,700 largest U.S. public companies according the the study’s 2003 data. This indicates that the majority of board members sit on no more than three boards. What this data does not specify is the number of committees to which these people belong.

You’ll often find that independent board members serve on both the audit and compensation committees and are also on three or more other boards. You have to wonder how much time a board member can devote to a company’s business if the person is on multiple boards. This situation also raises questions about the supply of independent outside directors. Are these people pulling double duty because there’s a lack of qualified outsiders?

5. Related Transactions
Companies must disclose any transactions with executives and directors in a financial note entitled « Related Transactions. » This discloses actions or relationships that cause conflicts of interest, such as doing business with a director’s company or having relatives of the CEO receiving professional fees from the company.

The Bottom Line
The composition and performance of a board of directors says a lot about its responsibilities to a company’s shareholders. A board loses credibility if its objectivity and independence are compromised by material shortcomings in this checklist. Investors are poorly served by substandard governance practices.

Clarifications au sujet des deux principaux systèmes de gouvernance | One Tier vs Two Tier

Ici, en Amérique du Nord, on entend quelquefois parler des distinctions entre le modèle de gouvernance européen et le modèle de gouvernance à l’américaine. Vous trouverez, ci-dessous, une brève synthèse des particularités des modèles de gouvernance européens eu égard à la distinction one tier/two tier systèmes de gouvernance.

Cette conclusions est basée sur une recherche de type « Benchmarking » conduite par ecoDa* (The European Confederation of Directors Associations) auprès de ses membres des Instituts de gouvernance européens ainsi qu’auprès d’autres membres non-européens, tel que le Collège des administrateurs de sociétés (CAS).

À la suite de l’extrait présentant les grandes lignes de ces modèles de gouvernance, vous trouverez un portrait plus précis des principales différences entre les deux systèmes, dont les deux plus représentatifs (UK, One Tier; Allemagne, Two Tier).

Bonne lecture !


Although the European Union tries to undermine the differences, the corporate law and corporate governance is highly diversified throughout Europe, embedded in a long history of specific societal and economic approaches towards the organisation of the business world, aligning governance with these quite different societal priorities.IMG_20140520_212116

In the two tier system, supervisory board members control the strategy but don’t define it. In the two tier system, there is also a clear cut between management and control responsibilities. In the one tier system, the board governs the company e. g. controls the direction, defines the strategic options and can address any issues related to the performance of the company.

People advocating for the two tier model always point out that having distance between management and oversight creates independence that makes sense. People defending the one-tier system consider that having executives and non-executives on the same board provides a better flow of information and helps to overcome problems that boards can face in understanding what is going on in the company. The one-tier system would also enable the non-executive to see how executive operate together as a team. The non-executive would be more involved in forward-looking of the strategy. As a downside effect of the one tier system, it is difficult for non-executives to draw distinction between monitoring and oversight.

The one tier system is often seen as an English model while the two-tier system is more of a German style. But the reality is more complex than that over the different countries in the European Union. The Nordic Corporate Governance (CG) model is quite unique with a strictly hierarchical governance structure and a direct chain of command among the general meeting, the board and the CEO. The Italian CG model is also special with the distinction between the managing body (sole administrator or, in the collective form of a board of directors) and the controlling organ (so called “board of statutory auditors”)


One-tier board system Two-tier board system 
A single board. A supervisory body and a management body.
Mixed, executive and non-executive directors may serve on the board. Separate, executive and non-executive directors serve on separate boards (i.e., a supervisory board composed exclusively of non-executive directors and a management board composed exclusively of executive directors).
Unitary Binary
Mandatory or recommended Supervisory and advisory committees(Mandatory) oversight and advisory committees such as the audit committee, the remuneration committee and the nomination (appointments) committee, composed of a majority of non-executive directors, one or more of whom must be independent.Supervisory committee

Optional committee entrusted with supervising the company, composed of both executive and non-executive directors.

Usually differs slightly from a true supervisory board (as found in the two-tier system) in terms of powers, composition and role.


Mostly found in countries which present characteristics of a one-tier system while incorporating certain features of a two-tier system.


OptionalHistorically not required but oversight and advisory committees are increasingly important in the two-tier system as well.
Board of directors Managerial roleDirection and executive actsDecision-taking, management and oversightPerformance enhancement

Supervisory role


Strategic and financial oversight


Management board Managerial roleDirection and executive actsDecision-taking and managementPerformance enhancement

Service and strategic role


Supervisory board


Supervisory role


Decision-taking and oversight

Monitoring role

Strategic and financial oversight



CEO duality
Allowed.The same person can serve as both CEO and chair of the board of directors (although this is generally not recommended by corporate governance practices). 


Restricted.No CEO duality (although the CEO can sometimes be a member or attend meetings of the supervisory board.)
Executive directors
Appointed by the general meeting of shareholders, based on a proposal by the board or appointments committee (if any).A director may be appointed by the board of directors when the term of office of another director comes to an end, in order to prevent the board from being paralyzed, for example if the board no longer has a sufficient number of members as required by law or the articles (co-optation procedure).The appointment of a co-opted director must be confirmed at the first general meeting of shareholders following his or her appointment.  Appointed by the supervisory board or the general meeting of shareholders, based on a proposal by the board or the appointments committee (if there is one).
Non-Executive (supervisory directors)
Idem. Appointed by the general meeting of shareholders or, based on a proposal by the supervisory board or the appointments committee (if there is one).
Conflicts perspective
Negatively associated with the separation of decision-management and decision-oversight roles due to its composition (a majority of executive directors) and unitary structure.Diffusion of tasks and responsibilities weakens the non-executive directors’ ability to oversee the implementation of decisions, especially where executive and non-executive directors face the same potential legal liability.Higher risk of conflicts of interest between management and shareholders. 

To avoid conflicts of interest, it is often recommended that the one-tier board be composed of a majority of non-executive directors, due to   (i)

their experience and knowledge, (ii) their contacts, which may enhance management’s ability to secure external resources, and (iii) their independence from the CEO.


In companies which have achieved a certain level of development, risks of conflicts of interest are often reduced through the creation of committees allowing these functions to be segregated. In addition, legal provisions aimed at preventing and resolving conflict of interest exist in most jurisdictions.

  • Positively associated with the separation of decision-management and decision-oversight roles, due to the composition of the supervisory board (independent directors) which ensures independence and its binary structure.No diffusion of tasks and responsibilities. 

    Lower risk of conflicts of interest between management and shareholders.













    AdvantagesSpirit of partnership and mutual respect between directors, which allows greater interaction amongst all board members.Non-executive directors have more contact with the company itself and are more involved in the decision-making process. Non-executive directors have direct access to information.


    Decision-making process is faster.


    A lighter administrative burden as only a single management body needs to hold meetings and only a single set of minutes need be drawn up.


    Board meetings take place more regularly.



    A single body is entrusted with both managing and supervising the company’s operations.


    More difficult to guarantee the independence of board members and there is a greater risk of non-executive directors aligning too much with executive directors.


    More liability for non-executive directors.



    Advantages Clear distinction between the supervisory and management functions within the company.Clear distinctions of liabilities between the members of the supervisory and management bodies.Supervisory board members are more independent.


    Clear separation of the roles of chairman and CEO.









    It is more difficult for directors to build relationships of trust, thereby potentially undermining communication between the two boards.


    Supervisory board members only receive limited information (from the management board) and at a later stage (decreased involvement). There is a heightened risk of the supervisory board not discovering shortcomings or discovering them too late.


    Decision-making process is delayed due to less frequent supervisory board meetings.


    Non-executive directors face several challenges which appear to be typical of the two-tier board model, such as difficulties (i) building relationships of trust, thereby potentially undermining communication and flows of information between the two boards, and (ii) fully understanding and ratifying strategic initiatives by the management board, thereby frustrating the decision-making processes.



    ecoDa (The European Confederation of Directors Associations) is a not-for-profit association based in Brussels, which acts as the « European voice of directors » and represents around 60,000 board directors from across the European Union (EU) member states. The organisation acts as a forum for debate and public advocacy by influencing the public policy debate at EU level and by promoting appropriate director training, professional development and boardroom best practice.

    Deux nouvelles formations spécialisées en gouvernance offertes aux administrateurs

    Vous trouverez, ci-dessous, un communiqué du Collège des administrateurs de sociétés (CAS) qui présente deux nouvelles formations spécialisées en gouvernance des sociétés.

    Toujours soucieux de répondre aux attentes des administrateurs, le CAS poursuit ses efforts afin de diversifier son offre de formation.

    Voici donc certaines informations concernant les deux nouveaux cours spécialisés en gouvernance qui sont à l’horaire dès cet automne. Bonne lecture !

    Gouvernance des OBNL

    Ce cours s’adressera spécifiquement aux directeurs généraux, présidents et administrateurs des organismes à but non lucratif soucieux d’intégrer de nouvelles pratiques de gouvernance adaptées au contexte des OBNL afin d’assurer la pérennité et la performance de leur organisation. Ce cours aura lieu à Québec, les 24 et 25 octobre prochains et le coût d’inscription est de 500 $ par participant.

    Pour plus d’information : Gouvernance des OBNL [+]

    Gouvernance et leadership à la présidence

    Cette formation sera destinée aux administrateurs d’expérience exerçant la fonction de présidence du conseil d’administration, d’un des comités du conseil ou du comité consultatif d’une PME. Basé sur des études de cas, des simulations et des discussions en petits groupes, ce cours sera principalement orienté sur la maîtrise des habilités relationnelles et de leadership qu’exige la fonction de présidence d’un conseil. Ce cours se tiendra à Québec, les 13 et 14 novembre prochains et le coût d’inscription est de 1950 $ par participant.

    Pour plus d’information : Gouvernance et leadership à la présidence [+]

    Gouvernance des PME

    De plus, le cours Gouvernance des PME est aussi à l’horaire pour les 5 et 6 novembre à Québec. Ce cours s’adresse aux chefs d’entreprise, hauts dirigeants, investisseurs et administrateurs appelés à siéger sur les conseils d’administration ou comités consultatifs de PME.

    Pour plus d’information : Gouvernance des PME [+]

    Tous les cours spécialisés sont offerts en alternance à Québec et Montréal et sont limités à des groupes de 20 participants. Il est déjà possible de s’inscrire à l’une ou l’autre de ces formations qui seront présentées à Montréal dès février 2015.

    Consulter le calendrier complet [+]

    Le pouvoir démesuré des firmes de conseil en votation !

    Voici un article publié par Daniel M. Gallagher* sur le blogue de Harvard Law School on Corporate Governance. L’auteur met sérieusement en question le pouvoir et l’influence des conseillers en votation. 

    L’article examine les conséquences de la montée des firmes de conseillers en votation et leur influence sur les décisions des investisseurs.

    Je sais, c’est un article un peu long mais je crois qu’il vous donnera l’heure juste sur l’historique de l’évolution des « Proxy Advisers » et sur certaines actions qui pourraient être entreprises pour les contrôler !

    Bonne lecture ! Vos commentaires sont les bienvenus.

    In addition, as I have stated in the past, I believe that the Commission should fundamentally review the role and regulation of proxy advisory firms and explore possible reforms, including, but not limited to, requiring them to follow a universal code of conduct, ensuring that their recommendations are designed to increase shareholder value, increasing the transparency of their methods, ensuring that conflicts of interest are dealt with appropriately, and increasing their overall accountability. I do not believe that the Commission should be in the business of comprehensively regulating proxy advisory firms—as we’ve seen from the 2006 NRSRO rule, such regulation often is simply ineffective—but there may be additional steps that we can take to promote transparency and best practices.



    Outsized Power & Influence: The Role of Proxy Advisers


    Shareholder voting has undergone a remarkable transformation over the past few decades. Institutional ownership of shares was once negligible; now, it predominates. This is important because individual investors are generally rationally apathetic when it comes to shareholder voting: value potentially gained through voting is outweighed by the burden of determining how to vote and actually casting that vote. By contrast, institutional investors possess economies of scale, and so regularly vote billions of shares each year on thousands of ballot items for the thousands of companies in which they invest.img00570-20100828-2239.jpg

    For example, an investor purchasing a share of an S&P 500 index mutual fund would likely have no interest in how each proxy is voted for each of the securities in each of the companies held by that fund. Indeed, it would defeat the purpose of selecting such a low-maintenance, lost-cost investment alternative. And so it is left to the investment adviser to the index fund to vote on the investor’s behalf. This enhanced reliance on the investment adviser to act on behalf of investors inevitably results in a classic agency problem: how do we make sure that the investment adviser is voting those shares in the investor’s best interest, and not the adviser’s?

    The Rise of Proxy Advisory Firms

    The Commission took up this very issue in a rulemaking in 2003, putting in place disclosures to inform investors how their funds’ advisers are voting, as well as outlining clear steps that advisers must undertake to ensure that they vote shares in the best interest of their clients. But every regulatory intervention carries with it the risk of unintended consequences. And the 2003 release has since proved that to be true—to the point where the costs of the unintended consequences now arguably dwarf those benefits originally sought to be achieved. How exactly did this happen?

    Proxy Voting by Investment Advisers

    In the 2003 release, the SEC took on one specific manifestation of the general agency problem discussed above: that an adviser could have a conflict of interest when voting a client’s securities on matters that affect the adviser’s own interests (e.g., if the adviser is voting shares in a company whose pension the adviser also manages). To remedy this issue, the release stated that an investment adviser’s fiduciary duty to its clients requires the adviser to adopt policies and procedures reasonably designed to ensure that it votes its clients’ proxies in the best interest of those clients. Further, the Commission noted that “an adviser could demonstrate that the vote was not a product of a conflict of interest if it voted client securities, in accordance with a pre-determined policy, based upon the recommendations of an independent third party.” From these statements, two specific unintended consequences arose.

    First, some investment advisers interpreted this rule as requiring them to vote every share every time. This seemed, perhaps, to be the natural outgrowth of the Department of Labor’s 1988 “Avon Letter,” which stated that “the fiduciary act of managing plan assets which are shares of corporate stock would include the voting of proxies appurtenant to those shares of stock.” As a result, investment advisers with investment authority over ERISA plan assets—and thus regulated by the Department of Labor as well as the SEC—were already required to cast a vote on every matter. Reading the SEC’s 2003 rule, some advisers may have assumed that the Commission intended to codify that result for all investment advisers.

    A requirement to vote every share on every vote, however, gives rise to a significant economic burden for investment advisers who may own only relatively small holdings in a large number of companies. For example, one study found that “most institutional investor holdings are relatively small portions of each firm’s total securities. For example, in our sample … the mean (median) holding of an individual stock by institutional investors is 0.3% (0.03 %).” Given that institutional investors hold stock in hundreds or thousands of companies (for example, TIAA‐CREF holds stock in 7,000 companies), institutional investors—particularly the smaller ones—may not be able to invest in the costly research needed to ensure that they cast each vote in the best interest of their clients. The logical answer is to outsource the research function to a third party, who could do the needed research and sell voting recommendations back to investment advisers for a fee: a proxy advisory firm. While these firms already existed, the 2003 rule gave advisers new economic incentives to use them.

    Second, proxy advisory firms noticed the suggestion in the 2003 rule that soliciting the views of an independent third party could overcome an adviser’s conflict of interest. In 2004, a proxy advisory firm requested—and received—“no-action” relief from the SEC staff that significantly expanded investment advisers’ incentive to use these firms. Specifically, the staff advised Institutional Shareholder Services (“ISS”) that “[A]n investment adviser that votes client proxies in accordance with a pre-determined policy based on the recommendations of an independent third party will not necessarily breach its fiduciary duty of loyalty to its clients even though the recommendations may be consistent with the adviser’s own interests. In essence, the recommendations of a third party who is in fact independent of an investment adviser may cleanse the vote of the adviser’s conflict.” Thus, rotely relying on the advice from the proxy advisory firm became a cheap litigation insurance policy: for the price of purchasing the proxy advisory firm’s recommendations, an investment adviser could ward off potential litigation over its conflicts of interest.

    Finally, in a second 2004 no-action letter to Egan‐Jones, the staff affirmed that a key aspect of some proxy advisory firms’ business model—selling corporate governance consulting services to companies—“generally would not affect the firm’s independence from an investment adviser.” This determination is somewhat incredible, as it places the proxy advisory firm in the position of telling investment advisers how to vote proxies on corporate governance matters that had been the subject of the proxy advisory firm’s consulting services—a seemingly obvious, and insurmountable, conflict of interest.

    In sum, the 2003 release and the 2004 no-action letters set the stage for proxy advisory firms to wield the power of the proxy, through investment adviser firms that had economic, regulatory, and liability incentives to rotely rely on the proxy advisory firms’ recommendations and through the SEC staff’s assurances that this arrangement was just fine, despite the obvious conflicts of interest involved throughout. But it would take some additional developments for proxy advisory firms to attain the dominant voice in American corporate governance that they have today.

    Subsequent Developments

    Since 2003–2004, some features of the SEC regulatory regime have acted to deepen investment advisers’ reliance on proxy advisory firms. First, the quantity of company disclosures has increased significantly over the past few years. For example, the SEC in 2006 adopted revisions to the proxy and periodic reporting rules to require extensive new disclosures about “executive and director compensation, related person transactions, director independence and other corporate governance matters and security ownership of officers and directors.” The new rule generated reams of new disclosures that were long, complex, and focused on regulatory compliance rather than telling the company’s compensation story. The sheer volume of information that an investment adviser would have to review in order to make a fully-informed voting decision is difficult even to organize, much less to read and digest.

    Second, the average number of items on which investors are asked to vote has also been on the rise. This trend is attributable at least in part to the Dodd‐Frank twin advisory votes on executive compensation: a vote for how often to approve executive pay (“say-on-frequency”), and a vote to in fact approve (or disapprove) that pay (“say-on-pay”). We have also seen a continued increase in shareholder proposals that SEC rules generally compel companies to include in the proxy to be voted on, which in turn reflects increased activism around shareholder voting.

    As a result, the economic imperative to use proxy advisory firms that the vote-every-share-every-time interpretation of the 2003 rulemaking created has only deepened over time. At the same time, serious questions emerged, particularly in the corporate community, about the power being wielded by proxy advisory firms in making their recommendations. These recommendations are of course provided contractually to investment advisers; proxy advisory firms have no fiduciary duty to shareholders, nor do they have any interest or stake in the companies that are the subject of the recommendations.

    In particular, corporate observers raised two key questions about proxy advisory firms: are their recommendations infected by conflicts of interest, and even assuming they are not, do they have the capacity to produce accurate, transparent, and useful recommendations?

    With regard to the former question, as alluded to in the Egan-Jones no-action letter, proxy advisory firms may have other, complementary lines of business. For example, in addition to selling vote recommendations to institutional investors (along with voting platforms, data aggregation, and other auxiliary services), they may also sell consulting services to companies that want to ensure that they have structured their governance and other proxy votes so as to avoid “no” recommendations from the proxy advisory firms. The sale of voting recommendations to institutional investors creates a risk that proxy advisory firms, in formulating their core voting recommendations, will be influenced by some of their largest customers (e.g., union or municipal pension funds) to recommend a voting position that would benefit them. The sale of consulting services to companies creates a risk that proxy advisory firms would be lenient in formulating voting recommendations for companies that are their clients and harsh in crafting the recommendations for those companies that have refused to retain their services.

    With regard to the latter question, proxy advisory firms themselves face the same difficulties as institutional investors faced before they determined to outsource their voting: how does one formulate timely, high-quality recommendations for thousands of votes at thousands of companies based on millions of pages of data—all while competing on price with other firms? To put it charitably, they just do the best they can. But their best often is simply not good enough: proxy advisory firms publish some recommendations that are based on clear, material mistakes of fact. Moreover, they base some recommendations on a cookie-cutter approach to governance—i.e., in favor of all proposals of a certain type, like de-staggering boards or removing poison pills, even if there is a sound basis for challenging the assumption that an otherwise beneficial governance reform might not be appropriate for a given company. As one academic article has argued:

    [I]f the institutional investors are only using the proxy advisor voting recommendations to meet their compliance requirement to vote their shares, these investors will favor lower costs over robust research. This raises the question of whether these payments are sufficient to compensate proxy advisors for sophisticated analysis of firm-specific circumstances that is necessary to develop correct governance recommendations. If the price paid by institutional investors is low, this will motivate proxy advisory firms to base their voting recommendation on simple models that ignore the important nuances that affect the appropriate choice of corporate governance. It is unlikely that this type of low level research can actually identify the appropriate governance structure for individual firms.

    Unfortunately companies have little access to proxy advisory firms in order either to correct a mistake of fact, or to explain why a generic corporate governance recommendation is the wrong result in the specific instance: letting companies appeal to the advisory firm is time-consuming and expensive, neither of which is consistent with the proxy advisory firm’s business model. As a result, while the companies that also hire a proxy advisory firm for its corporate consulting service may have some minimal degree of access (e.g., by being provided an opportunity to make limited comments on draft reports), smaller companies that are not clients generally are not afforded any such rights.

    Advisers that rely rotely on the proxy advisory firm’s recommendations also tend not to afford companies an opportunity to tell their story. This is unsurprising: if the advisers wanted to make contextualized decisions about casting each vote, they would not have outsourced their vote in the first place. But it is also supremely ironic: a company that may want to engage in good faith with its shareholders may find that it has no meaningful opportunity to do so. This trend is deeply troubling to me. If an investment adviser is approached by a company with information indicating that the basis on which the adviser is casting its vote is fundamentally flawed, is it really consistent with the investment adviser’s fiduciary duties for the adviser to simply ignore that information? I think the rote reliance on proxy advisory firms has caused investment advisers to lose the forest for the trees: they are so focused on checking the compliance boxes to absolve conflicts of interest under our rules that they forget that they still have a broader fiduciary duty to investors to cast votes in the investors’ best interest. That fiduciary duty, I believe, cannot be satisfied through rote reliance on proxy advisory firms.

    Regulatory Response

    First Steps

    These issues have been on the SEC’s radar for some time now, most notably when they were raised in the 2010 Concept Release on the U.S. Proxy System (the “Proxy Plumbing” release). This release outlined the conflict-of-interest and low-quality voting recommendation issues addressed above, and it requested comment on a long list of potential regulatory solutions. I raised this issue in a number of speeches in 2013 and 2014, and the Commission in December 2013 held a roundtable to examine key questions about the influence of proxy advisers on institutional investors, the lack of competition in this market, the lack of transparency in the proxy advisory firms’ vote recommendation process and, significantly, the obvious conflicts of interest when proxy advisory firms provide advisory services to issuers while making voting recommendations to investors. A wide range of other parties, including Congress, academia, public interest groups, the media, and a national securities exchange, have also been calling for reforms.

    There has also been substantial interest and work regarding the role of proxy advisers on the international front. Recently, the European Commission introduced legislation to address the accuracy and reliability of proxy advisers’ analysis as well as their conflicts of interest. If adopted by the EU’s legislature, Article 3i (entitled “Transparency of proxy advisors”) would require proxy advisors to publicly disclose certain information in relation to the preparation of their recommendations, including the sources of information, total staff involved, and other meaningful data points. It would also require that member states ensure that proxy advisers identify and disclose without undue delay any actual or potential conflicts of interest or business relationships that may influence their recommendations and what they have done to eliminate or mitigate such actual of potential conflicts. While I may not often find myself in a position of agreeing with the European Commission, here I believe their proposal takes an incredible step forward and one that I commend them for promoting.

    Staff Legal Bulletin No. 20

    After the concept release and the roundtable, which provided a wealth of information and perspectives, the SEC staff on June 30th moved toward addressing some of the serious issues. The Division of Investment Management and the Division of Corporation Finance released Staff Legal Bulletin No. 20 (“SLB 20”), providing much-needed guidance and clarification as to the duties and obligations of proxy advisers, and to the duties and obligations of investment advisers that make use of proxy advisers’ services.

    This guidance is a good initial step in addressing the serious deficiencies currently plaguing the proxy advisory process. In particular, it does three important things worth highlighting.

    First, it clarifies the widespread misconception discussed above that the Commission’s 2003 release mandates that investment advisers cast a ballot for each and every vote. The guidance makes clear that this interpretation is wrong. Rather, an investment adviser and its client have significant flexibility in determining how the investment adviser should vote on the client’s behalf. The investment adviser and client can agree that votes will be cast always, sometimes (e.g., only on certain key issues), or never. They similarly can agree that votes will be cast in lockstep with another party (e.g., management, or a large institutional investor). Advisers could agree with investors in a mutual fund managed by the adviser that the adviser would only vote shares in companies representing more than a certain threshold percentage of the fund’s assets—and refrain from voting smaller holdings, vote them with management, or vote them some other way. While possibilities may not be endless, there is room for much more creativity than exists today.

    Second, SLB 20 cautions against misguided reliance on the two 2004 staff no-action letters, which have been widely misinterpreted as permitting investment advisers to abdicate essentially all of their voting responsibilities to proxy advisers without a second thought. The guidance makes clear that investment advisers have a continuing duty to monitor the activities of their proxy advisers, including whether, among other things, the proxy advisory firm has the capacity to “ensure that its proxy voting recommendations are based on current and accurate information.” I have heard from many companies that proxy advisory firms sometimes produce recommendations based on materially false or inaccurate information, but they are unable to have the proxy advisory firm even acknowledge these claims, much less review them and determine whether to revise its recommendation in light of the corrected information.

    While I encourage companies to attempt to work with proxy advisers, I also believe it is important for companies to bring this type of misconduct by proxy advisers to the attention of their institutional shareholders. As explained in the new guidance, investment advisers are required to take reasonable steps to investigate errors. Repeated instances of proxy advisers failing to correct recommendations they based on materially inaccurate information should cause investment advisers to question whether the proxy adviser can be relied upon. Separate and apart from the guidance they receive, I believe investment advisers’ broader fiduciary duty should compel them to review the corrected information provided by the company and consider it when determining how ultimately to cast their votes.

    Third, SLB 20 makes clear that a proxy advisory firm must disclose to recipients of voting recommendations any significant relationship the proxy advisory firm has with a company or security holder proponent. This critical disclosure must clearly and adequately describe the nature and scope of the relationship, and boilerplate will not suffice.

    Further Interventions?

    While these reforms are much-needed, I am concerned that the guidance does not go far enough. SLB 20 provides some incremental duties and suggests ways that individual entities could structure their advisory relationship so as to reduce reliance on proxy advisory firms, but it has become clear to me that, over the past decade, the investment adviser industry has become far too entrenched in its reliance on these firms, and there is therefore a risk that the firms will not take full advantage of the new guidance to reduce that reliance.

    I therefore intend to closely monitor how these reforms are being executed and whether they are solving the current significant problems in this space. In fact, if a company does experience difficulties in getting the proxy advisory firm to respond to the company’s concerns about the accuracy of the information on which the recommendation is based, and does therefore follow my suggestion to reach out directly to its institutional investors, I would encourage the company also to provide a copy of its shareholder communications directly to my office. I would be very interested to learn which complaints are being disregarded by proxy advisory firms and institutional investors. In addition, I believe SLB 20 should diminish the number of these complaints over time, and I will be very interested to discover whether this is in fact the case.

    Finally, while I appreciate the important steps that are being taken above, I believe that the release of SLB 20 still may not fully address the fact that our rules have accorded to proxy advisors a special and privileged role in our securities laws—a role similar to that of nationally recognized statistical ratings organizations (“NRSRO”) before the financial crisis. I intend to continue to seek structural changes that will address this dangerous overreliance.

    For example, the Commission could replace the two staff no-action letters with Commission-level guidance. Such guidance would seek to ensure that institutional shareholders are complying with the original intent of the 2003 rule and effectively carrying out their fiduciary duties. Commission guidance clarifying to institutional investors that they need to take responsibility for their voting decisions rather than engaging in rote reliance on proxy advisory firm recommendations would go a long way toward mitigating the concerns arising from the outsized and potentially conflicted role of proxy advisory firms.

    In addition, as I have stated in the past, I believe that the Commission should fundamentally review the role and regulation of proxy advisory firms and explore possible reforms, including, but not limited to, requiring them to follow a universal code of conduct, ensuring that their recommendations are designed to increase shareholder value, increasing the transparency of their methods, ensuring that conflicts of interest are dealt with appropriately, and increasing their overall accountability. I do not believe that the Commission should be in the business of comprehensively regulating proxy advisory firms—as we’ve seen from the 2006 NRSRO rule, such regulation often is simply ineffective—but there may be additional steps that we can take to promote transparency and best practices.

    In Sum

    To be clear, I realize that proxy advisers can provide important information to institutional investors and others. But that business model should be able to stand or fall on its own merits—i.e., based on the usefulness of the information provided to the marketplace. The SEC’s rulebook should not accord proxy advisory firms a special, privileged role—or, if that privilege cannot be completely stripped away, proxy advisory firms should be subject to increased oversight and accountability commensurate with their role.


    Daniel M. Gallagher*  is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Washington Legal Foundation working paper by Mr. Gallagher; the complete publication, including footnotes, is available here.


    Les risques de gouvernance associés à l’OPA d’Alibaba

    , professeur de droit, d’économique et de finance, et directeur des programmes sur la gouvernance corporative à la Harvard law School vient de publier un article très important dans le New York Times.

    L’auteur met les investisseurs en garde contre de réels risques de gouvernance liés à l’offre publique d’achat (OPA) de l’entreprise chinoise Alibaba.

    Je crois qu’il est utile de mieux comprendre les enjeux de gouvernance avant d’investir dans cette immense OPA.

    Bonne lecture !


    Wall Street is eagerly watching what is expected to be one of the largest initial public offering in history: the offering of the Chinese Internet retailer Alibaba at the end of this week. Investors have been described by the media as “salivating” and “flooding underwriters with orders.” It is important for investors, however, to keep their eyes open to the serious governance risks accompanying an Alibaba investment.

    Several factors combine to create such risks. For one, insiders have a permanent lock on control of the company but hold only a small minority of the equity capital. Then, there are many ways to divert value to affiliated entities, but there are weak mechanisms to prevent this. Consequently, public investors should worry that, over time, a significant amount of the value created by Alibaba would not be shared with them.

    In Alibaba, control is going to be locked forever in the hands of a group of insiders known as the Alibaba Partnership. These are all managers in the Alibaba Group or related companies. The Partnership will have the exclusive right to nominate candidates for a majority of the board seats. Furthermore, if the Partnership fails to obtain shareholder approval for its candidates, it will be entitled “in its sole discretion and without the need for any additional shareholder approval” to appoint directors unilaterally, thus ensuring that its chosen directors always have a majority of board seats.

    Alibaba is scheduled to become a publicly traded company later this week.

    Many public companies around the world, especially in emerging economies, have a large shareholder with a lock on control. Such controlling shareholders, however, often own a substantial portion of the equity capital that provides them with beneficial incentives. In the case of Alibaba, investors need to worry about the relatively small stake held by the members of the controlling Alibaba Partnership.

    After the I.P.O., Alibaba’s executive chairman, Jack Ma, is expected to hold 7.8 percent of the shares and all the directors and executive officers will hold together 13.1 percent. Over time, insiders may well cash out some of their current holding, but Alibaba’s governance structure would ensure that directors chosen by the Alibaba Partnership will forever control the board, regardless of the size of the stake held by the Partnership’s members.

    With an absolute lock on control and a limited fraction of the equity capital, the Alibaba insiders will have substantial incentives to divert value from Alibaba to other entities in which they own a substantial percentage of the equity. This can be done by placing future profitable opportunities in such entities, or making deals with such entities on terms that favor them at the expense of Alibaba.

    Alibaba’s prospectus discloses information about various past “related party transactions,” and these disclosures reflect the significance and risks to public investors of such transactions. For example, in 2010, Alibaba divested its control and ownership of Alipay, which does all of the financial processing for Alibaba, and Alipay is now fully controlled and substantially owned by Alibaba’s executive chairman.

    Public investors should worry not only about whether the Alibaba’s divesting of Alipay benefited Mr. Ma at the expense of Alibaba, but also about the terms of the future transactions between Alibaba and Alipay. Because Alibaba relies on Alipay “to conduct substantially all of the payment processing” in its marketplace, these terms are important for Alibaba’s future success.

    Mr. Ma owns a larger fraction of Alipay’s equity capital than of Alibaba’s, so he would economically benefit from terms that would disfavor Alibaba. Indeed, given the circumstances, the I.P.O. prospectus acknowledges that Mr. Ma may act to resolve Alibaba-Alipay conflicts not in Alibaba’s favor.

    The prospectus seeks to allay investor concerns, however, by indicating that Mr. Ma intends to reduce his stake in in Alipay within three to five years, including by having shares in Alipay granted to Alibaba employees. But stating such an intention does not represent an irreversible legal commitment. Furthermore, transfers of Alipay ownership stakes from Mr. Ma to other members of the Alibaba Partnership would still leave the Partnership’s aggregate interest to be decidedly on the side of Alipay rather than Alibaba.

    Given the significant related party transactions that have already taken place, and the prospect of such transactions in the future, Alibaba tried to placate investors by putting in a “new related party transaction policy.” But this new policy hardly provides investors with solid protection. Unlike charter and bylaw provisions, corporate policies are generally not binding. Furthermore, Alibaba’s policy explicitly allows the board, where the nominees of Alibaba partnership will always have a majority, to approve any exceptions to the policy that the board chooses.

    Of course, the Alibaba partners might elect not to take advantage of the opportunities for diversion provided to them by Alibaba’s structure. And, even if the partners do use such opportunities, the future business success of Alibaba might be large enough to make up for the costs of diversions and leave public investors with good returns on their investment.

    Before jumping in, however, investors rushing to participate in the Alibaba I.P.O. must recognize the substantial governance risks that they would be taking. Alibaba’s structure does not provide adequate protections to public investors.


    Article relié :

    Alibaba Raises the Fund-Raising Target for Its I.P.O. to $21.8 Billion (Sept. 15, 2014)

    Une perspective française sur le « Say on Pay » et la réalité de la transparence

    Ce matin, je porte à votre attention une courte vidéo produite par la chaîne française Xerfi Canal qui aborde le sujet du « Say on Pay », une importation du système réglementaire américain.

    Entendez le point de vue de l’expert français Philippe Portier, avocat-associé au cabinet JeantetAssociés, qui répond aux questions Thibault Lieurade sur l’efficacité de ce dispositif appliqué au système de gouvernance français.

    Quel est votre avis sur l’application de certaines mesures de gouvernance dans un contexte culturel différent ?

    Voici une brève description du contenu. Bon visionnement !

    Depuis la mi-2013 en France, les actionnaires des entreprises cotées assujetties au code de gouvernance AFEP-MEDEF émettent un avis sur les rémunérations des dirigeants. C’est le principe du Say on Pay.

    L’objectif théorique est double :

    (1) limiter l’inflation jugée inacceptable socialement des rémunérations des dirigeants et

    (2) redonner du pouvoir aux actionnaires.

    Rémunération des dirigeants : « say on pay » et transparence réelle


    Philippe Portier | Rémunération des dirigeants : « say on pay » et transparence réelle

    Les modèles de gouvernance fondés sur la prise en compte des intérêts des « Stakeholders » sont-ils efficaces ?

    Dans ce billet, nous attirons votre attention sur une étude remarquable, récemment publiée par Franklin Allen, professeur d’économie à l’Université de Pennsylvanie et à Imperial College, Londres; Elena Carletti, professeure de finance à l’université Bocconi ; et Robert Marquez, professeur de finance à l’Université de Californie (Davis), paru sur le blogue de Harvard Law School Forum on Corporate Governance.

    L’étude montre que les entreprises peuvent adopter deux modèles relativement distincts de gouvernance.

    Le premier modèle, celui qui règne dans les pays Anglo-Saxons, adopte la perspective de la théorie de l’agence selon laquelle il doit exister une nette séparation des pouvoirs entre les actionnaires-propriétaires et les dirigeants de l’organisation. Dans ces pays (U.S., Canada, UK, Australie), les lois précisent assez clairement que les actionnaires sont les propriétaires de l’entreprise et que les managers ont le devoir fiduciaire d’agir en fonction de leurs intérêts, tout comme les administrateurs qui sont les représentants élus des actionnaires.

    La situation canadienne est un peu particulière parce que certains jugements stipulent que les administrateurs doivent aussi tenir compte des conséquences des décisions sur les diverses parties prenantes.

    Il y a plusieurs pays qui adoptent un deuxième modèle de gouvernance, un modèle qui accorde une importance capitale aux parties prenantes (Stakeholders), plus particulièrement aux employés.

    Par exemple, en Allemagne, le système de cogestion exige un nombre égal de sièges d’actionnaires et d’employés au conseil de supervision. Les intérêts des parties prenantes sont également pris en compte par une représentation significative d’employés en Autriche, en France, aux Pays-Bas, au Danemark, en Suède.

    D’autres pays tels que la Chine et le Japon ont des modèles de gouvernance qui se fondent sur des normes se rapportant aux consensus sociaux.

    Quel modèle de gouvernance peut le mieux optimiser la performance des entreprises, tout en répondant aux impératifs de rentabilité, de compétitivité et de pérennité de ces dernières ?

    Vous ne serez peut-être pas étonnés d’apprendre que le modèle Anglo-Saxon, fondé sur la propriété des actionnaires, n’est pas nécessairement le plus efficace ! Mais pourquoi ?

    Voilà ce que cette étude examine en profondeur. Voici quelques extraits de l’article, dont la conclusion suivante :

    « If workers and shareholders are made better off by co-determination and consumers are made worse off, then it is still likely that co-determination will be implemented. The reason is that workers and shareholders are usually better organized and are in a position to lobby in favor of co-determination, whereas consumers are dispersed. Such a political economy approach can help shed light on the emergence of stakeholder governance. In turn, the present study illustrates one of the likely consequences of the adoption of a stakeholder approach to corporate governance ».

    Stakeholder Governance, Competition and Firm Value


    ….. These differences in firms’ corporate orientation are confirmed by the results of a survey of senior managers at a sample of major corporations in Japan, Germany, France, the US, and the UK, who were asked whether “A company exists for the interest of all stakeholders” or whether “Shareholder interest should be given the first priority” (Yoshimori, 2005). The results of the survey strongly suggest that stakeholders are considered to be very important in Japan, Germany and France, while shareholders’ interests represent the primary concern in the US and the UK. The same survey reports that firm continuity and employment preservation are important concerns for managers of corporations located in Japan, Germany and France, but not for those located in the US and the UK. All these considerations suggest that in many countries the legal system or social conventions have as a common objective the inclusion of parties beyond shareholders into firms’ decision-making processes. In particular, workers are seen as important stakeholders in the firm, with continuity of employment being an important objective.IMG_20140516_140943

    In our paper, Stakeholder Governance, Competition and Firm Value, forthcoming in the Review of Finance, we examine these issues, and provide an understanding of how imposing stakeholder governance affects firms’ behavior even when this involves a trade-off between the interests of shareholders and those of other stakeholders. Our main idea is that stakeholder firms internalize the effects of their behavior on stakeholders other than shareholders. In particular, they are concerned with the benefits that their stakeholders would lose should the firm not survive. As a consequence, stakeholder firms are more concerned with avoiding bankruptcy since this prevents their stakeholders from enjoying their benefits. The different concern for survival affects firms’ strategic behavior in the product market and, in particular, the way they behave in the presence of uncertainty.

    Specifically, we develop a model where firms compete in the product market with other firms, and have to choose the prices at which to sell their goods. Firms are subject to uncertainty, and can go bankrupt if they fail to turn a profit either because the expected sales did not quite materialize, or because costs turned out to be higher than anticipated. The possibility, and fear, of bankruptcy thus induces firms to be more conservative in their pricing policies, preferring to maintain a larger cushion between their revenues and their costs, than in seeking out (possibly) larger sales but at thinner margins.

    A concern for stakeholders makes a firm even more concerned about avoiding bankruptcy to the extent that it may lead to dislocation of its workers, and makes it even more conservative in its pricing policies. While the direct consequence of this is to move a firm away from the objective of maximizing profits and thus shareholder value, there is an indirect effect coming through the interaction between competing firms in the product market: when one firm becomes less aggressive, other firms have an incentive to follow suit. This reduction in aggression (i.e., competition) industry-wide benefits the stakeholder-oriented firm, so much so that shareholders may in fact be better off when their firm can commit to internalizing stakeholder concerns. In other words, stakeholders’, such as employees, and shareholders’ interests become aligned through the competitive interactions among firms, rather than being at odds as they would appear to be if one ignores firms’ product market interactions.

    We use this basic idea to study a number of issues ranging from state-mandated inclusion of stakeholders in corporate governance (e.g., the case of Germany), to globalization that makes it commonplace for firms from shareholder-oriented societies to compete with those from countries with a stakeholder orientation. We also study the implications of financial constraints for the capital structure of stakeholder-oriented firms, and show that the same conservative stance in the product market translates into more conservative capital structure.

    Our study raises a number of unanswered questions about the ultimate effect of stakeholders’ orientations on firm behavior and value, and suggests directions for future research. One of the interesting questions is why some countries adopt stakeholder governance while others do not, and why governments adopt such governance although it may benefit firms and employees at the expense of consumers. There is a growing literature on corporate governance and political economy that emphasizes that the political process plays a very important part in determining the corporate governance structure in a country (see, e.g., Pagano and Volpin, 2005; Perotti and von Thadden, 2006; and Perotti and Volpin, 2007). For example, if workers and shareholders are made better off by co-determination and consumers are made worse off, then it is still likely that co-determination will be implemented …..

    Sur quoi les organisations doivent-elles d’abord travailler : sur la stratégie ou sur la culture ?

    Voici un article très intéressant de Elliot S. Schreiber* paru sur le blogue de Schreiber | Paris récemment. L’auteur pose une question cruciale pour mieux comprendre la nature et la priorité des interventions organisationnelles.

    À quoi le management et le C.A. doivent-ils accorder le plus d’attention : À stratégie ou à la culture de l’organisation ?

    L’auteur affirme que la culture, étant l’ADN de l’entreprise, devrait se situer en premier, …  avant la stratégie !

    Le bref article présenté ci-dessous pose deux questions fondamentales pour connaître si l’entreprise a une culture appropriée :

    (1) Does it cost us the same, more or less than competitors to recruit and retain top talent ?

    (2) Are customers happy with the relationship they have with our company versus our competition ?

    If it costs you more to recruit and retain your best talent or if customers believe that competitors are easier to deal with, you have cultural issues that need to be dealt with.   We can guarantee that if you do not, you will not execute your strategy successfully, no matter what else you do.

    Ce point de vue correspond-il à votre réalité ? Vos commentaires sont les bienvenus. Bonne lecture !

    Which To Work on First, Strategy or Culture ?


    Peter Drucker famously stated “culture eats strategy for breakfast”.   A great quote no doubt and quite right, but it still raises the question – one that we recently got from a board member at a client organization – “which should we work on first, strategy or culture”?

    Consider the following; you are driving a boat.  You want to head east, but every time you turn the wheel the boat goes south.  In this analogy, the course direction is strategy; the boat’s rudder is culture.  They are not in synch.  No matter how hard you turn the wheel, the rudder will win.  That is what Drucker meant.

    Every organization has a culture, whether it was intentionally developed or not.  This culture gets built over time by the personalities and principles of the leaders, as well as by rewards, incentives, processes and procedures that let people know what really is valued in the company.

    Culture is defined as “the way we do things around here every day and allow them to be done”. Employees look to their leaders to determine what behaviors are truly values, as well as to the rewards, incentives, processes and procedures that channel behaviors.

    Executives we work with often get confused about culture, thinking that they need to duplicate the companies that are written up in publications as having the best cultures.  We all know the ones in these listings.  They are the ones with skate ramps, Friday beer parties, and day care centers.  All these things are nice, but there is no need to duplicate these unless you are attempting to recruit the same employees and create the same products and services.  No two companies, even those in the same market segment, need to have the same culture.

    We know from discussions with other consultants and business executives that there are many who strongly believe that culture comes first.  What they suggest is that since culture is there—it is the DNA of the company—it comes before strategy.  It may be first in historical order, but that is not what matters. You don’t need pool tables and skate ramps like Google to have a good culture.   What matters with culture is whether or not it drives or undermines value creation, which comes from the successful interaction of employees and customers.



    * Elliot S. Schreiber, Ph.D., is the founding Chairman of Schreiber Paris.  He has gained a reputation among both corporate executives and academics as one of the world’s most knowledgeable and insightful business and market strategists. Elliot is recognized as an expert in organizational alignment, strategy execution and risk management.  He is a co-founder in 2003 of the Directors College, acknowledged as Canada’s « gold standard » for director education.

    Deux capsules vidéos en gouvernance – Les médias sociaux et la planification stratégique

    Le Collège des administrateurs de sociétés est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance. Une capsule sera dévoilée chaque semaine.

    Deux nouvelles « capsules d’experts » sont maintenant en ligne; elles ont pour thèmes « Les médias sociaux » par M. Sylvain Lafrance, ASC, professeur au HEC Montréal et consultant en communications et « La planification stratégique » par M. Dominic Deneault, ASC , Trebora Conseil.

    Visionnez ces deux capsules d’experts :

    Les médias sociaux, par Sylvain Lafrance, ASC




    La planification stratégique, par Dominic Deneault


    Toute la lumière sur les attentes envers les C.A. | L’état de situation selon Lipton

    Aujourd’hui, je veux vous faire partager le point de vue de Martin Lipton*, expert dans les questions de fusion et d’acquisition ainsi que dans les affaires se rapportant à la gouvernance des entreprises, sur les enjeux des C.A.. L’auteur met l’accent sur les pratiques exemplaires en gouvernance et sur les comportements attendus des conseils d’administration.

    Ce texte, paru sur le blogue du Harvard Law School Forum on Corporate Governance,résume très bien les devoirs et les responsabilités des administrateurs de sociétés de nos jours et renforce la nécessité, pour les conseils d’administration, de gérer les situations d’offres hostiles.

    Bonne lecture ! Êtes-vous d’accord avec les attentes énoncées ? Vos commentaires sont les bienvenus.

    The Spotlight on Boards


    The ever evolving challenges facing corporate boards prompts an updated snapshot of what is expected from the board of directors of a major public company—not just the legal rules, but also the aspirational “best practices” that have come to have almost as much influence on board and company behavior.

    Boards are expected to:

    Establish the appropriate “Tone at the Top” to actively cultivate a corporate culture that gives high priority to ethical standards, principles of fair dealing, professionalism, integrity, full compliance with legal requirements and ethically sound strategic goals.IMG_20140523_112914

    Choose the CEO, monitor his or her performance and have a succession plan in case the CEO becomes unavailable or fails to meet performance expectations.

    Maintain a close relationship with the CEO and work with management to encourage entrepreneurship, appropriate risk taking, and investment to promote the long-term success of the company (despite the constant pressures for short-term performance) and to navigate the dramatic changes in domestic and world-wide economic, social and political conditions. Approve the company’s annual operating plan and long-term strategy, monitor performance and provide advice to management as a strategic partner.

    Develop an understanding of shareholder perspectives on the company and foster long-term relationships with shareholders, as well as deal with the requests of shareholders for meetings to discuss governance and the business portfolio and operating strategy. Evaluate the demands of corporate governance activists, make changes that the board believes will improve governance and resist changes that the board believes will not be constructive. Work with management and advisors to review the company’s business and strategy, with a view toward minimizing vulnerability to attacks by activist hedge funds.

    Organize the business, and maintain the collegiality, of the board and its committees so that each of the increasingly time-consuming matters that the board and board committees are expected to oversee receives the appropriate attention of the directors.

    Plan for and deal with crises, especially crises where the tenure of the CEO is in question, where there has been a major disaster or a risk management crisis, or where hard-earned reputation is threatened by a product failure or a socio-political issue. Many crises are handled less than optimally because management and the board have not been proactive in planning to deal with crises, and because the board cedes control to outside counsel and consultants.

    Determine executive compensation to achieve the delicate balance of enabling the company to recruit, retain and incentivize the most talented executives, while also avoiding media and populist criticism of “excessive” compensation and taking into account the implications of the “say-on-pay” vote.

    Face the challenge of recruiting and retaining highly qualified directors who are willing to shoulder the escalating work load and time commitment required for board service, while at the same time facing pressure from shareholders and governance advocates to embrace “board refreshment”, including issues of age, length of service, independence, gender and diversity. Provide compensation for directors that fairly reflects the significantly increased time and energy that they must now spend in serving as board and board committee members. Evaluate the board’s performance, and the performance of the board committees and each director.

    Determine the company’s reasonable risk appetite (financial, safety, cyber, political, reputation, etc.), oversee the implementation by management of state-of-the-art standards for managing risk, monitor the management of those risks within the parameters of the company’s risk appetite and seek to ensure that necessary steps are taken to foster a culture of risk-aware and risk-adjusted decision-making throughout the organization.

    Oversee the implementation by management of state-of-the-art standards for compliance with legal and regulatory requirements, monitor compliance and respond appropriately to “red flags.”

    Take center stage whenever there is a proposed transaction that creates a real or perceived conflict between the interests of stockholders and those of management, including takeovers and attacks by activist hedge funds focused on the CEO.

    Recognize that shareholder litigation against the company and its directors is part of modern corporate life and should not deter the board from approving a significant acquisition or other material transaction, or rejecting a merger proposal or a hostile takeover bid, all of which is within the business judgment of the board.

    Set high standards of social responsibility for the company, including human rights, and monitor performance and compliance with those standards.

    Oversee relations with government, community and other constituents.

    Review corporate governance guidelines and committee charters and tailor them to promote effective board functioning.

    To meet these expectations, it will be necessary for major public companies

    (1) to have a sufficient number of directors to staff the requisite standing and special committees and to meet expectations for diversity;

    (2) to have directors who have knowledge of, and experience with, the company’s businesses, even if this results in the board having more than one director who is not “independent”;

    (3) to have directors who are able to devote sufficient time to preparing for and attending board and committee meetings;

    (4) to provide the directors with regular tutorials by internal and external experts as part of expanded director education; and

    (5) to maintain a truly collegial relationship among and between the company’s senior executives and the members of the board that enhances the board’s role both as strategic partner and as monitor.


    Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy

    Bulletin du Collège des administrateurs de sociétés (CAS) | Septembre 2014

    Vous trouverez, ci-dessous, le Bulletin du Collège des administrateurs de sociétés (CAS) du mois de septembre 2014.

    Seul programme de certification universitaire en gouvernance de sociétés offert au Québec, il s’adresse aux administrateurs siégeant à un conseil d’administration et disposant d’une expérience pertinente.

    Les administrateurs de sociétés certifiés (ASC) sont regroupés dans la Banque des ASC, un outil de recherche en ligne mis au point par le Collège, afin de faciliter le recrutement d’administrateurs sur les conseils d’administration.

    Bulletin du Collège des administrateurs de sociétés (CAS) | Septembre 2014



    RAPPORT D’ACTIVITÉ 2013-2014


    Rapport d'activité 2013-2014 du CASC’est avec plaisir que le Collège des administrateurs de sociétés vous présente son Rapport d’activité 2013-2014.

    Vous y trouverez un bilan positif de cette neuvième année, marquée par de nombreuses actions visant à diversifier notre offre de formation, à affirmer notre statut de leader de la formation des administrateurs et à promouvoir l’excellence en gouvernance au Québec.

    Consultez le rapport pour tous les détails [+]



    Banques des administrateurs de sociétés certifiés


    Le Collège est fier de mettre en ligne une nouvelle présentation de la Banque des Administrateurs de sociétés certifiés (ASC). La Banque des ASC est maintenant intégrée au site Web du Collège et propose un nouvel outil de recherche bonifié, ainsi qu’un design plus ergonomique.

    Plusieurs nouveautés ont été apportées à l’outil de recherche dans le but d’optimiser la recherche d’ASC selon les requêtes des recruteurs d’administrateurs.

    Consultez cette nouvelle Banque des ASC [+]




    3e série de capsules d'experts : les médias sociaux, par Sylvain LafranceLe CAS est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance.

    Une capsule sera dévoilée chaque semaine par bulletin électronique. À surveiller !

    Cette semaine : Les médias sociaux, par Sylvain Lafrance [+]

     Les programmes de formation du CAS


    Gouvernance des PME5 et 6 novembre 2014, à Québec

    Certification – Module 1 : Les rôles et responsabilités des administrateurs |  12, 13 et 14 février 2015, à Québec, et 26, 27 et 28 mars 2015, à Montréal


    Les événements en gouvernance auxquels le CAS est associé


    Inscription au programme « Réseau jeunes administrateurs » pour la cohorte d’automne | 8 septembre 2014, à Montréal

    Congrès national de l’IAS sur la gouvernance transformationnelle et Gala des Fellows | 18 septembre 2014, à Montréal

    Assemblée générale annuelle du Cercle des ASC et conférence « Un CA peut-il être trop avant-gardiste » par Mme Anne Darche, ASC | 23 septembre 2014, à Québec

    Conférence Prestige de l’Ordre des CPA du Québec, « Leadership éthique au 21e siècle » par Mme Cynthia Cooper | 1er octobre 2014, à Montréal

    Conférence Femmes Leaders par Les Affaires | 15 octobre 2014, à Québec

    Programme de l’ecoDa « New Governance Challenges for Board Members in Europe » | 21 et 22 octobre 2014, à Bruxelles



    Serge Bouchard, ASC | Conseil régional de l’environnement du Centre-du-Québec

    Marlène Deveaux, ASC | CLD Saguenay

    Sylvie Tremblay, ASC | Chambre des notaires du Québec

    Richard Audet, ASC | Inforoute Santé du Canada

    Marc Duchesne, ASC | Nicorp inc.

    Vincent Dagnault, ASC | Signes d’Espoir

    Annick Mongeau, ASC | Groupe TVA inc.

    Jean-François Thuot, ASC | Société canadienne des directeurs d’association, section du Québec

    Sylvain Beaudry, ASC | Institut québécois de planification financière

    Lyne Laverdure, ASC | PharmaBio Développement

    Louise Dostie, ASC | Caisse de l’Administration et des Services publics

    Pauline D’Amboise, ASC | Solidarité rurale du Québec

    Jean-Paul Gagné, ASC | Metix inc.

    Denis Arcand, ASC | Caisse Desjardins Brossard

    Josée De La Durantaye, ASC | Ordre des comptables professionnels agréés du Québec

    Michel Verreault, ASC | Chambre des notaires du Québec

    Michel Sanschagrin, ASC | Fondation des Violons du Roy et Club musical de Québec

    Carl Viel, ASC | Palais Montcalm

    Luc Séguin, ASC | Hydrocarbures Anticosti

    Anne Darche, ASC
    | Groupe Germain Hospitalité et Groupe St-Hubert


    DISTINCTIONS ASC et formateurs


    Marie Lavigne, ASC | Chevalière de l’Ordre national du Québec

    Claude Béland, formateur au CAS | Grand officier de l’Ordre national du Québec

    Maurice Gosselin, ASC
    | Prix du ministre accordé par le ministère de l’Enseignement supérieur, de la Recherche et de la Science

    Boîte à outils pour administrateurs


    Nouvelle référence mensuelle en gouvernance : Rémunération des administrateurs et gouvernance : enjeux et défis, par l’IGOPP.

    La capsule d’expert du mois – NOUVEAUTÉ : Les médias sociaux, par Sylvain Lafrance.

    Top 5 des billets les plus consultés cet été (juin, juillet et août) du blogue Gouvernance | Jacques Grisé.


    Bonne lecture !


    Collège des administrateurs de sociétés (CAS)

    Faculté des sciences de l’administration Pavillon Palasis-Prince

    2325, rue de la Terrasse, Université Laval Québec (Québec) G1V 0A6

    418 656-2630; 418 656-2624


    Devenez blogueur invité sur mon site en gouvernance

    Aimeriez-vous agir à titre d’auteur invité (« Invited guess ») sur mon blogue en gouvernance des sociétés ? Avez-vous un article déjà écrit ou souhaitez-vous m’aider en contribuant à l’écriture d’un court billet en gouvernance de sociétés ?

    Chaque jour, je publie un billet qui porte sur un sujet d’actualité récente en gouvernance; si vous êtes intéressés à ajouter de la valeur à ce blogue, vous êtes invités à me soumettre un article original portant sur un des multiples objets de la gouvernance des sociétés privées, publiques, OBNL, coopératives, PME, sociétés d’État, etc.

    Que retrouve-t-on dans ce blogue et quels en sont les objectifs ?


    Ce blogue fait l’inventaire des documents les plus pertinents et récents en gouvernance des entreprises. La sélection des billets, « posts », est le résultat d’une veille assidue des articles de revue, des blogues et sites web dans le domaine de la gouvernance, des publications scientifiques et professionnelles, des études et autres rapports portant sur la gouvernance des sociétés, au Canada et dans d’autres pays, notamment aux États-Unis, au Royaume-Uni, en France, en Europe, et en Australie. Chaque jour, je fais un choix parmi l’ensemble des publications récentes et pertinentes et je commente brièvement la publication.


     L’objectif de ce blogue est d’être la référence en matière de documentation en gouvernance dans le monde francophone, en fournissant au lecteur une mine de renseignements récents (les billets quotidiens) ainsi qu’un outil de recherche simple et facile à utiliser pour répertorier les publications en fonction des catégories les plus pertinentes.



    Devenez blogueur invité sur mon site en gouvernance




    Contribution des administrateurs externes à la vision des entreprises

    Michael Evans, l’auteur de ce court article publié dans Forbes, montre les nombreux avantages des entreprises (jeunes, petites, familiales, entrepreneuriales …) à recruter un ou quelques administrateurs externes au conseil d’administration.

    Les administrateurs externes doivent être judicieusement choisis afin de compter sur leurs expériences du domaine d’affaires ainsi que sur leurs capacités à exposer plus de perspective et de vision.

    L’auteur présente également les quatre rôles fondamentaux que les administrateurs externes peuvent contribuer à clarifier.

    Voici un extrait de la première partie de l’article. Bonne lecture !

    Outside Board Members Bring Needed Experience And Perspective To Your Company


    Middle-market companies often operate as small fiefdoms under the control of the king, or to use a business term, the CEO. Very few mid-sized companies have a formal board of directors and for those that do have boards, CEOs tend to populate them with family, friends, and internal management. The theory is that board members do not know the business of the company, cost too much, and often do not provide value. In some cases, those conclusions are often true. But in many cases, the establishment of an effective board and the inclusion of outside board members have saved many a company from ruin.

    It is estimated that less than 5 percent of middle-market companies have an established board or advisory board, the primary reason for such a low percentage is that small- and middle-market businesses believe they are smart enough not to need a board, think it is too expensive, or believe it would constrain their decision-making abilities.

    female outside board member

    With the demands on CEOs — including ongoing regulatory changes, pressure from family and other founders, the rise of new competitors and business models, and the need to transform businesses at an ever-quickening pace — it may be time for you to get some help and add an outside director to your board.

    Outside directors bring outside experience and perspective to the board. They keep a watchful eye on the inside directors and on the way the organization is run, and provide guidance as to risk management and good corporate governance practices. Outside directors are often useful in handling disputes between inside directors, or between shareholders and the board.

    Communications entre administrateurs et actionnaires concernant la rémunération des hauts dirigeants !

    Dans quelles circonstances les administrateurs doivent-ils intervenir directement auprès des actionnaires lorsque vient le temps de discuter des paramètres de la rémunération des hauts dirigeants ?

    Quelles modalités doivent encadrer les activités de communication des administrateurs avec les actionnaires et les investisseurs ?

    L’article de Jeremy L. Goldstein, paru sur le blogue du Harvard Law School Forum on Corporate Governance, aborde ces questions en présentant la problématique particulière de l’implication des administrateurs et en proposant des balises à considérer dans le choix des représentants.

    Depuis que les entreprises ont l’obligation de consulter les actionnaires sur l’acceptabilité du plan de rémunération globale des hauts dirigeants (Say on Pay), il devient de plus en plus important de bien informer les actionnaires sur ces questions et d’entretenir des liens plus étroits avec ceux-ci. Bonne lecture !

    Since the implementation of the mandatory advisory vote on executive compensation, shareholder engagement has become an increasingly important part of the corporate landscape. In light of this development, many companies are struggling to determine whether, when and how corporate directors should engage with shareholders on issues of executive compensation. Set forth below are considerations for companies grappling with these issues.IMG_20140515_134920

    As a general matter, the chief executive officer of the company should be the corporation’s primary spokesperson. Having the chief executive officer speak with investors and other constituencies helps ensure that the company has a consistent message expressed by its primary architect. However, engaging on executive pay may be different than engaging on other topics for several reasons. Executive pay in general, and CEO pay in particular, is ultimately approved by the board and, accordingly, board members may be best suited to discuss it. In addition, investors sometimes perceive chief executives as being interested in issues of executive compensation. By engaging with shareholders, board members can help add credibility to, and show support for, the company’s programs and can demonstrate to investors that they are exercising their key oversight function. For these reasons, depending on the corporation’s particular facts and circumstances, board members may be best suited to engage with shareholders on issues of executive compensation.

    Companies should take into account the following factors in determining whether a board member is the appropriate spokesperson on matters of executive pay:

    Knowledge of the Pay Programs: The single most important consideration is whether a director has a strong command of the matters at issue. The purpose of shareholder engagement is to enhance credibility and build trust. These goals are best achieved by the selection of a spokesperson who understands the company’s executive pay program and communicates most effectively the rationale behind it.

    Subject Matter to be Addressed: Discussions of CEO pay or similar matters may militate in favor of having a director speak with investors. If, however, the discussions are expected to focus on general compensation policy, other representatives may be better suited to the task.

    Preference of the Shareholder: Different shareholders may prefer to speak with different company representatives. Some shareholders may prefer to speak with compensation committee members, while others may not wish to engage with the board at all. Understanding the desires of the investor base and accommodating those desires, where possible, is key to successful shareholder engagement.

    Relationship of Individual with Shareholder: It is generally the case that either the lead director/independent chairman or a member of the compensation committee will be the spokesperson for the board on matters of executive pay. While the compensation committee chair might seem like the most logical choice for pay discussions because the compensation committee approves executive pay, selecting a lead director who is engaging with shareholders on other issues may help ensure consistency of message and messenger. A lead director/independent chairman who is also a member of the compensation committee may be an ideal choice.

    If a corporation decides to have director engagement on matters of executive pay, such discussions should be integrated into the corporation’s overall communications strategy. Many companies have established a formal protocol for circumstances under which directors receive shareholder inquiries where requests for engagement are routed through the corporate secretary, or if the company has one, the company’s director of corporate governance. In addition, there should be a clear and fully developed understanding between management and the board regarding the nature of the topics to be discussed. Discussions should be limited to agenda items and directors should generally avoid allowing investors to move the conversation into matters of corporate strategy and financial performance unless expressly agreed in advance. Management should ensure that (1) it is fully aware of board engagement activities and (2) directors have appropriate information to respond to investor questions and deliver messages that are consistent with other corporate communications.

    Companies should consider whether members of management should be present for the meetings with investors. Under most circumstances this is advisable to ensure that management is informed of the nature of the dialogue. The most likely candidates for attendance at such meetings are the general counsel, director of corporate governance, human resources executives and the head of investor relations. Whether or not these individuals attend, directors engaging with investors should provide the management team with investor feedback received during engagement so that the benefits of engagement may be fully realized. Finally, directors engaging with shareholders should be familiar with Regulation F-D so that information is not revealed to individual investors at a time that it is not disclosed to other market participants in a manner that violates the securities laws.

    Shareholder outreach has for many companies become a year-round endeavor. Engaging with investors outside of the regular proxy season enables companies to establish relationships with shareholders before a crisis erupts at a time when investors are not inundated with requests for meetings. Year-round dialogue between directors and shareholders under appropriate circumstances can help a company build credibility, foster investor relations, enhance transparency and avoid surprises during proxy season when it may be too late to change investor sentiment. 

    Dix pratiques exemplaires à l’intention des membres de comités d’audit

    Vous trouverez ci-dessous un article publié par Naomi Snyder* dans qui présente une synthèse des caractéristiques des comités d’audit performants dans le domaine bancaire.

    Bien sûr, ces pratiques peuvent aussi s’appliquer à tout autre comité d’audit. Bonne lecture !

    10 Best Practices for Audit Committee Members

    Serving on the audit committee can be one of the toughest jobs on the board, which is why audit committee members often are paid more than what members of other committees receive. Audit committee members have more duties than ever before, thanks to heightened regulatory scrutiny that banks have received in recent years, and are under more pressure than ever to get it right.

    Sal Inserra, a partner at accounting and advisory firm Crowe Horwath LLP, spoke at Bank Director’s Bank Audit Committee Conference in Chicago recently, and laid out some of the qualities of highly functioning audit committee members. This is not his list, but was created based on his talk.

    1. Be a skeptic.
      “If you notice inconsistencies, ask the question,’’ Inserra said. “It’s not necessarily wrong. You are just trying to find out.”
    2. Understand your business.
      If you enter a new business line, you must understand that new line of business. Trust departments present banks with a minefield of compliance issues, for example.
    3. Meet with regulators.
      Examiners are more likely now to have a discussion with board members than years past. Regulators are interested in learning about the audit committee’s understanding of the risks in the organization. Attend some meetings with examiners to get a flavor for the bank’s relationship with its regulators and to prepare you for any problems ahead of time.6-28-13_Naomi_Article.png
    4. Support the internal audit department and its findings.
      Make sure the department is adequately funded and staffed. “I have seen way too many situations where internal audit was not a functional unit of the bank because no one respected them,’’ Inserra said. The internal audit chief should report directly to the audit committee chairman.
    5. Look for red flags.
      Red flags include when management delivers the audit committee book without sufficient time for members to digest it before the audit committee meetings. Other red flags include problematic findings that remain unaddressed between audits.
    6. Take control of the audit committee meetings.
      Don’t let management control the meeting agenda by burying you under a mountain of detail. It’s your meeting. Put the priorities at the beginning of the meeting, instead of starting with the easiest things. Get summaries of reports with the most important points highlighted. Who can read a 600 page audit in two nights?
    7. Make sure every member is contributing.
      Three to six people should serve on the audit committee. If it’s politically problematic to remove someone who is no longer contributing, add people you do need on the audit committee.
    8. Hold management accountable.
      Actively monitor management’s action plans. If remediation plans aren’t followed or completed on time, why not?
    9. Communicate with internal and external auditors.
      Be proactive. Have executive sessions with members of the internal auditing staff on a regular basis, as well as with external auditors.
    10. Improve the committee’s knowledge of technology by recruiting an IT expert to be a member, or hire a consultant to advise the board.
      If you are getting third party reports on your bank’s information security you don’t fully understand, then you need help.

    Of course, there are many more aspects of being a great audit committee member. This is just a small sample. But at a time when audit committees have an increasing amount of responsibilities, it is important that the audit committee performs at the top of its game.

    *Naomi Snyder is the managing editor for Bank Directoran information resource for directors and officers of financial companies.

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