Comportements inadéquats d’un PDG lors des réunions du conseil d’administration


Voici un cas publié sur le site de Julie McLelland qui aborde une question de gouvernance relative aux comportements d’un PDG lors des réunions du conseil d’administration d’un OBNL.

Comme c’est souvent le cas, c’est un nouveau membre du CA qui a amorcé le questionnement sur la façon de se comporter du PDG lors des réunions.

Xuan, le nouvel administrateur, a constaté que le PDG voyageait souvent et qu’il n’y avait pas une politique de remboursement des frais le concernant.

Le fait d’aviser le président et de mettre cette question à l’ordre du jour a fait réagir fougueusement le PDG !

Xuan se demande comment il peut aider le président à trouver une issue à ce gâchis !

Le cas a d’abord été traduit en français en utilisant Google Chrome, puis, je l’ai édité et adapté. On y présente la situation de manière sommaire, puis trois experts se prononcent sur le cas.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Comportements inadéquats d’un PDG lors des réunions du conseil d’administration

 

Xuan a rejoint le conseil d’administration d’un organisme à but non lucratif (OBNL). Lors de sa première réunion, il a été stupéfait de l’attitude et du comportement du PDG ; celui-ci a tenté de diriger la réunion en disant aux administrateurs quand ils pouvaient parler, quand ils en avaient suffisamment discuté, et quel devait être le résultat ou la décision. Xuan a parlé au président après la réunion et ils ont convenu que ce n’était pas acceptable.

Xuan a rejoint le comité d’audit. Le PDG n’a pas assisté à la réunion du comité alors qu’il avait été invité. Le personnel ne savait pas où se trouvait le PDG et a laissé entendre qu’il était peut-être en voyage, car il voyageait « beaucoup ». Encore une fois, Xuan a discuté de la question avec le président et a découvert que le PDG voyageait fréquemment, réservait son propre voyage et réclamait des dépenses, que le directeur financier lui remboursait.

Pour la prochaine réunion du conseil d’administration, Xuan a préparé un document recommandant une politique de voyage comprenant des autorisations avant les réservations et l’approbation des remboursements par le président. Les déplacements et les remboursements du chef de la direction devaient être approuvés par le président et déposés pour information à la prochaine réunion du conseil.

Le document sur la politique des frais de voyages n’était pas dans le dossier envoyé avant la réunion. La discussion n’était pas non plus à l’ordre du jour. Xuan a de nouveau avisé le président qui lui a dit qu’il soulèverait la question avec le PDG. Deux heures plus tard, le PDG envoyait un courriel au conseil d’administration disant qu’il « démissionnait avec effet immédiat ». Au cours des prochaines heures, les administrateurs se sont envoyé des courriels et ils ont convenu qu’ils souhaitaient accepter la démission.

Le président a répondu en acceptant poliment la démission et en demandant une réunion pour discuter des détails administratifs. Le PDG a répondu qu’il était revenu sur sa décision de démission, estimant que le conseil d’administration minait son autorité. Celui-ci voulait être réintégré ou licencié avec les « avantages appropriés ».

Xuan n’a aucune formation en RH ou en droit. Comment peut-il aider la présidence à trouver une bonne solution à ce gâchis ?

Iain’s Answer

Hi Xuan,

Whew. You’ve walked into a wild party. I wish I could say it was unprecedented, but it’s not.  I’ve known more than one CEO who thought their job was to run the board. Others try to manipulate the board more subtly for their own ends. It won’t do.

There is a clear line of responsibility, by which the board is responsible to the shareholders (or the members of a non-profit association) for the good governance of the organisation.  One of the ways the board undertakes that role is by appointing, monitoring, and if necessary replacing, a CEO. To travel at the organisation’s expense without accountability is pretty flagrant, and your paper proposing proper accountability around this issue is quite appropriate. It is inexcusable that your proposal was dropped from the board papers without discussion.

A resignation cannot be retracted except by mutual agreement, and in your case the board had already agreed to accept the CEO’s resignation, and through its Chair had communicated this. You want to support your Chair.  It’s time to help him lance the boil and move on.  You can be a witness and backup when the Chair tells the CEO that there is no going back, the resignation has been accepted, and any amounts legally due to him on termination will be paid out.  Make sure there is good legal advice on exactly what should be said and paid.

Hold firm against any further bluster. And over the next few months the organisation will need stabilising, it will need a reliable acting CEO, and the board will need to find and engage the next CEO.  That’s a time of tension and high workload for your Chair.

When it’s all done, put it behind you and turn to face the future. Good luck.

Iain Massey is CEO of South West Leaders and Upland Consulting, he is also Chairman of AICD’s South West Regional Committee and Chairman of the Board of Forrest Personnel. He is based near Bunbury, in the south west of Western Australia.

Julie’s Answer

Xuan does not need an HR background to recognise that something is horribly wrong between this board and its CEO. The whole board should provide CEO oversight and Xuan can expect help from his board colleagues. His (quite correct) instinct to use policies to control expenditure may have triggered this incident but he is not responsible; this is not just for him and the Chair to resolve.

This could get nasty and Xuan must ensure emotion does not cause anyone to say or do something unhelpful. First the board should delegate the matter to a committee. They should get copies of the CEO’s contract, last performance review, and a list of all travel taken in the last year or two with the costs, destinations, duration, and purpose of trip. If there was a travel policy or prior agreement about travel the board should also get that.

Concurrent with getting this information they should appoint a specialist employment lawyer. This is important, even if the board has HR skills, or if the company has a senior HR manager; they need impartial expert advice.

All my experience tells me that the board should part company with this CEO. It may be cheaper to accept retraction of the resignation and then terminate for cause. It may be less disruptive to accept resignation rather than an accusatorial termination. The lawyer will help plot the best course.

An interim CEO may be appointed while the board begins a search for a permanent solution. The board should consider getting training to raise their skills in CEO oversight.

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

Richard’s Answer


The CEO resigning is the best thing that happened to the not for profit. The Board should not entertain any reversal of the CEO’s resignation whatsoever.

The Board needs to act swiftly and decisively. A protracted affair has the potential to harm the reputation of the not for profit, demoralise staff and ultimately be very expensive.

Given that the CEO is making allegations and demands Xuan should recommend that the Chairman engage an employment lawyer to guide the board as to their legal position and what they should do next to minimise any potential harm.

At the same time, the Board should instruct the CFO to investigate the CEO’s travel and all other expenditure for at least a couple of financial years. Sounds like the CEO may have something to hide and could be in breach of their contractual and other fiduciary obligations. The findings must be shared with the employment lawyer.

Once this matter is resolved the Board must take a deep and hard look at itself and consider why they let the CEO behave so inappropriately for so long.  At the same time, the Board will need to revisit the NFP’s policies and procedures playbook to ensure that money and time being spent by all staff is directed exclusively to furthering the mission of the NFP.

Finally, the Board must give careful consideration as to the attributes of their next CEO and how the hiring process should be conducted (from defining the position through to background verification) so that mistakes of making a bad hire are not repeated.

Richard Sterling is a Director of AltoPartners Australia. He is based in Sydney, Australia.

La gouvernance du capital humain, source de différentiation


Voici un article publié sur le site du Harvard Law School Forum on Corporate Governance par Steve W. Klemash, Jennifer Lee et Jamie Smith de la firme EY Americas Center for Board Matters.

Cet article met l’accent sur la gestion du capital humain comme élément fondamental d’une gouvernance exemplaire. En effet, sous la pression des grands investisseurs institutionnels, les entreprises doivent redoubler d’efforts afin d’associer cette dimension à la croissance de leur valeur marchande.

J’ai procédé à la traduction et à l’adaptation de ce document en utilisant l’outil de traduction de Google. Vous trouverez, ci-dessous, l’introduction au document ainsi que ces principales conclusions.

C’est un document très intéressant qu’il faut lire au complet. Celui-ci est très bien illustré.

Bonne lecture !

Human capital: Key Findings from a Survey of Public Company Directors

 

 

« L’accent mis sur le capital humain et les talents dans la gouvernance d’entreprise s’intensifie, car de plus en plus de parties prenantes — dirigées par de grands investisseurs institutionnels — cherchent à comprendre comment les entreprises intègrent les considérations de capital humain dans la stratégie globale pour créer de la valeur à long terme. Après tout, les actifs incorporels d’une entreprise, qui comprennent le capital humain et la culture, représentent désormais une part importante de la valeur marchande d’une entreprise.

De nombreux groupes influents, dont la Global Reporting Initiative, le Embankment Project for Inclusive Capitalism, la Business Roundtable et le Sustainability Accounting Standards Board (SASB), ont identifié le capital humain comme un moteur clé de la valeur à long terme. Les développements récents reflètent un appétit clair et croissant du marché pour comprendre comment les entreprises gèrent et mesurent le capital humain. Cela inclut des investisseurs influents faisant du capital humain une priorité d’engagement auprès des administrateurs, ainsi que des lettres de commentaires de diverses parties prenantes à la Securities and Exchange Commission des États-Unis soutenant une plus grande divulgation du capital humain et affirmant l’importance de la gestion du capital humain dans l’évaluation de la valeur et de la performance potentielles d’une entreprise sur le long terme.

Dans le même temps, il y a un changement culturel continu provoqué par les nouvelles générations de travailleurs, la numérisation, l’automatisation et d’autres mégatendances liées à l’avenir du travail. Dans cette nouvelle ère, il est essentiel que les équipes de direction et les conseils d’administration suivent le rythme de cette transformation et envisagent de redéfinir la valeur à long terme et l’objectif de l’entreprise. La création de valeur pour plusieurs parties prenantes, y compris les employés, contribuera en fin de compte à créer et à maintenir la valeur pour les actionnaires à long terme. Pour mieux comprendre où en sont les entreprises dans cette aventure, un administrateur, en partenariat avec le EY Center for Board Matters, a interrogé 378 membres de conseils d’administration de sociétés ouvertes américaines à l’automne 2019.

Cet article présente nos résultats.

Principales conclusions :

    • Il existe un écart entre les administrateurs qui considèrent les questions de capital humain et de talent comme des sujets importants pour le conseil et ceux qui croient que ces questions ne relèvent pas de la compétence du conseil.
    • Près de 80 % des administrateurs affirment que leur conseil d’administration passe plus de temps à discuter de la stratégie en matière de talents qu’il y a cinq ans à peine, mais de nombreux conseils d’administration ne surveillent pas les indicateurs clés des talents.
    • Les administrateurs se tiennent au courant des tendances du capital humain et des talents, principalement par le biais de séances d’information de la direction ; pourtant, près de la moitié disent que le directeur des ressources humaines (ou équivalent) ne fait pas régulièrement rapport au conseil d’administration sur le capital humain.
    • Près de 85 % des administrateurs soutiennent les investissements dans la formation et la requalification des employés pour garantir des avantages de valeur à long terme même s’ils peuvent ne pas générer de rendements à court terme.
    • Près de la moitié des administrateurs ne pensent pas que les rapports externes de leur entreprise communiquent la stratégie de l’organisation en matière de capital humain et les résultats pour les parties prenantes qu’elle vise à produire.
    • Il existe un écart entre les administrateurs qui considèrent les questions de capital humain et de talent comme des sujets importants pour le conseil et ceux qui croient que ces questions ne relèvent pas de la compétence du conseil.

L’intérêt des intervenants pour la gouvernance du capital humain et la stratégie en matière de talents a pris de l’ampleur ces dernières années en raison de plusieurs transformations qui se sont produites au sein de la main-d’œuvre. La plus grande génération de travailleurs commence à quitter le marché du travail, des technologies de pointe sont mises en œuvre, une jeune génération de travailleurs cherche de nouvelles méthodes de travail et les parties prenantes se concentrent de plus en plus sur les questions sociales. Ces développements bouleversent la nature même du travail — et de plusieurs industries.

Certains administrateurs estiment que la question des talents appartient au niveau des ressources humaines ou de la gestion et ne relève pas de la responsabilité de surveillance du conseil, certains citant le mantra de gouvernance “nose in, fingers out” pour justifier leur point de vue. Cela peut résulter, au moins en partie, des opinions générationnelles des administrateurs dont l’expérience provient d’un environnement de travail et d’une culture très différents, et dont le conseil d’administration a longtemps adhéré aux attentes selon lesquelles la surveillance des talents se limite à la planification et au développement de la relève de C-Suite.

À l’inverse, d’autres administrateurs soutiennent non seulement que le changement de génération en cours, la transformation de la relation employeur-employé traditionnel et l’élévation de la culture d’entreprise en tant que catalyseur stratégique-clé comportant de nouveaux risques importants, mais aussi qu’un processus bien pensé et exécuté la stratégie des talents sert de différenciateur compétitif, donnant ainsi une pertinence aux questions de capital humain à la table du conseil. Certains disent que c’est la nature changeante du travail — par le biais de la numérisation, de l’automatisation et de l’économie des concerts — qui remet en question la vision à long terme et, par conséquent, les conseils d’administration doivent intégrer cette réalité en évolution dans leur discussion stratégique de base. En conséquence, selon l’étude, près de 40 % des conseils discutent régulièrement des questions de capital humain à chaque réunion du conseil.

Dans l’ensemble, la plupart des administrateurs interrogés déclarent que le problème est maîtrisé, où qu’il se trouve et sous quelque angle qu’il soit perçu. Près de 70 % des administrateurs affirment que leur conseil d’administration passe suffisamment de temps à discuter de la stratégie et des enjeux en matière de talents, 78 % affirment que leur conseil a une bonne compréhension des problèmes actuels liés aux talents et à la main-d’œuvre, et 66 % affirment que leur conseil possède les compétences et l’expérience appropriées pour superviser la stratégie des talents à l’ère de la transformation d’aujourd’hui ».

Le recrutement d’administrateurs qualifiés au sein des CA d’OBNL | Un processus délicat !


Voici un cas publié sur le site de Julie McLelland qui aborde une question de gouvernance relative à la composition du conseil d’administration d’un OBNL.

Vance préside le conseil d’administration ; il a décidé d’exploiter les forces de son réseau de contacts et de s’impliquer personnellement dans le processus de recherche d’un nouvel administrateur.

Le processus de recherche conduit à la réception de deux excellentes candidatures, alors que l’on ne cherchait à pourvoir qu’un poste.

Vance se demande quelles considérations devraient orienter son action !

Le cas a d’abord été traduit en français en utilisant Google Chrome, puis, je l’ai édité et adapté. On y présente la situation de manière sommaire, puis trois experts se prononcent sur le cas.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Le recrutement d’administrateurs qualifiés au sein des CA d’OBNL | Un processus délicat !

 

Vance préside le conseil d’administration d’une entreprise à but lucratif non lucratif (OBNL) qui aide les enfants défavorisés. Comme de nombreux présidents d’OBNL, il essaie de réunir un conseil de bénévoles passionnés axé sur les compétences. Au cours des 12 derniers mois, il a recouru à son réseau pour trouver un avocat avec les bonnes passions et les bonnes compétences. 

Il y a deux mois, une connaissance l’a présenté à quelqu’un qui avait l’air parfait. L’introduction a été faite et le « futur administrateur » était tout ce que Vance avait espéré. La conversation s’est déplacée vers les familles et Vance a appris que la personne était mariée à un autre avocat avec une formation très similaire ; ils s’étaient rencontrés au travail et, bien qu’ils soient maintenant dans différentes entreprises, ils pratiquaient toujours dans des domaines similaires.

Vance a parlé au conseil d’administration de sa rencontre avec leur nouveau collègue potentiel et ils ont convenu que le futur administrateur recevrait un dossier de candidature et qu’il serait invité à se présenter aux élections.
Il y a cinq jours, Vance a reçu deux candidatures pour le poste. Les deux conjoints veulent rejoindre le conseil d’administration.

Ainsi le conseil, qui n’avait aucune expertise juridique en son sein, se retrouve avec deux candidatures d’avocats qualifiés lesquels possédant exactement le profil souhaité. Il n’est cependant pas certain de vouloir les deux personnes, ni comment choisir l’une d’entre elles, s’il ne prend pas les deux.

Réponse de Robert

 

It is not unusual for Chairs to scour their networks for potential directors. As many as 65% of director roles in Australia are filled without going to a formal recruitment stage, so Vance’s dilemma is not uncommon. For Vance, his challenge comes in the form of practicing good leadership and ensuring good governance practices.

There are two levels of conflict for Vance to consider. Vance has a potential internal conflict of not wanting to hurt anyone which may impair his judgement. Vance also has a potential conflict of interest as he has met the directors individually outside of a formal nominations process and has formed a somewhat biased view, i.e. this is the perfect director to fill this position.
Working in the best interest of the organisation, I would advise Vance to immediately step back and hand over the process to an independent director or (nomination) committee to ensure proper process. He also needs to be clear that the final decision will be a joint one, not his alone.

Although the prospect of recruiting two highly sought-after directors to your non-profit board is tantalising, the board and/or committee should consult their skills matrix, review the role requirements, and decide if they actually need two lawyers. They should also consider broader factors such as relevance of past experience, diversity and interpersonal skills.
The board could also consider offering a position on a committee for the unsuccessful candidate with a view of nomination at the next intake.

In the worst case scenario having aligned directors, such as family members, can impair independence in discussion and decision making, create voting blocks and hamper processes if one director needs to be stood down. If both are appointed, I would advise the whole board to discuss and develop strategies to minimise these types of issues before they arise.

__________________________

Robert Crowe is Chairman of Connect Child and Family Services and Managing Director of Leading for Purpose. He is based in Sydney , Australia.

 

Réponse de Julie

 

There is no law against married couples being members of the same board. This is rarely covered in constitutions although some constitutions require directors to be independent of other directors and members of staff.

Directors must act independently of each other and never act as a unit. Having a voting block, even if only two, seriously reduces a board’s ability to reach informed consensus.

The board needs to access diverse skills and experiences to enrich debate and enhance decision-making. Two board members from the same generation, with similar professional backgrounds and skills, and living in the same geographic and socio-economic environment, inevitably reduces overall board diversity.

People aren’t lego-bricks. Feelings may be hurt if he declines one candidate. Vance could be in a situation where his board gets both or neither.

Vance needs to balance the undoubted value that these candidates offer against the next skills needed under his board’s succession plan. Can the board operate effectively without those skills? What will be the impact on the projected skills matrix for the next nine years?

Finally Vance needs to evaluate the board’s processes. Does the nomination pack suggest that completing the paperwork automatically leads to standing for election (or appointment to a casual vacancy)? Does the board want to include a nominations committee to get more strategic in targeting skills? How are conflicts of interest registered, declared and managed? Is the current process good enough to handle issues arising from a married couple both on the board? Can the chair manage discussions well enough?

If the systems and succession plan can cope Vance should cope also.

____________________________

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

Réponse de Keith

 

Having a married couple in any organization has its challenges and certainly this is no different on a Board of Directors.

It is advisable to always be sure to undergo an independent search process to insure that your organization is seeing the top talent the market has to offer, unbiassed consul on available candidates and a proven process for selection.

In this case, consider: why this family have a passion for this organization? what is reasoning for them both to apply? Posing these questions to them, you may find one of the spouses withdraws rather quickly when they speak to each other. Assuming they are of equal abilities and fit, this removes the dilemma. If they have solid reasoning it becomes trickier.

Having a married couple on a board would certainly create potential conflict of interest. On the other hand (as most married couples would attest to) they don’t always agree and could work in a constructive and absolutely independent manner. A major consideration also is the size, breadth and revenue of your NFP and are there major contracts awarded? If so, can they be in anyway influenced by the board? This being the case, it could be called into question if a contract is awarded where they have some personal gain. Even though this conflict is no different than on any board of directors, it could create a major issue.

If the board has two seats available don’t look a gift horse in the mouth. So long as their intentions are sound and their skills are relevant. This could provide your organization with a power couple fundraising/PR “dynamic duo”.

___________________________

Keith Labbett is Co-founder and Co-chair of The Canadian University Mens Rugby Championship and Managing Partner of  Osprey Executive Search. He is based in Toronto, Canada.

Le dilemme d’un administrateur indépendant dans un cas de vol de données


Voici un cas publié sur le site de Julie McLelland qui aborde une situation où Trevor, un administrateur indépendant, croyait que le grand succès de l’entreprise était le reflet d’une solide gouvernance.

Trevor préside le comité d’audit et il se soucie de mettre en place de saines pratiques de gouvernance. Cependant, cette société cotée en bourse avait des failles en matière de gestion des risques numériques et de cybersécurité.

De plus, le seul administrateur indépendant n’a pas été informé qu’un vol de données très sensibles avait été fait et que des demandes de rançons avaient été effectuées.

L’organisation a d’abord nié que les informations subtilisées provenaient de leurs systèmes, avant d’admettre que les données avaient été fichées un an auparavant ! Les résultats furent dramatiques…

Trevor se demande comment il peut aider l’organisation à affronter la tempête !

Le cas a d’abord été traduit en français en utilisant Google Chrome, puis, je l’ai édité et adapté. On y présente la situation de manière sommaire puis trois experts se prononcent sur le cas.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Le dilemme d’un administrateur indépendant dans un cas de vol de données

 

 

 

 

 

 

 

 

 

Trevor est administrateur d’une société cotée qui a été un «chouchou du marché». La société fournit des évaluations de crédit et une vérification des données. Les fondateurs ont tous deux une solide expérience dans le secteur et un solide réseau de contacts et à une liste de clients qui comprenait des gouvernements et des institutions financières.

Après l’entrée en bourse, il y a deux ans, la société a atteint ou dépassé les prévisions et Trevor est fier d’être le seul administrateur indépendant siégeant au conseil d’administration aux côtés des deux fondateurs et du PDG. Il préside le comité d’audit et, officieusement, il a été l’initiateur des processus de gouvernance et de sa documentation.

Les fondateurs sont restés très actifs dans l’entreprise et Trevor s’est parfois inquiété du fait que certaines décisions stratégiques n’avaient pas été portées à son attention avant la réunion du conseil d’administration. Comme l’expérience de Trevor est l’audit et l’assurance, il suppose qu’il n’aurait pas ajouté de valeur au-delà de la garantie d’un processus sain et de la tenue de registres.

Il y a trois semaines, tout a changé. Une grande partie des données de l’entreprise ont été subtilisées et transférées sur le « dark web ». Ce vol comprenait les données financières des personnes qui avaient été évaluées ainsi que des données d’identification tels que les numéros de dossier fiscal et les adresses résidentielles. Pire, la société a d’abord affirmé que les informations ne provenaient pas de leurs systèmes, puis a admis avoir reçu des demandes de rançon indiquant que les données avaient été fichées jusqu’à un an avant cette catastrophe.

Plusieurs clients ont fermé leur compte, les actionnaires sont consternés, le cours de l’action est en chute libre et la presse réclame plus d’informations.

Comment Trevor devrait-il aider l’entreprise à surmonter cette tempête ?

Pour prendre connaissance de ce cas, rendez-vous sur www.mclellan.com.au/newsletter.html et cliquez sur « lire le dernier numéro ».

Adam’s Answer

 

This is a critical time for Trevor legally and reputationally, it is also a time when being an independent director carries additional responsibility to the company, the shareholders, the staff and the customers.

All Directors and Executives can only have one response to a blackmail attempt.  That is to immediately report it to the police and not respond to the ransomware demands.  Secondly the company should have had a crisis management plan in place ready for such an eventuality.  In this day and age, no company should operate without a cybercrime contingency plan.

In this case it is unclear, but it appears that the authorities were not informed and that Trevor’s company was unprepared for a data breach or ransomware demands.

There are 2 scenarios open to Trevor:

1) If Trevor was not informed straight away of the ransom demands and the CEO and founding Executive Directors knew but did not brief him on the ransom issue and the company’s response, then his independent status has been compromised and he should resign.

2) If Trevor was informed and the whole Board was involved in the response, then Trevor must remain and help the company ride out the storm.   This will involve working with the police, the ASX and crisis management guidance from external suppliers – technical and PR. 

The rule to follow is full transparency and speedy action. 

Trevor should refer to the recent ransomware attack on Toll Logistics and their response which was exemplary.

Adam Salzer OAM is the Chair and Global Designer for Whitewater Transformations. His other board experience includes Australian Transformation and Turnaround Association (AusTTA), Asian Transformation and Turnaround Association (ATTA), Australian Deafness Council, Bell Shakespeare Company, and NSW Deaf Society. He is based in Sydney, Australia.

Julie’s Answer

 

This is a listed company; Trevor must ensure appropriate disclosure. A trading halt may give the company time to investigate, and respond to, the events and then give the market time to disseminate the information. His customer liaison at the stock exchange should assist with implementing a halt and issuing a brief statement saying what has happened and that the company will issue more information when it becomes available.

This will be a costly and distracting exercise that could derail the company from its current successful track.

Three of the four board members are executives. That doesn’t mean the fourth can rely on their efforts. Trevor must add value by asking intelligent questions that people involved in the operations will possibly not think to ask. This board must work as a team rather than a group of individuals who each contribute their own expertise and then come together to document decisions that were not made rigorously or jointly.

Trevor has now learnt that there is more to good governance than just having meetings and documenting processes. He needs to get involved and truly understand the business. If his fellow directors do not welcome this, he needs to consider whether they are taking him seriously or just using him as window-dressing. He should ensure that the whole board is never again left out of the information flow when something important happens (or even when it perhaps might happen).

He should also take the lead on procuring legal advice (they are going to need it), liaising with the regulators, and establishing crisis communications. Engaging a specialist communications firm may help.

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

Jinan’s Answer

 

I recommend three separate parallel streams of work for Trevor. 

1. Immediate public facing actions
Immediately apologize and state your commitment to your customers.  Hire a PR firm and have the most public facing person issue an apology. The person selected to issue the apology has to be selected carefully (cannot be the person responsible for leak, and has potential to become the new trusted CEO)

2. Tactical internal actions
Assess the damage and contain the incident.  Engage an incident response firm to assess how the breach happened, when it happened, what was stolen. Confirm that leak doors are closed. Select your IR firm carefully – the better reputed they are, the better you will look in litigation.
Conduct an immediate audit and investigation. You need to understand who knew, when and why this was buried for a year.
Take disciplinary action against anyone who was part of the breach. Post audit, either allow them to keep their equity or buy them out.

3. Strategic actions
Review and update your cybersecurity incident response process.  This includes your ransomware processes (e.g. will you pay, how you pay, etc.), and how you communicate incidents. 
Build cybersecurity awareness, behavior and culture up, down and across your company.  Ensure that everyone from the board down are educated, enabled and enthusiastic about their own and your company’s cyber-safety. This is a journey not a one-off miracle.
Extend cybersecurity engagement to your customers. Be proactive not only on the status of this incident, but also on how you are keeping their data safe.  Go a step further and offer them help in their own cyber-safety.
Create a forward thinking, business and risk-aligned cybersecurity strategy. Understand your current people, process and technology gaps which led to this decision and how you’ll fix them.
Elevate the role of cybersecurity leadership.  You will need a chief information security officer who is empowered to execute the strategy, and has a regular and independent seat at the board table. 

Jinan Budge is Principal Analyst Serving Security and Risk Professionals at Forrester and a former Director Cyber Security, Strategy and Governance at Transport for NSW. She is based in Sydney, New South Wales, Australia.

Le modèle de gouvernance canadien donne la primauté aux Stakeholders | Le modèle de Wall Street donne la primauté aux actionnaires !


Shareholder Governance, “Wall Street” and the View from Canada

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The Business Roundtable, a group of executives of major corporations in the United States, recently released a statement on the purpose of a corporation that reflects a shift from shareholder primacy to a commitment to all stakeholders. While the statement seems radical to some, it is consistent with recent Canadian corporate law. Boards of directors in Canada have had to make decisions incorporating the concepts expressed in the Business Roundtable statement for over a decade.

The primary concern expressed by those opposed to a shift from shareholder primacy is that it undercuts managerial accountability, thereby resulting in increased agency costs and undermining the overall effectiveness and efficiency of corporations. The experience in Canada suggests such concerns are largely overblown.

A stakeholder-based governance model rejects the idea that corporations exist principally to serve shareholders. Instead, a stakeholder-based governance model requires the consideration of various stakeholder groups to inform directors as to what is in the best interest of the corporation.

The move to a stakeholder-based governance model is largely the result of general dissatisfaction with the shareholder primacy model, under which:

    • Management and boards felt intense pressure to focus on short-term results at the expense of long-term success;
    • Communities and workers often felt ignored or abandoned;
    • Customers felt unsatisfied with product quality and customer service;
    • And suppliers felt threatened and pressured to drive down costs, even if doing so requires reducing quality or moving offshore.

Indeed, the introduction of the statement by the Business Roundtable provides that:

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.

Put differently, a stakeholder model reflects a rejection of the Gordon Gekko ethos from the 1987 movie “Wall Street” that “greed, for lack of a better word, is good.”

The 2008 Supreme Court of Canada decision in BCE Inc. v 1976 Debentureholders rejected Revlon duties to maximize shareholder value in connection with a change of control transaction. In its decision, the court specifically provided that “the fiduciary duty of the directors to the corporation originated in common law. It is a duty to act in the best interests of the corporation. Often the interests of shareholders and stakeholders are co-extensive with the interests of the corporation. But if they conflict, the directors’ duty is clear—it is to the corporation.”

The thinking in the BCE decision has now been reflected in Canada’s federal corporate statute, which provides that that, when acting with a view to the best interests of the corporation, directors may consider, without limitation, the interests of shareholders, employees, retirees and pensioners, creditors, consumers and governments; the environment; and the long-term interests of the corporation.

At its most basic level, the move away from shareholder primacy better reflects the history and animating principles of corporate law, which establish that a corporation is a separate legal person and its shareholders are not owners of its assets per se, but investors with certain contractual and statutory rights (including a right to elect directors and a residual claim on the assets). That distinction―that shareholders are not owners in the classic sense―is of fundamental importance and gets to the heart of corporate governance and the role of boards. Indeed, the seminal work of Berle and Means, which has influenced a generation of corporate governance scholars, is focused exactly on the separation of ownership and control.

When the BCE decision first came out in Canada some expressed concern that a focus on the corporation provides no meaningful guidance for boards of directors. That concern has not manifested itself. The experience of advising boards following BCE has not been one of confusion or uncertainty―that’s not to say decisions are easy, but well-advised boards of directors understand and act in accordance with their fiduciary duties as expressed by BCE.

It is also worth pointing out that a singular focus on shareholders does not provide clear guidance to boards of directors. In a modern public company, shareholders come and go, each with their own investment criteria and objectives.

As a practical matter, in Canada, a stakeholder model allows directors to exercise their business judgment to consider the interests of stakeholders, to the extent those directors have an informed basis for believing that doing so will contribute to the long-term success and value of the corporation. However, in the context of a change of control transaction, much of the focus rightly remains on what consideration shareholders will receive.

As long as directors fulfill their duties of loyalty and due care when considering the interests and reasonable expectations of the corporation’s stakeholders, the business judgment rule protects Canadian directors from liability. Minutes of meetings should reflect, where appropriate, that directors considered such factors as reputation of the corporation, legal and regulatory risk, investments in employees, the environment and any other matter that could affect the success or value of the corporation.

Other factors that help address concerns of those who fear a stakeholder-based governance system is that the market for corporate control remains healthy and, since Canadian securities law does not permit a “just say no” defense, the threat of an unsolicited offer being made directly to shareholders is always present. In addition, product markets and reputational pressures also provide meaningful incentives to promote responsible and disciplined management. And perhaps most important, shareholders retain their most basic and powerful right in the stakeholder model: they elect the board of directors and can change the board if they are dissatisfied with its performance.

So, to our friends in the United States, we encourage you to consider the experience here in Canada before concluding that the ideas put forth by the Business Roundtable will undermine the effectiveness of your public corporations.

Une étude empirique sur la culture organisationnelle


La recherche empirique* présentée ci-dessous utilise une méthodologie particulière d’entrevue/survey auprès d’un échantillon de 1 348 dirigeants nord-américains afin de trouver réponse aux questions suivantes :

(1) Qu’est-ce que la culture et comment la mesurez-vous ?

(2) La culture est-elle une variable importante ?

(3) Peut-on attribuer une valeur à la culture organisationnelle ?

(4) Quels sont les résultats associés à une culture déficiente ?

(5) Comment établir une culture plus efficace à l’échelle de l’organisation ?

L’article publié sur le site de Harvard Law School Forum on Corporate Governance, révèle plusieurs résultats convaincants :

92 % des hauts dirigeants croient que l’amélioration de la culture influence positivement la valeur de l’entreprise ;

84 % des hauts dirigeants croient qu’ils doivent améliorer la culture de leurs organisations ;

85 % croient qu’une culture déficiente peut amener les employés à agir de manière non éthique, ou illégalement ;

Les hauts dirigeants croient quasi unanimement que la culture est une variable très importante, et que le prérequis pour son amélioration est de déterminer comment et pourquoi celle-ci est si importante.

Les auteurs concluent que les études empiriques sur le rôle crucial de la culture organisationnelle sont encore trop rares, malgré le fait que ce facteur est probablement le plus déterminant dans l’établissement de la valeur des firmes.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

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Corporate Culture: Evidence from the Field

 

While there is a lot of talk about corporate culture, there is very little empirical work—because culture is very difficult to measure. In our paper, Corporate Culture: Evidence from the Field, we use a novel interview/survey method that is ideally suited to explore the questions: ‘what is culture and how do you measure it?’, ‘does culture matter?’, ‘can we attach a value to culture?’, ‘what are the implications of an ineffective culture?’, and ‘how can a more effective culture be established within the firm?’ Our paper is based on a very large sample of 1,348 executives from North American firms in the survey part and 20% of the U.S. market capitalization in the interviews. Essentially, our study creates the first large scale database of corporate culture.

The results are striking. 92% believe that improving culture will lead to increased value at their firm. Yet 84% of CEO/CFOs believe they need to improve their firm’s culture. A notable 85% believe that a poorly implemented culture increases the chances that an employee would act unethically or even illegally. While executives share a near-unanimous belief that corporate culture matters, a prerequisite to improving culture is to determine how and why culture matters.

We show the potential importance of separating cultural values and norms for understanding the connection between culture and performance. Cultural values are the ideals employees strive to fulfill, while cultural norms reflect whether employees “walk the talk” by actually living out these values. While leaders are often puzzled when employees act contrary to a company’s stated values, our research suggests warning indicators are usually there in the form of employees’ day-to-day actions or norms. Our analyses of the survey data suggests leaders should start paying attention to these norms to understand the influence corporate culture has on firm performance. In fact, we do not find a strong relation between tracking stated cultural values and business outcomes. Instead, we find that for stated cultural values to have full impact on business outcomes, they must be complemented by norms that dictate actual behavior.

We also highlight what executives think works for and against an effective corporate culture as well as what does not matter. We find that formal institutions such as governance and compensation can either reinforce or work against the corporate culture. Some of the factors that executives say do not affect culture, such as the board of directors, are surprising; ultimately, these non-factors may be the items that need to change for culture to have its greatest potential impact on performance. Finally, given that an effective culture is positively associated with value creation and economic efficiency, we ask executives what is preventing their firm’s culture from being effective in practice: 69% blame their firms’ underinvestment in culture.

Some additional highlights from our study reveal how business executives strongly believe that an effective corporate culture enhances firm value. For example, it might be surprising that culture matters so much that 54% of executives would walk away from an M&A target that is culturally misaligned, while another one-third would discount the target by between 10%-30% of the purchase price. Executives also link culture to a wide range of decisions including ethical choices (compliance, short-termism), innovation (creativity, risk taking) and value creation (productivity, investment). For example, 77% percent of executives indicate that culture plays a moderate or important role in compliance decisions, and 69% indicate the same about the importance of culture to financial reporting quality.

The executives’ responses also point to the role of culture in decisions by firms to potentially take myopic actions that boost short-term stock price at the expense of long-term value. A majority believe that an effective culture would reduce the tendency of companies to engage in value-destroying end-of-quarter practices such as delaying valuable projects to hit consensus earnings. Similarly, using a hypothetical question that asks respondents to choose between two otherwise identical projects with five year durations, we find that 41% would choose the NPV-inferior project that favors short-term profitability. Among executives that choose projects that enhance long-term value (over projects that enhance short-term objectives), 80% indicate their firm culture influences their choices. Finally, many executives believe that their firms take on too little risk because of a dysfunctional culture.

In conclusion, we believe corporate culture deserves substantial attention going forward and we hope our paper helps build a bridge to enable this future. Our paper contains a host of descriptive information, which we interpret within the context of the related theory, offering suggestions on how firms can implement effective culture and what considerations future theory should focus on. In addition, we have an accompanying paper, Corporate Culture: The Interview Evidence, in which we highlight some of the schemes that executives shared with us and that either reinforce the culture by rewarding employees for living the cultural values or lead employees to ignore those values.

The complete paper is available for download here.


*Jillian Grennan is Assistant Professor of Finance at the Duke University Fuqua School of Business. This post is based on a recent paper by Professor Grennan; John R. Graham, D. Richard Mead, Jr. Family Professor at the Fuqua School of Business at Duke University; Campbell R. Harvey is Professor of Finance at the Fuqua School of Business at Duke University; and Shiva Rajgopal is the Kester and Byrnes Professor of Accounting and Auditing at Columbia Business School.

En rappel | Constats sur la perte de contrôle des sociétés québécoises | Le cas de RONA


C’est avec plaisir que je partage l’opinion de Yvan Allaire, président exécutif du CA de l’IGOPP, publié le 4 novembre dans La Presse.

Ce troisième acte de la saga RONA constitue, en quelque sorte, une constatation de la dure réalité des affaires corporatives d’une société multinationale, vécue dans le contexte du marché financier québécois.

Yvan Allaire présente certains moyens à prendre afin d’éviter la perte de contrôle des fleurons québécois.

Selon l’auteur, « Il serait approprié que toutes les institutions financières canadiennes appuient ces formes de capital, en particulier les actions multivotantes, pourvu qu’elles soient bien encadrées. C’est ce que font la Caisse de dépôt, le Fonds de solidarité et les grands fonds institutionnels canadiens regroupés dans la Coalition canadienne pour la bonne gouvernance ».

Cette opinion d’Yvan Allaire est un rappel aux moyens de défense efficaces face à des possibilités de prises de contrôle hostiles.

Dans le contexte juridique et réglementaire canadien, le seul obstacle aux prises de contrôle non souhaitées provient d’une structure de capital à double classe d’actions ou toute forme de propriété (actionnaires de contrôle, protection législative) qui met la société à l’abri des pressions à court terme des actionnaires de tout acabit. Faut-il rappeler que les grandes sociétés québécoises (et canadiennes) doivent leur pérennité à des formes de capital de cette nature, tout particulièrement les actions à vote multiple ?

Bonne lecture !

RONA, LE TROISIÈME ACTE

 

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Acte I : La velléité de la société américaine Lowe’s d’acquérir RONA survenant à la veille d’une campagne électorale au Québec suscite un vif émoi et un consensus politique : il faut se donner les moyens de bloquer de telles manœuvres « hostiles ». Inquiet de cette agitation politique et sociale, Lowe’s ne dépose pas d’offre.

Acte II : Lowe’s fait une offre « généreuse » qui reçoit l’appui enthousiaste des dirigeants, membres du conseil et actionnaires de RONA, tous fortement enrichis par cette transaction. Lowe’s devient propriétaire de la société québécoise.

Acte III : Devant un aréopage politique et médiatique québécois, s’est déroulé la semaine dernière un troisième acte grinçant, bien que sans suspense, puisque prévisible dès le deuxième acte.

En effet, qui pouvait croire aux engagements solennels, voire éternels, de permanence des emplois, etc. pris par l’acquéreur Lowe’s en fin du deuxième acte ?

Cette société cotée en Bourse américaine ne peut se soustraire au seul engagement qui compte : tout faire pour maintenir et propulser le prix de son action. Il y va de la permanence des dirigeants et du quantum de leur rémunération. Toute hésitation, toute tergiversation à prendre les mesures nécessaires pour répondre aux attentes des actionnaires sera sévèrement punie.

C’est la loi implacable des marchés financiers. Quiconque est surpris des mesures prises par Lowe’s chez RONA n’a pas compris les règles de l’économie mondialisée et financiarisée. Ces règles s’appliquent également aux entreprises canadiennes lors d’acquisitions de sociétés étrangères.

On peut évidemment regretter cette tournure, pourtant prévisible, chez RONA, mais il ne sert à rien ni à personne d’invoquer de possibles représailles en catimini contre RONA.

QUE FAIRE, ALORS ?

Ce n’est pas en aval, mais en amont que l’on doit agir. Dans le contexte juridique et réglementaire canadien, le seul obstacle aux prises de contrôle non souhaitées provient d’une structure de capital à double classe d’actions ou toute forme de propriété (actionnaires de contrôle, protection législative) qui met la société à l’abri des pressions à court terme des actionnaires de tout acabit. Faut-il rappeler que les grandes sociétés québécoises (et canadiennes) doivent leur pérennité à des formes de capital de cette nature, tout particulièrement les actions à vote multiple ?

Il serait approprié que toutes les institutions financières canadiennes appuient ces formes de capital, en particulier les actions multivotantes, pourvu qu’elles soient bien encadrées. C’est ce que font la Caisse de dépôt, le Fonds de solidarité et les grands fonds institutionnels canadiens regroupés dans la Coalition canadienne pour la bonne gouvernance.

(Il est étonnant que Desjardins, quintessentielle institution québécoise, se soit dotée d’une politique selon laquelle cette institution « ne privilégie pas les actions multivotantes, qu’il s’agit d’une orientation globale qui a été mûrement réfléchie et qui s’appuie sur les travaux et analyses de différents spécialistes » ; cette politique donne à Desjardins, paraît-il, toute la souplesse requise pour évaluer les situations au cas par cas ! On est loin du soutien aux entrepreneurs auquel on se serait attendu de Desjardins.)

Mais que fait-on lorsque, comme ce fut le cas au deuxième acte de RONA, les administrateurs et les dirigeants appuient avec enthousiasme la prise de contrôle de leur société ? Alors restent les actionnaires pourtant grands gagnants en vertu des primes payées par l’acquéreur. Certains actionnaires institutionnels à mission publique, réunis en consortium, pourraient détenir suffisamment d’actions (33,3 %) pour bloquer une transaction.

Ce type de consortium informel devrait toutefois être constitué bien avant toute offre d’achat et ne porter que sur quelques sociétés d’une importance stratégique évidente pour le Québec.

Sans actionnaire de contrôle, sans protection juridique contre les prises de contrôle étrangères (comme c’est le cas pour les banques et compagnies d’assurances, les sociétés de télécommunications, de transport aérien), sans mesures pour protéger des entreprises stratégiques, il faut alors se soumettre hélas aux impératifs des marchés financiers.

Spencer Stuart Board Index | 2019.


Julie Hembrock Daum , Laurel McCarthy et Ann Yerger, associés de la firme  Spencer Stuart présentent les grandes lignes du rapport annuel Spencer Stuart Board Index | 2019.

Comme vous le noterez, les changements observés sont cohérents avec les changements de fonds en gouvernance.

Cependant, puisque les CA ont tendance à être de plus petites tailles et que la rotation des administrateurs sur les conseils est plutôt faible, les changements se font à un rythme trop lent pour observer une modernisation significative

The 2019 U.S. Spencer Stuart Board Index finds that boards are heeding the growing calls from shareholders and other stakeholders and adding new directors with diversity of gender, age, race/ethnicity and professional backgrounds. However, because boardroom turnover remains low, with the new directors representing only 8% of all S&P 500 directors, changes to overall numbers continue at a slow pace.

Voici les points saillants de l’étude.

Bonne lecture !

2019 U.S. Spencer Stuart Board Index

 

A summary of the most notable findings in the 2019 U.S. Spencer Stuart Board Index.

Key Takeaways—2019 Spencer Stuart Board Index

Diversity is a priority

Of the 432 independent directors added to S&P 500 boards over the past year, a record-breaking 59% are diverse (defined as women and minority men), up from half last year. Women comprise 46% of the incoming class. Minority women (defined as African-American/Black, Asian and Hispanic/Latino) comprise 10% of new S&P 500 directors, and minority men 13%.

The professional experiences of S&P 500 directors are changing

Two thirds (65%) of the 2019 incoming class come from outside the ranks of CEO, chair/vice chair, president and COO. Financial talent is a focus area; 27% of the new directors have financial backgrounds. Other corporate leadership skills are valued, with 23% bringing experiences as division/subsidiary heads or as EVPs, SVPs or functional unit leaders.

Diverse directors are driving the changing profile of new S&P 500 directors

Only 19% of the diverse directors are current or former CEOs, compared to 44% of non-diverse men. Meanwhile 34% of the diverse directors are first-time corporate directors, nearly double the 18% of the non-diverse directors. Diverse directors bring other types of corporate leadership experience to the boardroom, with 31% of the diverse directors offering experiences as current or former line or functional leaders, compared to just 11% of the non-diverse men.

Sitting CEOs are increasingly not sitting on outside boards

This year’s survey found that on average, independent directors of S&P 500 companies serve on 2.1 boards, unchanged over the past five years. Meanwhile 59% of S&P 500 CEOs serve on no outside boards, up from 55% last year. Only 23 S&P 500 CEOs (5%) serve on two or more outside boards, and 79 independent directors (2%) serve on more than four public company boards.

Boards are adding younger directors, but the average age of S&P 500 directors is unchanged

Once again, one out of six directors added to S&P 500 boards are 50 or younger. Over half (59%) bring experiences from the private equity/investment management, consumer and information technology sectors. These younger directors are more diverse than the rest of the incoming class, with 69% either women (57% of “next gen” group) or minority men (12% of “next gen” group). They are also more likely to be serving on their first corporate board; 54% are first-time directors.

However, an overwhelming number of new directors are older. More than 40% of the incoming class is 60 or older; the average age of a new S&P 500 independent director is 57.5 years. Of the universe of S&P 500 independent directors, 20% are 70 or older, while only 6% are 50 or younger. The average age of an S&P 500 independent director is 63, largely unchanged since 2009.

Low turnover in the boardroom persists

Consistent with past years, 56% of S&P 500 boards added at least one independent director over the past year. More than one quarter (29%) made no changes to their roster of independent directors—neither adding nor losing independent directors—and 15% reduced the number of independent directors without adding any new independent directors.

The end result: in spite of the record number of female directors, representation of women on S&P 500 boards increased incrementally to 26% of all directors, up from 24% in 2018 and 16% in 2009. Today, 19% of all directors of the top 200 companies are male or female minorities, up from 17% last year and 15% in 2009.

Individual director assessments are gaining traction, but mandatory retirement policies continue to proliferate

This year 44% of S&P 500 companies disclosed some form of individual director assessment (up from 38% last year and 22% 10 years ago). However, 71% of S&P 500 boards (largely unchanged over the past five years) disclosed a mandatory retirement age for directors, and retirement ages continue to rise, with 46% of boards with caps setting the age at 75 or older, compared to just 15% in 2009.

Age caps influenced the majority of director departures from boards with retirement policies, with 41% either exceeding or reaching the age cap and another 14% leaving within three years of the retirement age.

Demographically, only 15% of the independent directors on boards with age caps are within three years of mandatory retirement. As a result, most S&P 500 directors have a long runway before reaching mandatory retirement.

Independent board chairs continue to grow in numbers and pay

Today more than half of S&P 500 boards (53%) split the chair and CEO roles, up from 37% a decade ago. One-third (34%) are chaired by an independent director, up from 31% last year and 16% in 2009.

Although the roles and responsibilities of an independent board chair and a lead director are frequently similar, the difference in compensation is wide and growing. Independent chairs receive, on average, an additional $172,000 in annual compensation, compared to an annual average supplement of $41,000 for independent lead directors.

For the first time, total director pay at S&P 500 boards averages more than $300,000

The average total compensation for S&P 500 non-employee directors, excluding independent chairs, is around $303,000, a 2% year-over-year increase. Director pay varies widely by sector, with a $100,000 difference between the average total pay of the highest and lowest paying sectors.

Key Takeaways—Survey of S&P 500 Nominating and Governance Committee Members

Our survey of more than 110 nominating and governance committee members of S&P 500 companies portends a continuation of trends identified in 2019 U.S. Spencer Stuart Board Index.

Turnover in the boardroom will remain low

On average, the surveyed nominating and governance committee members anticipate appointing/replacing one director each year over the next three years.

Boards will increase their focus on racial/ethnic diversity and continue to focus on gender diversity

Diversity considerations are two of the top five issues for the next three years. While 75% of the surveyed committee members reported that gender diversity was addressed in the past year, 66% said it would continue to be a priority over the next three years. Only 38% reported that racial/ethnic diversity was addressed in the past year, but 65% said it was a top priority for the next three years.

Industry experience will be a key recruiting consideration

The top priority for the next three years—cited by 82% of the surveyed committee members—is expanding director sector/industry experience.

Evaluations of boards and directors will be examined

Enhancing board and individual director evaluations is another top priority for the next three years, identified by 61% of the respondents. While more than three quarters of respondents ranked their full board and committee assessments as very or extremely effective, only 62% gave similar marks to peer evaluations and a just over a majority (53%) gave similar rankings to self-assessments.

Boards will have to cast a wide net to identify director talent

The top five recruiting priorities for the next three years are: female directors (40%); technology experience (38%); active CEO/COO (35%); digital/social media experience (29%); and minorities (27%). Finding a single director who meets all of these criteria is difficult at best, and given supply/demand pressures, boards will have to dig deeper to identify qualified director candidates.

Together the 2019 U.S. Spencer Stuart Board Index and Spencer Stuart’s Survey of S&P 500 Nominating and Governance Committee Members indicate that the profile of S&P 500 directors will continue to change and board composition will continue to evolve. But the pace of change will remain measured.

Actionnaires de contrôle des entreprises | cibles des activistes


Voici un article très intéressant de Amy Freedman, Michael Fein et Ian Robertson de la firme Kingsdale Advisors, publié sur le Forum de Harvard Law School aujourd’hui.

Les auteurs expliquent très bien les situations de contrôle et de quasi-contrôle des entreprises. Ils montrent pourquoi ces entreprises sont vulnérables et comment elles constituent une cible de choix pour les activistes, qui n’hésitent pas à utiliser différents moyens pour arriver à leurs fins.

Les actionnaires minoritaires activistes cherchent à bouleverser les structures de contrôle existantes afin de diminuer le pouvoir des principaux propriétaires. Ultimement, on cherche à modifier la composition du conseil d’administration.

L’article expose différents stratagèmes pour ébranler le pouvoir des actionnaires de contrôle.

      • « Undermine the image of the current board and controlling shareholder as competent business managers
      • Identify and exploit divides between independent directors and the controlling shareholder’s representatives
      • Where familial relationships exist, seek to divide the family members or position them against other directors
      • Demonstrate unfair and abusive treatment of minority shareholders
      • Shine a spotlight on what is seen as “self-dealing” in exposing related-party transactions
      • Demonstrate a divide between top management and the average worker on pay issues
      • Illustrate divides where board and management are out of touch with other stakeholder groups beyond shareholders such as employees, unions, and the communities in which they operate
      • Inflict brand damage that will impact business relations with customers, consumers, and the general public ».

Bonne lecture !

Fall of the Ivory Tower: Controlled Companies and Shareholder Activism

 

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Despite longstanding complaints about governance and the tyranny of a few who may or may not hold a meaningful economic interest in the company they founded and/or now control, investors have continued to allocate to controlled or quasi-controlled companies. What has changed is that minority shareholders are no longer content to sit quietly and go along for the ride, increasingly demonstrating they are willing to pull on the few levers of activism and change available at these companies.

Companies that were set up to inoculate themselves from the whims of shareholders have now become targets. Even if directors aren’t at risk of losing their seats in a vote, they are at risk of losing their reputations and being embarrassed into change.

While governance concerns usually provide the thin edge of the wedge to begin the advancement of change, the underlying driver for a minority shareholder is usually a dissatisfaction with the way the controlling entity is running the business—not just in terms of current performance, but also in a lack of willingness to explore other accretive opportunities that may impact the controller’s vision for the company and status quo.

Many of today’s controlled and quasi-controlled companies found their genesis in family enterprises that grew beyond the bounds of private ownership to embrace the opportunities of external capital and diversified ownership, for better or worse.

Given strong, centralized leadership from proven entrepreneur-managers, senior management, and closely aligned directors, the boards of these companies have traditionally seen themselves as only marginally accountable to minority shareholders that held slivers of “their company.” But all of this is starting to transform as shareholders have begun testing the waters for change. The fact is, controlled companies are no longer impenetrable. But will they realize this? And if not, at what cost?

A general awareness of the tools of shareholder activism, the advent of advocacy and advisory groups who target ESG issues at public companies (especially those who are seen as governance laggards), and advancing regulations related to disclosure and transparency have created an environment where controlled companies are exposed, at least from a reputational perspective.

Activists have developed an appetite and motivation for chasing difficult targets Notably, Third Point ran a highly publicized proxy contest to replace the entire twelve-person board at Campbell Soup Company, despite the fact that heirs of the company’s founder held 41% of the shares. Third Point ultimately settled for two seats on an expanded fourteen-person board, indicating that some degree of change is possible despite daunting odds.

While it is unlikely a shareholder proposal related to something like executive pay disclosure would pass, it could serve to embarrass the company and educate the broader shareholder base and market about the actions of the current management.

So far, 2019 has seen the greatest frequency of say-on-pay proposals received by controlled issuers. Furthermore, 2019 has seen an unprecedented level of shareholder support, with an average of 24.95%, compared to 20.65% in 2017 and 17.68% in 2015, years that had comparable volumes of proposals.

How We Define Control

A controlled company is commonly defined as a corporation where more than 50% of voting power is held by a single person, entity, or group. This may be facilitated through a dual-class share structure or outright ownership of the majority of an issuer’s common shares outstanding.

A wider concept of control may also include quasi-controlled companies, wherein a stake of 20% or greater is held by a single person, entity, or group.

Both types of controlled groups are largely comprised of enterprises that were once family-operated or those that have a strategic partner with a large ownership stake. Despite partially divesting their significant ownership stakes, these families and stakeholders still maintain extraordinary influence over operating facets of these companies, from day-to-day strategy to overarching governance, largely influencing how the board is constituted, and the respective board and committee mandates.

Why Controlled Companies Are Vulnerable to Change: The Adapted Activist Playbook

Pursuing an activist course of action at controlled companies presents a unique set of challenges that often require some creativity on the part of the minority shareholder. Given the significant obstacles to immediate and meaningful change, these challenges result in what are often seen as “against all odds” campaigns.

Shareholders who target controlled companies modulate their campaigns with the understanding that it will often require a long, multi-staged process to advance change. Given that influencing meaningful change in a single instance of activism is likely impossible, from a pragmatic standpoint, controlled company activist tactics and goals differ from those of traditional activists. Tactically, activists will rely on informal avenues for change while aiming for more incremental objectives.

Absent conventional proxy fight and bargaining mechanisms—such as the threat of nominating and electing an activist director or calling a special meeting to force change—reputational damage and exposure are the primary forces that an activist at a controlled company can use to influence change. A single campaign tied to a shareholder proposal or a withhold campaign targeted at a specific director may not result in immediate substantive change, but can act as a disciplinary mechanism by publicly shaming the board, serve as a lightning rod to attract and expose broader shareholder opposition that would be useful in a future campaign, or be used as a bargaining chip or lever to obtain smaller, more gradual, changes, such as adding new, independent members to the board or adjusting executive pay to reflect market realities. Through this lens, a successful campaign may not be one that passes, just one that exposes a controlled company’s entrenchment and opens the eyes of the controlling entity.

As such, when private pressure fails, an activist’s strategy at a controlled company usually centers on exacting maximum reputational damage to force change. Such campaigns can become a significant distraction and headache for the board and management. At Kingsdale, we have observed that campaigns against controlled companies generally retain a number of common features, with the activist seeking to:

  • Undermine the image of the current board and controlling shareholder as competent business managers

  • Identify and exploit divides between independent directors and the controlling shareholder’s representatives

  • Where familial relationships exist, seek to divide the family members or position them against other directors

  • Demonstrate unfair and abusive treatment of minority shareholders

  • Shine a spotlight on what is seen as “self-dealing” in exposing related-party transactions

  • Demonstrate a divide between top management and the average worker on pay issues

  • Illustrate divides where board and management are out of touch with other stakeholder groups beyond shareholders such as employees, unions, and the communities in which they operate

  • Inflict brand damage that will impact business relations with customers, consumers, and the general public

L’activisme actionnarial | la situation en France


Voici un texte publié par le Club des juristes français portant sur l’activiste actionnarial.

Cette organisation vient de publier son rapport sur l’état des lieux de l’activisme en France. Le document est en français, ce qui améliore sensiblement la compréhension de la situation.

Après un bref historique du phénomène, les auteurs ont :

identifié les progrès souhaitables (première partie) et ils proposent plusieurs pistes d’amélioration de l’encadrement juridique ou des bonnes pratiques qui régissent l’exercice de l’engagement actionnarial des activistes (deuxième partie).

Vous trouverez ci-dessous le sommaire du rapport, suivi de la table des matières qui fait état des principales recommandations.

Bonne lecture !

ACTIVISME ACTIONNARIAL | Club des juristes français

 

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Sommaire du rapport

 

▶ L’engagement des actionnaires dans la vie de l’émetteur étant
généralement considéré par tous les acteurs du marché comme une
condition de son bon fonctionnement et encouragé comme tel par les
autorités de marché, comment pourrait-on s’étonner qu’un actionnaire
soit particulièrement actif ?

▶ L’activisme actionnarial apparaît aux États-Unis dans les années
1930. Après s’y être épanoui à partir des années 70 et 80, il s’observe
désormais partout où les actionnaires connaissent un renforcement
de leurs droits : en Italie, en Allemagne, aux Pays-Bas, au Royaume-Uni,
etc. L’intérêt pour le sujet a ainsi pris de l’ampleur en Europe, à partir des
campagnes activistes menées dans les années 2000. Davantage qu’un
mimétisme spontané des actionnaires européens, c’est une exportation
des activistes américains à laquelle on assiste. Près de la moitié des
sociétés visées en 2018 ne sont pas américaines. Il semble que
l’activisme se soit développé en cadence de, et parfois en relation avec,
la généralisation de la gestion passive de titres pour compte de tiers.
En contrepoint d’une gestion indicielle qui ne permet pas d’intervenir
de manière ciblée sur une société déterminée, l’actionnaire activiste
intervient ponctuellement et revendique une fonction d’optimisation du
fonctionnement du marché.

▶ Les fonds activistes ont connu une croissance significative, gagnant
par la même occasion en crédibilité et en force. Par exemple, les
activistes américains ont atteint 250,3 milliards de dollars d’actifs
sous gestion au deuxième trimestre de 2018 quand ils n’en avaient que
94,7 milliards au quatrième trimestre de 2010. L’activisme représente
désormais une puissance colossale avec 65 milliards de capital déployé
dans des campagnes en 2018. Les campagnes en Europe ne sont plus
occasionnelles. Avec 58 campagnes européennes en 2018, les fonds
activistes ont indéniablement intégré le paysage boursier.

▶ Désormais, l’activisme actionnarial présente une telle diversité que sa
délimitation, et par conséquent son encadrement, sont des plus ardus.
Ainsi, aucune réglementation spécifique n’est applicable aux seuls
activistes. Seul le droit commun applicable à tout investisseur permet
d’appréhender l’activiste qui se prévaut précisément des prérogatives
ordinaires de l’actionnaire. Qu’il s’agisse des questions écrites posées
en assemblée générale, de la présentation de résolutions alternatives,
de la demande d’une expertise de gestion, ou, enfin, de l’information
périodique ou permanente, l’activiste invoque ses droits de minoritaire.
Il fait toutefois un exercice de ces droits qui peut apparaître
particulièrement radical voire, selon certains, déloyal, et faire peser un
risque d’atteinte à l’intérêt social. Il peut ainsi sortir du cadre que lui
réservait le législateur en mettant parfois en difficulté la société.

▶ Logiquement, le droit commun fournit des outils pour réagir :
identification des actionnaires, déclaration de franchissement de
seuils, déclaration d’intention, déclaration d’un projet d’opération,
déclaration des transferts temporaires de titres, déclaration des
positions nettes courtes en cas de ventes à découvert, déclaration à
la Banque de France, déclaration de clauses des pactes d’actionnaires,
encadrement de la sollicitation active de mandats et transparence sur
la politique de vote des fonds d’investissement. Ce droit commun
apparaît néanmoins insuffisant au regard de la diversité des outils dont
disposent les activistes et de leur sophistication juridique.

▶ La perspective d’une régulation adaptée ou d’une amélioration des
pratiques impose de cerner au préalable ce que recouvre l’activisme
actionnarial.

▶ Une campagne activiste peut être définie comme le comportement
d’un investisseur usant des prérogatives accordées aux minoritaires
afin d’influencer la stratégie, la situation financière ou la gouvernance
de l’émetteur, par le moyen initial d’une prise de position publique.
L’activiste a un objectif déterminé qui peut varier selon les activistes
et les circonstances propres à chaque campagne. L’activisme peut
être short ou long, avec le cas échéant des objectifs strictement
économiques ou alors environnementaux et sociétaux (ESG), chaque
activiste développant des modalités d’action qui lui sont propres.
Malgré ces différences indéniables entre les types d’activisme, les
difficultés soulevées par l’activisme sont communes et justifient de
traiter de l’activisme dans son ensemble.

▶ L’activisme ne doit pas être confondu avec la prise de position ponctuelle
par un actionnaire sur un sujet particulier, lorsque son investissement
n’est pas motivé par cette seule critique. Un investisseur peut ainsi être
hostile aux droits de vote double et le faire savoir, y compris en recourant
à une sollicitation active de mandats, sans être qualifié d’activiste car la création de valeur recherchée ne repose pas exclusivement sur cette
critique. Dans le cas où le retour sur investissement attendu ne repose
que sur une stratégie de contestation, l’investisseur adopte alors une
forme d’activisme économique.

▶ D’un point de vue prospectif, la question de l’activisme actionnarial a
parfois été abordée à l’occasion de travaux portant sur d’autres sujets
de droit des sociétés ou de droit boursier. Outre les rapports élaborés
par le Club des juristes, dans le cadre de la Commission Europe et
de la Commission Dialogue administrateurs-actionnaires, l’AMF,
tout comme les législateurs français et européen ont identifié la
problématique, sans toutefois proposer, à ce jour, un régime juridique
spécifique.

▶ Alors que l’année 2018 a été qualifiée d’année record de l’activisme,
la question de la montée en puissance des activistes, en Europe et en
France, est devenue un enjeu de Place dont se sont notamment saisis
les pouvoirs publics, comme l’illustrent le lancement par l’Assemblée
nationale d’une Mission d’information sur l’activisme actionnarial et
les déclarations récentes du ministre de l’Économie et des Finances.
Les entreprises y voient un sujet sensible et se sont déjà organisées
individuellement en conséquence. L’Association française des
entreprises privées (AFEP) et Paris Europlace ont également initié des
réflexions à ce sujet.

▶ En parallèle, l’activisme actionnarial a depuis plusieurs années donné
lieu à un vif débat académique sur ses effets économiques et sociaux
sur le long terme, tant aux États-Unis qu’en France. Pour ses
partisans, l’activisme actionnarial permet à la société de créer de la
valeur actionnariale et économique sur le long terme. Pour d’autres, les éventuels effets bénéfiques sont identifiés sur le seul court-terme et les
émetteurs doivent au contraire se focaliser sur la création de valeur à
long terme en intégrant plus vigoureusement les questions sociales et
environnementales comme cela a été acté en France par la loi PACTE
à la suite du Rapport NOTAT SÉNARD et aux États-Unis par la position
récente du Business Roundtable.

▶ C’est dans ce contexte que le Club des juristes a décidé la création d’une
commission multidisciplinaire chargée de faire le point des questions
posées par l’activisme actionnarial et de proposer éventuellement
des améliorations à l’environnement juridique et aux pratiques qui le
concernent.

▶ L’objectif de la Commission n’est pas de prendre parti dans le débat
économique, politique et parfois philosophique qui oppose les partisans
et les détracteurs de l’activisme actionnarial, ni de prendre position sur
telle ou telle campagne activiste actuelle ou passée. Il s’agit plutôt
d’identifier les comportements susceptibles d’être préjudiciables à
la transparence, la loyauté et le bon fonctionnement du marché et
d’examiner, au plan juridique, l’encadrement et les bonnes pratiques qui
pourraient être appliqués aux campagnes activistes.

▶ Les travaux de la Commission du Club des juristes ont consisté à
auditionner une trentaine de parties prenantes à la problématique
de l’activisme actionnarial, représentants des émetteurs et des
investisseurs, intermédiaires de marché et des personnalités
qualifiées, afin de bénéficier de leur expérience et de recueillir leur
avis sur les pistes de droit prospectif. Les autorités compétentes ont participé aux travaux de la Commission en qualité d’observateurs et
ne sont en rien engagées par les conclusions de la Commission. Pour
compléter son analyse, une enquête a été effectuée auprès d’environ
deux cents directeurs financiers et responsables des relations avec les
investisseurs de sociétés cotées.

 

Table des matières du rapport 

PREMIÈRE PARTIE – ÉTAT DES LIEUX 

I. LA DÉFINITION DE L’ACTIVISME FACE A LA DIVERSITÉ DES ACTIVISTES

1. L’absence de définition juridique de l’activisme actionnarial
2. L’irréductible hétérogénéité de l’activisme actionnarial

II. DES COMPORTEMENTS PARFOIS DISCUTABLES

1. La construction de la position
2. Le dialogue actionnarial
3. La campagne publique
4. Le vote en assemblée générale

DEUXIÈME PARTIE – PISTES DE RÉFLEXION 

1. De nouvelles règles de transparence
2. L’encadrement du short selling
3. L’encadrement du prêt-emprunt de titres en période
d’assemblée générale
4. L’extension de la réglementation sur la sollicitation
active de mandats à la campagne activiste

II. L’AMÉLIORATION DU DIALOGUE ENTRE éMETTEURS ET INVESTISSEURS 

1. Dialogue collectif : la création d’une plateforme de dialogue
actionnarial
2. Le renforcement du dialogue actionnarial en amont
de la campagne
3. La méthode d’élaboration du code de gouvernement
d’entreprise

III. RÉFLEXIONS SUR LE RÔLE DE L’AMF ET SUR L’ESMA

1. L’intervention de l’AMF
2. Les incertitudes de la notion d’action de concert

Conclusions

La responsabilité des administrateurs eu égard aux risques climatiques | En rappel


Les responsabilités des conseils d’administration ne cessent de s’accroître. La gestion du risque est une activité essentielle qui relève des fonctions de surveillance dévolues aux administrateurs de sociétés.
L’article ci-dessous, publié par Richard Howitt dans Board Agenda, présente clairement les devoirs et les responsabilités des administrateurs eu égard aux changements climatiques.
Pour la plupart des entreprises, il s’agit du risque le plus déterminant quoique souvent le plus sous-estimé. L’auteur montre toute l’ampleur du problème et suggère plusieurs manières d’exercer un leadership éclairé dans la considération des risques de cette nature.
À mon avis, chaque administrateur devrait être bien au fait de la situation et réfléchir aux mesures à prendre. L’auteur note que les entreprises qui divulguent leurs plans concernant les risques climatiques sont perçues de façon positive par les investisseurs.

The necessity for “climate competence” to be a core skill for corporate boards had already been underlined through the publication of guidance for Effective Climate Governance on Corporate Boards at the World Economic Forum in January.

 

Bonne lecture !

TCFD summit confirms climate risk should be your board’s priority

 

The Task Force on Climate-related Financial Disclosure (TCFD) has set a pathway for climate risk to become an integral part of corporate governance.

climate, climate change, ice melting

Image: Bernhard Staehli/Shutterstock

The recent global summit of the Task Force on Climate-related Financial Disclosure (TCFD) made it clear that companies will increasingly be subject to challenge on management of climate risk by regulators, investors and wider stakeholders.

The necessity for “climate competence” to be a core skill for corporate boards had already been underlined through the publication of guidance for Effective Climate Governance on Corporate Boards at the World Economic Forum in January.

There was a call for increased quality and quality of TCFD reporting, now standing at 800, in the Task Force’s last Status Report in June.

But as climate protests fill news bulletins around the world, this month’s summit in Tokyo is potentially far more significant, in setting a pathway for climate risk to become integral and unavoidable for mainstream corporate governance in all economic sectors.

A major push

If the original TCFD recommendations were a call to action, the summit charted an action plan through which they will be implemented.

Bank of England Governor Mark Carney used the summit to warn that regulation requiring TCFD reporting is probably two years away, appealing to businesses present to develop their own reporting in the meanwhile, to ensure mandatory measures are shaped to be most effective for business itself.

The veiled threat is that companies who delay on climate disclosure will find themselves subject to costly burden.

Full integration of TCFD recommendations in the EU’s Non-Financial Reporting Directive guidelines is a further sign that Europe may lead mandatory reporting requirements as part of its major push towards sustainable finance, also in the next two years.

Investors are themselves now rewarding and penalising companies on how far they are genuinely integrating climate risk

The UK’s own Green Finance Strategy is hardly less ambitious, setting a target for all listed companies and large asset owners to disclose their climate-related risks and opportunities by 2022 at the latest. And the capital markets regulator in Australia has issued guidance to company directors on addressing climate risk.

But the global summit was notable for its recognition that investors, not simply regulators, are themselves now rewarding and penalising companies on how far they are genuinely integrating climate risk.

One tangible initiative from the summit was new green investment guidance published by Japan’s own TCFD consortium. The effect will be a significant increase in investor engagement with companies on climate issues.

Companies present at the summit reporting anecdotal evidence of increased investor engagement on the issue included Shell, Total and Sumitomo Chemical.

A PwC report cited in Tokyo shows positive correlation between stock or share price and the quantity of TCFD disclosures made by the company, with research from the Commonwealth Climate and Law Initiative quantifying that that the risk of non-disclosure is a bigger liability for the company than of disclosure itself.

Meanwhile, during the 2019 proxy season shareholder activists pressed disclosure resolutions including climate risk at no fewer than 64 company AGMs in the US alone.

An opportunity for leadership

The summit heard TCFD reporting is being adopted by companies valued at a combined market capitalisation of $118trn—an important challenge to organisations that have not yet made the shift.

Already we know that climate-related financial risk should be treated by directors as a core part of their duty to promote the success of the company. Failure to do so could expose directors to legal challenge.

But the action required is now clear. The board should ensure that material climate-related risks and opportunities are not simply reported, but fully integrated in to the company’s strategy, risk-management process and investment decisions.

Climate-related financial risk should be treated by directors as a core part of their duty to promote the success of the company

Among the actions required are ensuring board and committee structures incorporate climate risk and opportunity; recruitment of new directors with the requisite knowledge and skills; incorporating management of climate risk into executive remuneration; and fully integrating it in the company’s own risk management.

Board members must provide the leadership for the company to engage with relevant experts and stakeholders to tackle the challenge, and should ensure they are sufficiently informed themselves to maintain adequate oversight.

Lastly, boards should recognise that climate risk may involve addressing timescales beyond conventional board terms, but are within mainstream investment and planning horizons accorded to every other financial risk and opportunity.

A board responsibility

The summit underlined how existing TCFD reporting is still falling short of being decision-useful, in demonstrating strategic resilience of the company and in incorporating targets for transition to net zero.

It also enabled further discussion of the measurements required for reporting, including clarifying what is green revenue, and the definition of terms such as “environmentally sustainable”.

But as work from the Corporate Reporting Dialogue shows, almost all of the necessary indicators are already available in existing frameworks. It is not whether they are available, but how they are used.

Ultimately this is a responsibility that must reside in the boardroom itself

Plentiful assistance for board members is on hand through online resources like the TCFD Knowledge Hub organised by the Climate Disclosure Standards Board, training offered by organisations such as Competent Boards, or detailed guidance for specific sectors through specific TCFD preparer forums.

But ultimately this is a responsibility that must reside in the boardroom itself. Every company board has its own responsibility to consider where its own business model stands in relation to that transition.

And with finance ministries, central banks and regulators in the top 20 economies of the world concluding that climate change is a risk to the stability of the entire global financial system, no company can ignore this task.

______________________________

Richard Howitt is a strategic adviser on corporate responsibility and sustainability, and former CEO at the International Integrated Reporting Council.

Êtes-vous moniste, pluraliste ou de l’approche impartiale, eu égard aux objectifs de l’organisation ?


Voici un article très éclairant sur la compréhension des modèles qui expliquent la recherche des objectifs de l’entreprise par les administrateurs de sociétés.

L’article de Amir Licht, professeur de droit à Interdisciplinary Center Herzliya, et publié sur le site du Harvard Law School Forum on Corporate Governance, présente une nouvelle façon de concevoir la gouvernance des organisations.

Êtes-vous moniste, pluraliste ou de l’approche impartiale, eu égard à la détermination des objectifs de l’organisation  ?

Dans le domaine de la gouvernance des entreprises, l’approche de la priorité accordée aux actionnaires domine depuis le début des lois sur la gouvernance des sociétés. C’est l’approche moniste qui considère que les organisations ont comme principal objectif de maximiser les bénéfices des actionnaires.

Récemment, une nouvelle approche émerge avec vigueur. C’est la conception selon laquelle l’entreprise doit prioritairement viser à atteindre les objectifs de l’ensemble des parties prenantes. On parle alors d’une approche pluraliste, c’est-à-dire d’un modèle de gouvernance qui vise à rencontrer les objectifs de plusieurs parties prenantes, d’une manière satisfaisante et optimale.

L’auteur constate que ces deux approches ont plusieurs failles et qu’un modèle mettant principalement l’accent sur l’impartialité de tous les administrateurs est la clé pour l’atteinte des objectifs de l’organisation.

The monistic position endorses a single maximand (that which is to be maximized)—invariably, shareholder interest—while the pluralistic position supports a multiple-objective duty that would balance the interests of several stakeholder constituencies, shareholders included.

Je vous invite à lire ce court article afin de vous former une opinion sur le modèle de gestion privilégiée par votre organisation.

Vos commentaires sont les bienvenus.

Bonne lecture !

 

Stakeholder Impartiality: A New Classic Approach for the Objectives of the Corporation

 

Modèles de gouvernance
Ivan Tchotourian, revue Contact – Université Laval

 

 

 

 

 

 

 

 

The stockholder/stakeholder dilemma has occupied corporate leaders and corporate lawyers for over a century. Most recently, the Business Roundtable, in a complete turnaround of its prior position, stated that “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” The signatories of this statement failed, however, to specify how they would carry out these newly stated ideals. Directors of large U.K. companies don’t enjoy this luxury anymore. Under section 172 of the Companies Act 2006, directors are required to have regard to the interests of the company’s employees, business partners, the community, and the environment, when they endeavor to promote the success of the company for the benefit of its members (shareholders). Government regulations promulgated in 2018 require large companies to include in their strategic reports a new statement on how the directors have considered stakeholders’ interest in discharging this duty.

These developments are recent twists in a plot that has been unfolding—in circles, in must be said—in the debate over the objectives of the corporation. This debate oscillates between two polar positions, dubbed “monistic” and “pluralistic” in the business management parlance. The monistic position endorses a single maximand (that which is to be maximized)—invariably, shareholder interest—while the pluralistic position supports a multiple-objective duty that would balance the interests of several stakeholder constituencies, shareholders included. How to perform this balancing act is a question that has virtually never been addressed until now. When the Supreme Court of Canada in 2008 discussed it in BCE Inc. v. 1976 Debentureholders, it explicitly eschewed giving it an answer. Lawyers are similarly at sea with regard to a multiple-stakeholder-objective provision in India’s Companies Act, 2013.

This article advances a new, yet classical, approach for the task of considering the interests of various stakeholders by directors and other corporate fiduciaries. I argue that for lawfully accomplishing this task, while also complying with their standard duties of loyalty and care, directors should exercise their discretion impartially. Respectively, judicial review of directors’ conduct in terms of treating different stakeholders should implement the concomitant doctrine of impartiality. This approach is new, as it has not yet been implemented in this context. At the same time, this approach is also classical, even orthodox. The duty of impartiality (or even-handedness, or fairness; courts use these terms interchangeably) has evolved in traditional trust law mostly during the nineteenth century. In recent years, it has been applied in trust cases in several common law jurisdictions. More importantly, this duty has been applied during the latter part of the twentieth century in modern, complex settings of pension funds, where fund trustees face inescapable conflicts between subgroups of savers. These conflicts resemble the tensions between different stakeholders in business corporations—a feature that renders this doctrine a suitable source of inspiration for the task at hand.

In a nutshell, the duty of impartiality accepts that there could be irreconcilable tensions and conflicts among several trust beneficiaries who in all other respects stand on equal footing vis-à-vis the trustee. Applying the rule against duty-duty conflict (dual fiduciary) in this setting would be ineffective, as it would disable the trustee—and consequently, the trust—without providing a solution to the conundrum. The duty of impartiality calls on the trustee to consider the different interests of the beneficiaries impartially, even-handedly, fairly, etc.; it does not impose any heavier burden on the good-faith exercise of the trustee’s discretion. Crucially, the duty of impartiality does not imply equality. All that it requires is that the different interests be considered within very broad margins.

This article thus proposes an analogous process-oriented impartiality duty for directors—to consider the interests of relevant stakeholders. Stakeholder impartiality, too, is a lean duty whose main advantage lies in its being workable. It is particularly suitable for legal systems that hold a pluralistic stance on the objectives of the corporation, such as Canada’s and India’s open-ended stakeholderist approaches. Such a doctrinal framework might also prove useful for systems and individuals that endorse a monistic, shareholder-focused approach. That could be the case in the United Kingdom and Australia, for instance, where directors could face liability if they did not consider creditors’ interest in a timely fashion even before the company reaches insolvency. Moreover, this approach could be helpful where the most extreme versions of doctrinal shareholderism arguably rein, such as Delaware law post-NACEPF v. Gheewalla—in particular, with regard to tensions between common and preferred stockholders post-Trados.

A normatively appealing legal regime is unlikely to satisfy even its proponents if it does not lend itself to practical implementation; a fortiori for its opponents. For legal systems and for individual lawyers that champion a pluralistic stakeholder-oriented approach for the objective of the corporation, having a workable doctrine for implementing that approach is crucial—an absolute necessity. This is precisely where impartiality holds a promise for advancing the discourse and actual legal regulation of shareholder-stakeholder relations through fiduciary duties.

The complete article is available for download here.

Changement de perspective en gouvernance de sociétés !


Yvan Allaire*, président exécutif du conseil de l’Institut sur la gouvernance (IGOPP) m’a fait parvenir un nouvel article intitulé «The Business Roundtable on “The Purpose of a Corporation” Back to the future!».

Cet article a été publié dans le Financial Post en septembre 2019. Celui-ci intéressera assurément tous les administrateurs siégeant à des conseils d’administration, et qui sont à l’affût des nouveautés dans le domaine de la gouvernance.

Le document discute des changements de paradigmes proposés par les CEO des grandes corporations américaines.

Les administrateurs selon ce groupe de dirigeants doivent tenir compte de l’ensemble des parties prenantes (stakeholders) dans la gouverne des organisations, et non plus accorder la priorité aux actionnaires.

Cet article discute des retombées de cette approche et des difficultés eu égard à la mise en œuvre dans le système corporatif américain.

Le texte est en anglais. Une version française devrait être produite bientôt sur le site de l’IGOPP.

Bonne lecture !

 

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CEOs in Business Roundtable ‘Redefine’ Corporate Purpose To Stretch Beyond Shareholders

The Business Roundtable on “The Purpose of a Corporation” Back to the future!

Yvan Allaire, PhD (MIT), FRSC

 

In September 2019, CEOs of large U.S. corporations have embraced with suspect enthusiasm the notion that a corporation’s purpose is broader than merely“ creating shareholder value”. Why now after 30 years of obedience to the dogma of shareholder primacy and servile (but highly paid) attendance to the whims and wants of investment funds?


Simply put, the answer rests with the recent conversion of these very funds, in particular index funds, to the church of ecological sanctity and social responsibility. This conversion was long acoming but inevitable as the threat to the whole system became more pressing and proximate.

The indictment of the “capitalist” system for the wealth inequality it produced and the environmental havoc it wreaked had to be taken seriously as it crept into the political agenda in the U.S. Fair or not, there is a widespread belief that the root cause of this dystopia lies in the exclusive focus of corporations on maximizing shareholder value. That had to be addressed in the least damaging way to the whole system.

Thus, at the urging of traditional investment funds, CEOs of large corporations, assembled under the banner of the Business Roundtable, signed a ringing statement about sharing “a fundamental commitment to all of our stakeholders”.

That commitment included:

Delivering value to our customers

Investing in our employees

Dealing fairly and ethically with our suppliers.

Supporting the communities in which we work.

Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate.

It is remarkable (at least for the U.S.) that the commitment to shareholders now ranks in fifth place, a good indication of how much the key economic players have come to fear the goings-on in American politics. That statement of “corporate purpose” was a great public relations coup as it received wide media coverage and provides cover for large corporations and investment funds against attacks on their behavior and on their very existence.


In some way, that statement of corporate purpose merely retrieves what used to be the norm for large corporations. Take, for instance, IBM’s seven management principles which guided this company’s most successful run from the 1960’s to 1992:

Seven Management Principles at IBM 1960-1992

  1. Respect for the individual
  2. Service to the customer
  3. Excellence must be way of life
  4. Managers must lead effectively
  5. Obligation to stockholders
  6. Fair deal for the supplier
  7. IBM should be a good corporate citizen

The similarity with the five “commitments” recently discovered at the Business Roundtable is striking. Of course, in IBM’s heydays, there were no rogue funds, no “activist” hedge funds or private equity funds to pressure corporate management into delivering maximum value creation for shareholders. How will these funds whose very existence depends on their success at fostering shareholder primacy cope with this “heretical nonsense” of equal treatment for all stakeholders?

As this statement of purpose is supported, was even ushered in, by large institutional investors, it may well shield corporations against attacks by hedge funds and other agitators. To be successful, these funds have to rely on the overt or tacit support of large investors. As these investors now endorse a stakeholder view of the corporation, how can they condone and back these financial players whose only goal is to push up the stock price often at the painful expense of other stakeholders?

This re-discovery in the US of a stakeholder model of the corporation should align it with Canada and the UK where a while back the stakeholder concept of the corporation was adopted in their legal framework.

Thus in Canada, two judgments of the Supreme Court are peremptory: the board must not grant any preferential treatment in its decision-making process to the interests of the shareholders or any other stakeholder, but must act exclusively in the interests of the corporation of which they are the directors.

In the UK, Section 172 of the Companies Act of 2006 states: “A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, among which the interests of the company’s employees, the need to foster the company’s business relationships with suppliers, customers and others, the impact of the company’s operations on the community and the environment,…”

So, belatedly, U.S. corporations will, it seems, self-regulate and self-impose a sort of stakeholder model in their decision-making.

Alas, as in Canada and the UK, they will quickly find out that there is little or no guidance on how to manage the difficult trade-offs among the interests of various stakeholders, say between shareholders and workers when considering outsourcing operations to a low-cost country.

But that may be the appeal of this “purpose of the corporation”: it sounds enlightened but does not call for any tangible changes in the way corporations are managed.

 

Gouvernance fiduciaire et rôles des parties prenantes (stakeholders) | En reprise


Je partage avec vous l’excellente prise de position de Martin Lipton *, Karessa L. Cain et Kathleen C. Iannone, associés de la firme Wachtell, Lipton, Rosen & Katz, spécialisée dans les fusions et acquisitions et dans les questions de gouvernance fiduciaire.

L’article présente un plaidoyer éloquent en faveur d’une gouvernance fiduciaire par un conseil d’administration qui doit non seulement considérer le point de vue des actionnaires, mais aussi des autres parties prenantes,

Depuis quelque temps, on assiste à des changements significatifs dans la compréhension du rôle des CA et dans l’interprétation que les administrateurs se font de la valeur de l’entreprise à long terme.

Récemment, le Business Roundtable a annoncé son engagement envers l’inclusion des parties prenantes dans le cadre de gouvernance fiduciaire des sociétés.

Voici un résumé d’un article paru dans le Los Angeles Times du 19 août 2019 : In shocking reversal, Big Business puts the shareholder value myth in the grave.

Among the developments followers of business ethics may have thought they’d never see, the end of the shareholder value myth has to rank very high.

Yet one of America’s leading business lobbying groups just buried the myth. “We share a fundamental commitment to all of our stakeholders,” reads a statement issued Monday by the Business Roundtable and signed by 181 CEOs. (Emphasis in the original.)

The statement mentions, in order, customers, employees, suppliers, communities and — dead last — shareholders. The corporate commitment to all these stakeholders may be largely rhetorical at the moment, but it’s hard to overstate what a reversal the statement represents from the business community’s preexisting viewpoint.

Stakeholders are pushing companies to wade into sensitive social and political issues — especially as they see governments failing to do so effectively.

Since the 1970s, the prevailing ethos of corporate management has been that a company’s prime responsibility — effectively, its only responsibility — is to serve its shareholders. Benefits for those other stakeholders follow, but they’re not the prime concern.

In the Business Roundtable’s view, the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders,” the organization declared in 1997.

Bonne lecture. Vos commentaires sont les bienvenus !

 

Stakeholder Governance and the Fiduciary Duties of Directors

 

Jamie Dimon
JPMorgan Chase Chief Executive Jamie Dimon signed the business statement disavowing the shareholder value myth.(J. Scott Applewhite / Associated Press)

 

There has recently been much debate and some confusion about a bedrock principle of corporate law—namely, the essence of the board’s fiduciary duty, and particularly the extent to which the board can or should or must consider the interests of other stakeholders besides shareholders.

For several decades, there has been a prevailing assumption among many CEOs, directors, scholars, investors, asset managers and others that the sole purpose of corporations is to maximize value for shareholders and, accordingly, that corporate decision-makers should be very closely tethered to the views and preferences of shareholders. This has created an opportunity for corporate raiders, activist hedge funds and others with short-termist agendas, who do not hesitate to assert their preferences and are often the most vocal of shareholder constituents. And, even outside the context of shareholder activism, the relentless pressure to produce shareholder value has all too often tipped the scales in favor of near-term stock price gains at the expense of long-term sustainability.

In recent years, however, there has been a growing sense of urgency around issues such as economic inequality, climate change and socioeconomic upheaval as human capital has been displaced by technological disruption. As long-term investors and the asset managers who represent them have sought to embrace ESG principles and their role as stewards of corporations in pursuit of long-term value, notions of shareholder primacy are being challenged. Thus, earlier this week, the Business Roundtable announced its commitment to stakeholder corporate governance, and outside the U.S., legislative reforms in the U.K. and Europe have expressly incorporated consideration of other stakeholder interests in the fiduciary duty framework. The Council of Institutional Investors and others, however, have challenged the wisdom and legality of stakeholder corporate governance.

To be clear, Delaware law does not enshrine a principle of shareholder primacy or preclude a board of directors from considering the interests of other stakeholders. Nor does the law of any other state. Although much attention has been given to the Revlon doctrine, which suggests that the board must attempt to achieve the highest value reasonably available to shareholders, that doctrine is narrowly limited to situations where the board has determined to sell control of the company and either all or a preponderant percentage of the consideration being paid is cash or the transaction will result in a controlling shareholder. Indeed, theRevlon doctrine has played an outsized role in fiduciary duty jurisprudence not because it articulates the ultimate nature and objective of the board’s fiduciary duty, but rather because most fiduciary duty litigation arises in the context of mergers or other extraordinary transactions where heightened standards of judicial review are applicable. In addition, Revlon’s emphasis on maximizing short-term shareholder value has served as a convenient touchstone for advocates of shareholder primacy and has accordingly been used as a talking point to shape assumptions about fiduciary duties even outside the sale-of-control context, a result that was not intended. Around the same time that Revlon was decided, the Delaware Supreme Court also decided the Unocal and Household cases, which affirmed the board’s ability to consider all stakeholders in using a poison pill to defend against a takeover—clearly confining Revlonto sale-of-control situations.

The fiduciary duty of the board is to promote the value of the corporation. In fulfilling that duty, directors must exercise their business judgment in considering and reconciling the interests of various stakeholders—including shareholders, employees, customers, suppliers, the environment and communities—and the attendant risks and opportunities for the corporation.

Indeed, the board’s ability to consider other stakeholder interests is not only uncontroversial—it is a matter of basic common sense and a fundamental component of both risk management and strategic planning. Corporations today must navigate a host of challenges to compete and succeed in a rapidly changing environment—for example, as climate change increases weather-related risks to production facilities or real property investments, or as employee training becomes critical to navigate rapidly evolving technology platforms. A board and management team that is myopically focused on stock price and other discernible benchmarks of shareholder value, without also taking a broader, more holistic view of the corporation and its longer-term strategy, sustainability and risk profile, is doing a disservice not only to employees, customers and other impacted stakeholders but also to shareholders and the corporation as a whole.

The board’s role in performing this balancing function is a central premise of the corporate structure. The board is empowered to serve as the arbiter of competing considerations, whereas shareholders have relatively limited voting rights and, in many instances, it is up to the board to decide whether a matter should be submitted for shareholder approval (for example, charter amendments and merger agreements). Moreover, in performing this balancing function, the board is protected by the business judgment rule and will not be second-guessed for embracing ESG principles or other stakeholder interests in order to enhance the long-term value of the corporation. Nor is there any debate about whether the board has the legal authority to reject an activist’s demand for short-term financial engineering on the grounds that the board, in its business judgment, has determined to pursue a strategy to create sustainable long-term value.

And yet even if, as a doctrinal matter, shareholder primacy does not define the contours of the board’s fiduciary duties so as to preclude consideration of other stakeholders, the practical reality is that the board’s ability to embrace ESG principles and sustainable investment strategies depends on the support of long-term investors and asset managers. Shareholders are the only corporate stakeholders who have the right to elect directors, and in contrast to courts, they do not decline to second-guess the business judgment of boards. Furthermore, a number of changes over the last several decades—including the remarkable consolidation of economic and voting power among a relatively small number of asset managers, as well as legal and “best practice” reforms—have strengthened the ability of shareholders to influence corporate decision-making.

To this end, we have proposed The New Paradigm, which conceives of corporate governance as a partnership among corporations, shareholders and other stakeholders to resist short-termism and embrace ESG principles in order to create sustainable, long-term value. See our paper, It’s Time to Adopt The New Paradigm.


Martin Lipton * is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy; Karessa L. Cain is a partner; and Kathleen C. Iannone is an associate. This post is based on their Wachtell Lipton publication.

Spencer Stuart Board Index | 2019.


Julie Hembrock Daum , Laurel McCarthy et Ann Yerger, associés de la firme  Spencer Stuart présentent les grandes lignes du rapport annuel Spencer Stuart Board Index | 2019.

Comme vous le noterez, les changements observés sont cohérents avec les changements de fonds en gouvernance.

Cependant, puisque les CA ont tendance à être de plus petites tailles et que la rotation des administrateurs sur les conseils est plutôt faible, les changements se font à un rythme trop lent pour observer une modernisation significative

The 2019 U.S. Spencer Stuart Board Index finds that boards are heeding the growing calls from shareholders and other stakeholders and adding new directors with diversity of gender, age, race/ethnicity and professional backgrounds. However, because boardroom turnover remains low, with the new directors representing only 8% of all S&P 500 directors, changes to overall numbers continue at a slow pace.

Voici les points saillants de l’étude.

Bonne lecture !

2019 U.S. Spencer Stuart Board Index

 

A summary of the most notable findings in the 2019 U.S. Spencer Stuart Board Index.

Key Takeaways—2019 Spencer Stuart Board Index

Diversity is a priority

Of the 432 independent directors added to S&P 500 boards over the past year, a record-breaking 59% are diverse (defined as women and minority men), up from half last year. Women comprise 46% of the incoming class. Minority women (defined as African-American/Black, Asian and Hispanic/Latino) comprise 10% of new S&P 500 directors, and minority men 13%.

The professional experiences of S&P 500 directors are changing

Two thirds (65%) of the 2019 incoming class come from outside the ranks of CEO, chair/vice chair, president and COO. Financial talent is a focus area; 27% of the new directors have financial backgrounds. Other corporate leadership skills are valued, with 23% bringing experiences as division/subsidiary heads or as EVPs, SVPs or functional unit leaders.

Diverse directors are driving the changing profile of new S&P 500 directors

Only 19% of the diverse directors are current or former CEOs, compared to 44% of non-diverse men. Meanwhile 34% of the diverse directors are first-time corporate directors, nearly double the 18% of the non-diverse directors. Diverse directors bring other types of corporate leadership experience to the boardroom, with 31% of the diverse directors offering experiences as current or former line or functional leaders, compared to just 11% of the non-diverse men.

Sitting CEOs are increasingly not sitting on outside boards

This year’s survey found that on average, independent directors of S&P 500 companies serve on 2.1 boards, unchanged over the past five years. Meanwhile 59% of S&P 500 CEOs serve on no outside boards, up from 55% last year. Only 23 S&P 500 CEOs (5%) serve on two or more outside boards, and 79 independent directors (2%) serve on more than four public company boards.

Boards are adding younger directors, but the average age of S&P 500 directors is unchanged

Once again, one out of six directors added to S&P 500 boards are 50 or younger. Over half (59%) bring experiences from the private equity/investment management, consumer and information technology sectors. These younger directors are more diverse than the rest of the incoming class, with 69% either women (57% of “next gen” group) or minority men (12% of “next gen” group). They are also more likely to be serving on their first corporate board; 54% are first-time directors.

However, an overwhelming number of new directors are older. More than 40% of the incoming class is 60 or older; the average age of a new S&P 500 independent director is 57.5 years. Of the universe of S&P 500 independent directors, 20% are 70 or older, while only 6% are 50 or younger. The average age of an S&P 500 independent director is 63, largely unchanged since 2009.

Low turnover in the boardroom persists

Consistent with past years, 56% of S&P 500 boards added at least one independent director over the past year. More than one quarter (29%) made no changes to their roster of independent directors—neither adding nor losing independent directors—and 15% reduced the number of independent directors without adding any new independent directors.

The end result: in spite of the record number of female directors, representation of women on S&P 500 boards increased incrementally to 26% of all directors, up from 24% in 2018 and 16% in 2009. Today, 19% of all directors of the top 200 companies are male or female minorities, up from 17% last year and 15% in 2009.

Individual director assessments are gaining traction, but mandatory retirement policies continue to proliferate

This year 44% of S&P 500 companies disclosed some form of individual director assessment (up from 38% last year and 22% 10 years ago). However, 71% of S&P 500 boards (largely unchanged over the past five years) disclosed a mandatory retirement age for directors, and retirement ages continue to rise, with 46% of boards with caps setting the age at 75 or older, compared to just 15% in 2009.

Age caps influenced the majority of director departures from boards with retirement policies, with 41% either exceeding or reaching the age cap and another 14% leaving within three years of the retirement age.

Demographically, only 15% of the independent directors on boards with age caps are within three years of mandatory retirement. As a result, most S&P 500 directors have a long runway before reaching mandatory retirement.

Independent board chairs continue to grow in numbers and pay

Today more than half of S&P 500 boards (53%) split the chair and CEO roles, up from 37% a decade ago. One-third (34%) are chaired by an independent director, up from 31% last year and 16% in 2009.

Although the roles and responsibilities of an independent board chair and a lead director are frequently similar, the difference in compensation is wide and growing. Independent chairs receive, on average, an additional $172,000 in annual compensation, compared to an annual average supplement of $41,000 for independent lead directors.

For the first time, total director pay at S&P 500 boards averages more than $300,000

The average total compensation for S&P 500 non-employee directors, excluding independent chairs, is around $303,000, a 2% year-over-year increase. Director pay varies widely by sector, with a $100,000 difference between the average total pay of the highest and lowest paying sectors.

Key Takeaways—Survey of S&P 500 Nominating and Governance Committee Members

Our survey of more than 110 nominating and governance committee members of S&P 500 companies portends a continuation of trends identified in 2019 U.S. Spencer Stuart Board Index.

Turnover in the boardroom will remain low

On average, the surveyed nominating and governance committee members anticipate appointing/replacing one director each year over the next three years.

Boards will increase their focus on racial/ethnic diversity and continue to focus on gender diversity

Diversity considerations are two of the top five issues for the next three years. While 75% of the surveyed committee members reported that gender diversity was addressed in the past year, 66% said it would continue to be a priority over the next three years. Only 38% reported that racial/ethnic diversity was addressed in the past year, but 65% said it was a top priority for the next three years.

Industry experience will be a key recruiting consideration

The top priority for the next three years—cited by 82% of the surveyed committee members—is expanding director sector/industry experience.

Evaluations of boards and directors will be examined

Enhancing board and individual director evaluations is another top priority for the next three years, identified by 61% of the respondents. While more than three quarters of respondents ranked their full board and committee assessments as very or extremely effective, only 62% gave similar marks to peer evaluations and a just over a majority (53%) gave similar rankings to self-assessments.

Boards will have to cast a wide net to identify director talent

The top five recruiting priorities for the next three years are: female directors (40%); technology experience (38%); active CEO/COO (35%); digital/social media experience (29%); and minorities (27%). Finding a single director who meets all of these criteria is difficult at best, and given supply/demand pressures, boards will have to dig deeper to identify qualified director candidates.

Together the 2019 U.S. Spencer Stuart Board Index and Spencer Stuart’s Survey of S&P 500 Nominating and Governance Committee Members indicate that the profile of S&P 500 directors will continue to change and board composition will continue to evolve. But the pace of change will remain measured.

Actionnaires de contrôle des entreprises | cibles des activistes


Voici un article très intéressant de Amy Freedman, Michael Fein et Ian Robertson de la firme Kingsdale Advisors, publié sur le Forum de Harvard Law School aujourd’hui.

Les auteurs expliquent très bien les situations de contrôle et de quasi-contrôle des entreprises. Ils montrent pourquoi ces entreprises sont vulnérables et comment elles constituent une cible de choix pour les activistes, qui n’hésitent pas à utiliser différents moyens pour arriver à leurs fins.

Les actionnaires minoritaires activistes cherchent à bouleverser les structures de contrôle existantes afin de diminuer le pouvoir des principaux propriétaires. Ultimement, on cherche à modifier la composition du conseil d’administration.

L’article expose différents stratagèmes pour ébranler le pouvoir des actionnaires de contrôle.

      • « Undermine the image of the current board and controlling shareholder as competent business managers
      • Identify and exploit divides between independent directors and the controlling shareholder’s representatives
      • Where familial relationships exist, seek to divide the family members or position them against other directors
      • Demonstrate unfair and abusive treatment of minority shareholders
      • Shine a spotlight on what is seen as “self-dealing” in exposing related-party transactions
      • Demonstrate a divide between top management and the average worker on pay issues
      • Illustrate divides where board and management are out of touch with other stakeholder groups beyond shareholders such as employees, unions, and the communities in which they operate
      • Inflict brand damage that will impact business relations with customers, consumers, and the general public ».

Bonne lecture !

Fall of the Ivory Tower: Controlled Companies and Shareholder Activism

 

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Despite longstanding complaints about governance and the tyranny of a few who may or may not hold a meaningful economic interest in the company they founded and/or now control, investors have continued to allocate to controlled or quasi-controlled companies. What has changed is that minority shareholders are no longer content to sit quietly and go along for the ride, increasingly demonstrating they are willing to pull on the few levers of activism and change available at these companies.

Companies that were set up to inoculate themselves from the whims of shareholders have now become targets. Even if directors aren’t at risk of losing their seats in a vote, they are at risk of losing their reputations and being embarrassed into change.

While governance concerns usually provide the thin edge of the wedge to begin the advancement of change, the underlying driver for a minority shareholder is usually a dissatisfaction with the way the controlling entity is running the business—not just in terms of current performance, but also in a lack of willingness to explore other accretive opportunities that may impact the controller’s vision for the company and status quo.

Many of today’s controlled and quasi-controlled companies found their genesis in family enterprises that grew beyond the bounds of private ownership to embrace the opportunities of external capital and diversified ownership, for better or worse.

Given strong, centralized leadership from proven entrepreneur-managers, senior management, and closely aligned directors, the boards of these companies have traditionally seen themselves as only marginally accountable to minority shareholders that held slivers of “their company.” But all of this is starting to transform as shareholders have begun testing the waters for change. The fact is, controlled companies are no longer impenetrable. But will they realize this? And if not, at what cost?

A general awareness of the tools of shareholder activism, the advent of advocacy and advisory groups who target ESG issues at public companies (especially those who are seen as governance laggards), and advancing regulations related to disclosure and transparency have created an environment where controlled companies are exposed, at least from a reputational perspective.

Activists have developed an appetite and motivation for chasing difficult targets Notably, Third Point ran a highly publicized proxy contest to replace the entire twelve-person board at Campbell Soup Company, despite the fact that heirs of the company’s founder held 41% of the shares. Third Point ultimately settled for two seats on an expanded fourteen-person board, indicating that some degree of change is possible despite daunting odds.

While it is unlikely a shareholder proposal related to something like executive pay disclosure would pass, it could serve to embarrass the company and educate the broader shareholder base and market about the actions of the current management.

So far, 2019 has seen the greatest frequency of say-on-pay proposals received by controlled issuers. Furthermore, 2019 has seen an unprecedented level of shareholder support, with an average of 24.95%, compared to 20.65% in 2017 and 17.68% in 2015, years that had comparable volumes of proposals.

How We Define Control

A controlled company is commonly defined as a corporation where more than 50% of voting power is held by a single person, entity, or group. This may be facilitated through a dual-class share structure or outright ownership of the majority of an issuer’s common shares outstanding.

A wider concept of control may also include quasi-controlled companies, wherein a stake of 20% or greater is held by a single person, entity, or group.

Both types of controlled groups are largely comprised of enterprises that were once family-operated or those that have a strategic partner with a large ownership stake. Despite partially divesting their significant ownership stakes, these families and stakeholders still maintain extraordinary influence over operating facets of these companies, from day-to-day strategy to overarching governance, largely influencing how the board is constituted, and the respective board and committee mandates.

Why Controlled Companies Are Vulnerable to Change: The Adapted Activist Playbook

Pursuing an activist course of action at controlled companies presents a unique set of challenges that often require some creativity on the part of the minority shareholder. Given the significant obstacles to immediate and meaningful change, these challenges result in what are often seen as “against all odds” campaigns.

Shareholders who target controlled companies modulate their campaigns with the understanding that it will often require a long, multi-staged process to advance change. Given that influencing meaningful change in a single instance of activism is likely impossible, from a pragmatic standpoint, controlled company activist tactics and goals differ from those of traditional activists. Tactically, activists will rely on informal avenues for change while aiming for more incremental objectives.

Absent conventional proxy fight and bargaining mechanisms—such as the threat of nominating and electing an activist director or calling a special meeting to force change—reputational damage and exposure are the primary forces that an activist at a controlled company can use to influence change. A single campaign tied to a shareholder proposal or a withhold campaign targeted at a specific director may not result in immediate substantive change, but can act as a disciplinary mechanism by publicly shaming the board, serve as a lightning rod to attract and expose broader shareholder opposition that would be useful in a future campaign, or be used as a bargaining chip or lever to obtain smaller, more gradual, changes, such as adding new, independent members to the board or adjusting executive pay to reflect market realities. Through this lens, a successful campaign may not be one that passes, just one that exposes a controlled company’s entrenchment and opens the eyes of the controlling entity.

As such, when private pressure fails, an activist’s strategy at a controlled company usually centers on exacting maximum reputational damage to force change. Such campaigns can become a significant distraction and headache for the board and management. At Kingsdale, we have observed that campaigns against controlled companies generally retain a number of common features, with the activist seeking to:

  • Undermine the image of the current board and controlling shareholder as competent business managers

  • Identify and exploit divides between independent directors and the controlling shareholder’s representatives

  • Where familial relationships exist, seek to divide the family members or position them against other directors

  • Demonstrate unfair and abusive treatment of minority shareholders

  • Shine a spotlight on what is seen as “self-dealing” in exposing related-party transactions

  • Demonstrate a divide between top management and the average worker on pay issues

  • Illustrate divides where board and management are out of touch with other stakeholder groups beyond shareholders such as employees, unions, and the communities in which they operate

  • Inflict brand damage that will impact business relations with customers, consumers, and the general public

L’activisme actionnarial | la situation en France


Voici un texte publié par le Club des juristes français portant sur l’activiste actionnarial.

Cette organisation vient de publier son rapport sur l’état des lieux de l’activisme en France. Le document est en français, ce qui améliore sensiblement la compréhension de la situation.

Après un bref historique du phénomène, les auteurs ont :

identifié les progrès souhaitables (première partie) et ils proposent plusieurs pistes d’amélioration de l’encadrement juridique ou des bonnes pratiques qui régissent l’exercice de l’engagement actionnarial des activistes (deuxième partie).

Vous trouverez ci-dessous le sommaire du rapport, suivi de la table des matières qui fait état des principales recommandations.

Bonne lecture !

ACTIVISME ACTIONNARIAL | Club des juristes français

 

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Sommaire du rapport

 

▶ L’engagement des actionnaires dans la vie de l’émetteur étant
généralement considéré par tous les acteurs du marché comme une
condition de son bon fonctionnement et encouragé comme tel par les
autorités de marché, comment pourrait-on s’étonner qu’un actionnaire
soit particulièrement actif ?

▶ L’activisme actionnarial apparaît aux États-Unis dans les années
1930. Après s’y être épanoui à partir des années 70 et 80, il s’observe
désormais partout où les actionnaires connaissent un renforcement
de leurs droits : en Italie, en Allemagne, aux Pays-Bas, au Royaume-Uni,
etc. L’intérêt pour le sujet a ainsi pris de l’ampleur en Europe, à partir des
campagnes activistes menées dans les années 2000. Davantage qu’un
mimétisme spontané des actionnaires européens, c’est une exportation
des activistes américains à laquelle on assiste. Près de la moitié des
sociétés visées en 2018 ne sont pas américaines. Il semble que
l’activisme se soit développé en cadence de, et parfois en relation avec,
la généralisation de la gestion passive de titres pour compte de tiers.
En contrepoint d’une gestion indicielle qui ne permet pas d’intervenir
de manière ciblée sur une société déterminée, l’actionnaire activiste
intervient ponctuellement et revendique une fonction d’optimisation du
fonctionnement du marché.

▶ Les fonds activistes ont connu une croissance significative, gagnant
par la même occasion en crédibilité et en force. Par exemple, les
activistes américains ont atteint 250,3 milliards de dollars d’actifs
sous gestion au deuxième trimestre de 2018 quand ils n’en avaient que
94,7 milliards au quatrième trimestre de 2010. L’activisme représente
désormais une puissance colossale avec 65 milliards de capital déployé
dans des campagnes en 2018. Les campagnes en Europe ne sont plus
occasionnelles. Avec 58 campagnes européennes en 2018, les fonds
activistes ont indéniablement intégré le paysage boursier.

▶ Désormais, l’activisme actionnarial présente une telle diversité que sa
délimitation, et par conséquent son encadrement, sont des plus ardus.
Ainsi, aucune réglementation spécifique n’est applicable aux seuls
activistes. Seul le droit commun applicable à tout investisseur permet
d’appréhender l’activiste qui se prévaut précisément des prérogatives
ordinaires de l’actionnaire. Qu’il s’agisse des questions écrites posées
en assemblée générale, de la présentation de résolutions alternatives,
de la demande d’une expertise de gestion, ou, enfin, de l’information
périodique ou permanente, l’activiste invoque ses droits de minoritaire.
Il fait toutefois un exercice de ces droits qui peut apparaître
particulièrement radical voire, selon certains, déloyal, et faire peser un
risque d’atteinte à l’intérêt social. Il peut ainsi sortir du cadre que lui
réservait le législateur en mettant parfois en difficulté la société.

▶ Logiquement, le droit commun fournit des outils pour réagir :
identification des actionnaires, déclaration de franchissement de
seuils, déclaration d’intention, déclaration d’un projet d’opération,
déclaration des transferts temporaires de titres, déclaration des
positions nettes courtes en cas de ventes à découvert, déclaration à
la Banque de France, déclaration de clauses des pactes d’actionnaires,
encadrement de la sollicitation active de mandats et transparence sur
la politique de vote des fonds d’investissement. Ce droit commun
apparaît néanmoins insuffisant au regard de la diversité des outils dont
disposent les activistes et de leur sophistication juridique.

▶ La perspective d’une régulation adaptée ou d’une amélioration des
pratiques impose de cerner au préalable ce que recouvre l’activisme
actionnarial.

▶ Une campagne activiste peut être définie comme le comportement
d’un investisseur usant des prérogatives accordées aux minoritaires
afin d’influencer la stratégie, la situation financière ou la gouvernance
de l’émetteur, par le moyen initial d’une prise de position publique.
L’activiste a un objectif déterminé qui peut varier selon les activistes
et les circonstances propres à chaque campagne. L’activisme peut
être short ou long, avec le cas échéant des objectifs strictement
économiques ou alors environnementaux et sociétaux (ESG), chaque
activiste développant des modalités d’action qui lui sont propres.
Malgré ces différences indéniables entre les types d’activisme, les
difficultés soulevées par l’activisme sont communes et justifient de
traiter de l’activisme dans son ensemble.

▶ L’activisme ne doit pas être confondu avec la prise de position ponctuelle
par un actionnaire sur un sujet particulier, lorsque son investissement
n’est pas motivé par cette seule critique. Un investisseur peut ainsi être
hostile aux droits de vote double et le faire savoir, y compris en recourant
à une sollicitation active de mandats, sans être qualifié d’activiste car la création de valeur recherchée ne repose pas exclusivement sur cette
critique. Dans le cas où le retour sur investissement attendu ne repose
que sur une stratégie de contestation, l’investisseur adopte alors une
forme d’activisme économique.

▶ D’un point de vue prospectif, la question de l’activisme actionnarial a
parfois été abordée à l’occasion de travaux portant sur d’autres sujets
de droit des sociétés ou de droit boursier. Outre les rapports élaborés
par le Club des juristes, dans le cadre de la Commission Europe et
de la Commission Dialogue administrateurs-actionnaires, l’AMF,
tout comme les législateurs français et européen ont identifié la
problématique, sans toutefois proposer, à ce jour, un régime juridique
spécifique.

▶ Alors que l’année 2018 a été qualifiée d’année record de l’activisme,
la question de la montée en puissance des activistes, en Europe et en
France, est devenue un enjeu de Place dont se sont notamment saisis
les pouvoirs publics, comme l’illustrent le lancement par l’Assemblée
nationale d’une Mission d’information sur l’activisme actionnarial et
les déclarations récentes du ministre de l’Économie et des Finances.
Les entreprises y voient un sujet sensible et se sont déjà organisées
individuellement en conséquence. L’Association française des
entreprises privées (AFEP) et Paris Europlace ont également initié des
réflexions à ce sujet.

▶ En parallèle, l’activisme actionnarial a depuis plusieurs années donné
lieu à un vif débat académique sur ses effets économiques et sociaux
sur le long terme, tant aux États-Unis qu’en France. Pour ses
partisans, l’activisme actionnarial permet à la société de créer de la
valeur actionnariale et économique sur le long terme. Pour d’autres, les éventuels effets bénéfiques sont identifiés sur le seul court-terme et les
émetteurs doivent au contraire se focaliser sur la création de valeur à
long terme en intégrant plus vigoureusement les questions sociales et
environnementales comme cela a été acté en France par la loi PACTE
à la suite du Rapport NOTAT SÉNARD et aux États-Unis par la position
récente du Business Roundtable.

▶ C’est dans ce contexte que le Club des juristes a décidé la création d’une
commission multidisciplinaire chargée de faire le point des questions
posées par l’activisme actionnarial et de proposer éventuellement
des améliorations à l’environnement juridique et aux pratiques qui le
concernent.

▶ L’objectif de la Commission n’est pas de prendre parti dans le débat
économique, politique et parfois philosophique qui oppose les partisans
et les détracteurs de l’activisme actionnarial, ni de prendre position sur
telle ou telle campagne activiste actuelle ou passée. Il s’agit plutôt
d’identifier les comportements susceptibles d’être préjudiciables à
la transparence, la loyauté et le bon fonctionnement du marché et
d’examiner, au plan juridique, l’encadrement et les bonnes pratiques qui
pourraient être appliqués aux campagnes activistes.

▶ Les travaux de la Commission du Club des juristes ont consisté à
auditionner une trentaine de parties prenantes à la problématique
de l’activisme actionnarial, représentants des émetteurs et des
investisseurs, intermédiaires de marché et des personnalités
qualifiées, afin de bénéficier de leur expérience et de recueillir leur
avis sur les pistes de droit prospectif. Les autorités compétentes ont participé aux travaux de la Commission en qualité d’observateurs et
ne sont en rien engagées par les conclusions de la Commission. Pour
compléter son analyse, une enquête a été effectuée auprès d’environ
deux cents directeurs financiers et responsables des relations avec les
investisseurs de sociétés cotées.

 

Table des matières du rapport 

PREMIÈRE PARTIE – ÉTAT DES LIEUX 

I. LA DÉFINITION DE L’ACTIVISME FACE A LA DIVERSITÉ DES ACTIVISTES

1. L’absence de définition juridique de l’activisme actionnarial
2. L’irréductible hétérogénéité de l’activisme actionnarial

II. DES COMPORTEMENTS PARFOIS DISCUTABLES

1. La construction de la position
2. Le dialogue actionnarial
3. La campagne publique
4. Le vote en assemblée générale

DEUXIÈME PARTIE – PISTES DE RÉFLEXION 

1. De nouvelles règles de transparence
2. L’encadrement du short selling
3. L’encadrement du prêt-emprunt de titres en période
d’assemblée générale
4. L’extension de la réglementation sur la sollicitation
active de mandats à la campagne activiste

II. L’AMÉLIORATION DU DIALOGUE ENTRE éMETTEURS ET INVESTISSEURS 

1. Dialogue collectif : la création d’une plateforme de dialogue
actionnarial
2. Le renforcement du dialogue actionnarial en amont
de la campagne
3. La méthode d’élaboration du code de gouvernement
d’entreprise

III. RÉFLEXIONS SUR LE RÔLE DE L’AMF ET SUR L’ESMA

1. L’intervention de l’AMF
2. Les incertitudes de la notion d’action de concert

Conclusions

Constats sur la perte de contrôle des sociétés québécoises | Le cas de RONA


C’est avec plaisir que je partage l’opinion de Yvan Allaire, président exécutif du CA de l’IGOPP, publié ce jour même dans La Presse.

Ce troisième acte de la saga RONA constitue, en quelque sorte, une constatation de la dure réalité des affaires corporatives d’une société multinationale, vécue dans le contexte du marché financier québécois.

Yvan Allaire présente certains moyens à prendre afin d’éviter la perte de contrôle des fleurons québécois.

Selon l’auteur, « Il serait approprié que toutes les institutions financières canadiennes appuient ces formes de capital, en particulier les actions multivotantes, pourvu qu’elles soient bien encadrées. C’est ce que font la Caisse de dépôt, le Fonds de solidarité et les grands fonds institutionnels canadiens regroupés dans la Coalition canadienne pour la bonne gouvernance ».

Cette opinion d’Yvan Allaire est un rappel aux moyens de défense efficaces face à des possibilités de prises de contrôle hostiles.

Dans le contexte juridique et réglementaire canadien, le seul obstacle aux prises de contrôle non souhaitées provient d’une structure de capital à double classe d’actions ou toute forme de propriété (actionnaires de contrôle, protection législative) qui met la société à l’abri des pressions à court terme des actionnaires de tout acabit. Faut-il rappeler que les grandes sociétés québécoises (et canadiennes) doivent leur pérennité à des formes de capital de cette nature, tout particulièrement les actions à vote multiple ?

Bonne lecture !

RONA, LE TROISIÈME ACTE

 

Résultats de recherche d'images pour « RONA »

 

Acte I : La velléité de la société américaine Lowe’s d’acquérir RONA survenant à la veille d’une campagne électorale au Québec suscite un vif émoi et un consensus politique : il faut se donner les moyens de bloquer de telles manœuvres « hostiles ». Inquiet de cette agitation politique et sociale, Lowe’s ne dépose pas d’offre.

Acte II : Lowe’s fait une offre « généreuse » qui reçoit l’appui enthousiaste des dirigeants, membres du conseil et actionnaires de RONA, tous fortement enrichis par cette transaction. Lowe’s devient propriétaire de la société québécoise.

Acte III : Devant un aréopage politique et médiatique québécois, s’est déroulé la semaine dernière un troisième acte grinçant, bien que sans suspense, puisque prévisible dès le deuxième acte.

En effet, qui pouvait croire aux engagements solennels, voire éternels, de permanence des emplois, etc. pris par l’acquéreur Lowe’s en fin du deuxième acte ?

Cette société cotée en Bourse américaine ne peut se soustraire au seul engagement qui compte : tout faire pour maintenir et propulser le prix de son action. Il y va de la permanence des dirigeants et du quantum de leur rémunération. Toute hésitation, toute tergiversation à prendre les mesures nécessaires pour répondre aux attentes des actionnaires sera sévèrement punie.

C’est la loi implacable des marchés financiers. Quiconque est surpris des mesures prises par Lowe’s chez RONA n’a pas compris les règles de l’économie mondialisée et financiarisée. Ces règles s’appliquent également aux entreprises canadiennes lors d’acquisitions de sociétés étrangères.

On peut évidemment regretter cette tournure, pourtant prévisible, chez RONA, mais il ne sert à rien ni à personne d’invoquer de possibles représailles en catimini contre RONA.

QUE FAIRE, ALORS ?

Ce n’est pas en aval, mais en amont que l’on doit agir. Dans le contexte juridique et réglementaire canadien, le seul obstacle aux prises de contrôle non souhaitées provient d’une structure de capital à double classe d’actions ou toute forme de propriété (actionnaires de contrôle, protection législative) qui met la société à l’abri des pressions à court terme des actionnaires de tout acabit. Faut-il rappeler que les grandes sociétés québécoises (et canadiennes) doivent leur pérennité à des formes de capital de cette nature, tout particulièrement les actions à vote multiple ?

Il serait approprié que toutes les institutions financières canadiennes appuient ces formes de capital, en particulier les actions multivotantes, pourvu qu’elles soient bien encadrées. C’est ce que font la Caisse de dépôt, le Fonds de solidarité et les grands fonds institutionnels canadiens regroupés dans la Coalition canadienne pour la bonne gouvernance.

(Il est étonnant que Desjardins, quintessentielle institution québécoise, se soit dotée d’une politique selon laquelle cette institution « ne privilégie pas les actions multivotantes, qu’il s’agit d’une orientation globale qui a été mûrement réfléchie et qui s’appuie sur les travaux et analyses de différents spécialistes » ; cette politique donne à Desjardins, paraît-il, toute la souplesse requise pour évaluer les situations au cas par cas ! On est loin du soutien aux entrepreneurs auquel on se serait attendu de Desjardins.)

Mais que fait-on lorsque, comme ce fut le cas au deuxième acte de RONA, les administrateurs et les dirigeants appuient avec enthousiasme la prise de contrôle de leur société ? Alors restent les actionnaires pourtant grands gagnants en vertu des primes payées par l’acquéreur. Certains actionnaires institutionnels à mission publique, réunis en consortium, pourraient détenir suffisamment d’actions (33,3 %) pour bloquer une transaction.

Ce type de consortium informel devrait toutefois être constitué bien avant toute offre d’achat et ne porter que sur quelques sociétés d’une importance stratégique évidente pour le Québec.

Sans actionnaire de contrôle, sans protection juridique contre les prises de contrôle étrangères (comme c’est le cas pour les banques et compagnies d’assurances, les sociétés de télécommunications, de transport aérien), sans mesures pour protéger des entreprises stratégiques, il faut alors se soumettre hélas aux impératifs des marchés financiers.

La responsabilité des administrateurs eu égard aux risques climatiques


Les responsabilités des conseils d’administration ne cessent de s’accroître. La gestion du risque est une activité essentielle qui relève des fonctions de surveillance dévolues aux administrateurs de sociétés.
L’article ci-dessous, publié par Richard Howitt dans Board Agenda, présente clairement les devoirs et les responsabilités des administrateurs eu égard aux changements climatiques.
Pour la plupart des entreprises, il s’agit du risque le plus déterminant quoique souvent le plus sous-estimé. L’auteur montre toute l’ampleur du problème et suggère plusieurs manières d’exercer un leadership éclairé dans la considération des risques de cette nature.
À mon avis, chaque administrateur devrait être bien au fait de la situation et réfléchir aux mesures à prendre. L’auteur note que les entreprises qui divulguent leurs plans concernant les risques climatiques sont perçues de façon positive par les investisseurs.

The necessity for “climate competence” to be a core skill for corporate boards had already been underlined through the publication of guidance for Effective Climate Governance on Corporate Boards at the World Economic Forum in January.

Bonne lecture !

TCFD summit confirms climate risk should be your board’s priority

 

The Task Force on Climate-related Financial Disclosure (TCFD) has set a pathway for climate risk to become an integral part of corporate governance.

climate, climate change, ice melting

Image: Bernhard Staehli/Shutterstock

The recent global summit of the Task Force on Climate-related Financial Disclosure (TCFD) made it clear that companies will increasingly be subject to challenge on management of climate risk by regulators, investors and wider stakeholders.

The necessity for “climate competence” to be a core skill for corporate boards had already been underlined through the publication of guidance for Effective Climate Governance on Corporate Boards at the World Economic Forum in January.

There was a call for increased quality and quality of TCFD reporting, now standing at 800, in the Task Force’s last Status Report in June.

But as climate protests fill news bulletins around the world, this month’s summit in Tokyo is potentially far more significant, in setting a pathway for climate risk to become integral and unavoidable for mainstream corporate governance in all economic sectors.

A major push

If the original TCFD recommendations were a call to action, the summit charted an action plan through which they will be implemented.

Bank of England Governor Mark Carney used the summit to warn that regulation requiring TCFD reporting is probably two years away, appealing to businesses present to develop their own reporting in the meanwhile, to ensure mandatory measures are shaped to be most effective for business itself.

The veiled threat is that companies who delay on climate disclosure will find themselves subject to costly burden.

Full integration of TCFD recommendations in the EU’s Non-Financial Reporting Directive guidelines is a further sign that Europe may lead mandatory reporting requirements as part of its major push towards sustainable finance, also in the next two years.

Investors are themselves now rewarding and penalising companies on how far they are genuinely integrating climate risk

The UK’s own Green Finance Strategy is hardly less ambitious, setting a target for all listed companies and large asset owners to disclose their climate-related risks and opportunities by 2022 at the latest. And the capital markets regulator in Australia has issued guidance to company directors on addressing climate risk.

But the global summit was notable for its recognition that investors, not simply regulators, are themselves now rewarding and penalising companies on how far they are genuinely integrating climate risk.

One tangible initiative from the summit was new green investment guidance published by Japan’s own TCFD consortium. The effect will be a significant increase in investor engagement with companies on climate issues.

Companies present at the summit reporting anecdotal evidence of increased investor engagement on the issue included Shell, Total and Sumitomo Chemical.

A PwC report cited in Tokyo shows positive correlation between stock or share price and the quantity of TCFD disclosures made by the company, with research from the Commonwealth Climate and Law Initiative quantifying that that the risk of non-disclosure is a bigger liability for the company than of disclosure itself.

Meanwhile, during the 2019 proxy season shareholder activists pressed disclosure resolutions including climate risk at no fewer than 64 company AGMs in the US alone.

An opportunity for leadership

The summit heard TCFD reporting is being adopted by companies valued at a combined market capitalisation of $118trn—an important challenge to organisations that have not yet made the shift.

Already we know that climate-related financial risk should be treated by directors as a core part of their duty to promote the success of the company. Failure to do so could expose directors to legal challenge.

But the action required is now clear. The board should ensure that material climate-related risks and opportunities are not simply reported, but fully integrated in to the company’s strategy, risk-management process and investment decisions.

Climate-related financial risk should be treated by directors as a core part of their duty to promote the success of the company

Among the actions required are ensuring board and committee structures incorporate climate risk and opportunity; recruitment of new directors with the requisite knowledge and skills; incorporating management of climate risk into executive remuneration; and fully integrating it in the company’s own risk management.

Board members must provide the leadership for the company to engage with relevant experts and stakeholders to tackle the challenge, and should ensure they are sufficiently informed themselves to maintain adequate oversight.

Lastly, boards should recognise that climate risk may involve addressing timescales beyond conventional board terms, but are within mainstream investment and planning horizons accorded to every other financial risk and opportunity.

A board responsibility

The summit underlined how existing TCFD reporting is still falling short of being decision-useful, in demonstrating strategic resilience of the company and in incorporating targets for transition to net zero.

It also enabled further discussion of the measurements required for reporting, including clarifying what is green revenue, and the definition of terms such as “environmentally sustainable”.

But as work from the Corporate Reporting Dialogue shows, almost all of the necessary indicators are already available in existing frameworks. It is not whether they are available, but how they are used.

Ultimately this is a responsibility that must reside in the boardroom itself

Plentiful assistance for board members is on hand through online resources like the TCFD Knowledge Hub organised by the Climate Disclosure Standards Board, training offered by organisations such as Competent Boards, or detailed guidance for specific sectors through specific TCFD preparer forums.

But ultimately this is a responsibility that must reside in the boardroom itself. Every company board has its own responsibility to consider where its own business model stands in relation to that transition.

And with finance ministries, central banks and regulators in the top 20 economies of the world concluding that climate change is a risk to the stability of the entire global financial system, no company can ignore this task.

______________________________

Richard Howitt is a strategic adviser on corporate responsibility and sustainability, and former CEO at the International Integrated Reporting Council.

Êtes-vous moniste, pluraliste ou de l’approche impartiale, eu égard aux objectifs de l’organisation ?


Voici un article très éclairant sur la compréhension des modèles qui expliquent la recherche des objectifs de l’entreprise par les administrateurs de sociétés.

L’article de Amir Licht, professeur de droit à Interdisciplinary Center Herzliya, et publié sur le site du Harvard Law School Forum on Corporate Governance, présente une nouvelle façon de concevoir la gouvernance des organisations.

Êtes-vous moniste, pluraliste ou de l’approche impartiale, eu égard à la détermination des objectifs de l’organisation  ?

Dans le domaine de la gouvernance des entreprises, l’approche de la priorité accordée aux actionnaires domine depuis le début des lois sur la gouvernance des sociétés. C’est l’approche moniste qui considère que les organisations ont comme principal objectif de maximiser les bénéfices des actionnaires.

Récemment, une nouvelle approche émerge avec vigueur. C’est la conception selon laquelle l’entreprise doit prioritairement viser à atteindre les objectifs de l’ensemble des parties prenantes. On parle alors d’une approche pluraliste, c’est-à-dire d’un modèle de gouvernance qui vise à rencontrer les objectifs de plusieurs parties prenantes, d’une manière satisfaisante et optimale.

L’auteur constate que ces deux approches ont plusieurs failles et qu’un modèle mettant principalement l’accent sur l’impartialité de tous les administrateurs est la clé pour l’atteinte des objectifs de l’organisation.

The monistic position endorses a single maximand (that which is to be maximized)—invariably, shareholder interest—while the pluralistic position supports a multiple-objective duty that would balance the interests of several stakeholder constituencies, shareholders included.

Je vous invite à lire ce court article afin de vous former une opinion sur le modèle de gestion privilégiée par votre organisation.

Vos commentaires sont les bienvenus.

Bonne lecture !

 

Stakeholder Impartiality: A New Classic Approach for the Objectives of the Corporation

 

Modèles de gouvernance
Ivan Tchotourian, revue Contact – Université Laval

 

 

 

 

 

 

 

 

The stockholder/stakeholder dilemma has occupied corporate leaders and corporate lawyers for over a century. Most recently, the Business Roundtable, in a complete turnaround of its prior position, stated that “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” The signatories of this statement failed, however, to specify how they would carry out these newly stated ideals. Directors of large U.K. companies don’t enjoy this luxury anymore. Under section 172 of the Companies Act 2006, directors are required to have regard to the interests of the company’s employees, business partners, the community, and the environment, when they endeavor to promote the success of the company for the benefit of its members (shareholders). Government regulations promulgated in 2018 require large companies to include in their strategic reports a new statement on how the directors have considered stakeholders’ interest in discharging this duty.

These developments are recent twists in a plot that has been unfolding—in circles, in must be said—in the debate over the objectives of the corporation. This debate oscillates between two polar positions, dubbed “monistic” and “pluralistic” in the business management parlance. The monistic position endorses a single maximand (that which is to be maximized)—invariably, shareholder interest—while the pluralistic position supports a multiple-objective duty that would balance the interests of several stakeholder constituencies, shareholders included. How to perform this balancing act is a question that has virtually never been addressed until now. When the Supreme Court of Canada in 2008 discussed it in BCE Inc. v. 1976 Debentureholders, it explicitly eschewed giving it an answer. Lawyers are similarly at sea with regard to a multiple-stakeholder-objective provision in India’s Companies Act, 2013.

This article advances a new, yet classical, approach for the task of considering the interests of various stakeholders by directors and other corporate fiduciaries. I argue that for lawfully accomplishing this task, while also complying with their standard duties of loyalty and care, directors should exercise their discretion impartially. Respectively, judicial review of directors’ conduct in terms of treating different stakeholders should implement the concomitant doctrine of impartiality. This approach is new, as it has not yet been implemented in this context. At the same time, this approach is also classical, even orthodox. The duty of impartiality (or even-handedness, or fairness; courts use these terms interchangeably) has evolved in traditional trust law mostly during the nineteenth century. In recent years, it has been applied in trust cases in several common law jurisdictions. More importantly, this duty has been applied during the latter part of the twentieth century in modern, complex settings of pension funds, where fund trustees face inescapable conflicts between subgroups of savers. These conflicts resemble the tensions between different stakeholders in business corporations—a feature that renders this doctrine a suitable source of inspiration for the task at hand.

In a nutshell, the duty of impartiality accepts that there could be irreconcilable tensions and conflicts among several trust beneficiaries who in all other respects stand on equal footing vis-à-vis the trustee. Applying the rule against duty-duty conflict (dual fiduciary) in this setting would be ineffective, as it would disable the trustee—and consequently, the trust—without providing a solution to the conundrum. The duty of impartiality calls on the trustee to consider the different interests of the beneficiaries impartially, even-handedly, fairly, etc.; it does not impose any heavier burden on the good-faith exercise of the trustee’s discretion. Crucially, the duty of impartiality does not imply equality. All that it requires is that the different interests be considered within very broad margins.

This article thus proposes an analogous process-oriented impartiality duty for directors—to consider the interests of relevant stakeholders. Stakeholder impartiality, too, is a lean duty whose main advantage lies in its being workable. It is particularly suitable for legal systems that hold a pluralistic stance on the objectives of the corporation, such as Canada’s and India’s open-ended stakeholderist approaches. Such a doctrinal framework might also prove useful for systems and individuals that endorse a monistic, shareholder-focused approach. That could be the case in the United Kingdom and Australia, for instance, where directors could face liability if they did not consider creditors’ interest in a timely fashion even before the company reaches insolvency. Moreover, this approach could be helpful where the most extreme versions of doctrinal shareholderism arguably rein, such as Delaware law post-NACEPF v. Gheewalla—in particular, with regard to tensions between common and preferred stockholders post-Trados.

A normatively appealing legal regime is unlikely to satisfy even its proponents if it does not lend itself to practical implementation; a fortiori for its opponents. For legal systems and for individual lawyers that champion a pluralistic stakeholder-oriented approach for the objective of the corporation, having a workable doctrine for implementing that approach is crucial—an absolute necessity. This is precisely where impartiality holds a promise for advancing the discourse and actual legal regulation of shareholder-stakeholder relations through fiduciary duties.

The complete article is available for download here.