L’amélioration de la participation de l’actionnariat au processus de votation par procuration

Vous trouverez, ci-dessous, les commentaires de Luis A. Aguilar, commissaire à la U.S. Securities and Exchange Commission, sur les moyens à prendre pour inciter les actionnaires des sociétés cotées à se prévaloir de leurs droits de vote par procuration.

Le commissaire présente clairement les difficultés liées au processus de votation existant, en adoptant le point de vue de l’actionnariat individuel (retail) et en mettant en exergue les incongruités de la règlementation.

Les panels constitués pour discuter de ces questions ont essentiellement deux sujets à explorer :

L’importance d’adopter un bulletin de vote « universel » qui permettrait aux actionnaires de voter séparément dans les cas d’administrateurs contestés

L’importance d’améliorer la participation de l’actionnariat au processus de votation par procuration. Aux États-Unis, les « petits actionnaires » possèdent 30 % des actions des 1 000 plus grandes entreprises mais leur taux de participation au processus de votation n’est que de 13 %. Les investisseurs institutionnels, en comparaison, utilisent leurs droits de vote dans 90 % des cas.

Je vous invite donc à lire les arguments exposés par le commissaire et à livrer votre point de vue sur ces deux questions. Cette problématique s’adresse tout autant à la situation canadienne.

Que faire pour assurer une meilleure participation de l’actionnariat diffus au processus de votation, surtout en cas d’élection contestée ?

Bonne lecture ?

Ensuring the Proxy Process Works for Shareholders

Today’s [February 19, 2015] Roundtable on Proxy Voting is certainly timely since over the course of the next several months, thousands of America’s public companies will hold annual shareholders meetings to elect directors and to vote on many important corporate governance issues. The start of the annual “proxy season” is an appropriate time to consider the annual process by which companies communicate with their shareholders and get their input on a variety of issues. Whether it’s voting on directors, executive compensation matters, or other significant matters, the annual meeting is the principal opportunity for shareholders—the true owners of public companies—to have their voices heard by the corporate managers of their investments. At these annual meetings, shareholders can express their support, or disappointment, with the direction of their companies through the exercise of their right to vote.

As today’s panelists know well, the days of shareholders coming together, sitting in a room and talking one-on-one with the directors and officers running their companies are long gone. The ownership of today’s public companies is both too widely dispersed geographically and would involve too many shareholders to reasonably attend shareholders meetings (such meetings would require football stadiums rather than typical conference rooms). Accordingly, rather than attending the annual shareholders meetings in person to cast their votes, shareholders of public companies typically submit their votes by proxy. To that end, the Commission recognizes that the proxy statement process is a vital means by which shareholders and companies’ leadership communicate with one another. Consistent with this reality, the Commission’s proxy rules operate on the principle that the proxy process should function, as close as possible, to replicate the rights of a shareholder who attends the annual meeting in person.

These rules are not static, however. The advent of the internet and other recent technological advances that have resulted in the rapid evolution in communications have raised tremendous possibilities, and a host of issues, related to how shareholders can engage in the proxy process. This is why it is so important for the Commission, the investor’s advocate, to continue to actively monitor and improve the proxy process so that it best protects the interests of shareholders.

To that end, today’s Roundtable will focus on two fundamental issues: first, a discussion of how best to empower shareholders so that they can effectively vote for the director they want; and second, a discussion of whether the existing proxy voting process is fostering or hindering the ability of shareholders to exercise their voting rights.

Importance of the Universal Proxy Ballot

To discuss the issues of empowering shareholders to vote for the directors of their choice, today’s first panel will focus on the state of contested director elections and discuss the use of universal proxy ballots. The fundamental issue to be addressed by this panel is straightforward: shareholders who could attend the annual meetings in person, particularly in contested elections, would have the ability to “split their tickets” and vote among all of the eligible candidates—whether recommended by management or by other shareholders. The same cannot be said for shareholders who participate in contested director elections by proxy. Rather, under today’s proxy regime, shareholders who vote by proxy effectively are unable to pick-and-choose among all eligible director candidates. This is because current proxy rules effectively do not provide shareholders with a single proxy ballot that would allow them to vote on candidates nominated by both shareholder proponents and management. This is one anomaly in the Commission’s proxy process rules that, when taken into account with prevailing state proxy laws, do not replicate an actual in-person meeting of shareholders. As a result, these proxy rules effectively result in diminishing shareholders’ rights by limiting voting choice during contested elections—an unwelcomed result at an important time for shareholders to have their voices heard.

To address these concerns, shareholders, commenters, and others have at various times promoted the idea of a universal proxy ballot—or a proxy card that permits shareholders to choose among all eligible director candidates. More recently, in 2013, the Commission’s Investor Advisory Committee (“IAC”) considered this issue and recommended that the Commission explore amending the proxy rules to provide any person soliciting proxies with the option of distributing a “universal ballot” in a “short slate” direction nomination—or a proxy contest in which the outside candidates would not control the board if elected. Even more recently, other commenters have suggested that the Commission facilitate the use of universal ballot proxy cards for all director elections, regardless of any resulting change in control.

The goal of these recommendations is to remove artificial barriers to shareholder nominations and thereby improve shareholder choice. The expectation is that a universal ballot proxy card would make management and boards of directors more responsive to the interests of shareholders.

I look forward to a robust discussion of the universal proxy ballot concept and a discussion of what can be done to improve the ways that shareholders can elect the directors that they want to run their companies.

Improving Informed Retail Participation in the Proxy Process

Today’s second panel will discuss possible approaches to addressing the drop in retail shareholder participation in the proxy process. This discussion is particularly important, given how Americans are increasingly relying on the capital markets for their savings and retirement. In fact, the data shows that about half of all U.S. households participate, either directly or indirectly, in the stock market.

While retail shareholders are no longer the predominant owners of America’s public companies like they were in the years before 1945, they remain significant direct owners of public companies. For example, one report found that as of the end of 2009, retail shareholders owned nearly 30% of the shares of America’s largest 1,000 public companies. This is a significant percentage of direct ownership interests and makes it clear why the Commission must promote policies that encourage retail investors to protect their interests by exercising their voting rights.

It’s no secret that retail shareholder participation in the proxy process has been falling. In fact, one of the first issues that I raised after becoming a Commissioner concerned the negative impact on retail investor voting following the Commission’s 2005 adoption of an “access equals delivery” rule. I noted in February 2009 that retail investor voting, already at low numbers, had plummeted at those companies using the notice and access model permitted by this rule. Indeed, the reports that compiled statistics on the level of participation by investors before and after the notice and access model was put in place at their companies found decreases of over 30% for large investors, and over 60% for smaller investors. Other reports find that retail response rates have declined each year since the introduction of the notice and access model, falling to less than a 13% response rate for the period from July 1, 2013 to June 30, 2014.

Although the Commission has not revisited the “access equals delivery” rule to determine its continuing impact, which is something I think should be done, the SEC has taken some steps to create greater interest in the voting process. For example, in 2010, the Commission identified a need for education outreach to better inform retail investors as to the importance of exercising their voting rights—and how to exercise those rights. In connection with that effort, the Commission took a series of steps designed to educate investors—including issuing an “investor alert” on new shareholder rules in advance of the 2010 proxy season, and launching a new “Spotlight on Proxy Matters” Web page at sec.gov that provides investors with information on the mechanics of proxy voting, the e-proxy rules, corporate elections, and proxy matters generally.

Notwithstanding the Commission’s efforts—which admittedly were limited—retail shareholder participation in the proxy process remains disappointingly low. For example, one report looking at a sample of annual meetings in 2013 found that 70% of shares held by retail shareholders were not voted. Another more recent report found that by July 2014, institutional shareholders had voted 90% of their shares, but retail shareholders had voted just 29% of their shares.

These dismal retail investor participation numbers have continued, despite technological advances that should have made it easier and more efficient for widely dispersed groups of shareholders to engage with other investors and their companies. For example, so-called “virtual shareholder meetings,” which allow shareholders to use the internet—not just to listen and watch, but also to vote their shares—have grown in prevalence over the past five years. Yet, retail shareholder participation remains low.

Perhaps it’s not just the use of new technology but, rather, how that technology is used that will result in greater shareholder participation.

For instance, it has been suggested that the better use of 21st century technology in the proxy process may facilitate how shareholders can more effectively receive and understand how their companies are performing, and to better put that performance into perspective. Indeed, it’s only logical to expect that better informed investors would likely participate in greater numbers.

In its 2010 Concept Release on the U.S. Proxy System, the Commission stated that if issuers provided reportable items in interactive data format, “shareholders may be able to more easily obtain specific information about issuers, compare information across different issuers, and observe how issuer-specific information changes over time as the same issuer continues to file in an interactive data format.” In addition, in 2013, the IAC recommended that the Commission immediately prioritize tagging important information with respect to various corporate governance issues, including portions of the proxy statement that relate to executive compensation and matters voted upon by shareholders. The IAC added that tagging the voting data and results contained in certain forms could result in more informed voting and investment decisions, and would facilitate comparisons among public companies. For these reasons, the IAC suggested that data tagging could “facilitate participation in the governance process.”

The end goal, of course, is not simply to increase retail shareholder participation in the proxy process, but rather to increase informed participation in this process. This is one of the fundamental concerns that have been previously raised about so-called “advance voting instructions” (sometimes referred to as “client-directed voting”). In particular, most iterations of advance voting instructions inevitably would set voting instructions for shareholders before any disclosures about the matters in question are known or even available. Any serious discussion of the merits of advanced voting instructions needs to consider how these processes will comport with the basic disclosure principles of investor protection and shareholder rights that underpin the current proxy rules.

As today’s panelists discuss various ways to promote retail shareholder participation in the proxy process, the discussion should focus, not only on how to get a shareholder to technically cast their vote, but also on how best to protect the fundamental interests of shareholders in making informed voting decisions.

Conclusion

I expect that today’s Roundtable will go a long way in assisting the Commission in exploring how best to get shareholders to participate in shareholders meetings and, in particular, how best to give them a more effective way to vote for the directors of their choice.

I would like to thank all of our panelists for taking the time to be here today, and I want to thank the staff for organizing this Roundtable. I look forward to an active discussion about the universal proxy ballots and the ways to increase the participation of informed shareholders in the proxy process.

In conclusion, I want to remind everyone that there will be a public comment file associated with today’s Roundtable. I look forward to receiving additional comments and input on these issues.

Le délicat problème de la rétribution des dirigeants d’OBNL !

L’expérience de la gestion des OBNL nous apprend que les entrepreneurs-propriétaires-fondateurs de ces organisations vivent souvent des aventures d’affaires formidables parce qu’ils sont animés par un feu sacré et une passion hors du commun. C’est souvent ce qui fait que certaines entreprises de l’économie sociale sortent de l’ombre !

Ainsi, suite à la mise sur pied de l’organisme à but non lucratif, les premiers dirigeants doivent s’impliquer activement dans la gestion quotidienne de l’entreprise; ils investissent beaucoup de temps – bénévolement – tout en occupant aussi un autre emploi.

Après plusieurs années de dévouement, de développement d’affaires tangible, de notoriété accrue et de succès répétés, souvent après des décennies d’efforts…, les gestionnaires bénévoles deviennent surchargés. L’entreprise doit se professionnaliser…

Toutes les organisations vivent ces grandes mutations, souvent déchirantes mais indispensables pour assurer la pérennité de l’entreprise.

Les leaders bénévoles doivent alors s’entourer de ressources additionnelles : administration générale, opérations, ventes, finances et comptabilité, recherche de commandites et de subventions, communications publiques, etc.

Ces nouvelles ressources, bien qu’ayant l’entreprise à cœur, ne sont pas animés de la même passion; en conséquence, l’organisation doit les rémunérer. Cela crée souvent deux classes : les responsables bénévoles (lesquels se retrouvent généralement au CA) et le personnel rémunéré.

Selon moi, le CA doit prévoir des mécanismes de transition clairs afin que les fondateurs-gestionnaires soient traités avec équité et reconnaissance.

When it comes to attracting and retaining talented leaders, the setting of executive compensation packages has posed continuing challenges to nonprofits since the 1980s. These challenges relate to the professionalization of the sector, the increasing desire to measure and reward success, and the need to retain and promote the most talented managers.

Voici un cas qui illustre pourquoi un CA doit se montrer très clairvoyant dans l’expression de sa gratitude envers les fondateurs bénévoles. Il ne doit pas attendre que les premiers dirigeants s’essoufflent, puis se retirent, pour leur exprimer sa satisfaction sous la forme d’une rétribution financière. On notera qu’il s’agit ici d’une OBNL d’envergure et que le PDG recevait déjà une rémunération significative.

Ce cas, rédigé par Ruth McCambridge et publié dans Nonprofit Quaterly, montre que le conseil d’administration d’une l’OBNL doit éviter de s’embourber dans des questions de rémunération du PDG, surtout lorsque l’organisme est tributaire de fonds publics pour son financement.

Nonprofit Boards Can and Should Avoid this Problem with CEO Compensation

This story is not new. A CEO spends decades providing measurably great leadership for a nonprofit, but no one ever considers ensuring that she is able to retire at the end of all that. So the board plays a little catch-up and makes a lump sum payment, causing a media storm in which scrutiny is focused unkindly on the organization.

So it was with the now-retired CEO of Health Care and Rehabilitation Services. Judith Hayward had been at the organization for 19 years and had built its budget from $8 million to $50 million annually. She was given a $650,000 compensation package when she retired around a year ago. Approximately 85 percent of the organization’s budget comes from taxpayer money.

Even though these kinds of payments may not be illegal and may even be ethical, when they come to light, they almost invariably cause problems for nonprofits—especially those that receive public contracts.

In this case, the board crossed its t’s and dotted its i’s. The executive and finance committees made recommendations and the board approved the payment in 2010. But when the payment was highlighted during a recent audit, the current CEO, George Karabakakis, felt compelled to travel to Montpelier to meet with local legislators to explain.

“It felt to myself, to the board, and to the senior leadership team that it was really important to come out and share the information,” Karabakakis said. “I don’t want legislators, or our staff, or anyone to get half truths or hear about this through the grapevine or the rumor mill. It’s important to put it out clearly and say ‘This is what happened.’”

Hayward’s annual salary when she retired was about $163,000. “Everyone on the board thought she did a tremendous job,” said J. Allen Dougherty, who served as chair of the HCRS board when the retirement package was approved. “She brought the organization out of bankruptcy, developed new programs and everyone who had contact with her, including people from the state, thought she did a magnificent job. She never had a retirement package and the board thought this was a way we could make it up to her.”

The package was originally approved at $450,000, but that was increased to $650,000 in 2013 when it was discovered that Hayward would be immediately taxed for $200,000 once she started to receive the payments.

Unfortunately, this year, for the first time in at least 10 years, HCRS employees did not get a raise, and Karabakakis said staff have been “disappointed, angry and outraged.”

“Some people may see it as excessive,” he said. “If we’re going to provide a deferred compensation package, it’s important that we look at the industry standard, and make sure that we do have a culture of openness and transparency.”

But the staff were unlikely to have been solely concerned about transparency. The other thing a board needs to ensure is that fair retirement benefits extend to all workers. The notion of caring only about the old age comfort of top employees is, naturally, abhorrent and insulting to many others. It’s no surprise, and in times where income inequality begs for our attention, our organizations should try not to mimic the bad policies of the larger economy.

Karabakakis said the whole incident has caused a review of employment policies, the establishment of a personnel committee, and a “commitment to open and transparent communication with all concerned.”

But all of that after-the-fact work is being done after the horse has left the barn. As reported here, Rep. Michael Mrowicki, who serves on the Human Services Committee, says he will bring up the possible oversight of executive compensation in the legislature. “These payments seem to have been structured in a way that they are legal, but they don’t really pass the smell test,” he said. “We are trying to figure out our next step.”

“Mainly we want to make sure this doesn’t happen again,” he said. “We wouldn’t want to set a precedent for other people to think they deserve more than they have been paid. The staff at these agencies work incredibly hard, and you don’t have to go very far to find people who are being denied services because they are told there is not enough money. These state agencies are entrusted with public money and the taxpayers deserve to be protected. It is frustrating and disappointing on a very basic level.”

The fact is that many nonprofits do not attend to retirement packages adequately until doing what feels fair on one level may look unreasonable to others. With as many baby boomers as there are in leadership at nonprofits, it is well past time to consider these issues.

Paula doit prendre une décision très délicate et déterminante au conseil | Cas en gouvernance

Voici un cas publié sur le site de Julie McLelland qui aborde un problème relatif à la conduite d’un conseil d’administration de petite entreprise, dans un contexte de conflit d’intérêt et de malversations potentielles. Paula, la nouvelle administratrice doit prendre une décision très délicate !

Le cas présente la situation de manière très claire, puis trois experts se prononcent sur le dilemme que vit la nouvelle membre du C.A.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Une décision difficile au conseil : Le cas de Paula

Une revue du blogue en 2014

Voici le rapport annuel du blogue préparé par The WordPress.com

Bonne lecture. Bonne année 2015 !

Voici un extrait du rapport annuel.

The concert hall at the Sydney Opera House holds 2,700 people.

This blog was viewed about 51,000 times in 2014.

If it were a concert at Sydney Opera House, it would take about 19 sold-out performances for that many people to see it.

Cliquez ici pour voir le rapport complet

Le cas du transfert de l’entreprise familiale Heineken

Aujourd’hui, je partage avec vous une belle histoire de succession d’une entreprise familiale mondialement connue : Heineken.

Ce cas d’entreprise m’a été proposé par Paul Michaud, un administrateur de sociétés certifié (ASC), une personne expérimentée dans les situations de transferts d’entreprises familiales.

Comme Paul le mentionne : « C’est un cas intéressant ! Le bonhomme est un hybride entre un entrepreneur et un CEO, la fille entre la mère-au-foyer et CEO ».

Je vous invite donc à lire ce cas de relève d’entreprise familiale publié par Patricia Sellers dans Fortune.

Vous trouverez, ci-dessous, quelques certaines conclusions tirées du cas. C’est une belle lecture du temps des Fêtes !

Heineken’s Charlene de Carvalho: A self-made heiress

For anyone who oversees a family business, passing it on to the next generation is the ultimate challenge of leadership. “If we get that wrong, we’ve wasted our energy on all that we’ve built,” says Michel de Carvalho, the investment banker husband of Charlene Heineken.

The de Carvalho family (from left): Alexander, Michel, Charlene, Louisa, Charles, Sophie, and Isabel

Heineken has a stock market value of $44 billion, and Charlene aims to pass on her 25% ownership stake and control of the voting shares more prudently than her father, Freddy Heineken, did to her. So she and Michel have been diligently studying the best practices of passing on a family business. No matter the size of a dynasty, certain basic rules apply.

CHOOSE ONE.

Other billionaire owners of family businesses have advised the de Carvalhos, regardless of how they divvy up the wealth, to select one of their five children to take control of the company. “But Charlene and I are not yet convinced that we could not have an odd number, perhaps three,” admits Michel, noting that ownership may be a lonely job for one heir. “Had Charlene not been married to someone who has a strong interest in the business, it would have been a terrible burden.”

TEST THE CHILDREN.

Don’t trap them,” says Byron Trott, a former Goldman Sachs banker whose merchant bank, BDT & Co., invests in and advises closely held companies. “Allow them to find their passion.” Trott admires the way the de Carvalhos are getting their five children to define their interests, whether philanthropic, arts-related, or corporate. Meanwhile, they’re preparing eldest son Alexander, who works in private equity, to inherit control of Heineken. “He’s on the board. He’s working in the financial industry,” notes Trott. “He understands the rigor of opting in.”

PICK STRONG ADVISERS.

Freddy Heineken stocked his board with yes men, which weakened the company before -Charlene inherited control in 2002. Charlene and Michel’s advice to Alexander or whoever among their children eventually takes control: “Surround yourself with the best possible people who are not yes men and sycophants. You want people who express doubt.”

HOLD ON.

Family control of a business protects management from “the short-term whims of Wall Street,” enabling it to focus on long-term growth, says Trott. “These companies tend to outperform the market over long periods of time.” Trott advises the de Carvalhos: “Keep doing what you’re doing, because you’re doing it very well.” —P.S.

Les fonds activistes créent-ils vraiment de la valeur à long terme pour la société ?

Vous trouverez ci-dessous un hyperlien menant au document qu’Yvan Allaire a présenté au Conference Board de New-York.

Voici donc la position adoptée par l’IGOPP eu égard au phénomène de l’activisme, des prises de contrôle hostile et de la création de valeur à long terme pour la société.

Je vous invite à télécharger le document Power Point au bas de la page. Vos commentaires sont les bienvenus.

Do activist hedge funds create long-term value for companies?

Le 14 novembre 2014, le président exécutif du conseil d’administration de l’IGOPP, le professeur Yvan Allaire fut conférencier-principal « keynote speaker » à la rencontre annuelle du Governance Center- Conference Board of New-York dont les membres sont tirés des plus grandes sociétés américaines.

La présentation portait sur le thème: Do activist hedge funds create long-term value for companies?

Le professeur Allaire a pris part à un panel auquel participaient:

– Abe Friedman, Managing Partner, Camberview Partners, LLC

– Roy J. Katzovicz, Partner, Investment Team Member and Chief Legal Officer of Pershing Square Capital Management, L.P.

– Modérateur : Charles Nathan, Senior Advisor, Finsbury

Rôles du comité exécutif versus rôles du conseil d’administration*

Voici une discussion très intéressante paru sur le groupe de discussion LinkedIn Board of Directors Society, et initiée par Jean-François Denault, concernant la nécessité de faire appel à un comité exécutif.

Je vous invite à lire les commentaires présentés sur le fil de discussion du groupe afin de vous former une opinion.

Personnellement, je crois que le comité exécutif est beaucoup trop souvent impliqué dans des activités de nature managériale.

Dans plusieurs cas, le CA pourrait s’en passer et reprendre l’initiative !

Qu’en pensez-vous ?

____________________________________________________

La situation exposée par Jean-François Denault est la suivante (en anglais) :

I’m looking for feedback for a situation I encountered.

I am a board member for a non-profit. Some of us learned of an issue, and we brought it up at the last meeting for an update.

We were told that it was being handled by the Executive Committee, and would not be brought up in board meetings.

It is my understanding that the executive committee’s role is not to take issues upon themselves, but to act in interim of board meetings. It should not be discussing issues independently from the board.

Am I correct in thinking this? Should all issues be brought up to the board, or can the executive committee handle situations that it qualifies as « sensitive »?

The Role of the Executive Committee versus the main board of directors

Alan Kershaw

Chair of Regulatory Board

Depends whether it’s an operational matter I guess – e.g. a staffing issue below CEO/Director level. If it’s a matter of policy or strategy, or impacts on them, then the Board is entitled to be kept informed, surely, and to consider the matter itself.

John Dinner

John T, Dinner Board Governance Services

Helping boards improve their performance and contributionI’ll respond a bit more broadly, Jean-François. While I am not opposed to the use of executive committees, a red flag often goes up when I conduct a governance review for clients and review their EC mandate and practices. There is a slippery slope where such committees find themselves assuming more accountability for the board’s work over time. Two classes of directors often form unintentionally as a result. Your situation is an example where the executive committee has usurped the board’s final authority. While I don’t recommend one approach, my inclination is to suggest that boards try to function without an executive committee because of the frequency that situations similar to the one you describe arise at boards where such committees play an active role. There are pros and cons, of course, for having these committees, but I believe the associated risk often warrants reconsideration of their real value and need.

Chuck Molina

Chief Technology Officer at DHI

I currently sit on the EC and have been in that role with other boards. Although I can see the EC working on projects as a subset of the board we Always go back to the full board and disclose those projects and will take items to the full board for approval. The board as a whole is accountable for decisions! There has to be transparency on the board! I found this article for you. http://www.help4nonprofits.com/BrainTeaser/BrainTeaser-Role_of_Executive_Committee.htm , which concurs to John’s comment. If used correctly the EC or a subset of the board can work on board issues more efficiently then venting through the full board, but they should always go back to the Full board for consideration or approval.

Dave Chapman

CHM and CEO of NorthPoint ERM

I have experienced couple of EB’s and unless the company is in deep financial or legal trouble for the most part the took away from the main board and in the whole worked ok but not great. If the board has over 10 to 15 board members it is almost a requirement but the board them is there for optics more than or effective and efficient decision making

James Clouser

Experienced CEO & Board member of Domestic and European companies.

I think Mr. Dinner, Mr. Molina, and Mr. Chapman summed it up beautifully:
– You cannot have two classes of Directors
– You have to have transparency and every Board member is entitled to the same information
– A Board of 10-15 members is inefficient and may need committees, but that does not change the fact that all Board members are entitled to have input into anything that the Board decides as a body.
– An Executive Committee is a sub-committee of the entire Board, not an independent body with extraordinary powers.

Al Errington

Entrepreneur & Governance Advocate

I agree with John, executive committees tend to be a slippery slope to bad governance. The board of directors has the responsibility of direction and oversight of the business or organization. If anything goes substantially wrong, the board of directors will also be accountable, legally. The rules of thumb for any and all committees is
– Committees must always be accountable to the board of directors, not the other way around.
– Committees must always have limits defined by the board of directors on authority and responsibility, and should have limits on duration.
– Committees should always have a specific reason to exist and that reason should be to support the board of directors in addressing it’s responsibilities.

Emerson Galfo

Consulting CFO/COO / Board Member/Advisor

Judging from the responses, we need to clearly define the context of what an Executive Committee is. Every organization can have it’s own function/view of what an Executive Committee is.

From my experience, an Executive Committee is under the CEO and reflects a group of trusted C-level executives that influence his decisions. I have had NO experience with Executive Boards other than the usual specific Board Committees dealing with specific realms of the organization.

So coming from this perspective, the Executive Committee is two steps down from the organizational pecking order and should be treated or viewed in that context..

Terry Tormey

President & CEO at Prevention Pharmaceuticals Inc.

I concur with Mr. James Clouser (above).
They should be avoided except in matters involving a performance question regarding C-Level Executive Board member, where a replacement may be sought.

John Baily

Board of Directors at RLI Corp

James hit the nail on the head. Executive committees are a throwback to times when we didn’t have the communication tools we do now. They no longer have a reason for their existence. All directors, weather on a not for profit or a corporate board have equal responsibilities and legal exposures. There is no room or reason for a board within a board in today’s world.

Chinyere Nze

Chief Executive Officer

My experience is; Board members have the last say in all policy issues- especially when it concerns operational matter. But in this case, where there is Executive Committee, what it sounds like is that, the organization in question has not clearly identified, nor delineated the roles of each body- which seem to have brought up the issue of ‘conflict’ in final decision- making. Often Executive Committees are created to act as a buffer or interim to the Board, this may sometime cause some over-lapping in executive decision-making.

My suggestion is for the organization to assess and evaluate its current hierarchy- clearly identify & define roles-benefits for creating and having both bodies, and how specific policies/ protocol would benefit the organization. In other words, the CEO needs to define the goals or benefits of having just a Board or having both bodies, and to avoid role conflict or over-lap, which may lead to confusion, as it seems to have been the case here.

STEPHEN KOSMALSKI

CEO / PRESIDENT/BOARD OF DIRECTORS /PRIVATE EQUITY OPERATING PARTNER known for returning growth to stagnant businesses

The critical consideration for all board members is ‘ fiduciary accountability’ of all bod members. With that exposure , all bod members should be aware of key issues .

Thomas Brattle « Toby » Gannett

President and CEO at BCR Managment

I think for large organizations, that executive committees still have an important role as many board members have a great deal going on and operational matters may come up from time to time that need to be handled in a judicial manner. While I think that the Executive committee has an important, at times critical role for a BOD, it is also critical that trust is built between the executive Committee and the BOD. This is only done when the executive committee is transparent, and pushes as many decisions that it can to the full board. If the committee does not have time to bring a matter to the full BOD, then they must convey to the BOD the circumstances why and reasoning for their decision. It is the executive committees responsibility to build that trust with the BOD and work hard to maintain it. All strategic decisions must be made by the full BOD. It sounds like you either have a communication failure, governance issue, or need work with your policies and procedures or a combination of issues.

____________________________

*En reprise

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

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

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

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

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

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

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

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

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

Which To Work on First, Strategy or Culture ?

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

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

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

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

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

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

…..

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

* En reprise

Réduire la taille du CA d’une OBNL | Une démarche qui demande souvent une aide externe !

Ce billet est paru dans Les Affaires du 29 Novembre 2014; il a été partagé par Richard Dancause* qui s’est impliqué avec le Collège des administrateurs de sociétés (CAS) pour réaliser une intervention visant à optimiser la gouvernance du Regroupement des jeunes chambres de commerce du Québec (RJCCQ).

Le billet est reproduit ci-dessous avec la permission de Richard Dancause, intervenant du CAS.

Bonne lecture !

Si la tendance est désormais aux conseils d’administration (CA) resserrés, comptant moins de 12 membres, en réduire le nombre représente parfois un défi… C’est ce qu’a appris le conseil du Regroupement des jeunes chambres de commerce du Québec (RJCCQ) lorsqu’il a commencé à vouloir revoir son fonctionnement. « Notre organisation, qui a plus de 20 ans, avait été créée par sept jeunes chambres de commerce. Le nombre d’administrateurs n’a ensuite cessé de croître à mesure que de nouvelles jeunes chambres se joignaient à nous », dit Christian Bélair, PDG sortant du RJCCQ.

Si bien que, l’an dernier, le réseau comptait 35 jeunes chambres de commerce, chacune étant représentée par un administrateur. « Cela faisait un gros conseil, avec en plus le président, le secrétaire, le trésorier… Il devenait difficile d’atteindre le quorum et d’assurer une participation minimale de chacun des membres. Sans compter qu’un tel nombre suscite aussi un certain désengagement, car si un administrateur n’a pas lu un document, il se dit qu’un autre l’aura forcément fait à sa place », résume Christian Bélair.

Lors de l’étude de son plan stratégique, le regroupement s’est donc retrouvé face au défi d’optimiser le fonctionnement de son CA. « Il a fallu une réflexion approfondie, car beaucoup d’organisations au Québec fonctionnaient sur le même modèle fédératif que nous, selon lequel les administrateurs sont nommés en fonction de leur provenance pour représenter les régions. Cela posait aussi des questions de bonne gouvernance, puisque ces gens qui venaient de loin pour assister à nos réunions avaient en quelque sorte le devoir de soulever les points concernant leur région », dit-il.

Une aide extérieure

Le regroupement a donc fait appel au Collège des administrateurs de sociétés (CAS) pour concevoir un programme de formation destinés aux jeunes entrepreneurs, comprenant des volets sur la gouvernance, la finance, l’aspect juridique et les questions stratégiques.

« Nous avons fortement recommandé à tous les membres du CA de suivre cette formation. Après une session, on s’est retrouvés rapidement avec des gens qui posaient des questions et remettaient en question le modèle », explique M. Bélair. Le regroupement a également travaillé avec un consultant externe qui a mené deux séances de formation avec le CA, afin de savoir ce qui fonctionnait bien ou mal. « Sans lui, nous n’aurions rien pu faire, car la direction générale et la présidence étaient toutes les deux impliquées et parties prenantes. Il fallait donc utiliser des ressources externes pour se dire dans le blanc des yeux ce qui marchait ou non», ajoute M. Bélair.

Au final, il estime que ces remises en question ont été très bénéfiques : « Cela a revalorisé le rôle de l’assemblée générale [AG] et celui du CA, parfois imprécis car on y retrouvait les mêmes personnes, en faisant comprendre aux gens que l’on n’avait pas forcément besoin de faire partie du CA pour communiquer ou pour soulever des questions », dit le président.

Des changements graduels

Le RJCCQ y est allé par étape, en votant lors d’une première réunion de CA la réduction à 11 personnes, ainsi que l’ouverture à 2 membres externes de plus de 40 ans. « Puis, lors d’un deuxième CA, nous avons choisi les critères de sélection des administrateurs et créé un comité pour faire l’analyse des CV et recommander des candidatures. Ce n’est que dans un troisième temps que les administrateurs ont entériné en CA et en AG la nouvelle structure», explique M. Bélair.

Pour s’assurer de ne pas couper les liens avec le passé et de réaliser une bonne transition, la moitié du CA est composée d’anciens membres dont le mandat est d’un an, tandis que l’autre moitié est composée de nouveaux administrateurs qui siégeront deux ans. Le RJCCQ a également travaillé à cibler une dizaine de besoins pour baliser le recrutement : « Nous voulions nous doter d’expertises juridiques, financières, comptables, mais aussi en vérification, marketing, ventes, développement de projet ou relations gouvernementales. Si nous possédions déjà en partie ces expertises, elles étaient un peu masquées par le nombre ainsi que par les préoccupations régionales de chacun », affirme Christian Bélair.

Pour dénicher ces profils, le regroupement a fait appel au réseau des jeunes chambres de commerce ainsi qu’à ses propres outils de communication, comme son bulletin, et à ses partenaires. « La réception a été bonne ! Avec un affichage de seulement un mois, nous avons eu des choix difficiles à faire. »

Des défis subsistent. « Contrairement à un CA de 37 personnes, qui ne donne pas le temps d’aller en profondeur et qui fait en sorte que chacun se repose un peu sur les autres, un CA resserré donne beaucoup moins de marge de manœuvre au directeur général, qui est davantage challengé. Et c’est une bonne chose ! » dit, avec un sourire, Christian Bélair. « J’avais même prévenu le bureau qu’il fallait s’attendre à ce qu’on nous pose plus de questions, qu’on cherche à comprendre, car les gens seront davantage concernés ! »

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*Entrepreneur-né, Richard Dancause, ASC travaille depuis plus de 30 ans aux côtés de hauts dirigeants déterminés à réussir la mise en œuvre des stratégies de leur organisation. Ayant vendu les deux firmes de services conseils qu’il a fondées, Richard poursuit son implication à titre de conseiller en gouvernance et en stratégie. Recherché pour son talent à transmettre sa passion et sa capacité à créer de l’impact là où ça compte, Richard intervient également auprès d’équipes de direction. Administrateur de sociétés certifié (ASC), Richard est intervenant formateur au Collège des administrateurs de sociétés.

Les PDG d’OBNL doivent-ils être membres de leurs C.A. ? *

Quels sont les pratiques exemplaires de gouvernance eu égard à l’appartenance des PDG (DG/CEO) aux conseils d’administration de leurs organisations, plus particulièrement des OBNL ?

C’est l’une des recherches les plus effectuées sur Google avec plus de cinq millions de références reliées à ce sujet… On note également des discussions très animées sur les groupes de discussion LinkedIn, tels que Non-Profit Management Professionals.

C’est un sujet très populaire et, comme vous vous en doutez, les avis diffèrent largement en fonction du (1) type d’organisation, (1) de son histoire, (3) de sa mission et (4) des obligations règlementaires.

Dans certaines organisations à but non lucratif, le ou la PDG siège au conseil d’administration mais, à mon avis, ce n’est pas le cas pour la plupart des associations de bénévoles, des fondations et des entreprises philanthropiques. Une recherche rapide montre que les PDG ne siègent pas sur des entreprises telles que la Croix Rouge canadienne, le Festival d’été de Québec, Centraide du grand Montréal, le Club Musical, l’OSQ, Musique de chambre à Sainte-Pétronille, l’Ordre des administrateurs agréés du Québec, pour n’en nommer que quelques-unes.

Français : Sainte Prétonille, Île d'Orléans, p... — Français : Sainte Prétonille, Île d’Orléans, province de Québec, Canada (Photo credit: Wikipedia)

Généralement, si la législation ou la réglementation l’autorise, c’est au conseil d’administration de décider si le ou la PDG a le statut de membre du C.A., avec plein droit de vote, ou sans droit de vote. On observe que certaines législations américaines (la Californie, notamment) ne permettent pas aux PDG de voter à titre de membres du conseil. Au Québec, c’est le cas du CLD de Québec, par exemple.

Dans les sociétés d’état québécoises, les PDG sont nommé(e)s par le gouvernement sur recommandation du C.A.; les PDG siègent habituellement de plein droit sur les conseils d’administration. Dans le monde municipal, les DG ne sont pas membres des conseils municipaux, des MRC et des CRÉ.

Comme on le constate, un tour d’horizon rapide indique qu’il y a plusieurs possibilités : (1) le ou la PDG est membre à part entière du C.A., (2) le ou la PDG est membre du C.A., mais sans droit de vote, (3) le ou la PDG n’est pas membre du C.A. Dans presque tous les cas cependant, les PDG assistent aux réunions du conseil à titre de personnes ressource, même sans être membres du C.A.

Afin de bien départager les rôles complémentaires exercés par les membres du conseil et les membres de la direction et éviter les conflits qui pourraient naître dans certaines zones d’intérêt, notamment dans le domaine lié aux rémunérations, il m’apparaît être une bonne pratique de gouvernance de ne pas accorder un statut de membre du conseil d’administration à un ou une PDG.

Pour les organisations qui vivent avec une situation particulière, il serait souhaitable que le C.A., par l’intermédiaire du ou de la PCA, mette en œuvre une stratégie de changement (à plus ou moins long terme) pour revoir cet aspect de leur gouvernance.

L’article ci-dessous publié par Eugene Fram, Professeur émérite au Saunders College of Business du Rochester Institute of Technology, explique un peu la situation. Vos commentaires sont les bienvenus.

Voici un extrait de l’article :

Should a Nonprofit CEO Be a Voting Member of the Board of Directors ?

Here are the issues as I see them:

State Legislation: Most nonprofit charters are issued by states, and it appears that the vast majority of American nonprofits are governed by these regulations. California does not permit the CEO to be a voting member. Until a recent change, New York did allow the CEO to become a board member. The motivations behind the legislation center on preventing a CEO developing conflicts-of interest, especially as they relate to salary decisions. Also, there is a feeling among some nonprofit directors that the board must be the « boss. » This attitude can even go as far as one nonprofit board member’s comment: « We tell the CEO exactly what to do. »

It appears that the restriction is considered a « best practice. » Some nonprofits move around it by naming the CEO an ex-official member of the board, a member without a vote. However, there is a « better practice, » available where permitted by legislation.

Developing An Even Better Practice in a Nonprofit

Start At The Top: Allow the CEO to hold the title of President/CEO and allow the senior volunteer to become board chair. This signals to staff and public that the board has full faith in the CEO as a professional manager. In addition, the change absolves the senior volunteer of potential financial liability, not unlike the volunteer who unwittingly received a $200,000 bill from the IRS because it appeared he had strong control of a bankrupt nonprofit’s finances and operations.

Ask The CEO: Make certain the CEO is willing and able to accept full responsibility for operations. Not all CEOs, designated as Executive Directors, want the increased responsibilities attached to such a title and to become a board member. These managers only feel comfortable with having the board micromanage operations and often openly discuss their reservations.

The CEO Becomes A Communications Nexus: Under the CEO’s guidance, board-staff contact takes place on task forces, strategic planning projects, at board orientations and at organization celebrations. It openly discourages the staff making « end runs » to board members, not a small problem in community-focused nonprofits

Brand Image: As a board director, the CEO can be more active in fund development. The board position and the title can easily help the CEO to build the organization’s public brand image through the clear public perceptions of the board’s choice to lead the organization. This provides leverage to make greater use of the board-CEO relationship required to develop funds. It can allow the CEO to be the spokesperson for the organization’s mission.

Peer Not Powerhouse: Probably descending from early religious nonprofits, its personnel may be seen by part of the public as not being « worldly. » They must be over-viewed by a group of laypersons that encounters the real world daily. The CEO, as a voting member and a team peer, takes on increasing importance to reducing these attitudes. As long as the CEO works successfully as a peer not a powerhouse, there should be substantial benefits to the organization.

* En reprise

L’évaluation du CA et des administrateurs | Sept étapes à considérer

Cet article rédigé par Geoffrey KIEL, James BECK et Jacques GRISÉ (1) et paru dans les Documents de travail de la Faculté des sciences de l’administration en 2008 est toujours d’actualité. Il présente un guide pratique des questions clés que les conseils d’administration doivent prendre en considération lorsqu’ils planifient une évaluation.

On met l’accent sur l’utilité d’avoir des évaluations bien menées ainsi que sur les sept étapes à suivre pour des évaluations efficaces d’un conseil d’administration et des administrateurs. Bonne lecture.

SEPT ÉTAPES À SUIVRE POUR DES ÉVALUATIONS EFFICACES D’UN CONSEIL D’ADMINISTRATION ET DES ADMINISTRATEURS

Lorsqu’une crise se produit au sein d’une société, comme celles qu’ont connues Nortel et Hollinger International, les intervenants, les médias, les organismes de réglementation et la collectivité se tournent vers le conseil d’administration pour trouver des réponses. Étant donné que ce dernier est le chef décisionnel ultime de la société, il est responsable des actions et du rendement de la société.

Le défi actuel que doivent relever les conseils d’administration consiste à accroître la valeur des organisations qu’ils gouvernent. Grâce à l’évaluation du rendement, les conseils d’administration peuvent s’assurer qu’ils ont les connaissances, les compétences et la capacité de relever ce défi.

Plusieurs guides et normes de pratiques exemplaires reconnaissent cette notion. Ainsi, la Commission des valeurs mobilières de l’Ontario indique dans les lignes directrices sur la gouvernance des sociétés (NP 58-201) que « le conseil d’administration, ses comités et chacun de ses administrateurs devraient faire l’objet régulièrement d’une évaluation à l’égard de leur efficacité et de leur contribution ».

L’évaluation du conseil d’administration est trop souvent perçue comme un mal nécessaire – un processus mécanique consistant à cocher des points sur une liste qui, en bout de ligne, a peu de valeur réelle pour le conseil d’administration si ce n’est pour satisfaire aux exigences en matière de conformité. Toutefois… un processus efficace d’évaluation du conseil d’administration peut donner lieu à une transformation.

Une publication du Collège des administrateurs de sociétés (CAS), sous forme de questions et réponses sur la gouvernance, a été conçue à l’intention des administrateurs nommés par le gouvernement du Québec comme membre d’un conseil d’administration d’une société d’État ou d’un organisme gouvernemental. Celle-ci vise à répondre aux questions les plus courantes qu’un administrateur nouvellement nommé peut légitimement se poser en matière de gouvernance. On y indique qu’ « une évaluation faite à intervalles périodiques est essentielle pour assurer le maintien d’une gouvernance efficace » (2).

Cet article offrira une approche pratique en matière d’évaluations efficaces des conseils d’administration et des administrateurs en appliquant un cadre comportant sept étapes qui pose les questions clés que tous les conseils d’administration devraient prendre en considération lorsqu’ils planifient une évaluation. Même les conseils d’administration efficaces peuvent tirer profit d’une évaluation bien menée.

Comme nous l’avons résumé dans le tableau 1, une évaluation menée adéquatement peut contribuer considérablement à des améliorations du rendement à trois niveaux : organisation, conseil d’administration et administrateur. Selon Lawler et Finegold « les conseils qui évaluent leurs membres et qui s’évaluent ont tendance à être plus efficaces que ceux qui ne le font pas ». Toutefois, il faut souligner que ces avantages ne sont possibles qu’au moyen d’une évaluation du conseil d’administration menée de manière appropriée; si l’évaluation n’est pas faite correctement, cela peut causer de la méfiance parmi les membres du conseil d’administration et entre le conseil lui-même et la direction.

Une publication de l’École d’administration publique du Québec (ENAP), produite en collaboration avec le Collège des administrateurs de sociétés (CAS), présente une section traitant de l’évaluation de la performance du conseil d’administration (3).

Selon les auteurs, « L’évaluation est une composante essentielle d’une saine gouvernance d’entreprise. Elle permet de jeter un regard sur la façon dont les décisions ont été prises et sur la manière d’exercer la gestion des activités de l’organisation et ce, dans une perspective d’amélioration continue… Il incombe au président du conseil d’instaurer une culture d’évaluation du rendement et de la performance. Pour ce faire, il doit veiller à la mise en place d’un processus d’évaluation clair, à l’élaboration de règles et d’outils pertinents, à la définition des responsabilités de chaque intervenant dans le processus d’évaluation, à la diffusion de l’information et à la mise en place des correctifs nécessaires ». Dans cette publication, on présente dix outils détaillés d’évaluations (questionnaires) qui concernent les groupes cibles suivants :

1. l’évaluation du conseil

2. l’évaluation du fonctionnement du conseil

3. l’évaluation du président du conseil

4. l’évaluation d’un membre de conseil

5. l’évaluation du comité de gouvernance et d’éthique

6. l’évaluation du comité de vérification

7. l’évaluation du comité des ressources humaines

8. l’évaluation du fonctionnement d’un comité

9. l’évaluation d’un membre de comité

10. l’évaluation du président d’un comité

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(1) Geoffrey Kiel, Ph.D., premier vice-chancelier délégué et doyen de l’École d’administration, University of Notre Dame, Australie, et président de la société Effective Governance Pty Ltd, James Beck, directeur général, Effective Governance Pty Ltd, Jacques Grisé, Ph.D., F.Adm.A., collaborateur spécial du Collège des administrateurs de sociétés (CAS), Faculté des sciences de l’administration, Université Laval, Québec.

(2) Collège des administrateurs de sociétés, Être un administrateur de sociétés d’état : 16 questions et réponses sur la gouvernance, Faculté des sciences de l’administration, Université Laval, 2007.

(3) ENAP, Les devoirs et responsabilités d’un conseil d’administration, Guide de référence, Bibliothèque et Archives nationales du Québec, 2007.

Dix (10) des plus importantes activités pour une gouvernance efficace*

Vous trouverez ci-dessous un checklist qui vous sera utile pour effectuer une révision de vos processus de gouvernance.

Bonne lecture. Vos commentaires sont les bienvenus.

Top Ten Steps to Improving Corporate Governance

1.      Recognise that good governance is not just about compliance

Boards need to balance conformance (i.e. compliance with legislation, regulation and codes of practice) with performance aspects of the board’s work (i.e. improving the performance of the organisation through strategy formulation and policy making). As a part of this process, a board needs to elaborate its position and understanding of the major functions it performs as opposed to those performed by management. These specifics will vary from board to board. Knowing the role of the board and who does what in relation to governance goes a long way towards maintaining a good relationship between the board and management.

2.      Clarify the board’s role in strategy

It is generally accepted today that the board has a significant role to play in the formulation and adoption of the organisation’s strategic direction. The extent of the board’s contribution to strategy will range from approval at one end to development at the other. Each board must determine what role is appropriate for it to undertake and clarify this understanding with management.

3.      Monitor organisational performance

Monitoring organisational performance is an essential board function and ensuring legal compliance is a major aspect of the board’s monitoring role. It ensures that corporate decision making is consistent with the strategy of the organisation and with owners’ expectations. This is best done by identifying the organisation’s key performance drivers and establishing appropriate measures for determining success. As a board, the directors should establish an agreed format for the reports they monitor to ensure that all matters that should be reported are in fact reported.

4.      Understand that the board employs the CEO

In most cases, one of the major functions of the board is to appoint, review, work through, and replace (when necessary), the CEO. The board/CEO relationship is crucial to effective corporate governance because it is the link between the board’s role in determining the organisation’s strategic direction and management’s role in achieving corporate objectives.

5.      Recognise that the governance of risk is a board responsibility

Establishing a sound system of risk oversight and management and internal control is another fundamental role of the board. Effective risk management supports better decision making because it develops a deeper insight into the risk-reward trade-offs that all organisations face.

6.      Ensure the directors have the information they need

Better information means better decisions. Regular board papers will provide directors with information that the CEO or management team has decided they need. But directors do not all have the same informational requirements, since they differ in their knowledge, skills, and experience. Briefings, presentations, site visits, individual director development programs, and so on can all provide directors with additional information. Above all, directors need to be able to find answers to the questions they have, so an access to independent professional advice policy is recommended.

7.      Build and maintain an effective governance infrastructure

Since the board is ultimately responsible for all the actions and decisions of an organisation, it will need to have in place specific policies to guide organisational behaviour. To ensure that the line of responsibility between board and management is clearly delineated, it is particularly important for the board to develop policies in relation to delegations. Also, under this topic are processes and procedures. Poor internal processes and procedures can lead to inadequate access to information, poor communication and uninformed decision making, resulting in a high level of dissatisfaction among directors. Enhancements to board meeting processes, meeting agendas, board papers and the board’s committee structure can often make the difference between a mediocre board and a high performing board.

8.      Appoint a competent chairperson

Research has shown that board structure and formal governance regulations are less important in preventing governance breaches and corporate wrongdoing than the culture and trust created by the chairperson. As the “leader” of the board, the chairperson should demonstrate strong and acknowledged leadership ability, the ability to establish a sound relationship with the CEO, and have the capacity to conduct meetings and lead group decision-making processes.

9.      Build a skills-based board

What is important for a board is that it has a good understanding of what skills it has and those skills it requires. Where possible, a board should seek to ensure that its members represent an appropriate balance between directors with experience and knowledge of the organisation and directors with specialist expertise or fresh perspective. Directors should also be considered on the additional qualities they possess, their “behavioural competencies”, as these qualities will influence the relationships around the boardroom table, between the board and management, and between directors and key stakeholders.

10.     Evaluate board and director performance and pursue opportunities for improvement

Boards must be aware of their own strengths and weaknesses, if they are to govern effectively. Board effectiveness can only be gauged if the board regularly assesses its own performance and that of individual directors. Improvements to come from a board and director evaluation can include areas as diverse as board processes, director skills, competencies and motivation, or even boardroom relationships. It is critical that any agreed actions that come out of an evaluation are implemented and monitored. Boards should consider addressing weaknesses uncovered in board evaluations through director development programs and enhancing their governance processes.

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* En reprise

Voir le site www.effectivegovernance.com.au

Attention aux huis clos (en reprise) !

Nous avons déjà abordé l’importance d’inscrire un item « huis clos » à l’ordre du jour des réunions du conseil d’administration. Celui-ci doit normalement être à la fin de la réunion et comporter une limite de temps afin d’éviter que la réunion ne s’éternise… et que les membres de la direction (qui souvent attendent la fin de la rencontre) soient mieux informés.

Ensuite, le président du conseil d’administration (PCA) devrait rencontrer le président et chef de la direction (PCD) en privé, et dans les meilleurs délais, afin de rendre compte des résultats et de la portée du huis clos. Cette responsabilité du PCA est déterminante, car les dirigeants ont de grandes attentes et un souci eu égard aux discussions du huis clos.

Plusieurs dirigeants et membres de conseil m’ont fait part de leurs préoccupations concernant la tenue des huis clos. Il y a des malaises dissimulés en ce qui a trait à cette activité ; il faut donc s’assurer de bien gérer la situation, car les huis clos peuvent souvent avoir des conséquences inattendues, voire contre-productives !

Ainsi, le huis clos :

(1) ne doit pas être une activité imprévue et occasionnelle inscrite à l’ordre du jour

(2) doit comporter une limite de temps

(3) doit être piloté par le PCA

(4) doit comporter un suivi systématique et

(5) doit se dérouler dans un lieu qui permet de préserver la confidentialité absolue des discussions.

J’insiste sur cette dernière condition parce que l’on a trop souvent tendance à la négliger ou à l’oublier, carrément. Dans de nombreux cas, la rencontre du conseil a lieu dans un local inapproprié, et les dirigeants peuvent entendre les conversations, surtout lorsqu’elles sont très animées…

Au début de la séance, les membres sont souvent insoucieux ; avec le temps, certains peuvent s’exprimer très (trop) directement, impulsivement et de manière inconvenante. Si, par mégarde, les membres de la direction entendent les propos énoncés, l’exercice peut prendre l’allure d’une véritable calamité et avoir des conséquences non anticipées sur le plan des relations interpersonnelles entre les membres de la direction et avec les membres du conseil.

registre-conseils-d-administration

L’ajout d’un huis clos à l’ordre du jour témoigne d’une volonté de saine gouvernance, mais, on le comprend, il y a un certain nombre de règles à respecter si on ne veut pas provoquer la discorde. Les OBNL, qui ont généralement peu de moyens, sont particulièrement vulnérables aux manquements à la confidentialité ! Je crois que dans les OBNL, les dommages collatéraux peuvent avoir des incidences graves sur les relations entre employés, et même sur la pérennité de l’organisation.

J’ai à l’esprit plusieurs cas de mauvaise gestion des facteurs susmentionnés et je crois qu’il vaut mieux ne pas tenir le bien-fondé du huis clos pour acquis.

Ayant déjà traité des bienfaits des huis clos lors d’un billet antérieur, je profite de l’occasion pour vous souligner, à nouveau, un article intéressant de Matthew Scott sur le site de Corporate Secretary qui aborde un sujet qui préoccupe beaucoup de hauts dirigeants : le huis clos lors des sessions du conseil d’administration ou de certains comités.

L’auteur explique très bien la nature et la nécessité de cette activité à inscrire à l’ordre du jour du conseil. Voici les commentaires que j’exprimais à cette occasion.

« Compte tenu de la “réticence” de plusieurs hauts dirigeants à la tenue de cette activité, il est généralement reconnu que cet item devrait toujours être présent à l’ordre du jour afin d’éliminer certaines susceptibilités.

Le huis clos est un temps privilégié que les administrateurs indépendants se donnent pour se questionner sur l’efficacité du conseil et la possibilité d’améliorer la dynamique interne ; mais c’est surtout une occasion pour les membres de discuter librement, sans la présence des gestionnaires, de sujets délicats tels que la planification de la relève, la performance des dirigeants, la rémunération globale de la direction, les poursuites judiciaires, les situations de conflits d’intérêts, les arrangements confidentiels, etc. On ne rédige généralement pas de procès-verbal à la suite de cette activité, sauf lorsque les membres croient qu’une résolution doit absolument apparaître au P.V.

La mise en place d’une période de huis clos est une pratique relativement récente, depuis que les conseils d’administration ont réaffirmé leur souveraineté sur la gouvernance des entreprises. Cette activité est maintenant considérée comme une pratique exemplaire de gouvernance et presque toutes les sociétés l’ont adoptée.

Notons que le rôle du président du conseil, en tant que premier responsable de l’établissement de l’agenda, est primordial à cet égard. C’est lui qui doit informer le PCD de la position des membres indépendants à la suite du huis clos, un exercice qui demande du tact !

Je vous invite à lire l’article ci-dessous. Vos commentaires sont les bienvenus ».

Are you using in-camera meetings ?

Comportements néfastes liés au narcissisme de certains PCD (CEO) | En reprise

Il est indéniable qu’un PCD (CEO) doit avoir une personnalité marquante, un caractère fort et un leadership manifeste. Ces caractéristiques tant recherchées chez les premiers dirigeants peuvent, dans certains cas, s’accompagner de traits de personnalité dysfonctionnels tels que le narcissisme.

C’est ce que Tomas Chamorro-Premuzic soutien dans son article publié sur le blogue du HuffPost du 2 janvier 2014. Il cite deux études qui confirment que le comportement narcissique de certains dirigeants (1) peut avoir des effets néfastes sur le moral des employés, (2) éloigner les employés potentiels talentueux et (3) contribuer à un déficit de valeurs d’intégrité à l’échelle de toute l’organisation.

L’auteur avance que les membres des conseils d’administration, notamment ceux qui constituent les comités de Ressources humaines, doivent être conscients des conséquences potentiellement dommageables des leaders flamboyants et « charismatiques ». En fait, les études montrent que les vertus d’humilité, plutôt que les traits d’arrogance, sont de bien meilleures prédicteurs du succès d’une organisation.

La première étude citée montre que les organisations dirigées par des PCD prétentieux et tout-puissants ont tendances à avoir de moins bons résultats, tout en étant plus sujettes à des fraudes.

La seconde étude indique que les valeurs d’humilité incarnées par un leader ont des conséquences positives sur l’engagement des employés.

Voici en quelques paragraphes les conclusions de ces deux études. Bonne lecture !

In the first study, Antoinette Rijsenbilt and Harry Commandeur assessed the narcissism levels of 953 CEOs from a wide range of industries, as well as examining objective performance indicators of their companies during their tenure. Unsurprisingly, organizations led by arrogant, self-centered, and entitled CEOs tended to perform worse, and their CEOs were significantly more likely to be convicted for corporate fraud (e.g., fake financial reports, rigged accounts, insider trading, etc.). Interestingly, the detrimental effects of narcissism appear to be exacerbated when CEOs are charismatic, which is consistent with the idea that charisma is toxic because it increases employees’ blind trust and irrational confidence in the leader. If you hire a charismatic leader, be prepared to put up with a narcissist.

In the second study, Bradley Owens and colleagues examined the effects of leader humility on employee morale and turnover. Their results showed that « in contrast to rousing employees through charismatic, energetic, and idealistic leadership approaches (…) a ‘quieter’ leadership approach, with listening, being transparent about limitations, and appreciating follower strengths and contributions [is the most] effective way to engage employees. » This suggests that narcissistic CEOs may be good at attracting talent, but they are probably better at repelling it. Prospective job candidates, especially high potentials, should therefore think twice before being seduced by the meteoric career opportunities outlined by charismatic executives. Greed is not only contagious, but competitive and jealous, too…

The Dark Side of Executive Narcissism: How CEOs Destroy Companies’ Reputation and Employee Morale

If we can educate organizations, in particular board members, on the virtues of humility and the destructive consequences of narcissistic and charismatic leadership, we may see a smaller proportion of entitled, arrogant, and fraudulent CEOs — to everyone’s benefit. Instead of worshiping and celebrating the flamboyant habits of corporate bosses, let us revisit the wise words of Peter Drucker, who knew a thing or two about management:

The leaders who work most effectively, it seems to me, never say ‘I’. And that’s not because they have trained themselves not to say ‘I’. They don’t think ‘I’. They think ‘we’; they think ‘team’. They understand their job to be to make the team function. They accept responsibility and don’t sidestep it, but ‘we’ gets the credit.

Comment rendre plus explicite le travail des administrateurs eu égard à la prise en compte des parties prenantes ?

Quels moyens les organisations peuvent-elles prendre afin de s’assurer que les intérêts de toutes les parties prenantes soient pris en compte plutôt qu’uniquement ceux des actionnaires.

Cet article écrit par Leo Strine, Chief Justice of the Delaware Supreme Court et Senior Fellow du Harvard Law School Program on Corporate Governance, et paru dans le Harvard Business Law Review, propose, à l’instar de la règlementation du Delaware, de modifier les actes constitutifs des entreprises afin d’énoncer clairement que les corporations publiques à buts lucratifs doivent gérer non seulement en fonction des intérêts des actionnaires, mais également en fonction des intérêts de toutes les autres parties prenantes.

Public benefit corporation” is a for-profit corporation organized under and subject to the requirements of this chapter that is intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner. To that end, a public benefit corporation shall be managed in a manner that balances the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit or public benefits identified in its certificate of incorporation.

This general provision is matched by a more specific one directed to the duties of directors, which plainly states: The board of directors shall manage or direct the business and affairs of the public benefit corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in its certificate of incorporation.

Bonne lecture !

MAKING IT EASIER FOR DIRECTORS TO “DO THE RIGHT THING”?

The abstract of Chief Justice Strine’s essay summarizes it briefly as follows:

Some scholars argue that managers should take constituencies other than stockholders into account when running a corporation, and refuse to put short-term profit for stockholders over the best interests of the corporation’s employees, consumers, and communities, as well as the environment and society generally. In other words, they argue that managers should “do the right thing,” while ignoring that in the current corporate accountability structure, stockholders are the only constituency given any enforceable rights, and thus are the only one with substantial influence over managers. Few commentators have proposed real solutions that would give corporate managers more ability and greater incentives to consider the interests of other constituencies.

This Article posits that benefit corporation statutes have the potential to change the accountability structure within which managers operate. These statutes create incremental reform that puts actual power behind the idea that corporations should “do the right thing.” Certain provisions of the Delaware benefit corporation statute are discussed as an example of how these statutes can create a meaningful shift in the balance of power that will in fact give corporate managers more ability to and impose upon them an enforceable duty to “do the right thing.”

But this Article acknowledges that several important questions must be answered to determine whether benefit corporation statutes will have the durable, systemic effect desired. First, the initial wave of entrepreneurs who form benefit corporations must demonstrate a genuine commitment to social responsibility to preserve the credibility of the movement. Second, because the benefit corporation model relies on stockholders to enforce the duties to other constituencies, socially responsible investment funds must be willing to vote their long-term consciences instead of cashing in for short-term gains. To that end, it is crucial that benefit corporations show that doing things “the right way” will be profitable in the long run. Third, benefit corporations must pass the “going public” test. Finally, subsidiaries that are governed as benefit corporations must honor their commitments and grow successfully, if the movement is to grow to scale.

Le rôle du comité exécutif versus le rôle du conseil d’administration

Je vous invite à lire les commentaires présentés sur le fil de discussion du groupe afin de vous former une opinion.

Personnellement, je crois que le comité exécutif est beaucoup trop souvent impliqué dans des activités de nature managériale.

Dans plusieurs cas, le CA pourrait s’en passer et reprendre l’initiative !

Qu’en pensez-vous ?

____________________________________________________

La situation exposée par Jean-François Denault est la suivante (en anglais) :

I’m looking for feedback for a situation I encountered.

I am a board member for a non-profit. Some of us learned of an issue, and we brought it up at the last meeting for an update.

We were told that it was being handled by the Executive Committee, and would not be brought up in board meetings.

It is my understanding that the executive committee’s role is not to take issues upon themselves, but to act in interim of board meetings. It should not be discussing issues independently from the board.

Am I correct in thinking this? Should all issues be brought up to the board, or can the executive committee handle situations that it qualifies as « sensitive »?

The Role of the Executive Committee versus the main board of directors

Alan Kershaw

Chair of Regulatory Board

Depends whether it’s an operational matter I guess – e.g. a staffing issue below CEO/Director level. If it’s a matter of policy or strategy, or impacts on them, then the Board is entitled to be kept informed, surely, and to consider the matter itself.

John Dinner

John T, Dinner Board Governance Services

Helping boards improve their performance and contributionI’ll respond a bit more broadly, Jean-François. While I am not opposed to the use of executive committees, a red flag often goes up when I conduct a governance review for clients and review their EC mandate and practices. There is a slippery slope where such committees find themselves assuming more accountability for the board’s work over time. Two classes of directors often form unintentionally as a result. Your situation is an example where the executive committee has usurped the board’s final authority. While I don’t recommend one approach, my inclination is to suggest that boards try to function without an executive committee because of the frequency that situations similar to the one you describe arise at boards where such committees play an active role. There are pros and cons, of course, for having these committees, but I believe the associated risk often warrants reconsideration of their real value and need.

Chuck Molina

Chief Technology Officer at DHI

I currently sit on the EC and have been in that role with other boards. Although I can see the EC working on projects as a subset of the board we Always go back to the full board and disclose those projects and will take items to the full board for approval. The board as a whole is accountable for decisions! There has to be transparency on the board! I found this article for you. http://www.help4nonprofits.com/BrainTeaser/BrainTeaser-Role_of_Executive_Committee.htm , which concurs to John’s comment. If used correctly the EC or a subset of the board can work on board issues more efficiently then venting through the full board, but they should always go back to the Full board for consideration or approval.

Dave Chapman

CHM and CEO of NorthPoint ERM

I have experienced couple of EB’s and unless the company is in deep financial or legal trouble for the most part the took away from the main board and in the whole worked ok but not great. If the board has over 10 to 15 board members it is almost a requirement but the board them is there for optics more than or effective and efficient decision making

James Clouser

Experienced CEO & Board member of Domestic and European companies.

I think Mr. Dinner, Mr. Molina, and Mr. Chapman summed it up beautifully:
– You cannot have two classes of Directors
– You have to have transparency and every Board member is entitled to the same information
– A Board of 10-15 members is inefficient and may need committees, but that does not change the fact that all Board members are entitled to have input into anything that the Board decides as a body.
– An Executive Committee is a sub-committee of the entire Board, not an independent body with extraordinary powers.

Al Errington

Entrepreneur & Governance Advocate

I agree with John, executive committees tend to be a slippery slope to bad governance. The board of directors has the responsibility of direction and oversight of the business or organization. If anything goes substantially wrong, the board of directors will also be accountable, legally. The rules of thumb for any and all committees is
– Committees must always be accountable to the board of directors, not the other way around.
– Committees must always have limits defined by the board of directors on authority and responsibility, and should have limits on duration.
– Committees should always have a specific reason to exist and that reason should be to support the board of directors in addressing it’s responsibilities.

Emerson Galfo

Consulting CFO/COO / Board Member/Advisor

Judging from the responses, we need to clearly define the context of what an Executive Committee is. Every organization can have it’s own function/view of what an Executive Committee is.

From my experience, an Executive Committee is under the CEO and reflects a group of trusted C-level executives that influence his decisions. I have had NO experience with Executive Boards other than the usual specific Board Committees dealing with specific realms of the organization.

So coming from this perspective, the Executive Committee is two steps down from the organizational pecking order and should be treated or viewed in that context..

Terry Tormey

President & CEO at Prevention Pharmaceuticals Inc.

I concur with Mr. James Clouser (above).
They should be avoided except in matters involving a performance question regarding C-Level Executive Board member, where a replacement may be sought.

John Baily

Board of Directors at RLI Corp

James hit the nail on the head. Executive committees are a throwback to times when we didn’t have the communication tools we do now. They no longer have a reason for their existence. All directors, weather on a not for profit or a corporate board have equal responsibilities and legal exposures. There is no room or reason for a board within a board in today’s world.

Chinyere Nze

Chief Executive Officer

My experience is; Board members have the last say in all policy issues- especially when it concerns operational matter. But in this case, where there is Executive Committee, what it sounds like is that, the organization in question has not clearly identified, nor delineated the roles of each body- which seem to have brought up the issue of ‘conflict’ in final decision- making. Often Executive Committees are created to act as a buffer or interim to the Board, this may sometime cause some over-lapping in executive decision-making.

My suggestion is for the organization to assess and evaluate its current hierarchy- clearly identify & define roles-benefits for creating and having both bodies, and how specific policies/ protocol would benefit the organization. In other words, the CEO needs to define the goals or benefits of having just a Board or having both bodies, and to avoid role conflict or over-lap, which may lead to confusion, as it seems to have been the case here.

STEPHEN KOSMALSKI

CEO / PRESIDENT/BOARD OF DIRECTORS /PRIVATE EQUITY OPERATING PARTNER known for returning growth to stagnant businesses

The critical consideration for all board members is ‘ fiduciary accountability’ of all bod members. With that exposure , all bod members should be aware of key issues .

Thomas Brattle « Toby » Gannett

President and CEO at BCR Managment

I think for large organizations, that executive committees still have an important role as many board members have a great deal going on and operational matters may come up from time to time that need to be handled in a judicial manner. While I think that the Executive committee has an important, at times critical role for a BOD, it is also critical that trust is built between the executive Committee and the BOD. This is only done when the executive committee is transparent, and pushes as many decisions that it can to the full board. If the committee does not have time to bring a matter to the full BOD, then they must convey to the BOD the circumstances why and reasoning for their decision. It is the executive committees responsibility to build that trust with the BOD and work hard to maintain it. All strategic decisions must be made by the full BOD. It sounds like you either have a communication failure, governance issue, or need work with your policies and procedures or a combination of issues.

Le dilemme de Mélanie | Le cas d’une administratrice d’OBNL

Vous serez certainement très intéressés par le site de Julie Garland McLellan, administratrice de sociétés et consultante internationale auprès de conseils d’administration, de Sydney, Australie.

Voyez le genre de questionnements ou de dilemmes présentés dans sa série The Director’s Dilemma.

In the course of my work advising boards and directors I encounter complex and challenging issues. There are often several different ways to resolve the issues. Each way will have different pros and cons for the individuals and companies concerned. Every month The Director’s Dilemma will address an issue with the assistance of some governance experts that I admire and enjoy working with.

En guise d’exemple, je vous présente le cas du mois de novembre 2014 :

Le dilemme de Mélanie, administratrice d’OBNL

Si le sujet vous intrigue, consultez les avis de trois experts de la gouvernance

à la suite du cas.

Bonne lecture. Souhaitez-vous partager vos points de vue au sujet du recrutement de

relations familiales dans un contexte comme celui décrit dans le cas ?

La réglementation canadienne est déficiente à plusieurs égards | Richard Leblanc

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

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

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

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

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

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

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

Canada’s Corporate Governance Guidelines Are Out of Date

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

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

1. Lack of principles and practices:

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

2. Lack of focus on risk management:

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

3. Lack of independence of mind:

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

4. Lack of industry expertise:

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

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

5. Lack of financial literacy and internal audit:

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

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

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

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

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

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

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

(2) la réglementation et les enjeux touchant les investisseurs

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

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

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

Bon visionnement !