Mois : janvier 2019

Dissension au conseil d’administration et violation de confidentialité


Voici un cas publié sur le site de Julie Garland McLellan qui expose un sérieux problème de gouvernance auquel plusieurs conseils d’administration sont confrontés, surtout dans les OBNL.

Certains administrateurs ont beaucoup de difficulté à soutenir les prises de position du conseil lorsqu’ils sont en profond désaccord avec les décisions du CA.

Comment un président de CA doit-il agir afin de s’assurer que les décisions prises au conseil sont confidentielles et que les administrateurs sont tenus d’y adhérer, même s’ils ne sont pas de l’avis du CA ?

Et comment le président du CA doit-il se comporter lorsque la situation dégénère lourdement comme dans le cas exposé ci-dessous ?

À tout le moins, le membre dissident ne devrait pas défendre son point de vue dissident sur la place publique !

Le cas présente une situation bien réelle et plus fréquente que l’on pense ; puis, trois experts se prononcent de façon relativement unanime sur le dilemme que vit Henry, le président du CA. Il s’agit de :

Jane Davel is a non-executive director and consultant. She is based in Auckland, New Zealand

Julie Garland McLellan is a non-executive director and board consultant based in Sydney, Australia

Lauren Smith is President of the Florida Chapter of NACD and a director on five boards. She is based in Miami, Florida, USA

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 !

 

Dissension au conseil d’administration et violation de confidentialité

 

 

 

 

Henry chairs a not-for-profit company and usually finds it a gratifying experience. Recently the company has been through hard times as the government ceased funding some activities although the community still needs them.

Henry and his board worked hard to develop new income streams to support continuing the company’s work. They achieved some success, but not enough to avoid having to discontinue some work and reduce headcount. All directors regretted having to make long-serving and loyal staff redundant. However, they had to find a balance of activity and income that would be sustainable; this was a necessary part of the strategy for success.

One director was vehemently opposed to the changes, preferring to run at a loss, eat into reserves, and hope for a change of heart from the government. When it was clear that this director would never agree, Henry took the matter to a vote and the cuts were approved with only one dissenter. Henry reminded the board that board decisions were ‘board decisions’ and all agreed that they would publicly support the approved course of action.

Since then the CEO has complained to Henry that the dissenting director has spoken to staff suggesting they ‘lawyer up’ to protect themselves from redundancies, oppose the closure of the unsustainable activities, and start a Facebook campaign to ‘shame the government into resuming funding’. Henry has also heard from friends that his dissenter is complaining publicly about the decision even though board policy is that the CEO or Chair are the two authorised spokesmen.

How can Henry handle this dissident director?

Les politiques des Cégeps et la gouvernance créatrice de valeur


Nous publions ici un billet de Danielle Malboeuf* qui nous renseigne sur une gouvernance créatrice de valeur eu égard à la gestion des CÉGEP.

Comme à l’habitude, Danielle nous propose son article à titre d’auteure invitée.

Je vous souhaite bonne lecture. Vos commentaires sont appréciés.

 

Cégeps : politiques et gouvernance

par

Danielle Malboeuf*  

 

Résultats de recherche d'images pour « gouvernance créatrice de valeur »

 

Un enjeu à ne pas négliger

 

Chaque année, des personnes motivées et intéressées investissent leur temps et leur énergie dans les conseils d’administration (CA) des collèges. Elles surveillent particulièrement la gestion financière du collège et assurent une utilisation efficace et efficiente des sommes d’argent qui y sont dédiées. Toutefois, comme j’ai pu le constater lors de mes échanges avec des administrateurs, ces personnes souhaitent jouer un rôle qui va au-delà de celui de « fiduciaire ». Elles veulent avoir une contribution significative à la mission première du Cégep : donner une formation pertinente et de qualité où l’étudiant et sa réussite éducative sont au cœur des préoccupations. Elles désirent ainsi soutenir les cégeps dans leur volonté d’améliorer leur efficacité et leur efficience, de se développer et d’assurer la qualité et la pertinence de leurs services. Le nouveau mode de gouvernance qui est actuellement encouragé dans les institutions tant publiques que privées répond à ces attentes. Il s’agit d’une « gouvernance créatrice de valeurs » (1). Ce mode de gouvernance permet à chacun de contribuer sur la base de ses expériences et compétences au développement de nos collèges.

Pour permettre au CA de jouer pleinement son rôle de « créateur de valeurs », les collèges doivent compter sur des administrateurs compétents qui veillent au respect de ses obligations et à l’atteinte de haut niveau de performance. D’ailleurs, dans la suite de la parution d’un rapport de la vérificatrice générale en 2016 portant sur la gestion administrative des cégeps (2), j’ai rédigé un article dans lequel, je rappelais l’importance d’avoir, au sein des conseils d’administration (CA) des collèges, des administrateurs compétents qui ont, entre autres, une bonne connaissance des politiques, directives et exigences réglementaires en vigueur afin de répondre adéquatement aux attentes formulées dans ce rapport. La vérificatrice générale y recommandait entre autres, au regard des modes de sollicitation, le respect de la réglementation et des politiques internes (3). Il m’apparaît donc essentiel que les administrateurs soient en mesure d’évaluer régulièrement leur pertinence et leur mise en application.

Ainsi, parmi les responsabilités confiées au conseil, on retrouve celles-ci (4) :

  1. s’assurer que l’institution est administrée selon des normes reconnues et en conformité avec les lois.
  2. définir les politiques et les règlements de l’institution, les réviser périodiquement et s’assurer qu’ils sont appliqués.

 

Les collèges ont cinquante ans. Tout au cours de ces années, on a élaboré et mis en œuvre de nombreuses politiques et règlements qui ont été adoptés par les CA. Ces documents sont apparus au fil des ans pour répondre à des exigences légales et ministérielles, mais également à des préoccupations institutionnelles. Pour assurer l’application de ces politiques et règlements, les gestionnaires ont produit des outils de gestion : programmes, directives et procédures. On retrouve donc dans les collèges, des Cahiers de gestion qui regroupent tous ces documents et qui amènent des défis de mise en œuvre, de suivi et de révision.

Des collèges reconnaissent ces défis. En effet, la Commission d’évaluation de l’enseignement collégial (CEEC) fait le constat suivant dans son bilan des travaux portant sur l’évaluation de l’efficacité des systèmes d’assurance qualité. « Certains collèges ont entrepris…, la mise en place d’outils de gestion concertée et intégrée de la qualité ». « Certains collèges estiment toutefois que du travail reste à faire pour améliorer la synergie entre les mécanismes » (5).

Considérant les préoccupations actuelles et les attentes formulées par la Vérificatrice générale, j’invite tous les collèges à se doter de mécanismes au regard des politiques et règlements qui s’inscrivent dans les bonnes pratiques de gouvernance :

  1. Valider la pertinence de toute cette documentation ;

D’abord, les administrateurs doivent connaître le contenu des politiques et règlements, car ils ont, rappelons-le, la responsabilité de s’assurer qu’ils sont appliqués. Ils doivent également valider que tous ces documents sont encore pertinents. Constate-t-on des redondances ? Si c’est le cas, il faut apporter des correctifs.

2. Assurer la cohérence de toute cette documentation ;

À la lecture de documents institutionnels, on constate que les termes politiques, règlements, programmes, directives et procédures n’ont pas la même signification d’un collège à l’autre et à l’intérieur d’un même collège. On note la présence de politiques et de programmes qui sont rattachés au même objet. Alors qu’une politique est un ensemble d’orientation et de principes, un programme est un « ensemble des intentions d’action et des projets que l’institution doit mettre en œuvre pour respecter les orientations gouvernementales ou institutionnelles. »

À titre d’exemple, pour se conformer à une exigence ministérielle, les collèges ont élaboré, il y a plusieurs années, une Politique de gestion des ressources humaines pour le personnel membre d’une association accréditée au sens du Code du travail (on exclut ici les hors-cadre et cadres). Cette politique devait inclure des dispositions concernant l’embauche, l’insertion professionnelle, l’évaluation et le perfectionnement de ces employés. Dans certains collèges, ces dispositions se sont traduites par des programmes et d’autres par des politiques. Dans un même collège, on peut retrouver pour l’évaluation du personnel, un programme pour certaines catégories de personnel et une politique pour d’autres employés. Rappelons encore ici que le CA porte un regard sur les politiques et non les programmes. Cela pose un problème de cohérence, mais également d’équité.

De plus, on peut retrouver dans une politique des modalités de fonctionnement. Rappelons qu’une politique est un « ensemble d’orientations et de principes qui encadrent les actions que doit mettre en œuvre l’institution en vue d’atteindre les principes généraux préalablement fixés par le Ministère ou le CA. » Donc, dans une politique, on ne devrait pas retrouver des actions ou des modalités de fonctionnement qui s’apparentent à des directives ou des procédures. Le CA n’a pas à d’adopter des modalités de fonctionnement, car c’est une responsabilité de la direction générale.

3. Valider l’applicabilité des politiques et règlements en vigueur

Tel que suggéré par l’IGOPP (Institut sur la gouvernance d’organisations privées et publiques), le comité d’audit devrait avoir, entre autres, le mandat de :

Prendre connaissance au moins une fois l’an des mesures de conformité aux lois, règlements et politiques (6).

Un exemple de l’importance pour le CA de s’assurer de l’application des Lois et politiques est celle liée à la gestion contractuelle. La Loi sur les contrats dans les organismes publics demande à chaque collège de nommer un responsable de l’observation des règles contractuelles (RORC). Cette personne doit transmettre au CA et au Secrétariat du Conseil du trésor un rapport qui fait état de ses activités, de ses observations et de ses recommandations. Le but visé est de valider que la gestion contractuelle du collège se conforme à la loi, aux directives et aux règlements (du gouvernement et du collège). Il faut s’assurer que cela soit fait.

4. Procéder à la révision de ces politiques et règlements de façon systématique ;

La majorité des politiques et des règlements prévoient des moments de révision. A-t-on un calendrier de suivi à cet effet ?

J’encourage donc les conseils d’administration des collèges et les gestionnaires à inscrire la validation et l’évolution des politiques et règlements, à leurs priorités institutionnelles. On permet ainsi aux administrateurs de jouer pleinement leur rôle et de participer au développement de nos institutions.

(1) Le modèle de gouvernance « Créatrice de valeurs »®, préconisé par l’Institut sur la gouvernance d’organisations privées et publiques est celui développé par le professeur Yvan Allaire, président exécutif du conseil de l’IGOPP.

(2) Rapport du Vérificateur général du Québec à l’Assemblée nationale pour l’année 2016-2017, Gestion administrative des cégeps, Automne 2016

(3) idem, p.4

(4) Extraits du séminaire sur la gouvernance ; vers une gouvernance « Créatrice de valeurs », IGOPP (Institut sur la gouvernance d’organisations privées et publiques)

(5) Bilan de l’an 3-2016-2017, principaux constats découlant des audits de l’an 3, Évaluation de l’efficacité des systèmes d’assurance qualité des collèges québécois, p.20

(6) Extrait du séminaire sur la gouvernance ; vers une gouvernance « Créatrice de valeurs », IGOPP (Institut sur la gouvernance d’organisations privées et publiques), charte du comité de vérification et de finances.

_____________________________________

*Danielle Malboeuf est consultante et formatrice en gouvernance ; elle possède une grande expérience dans la gestion des CÉGEPS et dans la gouvernance des institutions d’enseignement collégial et universitaire. Elle est CGA-CPA, MBA, ASC, Gestionnaire et administratrice retraitée du réseau collégial et consultante.

 

Articles sur la gouvernance des CÉGEPS publiés sur mon blogue par l’auteure :

 

(1) LE RÔLE DU PRÉSIDENT DU CONSEIL D’ADMINISTRATION (PCA) | LE CAS DES CÉGEPS

(2) Les grands enjeux de la gouvernance des institutions d’enseignement collégial

(3) L’exercice de la démocratie dans la gouvernance des institutions d’enseignement collégial

(4) Caractéristiques des bons administrateurs pour le réseau collégial | Danielle Malboeuf

(5) La gouvernance des CÉGEPS | Une responsabilité partagée

(6) La gouvernance des Cégeps | Le rapport du Vérificateur général du Québec

Une revue de l’activisme actionnarial


Excellente revue de l’activisme actionnarial en 2018 par Jim Rossman, directeur de Shareholder Advisory de la firme Lazard. L’article a été publié sur le forum de la Harvard Law School aujourd’hui.

Vous trouverez ci-dessous les faits marquants de l’année. Je vous encourage à prendre connaissance des nombreuses illustrations infographiques dans la version complète.

Bonne lecture !

2018 Review of Shareholder Activism

 

 Résultats de recherche d'images pour « Shareholder Activism »

1. A New High-Water Mark for Global Activist Activity

  1. A record 226 companies were targeted in 2018, as compared to 188 companies in 2017
  2. $65.0bn of capital deployed in 2018, up from $62.4bn in 2017
  3. In spite of significant market volatility, Q4 2018 was the most active Q4 on record both by campaign volume and capital deployed
  4. Against the backdrop of a robust M&A market, 33% of 2018 activist campaigns were M&A related

2. Broadening Use of Activism as a Tactic

  1. A record 131 investors engaged in activism in 2018, reflecting the continued expansion of activism as a tactic
  2. 40 “first timers” launched activist campaigns in 2018, as compared to 23 “first timers” in 2017
  3. Nine of the top 10 activists (by current activist positions [1]) invested more than $1bn in 2018 (60 new campaigns in aggregate)
  4. Elliott continued to be the most prolific activist, with 22 new campaigns launched in 2018

3. Activism Is Reshaping Boardrooms

  1. 161 Board seats won in 2018, [2] up 56% from 2017 and 11% higher than the previous record of 145 seats in 2016
  2. Starboard led the way in 2018, winning 29 seats exclusively through negotiated settlements
  3. Activists continue to name accomplished candidates, with 27% of activist appointees having public company CEO/CFO experience
  4. However, only 18% of activist appointees in 2018 were female, as compared to 40% of new S&P 500 directors in 2018 [3]

4. Activism Has Global Reach

  1. Activist campaigns in Europe and APAC accounted for 23% and 12% of companies targeted, respectively
  2. 58 European campaigns and 30 APAC campaigns in 2018 were each record highs
  3. National champions, iconic family owned companies and regulated industries featured prominently among targeted companies

5. Traditional Active Managers Are the “New Vocalists”

  1. Traditional active managers are increasingly comfortable sharing their views on major activist campaigns in private interactions with
    management and more public forums
  2. Traditional managers like T. Rowe Price, Janus Henderson and GBL publicly voiced their opinions on major activist campaigns

6. Shareholder Dynamics Are Attracting Scrutiny

  1. BlackRock’s Larry Fink set the tone for the year, calling on companies to identify and follow through on their social purpose
  2. Stakeholder duties, employee Board representation and capital allocation / share buybacks became political issues
  3. Voting power of index funds remains a highly debated topic, and regulators have begun to explore the influence of proxy advisory firms and the proxy voting process itself

The complete publication, including Appendix, is available here.

Top 10 de Harvard Law School Forum on Corporate Governance au 24 janvier 2019


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 24 janvier 2019.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

Résultats de recherche d'images pour « top 10 »

 

Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

 

  1. Incorporating Social Activism
  2. Public Hedge Funds
  3. 10 Tips for 10-Ks and Proxy Statement
  4. OCIE Examination Priorities for 2019
  5. Another Look at “Super Options”
  6. Corporate Governance Survey: 2018 Proxy Season
  7. Directors: Older and Wiser, or Too Old to Govern?
  8. Market Power and Inequality
  9. Purpose & Profit
  10. Global Antitakeover and Antiactivist Devices

L’âge des administrateurs de sociétés représente-t-il un facteur déterminant dans leur efficacité comme membres indépendants de conseils d’administration ?


Voici une question que beaucoup de personnes expertes avec les notions de bonne gouvernance se posent : « L’âge des administrateurs de sociétés représente-t-il un facteur déterminant dans leur efficacité comme membres indépendants de conseils d’administration ? »

En d’autres termes, les administrateurs indépendants (AI) de 65 ans et plus sont-ils plus avisés, ou sont-ils carrément trop âgés ?

L’étude menée par Ronald Masulis* de l’Université de New South Wales Australian School of Business et de ses collègues est très originale dans sa conception et elle montre que malgré toutes les réformes réglementaires des dernières années, l’âge des administrateurs indépendants est plus élevé au lieu d’être plus bas, comme on le souhaitait.

L’étude montre que pendant la période allant de 1998 à 2014, l’âge médian des administrateurs indépendants (AI) des grandes entreprises américaines est passé de 60 à 64 ans. De plus, le pourcentage de firmes ayant une majorité de AI de plus de 65 ans est passé de 26 % à 50 % !

L’étude montre que le choix d’administrateurs indépendants de plus de 65 ans se fait au détriment d’une nouvelle classe de jeunes administrateurs dynamiques et compétents. Cela a pour effet de réduire le bassin des nouveaux administrateurs requis pour des postes d’administrateurs de la relève, ainsi que pour les besoins criants d’une plus grande diversité.

In our new study Directors: Older and Wiser, or Too Old to Govern?, we investigate this boardroom aging phenomenon and examine how it affects board effectiveness in terms of firm decision making and shareholder value creation. On the one hand, older independent directors can be valuable resources to firms given their wealth of business experience and professional connections accumulated over the course of their long careers. Moreover, since they are most likely to have retired from their full-time jobs, they should have more time available to devote to their board responsibilities. On the other hand, older independent directors can face declining energy, physical strength, and mental acumen, which can undermine their monitoring and advisory functions. They can also have less incentive to build and maintain their reputation in the director labor market, given their dwindling future directorship opportunities and shorter expected board tenure as they approach normal retirement age.

Dans la foulée des mouvements activistes, plusieurs entreprises semblent faire le choix d’AI plus âgés. Cependant, l’analyse coût/bénéfice de l’efficacité des AI plus âgés montre que leurs rendements est possiblement surfait et que la tendance à éliminer ou à retarder l’âge limite de retraite doit faire l’objet d’une bonne réflexion !

Si le sujet vous intéresse, je vous invite à lire l’article original. Vos commentaires sont les bienvenus.

Bonne lecture !

Directors: Older and Wiser, or Too Old to Govern?

 

 

figure 3

 

 

The past two decades have witnessed dramatic changes to the boards of directors of U.S. public corporations. Several recent governance reforms (the 2002 Sarbanes-Oxley Act, the revised 2003 NYSE/Nasdaq listing rules, and the 2010 Dodd-Frank Act) combined with a rise in shareholder activism have enhanced director qualifications and independence and made boards more accountable. These regulatory changes have significantly increased the responsibilities and liabilities of outside directors. Many firms have also placed limits on how many boards a director can sit on. This changing environment has reduced the ability and incentives of active senior corporate executives to serve on outside boards. Faced with this reduced supply of qualified independent directors and the increased demand for them, firms are increasingly relying on older director candidates. As a result, in recent years the boards of U.S. public corporations have become notably older in age. For example, over the period of 1998 to 2014, the median age of independent directors at large U.S. firms rose from 60 to 64, and the percentage of firms with a majority of independent directors age 65 or above nearly doubled from 26% to 50%.

In our new study Directors: Older and Wiser, or Too Old to Govern?, we investigate this boardroom aging phenomenon and examine how it affects board effectiveness in terms of firm decision making and shareholder value creation. On the one hand, older independent directors can be valuable resources to firms given their wealth of business experience and professional connections accumulated over the course of their long careers. Moreover, since they are most likely to have retired from their full-time jobs, they should have more time available to devote to their board responsibilities. On the other hand, older independent directors can face declining energy, physical strength, and mental acumen, which can undermine their monitoring and advisory functions. They can also have less incentive to build and maintain their reputation in the director labor market, given their dwindling future directorship opportunities and shorter expected board tenure as they approach normal retirement age.

We analyze a sample of S&P 1500 firms over the 1998-2014 period and define an independent director as an “older independent director” (OID) if he or she is at least 65 years old. We begin by evaluating individual director performance by comparing board meeting attendance records and major board committee responsibilities of older versus younger directors. Controlling for a battery of director and firm characteristics as well as director, year, and industry fixed effects, we find that OIDs exhibit poorer board attendance records and are less likely to serve as the chair or a member of an important board committee. These results suggest that OIDs either are less able or have weaker incentives to fulfill their board duties.

We next examine major corporate policies and find a large body of evidence consistently pointing to monitoring deficiencies of OIDs. To measure the extent of boardroom aging, we construct a variable, OID %, as the fraction of all independent directors who are categorized as OIDs. As the percentage of OIDs on corporate boards rises, excess CEO compensation increases. This relationship is mainly driven by the cash component of CEO compensation. A greater OID presence on corporate boards is also associated with firms having lower financial reporting quality, poorer acquisition profitability measured by announcement returns, less generous payout polices, and lower CEO turnover-to-performance sensitivity. Moreover, we find that firm performance, measured either by a firm’s return on assets or its Tobin’s Q, is significantly lower when firms have a greater fraction of OIDs on their boards. These results collectively support the conclusion that OIDs suffer from monitoring deficiencies that impair the board’s effectiveness in providing management oversight.

We employ a number of approaches to address the endogeneity issue. First, we include firm-fixed effects wherever applicable to control for unobservable time-invariant firm-specific factors that may correlate with both the presence of OIDs and the firm outcome variables that we study. Second, we employ an instrumental variable regression approach where we instrument for the presence of OIDs on a firm’s board with a measure capturing the local supply of older director candidates in the firm’s headquarters state. We find that all of our firm-level results continue to hold under a two-stage IV regression framework. Third, we exploit a regulatory shock to firms’ board composition. The NYSE and Nasdaq issued new listing standards in 2003 following the passage of the Sarbanes-Oxley Act (SOX), which required listed firms to have a majority of independent directors on the board. We show that firms non-compliant with the new rule experienced a significantly larger increase in the percentage of OIDs over the 2000-2005 period compared to compliant firms. A major reason for this difference is that noncompliant firms needed to hire more OIDs to comply with the new listing standards. Using a firm’s noncompliance status as an instrument for the change in the board’s OID percentage, we find that firm performance deteriorates as noncompliant firms increase OIDs on their boards. We also conduct two event studies, one on OID appointment announcements and the other on the announcements of firm policy changes that increase the mandatory retirement age of outside directors. We find that shareholders react negatively to both announcements.

In our final set of analysis, we explore cross-sectional variations in the relation between OIDs and firm performance and policies. We find that the negative relation between OIDs and firm performance is more pronounced when OIDs hold multiple outside board seats. This evidence suggests that “busyness” exacerbates the monitoring deficiency of OIDs. We also find that for firms with high advisory needs, the relation between OIDs and firm performance is no longer significantly negative and in some cases, becomes positive. These results are consistent with OIDs using their experience and resources to provide valuable counsel to senior managers in need of board advice. Also consistent with OIDs performing a valuable advisory function, our analysis of acquirer returns shows that the negative relation between OIDs and acquirer returns is limited to OIDs who have neither prior acquisition experience, nor experience in the target industry. For OIDs with either type of experience, their marginal effect on acquirer returns is non-negative, and sometimes significantly positive.

Our research is the first investigation of the pervasive and growing phenomenon of boardroom aging at large U.S. corporations and its impact on board effectiveness and firm performance. As the debate over director age limits continues in the news media and among activist shareholders and regulators, our findings on the costs and benefits associated with OIDs can provide important and timely policy guidance. For companies considering lifting or waiving mandatory director retirement age requirements, so as to lower the burden of recruiting and retaining experienced independent directors, our evidence should give them pause. Similarly, while recent corporate governance reforms and the rise in shareholder activism have made boards, and especially independent directors, more accountable for managerial decisions and firm performance, they may also have created the unintended consequence of shrinking the supply of potential independent directors who are younger active executives. This result has led firms to tap deeper into the pool of older director candidates, which our analysis shows can undermine the very objectives that corporate governance reforms seek to accomplish.

The complete paper is available for download here.

___________________________________________________________________________________

*Ronald Masulis is Scientia Professor of Finance at University of New South Wales Australian School of Business; Cong Wang is Professor of Finance at The Chinese University of Hong Kong, Shenzhen and the associate director of Shenzhen Finance Institute; Fei Xie is Associate Professor of Finance at the University of Delaware; and Shuran Zhang is Associate Professor of Finance at Jinan University. This post is based on their recent paper.

Top 10 de Harvard Law School Forum on Corporate Governance au 17 janvier 2019


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 17 janvier 2019.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

Résultats de recherche d'images pour « top 10 »

 

Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

 

  1. Quarterly Reporting—What’s Next?
  2. Top Priorities for Boards in 2019
  3. Compensation Season 2019
  4. The Board, CEO Misconduct, and Corporate Culture
  5. Corporate Governance Failures and Interim CEOs
  6. Transparency in Corporate Groups
  7. 2019 Proxy Letter—Aligning Corporate Culture with Long-Term Strategy
  8. Electronic Proxy Statement Dissemination and Shareholder Monitoring
  9. Top 10 Topics for Directors in 2019
  10. 2018 Private Equity Year in Review

Dix sujets « hots » pour les administrateurs en 2019


Voici dix thèmes « chauds » qui devraient préoccuper les administrateurs en 2019.

Ils ont été identifiés par Kerry Berchem, Christine LaFollette, et Frank Reddick, associés de la firme Akin Gump Strauss Hauer & Feld.

Le billet est paru aujourd’hui sur le forum du Harvard Law School.

Bonne lecture ! Quels sont vos points de vue à ce sujet ?

 

Top 10 Topics for Directors in 2019

 

 

Résultats de recherche d'images pour « Akin Gump Strauss Hauer & Feld »

 

1. Corporate Culture

The corporate culture of a company starts at the top, with the board of directors, and directors should be attuned not only to the company’s business, but also to its people and values across the company. Ongoing and thoughtful efforts to understand the company’s culture and address any issues will help the board prepare for possible crises, reduce potential liability and facilitate appropriate responses internally and externally.

2. Board Diversity

As advocates and studies continue to highlight the business case for diversity, public companies are facing increasing pressure from corporate governance groups, investors, regulators and other stakeholders to improve gender and other diversity on the board. As a recent McKinsey report highlights, many successful companies regard inclusion and diversity as a source of competitive advantage and, specifically, as a key enabler of growth.

3. #MeToo Movement

A responsible board should anticipate the possibility that allegations of sexual harassment may arise against a C-suite or other senior executive. The board should set the right tone from the top to create a respectful culture at the company and have a plan in place before these incidents occur. In that way, the board is able to quickly and appropriately respond to any such allegations. Any such response plan should include conducting an investigation, proper communications with the affected parties and the implementation of any necessary remedial steps.

4. Corporate Social Responsibility

Corporate social responsibility (CSR) concerns remained a hot-button issue in 2018. Social issues were at the forefront this year, ranging from gun violence, to immigration reform, to human trafficking, to calls for greater accountability and action from the private sector on issues such as climate change. This reflects a trend that likely foretells continued and increased focus on environmental, social and governance issues, including from regulatory authorities.

5. Corporate Strategy

Strategic planning should continue to be a high priority for boards in 2019, with a focus on the individual and combined impacts of the U.S. and global economies, geopolitical and regulatory uncertainties, and mergers and acquisitions activity on their industries and companies. Boards should consider maximizing synergies from recent acquisitions or reviewing their companies’ existing portfolios for potential divestitures.

6. Sanctions

During the second year of the Trump administration, U.S. sanctions expanded significantly to include new restrictions that target transactions with Iran, Russia and Venezuela. Additionally, the U.S. government has expanded its use of secondary sanctions to penalize non-U.S. companies that engage in proscribed activities involving sanctioned persons and countries. To avoid sanctions-related risks, boards should understand how these evolving rules apply to the business activities of their companies and management teams.

7. Shareholder Activism

There has been an overall increase in activism campaigns in 2018 regarding both the number of companies targeted and the number of board seats won by these campaigns. This year has also seen an uptick in traditionally passive and institutional investors playing an active role in encouraging company engagement with activists, advocating for change themselves and formulating express policies for handling activist campaigns.

8. Cybersecurity

With threats of nation-states infiltrating supply chains, and landmark laws being passed, cybersecurity and privacy are critical aspects of director oversight. Directors must focus on internal controls to guard against cyber-threats (including accounting, cybersecurity and insider trading) and expand diligence of third-party suppliers. Integrating both privacy and security by design will be critical to minimizing ongoing risk of cybersecurity breaches and state and federal enforcement.

9. Tax Cuts and Jobs Act

A year has passed since President Trump signed the Tax Cuts and Jobs Act (TCJA) into law, and there will be plenty of potential actions and new faces on the tax landscape in 2019. Both the Senate Finance Committee and the Ways and Means Committee will have new chairs, and Treasury regulations implementing the TCJA will be finalized. President Trump will continue to make middle-class tax cuts a priority heading into next year. Perennial issues, such as transportation, retirement savings and health care, will likely make an appearance, and legislation improving the tax reform bill could be on the table depending on the outcome of the Treasury regulations.

10. SEC Regulation and Enforcement

To encourage public security ownership, the Securities and Exchange Commission (SEC) has adopted and proposed significant revisions to update and simplify disclosure requirements for public companies. It has taken steps to enhance the board’s role in evaluating whether to include shareholder proposals in a company’s proxy statement. It has also solicited comments on the possible reform of proxy advisor regulation, following increasing and competing calls from corporations, investor advocates and congressional leaders to revise these regulations. Boards and companies should monitor developments in this area, as well as possible changes in congressional and administration emphasis following the 2018 midterm elections.

Bonus: Midterm Elections

The 2018 midterm elections are officially over. Americans across the country cast their ballots for candidates for the House of Representatives and the Senate in what was widely perceived to be a referendum on President Trump’s first two years in office. With Democrats taking control of the House, and Republicans maintaining control of the Senate, a return to divided government will bring new challenges for effective governance. Compromise and bipartisanship will be tested by what is expected to be an aggressive oversight push from House Democrats. However, areas where there may be possible compromise include federal data privacy standards, infrastructure development, criminal justice reform and pharmaceutical drug pricing initiatives.

The complete publication is available here.

De nombreux programmes de formation continue à l’intention des administrateurs de sociétés


Que l’on soit soumis à une politique de formation continue ou non, janvier est un bon moment pour planifier des formations d’appoint.

Ayant une bonne connaissance des formations offertes aux membres de conseils d’administration, je me permets de vous suggérer les formations offertes par le Collège des administrateurs de sociétés (CAS).

Les formations du Collège sont à la fine pointe en matière de perfectionnement des administrateurs.

En plus de leurs formations spécialisées (PME, TI, OBNL), le Collège offre des programmes de perfectionnement pour les administrateurs (ASC ou non) qui sont variés et pertinents.

De plus, je vois que les formations sont offertes en présentiel et même en ligne. Voilà un bon moyen de cumuler des heures de formation continue, sans même se déplacer !

Bonne lecture !

 

Entête programme de perfectionnement

 

 

FAIRE RAYONNER L’EXCELLENCE DES ADMINISTRATEURS DE SOCIÉTÉS CERTIFIÉS

On constate une évolution progressive dans la composition des conseils d’administration


Julie Hembrock Daum*, de SpencerStuart, a publié un excellent article sur l’évolution de la composition des membres de CA des grandes entreprises américaines.
Voici ce qu’il faut retenir à cet égard :
Les administrateurs aux profils divers se joignent de plus en plus aux conseils d’administration ;
Le roulement des effectifs continuera d’être motivé par les départs d’administrateurs ainsi que par la retraite obligatoire à court terme ;
L’expérience en tant que PDG (CEO) ou Président de conseil d’administration n’est plus considérée comme facteur déterminant des compétences permettant aux candidats de se qualifier. Ainsi, sur les 428 nouveaux administrateurs indépendants ajoutés aux conseils du S&P 500 au cours de l’année 2018, seuls 35,5 % étaient des PDG ou des Présidents de conseil d’administration, actifs ou retraités, comparativement à 47 % il y a dix ans ;
Le conseil d’administration sera progressivement remodelé par l’ajout de nouvelles perspectives et compétences. Cependant, les compétences financières restent prisées, en particulier l’expérience des directeurs financiers, des directeurs financiers et/ou des professionnels de l’investissement;

Les plus jeunes administrateurs sont appelés à devenir de nouvelles voix influentes dans les conseils ;

La demande des entreprises et la pression des investisseurs sont susceptibles de changer la façon dont les conseils pensent aux stratégies de composition et de rafraîchissement.Quelles sont les questions clés à prendre en ligne de compte par les administrateurs :

  1. Le conseil, dans sa composition actuelle, possède-t-il tous les atouts nécessaires pour réaliser la stratégie ?
  2. Quelles compétences ou expertises supplémentaires amélioreraient significativement la capacité du conseil à mieux faire son travail ?
  3. Quelles sont les stratégies de rafraîchissement en place, et comment sont-elles communiquées aux parties prenantes, y compris aux investisseurs ?
  4. Comment se fait l’évaluation du conseil ; celle-ci contribue-t-elle à identifier les lacunes eu égard à l’expertise et aux compétences requises au cours des prochaines années ?
  5. Le programme d’intégration est-il robuste et adapté aux besoins et aux antécédents des administrateurs ?

 

New Voices in the Boardroom: The Gradual Evolution of Board Composition

 

Résultats de recherche d'images pour « evolution composition CA »

 

The stakes for having the right people around the boardroom table have never been higher. Directors need to have the skills and experiences that not only align with their company’s long-term strategic direction but also enable their boards to effectively advise management amid unprecedented change and business disruption. Board succession has emerged as a key priority for shareholders, who increasingly expect boards to have a rigorous process in place for assessing board composition and refreshment. Of particular concern are whether there is enough diversity in the boardroom, whether the board has the right combination of skills, and how the board views director tenure.

Notably, directors with diverse profiles are increasingly joining US boardrooms. However, a chronically low rate of director turnover is bringing about only gradual shifts in the overall makeup of US boards. The modest pace of change is likely to persist, meaning that corporate boards are likely to evolve only incrementally.

Directors with diverse profiles are increasingly joining US boardrooms.

Looking to the year ahead, the following represent the board trends Spencer Stuart believes will continue or accelerate in 2019, and how they are likely to shape board composition in 2019 and beyond.

 

Turnover will continue to be driven by director departures and mandatory retirement in the near term.

 

In 2018, S&P 500 companies added the highest number of new directors since 2004 — roughly 0.88 new independent directors per board. That said, overall turnover in US boardrooms is modest, and is likely to remain so for the foreseeable future, impeding meaningful year-over-year change in the overall composition of S&P 500 boards. During the 2018 proxy season, a little more than half of S&P 500 boards (57%) added one or more new directors.

Barring changes in boardroom refreshment practices, this trend is likely to continue. Limits on director tenure are rare today. Only 25 S&P 500 boards (5%) set explicit term limits for nonexecutive directors, with terms ranging from 9 to 20 years. Additionally, it does not appear that individual and/or peer assessments are regularly used by boards to promote refreshment. Only 38 percent of S&P 500 companies report some form of individual director evaluations, a percentage largely unchanged over the past five years.

Instead, S&P 500 boards are likely to continue relying on mandatory retirement policies to stimulate board turnover. Today, 71 percent of S&P 500 boards disclose a mandatory retirement age for directors, consistent with the past five years. Retirement ages also continue to climb. In 2008, a meager 11 percent of S&P 500 companies with mandatory retirement policies set the age limit at 75 or older, compared to 43.5 percent today. More than half of these companies mandate a retirement age of at least 73 or older. Three boards have a retirement age of 80.

 

 

Three-quarters of the independent directors who left S&P 500 boards in the 2018 proxy season served on boards with mandatory retirement ages. The age limits appeared to have influenced many of these departures — 37 percent of retirees had reached or exceeded the age limit at retirement, and another 16 percent left within three years of the retirement age. Currently, only 16 percent of the independent directors on S&P 500 boards with age caps are within three years of mandatory retirement.

Experience as a CEO, board chair, or similar position is no longer viewed as the only qualifying credential for director candidates.

The boardroom will gradually be reshaped by new perspectives and expertise.

 

While modest turnover will continue, evidence suggests that boards will use openings from director departures to inject fresh perspectives and expertise into emerging areas of need.

For one thing, experience as a CEO, board chair, or similar position is no longer viewed as the only qualifying credential for director candidates. Of the 428 new independent directors added to S&P 500 boards in the 2018 proxy year, only 35.5 percent were active or retired CEOs, board chairs, or similar, down from 47 percent a decade ago. Nor is a background in a public company boardroom a requirement. First-time public company directors constituted 33 percent of the 2018 class of new S&P 500 directors. These first-timers are younger than their peers and more likely to be actively employed (64% versus 53%). They are less likely to be CEOs or chief operating officers, and more likely to have other managerial experiences such as line or functional backgrounds or to hold roles in division/subsidiary leadership. They are also more likely to be minorities: 24 percent of first-time directors in 2018 are minorities, versus 19 percent of all new S&P 500 directors.

Of the 428 new independent directors added to S&P 500 boards in the 2018 proxy year, only 35.5 percent were active or retired CEOs, board chairs, or similar, down from 47 percent a decade ago.

*Includes directors who had served or were serving as an executive director on a public company board.

 

Recognizing the strategic imperative for new perspectives and experience in the boardroom, boards are increasingly adding directors with backgrounds in technology, digital transformation and technologies, consumer marketing, and other areas of emerging importance. Financial talent remains prized, especially the experiences of chief financial officers, finance executives, and/or investment professionals. That said, as investors have continued to press for more gender diversity, S&P 500 boards have increased the number of women directors, reaching a new high: 40 percent of new directors in the 2018 proxy year are women, an increase from 36 percent in 2017.

Financial talent remains prized, especially the experiences of chief financial officers, finance executives, and/or investment professionals.

 

Boards are also likely to enhance disclosures about composition. As interest in boardroom composition among investors has increased, a growing number of companies are voluntarily enhancing their disclosures to highlight the diversity of their boards and to showcase how director skills and qualifications align with company strategy. In fact, nearly a third (30%) of S&P 500 companies have published a board matrix spotlighting the skills and qualifications of each director on their governance web page.

Younger directors may become a potent new voice in the boardroom.

 

As boards prioritize new areas of expertise — such as industry and functional experience in technology and digital transformation, and certain areas of marketing and finance — many are tapping “next-generation” directors whose qualifications align with the needs of their organizations. One out of six directors (17%) in the 2018 class of new directors is age 50 or younger.

Given that their backgrounds and profiles differ from more traditional board members, these directors are likely to bring varied perspectives to boardroom discussions. Nearly two-thirds of these “next-gen” corporate directors have expertise in three sectors: technology/telecommunications (34%), consumer goods (16%), and private equity/investments (14%). A majority (almost two-thirds) are serving on their first public company board. More than half (53%) are women.

Interestingly, these directors may also be less likely to have lengthy tenures, due to factors such as the demands of their careers, a desire to move on, or dissatisfaction with their board experience. Twenty-eight (7%) of the 417 directors who left an S&P 500 board seat in the 2018 proxy season were 55 years old or younger, with an average tenure of five years. Other directors who departed their boards over the same period had a much longer tenure on average (12.7 years) and were 68.4 years old on average.

Business demands and investor pressure are likely to change how boards think about composition and refreshment strategies.

The implications for your board

 

Business demands and investor pressure are likely to change how boards think about composition and refreshment strategies. Increasingly, directors are recognizing that board composition should support and reflect the strategic needs of the organization. Boards can use the following recommendations to enhance short- and long-term approaches to their composition:

Have an ongoing refreshment strategy.

The composition of the board should be viewed as a strategic asset. Boards will be better prepared to plan for and take advantage of openings if there is a formal approach to refreshment. This includes regularly reviewing and aligning the board’s makeup to the company’s strategic direction, identifying desired competencies for future directors, and regularly infusing the board with perspectives relevant to the organization’s future needs.

Increasingly, investors consider meaningful full-board and individual assessments as “best practice” not only for evaluating and enhancing board and director performance but also for promoting boardroom refreshment. While annual evaluations have become the norm for boards, far fewer — 38 percent of S&P 500 boards — report some form of individual director evaluations. Proactive boards assess skills and attributes, incorporating results from board self-assessments. They also take a multiyear view of departures, including upcoming board leadership changes, and set clear expectations around director tenure.

Key Questions for Directors to Consider:

 

  1. Does the board as currently constituted give the company its best shot at success in supporting the strategy?
  2. What additional, and potentially underrepresented, skills or expertise would significantly enhance the board’s ability to do its job?
  3. What are our refreshment mechanisms and strategy, and how are they communicated to stakeholders, including investors?
  4. Are we using board evaluations to help identify gaps in expertise and skills the board may require in the coming years?
  5. Is our onboarding program robust and tailored to individual director needs and backgrounds?
Position new directors for success.

The nominating and governance committee chair and other board leaders should ensure that the board has a robust new-director orientation program in place. Incoming directors, particularly younger and first-time board members, benefit from an orientation and continuing education that familiarize them with the company’s needs and the board’s approach to governance. At a minimum, a director onboarding program should provide insights about public disclosures and nonpublic materials (such as board meeting minutes, forecasts, budgets, strategic plans, etc.) and socialize the new director(s) with key executives and members of senior management. Additionally, the board should recognize that new directors may find it helpful to partner with a mentor — formally or informally — who they can turn to for questions and feedback.

With greater focus on diversity, board culture becomes critical.

Boards are adding new perspectives to enhance board deliberations and improve outcomes. But greater diversity also increases the likelihood of misunderstanding and tension among directors with different points of view and backgrounds. In the past, boards tended to be more homogeneous and, as a result, there was typically more implicit agreement about director interaction and behavior. Today, with higher levels of diversity in the boardroom — whether in terms of experiences, skills, gender, race, ethnicity, nationality, and/or age — it’s critical to create a boardroom culture that facilitates constructive interactions between board members. All boards can benefit from cultures that value inquisitiveness and flexibility, and where directors are comfortable challenging one another’s — and management’s — assumptions and ideas.

_____________________________________________________________

Note: This article was originally published in the NACD 2019 Governance Outlook.

*Julie Hembrock Daum leads the North American Board Practice and was a long standing board member of Spencer Stuart. She consults with corporate boards, working with companies of all sizes from the Fortune 10 to pre-IPO companies. She has conducted more than 1,000 board director assignments, recently recruiting outside directors for Johnson & Johnson, Whole Foods, Amazon, Saudi Aramco, Nike, numerous IPOs and spin off boards.

Top 10 de Harvard Law School Forum on Corporate Governance au 10 janvier 2019


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 10 janvier 2019.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

Résultats de recherche d'images pour « top 10 »

 

Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

 

  1. Shareholder Resolutions and IPOs
  2. NACD Public Company Governance Survey
  3. Boardrooms Without Female Representation
  4. Blockholder Heterogeneity, Multiple Blocks, and the Dance Between Blockholders
  5. Climate Change and Proxy Voting in the U.S. and Europe
  6. Why Are Firms with More Managerial Ownership Worth Less?
  7. A Regulatory Classification of Digital Assets
  8. The Government Shutdown’s Effect on Deals
  9. Looking Ahead: Key Trends in Corporate Governance
  10. Investor Demand for Internal Control Audits of Large U.S. Companies

Éléments susceptibles d’influer sur les décisions relatives à la gouvernance des grandes entreprises en 2019


L’article ci-dessous brosse un portrait de ce qui attend les grandes entreprises en 2019. Le billet de Holly J. Gregory, associé de la firme Sidley Austin, a été publié sur le site de Harvard Law School Forum aujourd’hui.

Quelles sont les variables susceptibles d’influer sur les décisions relatives à la gouvernance ainsi que sur les relations avec les actionnaires ?

L’auteur fait ressortir les éléments critiques suivants :

  1. Le maintien des caractéristiques du rôle du conseil et des devoirs des administrateurs;
  2. L’examen approfondi de la primauté des actionnaires et de leur influence;
  3. La réforme du vote par procuration et la réglementation des conseillers en vote;
  4. La poursuite de la convergence des idées sur les pratiques de gouvernance d’entreprise;
  5. Un accent encore plus affirmé sur les questions environnementales, sociales et de gouvernance (ESG);
  6. Une demande continue d’engagement des actionnaires et d’attention envers les investisseurs activistes.

 

Bonne lecture !

 

Looking Ahead: Key Trends in Corporate Governance

Résultats de recherche d'images pour « trend en gouvernance »

Board’s Role and Director Duties Remain Durable

 

While the corporate governance environment is always changing, board responsibilities and the fiduciary duties of directors under state corporate law have proven remarkably durable. Directors must:

Manage or direct the affairs of the company and cannot abdicate that responsibility by deferring to shareholder pressure.

Act with due care, without conflict, in good faith, and in the company’s best interest.

Delegate and oversee management of the company (for example, by selecting the CEO, monitoring the CEO’s performance, and planning for succession), and oversee strategy and risk management.

Ensuring that the day-to-day management of the company is in the right hands, providing management with forward-looking strategic guidance, and monitoring management’s efforts to identify and manage risk, including risks that pose an existential threat, remain at the heart of the board’s role. To accomplish this, boards need to understand and address disruptive risks. Boards should be mindful that adequate time is reserved on the agenda for these matters, with less focus on formal management presentations and more focus on the problems and concerns management is grappling with.

The National Association of Corporate Directors (NACD) Blue Ribbon Commission recently provided guidance on oversight of risks that pose an existential threat (NACD, Adaptive Governance: Board Oversight of Disruptive Risks (Oct. 2018), available at nacdonline.org). The Commission recommends that boards prioritize certain actions, including:

Understanding and addressing disruptive risks “in the context of the [company’s] specific circumstances, strategic assumptions, and objectives.”

Allocating oversight of disruptive risks between and among the full board and its committees, and clarifying the allocation of responsibilities in committee charters.

Recognizing that enterprise risk management processes may not capture disruptive risks.

Evaluating board culture regularly for “openness to sharing
concerns, potential problems, or bad news; response to mistakes; and acceptance of nontraditional points of view.”

Assessing “leadership abilities in an environment of disruptive risks” in CEO selection and evaluation processes.

Aligning the company’s “talent strategy” with “the skills and structure needed to navigate disruptive risks.”

Refraining from automatically re-nominating directors as a “default decision.”

Treating board diversity as “a strategic imperative, not a compliance issue.”

Requiring continuing learning of all directors, and assessing that factor in the board’s evaluation process.

Ensuring risk reports provide “forward-looking information about changing business conditions and potential risks in a format that enables productive dialogue and decision making.”

Holding a substantive discussion, at least annually, of the company’s vulnerability to disruptive risks, “using approaches such as scenario planning, simulation exercises, and stress testing to inform these discussions.”

Shareholder Primacy and Shareholder Influence Under Scrutiny

 

While it is prudent for directors to listen to and engage with shareholders and understand their interests, directors must apply their own business judgment and determine what course is in the best interests of the company. This means that they cannot merely succumb to pressures from activist investors and other shareholders (see, for example, In re PLX Tech., Inc. Stockholders Litig., 2018 WL 5018535, at *45 (Oct. 16, 2018) (an activist “succeeded in influencing the directors to favor a sale when they otherwise would have decided to remain independent” and the incumbent directors improperly deferred to the activist and allowed him “to take control of the sale process when it mattered most”)).

However, shareholders have gained considerable power relative to boards over the last 20 years, making it difficult to resolve shareholder pressures that conflict with director viewpoints regarding the best course for the company. The forces that have strengthened shareholder influence include:

Concentration of shareholding in the hands of powerful institutional investors (with institutions owning 70% of US public company shares in 2018).

The activation of institutional investors regarding proxy voting (with institutional voting participation at 91% compared to retail shareholder participation at 28%).

The rise of proxy advisory firms that serve to coordinate proxy voting.

The dismantling of classic corporate defenses, such as classified boards and poison pills.

The rise in shareholder engagement and negotiation (or “private ordering”) of governance processes. (Broadridge, 2018 Proxy Season Review (Oct. 2, 2018), available at broadridge.com.)

While there is no sign that shareholder influence will dissipate, recent legislative developments suggest that shareholder primacy (the premise that a company is run for the benefit of its shareholders in the first instance) is under some pressure. For example, in August 2018, US Senator Elizabeth Warren proposed the Accountable Capitalism Act, which among other things would require directors of US companies with $1 billion or more in annual revenues to obtain a charter as a “United States Corporation” and consider the interests of all corporate stakeholders, including employees, customers, and communities, in their decision-making, in addition to the interests of shareholders. (S. 3348, 115th Cong. § 5(c)(1)(B) (2017–2018); for more information, search Looking Ahead: Key Trends in Corporate Governance on Practical Law.)

In addition, there are increasing calls for the responsible use of power by large institutional investors, which have a considerable and growing influence on the companies in which they invest. The underlying concern is the responsible use of significant economic power, given the substantial impact on society that large institutional investors and companies have. For example, in January 2018, BlackRock CEO Larry Fink wrote to the CEOs of BlackRock portfolio companies that “society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. … To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate” (Annual Letter to CEOs from Larry Fink, Chairman and CEO, BlackRock, available at blackrock.com).

This broader view of a company’s purpose recognizes that, while social interests and shareholder interests are often viewed as in tension, outside of a short-term perspective social interests and shareholder interests tend to align. For pension funds and many other institutional investors, the interests of their beneficiaries are aligned with the successful performance of healthy companies over a period of years.

Given the size of institutional investors’ portfolios, they face challenges in applying their influence on a company-specific basis. While some of the largest institutional investors are investing in the human resources and technology needed to make informed voting decisions on a case-by-case, company-specific basis, with respect to a large number of companies in their portfolios, many institutional investors still apply set policies on a one-size-fits-all basis, without nuanced analysis of the circumstances, in voting their shares. Institutional investors should assess whether they:

Are well positioned to vote their shares on an informed basis.

Have designed screens that consider company performance and other factors that may support a change from standard policy, if relying on the application of pre-set policies.

When institutional investors turn to proxy advisory firms to make voting decisions, they should evaluate how the proxy advisor is positioned to make sophisticated and nuanced case-by-case determinations, and whether resource constraints require the proxy advisor to rely heavily on the use of set policies (see below Convergence of Ideas on Corporate Governance Practices Continues).

In January 2017, a group of institutional investors launched the Investor Stewardship Group (ISG) and issued Stewardship Principles and Corporate Governance Principles that took effect on January 1, 2018 (available at isgframework.org). The Stewardship Principles set forth a stewardship framework for institutional investors that includes the following principles:

Principle A: Institutional investors are accountable to those whose money they invest.

Principle B: Institutional investors should demonstrate how they evaluate corporate governance factors with respect to the companies in which they invest.

Principle C: Institutional investors should disclose, in general terms, how they manage potential conflicts of interest that may arise in their proxy voting and engagement activities.

Principle D: Institutional investors are responsible for proxy voting decisions and should monitor the relevant activities and policies of third parties that advise them on those decisions.

Principle E: Institutional investors should address and attempt to resolve differences with companies in a constructive and pragmatic manner.

Principle F: Institutional investors should work together, where appropriate, to encourage the adoption and implementation of the Corporate Governance Principles and Stewardship Principles.

Reform of Proxy Voting and Regulation of Proxy Advisors Under Consideration

 

The Securities and Exchange Commission (SEC) staff recently held a roundtable to assess whether the SEC should update its rules governing proxy voting mechanics and the shareholder proposal process, and strengthen the regulation of proxy advisory firms. These issues have been under consideration since the SEC solicited public comment on the proxy system in 2010. (SEC, November 15, 2018: Roundtable on the Proxy Process, available at sec.gov; Concept Release on the U.S. Proxy System, 75 Fed. Reg. 42982-01, 2010 WL 2851569 (July 22, 2010).)

Topics discussed at the roundtable included:

Proxy voting mechanics and technology. Panelists agreed that the current proxy voting system needs to be modernized and simplified, for example, by:

implementing a vote confirmation process so that shareholders may verify, before the vote deadline, that voting instructions were followed and their votes were counted;

using technology to encourage wider participation and reduce costs and delays in the voting process;

studying why retail shareholder participation has fallen and whether more direct communication channels would improve information flow and participation; and

mandating use of universal proxy cards in proxy contests.

The shareholder proposal process. Some panelists asserted that the current shareholder proposal process functions well, while others identified areas for reform, including:

revisiting the ownership thresholds and holding period required to submit a shareholder proposal (currently, the lesser of $2,000 or 1%, and one year);

increasing resubmission thresholds to address reappearance of a proposal even though a majority of shareholders voted it down year after year;

providing more SEC guidance on no-action decisions and rationales;

requiring proxy disclosure of the name of the shareholder proponent (and its proxy, if any) and its level of holdings; and

requiring disclosure of preliminary vote tallies.

The role and regulation of proxy advisory firms. While no significant consensus emerged regarding whether proxy advisory firms should be subject to further SEC regulation, areas under discussion included:

improving accuracy of proxy advisor reports and affording all companies opportunities to review and verify information in advance of publication; and

improving procedures to monitor and manage, and enhancing disclosure of, conflicts of interest.

The Corporate Governance Reform and Transparency Act

 

The Corporate Governance Reform and Transparency Act, H.R. 4015, would require proxy advisory firms to register with the SEC, which would require:

Sufficient staffing to provide voting recommendations based on current and accurate information.

The establishment of procedures to permit companies reasonable time to review and provide meaningful comment on draft proxy advisory firm recommendations, including the opportunity to present (in person or telephonically) to the person responsible for the recommendation.

The employment of an ombudsman to receive and timely resolve complaints about the accuracy of voting information used in making recommendations.

Policies and procedures to manage conflicts of interest.

Disclosure of procedures and methodologies used in developing proxy recommendations and analyses.

Designation of a compliance officer responsible for administering the required policies and procedures.

Annual reporting to the SEC on the proxy advisory firm’s recommendations, including the number of companies that are also consulting division clients, as well as the number of proxy advisory firm staff who reviewed and made recommendations.

The bill would also direct the SEC staff to withdraw two no-action letters issued by the SEC in 2004, which the fact sheet suggests “have led to overreliance on proxy advisory firm recommendations.” (The SEC rescinded those two no-action letters in September 2018.)

The bill is supported by both Nasdaq and the New York Stock Exchange, as well as leading business groups and the Society for Corporate Governance. It is opposed by the Council of Institutional Investors, the Consumer Federation of America, and many public pension fund managers.

(See, for example, Nelson Griggs, Nasdaq, U.S. House of Representatives Passes Proxy Advisory Firm Reform Legislation (Dec. 16, 2017), available at nasdaq.com; Council of Institutional Investors, CII Urges Members to Contact Congressional Reps, Opposing Proxy Advisors Bill (Jan. 13, 2018), available at cii.org.) The bill is unlikely to be passed into law before the current congressional term ends, but may be reintroduced during the following congressional term.

It remains to be seen whether the SEC will incorporate input from the roundtable into future rulemaking or new SEC staff guidance or practice. The SEC is more likely to focus on proxy reform as a priority than on regulation of proxy advisory firms absent pressure from Congress.

Two bills seeking SEC regulation of proxy advisory firms were introduced in the 115th Congress:

The Corporate Governance Reform and Transparency Act, H.R. 4015. In June 2018, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing on this bill, which was sent by the House of Representatives to the Senate in December 2017 for consideration. (See Box, The Corporate Governance Reform and Transparency Act.)

The Corporate Governance Fairness Act, S. 3614. In November 2018, this bill was introduced in the Senate to amend the Investment Advisers Act of 1940 (Advisers Act) to expressly require proxy advisory firms to register as investment advisers under the Advisers Act, thereby subjecting them to enhanced fiduciary duties and SEC oversight, including regular SEC staff examinations into their conflict of interest policies and programs, and whether they knowingly have made false statements to clients or have omitted to state material facts that would be necessary to make statements to clients not misleading.

Both bills would subject proxy advisory firms to SEC regulation, and focus on policies and procedures regarding conflicts of interest and accuracy. H.R. 4015 goes further by mandating
maintenance of certain staffing levels and annual reporting relating to recommendations. Neither bill is likely to be passed into law by the end of the current session of Congress.

 

Convergence of Ideas on Corporate Governance Practices Continues

 

Proxy advisory firms are often criticized for imposing a one-size-fits-all view of corporate governance on public companies in the US. However, the divide is narrowing between what investors and their proxy advisors, on the one hand, and corporate directors and CEOs, on the other hand, think are good corporate governance practices.

Recently, a high-profile group of senior executives from major public companies and institutional investors issued the Commonsense Principles 2.0 to revise corporate governance principles that the group published in 2016 (available at governanceprinciples.org). The Commonsense Principles 2.0 describe corporate governance practices that have become widely accepted among leading companies and their institutional investors, including in previously controversial areas such as majority voting in uncontested director elections and proxy access. A majority of S&P 500 companies already practice most of the recommendations, and many of the recommendations are requirements for publicly traded companies under SEC regulations or stock exchange listing rules. For example, the Commonsense Principles 2.0 provide that:

One-year terms for directors are generally preferable, but if a board is classified, the reason for that structure should be explained.

The independent directors should decide whether to have combined or separate chair and CEO roles based on the circumstances. If they combine the chair and CEO roles, they should designate a strong lead independent director. In any event, the reasons for combining or separating the roles should be explained clearly.

A director who fails to receive a majority of votes in uncontested elections should resign and the board should accept the resignation or explain to shareholders why it is not accepted.

These recommendations are in line with evolving practices.

The Commonsense Principles 2.0 address some recommendations to institutional investors and asset managers, and call on them to use their influence transparently and responsibly. Among other things, they urge asset managers to disclose their proxy voting guidelines and reliance on proxy advisory firms, and be satisfied that the information that they are relying on is accurate and relevant.

Notably, the Commonsense Principles 2.0 reflect the convergence of viewpoints through agreement among a coalition of high-profile leaders of well-known public companies, institutional investors, and one activist hedge fund. Signatories include Mary Barra of General Motors, Ed Breen of DowDupont, Warren Buffet of Berkshire Hathaway, Jamie Dimon of JPMorgan Chase, Larry Fink of BlackRock, Bill McNabb of Vanguard, Ronald O’Hanley of State Street, and Jeff Ubben of ValueAct Capital. The Council of Institutional Investors and the Business Roundtable have expressed support for or endorsed the Commonsense Principles 2.0.

 

Shifting Focus of Private Ordering to ESG Issues

 

The convergence of views among corporate leaders and large institutional investors on corporate governance practices reflects to a significant degree the success shareholders have had in influencing corporate governance reforms through engagement with boards, or private ordering. Shareholders are continuing to engage companies and press for reforms in the areas of shareholder rights and board composition and quality, but they are also increasing their focus on ESG issues, such as climate change, diversity, and board effectiveness, and the impact of ESG issues on companies’ financial performance. ESG is no longer a fringe issue of interest only to special issue investors. Mainstream institutional investors are recognizing that attention to ESG and corporate social responsibility impacts portfolio company financial performance.

The rising interest in ESG among investors is apparent in the sharp rise in US-domiciled assets under management using ESG strategies ($12.0 trillion at the start of 2018, up 38% since 2016 and an 18-fold increase since 1995, as reported by the US SIF Foundation), increasing support for shareholder proposals relating to ESG issues, as well as in the focus of engagement efforts. According to Broadridge, institutional investor support for social and environmental proposals increased from 19% in 2014 to 29% in 2018 (Broadridge, 2018 Proxy Season Review (Oct. 2, 2018), available at broadridge.com).

 

Continuing Demand for Shareholder Engagement and Attention to Activist Investors

 

In this era of enhanced shareholder influence, directors need to be especially attuned to the interests and concerns of significant shareholders, while continuing to apply their own judgment about the best interests of the company. This requires active outreach and engagement with the company’s core shareholders and, in particular, the persons responsible for voting proxies and setting the governance policies that often drive voting decisions. Caution, balance, and effective communication are also necessary to ensure that director judgment is not replaced with shareholder appeasement.

In the first half of 2018, record numbers of hedge fund activist campaigns were launched, backed by record levels of capital. Activist investors are having greater success in negotiating board seats and in winning seats in contested elections. The general level of vote support for directors is falling. For example, 416 directors failed to receive majority shareholder support in the 2018 proxy season (an 11% increase over 2017) and 1,408 directors failed to attain at least 70% shareholder support (a 14% increase over 2017) (Broadridge, 2018 Proxy Season Review (Oct. 2, 2018), available at broadridge.com).

Understanding key shareholders’ interests and developing relationships with long-term shareholders can help position the company to address calls by activist investors for short-term actions that may impair long-term value. However, boards also should view the input they receive from activist investors as valuable, because it could help identify potential areas of vulnerability. Moreover, establishing an open and positive dialogue with activist investors, and engaging with them in meaningful discussions, can assist boards in avoiding a public shareholder activist campaign in the future. This requires:

Identifying the company’s key shareholders and the issues about which they care the most.

Objectively assessing strategy and performance from the perspective of an activist investor, including proactively identifying areas in which the company may be subject to activism.

Monitoring corporate governance benchmarks and trends in shareholder activism to keep abreast of “hot topic” issues.

Comparing the company’s corporate governance practices to evolving best practice.

Attending to potential vulnerabilities in board composition. Activist investors scrutinize the tenure, age, demographics, and experience of each director. They will target directors whose expertise is arguably outdated, who have poor track records as officers or directors of other companies, or who have served on the board for long tenures. They will also look for gaps in the expertise needed by the board given the current dynamic business environment, and for a lack of gender or ethnic diversity. Boards should monitor developments in these areas (see, for example, Institutional Shareholder Services Inc. (ISS), 2019 ISS Americas Policy Updates (Nov. 19, 2018), available at issgovernance.com (announcing that, beginning in 2020, ISS will oppose the nominating committee chair at Russell 3000 or S&P 1500 companies when there are no women on the board); 2018 Cal. Legis. Serv. ch. 954 (S.B. 826) (to be codified at Cal. Corp. Code §§ 301.3, 2115.5) (mandating gender quotas for boards of US public companies that are headquartered in California)).

Addressing potential vulnerabilities in CEO compensation, including disparity with respect to peer companies and other named executive officers. Activist investors could claim that this signals a culture in which too much deference is given to the CEO and there is a lack of team emphasis in the compensation of management.

Reviewing structural defenses with the assistance of seasoned proxy fight and corporate governance counsel. Many companies have not reviewed their charter and bylaws recently, and in a proxy contest the language of many bylaw provisions can take on a different meaning. Boards should be aware that proxy advisory firm ISS recently announced that it will generally oppose management proposals to ratify a company’s existing charter or bylaw provisions, unless the provisions align with best practice (2019 ISS Americas Policy Updates, at 11).

Effectively communicating long-term plans with respect to strategy and performance pressures, defending past performance, and addressing calls for an exploration of strategic alternatives.

Preparing a response plan for engaging with activist investors to ensure that the board and management convey a measured and unified position.

Il y a encore trop de CA sans représentation féminine !


Lyla Qureshi, analyste chez Equilar, vient de publier un article très intéressant sur les caractéristiques des entreprises du Russell 3000 qui n’ont pas de femmes siégeant au conseil d’administration.

L’une des raisons invoquées pour ne pas avoir de représentation féminine au conseil est que la composition du CA n’est pas une priorité pour les actionnaires ! Qu’en pensez-vous ?

La situation change, mais pas suffisamment rapidement selon les spécialistes de la gouvernance.

Bonne lecture !

 

Boardrooms Without Female Representation

 

Board diversity is a governance issue that has been getting a large amount of attention for the past couple of years. This year, gender diversity, particularly in relation to board member appointments, has been in the limelight. This heightened focus comes in part thanks to SB-826, a recently-passed California bill that will mandate that public companies headquartered in the state must place at least one woman on their board by the end of 2019. Furthermore, the legislation directs publicly listed companies to have two women on boards with five members, and three on those which have six or more members by 2021. To find out where the current Russell 3000, not just California, stands in terms of board gender diversity, Equilar conducted a study to examine which companies have not had a woman on their board.

 

 

Out of the entire Russell 3000 index, 344 companies have not had a female board member in the history of the Equilar database, which goes back to the year 2000. Additionally, the two sectors with the highest count of companies without a female on their board are the financial and technology sectors, with each having approximately 48 companies with all male boards. Healthcare, as well as the services sector, both had at least 40 companies with all male boards for their entire Equilar database history. On the flip side, companies that are a part of the utilities sector account for approximately 1.4% of the companies with all-male boards.

According to The Guardian, one of the reasons cited by companies for not recruiting females to their boards is the fact that the make-up of boards is not a priority for shareholders. However, that excuse may not necessarily hold true. For instance, BlackRock, one of the largest shareholders of American companies, stated in the beginning of this year that they would like to see at least two female board members at companies in which it invests. As mentioned in The Wall Street Journal, Michelle Edkins, Global Head of Investment Stewardship at BlackRock, wrote, “We believe that a lack of diversity on the board undermines its ability to make effective strategic decisions. That, in turn, inhibits the company’s capacity for long-term growth.” Yet another reason provided by companies to justify male-dominated boards is due to an alleged dearth of qualified female candidates and “over-boarding” of women who are experienced. Research conducted on this indicates that rather than a lack of expertise, what women tend to lack is board experience. This is because many businesses prefer veteran female directors over novices. Women trying to enter the world of board memberships have a tough time landing their first board position; however the same is not true for men. While speaking with The Wall Street Journal, Bill George, former head of Medtronic PLC, said, “To gain their first corporate board seat, women still have to overcome strong cultural issues that most men don’t have to overcome.” Furthermore, men also have the advantage of having a wider network made up of other powerful, well-positioned men. Coco Brown, founder of Athena Alliance, told The Journal, “Women on the whole are outside the trusted networks of public company boards. So they end up with the bar that requires board experience.”

Although the numbers provided above are not encouraging, what is positive is that there were approximately 44 new companies that added a female to their board in the second quarter of 2018. An interesting trend observed in the proxies of these companies is that almost all of the documents had a disclosure regarding diversity in them. Out of the 44 companies in discussion, 38 had text that addressed the topic of diversity, while 29 of those 38 disclosures had text pertaining specifically to gender diversity. The disclosures stated that the company recognized the importance of diversity and relayed the fact that they were cognizant that changes must be made to the organization in order show how truly committed they are to rectifying the male-dominated board structure. The appointments of female directors by these companies shortly after the release of their proxies showed that the companies followed through with their promise of making their board more gender balanced.

Although the numbers reported in this study with respect to the prevalence of all-male boards paint a bleak picture regarding gender equity in American boardrooms, the increased focus on gender-balanced boards has resulted in companies making concrete changes, as witnessed by the rise in female board members this year alone. In a study earlier this year, Equilar reported that the percentage of women on Russell 3000 boards increased from 16.9% to 17.7% between March 31 and June 30, 2018. Despite the fact that for some the pace of change is not fast enough, one hopes that if present efforts to ensure equal gender representation on boards continue, gender-balanced boardrooms will become a reality in the near future.

Top 10 de Harvard Law School Forum on Corporate Governance au 3 janvier 2019


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 3 janvier 2019.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

Résultats de recherche d'images pour « top 10 »

 

Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

 

  1. Stock Exchanges and Shareholder Rights: A Race to the Top, Not the Bottom?
  2. Fighting the Rising Tide of Federal Disclosure Suits
  3. 2019 Global & Regional Trends in Corporate Governance
  4. The CFTC and Market Manipulation
  5. SEC Cyber Briefing: Regulatory Expectations for 2019
  6. Politics and Antitrust: Lessons from the Gilded Age
  7. California Courts and Forum Selection Bylaws
  8. Activism: The State of Play at Year-End 2018
  9. Matters to Consider for the 2019 Annual Meeting and Reporting Season
  10. Confronting the Problem of Fraud on the Board

La prévalence de l’activisme actionnarial en 2019


Voici une mise à jour de Martin Lipton*, associé fondateur de la firme Wachtell, Lipton, Rosen & Katz, qui se spécialise dans les politiques et stratégies organisationnelles ayant un impact sur la gouvernance des entreprises. L’article a été publié aujourd’hui sur le site de HLS Forum sur la gouvernance.

En 2019, les auteurs prédisent que la menace de l’activisme sera encore plus prévalente.

Bonne lecture !

 

Activism: The State of Play at Year-End 2018

 

Résultats de recherche d'images pour « activisme actionnarial »

 

As we noted [in 2018], the threat of activism continues to be high, and has become a global phenomenon. The conclusion of a volatile and dynamic 2018 prompts a brief update of the state of play.

  1. Activist assets under management remain at elevated levels, encouraging continued attacks on large successful companies in the U.S. and abroad. In many cases, activists have been taking advantage of recent stock market declines to achieve attractive entry points for new positions. These trends have been highlighted in several recent media reports, including in The Wall Street Journal and Bloomberg.
  2. While the robust M&A environment of much of 2018 has recently subsided, deal-related activism remains prevalent, with activists instigating deal activity, challenging announced transactions (e.g., the “bumpitrage” strategy of pressing for a price increase) and/or pressuring the target into a merger or a private equity deal with the activist itself.
  3. “Short” activists, who seek to profit from a decline in the target’s market value, remain highly aggressive in both the equity and corporate debt markets. In debt markets, we have also recently seen a rise in “default activism,” where investors purchase debt on the theory that a borrower is already in default and then actively seek to enforce that default in a manner by which they stand to profit.
  4. Elliott Management was the most active and in many cases aggressive activist of 2018. The Wall Street Journal noted that Elliott has publicly targeted 24 companies in 2018, with Icahn and Starboard runners-up with nine public targets each. The New Yorker published a lengthy profile of Paul Singer and Elliott in August, “Paul Singer, Doomsday Investor”. “Singer has excelled in this field in part because of a canny ability to discern his opponents’ weaknesses and a seeming imperviousness to public disapproval.”
  5. Enhanced ESG disclosure remains a topic of great interest to institutional investors and the corporate governance community. In October, two prominent business law professors, supported by investors and other entities with over $5 trillion in assets under management, filed a petition for rulemaking calling for the SEC to “develop a comprehensive framework requiring issuers to disclose identified environmental, social, and governance (ESG) aspects of each public-reporting company’s operations.” In November, the Embankment Project of the Coalition for Inclusive Capitalism issued its report outlining proposed ways to measure long-term sustainable value creation beyond financial results. And earlier this month, ESG disclosure was the subject of a lively discussion at a meeting of the SEC’s Investor Advisory Committee, with various views expressed regarding the merits of regulatory efforts versus private ordering in this area.

It has become increasingly evident that the activism-driven corporate world is relatively fragile and is proving to be unsustainable, particularly when viewed in the broader context of rapidly changing political and social norms and increasing divisiveness across many planes of the social contract. A number of initiatives have been underway to establish a modern corporate governance framework that is calibrated to the current environment. For our part, at the request of the World Economic Forum, we prepared a paper titled, The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, which was issued in September 2016 and most recently updated in our memo, Some Thoughts for Boards of Directors in 2019.

In essence, The New Paradigm conceives of corporate governance as a collaboration among corporations, shareholders and other stakeholders working together to achieve long-term value and resist short-termism. While we have seen considerable interest in The New Paradigm and similar initiatives from major institutional investors and other key stakeholders, until such a framework is widely adopted, it is unlikely that absent legislation, there will be any decrease in activism. Accordingly, companies should regularly review and adjust their plans to avoid an activist attack and to successfully deal with an activist attack if one should occur. Effective engagement with major shareholders is the essential element of activist defense.

____________________________________________________________

*Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy, and Zachary S. Podolsky is a corporate associate. This post is based on a Wachtell Lipton memorandum authored by Mr. Lipton and Mr. Podolsky. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here); Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).

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