La réglementation canadienne est déficiente à plusieurs égards | Richard Leblanc


Aujourd’hui, je tiens à partager avec vous le point de vue de Richard Leblanc, expert canadien de la gouvernance corporative, professeur de droit des affaires, consultant en gouvernance et observateur attentif de la scène réglementaire canadienne.

Richard nous présente cinq domaines de la règlementation canadienne qui sont déficients, ou à tout le moins  perfectibles. Ce jugement peut sembler assez sévère mais, en ce qui me concerne, je le partage entièrement, d’autant plus que plusieurs de mes billets vont dans le sens des lacunes observées par Richard.

Un document réglementaire de quatre (4) pages sur la bonne gouvernance est, en effet, un  peu restreint !

La règlementation en gouvernance au Canada, laquelle date de 10 ans, est certainement désuète eu regard aux autres règlementations des pays développés.

Voici donc cinq (5) lacunes identifiées par Richard Leblanc, qui, selon plusieurs observateurs, méritent une attention particulière, sinon une révision systématique :

  1. Déficiences au niveau des pratiques et des principes de gouvernance
  2. Manque d’importance accordée à la gestion des risques
  3. Manque d’une définition objective de l’indépendance des administrateurs
  4. Manque d’importance accordée à l’expertise requise dans le domaine de l’industrie
  5. Connaissances insuffisantes relatives aux aspects financiers et à l’audit interne.

Je vous invite à lire le compte rendu de son blogue, ci-dessous, afin de connaître les raisons invoquées.

Canada’s Corporate Governance Guidelines Are Out of Date

In my teaching, research and consulting, I no longer use “NP-58201 Corporate Governance Guidelines,” June 17, 2005 (“Guidelines”), that apply to publicly traded companies in Canada, as an example of exemplary corporate governance. I regard them as stale and dated. I cannot think of another developed country that has not updated its governance guidelines in almost 10 years. There have been more changes to governance since the financial crisis of 2008 than in a generation. And we are only about half way through all of them. Canadian regulators – including all provinces and territories – need to keep up, and step up.

Here are the deficiencies to the Guidelines as I see them:

IMG_20141013_150649

1. Lack of principles and practices:

Our Guidelines are four pages long. The UK’s new Code (September 2014) is thirty-six pages. Australia’s Principles and Recommendations (March 2014) are forty-four. South Africa’s “King III” (2009) is sixty-six pages, to pick only three examples. Quantity is not necessarily quality, but by having such succinct guidelines, the opportunity to set out (i) best practices that (ii) achieve the objective of principles is gone. It is comply or explain against a perfunctory unitary guideline, which can be – and is – gamed by reporting management. There should be more robust guidance, where the regulator explains various ways good governance can occur, from which listed companies can pick and choose according to their circumstances.

2. Lack of focus on risk management:

Take risk for example. The Canadian Guidelines simply state that the board should identify principal risks and ensure appropriate systems are in place to manage these risks. I have no idea what this actually means, nor may directors. Risk management oversight now involves an explicit risk appetite framework, internal controls to mitigate, technology, limitations, and assurance provided directly to the board and committees by independent risk, compliance, and internal audit functions. None of these practices, which are very much addressed by other regulators, appear in the 2005 Guidelines. Consequently, many public companies have immature risk management, especially in addressing non-financial risks such as cyber security, operations, terrorism and reputation. Regulatory inaction has an effect. Even a forward-thinking director may be blocked by intransigent management to devote greater resources to mitigating risk because of inadequate regulation.

3. Lack of independence of mind:

In Canada, a board can subjectively believe a director to be independent, but this belief need not be independently validated, nor tied to any objective or reasonable standard. Nowhere else can a conflict of interest lack a perceptual foundation. As a result, directors tell me how colleagues are compromised by an office, perks, vacations, gifts, jobs for friends, social relatedness, relations to major shareholders, excessive pay, excessive tenure, interlocks, and other forms of capture. If a director or chair is captured, they are owned by management and totally ineffective. If there is a difference between regulatory independence and the independence of mind of directors, the fault lies with the regulation. Regulators should implement an objective standard of director independence, not a subjective one.

4. Lack of industry expertise:

It was admitted in open forum that the original 1994 committee did little research. Sufficient industry expertise on boards is glaringly absent from the Guidelines, and consequently in many boardrooms. We are suffering from an independence legacy, perpetuated by entrenched directors, and unsupported by academic research. For example, in Australia, two academics claim has cost their country’s decline in shareholder value between 30 and 50 billion Australian dollars (“Does “Board Independence” Destroy Corporate Value,” by Peter L. Swan and David Forsberg).

Fraud, meltdowns and underperformance such as Nortel, RIM and CP all had a paucity of industry experts on their boards, including, most recently, Tesco in the UK. JP Morgan at the time of the risk management failure did not have a single independent director with banking experience. Prior to Bill Ackman’s involvement in CP, not a single independent director had rail experience. I recently assessed a similar board and not a single director had the necessary industry experience. The Guidelines should require relevant industry expertise on boards. I recommended this to OSFI when I was retained by them to examine their earlier guidelines, and this is now the law for all federally regulated financial institutions, along with risk expertise being present on boards.

5. Lack of financial literacy and internal audit:

There is no requirement to be financially literate to sit, initially, on an audit committee of a Canadian public company. This presumes someone can acquire financial literacy as opposed to having it to begin with. There is also no requirement to have an internal audit function for a Canadian public company. This should also change so audit committee members hit the ground running, and there should be a comply or explain approach to internal audit. In many compliance failures, there is a defective or non-existent internal audit function, with a weak audit committee lacking recent and relevant expertise. Regulators are now moving towards “independent coordinated assurance,” which means that reporting to, and functional oversight by, the board and committees are fulfilled by internal and external personnel who are independent of senior and operating management, including, most importantly, an effective and independent internal audit function.

Vidéo de formation sur les tendances en matière de gouvernance de sociétés au Canada et aux États-Unis | Une réalisation du CAS


Récemment, le Collège des administrateurs de sociétés (CAS) a répondu à la demande de l’organisme « ecoDa » (The European Confederation of Directors Associations) de produire une capsule vidéo de formation sur les tendances en matière de gouvernance de sociétés au Canada et aux États-Unis. Cette vidéo sera présentée par ecoDa à chaque offre de son cours « New Governance Challenges for Board Members in Europe » présentée en classe à Bruxelles en Belgique, siège social de l’ecoDa.

Ce mandat a été réalisé avec succès grâce à la contribution de Gilles Bernier, directeur des programmes du CAS, qui a réuni Mme Alexandra Lajoux, Chief Knowledge Officer de la National Association of Corporate Directors (NACD) aux États-Unis et M. Chris Bart, Founder and Lead Faculty du Directors College en Ontario.

 

Intitulé « Where is Corporate Governance Going : The View from Canada and the USA », cette vidéo de formation vise à sensibiliser les participants à l’évolution des pratiques de gouvernance à l’extérieur de l’Europe.

D’une durée de 20 minutes, les experts invités discutent des sujets suivants :

(1) le rôle du CA à l’égard de la stratégie et du risque

(2) la réglementation et les enjeux touchant les investisseurs

(3) les nouvelles tendances en matière de gouvernance des TI et celles touchant la gouvernance des principales sociétés œuvrant dans le secteur technologique

(4) l’importance du talent et de la diversité sur les conseils, ainsi que l’importance de la formation des administrateurs de sociétés.

La capsule vidéo (en anglais) est disponible sur la page  You Tube | CASulaval.

Bon visionnement !

 

Cinq questions d’éthique au cœur des actions des hauts dirigeants | Comment y faire face ?


publié dans Chief Executive magazine qui présente cinq erreurs en éthique, souvent commises par le président et chef de la direction de nos entreprises.

Il est très important de bien comprendre la portée de ces erreurs parce que, comme dit l’auteur, celles-ci peuvent être évitées. Je crois que les énoncés qui suivent sont assez évidents !

Je vous souhaite une bonne lecture et je souhaiterais recevoir vos commentaires.

The Biggest Ethical Mistakes Made by CEOs and How to Avoid Them

Mistake #1: Assuming that a business practice is acceptable because it’s common practice in the industry

This depends on which companies in an industry you compare yourself to. For example, Enron was the most admired company in the energy industry—until it wasn’t. If you are the first one in an industry caught doing something wrong, you often pay the price for the entire industry correcting its practices. There is a scene in the movie Tin Men in which two aluminum siding salesmen sit outside a congressional hearing saying to one another, “We only did what everyone was doing.” If this sounds a bit lame, avoid putting yourself in the same position.IMG_20140921_133847

Mistake #2: Confusing legal advice with ethical advice

The job of legal counsel is to tell you the legal consequences of various courses of action—not whether you should take those actions. It is the job of the CEO to decide which risks to take and which to avoid. An action can be legal but still be unethical. Many of the investment activities that led to the 2008 recession were perfectly legal—and also perfectly unethical. It is a mistake to use your legal counsel as your conscience just because you are used to disclosing confidential information to your lawyers. Once you step outside of the domain of legal advice, legal counsel is no more able to give good ethical advice than any of your other advisors.

Mistake #3: Trusting the managers potentially implicated in an ethical issue to investigate the issue

While it is important to show managers that you trust them, it is more important to protect the reputation of your company. It is hard for managers to admit they made an ethical mistake or that an ethical mistake was made on their watch. The CEO should have resources, such as a compliance officer or director of internal audit, outside the line of command to investigate potential legal and ethical breaches. When these resources are regularly used to investigate serious matters, line managers will not be surprised when they are called upon to investigate an ethical issue. They will not conclude that you don’t trust them if they know that this is how serious issues are always addressed.

Mistake #4: Fixing a problem going forward without owning the problem’s history

This would be like GM fixing its ignition problem going forward without owning the problem in cars currently on the road. This never works, but it is very tempting to CEOs who don’t want a past problem dragging their organization down. How often have you heard a CEO or company say, “As soon as we learned of the problem, we fixed it.” That is simply not good enough. You need to show that the organization recognizes the harm caused by an unethical practice and is taking steps to rectify past harm, while avoiding repeating the same action again. Everyone will be asking, “What about everything leading up to the present?” So you have to be ready to answer this question.

Mistake #5: Judging the information you receive by the person from whom you receive it

I know of no ethical fiasco that did not present clearer warning signs. Somehow these signs were ignored—and not without reason. The information that enables you to prevent an ethical crisis often comes from individuals who are afraid of taking any risks, whine about everything, and have a chip on their shoulder. I have just described one type of whistleblower. Whistleblowers are more protected and rewarded under current law than many CEOs realize. This is especially true of the defense, financial services, and healthcare sectors where whistleblowers are not only protected, but can sometimes even receive bounties in the tens of millions of dollars. Sharp CEOs ignore the source of troubling information and evaluate the information without bias. An ethical leader is always asking, “What if this information, although from a questionable source, is true? Would I gamble the future of my organization on it not being true?”

All of these ethical mistakes can be avoided if you are on the lookout for them. The most important way to avoid ethical mistakes is by paying attention to information you would rather ignore or believe to be untrue. Ethical mistakes tend not to go away. The longer you know of an unethical action without reacting to it, the worse the consequences of eventually admitting the mistake for the organization—and its leader. CEOs know that such mistakes, even if not involving illegal activities, can destroy the reputation of an organization. And they know that ignoring or covering up such a mistake simply compounds the consequences of mistakes.

Ethical leadership is not just about having and acting on sound values; it is about confronting the facts no matter how uncomfortable it may be to do so.

 

ISS propose une nouvelle approche pour définir l’indépendance du président du CA


Quels sont les critères retenus par la firme Institutional Shareholder Services Inc. (ISS) pour recommander une déviation à la règle d’indépendance du président du conseil d’administration ?

On sait qu’aux États-Unis environ 50 % des entreprises ont des situations de combinaison des rôles de président du conseil et de président et chef de la direction. J’ai souvent écrit dans ce blogue que l’indépendance du président du conseil était très difficile à réaliser aux É.U. et que la gouvernance pouvait en souffrir.

Cependant, on fait face à une résistance féroce dans ce pays et ce n’est que très graduellement que les grandes sociétés américaines se « convertissent ». Même une entreprise comme ISS, qui fait des recommandations aux actionnaires sur les questions de gouvernance, a dû repenser sa politique d’indépendance du président du CA afin de prévoir certaines exceptions.

Carol Bowie, l’auteure de cet article paru dans le Harvard Law School Forum on Corporate Governance, est la directrice des recherches à ISS. Elle nous présente les changements apportés aux recommandations de votation aux assemblées annuelles.

En général, ISS recommande l’indépendance absolue de la présidence du conseil d’administration, sauf si l’entreprise rencontre toutes les conditions suivantes :

  1. L’entreprise désigne un administrateur principal (Lead Director) qui est élu par les administrateurs indépendants et qui est soumis à des tâches et des devoirs clairement définis;
  2. Le conseil est au moins aux deux-tiers indépendant;
  3. Les principaux comités du conseil sont complètement indépendants;
  4. L’entreprise a divulgué ses règles de gouvernance;
  5. L’entreprise ne présente pas une faible performance soutenue par rapport aux autres entreprises de son secteur d’activité;
  6. L’entreprise n’a pas de failles problématiques en matière de gouvernance.

 

Pour une compréhension plus fine des nouvelles règles de votation proposées aux actionnaires, je vous invite à lire ce court billet. Bonne lecture !

 

ISS Proposes New Approach to Independent Chair Shareholder Proposals

 

Calls for independent board chairs were the most prevalent type of shareholder proposal offered for consideration at U.S. companies’ annual meetings in 2014. As of June 30, 62 of these proposals have come to a shareholder vote, up from 55 P1030052resolutions over the same time period in 2013. Notably, the number of proposals calling for independent board chairs has more than doubled over the past five years. Under the current policy formulation, ISS recommended against 32 of these 62 proposals in 2014. In line with results from recent seasons, independent chair proposals received average support of 31.2 percent of votes cast at 2014 meetings. Only four of these proposals received the support of a majority of votes cast.

Enjeux et obligations du CA | Avis d’experts


Voici le dossier sur la gouvernance publié dans le Journal Les Affaires.

Vous y trouverez une mine d’informations sur divers sujets d’actualité en gouvernance publiés par des experts du domaine.

Bonne lecture !

 

Former un CA : enjeux et obligations

 

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Mettre sur pied un conseil d’administration est un exercice complexe : les entreprises veulent s’entourer de personnes compétentes, (…) 13 articles

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par Davies

L’activisme actionnarial a connu une croissance exponentielle au cours de dernières années. « Au …
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par Davies

En 2010, un examen approfondi par Davies de la structure du vote par procuration donnait naissance à un rapport …
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par Davies

Vendredi après la fermeture des marchés, un concurrent important vous appelle : lundi, il annoncera …
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par Davies

Souvent considéré comme une première étape avant un conseil d’administration formel …
 

par Davies

Une crise, ça se prépare. Le rôle le plus important du conseil n’est pas tant de gérer …

 

Édition du 20 Septembre 2014  |  Diane Bérard

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«Aujourd’hui, être administrateur, c’est l’fun à mort!» | Offert par Les Affaires

 

 

 

Édition du 20 Septembre 2014  |  Marie Lyan

 

La rémunération, pas le facteur numéro un | Offert par Les Affaires 

Si la participation à certains conseils peut être bénévole, comme dans la plupart des organismes à but non …

 

Une banque de 240 candidats triés sur le volet chez Desjardins | Offert par Les Affaires image

Desjardins capital de risque a mis sur pied une banque de candidats potentiels qui compte près de 240 profils, dont …

Choisir un administrateur, aussi important que recruter un cadre | Offert par Les Affaires image

Le choix des administrateurs est déterminant pour le bon fonctionnement du CA. Bien qu’ils soient nommés par la …

Ce qu’il faut savoir avant d’accepter (ou pas) de siéger à un CA | Offert par Les Affaires image

Quelles sont les normes en ce qui a trait au nombre d’heures, de tâches et à d’autres responsabilités à confier aux …

Management: cinq idées reçues qui ont la vie dure


Recruter des profils similaires, capitaliser sur ses points forts… Ces « archaïsmes managériaux » sont à revoir, selon Pascal Picq, paléoanthropologue au Collège de France. Car la clef de l’évolution est dans la diversité. Décryptage.

Source: lentreprise.lexpress.fr

Vouloir coller parfaitement à un modèle idéal préétabli est une vue universaliste des choses qui nie les contraintes mouvantes et nos capacités à y répondre en innovant. Car l’homme est l’espèce qui a la plus grande plasticité comportementale, physique et cognitive. D’où l’importance pour un manager de dépasser les clichés du « bien agir » qui figent les comportements et freinent l’élan créatif et adaptatif.
En savoir plus sur http://lentreprise.lexpress.fr/rh-management/management/management-cinq-idees-recues-qui-ont-la-vie-dure_1614209.html#c1kIkRIcVqUuvVpy.99

La séparation des pouvoirs entre PCA et PCD : une règle de bonne gouvernance !


L’article de Paul Hodgson publié dans Fortune affiche est une position très nette en ce qui concerne la séparation des rôles de président du conseil d’administration (PCA) et de président et chef de la direction (PCD) : C’est une mauvaise stratégie sur toute la ligne !

Plusieurs études ont montré l’inefficacité de cette approche, en plus de démontrer clairement les risques de conflits entre le devoir de fiduciaire de l’administrateur et le rôle de premier dirigeant.

Alors que la plupart des modèles de gouvernance dans le monde se fondent sur la séparation des rôles, pourquoi constate-t-on une si forte résistance dans le cas des entreprises américaines ?

L’auteur apporte plusieurs arguments qui expliquent la lenteur des changements aux É.U. Voici un aperçu des grandes lignes de l’article.

Bonne lecture ! Vos commentaires sont appréciés.                

Should the chairman be the CEO?

Put simply, no. Splitting the roles saves money and improves a company’s performance. So why isn’t Corporate America listening?

Brian Moynihan, chairman and chief executive officer of Bank of America Corp.

A study published in 2012 found that the cost of paying one person as CEO/chairman was significantly higher than paying two people as CEO and non-executive chairman. The study also found that long-term shareholder returns were significantly better at companies that had separated the roles. This model—an executive CEO and a non-executive chairman—has been adopted in most other economies. Why is the U.S. so resistant?

So why is it important to have a separate chairman and CEO? Put simply, the CEO is the primary manager of a company and the chairman is the head of the board, which oversees management. There’s really no good reason why one person should do both jobs. And there’s really no sense in recombining the two roles when a company’s problems are resolved. It’s silly to believe that new problems, the kind that will require an independent board’s insight, won’t arise in the future.

Finally, appointing an executive chairman, especially when it is a former CEO, is just a bad idea. It puts two managers—or, in the case of Oracle, three managers—in place where one is sufficient, and there is still no independent check on management. And, really, when a former CEO becomes chair, no one is really in any doubt as to who remains in charge.

Most, if not all, companies would be wise to appoint an independent chairman and make the position permanent in the company’s bylaws, so the decision can’t be reversed without shareholder approval.

Nouvelles capsules vidéos en gouvernance : (1) le comité de gouvernance (2) l’auditeur externe


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 « le comité de gouvernance » par M. Richard Joly, président, Leaders & Cie et «l’auditeur externe» par Mme Lily Adam, associée, Services de certification, EY.

Visionnez ces deux capsules d’experts :

Le comité de gouvernance par Richard Joly 

 

________________________________________________

La surveillance de la rémunération de la direction par les actionnaires via le Say-on-Pay


L’étude de Mathias Kronlund, professeur au département de finance de l’Université de l’Illinois à Urbana-Champaign et Shastri Sandy, professeur au département de finance de l’Université du Missouri à Columbia, aborde un sujet dont nous avons beaucoup parlé au cours des cinq dernières années : le Say-on-Pay.

Il est temps de revisiter les résultats de ce mode de consultation des actionnaires à propos des rémunérations globales des hauts dirigeants. Les auteurs font une analyse très fine des conséquences liées au Say-on-Pay.

Dans l’ensemble, les résultats montrent que cette mesure a eu des effets positifs sur les décisions des comités de rémunération qui proposent des schèmes de rémunération plus en ligne avec la performance organisationnelle.

« The net effect on total CEO pay from these changes in various pay components is positive. In other words, firms increase total CEO compensation when they face increased scrutiny, mainly as a result of the higher stock awards. Thus, to the extent that the goal of the say-on-pay mandate was to reduce total executive pay, this regulation has had the opposite effect. We generally find much weaker results among non-CEO executives compared with CEOs, which is consistent with CEO pay receiving the most scrutiny around say-on-pay votes ».

Bonne lecture !

Shareholder Scrutiny and Executive Compensation

As a result of the Dodd-Frank Act of 2010, public firms must periodically hold advisory shareholder votes on executive compensation (“say on pay”). One of the main goals of the say-on-pay mandate is to increase shareholder scrutiny of executive pay, and thus alleviate perceived governance problems when boards decide on executive compensation. In our paper, Does Shareholder Scrutiny Affect Executive Compensation? Evidence from Say-on-Pay Voting, which was recently made publicly available on SSRN, we examine how firms change the structure and level of executive compensation depending on whether the firm will face a say-on-pay vote or not.P1030038

The theoretical impact of having a say-on-pay vote on executive compensation is ambiguous. On the one hand, it is possible that having a vote results in more efficient compensation practices, for example, in the form of stronger alignment between pay and performance, or in the form of lower pay if past pay was excessive. Say-on-pay may also improve compensation practices simply because directors pay more attention to executive compensation when they know that the pay packages they award face increased scrutiny. On the other hand, it is also possible that say-on-pay results in less efficient compensation practices. For example, having a say-on-pay vote may lead firms to excessively conform to the guidelines of proxy advisors, who tend to prefer specific pay practices that may not sufficiently account for each firm’s unique circumstances. Finally, it is possible that say-on-pay has no effect at all, either because governance problems are so severe that say-on-pay is an insufficient mechanism to improve firms’ pay practices, or conversely, because firms already have optimal pay practices and therefore have no reason to change them in response to increased scrutiny.

To examine the effect of say-on-pay on executive compensation, our identification strategy exploits within-firm variation regarding when (i.e., in which years) firms hold say-on-pay votes based on a pre-determined cyclical schedule. Specifically, many firms have elected to hold votes in cycles of every two or three years rather than every year, resulting in predictable year-to-year variation in whether a vote is held or not. Our empirical strategy then compares executive compensation across years when, according to its voting cycle, a firm is expected to hold a vote, versus the same firm in years when it is expected to not hold a vote.

Our results show that in years when firms are expected to hold a say-on-pay vote, they decrease CEO salaries, and increase stock awards. We also find that firms are significantly less likely to have change-in-control payments (“golden parachutes”) for their CEOs in years with a vote. These results are consistent with altering pay practices to better comply with proxy advisors’ guidelines. Further, deferred compensation and pension balances are higher in years with a vote, which is consistent with say-on-pay resulting in increased use of less-scrutinized components of pay.

The net effect on total CEO pay from these changes in various pay components is positive. In other words, firms increase total CEO compensation when they face increased scrutiny, mainly as a result of the higher stock awards. Thus, to the extent that the goal of the say-on-pay mandate was to reduce total executive pay, this regulation has had the opposite effect. We generally find much weaker results among non-CEO executives compared with CEOs, which is consistent with CEO pay receiving the most scrutiny around say-on-pay votes.

We also find economically large, but statistically weaker, evidence that executives choose to exercise fewer options in years when they face say-on-pay votes. Executives thus appear to shift realized pay from voting years to non-voting years—which suggests that executives believe that observers of pay (e.g., shareholders, news media) do not distinguish between awarded pay and ex-post realized pay.

One goal of the say-on-pay regulation was to foster more transparent CEO compensation and better alignment of CEO incentives with the interests of shareholders. Overall, our results show that holding a say-on-pay vote does cause firms to change how they pay executives. But despite the law’s intention of improving executive pay practices, the say-on-pay mandate has not unambiguously resulted in more efficient CEO compensation. And contrary to the goals of the say-on-pay regulation, the net result of these changes may be higher, not lower, total compensation. The fact that salaries are lower but stock awards higher is consistent with firms being particularly concerned about the optics of pay (Bebchuk and Fried (2004)) in years when compensation will be put to a vote, but is also consistent with models of optimal pay as in Dittmann and Maug (2007). Because CEOs receive more stock awards in voting years, which in turn will make their wealth more closely aligned with that of shareholders going forward, it is possible that pay in these years is more efficient, despite being higher. The fact that firms change pay practices between years with and without votes further is evidence that pay practices are not always perfectly optimal. If they were, whether a vote is held or not should be irrelevant for pay.

The full paper is available for download here.

Responsabilités des administrateurs au Canada | Osler


Voici un excellent guide sur les responsabilités et les obligations des administrateurs de sociétés au Canada produit par Osler.

La version présentée ici est en anglais (la version française sera bientôt disponible).

Bonne lecture !

Directors’ Responsibilities in Canada : Osler

Le guide Responsabilités des administrateurs au Canada, issu de la collaboration entre Osler et l’Institut des administrateurs de sociétés, est un outil de référence de choix dont tous les administrateurs ont besoin pour comprendre les pratiques exemplaires en matière de gouvernance et pour s’acquitter de leurs responsabilités, dans le contexte actuel des tendances commerciales en constante évolution et des changements dans le marché.

Le guide couvre :

  1. les devoirs et l’obligation de rendre compte des administrateurs, et le rôle des actionnaires DirectorsResponsibilities-LGthumb-F
  2. les questions de gouvernance, y compris les conflits d’intérêts des administrateurs, les lois sur les valeurs mobilières et les exigences des marchés boursiers
  3. les obligations d’information des sociétés ouvertes
  4. les questions de financement, de marchés des capitaux et d’offres publiques d’achat
  5. les responsabilités imposées par la loi, y compris les opérations d’initiés, la législation sur l’environnement et les questions d’ordre fiscal
  6. la responsabilité pour les infractions en vertu des lois sur les sociétés
  7. la gestion du risque

 

Inscrivez-vous pour obtenir un exemplaire en cliquant sur le lien ci-dessous. Il vous sera envoyé par courriel dès sa publication.

Request a copy-French

 

Gouverner dans l’anxiété | Effet insoupçonné de l’actionnariat activiste ?


M. François Dauphin, directeur de projets de l’IGOPP, nous fait parvenir le billet suivant à titre de blogueur invité.

L’article insiste sur les conséquences, souvent dysfonctionnelles, de gouverner dans un climat d’appréhension relié aux probabilités d’interventions d’actionnaires activistes, qui, selon lui, sont généralement à court terme et bénéficient surtout à ces deniers.

Il semble cependant que ce phénomène continuera sa progression et que les conseils d’administration doivent être de plus en plus vigilants car les « fonds activistes savent cibler des sociétés dont les conseils d’administration n’ont pas été à la hauteur ».

Cet article apporte un éclairage très pertinent aux administrateurs de sociétés, notamment en affirmant que la peur des fonds activistes est exagérée dans les cas de sociétés qui observent des règles de gouvernance exemplaires.

Bonne lecture !

Gouverner dans l’anxiété : Serait-ce un effet insoupçonné de l’actionnariat activiste ?

Par

François Dauphin, MBA, CPA, CMA

Directeur de projets, IGOPP

En septembre dernier, nombreux sont ceux qui n’ont pu réprimer un sourire en observant la dernière salve de l’actionnaire activiste Starboard Value contre le conseil d’administration et la haute direction de Darden Restaurants (société mère qui regroupe plusieurs chaînes de restaurants, dont Olive Garden, Longhorn Steakhouse et, jusqu’à très récemment, Red Lobster). En effet, dans une présentation de près de 300 pages, l’activiste ridiculisait la façon dont l’entreprise gérait son réseau de restaurants, allant jusqu’à souligner l’incapacité des cuisiniers à bien faire cuire les pâtes ou le nombre de pains trop élevés laissé par les serveurs sur les tables.

Rappelons qu’un investisseur « activiste » est un actionnaire qui acquière une participation dans une entreprise publique, et qui utilise différentes techniques (souvent hostiles) afin de contraindre le conseil d’administration ou la direction de l’entreprise ciblée à se conformer à ses requêtes, lesquelles visent essentiellement à créer rapidement de la valeur pour les actionnaires. Les recettes sont relativement toujours les mêmes : distribuer les liquidités excédentaires sous forme de dividendes spéciaux ou de rachats d’actions ou même endetter l’entreprise pour ce faire, vendre des actifs dont le rendement apparaît insuffisant, séparer l’entreprise en deux ou plusieurs entités qui seront inscrites en bourse, forcer la vente de l’entreprise, etc. Le moyen le plus utilisé est de faire planer la menace d’une course aux procurations pour remplacer plusieurs membres du conseil si les administrateurs en place n’obtempèrent pas.

P1030055

Dans le cas de Darden, Starboard Value a gagné son pari : les 12 membres du conseil d’administration ont été remplacés, dans un résultat sans précédent pour une telle course aux procurations, surtout en considérant que Starboard ne détenait que 8,8% des votes. Le conseil d’administration de Darden n’était pas sans faute, après tout, il avait procédé à la vente de Red Lobster à peine quelque temps avant que les actionnaires ne se prononcent sur le sujet, un geste que certains qualifieront de panique en réaction aux pressions exercées par les activistes.

L’exemple de Darden est certes étonnant. Toutefois, il traduit un malaise bien réel qui tend à s’accentuer. Une étude récente de PwC (Annual Corporate Directors Survey 2014) montre que 85% des conseils d’administration d’entreprises dont les revenus excèdent les 10 milliards de dollars (75% des entreprises dont les revenus sont moins d’un milliard de dollars) ont eu des discussions au sujet de la préparation (ou de la réaction) pour faire face à un éventuel (réel) actionnaire activiste. La crainte de devoir affronter un de ces investisseurs – et de perdre, puisque les activistes, disposant de ressources sans précédent, remportent la majorité de leurs affrontements – pousse de plus en plus d’entreprises à abdiquer rapidement lorsqu’un activiste se manifeste, ou encore à agir de manière préventive en tentant d’anticiper ce qu’un activiste potentiel pourrait réclamer.

Ainsi, on constate déjà les effets de telles décisions. Du côté de ceux qui ont capitulé, on retrouve des exemples comme Hertz (3 sièges au conseil offerts à l’activiste Carl Icahn en moins d’une semaine) et Walgreen (2 sièges au conseil offerts à Jana Partners, un activiste qui ne détenait pourtant qu’une participation de 1,2%), alors que du côté des conseils d’administration préventifs (craintifs) on retrouve des exemples comme Symantec (annonce de la séparation de l’entreprise en deux entités distinctes) ou Adidas (annonce d’un programme de rachat d’actions massif à la suite d’une rumeur suggérant un intérêt de la part d’activistes).

On pourrait conclure qu’il en est ainsi parce que ces fonds activistes savent cibler des sociétés dont les conseils d’administration n’ont pas été à la hauteur.

Malheureusement, la perspective d’une capitulation massive devant la menace de ces investisseurs n’annonce rien de bien favorable. En effet, les entreprises deviendront de plus en plus réticentes à investir dans leur avenir et se concentreront davantage sur le très court terme (qui se mesure maintenant en trimestres et non en années). Si certains actionnaires pourront profiter de cette nouvelle réalité – les activistes au premier rang  –, les autres parties prenantes risquent au contraire d’en subir les contrecoups.

Les détenteurs de titres de dette, par exemple, subissent fréquemment les effets corollaires de l’activisme. Moody’s publiait déjà en 2007 un avis soulignant que la cote de crédit des émetteurs ciblés par les activistes était presque universellement revue à la baisse; de son côté, Standard & Poor’s a récemment publié un rapport soulignant que 40% des entreprises qui ont exécuté un essaimage (« spin-off » d’actifs) ont vu leur cote de crédit être révisée à la baisse sur le long terme.

Ainsi, plusieurs entreprises sont plus à risque, davantage fragilisées après le passage d’un activiste. Et voilà que des conseils d’administration optent pour des stratégies qui fragiliseront l’avenir de leur propre entreprise simplement pour éviter d’apparaître sur le radar d’un hypothétique actionnaire activiste! Si le phénomène ne s’est pas encore manifesté sous sa forme la plus acrimonieuse au Québec, cela ne signifie pas qu’il faille l’ignorer, bien au contraire!

La peur n’est généralement pas un état favorisant la prise de décision réfléchie, l’éclosion d’idées nouvelles ou le développement d’une vision d’avenir dynamisante.

Le rôle du conseil d’administration est remis en cause par cette forme d’actionnariat prônant une démocratie directe. Si le conseil d’administration comme entité mérite de préserver sa place, il devra le prouver en se renouvelant, en se montrant vigilant, aussi « activiste » que les fonds mais avec, comme objectif, l’intérêt à long terme de la société et de toutes ses parties prenantes.

Tendances en gouvernance et CA du futur | PwC’s 2014 Annual Corporate Directors Suveys


Il y a dans le document de PwC un exposé clair des principales tendances en gouvernance au cours des prochaines années. Le site de PwC  présente également les chapitres individuels du rapport.

Voici un résumé de l’échantillon des entreprises, suivi d’un rappel des 12 tendances observées. Vous trouverez beaucoup de points communs avec l’article que j’ai publié dans le journal Les Affaires : Gouvernance : 12 tendances à surveiller

Bonne lecture !

In the summer of 2014, 863 public company directors responded to our survey. Of those directors, 70% serve on the boards of companies with more than $1 billion in annual revenue, and participants represented nearly two-dozen industries. In PwC’s 2014 Annual Corporate Directors Survey, directors share their views on governance trends that we believe will impact the board of the future, including: board performance and diversity, board priorities and practices, IT and cybersecurity oversight, strategy and risk oversight, and executive compensation and director communications.

Trends shaping governance and the board of the future | PwC’s 2014 Annual Corporate Directors Suveys

Board performance takes center stage

 Many boards are giving even more attention to enhancing their own performance and acting on issues identified in their self-assessments.

 

Board composition is scrutinized

Board composition is under pressure to evolve to meet new business challenges and stakeholder expectations. Today’s directors are more focused than ever on ensuring their boards have the right expertise and experience to be effective.

 

Board diversity gets attention

Stakeholders are more interested in board diversity, and boards are increasingly focused on recruiting directors with diversity of background and experience.

 

More pressure on board priorities and practices

Director performance continues to face scrutiny from investors, regulators, and other stakeholders, causing board practices to remain in the spotlight.

 

Activist shareholders get active

With over $100 billion in assets under activist management1, more directors are discussing how to deal with potential activist campaigns.

 

The influence of emerging IT grows

Companies and directors increasingly see IT as inextricably wed to corporate strategy and the company’s business. IT is now a business issue, not just a technology issue.

 

Increased concerns about the Achilles’ heel of IT—cybersecurity

Cybersecurity breaches are regularly and prominently in the news. And directors are searching for answers on how to provide effective oversight in this area.

 

It’s still all about risk management

Risk management is a top priority for investors, and they have high expectations of boards in this regard.

 

Investors question company strategies

Effective oversight requires that the board receive the right information from management to effectively address key elements of strategy.

 

Executive compensation remains a hot topic

Boards are devoting even more time and attention to the critical issue of appropriate compensation.

 

Stakeholders are showing continuing interest in how proxy advisory firms operate.

The interest of stakeholders in the proxy advisory industry is a key trend.

 

Increasing expectations about director communications

In response, boards must determine their role in stakeholder communications—and evaluate their processes and procedures governing such communications

 

Les dangers du micro-management !


Le micro-management est certainement un danger qui guette beaucoup d’administrateurs siégeant sur des conseils d’administration, surtout sur des CA d’OBNL.

Le court article publié par Eugene Fram sur son blogue Nonprofit Management montre qu’il y certaines situations de Start-Up qui nécessitent une implication des administrateurs dans la gestion de leur organisation; mais, il n’est pas rare que ce comportement devienne une très mauvaise habitude à plus long terme*.

L’auteur présente les dangers reliés aux comportements des administrateurs qui investissent inconsidérément les rôles de gestionnaires.

Les administrateurs doivent toujours se rappeler qu’ils ont un devoir de fiduciaire envers les actionnaires ou les membres d’une OBNL et qu’ils peuvent difficilement exercer leurs responsabilités s’ils effectuent des tâches de nature managériale.

Cette façon de faire détruit l’initiative des gestionnaires et sape leurs sens des responsabilités.

Bonne lecture !

  The Dangers of Board Micromanagement

Micromanaging is a method of management in which an individual closely observes or controls the work of an employee. In comparison to simply giving general direction, the micromanager monitors and evaluates every stage in a process, from beginning to end. This behavior negatively affects efficiency, creativity, trust, communication, problem-solving, and the company’s ability to reach its goals.P1030954

The typical micromanager spends their time directing employees rather than empowering them. They are often very insecure. They spend more time with the details of business operations instead of planning the company’s short-term and long-term growth strategies. The fact of the matter is, time DOES equal money. When the designated leader of an organization is wasting time (and therefore money) on overseeing projects instead of focusing on specific growth opportunities, it’s time to reevaluate a few things.

The Need for a Micromanaging Board

Board micromanagement is an appropriate approach when either a nonprofit or for-profit is in a start-up stage. Financial and human resources are modest, and the directors often assume some responsibilities normally executed by compensated staff. The chief executive often has managerial responsibilities as well as a list of low-level operational duties. As extreme examples, I have even seen CEOs install office furniture or install floor tiles.

Long Term Implications

Prolonging these types of activities much after they are needed can imbed micromanagement in the DNA of the organization’s decision-making. Some directors may even obtain ego gratification from continual micromanaging. It can provide more immediate gratifications not found with policy or strategy development. If their mandates fail, they can always quietly blame management for poor implementations. Eventually these failures have an impact on the organization, either by stunting development or causing it to fail. Following are some of the behavioral patterns that become part of the decision-making environment:

Less competent managers are attracted to executive positions – There is a tendency to promote people with good operational records work into key management positions. They may have even taken university courses in management or social dynamics but they fail to realistically implement what they have learned into the dynamics of the real world problems.

Delegating Decisions Upward – Knowing that even small decisions will need to have board review, if not approval, the organization takes no pride in taking initiative, being creative and employing critical thinking. There is also a tendency to shirk responsibility.

More Difficult Recruitment — When the board comes to the conclusion it needs more talented managers, the directors may have trouble understanding why talented recruits reject their offers. Sometimes a talented senior manger may take a position after negotiating an understanding that the micromanaging board will change or modify the way it operates. However changing such an imbedded culture can be difficult and sometimes impossible, if a founder has established a micromanagement environment for the board.

Founders of both nonprofit and for-profit organizations can generate micromanaging boards that last for years beyond their tenures. Succeeding boards can be composed of directors who follow the founders’ management styles and are not capable of excising the unhealthy DNA surging through the organization.

Board micromanagement in either nonprofit or business organizations, when continued beyond a start-up stage, can be can be viewed as an incipient disease. It, at any point, can cause a “heart attack” in the organization.

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*Voir aussi Micromanagers: Flushing Companies Down the Toilet, One Detail at a Time

 

Le rôle de l’audit interne dans la compréhension de la culture organisationnelle


Vous trouverez, ci-après, un document de l’Institut de l’audit interne (IIA) du Royaume-Uni (UK) partagé par Denis Lefort, expert conseil en gouvernance, audit interne et contrôle, qui porte sur le rôle de l’audit interne sur la culture organisationnelle.

Auditer la culture organisationnelle est une activité qui peut s’avérer complexe mais qui peut apporter néanmoins  une grande valeur ajoutée. Le présent guide de l’IIA UK saura vous apporter un éclairage intéressant et utile à cet égard.

Le document de l’IIA est très intéressant car il expose clairement la problématique d’intervention de l’audit interne dans ce domaine, tout en agrémentant les actions à entreprendre de plusieurs exemples concrets d’intervention.

Bonne lecture !

Culture and the role of internal audit

Looking below the surface

The approach taken by IIA report on culture is reflected in the new (September 2014) FRC Corporate Governance Code, which says « One of the key roles for the board includes establishing the culture, values and ethics of the company. It is important that the board sets the correct ‘tone from the top’. »

The accompanying FRC guidance on risk management – exercising responsibilities says “The board should establish the tone for risk management and internal control and put in place appropriate systems to enable it to meet its responsibilities effectively”

“In deciding what arrangements are appropriate the board should consider, amongst other things:

  1. The culture it wishes to embed in the company, and whether this has been achieved.
  2. What assurance the board requires, and how this is to be obtained.”

How should internal audit support boards in giving assuarance on culture?

Culture report cover

Foreword

Public trust in business has ebbed and flowed over recent years but a significant minority (circa 40%) of those questioned by Ipsos MORI believe companies are ‘not very’ or ‘not at all’ ethical in the way they behave. Responsibility and ownership for addressing this lies with those who sit in the boardroom. This is supported by regulators in the way that they now monitor and review the culture of organisations.

Internal audit is a unique function within an organisation with its independence and access to give assurance to those in the boardroom. This can provide confidence that there is a strong commitment to good conduct and that it is actually being translated into everyday behaviours, but also, more importantly, where it is not. To have this information allows the board an opportunity to mitigate the risk of integrity failure.

Leaders need to send a message and show by example that culture and values matter, demonstrating this by putting in place all the necessary measures. I believe this report will support boards and audit committees to help rebuild public trust by making the best use of internal audit as they develop their thinking around how to improve ethical conduct for the benefit of customers, employees, all other stakeholders and for business itself.

Philippa Foster Back CBE
Director
Institute of Business Ethics

Étude du Conference Board sur les récentes interventions des actionnaires activistes


Comme vous le savez, je suis désireux d’être au fait des derniers développements eu égard aux interventions des actionnaires activistes car je pense que ce mouvement peut avoir des conséquences positives sur la gouvernance des sociétés, même si le management a tendance à se défendre âprement contre les « intrusions des actionnaires activistes et opportunistes »

L’article ci-dessous, paru sur le site du Harvard Law School Forum on Corporate Governance, nous fait part d’une récente étude du Conference Board* sur l’évolution du phénomène de l’activisme aux É.U.

L’étude en question, Proxy Voting Analytics (2010-2014), montre que le mouvement, loin de s’essouffler, a continué d’avoir un impact significatif sur les relations entre les actionnaires et les dirigeants des grandes entreprises américaines.

Voici donc un résumé des faits saillants de cette étude. Bonne lecture !

The Recent Evolution of Shareholder Activism

Proxy Voting Analytics (2010-2014), a report recently released by The Conference Board in collaboration with FactSet, reviews the last five years of shareholder activism and proxy voting at Russell 3000 and S&P 500 companies.

Data analyzed in the report includes:

  1. Shareholder activism, including proxy fights, exempt solicitations, and other public agitations for change.
  2. Most frequent activist funds and their tactics.
  3. Volume, sponsors, and subjects of shareholder proposals.IMG00571-20100828-2241
  4. Voted, omitted, and withdrawn shareholder proposals.
  5. Voting results of shareholder proposals.
  6. Shareholder proposals on executive compensation.
  7. Shareholder proposals on corporate governance.
  8. Shareholder proposals on social and environmental policy.
  9. Volume and subjects of management proposals.
  10. Failed say-on-pay proposals among Russell 3000 companies.
  11. Say-on-pay proposals that received the support of less than 70 percent of votes cast.

Additional insights (including volume by index, industry, and sponsor, most frequent sponsors, and support levels) are offered with respect to key issues from the last few proxy seasons, including: majority voting; board declassification; supermajority vote requirements; independent board chairmen; proxy access; sustainability reporting; political issues; election of dissident’s director nominee.

The report pays special attention to trends and developments that have emerged in the last few months. In fact, what started as an unremarkable proxy voting season has blossomed into a series of developments that may influence annual general meetings for years to come.

There is a clear indication that activist investors are turning their attention to new issues. For example, in the Russell 3000, five investor-sponsored proposals restricting golden parachutes received the support of a majority of shareholders. While the volume remains low, it is the highest ever recorded on this topic and it signals that voting on executive compensation issues other than say on pay can still find its way to general meetings of shareholders. Political spending and lobbying activities, a topic virtually absent from voting ballots until a few years ago, became the most frequently submitted shareholder proposal type of 2014, with 86 voted proposals and five receiving more than 40 percent of votes cast (compared to only one in 2013). Finally, support for resolutions on proxy access reached a tipping point in the first six months of the year, with five proposals approved and four receiving more than 40 percent of votes cast in favor.

The advisory vote on executive compensation was a game changer for corporate/investor relations and, in 2014, more than ever before, shareholders have been pursuing opportunities to engage with senior management and be heard ahead of a shareholder meeting. This trend was reflected in the rate of withdrawals of shareholder proposals, which doubled from a few years ago as companies chose to preempt a vote on certain investor requests by voluntarily implementing their own reforms. It was not all a product of engagement, however, and guidelines on board responsiveness from proxy advisory firm ISS also drove the surge of management proposals on issues previously raised by activists.

Increased dialogue with senior executives and board members as well as the progress made by many large companies in the adoption of baseline corporate governance practices prompted large institutional investors to reconsider their role as agents of corporate change. For example, while some public pension funds such as the California State Teachers Retirement System (CalSTRS) cut back significantly on their submissions in 2014, others such as the New York City Employees’ Retirement Systems remained prolific proponents and galvanized around proxy access requests. Similarly, the popularity of social and environmental policy issues observed this year is in part explained by the larger number of proposals filed by labor-affiliated investment funds, which, before the introduction of mandatory say on pay, had always concentrated on executive compensation issues. Despite the traditional focus of this type of fund on industrial sectors, in 2014, for the first time, more than 20 percent of the 86 proposals submitted by labor unions were directed at companies in the finance industry.

Social media and other new technologies allow a broad outreach that was unimaginable only a few years ago, and activists are perfecting their use. This year, a growing number of activist investors, especially hedge funds, have agitated for change without even filing a shareholder proposal, let alone waging a proxy fight. Despite the increase in activism campaign announcements, there was a sensible decline in the number of campaigns related to shareholder meetings held in the first six months of 2014. This decline suggests that, rather than urge other shareholders to oppose a director election or vote for a certain resolution, these activism campaign announcements now serve to publicize the investor’s view of the business strategy or organizational performance. It is a first step that may lead to the future filing of a proposal or the solicitation of proxies but that may also prove sufficient to persuade the company to seek dialogue and reach a compromise.

The following are the major findings of the report:

Although activism campaign announcements in the Russell 3000 were up in 2014, the number of campaigns related to a shareholder meeting declined, as some hedge funds chose to agitate for change without even filing a shareholder proposal.

 

Observations made in 2013 that hedge funds were starting to set their sights on larger companies appear disputed by numbers for 2014, when a sharp decline in activism campaign volume was recorded among S&P 500 companies.

 

Proxy contests were the only type of activist campaign related to a shareholder vote to increase among Russell 3000 companies in 2014, with a concentration in the retail trade and finance industries, and dissidents reported their highest success rates in years.

 

Engagement between corporations and investors has not curbed the most hostile forms of activism, as the volume of proposals to elect a dissident’s nominee remains fairly high.

 

Shareholder proposal volume was slightly lower this year, with a sharper decline among larger companies as investors focus on new topics and broaden their targets.

 

Excess cash on US companies’ balance sheets fueled the growth of the activist hedge fund industry, and the number of resolutions sponsored by hedge funds surpassed the record levels of 2008.

 

The 2014 proxy season marked another sharp year-over-year decline in the number of proposals submitted by multiemployer investment funds affiliated with labor unions, as those investors showed new interests, especially in social and environmental policy issues.

 

Proposals on corporate governance, once a stronghold for pension funds, were sharply reduced as more companies introduced engagement policies with large investors.

 

Shareholder resolutions on social and environmental policy rose to unprecedented levels, while some institutional investors dropped governance issues that were a staple of their past activity but never garnered widespread support.

 

The rate of withdrawals of shareholder proposals doubled from a few years ago as companies preempted some of the issues by voluntarily implementing their own reforms.

 

As large groups of institutional investors reduced their 14a-8 filings or shifted their attention to new and less popular topics, the percentage of voted proposals winning the support of a majority of shareholders reached a new low.

 

Proposals on board declassification and majority voting have become a sure bet for labor unions and public pension funds, as they are widely recognized as a baseline in corporate governance.

 

A surge in requests from corporate gadflies made the separation of CEO and chairman roles the top shareholder proposal topic by volume, but the institutional investment community remains skeptical of a one-size-fits-all approach to board leadership.

 

For the first time in the same proxy season, five investor-sponsored proposals restricting golden parachutes received majority support, signaling that voting on executive compensation issues other than say on pay may still find its way to the AGM.

 

 hareholder proposals on political spending and lobbying activities skyrocketed this year, with five receiving more than 40 percent of votes cast (compared to only one in 2013).

 

Support for shareholder proposals on proxy access rights reached a tipping point in 2014, with five proposals approved and four others receiving the support of more than 40 percent of votes cast, and a handful of companies submitted board-sponsored proposals.

 

Say-on-pay analysis confirms a significant turnover in failed votes, with several companies losing the confidence of their shareholders this year after winning the vote by a wide margin in 2013.

__________________________________________________

*Matteo Tonello is vice president at The Conference Board. This post relates to a report released jointly by The Conference Board and FactSet, authored by Dr. Tonello and Melissa Aguilar of The Conference Board. The Executive Summary is available here (the document is free but registration is required).

Débat sur la contribution des actionnaires activistes au sein des conseils d’administration


Voyez le panel de discussion sur les aspects pratiques liés aux activités des actionnaires activistes, diffusé par la National Association of Corporate Directors (NACD).

Cette vidéo montre comment les activistes opèrent sur les marchés mais aussi au sein des conseils d’administration. C’est une présentation vraiment très utile pour mieux saisir les différentes catégories d’activistes ainsi que les motivations qui les animent.

Excellente discussion sur la montée de l’activisme. À visionner !

Activist Shareholders in the Boardroom

Activism is on the rise. When and how can activist shareholders in the boardroom be a force for positive change? Directors need to be prepared.  Janet Clark, and Andrew Shapiro discuss the issues around strategy and corporate governance at an NACD board leadership conference.NACDlogo

The National Association of Corporate Directors (NACD) is certainly a recognized authority, when it comes to discussing and establishing leading boardroom practices in the United States.

Informed by more than 35 years of experience, NACD delivers insights and resources that more than 14,000 corporate director members from the public, private and non-profit sectors rely upon to make sound strategic decisions and confidently confront complex business challenges.

Nouvelles capsules vidéos en gouvernance : (1) la gouvernance des PME (2) la présidence du CA


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 gouvernance des PME » par Mme Anne-Marie Croteau, ASC, vice-doyenne responsable des relations externes à l’École de gestion John-Molson et professeure titulaire, Université Concordia, et « La présidence du CA » par M. Michel Clair, ASC, président et chef de la direction, Groupe Santé Sedna.

Visionnez ces deux capsules d’experts :

La gouvernance des PME par Anne-Marie Croteau

 

________________________________________________

L’évaluation du conseil d’administration revisitée


Aujourd’hui, nous abordons le thème de l’évaluation du fonctionnement du conseil d’administration. Il n’y a pas de doute que le processus d’évaluation est un moyen très efficace pour l’amélioration de la gouvernance des sociétés.

La presque totalité des entreprises, et toutes celles du NYSE, ont mises en place des mécanismes d’évaluation sur une base annuelle; mais encore faut-il que cette activité soit conduite avec beaucoup de compétence et de doigté par le président du conseil, ce qui n’est pas nécessairement le cas puisque beaucoup d’administrateurs ne prennent pas encore cet exercice assez au sérieux.

En effet, plusieurs études montrent que l’on ne se contente trop souvent que d’une autoévaluation sommaire, produite dans le but de satisfaire aux exigences réglementaires. Le sujet est délicat … les administrateurs sont relativement réticents à se faire évaluer … et à évaluer le travail de leurs pairs !

, dans un article paru sur le blogue de Securities & Corporate Governance Group, nous présente un rappel de l’importance de bien concevoir l’évaluation du conseil d’administration.

Il expose les principales étapes de l’évaluation, donne un exemple d’une plus grande divulgation du processus, et insiste sur l’exploitation des résultats et sur la nécessité de faire le suivi, tout en soulevant l’épineux problème de la conservation des données et des risques légaux associés à leur divulgation.

Bonne lecture ! Vos commentaires relatifs à l’activité d’évaluation dans vos conseils sont les bienvenus.

Re-evaluating the Board Evaluation 

Board evaluations have long been standard practice among public companies. With shareholder interest in corporate governance practices at an all-time high, the focus on board evaluations is expected to increase.  Given that board evaluations can be an effective tool to improve board and company performance, now may be a good time to review your company’s current board evaluation process and the disclosure of that process.

The Evaluation Process

A recent study by PwC found that 63% of directors believe self-evaluations are mostly a “check the box” exercise.  This attitude may stem from the fact that NYSE listed companies are required to conduct evaluations on an annual basis.  (See NYSE Rule 303A.09; NASDAQ does not require an annual evaluation.)  That means that a significant number of boards may be missing out on a valuable opportunity to identify issues with and improve on various board functions.  Evaluations may provide helpful information about how the board conducts its meetings and interacts with management, what type of board education programs are needed in the upcoming year and whether the current structure of the board is appropriate in guiding and executing the company’s strategy.  The evaluations may identify small changes, like changing the order of items on board meeting agendas, or more substantive areas for improvement, like a gap in expertise and the need to add a new director.

Securities & Corporate Governance Group

Because the process should fit the board’s culture, there is no one-size-fits-all approach to designing effective board evaluations.  Furthermore, a process designed years ago may no longer fit the company’s current culture and strategic goals.  Therefore, it is necessary to re-evaluate from time to time the effectiveness of the process and implement any necessary changes.

In taking on this challenge, you should consider the following:

  1. What is the current culture?  Are director interactions formal or informal?  Are there clear leaders and followers?  Does anyone unduly dominate the meetings?  Are there factions (activist investor or private equity fund designees, long-tenured versus recently elected, etc.)?  Do some directors seem passive or prefer anonymity?
  2. What are the objectives?  Has an area of concern (like lack of board alignment) been identified? Or is the board engaging in the process to determine what, if anything, might be done better?
  3. Who will be evaluated? The board as a whole? Each committee?  Will individual directors review each other?  Will individual directors perform a self-evaluation?  Will the board solicit the opinion of members of management that have regular contact with the board?
  4. Who will do the evaluating? Recent trends show a slight increase in the retention of external advisors to conduct the evaluations, but the majority of public companies still employ an internally driven process lead by either the Chairman, Lead Independent Director, Chair of the Nominating and Corporate Governance Committee or General Counsel.
  5. How will they be evaluated? Typically, evaluations are conducted using written questionnaires or interviews.  Written questionnaires may include any combination of a standardized survey of questions, comment sections meant to facilitate the explanation of the standard survey of questions and open-ended questions intended to solicit feedback.  Interviews may be conducted on an individual basis or in a group setting.  The objectives of the evaluation will dictate the content of questions being solicited.  And the questions should be refreshed on an annual basis to ensure they are relevant and effective.
  6. What will be done with the results of the evaluations? This will partially depend on the method of evaluation but may include a discussion of the results, a memo summarizing the results or an individual meeting with each director.  The company should also use the results of the evaluations to resolve issues, make changes and achieve goals.

While the benefits of board evaluation are widely accepted, it is important to consider how such evaluations may impact the collegiality and trust that is vital for board room discussions, along with what, if any, impact the board evaluation process may have on director candidates.  Another consideration in designing the process is how evaluation material could be used in litigation and what the board can do to mitigate that risk.  On one hand, it is important for the board to develop a written record that demonstrates that the board acted deliberately in conducting evaluations.  On the other hand, questionnaires and other evaluation material are discoverable and may contain damaging information regarding board performance.  Accordingly, it is important to consider whether questionnaires and other evaluation material need to be retained after the evaluations have taken place. Regardless of whether the evaluation material is retained or not, it is important that the board apply this policy consistently for all evaluations – good or bad – year after year.

Enhancing Disclosure of Board Evaluation

While most U.S. public companies have a board evaluation process in place, the disclosure explaining the evaluation process (whether in the proxy statement of corporate governance guidelines) is minimal.  Recently, however, the Council of Institutional Investors released a report entitled Best Disclosure: Board Evaluation, which delineates two approaches for disclosing board evaluations that the Council believes are helpful to investors.  The first approach describes the board evaluation process and the mechanics of the board’s self-evaluations.  The second approach provides not only a description of the process employed to evaluate the board, but also the takeaways and results of the evaluation.

One U.S company that has presented a more in-depth description of its board evaluation process is General Electric.  The disclosure does not appear in the company’s proxy statement, but instead it is contained in its “Governance and Public Affairs Committee Key Practices” document.  General Electric’s proxy statement provides a high-level overview of the process and directs shareholders to the “Governance and Public Affairs Committee Key Practices” document by providing a link.  An excerpt from the disclosure is provided below:

Method of Evaluating Board and Committee Effectiveness. The committee will oversee the following self-evaluation process, which will be used by the board and by each committee of the board to determine their effectiveness and opportunities for improvement. All of the board and committee self-evaluations should be done annually at the November board and committee meetings. Every October, an independent expert in corporate governance will contact each director soliciting comments with respect to both the full board and any committee on which the director serves, as well as director performance and board dynamics. These comments will relate to the large question of how the board can improve its key functions of overseeing personnel development, financials, other major issues of strategy, risk, integrity, reputation and governance. In particular, for both the board and the relevant committee, the process will solicit ideas from directors about:

a. improving prioritization of issues;
b. improving quality of written, chart and oral presentations from management;
c. improving quality of board or committee discussions on these key matters;
d. identifying how specific issues in the past year could have been handled better;
e. identifying specific issues which should be discussed in the future; and
f. identifying any other matter of importance to board functioning.

The independent expert in corporate governance will then work with the committee chairs and the lead director to organize the comments received around options for changes at either board or committee level. At the November board and committee meetings, time will be allocated to a discussion of – and decisions relating to – the actionable items.

Robust disclosure of the board evaluation process is not yet common practice.  However, shareholders value the board evaluation process and are eager for details about the process, what the board has learned from the process and how the board intends to address issues or objectives identified in the process.  Accordingly, companies should expect to receive more interest (or pressure) to adopt a more formal evaluation process and provide more robust disclosure about the process.

Whether to address existing board effectiveness issues, to simply update outdated processes or to anticipate increased shareholder interest in board functionality, now is a good time to review your company’s board evaluation process and related public disclosures.

Proposition pour un changement significatif dans la gouvernance des sociétés | Richard Leblanc


Voici un article de Richard Leblanc, avocat, expert-conseil en gouvernance et professeur-chercheur, publié récemment dans le HuffPost Business Canada, qui alimentera les discussions portant sur les changements requis en gouvernance au Canada.

L’auteur présente un changement réglementaire qui permettrait à des actionnaires d’avoir accès à la circulaire d’information pour fins de votation aux assemblées annuelles. Présentement, les actionnaires n’ont pas la possibilité de faire inscrire des candidatures d’administrateurs dans la circulaire de la direction; cela est du ressort du conseil d’administration qui fait des propositions de candidatures basées sur les recommandations d’un comité de gouvernance formé de membres du C.A.

Cette façon de fonctionner, selon Richard Leblanc, a pour résultat de bloquer la nomination de nouveaux administrateurs issus de la base actionnariale, ouvrant ainsi la voie à de grandes batailles d’opinions lorsque les actionnaires-investisseurs activistes exigent des changements à la gouvernance des sociétés.

La proposition de Richard Leblanc permettrait l’inclusion de candidatures d’actionnaires dans le prospectus de sollicitation à certaines conditions :

(1)   L’actionnaire ou le groupe d’actionnaires doit posséder un minimum d’actions dans l’entreprise (disons environ 3 %);

(2)  Les actions doivent avoir été acquises depuis une certaine période de temps (disons trois ans);

(3)  Les actionnaires peuvent soumettre annuellement des candidatures d’administrateurs jusqu’à un maximum de 25 % des administrateurs proposés dans la circulaire (dans le cas d’une élection non contestée, c’est-à-dire dans le cas où un changement de contrôle n’est pas envisagé).

L’auteur est très conscient que le management des entreprises est susceptible de résister à un tel changement car il ne veut pas de surprises (le management veut conserver son pouvoir d’influence dans le processus …). De plus, le C.A. veut conserver ses prérogatives de choisir ses pairs !

Que pensez-vous de cette approche ? En quoi celle-ci peut-elle améliorer la gouvernance ? Les actionnaires minoritaires auront-ils un rôle significativement plus crucial à jouer ? Est-ce le bon moyen pour susciter une plus grande participation des actionnaires ?

L’argumentation pour les changements proposés est développée dans l’article de Richard Leblanc présenté ci-dessous.

Bonne lecture ! Je souhaite avoir votre opinion sur cette approche, à première vue, favorable aux actionnaires.

The Corporate Governance Game Changer That Needs to Come to Canada

I teach my students and counsel board clients that shareholders elect directors; directors appoint managers; directors are accountable to shareholders; and managers are accountable to directors. This is largely theoretical.

Here is the reality: Shareholders: (i) cannot select directors; (ii) cannot communicate with directors; and (iii) cannot remove directors, by law, without great cost and difficulty. Therefore, directors are largely homogenous groups who are selected by themselves, or, worse yet, management.

Addressing the foregoing is the one piece of reform that will change corporate governance and performance for the better. The rest is, as they say, window dressing.

I have encouraged institutional investors and regulators to consider advocating what is known as « proxy access. » This means that a shareholder, or a group of shareholders, who (i) own a modest, minimum threshold of shares (say 3 per cent, although the percentage could be higher or lower, or floating, depending on the size of the company); (ii) for a period of time (say three years, although the time period could be shorter); (iii) can select up to 25 per cent of proposed directors, of the total board size, in an uncontested election (meaning a change of control is not desired by the shareholders) in a given year.P1030704

When shareholders « select » their nominees for the board, these directors would be alongside, in the management proxy circular, in alphabetical order, with profile parity (short bios and areas of competency), the management slate of directors. Management would be obliged to include shareholder-nominated directors, at a cost to the company, not shareholders, if the above ownership and time requirements are met. There would be no costly proxy battles or dissident slates. There would be no undue influence by management to marginalize shareholder-nominated directors within or outside of the proxy. Rules of the road will be set.

Then, shareholders get to decide, as they should, on the best directors from among the management-proposed and the shareholder-proposed directors. Ideally, the selection should be as blind or neutral as possible. The focus should be solely on the qualifications, competencies and track record of the proposed directors for election at that company. May the best directors win, as should be the case in any election, versus a slate of management-nominated directors, which is the case now. Under this new regime, there will be winners and losers. The practical effect may be that legacy or unqualified directors may withdraw from this scrutiny, as Canadian Pacific directors did at the time of shareholder Pershing Square’s involvement. This is not an undesired outcome and creates a market for the most qualified directors to rise to the top.

When proxy access was proposed by the Securities and Exchange Commission (SEC) in the U.S., management and lawyers who work for management used shareholder money to fight proxy access proposed under Dodd Frank, and won in the U.S. Court of Appeals, on the basis of an inadequate cost benefit analysis. Canadian investors and regulators should learn from this experience. Proxy access now is left to companies on a one-off basis, rather than being system wide. Meaningful proxy access has only occurred at a small number of companies as a result. The SEC should revisit proxy access. Industry Canada is currently looking at implementing proxy access at the 5 per cent level for all federally incorporated companies.

Opponents to proxy access argue that shareholders selecting directors will propose special purpose directors or directors who lack the background or experience. The evidence is the opposite. Shareholders are better at proposing directors who have the shareholder track record and industry expertise that the current board lacks. Recall Canadian Pacific, where not a single director possessed rail experience prior to shareholder involvement. There are other examples at Hess, Office Depot, Darden, Bob Evans, Abercrombie and Occidental Petroleum (see Field Experience Helps Win Board Seats), where shareholder-advocated directors were either better than incumbent ones, or caused the renewal of management-advocated ones. A director qualification dispute is welcome and will focus the lens on competencies of directors, including industry expertise, which is a good thing. Ann C. Mule and Charles Elson report in « Directors and Boards » that « One study concludes that more powerful CEOs tend to avoid independent expert directors. »

Herein lies the real resistance to proxy access: Management does not want it, and, the record shows, will fight vigorously to resist it. Management-retained advocates hired to oppose proxy access should disclose whom their client is. Directors however, when deciding to support proxy access, or not, should not be beholden to management, nor their advisors, nor act out of self-interest in entrenching themselves, but should be guided only by the best interests of the company, including its shareholders.

There is evidence that the market values strong proxy access positively, leading to an increase in shareholder wealth. If a director possesses the independence of mind, and the competency and skills to serve on the board, they should welcome proxy access. It will mean that the under performing directors on the board will be ferreted out, and current directors can avoid this uncomfortable task. Shareholders and the new competitive market for corporate directors will do it for them.

Suggestions d’ordre pratique pour l’adoption de comportements appropriés de la part des administrateurs


Doug Raymond, associé de la firme Drinker Biddle & Reath LLP et chroniqueur pour la revue Directors & Boards, nous présente une bonne revue des comportements à adopter comme membre d’un conseil d’administration.

Même si l’article revient sur des suggestions que vous connaissez bien, j’ai pensé vous faire partager les avis d’ordre pratique de l’auteur.

Bonne lecture !

Practical Dos and Don’ts for Directors

 

It isn’t exactly a “Top 10 list,” but I thought a listing of practical advice might be welcome to readers. So, recognizing that no list is perfect or exhaustive:

  1. Understand the company and its business—Directors should take the time to learn about the company’s business and the company’s industry, including its significant competitors.
  2. Do your homework—Directors should read and understand the board packet before the meeting; call if you have questions about the materials. The meeting should be used to discuss and make decisions rather than to educate directors who did not do their homework.IMG_00002057
  3. Keep the core strategy in mind—Once a strategic plan is formulated, further decisions should be evaluated by referring back to that plan. If the plan is broken or needs to be updated, be willing to suggest changing it.
  4. Directors plan and guide; management does—Directors should not confuse formulating and overseeing strategy with implementing it, which is done by management. Don’t overly defer to management in strategic matters in the planning stages, but don’t micromanage the tactics.
  5. Be constructive—Each director should be engaged at each meeting and participate in discussions without monopolizing them. Each member of the board has been chosen for his or her skills and potential to add value; for this to happen each director must be treated with courtesy, and board discussions must be open, thorough and deliberative.
  6. During board meetings, leave your iPhone in your briefcase—The board’s time is limited; don’t try to multitask during board meetings. Instead, directors should remain focused on the matters under discussion in order to appropriately discharge their duties.
  7. Don’t disappear after meetings—The job of being a director doesn’t end with the meeting. Feel free to contact your fellow directors, and, within reason, management, to stay involved with the company between meetings.
  8. Be social—Don’t skip board and management dinners and other social functions; these events help to form board culture and help the board function more effectively, particularly during hard times.
  9. Avoid conflicts of interest—Company business should never be influenced, or appear to be influenced, by personal interests; directors should avoid any implication of creating a conflict of interest, taking a company opportunity, or improperly using company knowledge or assets.
  10. No surprises—Directors should be forthcoming; if any circumstance might appear to compromise a board member or create a conflict, directors should discuss the circumstances with the board; often a mechanism to resolve or cleanse the situation will be available. Directors should also share whatever they know about issues being considered by the board.
  11. Follow the ‘elevator rule’—Much of the information that directors receive is non-public and belongs to the company or its business partners. Directors must carefully protect this information, discussing it only with people who need to know it and avoiding inappropriate discussions, including on mobile phones, and in public places such as airplanes, restaurants and elevators.
  12. No short-term trading—Directors should be long-term investors, not short-term traders. While directors are often required to own stock in the companies they serve, these holdings should be passive, absent extraordinary circumstances.
  13. Gifts—Gifts are a normal part of human interaction; however, no gift of meaningful value should ever be accepted or provided by a director, and no gift of any nature should be accepted if it might obligate, or appear to obligate, the company or any director.
  14. You are not the press secretary—Outside the boardroom, do not speak on behalf of the company unless specifically authorized to do so; directors should avoid making statements that might be perceived as company statements, even if not so intended.

The points discussed above are practical points that can contribute to being a more effective director. Of course, good directors must also have a working knowledge of the relevant legal rules, including applicable laws and company policies; standards for fiduciary duties, including those of care and loyalty; and insider trading rules, but regular readers of Directors & Boards already know that.