Compte rendu hebdomadaire de la Harvard Law School Forum on Corporate Governance | 28 décembre 2017

Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 28 décembre 2017.

Cette semaine, j’ai relevé les dix principaux billets.

Bonne lecture !


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  1. Top 5 Things Shareholder Activists Need to Know
  2. Analysis of Final Tax Reform Legislation
  3. Analysis of ISS’ Proxy Voting Guidelines
  4. The Information Content of Dividends: Safer Profits, Not Higher Profits
  5. Advising Shareholders in Takeovers
  6. SEC Cyber Unit and Allegedly Fraudulent ICO
  7. Board Composition: A Slow Evolution
  8. Do Activists Turn Bad Bidders into Good Acquirers?
  9. Appraisal Litigation Update
  10. The Legal Validity of Oral Agreements with Activist Investors

Compte rendu hebdomadaire de la Harvard Law School Forum on Corporate Governance | 21 décembre 2017

Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 21 décembre 2017.

Cette semaine, j’ai relevé les dix principaux billets.

Bonne lecture !


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Résultats de recherche d'images pour « harvard law school forum on corporate governance »


  1. Revised FCPA Corporate Enforcement Policy
  2. Analysis of 2018 Revenue Recognition Rules
  3. Analysis of Two-Step Merger With Uninformed Stockholder Consent
  4. Matters to Consider for the 2018 Annual Meeting
  5. 2017 Board Diversity Survey
  6. Proposed Revisions to the UK’s Corporate Governance Regime
  7. Meaningful Limits on Director Pay
  8. Passive Fund Providers and Investment Stewardship
  9. The Limits of Shareholder Ratification for Discretionary Director Compensation
  10. Finding the Right Balance in Appraisal Litigation: Deal Price, Deal Process, and Synergies


Évolution dans la composition des conseils d’administration aux É.U.

Les changements apportés à la gouvernance des entreprises passent souvent par un renouvellement du membership du conseil d’administration.

Le document publié par Spencer Stuart intitulé 2017 Spencer Stuart Board Index montre que les pressions sont de plus en plus grandes, notamment de la part des investisseurs institutionnels, pour moduler la composition du CA.

Ainsi, tel que le rapporte Julie Daum, Laurel McCarthy et Ann Yerger, dans une publication de Spencer Stuart, les changements sont assez importants, bien que jugés encore trop lents.

Vous trouverez, ci-dessous un résumé de cette publication ainsi que dix (10) suggestions à considérer afin de poursuivre dans la voie du renouvellement de la composition des conseils d’administration.

En cette période des fêtes de Noël et de la nouvelle année, je vous souhaite une lecture agréable et profitable.

Jacques Grisé, Ph. D., F.Adm.A.

Éditeur de ce blogue en gouvernance


Board Composition: A Slow Evolution


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Conseils d’administration : mesdames, il y a des places à prendre !


Interest in the composition of U.S. boards has never been greater. Pressure for change is coming from many fronts, particularly from institutional and activist investors. We have been tracking board composition issues for more than 30 years, and as the data from our 2017 Spencer Stuart Board Index show, U.S. boards are evolving, slowly.

– The number of new independent directors elected to S&P 500 boards during the 2017 proxy year rose to 397, the most since 2004 and an increase of 15% from 2016.

– For the first time in the history of our survey, just over half (50.1%) of incoming independent directors on S&P 500 boards are women or minorities.

– A record-breaking 45% of the new S&P 500 independent directors are serving on their first public company board.

– Boards are seeking talent beyond C-suite chairs, CEOs, presidents or COOs. Slightly more than a third of new independent directors are active or retired C-suite executives, down from 47% 10 years ago.

– Fewer active CEOs serve on boards. Today only 37% of S&P 500 CEOs serve on one or more outside public company boards, down from 52% 10 years ago.

Calls for greater boardroom diversity—encompassing considerations such as gender, race, age, skills, qualifications and backgrounds—are on the rise. And boards are responding.

Director skills and experiences are changing. Nearly 20% of new independent S&P 500 directors have experience in the technology or telecommunications industries. Directors with backgrounds in banking, finance, investment or accounting are in high demand, representing 29% of new directors in 2017, up from 19% in 2007. Of this group, directors with investing and investment management experience are of particular interest. Thirteen percent (13%) of new directors come from the investment field, up from 5% a decade ago; less than 20% of these directors were appointed under publicized settlements with activist investors.

S&P 500 boards are opening their doors to directors without prior public board experience. These first-time independent directors are more likely than other new directors to be actively employed (64% versus 42%). They are less likely to be C-suite executives and more likely to have other executive experiences, such as division or subsidiary leadership. They are younger, with an average age of 55.2, compared to 57.3 for other incoming independent directors. They are also more likely to be diverse; more than half (55%) of this year’s incoming first-time directors are women or minorities, a significant jump from 37% a year ago.

Female representation among all new independent S&P 500 directors rose to 36% in 2017—the highest percentage we’ve ever tracked—while 20% of incoming independent directors are minorities, defined as African-American, Hispanic/Latino or Asian. (Six percent of the new directors are women and minorities.) Women are increasingly assuming leadership roles on S&P 500 boards, chairing 20% of audit committees, 17% of compensation committees and 22% of nominating committees, up from 15%, 11% and 20%, respectively, in 2016.

Despite these steps forward, the overall pace of change in boardroom diversity remains slow. With 48% of S&P 500 boards adding no directors, board turnover continues to be low and hinders change to the overall composition of U.S. boardrooms.

– Today 22% of all S&P 500 directors are women, up incrementally from 21% in 2016 and 17% in 2012.

– Minority representation at the top 200 S&P 500 companies is low. Seventeen percent (17%) of directors of the top 200 companies are male or female minorities, and representation of African-Americans and Hispanics/Latinos in the top 200 boardrooms has not significantly changed over the past five to 10 years.

Boardroom refreshment faces other headwinds. About three-quarters (73%) of S&P 500 boards report having a mandatory retirement age for directors, unchanged over the past five years, and boards continue to raise retirement ages. Today 42% of S&P 500 companies with retirement policies set their retirement age at 75 or older, compared with 22% in 2012 and just 11% in 2007. Meanwhile, the percentage of S&P 500 companies disclosing some form of individual director assessments is low (37%) and largely unchanged. The data suggest that rather than using evaluations to evaluate director fit in the boardroom, boards are relying on mandatory retirement ages as a primary mechanism for board refreshment.

10 ways boards can continue to evolve

Purposeful leadership by directors is required to continue the evolution in the boardroom. In our experience working with boards, the most effective strategies for building a board composed of the diverse portfolio of skills, qualifications, perspectives and backgrounds matched to the company’s current and future strategic objectives and risks include these 10 elements:

  1. Continuously review the board’s skill sets and performance relative to the company’s strategy and direction. The annual board self-evaluation is a natural platform for the board to review its composition and future needs so that it is in the best position to oversee management as new challenges and market opportunities emerge.

  2. Expand the use of peer and self-evaluations, which can be invaluable tools for providing feedback to and enhancing the performance of new and tenured directors, and for identifying gaps in boardroom skills and experiences.

  3. Take a hard look at formal policies—such as mandatory retirement policies—intended to promote turnover and evaluate whether the policies may be impeding refreshment.

  4. Understand that boardroom diversity, defined broadly but with an emphasis on gender and racial diversity, is of growing interest not just to investors, but also to other key company stakeholders, including employees, suppliers and customers. A tangible commitment to boardroom diversity will be increasingly important, and a “one and done” mentality will be challenged more often in the future, particularly as boards plan for anticipated board vacancies. One approach is to strive to interview several qualified candidates for every open board seat.

  5. Carefully define the expertise that is important for the board—for example, industry or functional knowledge, digital expertise or international experience. Be clear about the perspectives or expertise that the board is looking to gain.

  6. Foster an open mind about what a director candidate should look like and the different ways a director can contribute. Consider senior business unit or functional leaders, including younger executives who may be experts in specific areas such as e-commerce, digital marketing and cybersecurity.

  7. Avoid creating an overly long list of director qualifications, which can limit the talent pool. Be realistic about desired director qualifications; sitting CEOs today are serving on fewer (if any) outside boards. The selection process should cast a wide net and look for the best candidate—not just the one known to board members.

  8. Consider candidates without prior board experience. When assessing first-time candidates, look at their underlying capabilities and mindset—including what we call “board intrinsics,” attributes such as intellectual approach, independent-mindedness, integrity, interpersonal skills and inclination to engage—to understand how likely they are to be able to contribute as well-rounded directors. Spencer Stuart’s Board Intrinsics™ assessment approach focuses on these critical underlying talents and competencies. Candidates who score well in all five areas are most likely to be capable of contributing as “all-round” directors, in addition to the specific knowledge, skill or set of experiences that makes them of interest to boards.

  9. Establish a robust new director orientation program. All new directors—male and female, first-time and experienced—benefit from an orientation program that helps them quickly get up to speed on the business and the company’s approach to governance.

  10. Commit to transparency about board governance practices. With investor attention to board performance on the rise, boards are enhancing their disclosure about key areas of investor interest, including board composition and leadership, director tenure and turnover, board evaluation and performance, and shareholder engagement.

Comment se comporter lors de campagnes menées par des actionnaires activistes | Cinq conseils utiles

Vous trouverez, ci-dessous, une publication des auteurs Steve Wolosky*, Andrew Freedman, et Ron Berenblat, associés de la firme Olshan Frome Wolosky, qui présente, de façon intelligible, ce que les actionnaires activistes doivent prévoir lorsqu’ils décident de faire inscrire de nouveaux administrateurs sur la liste des candidats aux élections annuelles.

Au cours des dernières années, le phénomène de l’activisme a connu une progression assez substantielle. La gouvernance des entreprises passe souvent par une solide compréhension de ce que les actionnaires activistes cherchent à accomplir.

Les entreprises qui ont des lacunes dans la gouvernance (au conseil) et dans l’efficacité des hauts dirigeants (notamment du CEO) sont beaucoup plus susceptibles d’être la cible des campagnes activistes. Les conseils offerts par la firme Olshan Frome Wolosky sont très utiles, autant pour les actionnaires activistes, que pour les dirigeants des entreprises visés. Leurs recommandations à l’intention des activistes portent sur les cinq points ci-dessous.


– Il est temps de présenter des candidatures qui démontrent un souci marqué pour la diversité dans la composition du conseil d’administration. C’est l’un des plus importants critères des firmes de conseils en votation (ISS et Glass Lewis) et des investisseurs institutionnels.

– Lorsque les actionnaires activistes ciblent le CEO d’une organisation, ceux-ci sont invités à la prudence dans la présentation des arguments à l’actionnariat, car il est toujours délicat et difficile de s’attaquer à la tête dirigeante de l’entreprise.

– Les experts de la gouvernance et les groupes d’activistes ont essentiellement mis l’accent sur les opérations américaines. Cependant, au cours des dernières années, on assiste à un activisme de plus en plus international. Les auteurs incitent donc les actionnaires activistes à s’intéresser aux entreprises mondiales, en soulignant que le terrain est souvent plus propice à leurs activités dans certains pays, tels que la Corée du Sud, le Canada, etc. Certains mécanismes de défense légaux qui existent aux États-Unis sont absents des réglementations de plusieurs pays.

– Les auteurs mettent en garde les actionnaires activistes contre des propositions de candidatures considérées comme « illégitimes ». Il arrive que, dans la préparation de dossiers de candidatures de haut calibre, les activistes aient tendance à oublier la règle du maximum de cinq conseils pour un administrateur indépendant et de deux pour un CEO siégeant à d’autres conseils.

– Enfin, les auteurs soulignent le fait que les entreprises utilisent toutes sortes de moyens de défense pour éliminer les candidatures provenant des activistes. Pour eux, qui prêchent pour leurs paroisses, il est crucial de bien connaître les règlements intérieurs de l’entreprise ciblée ainsi que les mécanismes de nomination.


Bien entendu, la firme Olshan Frome Wolosky propose leurs services juridiques afin de maximiser les efforts des activistes !

J’espère que ce bref tour d’horizon du monde de l’actionnariat activiste vous sera utile dans la bonne gouvernance des entreprises dans lesquelles vous êtes impliqués.

Je vous souhaite donc une bonne lecture et j’attends vos commentaires.

Top 5 Things Shareholder Activists Need to Know


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Nomination deadlines for the 2018 proxy season are fast approaching. Based on feedback from our shareholder activist clients and colleagues in the activism community, we are preparing for a very busy nomination season, which will begin to pick up steam in the next few weeks and continue into the new year. Drawing from our experience as the leading law firm to shareholder activists—including our involvement in delivering over 55 nomination letters during the past 12 months alone—and our views on current hot-button topics such as board diversity, global activism and the targeting of CEOs, Olshan’s Activist & Equity Investment Group presents you with its list of top 5 things activists should consider before nominating directors for the upcoming proxy season.


1. It’s Time to Diversify


We are beginning to advise our clients to include diversity as a key criterion in selecting their slates of nominees and, in the case of short-slate contests, identifying the incumbent directors they will seek to replace. Board diversity is currently one of the hottest corporate governance topics and will be highly relevant during the upcoming proxy season. In addition to highlighting the inequality engendered by the lack of diversity of current public company boards, there is abundant research showing a correlation between diverse boards and improved financial performance, corporate governance and accountability to shareholders.

As a result, numerous institutional investors have prioritized their efforts to foster greater diversity, particularly gender diversity, in the boardroom. Earlier this year, BlackRock stated that it will reach out to portfolio companies “to better understand their progress on improving gender balance in the boardroom.” Vanguard recently sent an open letter to public companies stating that over the coming years it will focus on gender diversity in the boardroom and that it “expect[s] boards to focus on it as well, and their demonstration of meaningful progress over time will inform our engagement and voting going forward.” State Street voted against the election of directors at 400 portfolio companies that it determined had failed to take adequate measures to address the absence of women in the boardroom. There is a high probability that one or more of these or other like-minded institutional investors will account for a meaningful percentage of the shareholder base in any domestic election contest initiated by an activist.

An activist’s likelihood of success in an election contest is inextricably tied to the qualifications and expertise of the activist’s director slate. Based on the unebbing wave of board diversity awareness and volume of research extolling the strengths of diverse boards, highly-qualified dissident nominees with diverse backgrounds not only improve the quality of the overall dissident slate—and are therefore more likely to be viewed favorably by shareholders—but are also more likely to be better positioned to advance the activist’s platform once elected to the board. For the same reasons, diversity should also be taken into consideration when evaluating which incumbent directors an activist may seek to replace in a short-slate election contest.


2. Beware of CEO “Bloodlust”


Departing from the early days of shareholder activism, there was a noticeable spike during the past year in the number of activist campaigns that sought the removal of members of their targets’ upper management, particularly CEOs. Elliott Management’s election contest against Arconic, which sought to hold CEO Klaus Kleinfeld directly accountable to shareholders, led to Kleinfeld’s departure during the late stages of the campaign. Pressure from Mantle Ridge resulted in the appointment of Hunter Harrison as the new CEO of CSX. After Marcato Capital ran a slate of directors at Buffalo Wild Wings and called upon the company to replace its CEO Sally Smith, Smith announced on the day of the annual meeting her intention to resign as CEO. Just six months later, Buffalo Wild Wings agreed to be acquired by Arby’s Restaurant Group for a hefty premium.

In a recently settled activist situation, Jeereddi Partners and Purple Mountain Capital initially nominated two director candidates for election at Tuesday Morning’s annual meeting, one of which was recruited specifically for the purpose of becoming the next CEO. Interestingly, in a communication to Tuesday Morning’s employees apprising them of the activist incursion, the existing CEO stated that the investor group’s tactic of seeking to replace him reflected a “new norm” of activism:

These activists also seek to have one of their candidates join the management team as CEO. This tactic used by activist investors is common in today’s market environment.

A Wall Street Journal article by David Benoit succinctly identified this trend in its headline—“Activist Investors Have a New Bloodlust: CEOs.”

Despite the growing number of activist campaigns targeting CEOs, activists should think long and hard before going for the jugular. While every situation is different, seeking to replace a director who is also the CEO (even in a short-slate contest) or calling for the ouster of a CEO as part of the activist’s platform in an election contest is still an aggressive strategy. Attempting to remove the principal executive officer of a company may not sit well with other institutional investors or the proxy advisory firms, depending on the facts and circumstances.

This topic was recently addressed by proxy advisory firm Institutional Shareholder Services (“ISS”) after one of the defense law firms publicly expressed its view that ISS should alter its analytical framework for reviewing proxy contests to take into account whether the dissident is seeking to replace a CEO/director. In commentary issued by ISS dismissing the need to change its analytical framework in this manner, ISS stated:

… the notion that ISS does not already view the targeting of a CEO as an unusual and significant factor—and thus worthy of careful consideration in a short-slate fight—would be a misrepresentation of our framework.

The removal of a CEO from a board represents a vote of no-confidence that carries further-reaching consequences than the removal of most other directors. However, in instances of demonstrably poor execution, operational issues, or undue management influence over the board, such targeting may be appropriate—provided that the consequent risks have been properly assessed.

ISS’ perspective on this topic is highly instructive and, in our view, should be applied broadly by an activist when evaluating whether to target a CEO. Activists should understand that the standard will be higher for obtaining shareholder support and ISS’ recommendation to remove the CEO from the board in an election contest. As ISS points out above, the facts and circumstances of a particular situation could make the targeting of a CEO appropriate, and hence a winning strategy for an activist. Nevertheless, activists should proceed with caution before going down this path.


3. Let’s Go Global


As the activism space gets more and more crowded in the U.S. as a result of an increasing number of activists and bloated war chests activist managers are tasked to deploy, opportunities abound in Europe, Asia and Australia. The corporate governance regimes of certain of these jurisdictions are actually more favorable to shareholders than in the U.S. and the breadth of legal and structural defenses that are commonly utilized by targets in the U.S. are not present in many of these countries. We would even characterize certain countries as “wide open” for shareholder activism. In South Korea, President Moon Jae-in and other government officials are actually inviting foreign shareholders to invest in South Korean companies and play activist roles in overseeing their investments as the administration attempts to promote a culture of accountability to foreign and minority shareholders that South Korea historically lacked.

Offshore campaigns recently commenced by U.S. activist titans are capturing headlines. Third Point is putting pressure on Swiss conglomerate Nestlé to improve productivity, divest non-priority assets and return capital to shareholders. Corvex Management successfully blocked Swiss chemical giant Clariant’s proposed merger with Huntsman. Elliott Management has multiple active situations in Europe, Asia and Australia.

These high-profile campaigns are not isolated incidents. Shareholder activists of all sizes and vintages are taking companies to task all over the globe. In fact, over 290 non-U.S. companies were publicly subjected to activist demands during 2017 (through October 31) according to Activist Insight Online. The action is not only in the U.S.

Activists who are willing to cast a wider net in evaluating potential situations may find prime opportunities abroad. Olshan has experience advising activists in Canada, Europe and Asia and has relationships with law firms, solicitors and consultants all over the globe who can advise on local securities laws, proxy mechanics and cultural considerations that are unique to each jurisdiction.


4. Don’t Go Overboard


Activists should make sure each of their director nominees complies with the “overboarding” guidelines of the two leading proxy advisory firms—ISS and Glass Lewis. Under the current ISS proxy voting guidelines, ISS will generally recommend a vote against or withhold from an individual director nominee who (i) serves on more than five public company boards, or (ii) is CEO of a public company who serves on the boards of more than two public companies (besides his or her own); provided that the negative vote recommendation will only apply to the CEO’s outside boards. ISS may give a positive recommendation for an overboarded nominee after he or she undertakes to gain compliance with the guideline by resigning from an existing directorship if elected at the meeting in question.

Under the Glass Lewis guidelines, Glass Lewis will generally recommend a vote against an individual director nominee who (i) serves on more than five public company boards, or (ii) is an executive officer of a public company while serving on a total of more than two public company boards. Glass Lewis may refrain from making a negative vote recommendation on overboarded nominees if provided with “sufficient rationale” for their board service.

Given the importance of obtaining ISS and Glass Lewis support in most election contests, it is critical that activists take measures to ensure that their nominees are not overboarded. This can be done by requiring prospective nominees to provide updated bios or resumes, including all current directorships and executive officer positions. This is typically covered by Olshan’s form of nominee questionnaire we recommend all our activist clients obtain from their prospective nominees prior to nominating. Nominees should also be made aware of the overboarding requirements and reminded to consult with the activist before accepting additional directorships or executive officer positions prior to the meeting date.


5. Sweat the Mechanics


Failure to pay close attention to the mechanics involved in the nomination process could allow the target company to gain the upper hand or even derail the activist’s campaign in its entirety. Activists who are in the process of evaluating a potential campaign should contact us early in the process so we can begin to identify and work through all the mechanics, which could be complex and involve more than just putting shares in record name in order to validly nominate.

Understanding the company’s advance notice procedures for nominating directors typically contained in the bylaws is critical from both a timing and strategic standpoint. Activists should not necessarily rely on any nomination deadline set forth in the prior year’s proxy statement as these deadlines are often erroneously calculated by the company under the advance notice procedures contained in the bylaws or confused with the Rule 14a-8 deadline due to sloppy drafting. Allowing us sufficient time to review the nomination procedures in the bylaws will ensure that everyone is working with the correct nomination deadline and monitoring the company’s public filings and press releases for the meeting date. This is critical as under most nomination procedures, companies have the ability to accelerate the nomination deadline by announcing a meeting date that is a certain number of days (typically more than 30 or 60 days) before the anniversary of the previous year’s meeting.

Companies are artfully expanding their nomination procedures in order to flush out activists earlier in the process and to make it more expensive for them to nominate. For example, there is a good chance the nomination procedures will contain a requirement that the dissident nominees complete and sign the target company’s director questionnaires for inclusion in the activist’s nomination package. If this is the case, we will need to reach out to company counsel in order to obtain the form of questionnaire prior to the nomination deadline. Getting us involved early can allow us to ensure that the company does not use the nominee questionnaire requirement as a defensive tactic. We are aware of companies whose nomination procedures give them up to 10 days to provide the form of questionnaire after one has been requested by a shareholder. For such companies, we would need to request the form of questionnaire more than 10 days prior to the nomination deadline in order to be in a position to receive the form of questionnaire and submit a complete nomination package prior to the deadline. Otherwise, the company would be permitted to wait until after the nomination deadline before providing a form of questionnaire, thereby preventing the activist from being in technical compliance with the advance nomination procedures.


*Steve Wolosky, Andrew Freedman, and Ron Berenblat are partners at Olshan Frome Wolosky LLP. This post is based on an Olshan publication by Mr. Wolosky, Mr. Freedman, and Mr. Berenblat. Related research from the Program on Corporate Governance includes Dancing With Activists by Lucian Bebchuk, Alon Brav, Wei Jang, and Thomas Keusch (discussed on the Forum here).

Rôle du CA dans l’établissement d’une forte culture organisationnelle | Un guide pratique

Vous trouverez, ci-dessous, un document partagé par Joanne Desjardins*, qui porte sur le rôle du CA dans l’établissement d’une solide culture organisationnelle.

C’est certainement l’un des guides les plus utiles sur le sujet. Il s’agit d’une référence essentielle en matière de gouvernance.

Je vous invite à lire le sommaire exécutif. Vos commentaires sont appréciés.


Managing Culture | A good practical guide – December 2017


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Executive summary


In Australia, the regulators Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) have both signalled that there are significant risks around poor corporate culture. ASIC recognises that culture is at the heart of how an organisation and its staff think and behave, while APRA directs boards to define the institution’s risk appetite and establish a risk management strategy, and to ensure management takes the necessary steps to monitor and manage material risks. APRA takes a broad approach to ‘risk culture’ – includingrisk emerging from a poor culture.

Regulators across the globe are grappling with the issue of risk culture and how best to monitor it. While regulators generally do not dictate a cultural framework, they have identified common areas that may influence an organisation’s risk culture: leadership, good governance, translating values and principles into practices, measurement and accountability, effective communication and challenge, recruitment and incentives. Ultimately, the greatest risk lies in organisations that are believed to be hypocritical when it comes to the espoused versus actual culture.

The board is ultimately responsible for the definition and oversight of culture. In the US, Mary Jo White, Chair of the Securities and Exchange Commission (SEC), recognised that a weak risk culture is the root cause of many large governancefailures, and that the board must set the ‘tone at the top’.

Culture also has an important role to play in risk management and risk appetite, and can pose significant risks that may affect an organisation’s long-term viability.

However, culture is much more about people than it is about rules. This guide argues that an ethical framework – which is different from a code of ethics or a code of conduct – should sit at the heart of the governance framework of an organisation. An ethical framework includes a clearly espoused purpose, supported by values and principles.

There is no doubt that increasing attention is being given to the ethical foundations of an organisation as a driving force of culture, and one method of achieving consistency of organisational conduct is to build an ethical framework in which employees can function effectively by achieving clarity about what the organisation deems to be a ‘good’ or a ‘right’ decision.

Culture can be measured by looking at the extent to which the ethical framework of the organisation is perceived to be or is actually embedded within day-to-day practices. Yet measurement and evaluation of culture is in its early stages, and boards and senior management need to understand whether the culture they have is the culture they want.

In organisations with strong ethical cultures, the systems and processes of the organisation will align with the ethical framework. And people will use the ethical framework in the making of day-to-day decisions – both large and small.

Setting and embedding a clear ethical framework is not just the role of the board and senior management – all areas can play a role. This publication provides high-level guidance to these different roles:

The board is responsible for setting the tone at the top. The board should set the ethical foundations of the organisation through the ethical framework. Consistently, the board needs to be assured that the ethical framework is embedded within the organisation’s systems, processes and culture.

Management is responsible for implementing and monitoring the desired culture as defined and set by the board. They are also responsible for demonstrating leadership of the culture.

Human resources (HR) is fundamental in shaping, reinforcing and changing corporate culture within an organisation. HR drives organisational change programs that ensure cultural alignment with the ethical framework of the organisation. HR provides alignment to the ethical framework through recruitment, orientation, training, performance management, remuneration and other incentives.

Internal audit assesses how culture is being managed and monitored, and can provide an independent view of the current corporate culture.

External audit provides an independent review of an entity’s financial affairs according to legislative requirements, and provides the audit committee with valuable, objective insight into aspects of the entity’s governance and internal controls including its risk management.



*Joanne Desjardins est administratrice de sociétés et consultante en gouvernance. Elle possède plus de 18 années d’expérience comme avocate et comme consultante en gouvernance, en stratégie et en gestion des ressources humaines. Elle est constamment à l’affût des derniers développements en gouvernance et publie des articles sur le sujet.

Compte rendu hebdomadaire de la Harvard Law School Forum on Corporate Governance | 14 décembre 2017

Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 14 décembre 2017.

Cette semaine, j’ai relevé les dix principaux billets.

Bonne lecture !


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  1. Excluding Shareholder Proposals Based on New SLB 141
  2. Audit Committee Disclosure Trends in Proxy Statements
  3. Leverage, CEO Risk-Taking Incentives, and Bank Failure During the 2007-2010 Financial Crisis
  4. Executives in Politics
  5. Governing Through Disruption: A Boardroom Guide to 2018
  6. Critical Update Needed: Cybersecurity Expertise in the Boardroom
  7. Statement on Cryptocurrencies and Initial Coin Offerings
  8. Reexamining Staggered Boards and Shareholder Value
  9. Shaped by Their Daughters: Executives, Female Socialization, and Corporate Social Responsibility
  10. Court of Chancery Dismisses Challenge to Stock Reclassification

Liste des billets les plus récents publiés sur mon blogue en gouvernance | Trimestre se terminant le 30 novembre 2017

Voici une liste des billets en gouvernance les plus lus, publiés sur mon blogue au cours du trimestre se terminant le 30 novembre 2017.

Cette liste constitue, en quelque sorte, un sondage de l’intérêt manifesté par des dizaines de milliers de personnes sur différents thèmes de la gouvernance des sociétés. On y retrouve des points de vue bien étayés sur des sujets d’actualité relatifs aux conseils d’administration.

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 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.

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.

Quelques statistiques à propos du blogue Gouvernance | Jacques Grisé

Ce blogue a été initié le 15 juillet 2011 et, à date, il a accueilli plus de 26 000 visiteurs. Le blogue a progressé de manière tout à fait remarquable et, au 30 novembre 2017, il était fréquenté par environ 5 000 visiteurs par mois. Depuis le début, j’ai œuvré à la publication de 1 600 billets.

On note que 44 % des billets sont partagés par l’intermédiaire de LinkedIn et 44 % par différents moteurs de recherche. Les autres réseaux sociaux (Twitter, Facebook et Tumblr) se partagent 13 % des références.

Voici un aperçu du nombre de visiteurs par pays :

  1. Canada (64 %)
  2. France (+ francophonie) (22 %)
  3. Maghreb (Maroc, Tunisie, Algérie) (5 %)
  4. États-Unis (4 %)
  5. Autres pays de provenance (5 %)

Vos commentaires sont toujours grandement appréciés. Je réponds toujours à ceux-ci.

Bonne lecture !


 Liste des plus récents billets en gouvernance publiés sur mon blogue au cours du trimestre se terminant le 30 novembre 2017


Le processus de gestion des réunions d’un conseil d’administration | Première partie
Cadre de référence pour évaluer la gouvernance des sociétés | Questionnaire de 100 items

Composition du conseil d’administration d’OSBL et recrutement d’administrateurs | Une primeur

Vous siégez à un conseil d’administration | comment bien se comporter ?
Le rôle du comité exécutif vs le rôle du conseil d’administration | En rappel
Gouvernance des sociétés d’État | une étude montre des problèmes dans la moitié d’entre elles
Réflexions sur les bénéfices d’une solide culture organisationnelle
Le rôle du secrétaire général d’une société
Comment bien se comporter lorsque l’on siège à un conseil d’administration ? | En reprise
L’utilisation des huis clos lors des sessions de C.A.
Séparation des fonctions de président du conseil et de chef de la direction : retour sur un grand classique !

Compte rendu hebdomadaire de la Harvard Law School Forum on Corporate Governance | 7 décembre 2017

Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 7 décembre 2017.

Cette semaine, j’ai relevé les dix principaux billets.

Bonne lecture !


Résultats de recherche d'images pour « harvard law school forum on corporate governance »



Résultats de recherche d'images pour « harvard law school forum on corporate governance »



  1. Managerial Liability and Corporate Innovation: Evidence from a Legal Shock
  2. Analysis of Updated ISS Voting Policies
  3. Firm Age, Corporate Governance, and Capital Structure
  4. 10 Consensuses on CEO Pay Ratio Planning
  5. Institutional Investor Attention and Demand for Inconsequential Disclosures
  6. Shareholder Proposals in an Era of Reform
  7. SEC Chairman’s Remarks on Small Business Capital Formation
  8. Analysis of SEC Enforcement Division Annual Report
  9. Anatomy of Political Risk in the United States
  10. Activists at the Gate

Faut-il rémunérer les administrateurs d’OBNL ?

Voici un cas publié sur le site de Julie Garland McLellan qui expose un problème très réel dans la plupart des OBNL. Comment la présidente du CA doit-elle agir afin de respecter les politiques de rémunération en vigueur dans son organisme ?

La situation décrite dans ce cas se déroule dans une organisation à but non lucratif (OBNL) qui vient de recruter un nouvel administrateur, sur recommandation du Ministère de l’Éducation, qui provient d’une communauté autochtone bénéficiaire des bourses de l’organisation.

Dans ce cas, le nouvel administrateur a accepté de siéger au conseil sans rémunération et sans remboursement de dépenses. C’est la politique de l’organisme qui s’applique à tous les autres administrateurs.

À la première réunion du CA, celui-ci insiste pour se faire rembourser ses frais de voyage et il demande une rémunération de 1 000 $ par réunion. Devant un refus, il avise le ministère de son insatisfaction.

Comment Victoria, la présidente du conseil, doit-elle agir afin de dénouer cette impasse ?

Le cas présente la situation de manière assez explicite ; puis, trois experts se prononcent sur le dilemme que vit Victoria.

Je vous invite donc à prendre connaissance de ces avis, en cliquant sur le lien ci-dessous, et me faire part de vos commentaires, si vous le souhaitez.

Bonne lecture !

Faut-il rémunérer les administrateurs d’OBNL ? | Un cas particulier


Victoria chairs the board of a not-for-profit organisation that offers scholarships at leading boarding schools for children in secondary education from disadvantaged backgrounds and living in regional, rural and remote communities. Many of the beneficiaries are from indigenous peoples and her board was delighted when the Minister for Education offered to help them source a new director. The Minister suggested a high profile and well-connected leader from a beneficiary community. It seemed just what they needed.

Résultats de recherche d'images pour « rémunération OBNL »

The new director met Victoria for a coffee and said that he was delighted to be joining her board as his people had great need for quality education. He had some good insights about sourcing grant funds to supplement their current bequests and donations. He then met some other directors, and all agreed that he would be a perfect addition to the board. A letter of appointment was sent and a consent form was received.

At his first board meeting the new director asked for the company to pay his travel and accommodation in attending the meeting and also for a sitting fee of one thousand dollars. He said this was a legitimate expectation and that he was paid for his service on other boards. The letter of appointment clearly stated that directors were unremunerated and attended meetings at their own cost. Now he has complained to the Minister that he hasn’t been paid and a staffer has called to ask why not.

How can Victoria resolve this difference between the expectations of the board and its new director?

Propositions de changement visant l’établissement de la rémunération des dirigeants des sociétés canadiennes | IGOPP

Yvan Allaire, président exécutif du conseil de l’Institut sur la gouvernance (IGOPP), vient de publier une 9e prise de position sur la rémunération des dirigeants des sociétés canadiennes.

Cette prise de position formule plusieurs recommandations aux conseils d’administration afin de les inciter à modifier les méthodes d’établissement des rémunérations de leurs dirigeants.

Selon l’IGOPP, « cette prise de position se veut un appel pressant à une remise en question de la démarche devenue standard et conventionnelle pour établir la rémunération des dirigeants d’entreprises publiques. Cette démarche, rassurante en raison du nombre de ses adhérents, ne prend en compte aucune particularité de l’entreprise, de son industrie, de son modèle d’affaires, de son horizon de gestion et ses propres leviers de création de valeur. Elle enferme les sociétés dans un moule fabriqué par les conseillers en rémunération, lequel produit de hautes rémunérations, satisfait aux attentes des investisseurs et aux diktats des gendarmes de la gouvernance, mais ne fait pas ce que la rémunération devrait faire.

Cette démarche s’appuie sur des hypothèses en grande partie factices et sans appui empirique : une forte mobilité des dirigeants d’une entreprise à l’autre ; la transférabilité du talent de gestion d’une entreprise à une autre, d’une industrie à une autre, la rémunération “à risque” comme facteur de motivation à de hautes performances ; une sous-estimation du rôle de la chance et du hasard dans la vie des organisations ; un groupe d’entreprises bien sélectionnées pouvant servir de quasi-marché du talent de direction, etc. Les conseils d’administration des grandes entreprises publiques doivent se doter de mécanismes pour aborder de façon collective les moyens, mesures et démarches susceptibles de changer ce système. Il y va de leur légitimité et de leur crédibilité.

Cette prise de position met de l’avant un certain nombre de propositions dont l’adoption, pensons-nous, ferait évoluer positivement l’encadrement des rémunérations. Il est probable que les changements nécessaires surviendront de façon graduelle, mais le but est clair : en arriver à des systèmes de rémunération conçus par le conseil d’administration pour leur entreprise bien spécifique, prenant en compte l’ensemble des parties prenantes de la société et suscitant une gestion à long terme de l’entreprise ».

Les douze propositions présentées par l’IGOPP m’apparaissent très judicieuses. Les conseils d’administration, ainsi que les autorités réglementaires, devraient en prendre bonne note afin d’assurer des mécanismes d’établissement des rémunérations des dirigeants plus appropriés.



La rémunération des dirigeants | Trancher le noeud gordien


Résultats de recherche d'images pour « igopp »


La rémunération médiane des chefs de la direction des grandes entreprises publiques canadiennes a plus que doublé entre 1998 et 2007, suivie d’une baisse substantielle de 17,7 % en 2008 en raison de la crise financière. Depuis lors, leur rémunération a repris à la hausse puis s’est stabilisée autour de 8 millions $ depuis 2010.

La rémunération médiane des PDG des six grandes banques canadiennes atteignait 10,5 millions $ en 2016, une baisse notable par comparaison aux 11,8 millions $ de 2010. Le rapport entre la rémunération médiane des PDG des grandes entreprises canadiennes et le salaire moyen gagné par les travailleurs du secteur privé canadien est passé de 62 fois en 1998 à un apogée de 159 fois en 2013 pour terminer à 140 fois en 2016. Ce même rapport pour les PDG des banques a atteint 184 fois en 2016.

Au cours des 20 dernières années, la rémunération des dirigeants d’entreprises fut l’objet de critiques sévères et persistantes, celles-ci étant méritées dans beaucoup de cas.

Pour composer avec les pressions exercées sur eux, la plupart des conseils d’administration ont opté pour une démarche prudente qui consiste à adopter la forme de rémunération devenue un standard, conçue en bonne partie par des conseillers en rémunération et diffusée quasi universellement.

En conséquence, les systèmes de rémunération devinrent de véritables arcanes exigeant des explications longues et détaillées. Ainsi, le nombre moyen de pages consacrées à la description de la rémunération des dirigeants des grandes entreprises canadiennes a quintuplé en une quinzaine d’années à peine, atteignant 34 pages en 2016.

Cette approche « prudente » pour l’établissement des rémunérations se comprend dans les circonstances actuelles alors que les conseils d’administration sont ciblés isolément, doivent réagir au cas par cas, manquent de voix collective, ne jouissent d’aucun forum où discuter et adopter des positions communes et, s’il y a lieu, résister collectivement aux pressions des investisseurs et autres intervenants. En bref, les conseils d’administration n‘ont pas de forum, d’associations ou de « coalition » où se réunir et prendre position comme le fait la Coalition canadienne pour la bonne gouvernance en regroupant les grands investisseurs institutionnels.

Cette prise de position appelle les conseils d’administration à revoir cette démarche standard pour l’établissement des programmes de rémunération, laquelle nous semble déficiente. Laisser tomber les approches devenues standard pour fixer les rémunérations : Le rituel en place pour établir la rémunération est en effet rassurant en vertu du grand nombre d’entreprises qui y ont recours; mais cette approche standard ne prend pas en compte les particularités de l’entreprise et de son industrie, du caractère de son modèle d’affaires, de l’horizon temporel selon lequel sa stratégie se déploie, des leviers de création de valeur qui lui est propre.

Cette démarche enferme les sociétés et leurs conseils d’administration dans un modèle de rémunération conçu par des consultants qui produite de hautes rémunérations tout en satisfaisant aux attentes des

observateurs critiques, mais qui n’atteint pas les objectifs que la rémunération devrait cibler.

Cette démarche standard pour établir la rémunération des dirigeants s’appuie en fait sur des hypothèses empiriquement douteuses sinon carrément fausses: une forte mobilité entre firmes et industries des dirigeants, une haute transférabilité du talent de gestion d’une industrie à une autre, la rémunération «à risque» comme facteur de motivation à de hautes performances, une surévaluation de la relation entre le prix de l’action et les efforts individuels des dirigeants (minimisant le rôle de la chance dans la production de fortes rémunérations) , la notion qu’un groupe témoin d’entreprises bien choisies peut servir de quasi-marché du talent pour établir la valeur marchande du PDG et autres dirigeants, etc.

De façon urgente, les conseils d’administration doivent se doter d’un mécanisme, établir un forum, pour enclencher une démarche concertée pour changer ce système. De leur capacité à tracer une voie nouvelle dépendent leur légitimité et leur crédibilité.

Cette prise de position avance un certain nombre de propositions qui, si elles étaient adoptées, contribueraient à une nouvelle approche, une approche plus conforme aux attentes en matière de rémunération. Cette nouvelle approche pourrait bien s’installer de façon incrémentielle, mais l’objectif est clair : un système de rémunération conçu par le conseil d’administration pour le contexte très spécifique d’une entreprise précise, sensible aux attentes des parties prenantes et induisant la direction à gérer l’entreprise dans une perspective de long terme.

Principales propositions


Les entreprises devraient abandonner le principe que la rémunération du PDG doit être établie selon les rémunérations versées aux dirigeants d’entreprises semblables par leur taille, leur chiffre d’affaires, etc. C’est le maillon faible de toute la démarche actuelle de rémunération qui a mené à une augmentation quasi automatique des rémunérations.

Pas d’octrois d’options (sauf dans des circonstances exceptionnelles comme un redressement) et l’attribution d’unités d’actions ne devrait pas être un rite annuel ; les unités devraient être attribuées au moment où un dirigeant assume un poste ou est promu et le niveau de telles unités devrait être revu aux trois ans seulement; ces unités d’actions ne devraient être exerçables qu’au terme d’un nombre d’années établi selon le cycle d’investissement et de gestion de l’industrie à laquelle l’entreprise appartient; selon les situations, le terme pourrait être 1 an, 3 ans, 5 ans, voire 10 ans!

Le conseil devra déclarer dans la Circulaire de sollicitation de procurations qu’il est informé du rapport entre la rémunération du PDG et la rémunération médiane dans l’entreprise ainsi que dans la société civile et qu’il juge ce rapport approprié dans le contexte de l’entreprise, de l’industrie et des valeurs de la société ambiante;

Les arrangements en cas de changement de contrôle devraient comporter les aspects suivants : seules les options et les unités-actions exerçables au moment de l’offre pourront être encaissées, mais au prix de l’action qui prévalait 90 jours avant l’annonce publique d’une offre d’achat pour l’entreprise.

Le conseil est responsable de s’assurer que les dirigeants ne peuvent bénéficier de la plusvalue de leurs options ou unités d’actions provoquées essentiellement par des mesures financières comme le rachat d’actions, la vente d’actifs ou autres mesures.

Tout progrès dans l’implantation de mesures comme celles proposées ici passe par une volonté collective des présidents de conseil des entreprises du TSX 60. Il est impérieux de créer un forum où des propositions comme certaines contenues dans cette prise de position pourraient être discutées et celles faisant consensus, adoptées pour encadrer la démarche de rémunération de toutes ces grandes sociétés canadiennes. Ces positions collectives serviraient de contrepoids aux pressions exercées isolément sur les entreprises.

Cette prise de position interpelle aussi les fonds institutionnels afin qu’ils deviennent des participants engagés dans la solution des dilemmes, paradoxes et labyrinthes que sont devenus les enjeux de rémunération. Ces fonds doivent donner une substance concrète à leur engagement envers la gestion à long terme des sociétés dans lesquelles ils investissent.


Nouvelles perspectives pour la gouvernance en 2018

Aujourd’hui, je vous propose la lecture d’un excellent article de Martin Lipton* sur les nouvelles perspectives de la gouvernance en 2018. Cet article est publié sur le site du Harvard Law School Forum on Corporate Governance.

Après une brève introduction portant sur les meilleures pratiques observées dans les entreprises cotées, l’auteur se penche sur les paramètres les plus significatifs de la nouvelle gouvernance.

Les thèmes suivants sont abordés dans un contexte de renouvellement de la gouvernance pour le futur :

  1. La notion de l’actionnariat élargie pour tenir compte des parties prenantes ;
  2. L’importance de considérer le développement durable et la responsabilité sociale des entreprises ;
  3. L’adoption de stratégies favorisant l’engagement à long terme ;
  4. La nécessité de se préoccuper de la composition des membres du CA ;
  5. L’approche à adopter eu égard aux comportements d’actionnaires/investisseurs activistes ;
  6. Les attentes eu égard aux rôles et responsabilités des administrateurs.

À l’approche de la nouvelle année 2018, cette lecture devrait compter parmi les plus utiles pour les administrateurs et les dirigeants d’entreprises ainsi que pour toute personne intéressée par l’évolution des pratiques de gouvernance.

Bonne lecture ! Vos commentaires sont appréciés.


Some Thoughts for Boards of Directors in 2018





As 2017 draws to a conclusion and we reflect on the evolution of corporate governance since the turn of the millennium, a recurring question percolating in boardrooms and among shareholders and other stakeholders, academics and politicians is: what’s next on the horizon for corporate governance? In many respects, we seem to have reached a point of relative stasis. The governance and takeover defense profiles of U.S. public companies have been transformed by the widespread adoption of virtually all of the “best practices” advocated to enhance the rights of shareholders and weaken takeover defenses.

While the future issues of corporate governance remain murky, there are some emerging themes that portend a potentially profound shift in the way that boards will need to think about their roles and priorities in guiding the corporate enterprise. While these themes are hardly new, they have been gaining momentum in prompting a rethinking of some of the most basic assumptions about corporations, corporate governance and the path forward.

First, while corporate governance continues to be focused on the relationship between boards and shareholders, there has been a shift toward a more expansive view that is prompting questions about the broader role and purpose of corporations. Most of the governance reforms of the past few decades targeted the ways in which boards are structured and held accountable to the interests of shareholders, with debates often boiling down to trade-offs between a board-centric versus a more shareholder-centric framework and what will best create shareholder value. Recently, efforts to invigorate a more long-term perspective among both corporations and their investors have been laying the groundwork for a shift from these process-oriented debates to elemental questions about the basic purpose of corporations and how their success should be measured and defined.

In particular, sustainability has become a major, mainstream governance topic that encompasses a wide range of issues such as climate change and other environmental risks, systemic financial stability, labor standards, and consumer and product safety. Relatedly, an expanded notion of stakeholder interests that includes employees, customers, communities, and the economy and society as a whole has been a developing theme in policymaking and academic spheres as well as with investors. As summarized in a 2017 report issued by State Street Global Advisor,

“Today’s investors are looking for ways to put their capital to work in a more sustainable way, one focused on long-term value creation that enables them to address their financial goals and responsible investing needs. So, for a growing number of institutional investors, the environmental, social and governance (ESG) characteristics of their portfolio are key to their investment strategy.”

While both sustainability and expanded constituency considerations have been emphasized most frequently in terms of their impact on long-term shareholder value, they have also been prompting fresh dialogue about the societal role and purpose of corporations.

Another common theme that underscores many of the corporate governance issues facing boards today is that corporate governance is inherently complex and nuanced, and less amenable to the benchmarking and quantification that was a significant driver in the widespread adoption of corporate governance “best practices.” Prevailing views about what constitutes effective governance have morphed from a relatively binary, check-the-box mentality—such as whether a board is declassified, whether shareholders can act by written consent and whether companies have adopted majority voting standards—to tackling questions such as how to craft a well-rounded board with the skills and experiences that are most relevant to a particular corporation, how to effectively oversee the company’s management of risk, and how to forge relationships with shareholders that meaningfully enhance the company’s credibility. Companies and investors alike have sought to formulate these “next generation” governance issues in a way that facilitates comparability, objective assessment and accountability. For example, many companies have been including skills matrices in their proxy statements to show, in a visual snapshot, that their board composition encompasses appropriate skills and experiences. Yet, to the extent that complicated governance issues cannot be reduced to simple, user-friendly metrics, it remains to be seen whether this will prompt new ways of defining “good” corporate governance that require a deeper understanding of companies and their businesses, and the impact that could have on the expectations and practices of stakeholders.

Against this backdrop, a few of the more significant issues that boards of directors will face in the coming year, as well as an overview of some key roles and responsibilities, are highlighted below. Parts II through VI contain brief summaries of some of the leading proposals and thinking for corporate governance of the future. In Part VII, we turn to the issues boards of directors will face in 2018 and suggestions as to how to prepare to deal with them.


Expanded Stakeholders


The primacy of shareholder value as the exclusive objective of corporations, as articulated by Milton Friedman and then thoroughly embraced by Wall Street, has come under scrutiny by regulators, academics, politicians and even investors. While the corporate governance initiatives of the past year cannot be categorized as an abandonment of the shareholder primacy agenda, there are signs that academic commentators, legislators and some investors are looking at more nuanced and tempered approaches to creating shareholder value.

In his 2013 book, Firm Commitment: Why the Corporation is Failing Us and How to Restore Trust in It, and a series of brilliant articles and lectures, Colin Mayer of the University of Oxford has convincingly rejected shareholder value primacy and put forth proposals to reconceive the business corporation so that it is committed to all its stakeholders, including the community and the general economy. His new book, Prosperity: Better Business Makes the Greater Good, to be published by Oxford University Press in 2018, continues the theme of his earlier publications and will be required reading.

Similarly, an influential working paper by Oliver Hart and Luigi Zingales argues that the appropriate objective of the corporation is shareholder welfare rather than shareholder wealth. Hart and Zingales advocate that corporations and asset managers should pursue policies consistent with the preferences of their investors, specifically because corporations may be able to accomplish objectives that shareholders acting individually cannot. In such a setting, the implicit separability assumption underlying Milton Friedman’s theory of the purpose of the firm fails to produce the best outcome for shareholders. Indeed, even though Hart and Zingales propose a revision that remains shareholder-centered, by recognizing the unique capability of corporations to engage in certain kinds of activities, their theory invites a careful consideration of other goals such as sustainability, board diversity and employee welfare, and even such social concerns, as, for example, reducing mass violence or promoting environmental stewardship. Such a model of corporate decision-making emphasizes the importance of boards establishing a relationship with significant shareholders to understand shareholder goals, beyond simply assuming that an elementary wealth maximization framework is the optimal path.

Perhaps closer to a wholesale rejection of the shareholder primacy agenda, an article by Joseph L. Bower and Lynn S. Paine, featured in the May-June 2017 issue of the Harvard Business Review, attacks the fallacies of the economic theories that have been used since 1970 to justify shareholder-centric corporate governance, short-termism and activist attacks on corporations. In questioning the benefits of hedge fund activism, Bower and Paine argue that some of the value purportedly created for shareholders by activists is not actually value created, but rather value transferred from other parties or from the public purse, such as shifting a company’s tax domicile to a lower-tax jurisdiction or eliminating exploratory research and development. The article supports the common sense notion that boards have a fiduciary duty not just to shareholders, but also to employees, customers and the community—a constituency theory of governance penned into law in a number of states’ business corporation laws.

Moreover, this theme has been metastasizing from a theoretical debate into specific reform initiatives that, if implemented, could have a direct impact on boards. For example, Delaware and 32 other states and the District of Columbia have passed legislation approving a new corporate form—the benefit corporation —a for-profit corporate entity with expanded fiduciary obligations of boards to consider other stakeholders in addition to shareholders. Benefit corporations are mandated by law to consider their overall positive impact on society, their workers, the communities in which they operate and the environment, in addition to the goal of maximizing shareholder profit.

This broader sense of corporate purpose has been gaining traction among shareholders. For example, the endorsement form for the Principles published by the Investor Stewardship Group in 2017 includes:

“[I]t is the fiduciary responsibility of all asset managers to conduct themselves in accordance with the preconditions for responsible engagement in a manner that accrues to the best interests of stakeholders and society in general, and that in so doing they’ll help to build a framework for promoting long-term value creation on behalf of U.S. companies and the broader U.S. economy.”

Notions of expanded stakeholder interests have often been incorporated into the concept of long-termism, and advocating a long-term approach has also entailed the promotion of a broader range of stakeholder interests without explicitly eroding the primacy of shareholder value. Recently, however, the interests of other stakeholders have increasingly been articulated in their own right rather than as an adjunct to the shareholder-centric model of corporate governance. Ideas about the broader social purpose of corporations have the potential to drive corporate governance reforms into uncharted territory requiring navigation of new questions about how to measure and compare corporate performance, how to hold companies accountable and how to incentivize managers.




The meaning of sustainability is no longer limited to describing environmental practices, but rather more broadly encompasses the sustainability of a corporation’s business model in today’s fast-changing world. The focus on sustainability encompasses the systemic sustainability of public markets and pressures boards to think about corporate strategy and how governance should be structured to respond to and compete in this environment.

Recently, the investing world has seen a rise of ESG-oriented funds—previously a small, niche segment of the investment community. Even beyond these specialized funds, ESG has also become a focus of a broad range of traditional investment funds and institutional investors. For instance, BlackRock and State Street both offer their investors products that specifically focus on ESG-oriented topics like climate change and impact investing—investing with an intention of generating a specific social or environmental outcome alongside financial returns.

At the beginning of 2017, State Street’s CEO Ronald P. O’Hanley wrote a letter advising the boards of the companies in which State Street invests that State Street defines sustainability “as encompassing a broad range of environmental, social and governance issues that include, for example, effective independent board leadership and board composition, diversity and talent development, safety issues, and climate change.” The letter was a reminder that broader issues that impact all of a company’s stakeholders may have a material effect on a company’s ability to generate returns. Chairman and CEO of BlackRock, Laurence D. Fink remarked similarly in his January 2017 letter that

“[e]nvironmental, social and governance factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects. We look to see that a company is attuned to the key factors that contribute to long-term growth: sustainability of the business model and its operations, attention to external and environmental factors that could impact the company, and recognition of the company’s role as a member of the communities in which it operates.”

Similarly, the UN Principles for Responsible Investment remind corporations that ESG factors should be incorporated into all investment decisions to better manage risk and generate sustainable, long-term returns.

Shareholders’ engagement with ESG issues has also increased. Previously, ESG was somewhat of a fringe issue with ESG-related shareholder proxy proposals rarely receiving significant shareholder support. This is no longer the case. In the 2017 proxy season, the two most common shareholder proposal topics related to social (201 proposals) and environmental (144 proposals, including 69 on climate change) issues, as opposed to 2016’s top two topics of proxy access (201) and social issues (160). Similar to cybersecurity and other risk management issues, sustainability practices involve the nuts and bolts of operations—e.g., life-cycle assessments of a product and management of key performance indicators (KPIs) using management information systems that facilitate internal and public reporting—and provide another example of an operational issue that has become a board/governance issue.

The expansion of sustainability requires all boards—not just boards of companies with environmentally sensitive businesses—to be aware of and be ready to respond to ESG-related concerns. The salient question is whether “best” sustainability practices will involve simply the “right” messaging and disclosures, or whether investors and companies will converge on a method to measure sustainability practices that affords real impact on capital allocation, risk-taking and proactive—as opposed to reactive—strategy.

Indeed, measurement and accountability are perhaps the elephants in the room when it comes to sustainability. Many investors appear to factor sustainability into their investing decisions. Other ways to measure sustainability practices include the presence of a Chief Sustainability Officer or Corporate Responsibility Committee. However, while there are numerous disclosure frameworks relating to sustainability and ESG practices, there is no centralized ESG rating system. Further, rating methodologies and assessments of materiality vary widely across ESG data providers and disclosure requirements vary across jurisdictions.

Pending the development of clear and agreed standards to benchmark performance on ESG issues, boards of directors should focus on understanding how their significant investors value and measure ESG issues, including through continued outreach and engagement with investors focusing on these issues, and should seek tangible agreed-upon methodologies to address these areas, while also promoting the development of improved metrics and disclosure.

Promoting a Long-Term Perspective


As the past year’s corporate governance conversation has explored considerations outside the goal of maximizing shareholder value, the conversation within the shareholder value maximization framework has also continued to shift toward an emphasis on long-term value rather than short term. A February 2017 discussion paper from the McKinsey Global Institute in cooperation with Focusing Capital on the Long Term found that long-term focused companies, as measured by a number of factors including investment, earnings quality and margin growth, generally outperformed shorter-term focused companies in both financial and other performance measures. Long-term focused companies had greater, and less volatile, revenue growth, more spending on research and development, greater total returns to shareholders and more employment than other firms.

This empirical evidence that corporations focused on stakeholders and long-term investment contribute to greater economic growth and higher GDP is consistent with innovative corporate governance initiatives. A new startup, comprised of veterans of the NYSE and U.S. Treasury Department, is working on creating the “Long-Term Stock Exchange”—a proposal to build and operate an entirely new stock exchange where listed companies would have to satisfy not only all of the normal SEC requirements to allow shares to trade on other regulated U.S. stock markets but, in addition, other requirements such as tenured shareholder voting power (permitting shareholder voting to be proportionately weighted by the length of time the shares have been held), mandated ties between executive pay and long-term business performance and disclosure requirements informing companies who their long-term shareholders are and informing investors of what companies’ long-term investments are.

In addition to innovative alternatives, numerous institutional investors and corporate governance thought leaders are rethinking the mainstream relationship between all boards of directors and institutional investors to promote a healthier focus on long-term investment. While legislative reform has taken a stronger hold in the U.K. and Europe, leading American companies and institutional investors are pushing for a private sector solution to increase long-term economic growth. Commonsense Corporate Governance Principles and The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth were published in hopes of recalibrating the relationship between boards and institutional investors to protect the economy against the short-term myopic approach to management and investing that promises to impede long-term economic prosperity. Under a similar aim, the Investor Stewardship Group published its Stewardship Principles and Corporate Governance Principles, set to become effective in January 2018, to establish a framework with six principles for investor stewardship and six principles for corporate governance to promote long-term value creation in American business. A Synthesized Paradigm for Corporate Governance, Investor Stewardship, and Engagement provides a synthesis of these and others in the hope that companies and investors would agree on a common approach. In fact, over 100 companies to date have signed The Compact for Responsive and Responsible Leadership: A Roadmap for Sustainable Long-Term Growth and Opportunity, sponsored by the World Economic Forum, which includes the key features of The New Paradigm.

Similarly, the BlackRock Investment Stewardship team has proactively outlined five focus areas for its engagement efforts: Governance, Corporate Strategy for the Long-Term, Executive Compensation that Promotes Long-Termism, Disclosure of Climate Risks, and Human Capital Management. BlackRock’s outline reflects a number of key trends, including heightened transparency by institutional investors, more engagement by “passive” investors, and continued disintermediation of proxy advisory firms. In the United Kingdom, The Investor Forum was founded to provide an intermediary to represent the views of its investor members to investee companies in the hope of reducing activism, and appears to have achieved a successful start.

Similarly, in June 2017, the Coalition for Inclusive Capitalism and Ernst & Young jointly announced the launch of a project on long-term value creation. Noting among other elements that trust and social cohesion are necessary ingredients for the long-term success of capitalism, the project will emphasize reporting mechanisms and credible measurements supporting long-term value, developing and testing a framework to better reflect the full value companies create beyond simply financial value. There is widespread agreement that focusing on long-term investment will promote long-term economic growth. The next step is a consensus between companies and investors on a common path of action that will lead to restored trust and cohesion around long-term goals.


Board Composition


The corporate governance conversation has become increasingly focused on board composition, including board diversity. Recent academic studies have confirmed and expanded upon existing empirical evidence that hedge fund activism has been notably counterproductive in increasing gender diversity—yet another negative externality of this type of activism. Statistical evidence supports the hypothesis that the rate of shareholder activism is higher toward female CEOs holding all else equal, including industries, company sizes and levels of performance. A study forthcoming in the Journal of Applied Psychology investigated the reasons that hedge fund activists seemingly ignore the evidence for gender-diverse boards in their choices for director nominees and disproportionately target female CEOs. The authors suggest these reasons may include subconscious biases of hedge funds against women leaders due to perceptions and cultural attitudes.

In the United Kingdom, the focus on board diversity has spread into policy. The House of Commons Business, Energy, and Industrial Strategy Committee report on Corporate Governance, issued in 2017, included recommendations for improving ethnic, gender and social diversity of boards, noting that “[to] be an effective board, individual directors need different skills, experience, personal attributes and approaches.” The U.K. government’s response to this report issued in September 2017 notes its agreement on various diversity-related issues, stating that the “Government agrees with the Committee that it makes business sense to recruit directors from as broad a base as possible across the demographic of the UK” and further, tying into themes of stakeholder capitalism, that the “Government believes that greater diversity within the boardroom can help companies connect with their workforces, supply chains, customers and shareholders.”

In the United States, institutional investors are focused on a range of board composition issues, including term limits, board refreshment, diversity, skills matrices and board evaluation processes, as well as disclosures regarding these issues. In a recent letter, Vanguard explained that it considers the board to be “one of a company’s most critical strategic assets” and looks for a “high-functioning, well-composed, independent, diverse, and experienced board with effective ongoing evaluation practices,” stating that “Good governance starts with a great Board.” The New York Comptroller’s Boardroom Accountability Project 2.0 is focused on increasing diversity of boards in order to strengthen their independence and competency. In connection with launching this campaign, the NYC Pension Funds asked the boards of 151 U.S. companies to disclose the race and gender of their directors alongside board members’ skills in a standardized matrix format. And yet, similar to the difficulty of measuring and comparing sustainability efforts of companies, investors and companies alike continue to struggle with how to measure and judge a board’s diversity, and board composition generally, as the conversation becomes more nuanced. Board composition and diversity aimed at increasing board independence and competency is not a topic that lends itself to a “check-the-box” type measurement.

In light of the heightened emphasis on board composition, boards should consider increasing their communications with their major shareholders about their director selection and nomination processes to show the board understands the importance of its composition. Boards should consider disclosing how new director candidates are identified and evaluated, how committee chairs and the lead director are determined, and how the operations of the board as a whole and the performance of each director are assessed. Boards may also focus on increasing tutorials, facility visits, strategic retreats and other opportunities to increase the directors’ understanding of the company’s business—and communicate such efforts to key shareholders and constituents.




Despite the developments and initiatives striving to protect and promote long-term investment, the most dangerous threat to long-term economic prosperity has continued to surge in the past year. There has been a significant increase in activism activity in countries around the world and no slowdown in the United States. The headlines of 2017 were filled with activists who do not fit the description of good stewards of the long-term interests of the corporation. A must-read Bloombergarticle described Paul Singer, founder of Elliott Management Corp., which manages $34 billion of assets, as “aggressive, tenacious and litigious to a fault” and perhaps “the most feared activist investor in the world.” Numerous recent activist attacks underscore that the CEO remains a favored activist target. Several major funds have become more nuanced and taken a merchant banker approach of requesting board representation to assist a company to improve operations and strategy for long-term success. No company is too big for an activist attack. Substantial new capital has been raised by activist hedge funds and several activists have created special purpose funds for investment in a single target. As long as activism remains a serious threat, the economy will continue to experience the negative externalities of this approach to investing—companies attempting to avoid an activist attack are increasingly managed for the short term, cutting important spending on research and development and focusing on short-term profits by effecting share buybacks and paying dividends at the expense of investing in a strategy for long-term growth.

To minimize the impact of activist attacks, boards must focus on building relationships with major institutional investors. The measure of corporate governance success has shifted from checking the right boxes to building the right relationships. Major institutional investors have reiterated their commitment to bringing a long-term perspective to public companies, including, for example, Vanguard, which sent an open letter to directors of public companies world-wide explaining that a long-term perspective informed every aspect of its investment approach. Only by forging relationships of trust and credibility with long-term shareholders can a company expect to gain support for its long-term strategy when it needs it. In many instances, when an activist does approach, a previously established relationship provides a foundation for management and the board to persuade key shareholders that short-term activism is not in their best interest—an effort that is already showing some promise. General Motors’ resounding defeat of Greenlight Capital’s attempt to gain shareholder approval to convert its common stock into two classes shows a large successful company’s ability to garner the

support of its institutional investors against financial engineering. Trian’s recent proxy fight against Procter & Gamble shows the importance of proactively establishing relationships with long-term shareholders. Given Trian’s proven track record of success in urging changes in long-term strategy, Nelson Peltz was able to gain support for a seat on P&G’s board from proxy advisors and major institutional investors. We called attention to importantlessons from this proxy fight (discussed on the Forum here and here).


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 equivalent influence on board and company behavior. In the coming year, boards will be expected to:

Oversee corporate strategy and the communication of that strategy to investors;

Set the tone at the top to create a corporate culture that gives priority to ethical standards, professionalism, integrity and compliance in setting and implementing strategic goals;

Choose the CEO, monitor the CEO’s and management’s performance and develop a succession plan;

Determine the agendas for board and committee meetings and work with management to assure appropriate information and sufficient time are available for full consideration of all matters;

Determine the appropriate level of executive compensation and incentive structures, with awareness of the potential impact of compensation structures on business priorities and risk-taking, as well as investor and proxy advisor views on compensation;

Develop a working partnership with the CEO and management and serve as a resource for management in charting the appropriate course for the corporation;

Oversee and understand the corporation’s risk management and compliance efforts, and how risk is taken into account in the corporation’s business decision-making; respond to red flags when and if they arise (see Risk Management and the Board of Directors, discussed on the Forum here);

Monitor and participate, as appropriate, in shareholder engagement efforts, evaluate potential corporate governance proposals and anticipate possible activist attacks in order to be able to address them more effectively;

Evaluate the board’s performance on a regular basis and consider the optimal board and committee composition and structure, including board refreshment, expertise and skill sets, independence and diversity, as well as the best way to communicate with investors regarding these issues;

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

Be prepared to deal with crises; and

Be prepared to take an active role in matters where the CEO may have a real or perceived conflict, including takeovers and attacks by activist hedge funds focused on the CEO.

To meet these expectations, major public companies should seek to:

Have a sufficient number of directors to staff the requisite standing and special committees and to meet expectations for diversity;

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”;

Have directors who are able to devote sufficient time to preparing for and attending board and committee meetings;

Meet investor expectations for director age, diversity and periodic refreshment;

Provide the directors with the data that is critical to making sound decisions on strategy, compensation and capital allocation;

Provide the directors with regular tutorials by internal and external experts as part of expanded director education; and

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. This post is based on a Wachtell Lipton publication by Mr. Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles, Vishal Chanani, and Kathleen C. Iannone.

Compte rendu hebdomadaire de la Harvard Law School Forum on Corporate Governance | 30 novembre 2017

Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 30 novembre 2017.

Cette semaine, j’ai relevé les dix principaux billets.

Bonne lecture !


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