Catégorie : Conseils d’administration

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


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

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

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

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

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

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

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

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

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

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

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

The Corporate Governance Game Changer That Needs to Come to Canada

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

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

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

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

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

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

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

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

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

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

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


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

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

Bonne lecture !

Practical Dos and Don’ts for Directors

 

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

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

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

Guide des meilleures pratiques pour les C.A. concernant (1) les fusions et acquisitions, (2) les crises d’entreprise et (3) les difficultés financières


Voici un excellent guide, produit par Deloitte, qui porte sur les bons gestes à poser par les conseils d’administration lorsqu’ils sont aux prises avec les problématiques liées aux fusions et acquisitions, aux crises à gérer et aux problèmes financiers.

Afin de vous donner une idée du contenu du document, voici un aperçu des thèmes abordés.

  1. Les paramètres de la gouvernance évoluent
  2. Fusions et acquisitions : une bonne gouvernance à toutes les étapes du processus
  3. Gestion de crise : le manque de préparation représente clairement un risque
  4. Difficultés financières : priorité aux risques
  5. Le conseil d’administration peut relever le défi
  6. Personnes-ressources

Bonne lecture !

Un guide des meilleures pratiques pour les conseils d’administration qui porte sur les fusions et acquisitions, les crises d’entreprise et les difficultés financières

Le conseil d’administration vient d’apprendre que l’entreprise pourrait être à court de liquidités d’ici un an. Que devez-vous faire? Après une acquisition d’entreprise, le conseil d’administration est poursuivi par les actionnaires, qui l’accusent de ne pas avoir supervisé adéquatement la décision concernant le prix d’achat. Comment prévenir une telle situation? Votre entreprise traverse une crise depuis que la direction a été accusée d’avoir fourni de faux renseignements à des auditeurs externes. Quand faut-il demander conseil à des experts indépendants?

On a fait grand cas des pressions subies par les conseils d’administration dans les mois éprouvants qui ont suivi la crise financière mondiale. De nombreux facteurs ont été mis en cause, notamment la déréglementation du secteur financier, les procédures d’audit inadéquates, la confiance excessive des investisseurs, les pratiques de prêt viciées et la cupidité des entreprises. Les conseils d’administration n’ont pas échappé à cet examen, et les observateurs se demandent si une surveillance plus efficace de la part des conseils d’administration des institutions financières n’aurait pas permis de repérer et de résoudre certains des problèmes qui ont presque anéanti l’économie mondiale. Les conseils d’administration comprenaient-ils assez de membres possédant des connaissances suffisantes et appropriées? Les administrateurs ont-ils posé les bonnes questions? Ont-ils pris les bonnes mesures? Avaient-ils l’information la plus récente sur les nouveaux enjeux? Étaient-ils prêts à contester la direction? Naturellement, avec le recul, la crise financière est maintenant vue comme une tempête causée par une multitude de facteurs dont aucun n’est entièrement à blâmer, et les instances de réglementation et les entreprises appliquent encore les mesures correctives qui s’imposent. Les questions que cette crise a soulevées continuent cependant de préoccuper les conseils d’administration en général. En effet, à mesure que la crise financière devient chose du passé, les conseils d’administration s’interrogent sur d’autres questions et sur un éventail de risques et de responsabilités possibles.

Les cinq dernières années ont été le théâtre de grands bouleversements dans l’arène mondiale de la réglementation. Dans bien des secteurs, la quantité et la complexité des règles ont augmenté, de même que la rigueur avec laquelle elles sont appliquées; les entreprises ont du mal à suivre la cadence, car elles composent encore avec les effets de l’après-crise et cherchent le plus possible à limiter les risques. De leur côté, les conseils d’administration tentent également de s’adapter, malgré la transformation des attentes des parties prenantes, des organismes de réglementation et du public.

Quelles ont été les conséquences de ces événements pour l’administrateur moyen? Des pressions venant de tous les fronts. Par exemple, le rôle de l’administrateur, surtout de celui qui cumule plusieurs postes, peut être si astreignant qu’il devient ingérable et présente de plus en plus de risques du point de vue de la responsabilité. La quantité de connaissances réglementaires et spécialisées nécessaires pour siéger efficacement à un conseil d’administration va en augmentant, et les administrateurs sont souvent dépassés par l’étendue croissante de leurs tâches.

Les conseils d’administration se trouvent donc actuellement dans une position très difficile. Étant donné leur vaste mandat, ils doivent se tenir à l’affût d’une variété de plus en plus importante de renseignements, adopter de nouvelles stratégies de réponse en vertu de leur mandat et déterminer dans quelles circonstances ils doivent consulter des experts indépendants.

Le présent document est conçu pour leur venir en aide. Il examine trois questions cruciales auxquelles les conseils d’administration accordent rarement leur attention, c’est-à-dire les fusions et acquisitions, la gestion de crise et les difficultés financières. Il présente les principaux risques que les conseils d’administration devraient prendre en considération dans chaque domaine, suggère des mesures d’atténuation de ces risques et décrit les avantages d’une meilleure surveillance de leur part ainsi que les dangers d’un laxisme prolongé.

 

Bulletin du Collège des administrateurs de sociétés (CAS) | Octobre 2014


Vous trouverez, ci-dessous, le Bulletin du Collège des administrateurs de sociétés (CAS) du mois d’octobre 2014.

Le programme de certification universitaire en gouvernance de sociétés est le seul programme universitaire offert au Québec. Il s’adresse aux administrateurs siégeant à un conseil d’administration et disposant d’une expérience pertinente.

Les administrateurs de sociétés certifiés (ASC) sont regroupés dans la Banque des ASC, un outil de recherche en ligne mis au point par le Collège, afin de faciliter le recrutement d’administrateurs sur les conseils d’administration.

Bulletin du Collège des administrateurs de sociétés (CAS) | Octobre 2014  

 

 CÉRÉMONIE OFFICIELLE DE REMISE DES DIPLÔMES

 

Le Collège des administrateurs de sociétés (CAS) a honoré les 78 nouveaux finissants du programme de certification universitaire en gouvernance de sociétés à l’occasion de la 9e cérémonie officielle de remise des diplômes. Présenté le jeudi 11 septembre 2014 à l’hôtel Château Laurier de Québec, l’événement a réuni les nouveaux administrateurs de sociétés certifiés (ASC), en plus d’une cinquantaine de partenaires et collaborateurs.

Au total, près de 150 invités s’étaient donné rendez-vous afin d’applaudir les diplômés de la promotion 2014 et célébrer la plus importante communauté d’administrateurs formés en gouvernance de sociétés au Québec qui se chiffre maintenant à 664 ASC (consultez le www.BanqueAdministrateurs.com pour leurs profils).

Pour tous les détails et des photos de l’événement [+]

DÉVOILEMENT DE LA 3E SÉRIE DE CAPSULES D’EXPERTS EN GOUVERNANCE

 

Le CAS est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance.

 

Une capsule sera dévoilée chaque semaine par bulletin électronique. À surveiller !

 

 

Cette semaine : La présidence du CA, par Michel Clair [+]

 DEUX NOUVEAUX COURS SPÉCIALISÉS EN GOUVERNANCE 

 

Il nous fait plaisir de vous informer que deux nouveaux cours spécialisés en gouvernance sont à l’horaire dès cet automne.

GOUVERNANCE DES OBNL : Cette formation s’adresse spécifiquement aux directeurs généraux, présidents et administrateurs des organismes à but non lucratif (OBNL) soucieux d’intégrer de nouvelles pratiques de gouvernance adaptées au contexte des OBNL afin d’assurer la pérennité et la performance de leur organisation.

Ce cours aura lieu à Québec, les 24 et 25 octobre prochains. Le coût d’inscription est normalement de 1 950 $ pour cette formation de deux jours. Toutefois, grâce à la participation financière de la SAQ et des partenaires du Collège, le tarif est réduit à 500 $ par participant. Détails et inscription [+]

GOUVERNANCE ET LEADERSHIP À LA PRÉSIDENCE : Cette formation est destinée aux administrateurs d’expérience exerçant la fonction de présidence du conseil d’administration, d’un des comités du conseil ou du comité consultatif d’une PME. Basé sur des études de cas, des simulations et des discussions en petits groupes, cette formation est principalement orientée sur la maîtrise des habilités relationnelles et de leadership qu’exige la fonction de présidence d’un conseil.

Ce cours se tiendra à Québec, les 13 et 14 novembre prochains et le coût d’inscription est de 1950 $ par participant. Détails et inscription [+]

Les formations spécialisées sont offertes en alternance à Québec et Montréal et sont limitées à des groupes de 20 participants. Il est aussi possible de s’inscrire à l’une ou l’autre de ces formations qui seront présentées à Montréal dès février 2015. Consulter le calendrier complet [+]

Les formations du collège et les événements en gouvernance auxquels le CAS est associé

 

Gouvernance des OBNL | 24 et 25 octobre 2014, à Québec | 13 et 14 mars 2015, à Montréal

Gouvernance des PME | 5 et 6 novembre 2014, à Québec | 24 et 25 février 2015, à Montréal

Gouvernance et leadership à la présidence | 13 et 14 novembre 2014, à Québec | 28 et 29 mai 2015, à Montréal

Certification – Module 1 : Les rôles et responsabilités des administrateurs | 12, 13 et 14 février 2015, à Québec, et 26, 27 et 28 mars 2015, à Montréal

Petit-déjeuner conférence de l’IAS section du Québec sur « Les défis technologiques : cybersécurités, nouvelles technologies et données massives » | 15 octobre 2014, à Montréal

Conférence Femmes Leaders par Les Affaires | 15 octobre 2014, à Québec

Journée annuelle des administrateurs de l’Institut français des administrateurs sur le thème «gouvernance et compétitivité» | 21 octobre 2014, à Paris

Programme de l’ecoDa « New Governance Challenges for Board Members in Europe » | 21 et 22 octobre 2014, à Bruxelles

7e édition du Colloque régional Entreprendre Façon Femme | 22 octobre 2014, à Québec

Petit-déjeuner conférence du Cercle des ASC sur « Votre CV d’administrateur : comment mettre en valeur votre expertise? » | 23 octobre 2014, à Québec | 30 octobre 2014, à Montréal

NOMINATIONS ASC

 

Catherine Claveau, ASC | Barreau du Québec et Conseil du Barreau du Québec

André Boisclair, ASC | Fondation du cancer du sein du Québec

Josée De La Durantaye, ASC | P. Baillargeon ltée.

Éric Fournier, ASC | Verseau International inc.

Alain Bolduc, ASC | Capsana

Michel Lamontagne, ASC | Coffrage Saulnier

Martin Cyrenne, ASC | Cercle des administrateurs de sociétés certifiés (ASC)

Annie Tremblay, ASC | Cercle des administrateurs de sociétés certifiés (ASC)

Paulette Legault, ASC | Cercle des administrateurs de sociétés certifiés (ASC), Ordre des opticiens d’ordonnances du Québec et Chambre de la sécurité financière du Québec

Clarence Turgeon, ASC | Conseil du Patronat du Québec

Lucie Lebeuf, ASC | Ville de Laval

Éric Lavoie, ASC | Institut universitaire de cardiologie et de pneumologie de Québec

François Désy, ASC | Garde Côtière Auxiliaire Canadienne (Québec), Désy Meunier Construction Rénovation inc et Caisse populaire Desjardins de Baie-Comeau

José Mathieu, ASC | VCI Composites et NSE-Automatech

Boîte à outils pour administrateurs

 

Nouvelle référence mensuelle en gouvernance : Dossier spécial « Former un CA : enjeux et obligations » du Journal Les Affaires

La capsule d’expert du mois – NOUVEAUTÉ : La présidence du CA, par Michel Clair

Top 5 des billets les plus consultés au mois de septembre du blogue Gouvernance | Jacques Grisé.

Portrait d’Adm.A. sur Mme Lisane Dostie, ASC et formatrice au CAS

Bonne lecture !

____________________________________________

Collège des administrateurs de sociétés (CAS)

Faculté des sciences de l’administration Pavillon Palasis-Prince

2325, rue de la Terrasse, Université Laval Québec (Québec) G1V 0A6

418 656-2630; 418 656-2624

info@cas.ulaval.ca

 

Deux grandes approches réglementaires à la diversité sur les C.A. : (1) les quotas ou les mesures ciblées et (2) l’obligation de divulgation


Aujourd’hui, j’aimerais partager avec vous une étude empirique vraiment très intéressante portant sur deux approches réglementaires à la diversité sur les conseils d’administration:

(1) les quotas ou les mesures ciblées et

(2) l’obligation de divulgation.

Aaron A. Dhir,  professeur associé de droit à la Osgoode Hall Law School de Toronto, présente plusieurs réflexions fort pertinentes sur l’expérience norvégienne d’imposition de quotas pour accroître le nombre de femmes sur les conseils d’administration.

Plusieurs règlementations se sont inspirées de cette approche pour prendre en compte cette variable fondamentale. La conclusion de l’auteur au sujet de cette première approche réglementaire est résumée de la façon suivante :

My study of the Norwegian quota model demonstrates the important role diversity can play in enhancing the quality of corporate governance, while also revealing the challenges diversity mandates pose.

En ce qui concerne l’approche basée sur l’obligation de divulgation des mesures de diversité adoptée par la Securities and Exchange Commission (SEC), il appert que la règle ne donne aucune définition de la diversité et que les entreprises peuvent l’interpréter comme bon leur semble.

L’étude montre cependant que les organisations ont tendance à définir la diversité de manière très large, notamment en faisant référence à l’expérience antérieure pertinente des administrateurs (qui n’a rien à voir avec les caractéristiques sociodémographiques telles que le genre).

L’auteur avance également que cette réglementation a donné lieu à beaucoup d’efforts de définition de la diversité :

My study shows that “diversity” carries multiple connotations for these firms. My most salient finding, however, is that when interpreting this concept in the absence of regulatory guidance, the dominant corporate discourse is experiential rather than identity-based. Firms most frequently define diversity with reference to a director’s prior experience or other non-identity-based factors rather than his or her socio-demographic characteristics. The data provide a unique window into the potential meanings of “diversity” in the corporate governance setting, as well as the limits of a strategy that permits corporations to give the term their own definition.

L’auteur nous incite à lire les chapitres 1, 4 et 6 qui ont été publiés sur le réseau SSRN (Social Science Research Network). Le chapitre 1 présente l’objet de l’étude, la méthodologie, les deux variables étudiées, les résultats sommaires et les perspectives futures eu égard au débat sur la diversité.

Bonne lecture !

Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity

The lack of gender parity in the governance of business corporations has ignited a heated global debate, leading policymakers to wrestle with difficult questions that lie at the intersection of market activity and social identity politics. In my new book, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity (Cambridge University Press, forthcoming in 2015), I draw on semi-structured interviews with corporate board directors in Norway and documentary content analysis of corporate securities filings in the United States to investigate empirically two distinct regulatory models designed to address diversity in the boardroom—quotas and disclosure.IMG_00001049

In Chapter 4, recently made available on SSRN, I explore the quota-based approach to achieving gender balance in corporate boardrooms. Quotas and related target-based measures for publicly traded firms are currently in place in a number of countries, including Iceland, Belgium, France, Italy, and Norway and are at different stages of consideration in other jurisdictions, including Canada, the European Union, and Germany.

I present findings from my qualitative, interview-based study of Norwegian corporate directors in order to provide empirical elucidation of how quota-based regimes operate in practice. The identity narratives of Norwegian board members offer particularly rich sources of insight, given that Norway was the first jurisdiction to pursue the quota path and thus has the most mature quota regime. While highly contentious when adopted, the Norwegian quota project unquestionably set the stage for subsequent legislative developments in other countries.

I delve into the lived experiences of Norwegian directors who gained appointments as a result of Norway’s quota law, as well as those who held appointments before the law was enacted. Several questions frame my investigation. How have these individuals subjectively experienced, and made sense of, this intrusive form of regulation? How does legally required gender diversity affect their economic and institutional lives? And how has it shaped boardroom cultural dynamics and decision making, as well as the overall governance fabric of the board?

The forced repopulation of boards along gender lines has disturbed the traditional order of corporate governance systems, dislocating established hierarchies of power in key market-based institutions. Norway represents the paradigmatic case of this disturbance and has set in motion a wave of corporate governance reform unlike any other. As such, it constitutes a fascinating and appropriate case study through which to consider the implications of quota regimes. My study of the Norwegian quota model demonstrates the important role diversity can play in enhancing the quality of corporate governance, while also revealing the challenges diversity mandates pose.

In Chapter 6, also recently made available on SSRN, I explore the disclosure-based approach to addressing diversity in corporate governance. In 2009, the United States Securities and Exchange Commission adopted a rule requiring publicly traded firms to report on whether they consider diversity in identifying director nominees and, if so, how. The rule also requires firms that have adopted a diversity policy to describe how they implement the policy and assess its effectiveness. The rule does not define “diversity,” however, leaving it to corporations to give this term meaning.

I present findings from my mixed-methods content analysis of corporate disclosures submitted during the first four years of the rule in order to provide empirical elucidation of how the rule operates in practice. The research sample consists of a hand-collected dataset of the 2010–2013 definitive proxy statements of S&P 100 firms. I am interested in learning how these firms, in responding to the rule, construct the concept of diversity through their public discourse. What does diversity, viewed through the prism of legal regulation, mean to market participants? How do they interpret and understand this socio-political idea in the absence of a regulatory definition? How is diversity constituted and discursively performed?

The SEC’s disclosure rule has caused US corporations to establish a vocabulary of diversity. My study shows that “diversity” carries multiple connotations for these firms. My most salient finding, however, is that when interpreting this concept in the absence of regulatory guidance, the dominant corporate discourse is experiential rather than identity-based. Firms most frequently define diversity with reference to a director’s prior experience or other nonidentity-based factors rather than his or her socio-demographic characteristics. The data provide a unique window into the potential meanings of “diversity” in the corporate governance setting, as well as the limits of a strategy that permits corporations to give the term their own definition.

Challenging Boardroom Homogeneity aims to deepen ongoing policy conversations and offer new insights into the role law can play in reshaping the gendered dynamics of corporate governance cultures. The full version of Chapter 1 is available for download here.

Notions de gouvernance 101 | Que font les administrateurs ?


Vous trouverez ci-dessous un article de Lucy P. Marcus*, experte en gouvernance, qui présente, de manière vulgarisée, en quoi consiste le travail des administrateurs de sociétés aujourd’hui.

On y trouvera une bonne définition des responsabilités des administrateurs ainsi qu’une métaphore intéressante qui montre comment le travail des administrateurs a considérablement changé au cours des vingt dernières années.

L’auteure distingue entre les activités qui sont de nature « grounding » (connaissances de bases de la performance et des obligations de conformité) et celles, toujours plus importantes, qui sont de l’ordre du « stargazing » (la vision à long terme et la stratégie).

Je vous invite à lire ce bref article qui tient lieu de notions de gouvernance 101 !

Bonne lecture !

Boardroom 101: What, exactly, do directors do?

 

The boardroom is changing at a fast pace. The agenda items we discuss, the expectations of board directors and the responsibility we hold are all areas that are going through a much needed, and, in my experience, a very welcome, transition.

When my son was around 5 years old, I was preparing for a board meeting and he asked what that was and what I was going to do there.

Lucy P. Marcus
Lucy P. Marcus*, experte en gouvernance

That’s a question many adults have, too. What, exactly, is a board and what does a board director do?

Searching for an explanation, I finally went with this: « You know about King Arthur and the Round Table? Well, like King Arthur and the Round Table, a group of wise people gather together every month or so. We sit around a table and talk about what the people we are helping have been doing and what they are planning to do next. We try to make sure they are acting honourably and following the law and doing what is best for everyone. »

He seemed fairly satisfied with that answer, but it got me thinking — was the metaphor apt? Is that really what directors are doing in practice?

It does seem sometimes like the board is an arcane and distant body. A caricature would be one where the doors open with a whoosh to reveal suited people sitting around a table in an oak panelled room, having confidential discussions in hushed tones, drawing on deep expertise and thinking big thoughts. And of course, those discussions would be spoken in a special « thee and thou » language.

There are parts of that caricature which do ring true. We board directors generally do sit around a table, and I’d like to think we generally have robust discussions. Strangely, we do often speak in formal ways, referring to “Mr Chairman” and the like. As for the “deep expertise” and “big thoughts” part, I’m not sure we are always well equipped with enough information to make decisions.

Changes afoot

The boardroom is changing at a fast pace. The agenda items we discuss, the expectations of board directors and the responsibility we hold are all areas that are going through a much needed, and, in my experience, a very welcome, transition.

Board agendas used to be rigid and mostly focused on traditional oversight topics such as compensation and compliance. That mandate has grown to include a great deal more.

To better understand the changes and how they affect our job as directors, it is useful to think of the tasks and the agenda items of the board as being broadly divided into a balance of what I call “grounding” and “stargazing”.

The “grounding” side consists of what you might think of as the tick-boxing items: questions around the structure and performance of the organisation in the “here and now”. Is it behaving legally and responsibly? Is it following the rules and regulations? Are its financial accounts in good order? Does it meet to the expectations not just of its shareholders but also of other stakeholders in the broader ecosystem in which it operates?

The “stargazing” side is about strategy. This is the essence of what and where the organisation wants to be in the future. It is about asking questions about how the sector is changing and how the organisation plans to grow. It is also about challenging it to make the necessary changes as the world around it changes too, and to be a driver of positive change. It is about building innovation and a sense of excitement about the future into the DNA.

The old agendas were heavily weighted towards the “grounding” side of the equation, but today, a good balance of “grounding” and “stargazing” is vital to preparing the organisation for the future. The board must look closely at the here and now, making sure everything is working correctly; otherwise we run the risk of missing signs of everything from neglect to malfeasance. We must also look into the next 10 to 15 years to make sure that the organisation has a robust future to look forward to.

Responsibilities increase

The world around us has changed at an exponential pace. Companies are seen as having a greater responsibility for the role they play in the health and well-being of society. They also bear some responsibility for the individuals that they touch, be it employees, partners, or people who live in the community. At the same time, social media and niche publications amplify the voices of shareholders, communities and consumers. Also, boards and companies no longer operate in a black box — with the advent of everything from Twitter to Google Earth, there is more transparency than ever before.

Partly as a consequence of these changes in the boardroom and beyond, the responsibilities and expectations of directors, particularly independent directors, have increased exponentially. It is not sufficient to skim the board papers, ask a couple of superficial questions, eat the lovely meal, and be on your merry way home.

Board directors are now, rightly, expected to read the papers, come prepared, and ask the tough questions. Though the boardroom has traditionally been a black box room, much has changed. Individual directors will increasingly find themselves being held to account for the choices that they have made in the boardroom in many areas, be it around executive compensation or “innovative” tax strategies.

It means that we as directors must be more diligent and make sure we are only voting ‘yes’ for things when we have a thorough understanding of what the implications of the ‘yes’ is — both now and in the longer term. We must take into account those whose lives are impacted directly, such as people who work for the company and those who live in the area where the company sits, as well as the people who use the company’s products and services. It also about those who are impacted indirectly, such as shareholders whose life savings may be at stake. Those are all positives, in my view.

In the end, if we are to live up to the ideal of King Arthur and the Round Table, chivalrous knights who are guided by the ideals of courtesy, courage, and honour, we must ask ourselves every time we gather, “Why are we here and who do we serve?” so that the decisions we take are made wisely and judiciously, not only to serve the needs of the few, but to ensure that we help the organisation to live up to its potential, and do so in an honourable way.

_________________________

*, CEO, Non-Exec Board Director, Prof IE Biz School, Project Syndicate & BBC columnist.

L’audit interne au cœur d’une grande bataille !


Je partage avec vous un récent article que Denis Lefort, expert conseil en gouvernance et audit interne, m’a fait parvenir, accompagné de ses commentaires.

Cet article de Mike Jacka* est paru dans Internal Auditor Magazine​​​​​​​. Toute personne préoccupée par l’importance de cette fonction devrait prendre connaissance de cette mise en garde.

« En lisant ce bref article, vous saisirez rapidement que son auteur est d’avis que l’audit interne et les autres fonctions d’assurance des organisations (gestion des risques, conformité, sécurité et autres) sont entrées dans une guerre de juridiction… Et que l’audit interne ne peut agir comme si elle était comme la Suisse, neutre et inattaquable…!!!

L’auteur est ainsi d’avis que l’audit interne doit préparer à la fois sa stratégie de défense et d’attaque pour contrer les coups durs présents et à venir… »

Bonne lecture !

Internal Audit Is in the Midst of a Great War

 

The Harvard Law School Forum on Corporate Governance and Financial Regulation recently posted an interesting piece titled « Compliance or Legal? The Board’s Duty to Assure Compliance. » I know it all sounds a little boring, but trust me on this one — there is interesting information here. Take some time to read through it before we dive in.

(One very quick, very important aside. I came across this article as a part of The IIA’s SmartBrief — a weekly « snapshot » of news and issues internal auditors might care about. To receive the newsletter you must « opt in. » I cannot urge you enough to opt in. No puffery here. Seldom does a week go by where I don’t find at least one nugget I can use. If you aren’t receiving it, you can opt in here.)

Ia Online Home

If you have been paying attention to the discussions that are going on regarding internal audit’s evolving role you were probably gobsmacked by the similarities between those discussions and what is being said in this article. Take the opening sentence: « A series of developments threaten to blur the important distinction between the corporation’s legal and compliance functions. » Make a few changes and you are talking about the dilemma internal audit is facing. « A series of developments threaten to blur the important distinction between the organization’s internal audit department and [insert your favorite assurance provider’s name here]. »

There it is in a nutshell, the crux of the battle currently being waged over the role of internal audit and others within the organization.

Wait, let’s back up a second. Did you miss that there is a war going on? Let’s take a quick look.

I have a good friend who is a CAE. In that role he is also in charge of risk management. We often talk about the potential conflict that exists with those dual roles. He is not alone. I have talked with other audit leaders who are being approached about audit taking on the role of risk. Not a bad fit. We are risk experts, we have the communication and relationship skills, and there should be a definite meshing of gears between audit and risk.

On the other hand, I have also heard from others who face the opposite issue; they are under pressure to have internal audit placed under the jurisdiction of the risk officer. « Wait a minute, » you say, « That is a very bad idea: a serious problem, a conflict of interests, a subversion of our objectivity, an invasion on our independence. » Our list of reasons why this shouldn’t happen is quite long.

When the shoe is on the other foot the bunions become just a tad more obvious.

And it is not just the risk function. While not as common, I am hearing similar discussions around such functions as compliance, corporate security, finance, quality assurance, and, yes, even legal. In some cases the discussion is around audit taking on part of the role; in others it is about audit becoming a part of the other function.

Why are we suddenly seeing this land grab?

Governance has become an important topic at the executive and board level. (Definitely a good thing.) Assurance providers (compliance, legal, risk, et al) realize the way to raise the esteem with which the board and executives hold them is to take on a greater piece of the governance pie. The pushing and shoving starts. Escalation ensues. And we find ourselves in the midst of a jurisdictional war.

And while internal audit would like to believe we are above the fray (we are independent, we are objective, we are internal audit, hear us roar), unless we recognize the existence of this war — unless we are willing to take up arms and join in the fray — we will find ourselves trivialized, the core values we provide handed off to the victors.

We think we are Switzerland. But there is no such thing as neutrality in this battle.

So, with that background, let’s return to the article previously referenced. The contents provide a good indication of the type of arguments internal audit will encounter. Two examples:

  1. The author states that a forced separation of compliance from under legal would jeopardize the ability of the organization to preserve attorney-client privilege. Cold chills went up my spine as I read this. I still vividly recall similar debates from 20 years ago when the legal department argued they should have more direct control over internal audit in order to preserve attorney-client privilege. We won. But it is obvious that the ugly head of that particular argument continues to rise again and again.
  2. The article quotes compliance thought leaders as saying that the role of « guardian of corporate reputation » is exclusively reserved for the corporate compliance officer; that the compliance officer is the organizational « subject matter expert » for ethics and culture. The author of the article states that this is « contrary to long standing public discourse that frames the lawyer’s role as a primary guardian of the organizational reputation. » My first, knee-jerk reaction is that internal audit should be the guardian of reputation and the subject matter expert. But once I put my knee back where it belongs, I realize it is probably more true that the attempt to define any one department as guardian or expert is a fool’s game. Everyone with any governance role should have the protection of reputation, ethics, and culture as their No. 1 responsibility.

There is much more in the article and many more thoughtful and reasoned arguments. And it would be quite easy to say « Let them duke it out. Their arguments are not important to us. » However, that is exactly why we should be paying attention. The article contains the points that will be used in the battle — points to be used against us and points we can use in our defense.

We are in a war. And audit cannot sit back and say, « We have independence; we are safe and above the fray. » No. They will have an eye on our « turf, » also. And who’s to say that some of their turf shouldn’t be ours. I’m not saying we break out the bayonets and start going after some of the unwounded, but I am saying we have to recognize the existence of a battle and be willing to take a stand — be willing to say what it is we do, why it is important, and why we should have those responsibilities.

What are your thoughts? What is internal audit’s role regarding the organization’s approach to risk, governance, compliance, legal, etc.? If we are more involved, is there a conflict? If the lines blur, does it have a negative impact on the company? Is there really a war brewing? And what might this have to do with the future (if there is going to be a future) of internal audit?​

_____________________________________

*Mike Jacka, CIA, CPA, CPCU, CLU, worked in internal audit for nearly 30 years at Farmers Insurance Group.

Candidature à un poste d’administrateur de sociétés | Sept défis à considérer


Tracy E. Houston* est présidente de Board Resources Services; elle possède une solide expérience des conseils d’administration et de de la consultation en gouvernance.

Dans le cadre de ses activités de consultation, elle a souvent l’occasion d’orienter les candidats vers des postes de membres de conseils d’administration d’organisation publiques (cotées). Dans ses fonctions, elle est en mesure de fournir certaines recommandations aux futurs administrateurs.

Voici donc, selon elle, les sept principaux défis que les administrateurs de sociétés potentiels doivent envisager. Bonne lecture !

Top 7 Challenges for Public Company Director Candidates

Over the last few years, I have heard from a number of board candidates about their biggest challenges. I have dug through my notes to share these. My hope is that the definitions and tips will bring further insights that will leverage and prioritize your time and efforts to gain a board seat.

1. Time

Boards move slowly. This makes keeping in touch essential for director candidates. Some become discouraged, lose momentum, or completely stop networking. Those who remain consistent in their networking and communication efforts have an advantage.

2. A Clear Focus

The board world is large and mysterious. Without a well-defined board-level value proposition of what you bring to a board—one that provides focus and definition—then, time and energy is spent in a mud-on-the-wall approach and drains any sense of confidence that could be used to capitalize on potential opportunities. This is not just about having a good resume, you need to know how you can bring value, to what size company boards, and in what industry.

3. Priorities that Have Impact

There is a diverse set of stakeholders that are a part of the networking to gain a board seat. This is a complex business ecosystem in which to execute and can cause indecisiveness. Stakeholders, once defined, must be weighted for level of importance and leveraged to help you gain visibility.

4. Relearn

Boards are in a time of transition in defining who will be the next director. For the transformations happening now and in the future, your talents need to be closely aligned with the agendas and priorities with the boards on your target list. Build a strategic message about why you should be their next director.

5. Fragmentation

The market is producing a number of new ways to identify the next generation candidate. This makes it hard to know where you need to be and to stay on top of the trends. Ensure your reading and networking time gains key information in this area.

6. Foundational Changes

There are three foundational changes needed for a 21st century director candidate:

(1) Develop the skills, routines, and tools to truly leverage your potential from social media.

(2) Create and champion your brand or value proposition—it must be grounded in tangible differences.

(3) Deeply understand the boards you have targeted and create insights that naturally engage those to whom you present yourself as a board candidate. Be thoughtful so that the assumptions you make are not ones locked in the past.

7. Breaking Through the Clutter

Once on a short list for a director seat, be on your “A” game. Ask the right questions before the interviewing process to help shape your contributions in the interviews. Be consistent and have a few themes or main points developed.

_______________________________________

*Tracy E. Houston is the president of Board Resources Services, LLC. She is a refined specialist in board consulting and executive coaching with a heartfelt passion for rethinking performance, teams and the boardroom.

Nouvelles capsules vidéos en gouvernance – La diversité et la gestion des risques


Le Collège des administrateurs de sociétés est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéo.

Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance. Une capsule est dévoilée chaque semaine.

Aujourd’hui, je vous propose le visionnement des deux plus récentes capsules d’experts qui sont maintenant en ligne. Elles ont pour thèmes « La diversité » par Mme Nicolle Forget, administratrice de sociétés, et « La gestion des risques » par M. Martin Leblanc, CA, CMC, Associé, Services-conseils – Management et Gestion des risques, KPMG.

Visionnez ces deux capsules d’experts :

La diversité, par Nicolle Forget [+]

 

________________________________________________

Comment les principaux intéressés peuvent-ils évaluer la qualité d’un conseil d’administration ?


Que peut faire un actionnaire ou un investisseur pour évaluer la compétence d’un conseil d’administration et se former une opinion sur l’efficacité de son rôle de fiduciaire ?

Voici un article, publié par la rédaction d’Investopedia, qui présente un checklist en cinq points, simple mais fort utile, pour mieux savoir quoi regarder dans la documentation publique.

Bien sûr, votre évaluation ne sera pas nécessairement concluante mais je suis assuré que si vous portez une attention spéciale aux 5 éléments présentés ci-dessous, vous aurez une bien meilleure appréciation des qualités du conseil et de ses administrateurs.

Quels autres facteurs considérez-vous dans l’évaluation des compétences d’un Board ? Bonne lecture !

Evaluating The Board Of Directors

You can learn a lot from looking at the disclosures made about a company’s board of directors in its annual report, but it takes time and knowledge to pick up clues on the level of quality of a company’s governance as reflected in its board’s composition and responsibilities. (For related reading, see An Investor’s Checklist To Financial Footnotes and Footnotes: Early Warning Signs For Investors.)

Tulips

In theory, the board is responsible to the shareholders and is supposed to govern a company’s management. But in many instances, the board has become a servant of the chief executive officer (CEO), who is typically also the chairman of the board. The role of the board of directors has increasingly come under scrutiny in light of corporate scandals such as those at Enron, WorldCom and HealthSouth, in which the board of directors failed to act in investors’ best interests. Although the Sarbanes-Oxley Act of 2002 made corporations more accountable, investors should still pay attention to what a corporation’s board of directors is up to. Here we’ll show you what the board of directors can tell you about how a company is being run.

The Checklist
According to an October 27, 2003, Wall Street Journal article, a checklist was developed by the Corporate Library to help investors evaluate the objectivity and effectiveness of a board. According to this checklist, investors should examine:

1. Size of the Board
There is no universal agreement on the optimum size of a board of directors. A large number of members represents a challenge in terms of using them effectively and/or having any kind of meaningful individual participation. According to the Corporate Library’s study, the average board size is 9.2 members, and most boards range from 3 to 31 members. Some analysts think the ideal size is seven.

In addition, there are two critical board committees that must be made up of independent members:

  1. The compensation committee
  2. The audit committee

The minimum number for each committee is three. This means that a minimum of six board members is needed so that no one is on more than one committee. Having members doing double duty may compromise the important wall between audit and compensation, which helps avoid any conflicts of interest. Members serving on a number of other boards may not devote adequate time to their responsibilities.

The seventh member is the chairperson of the board. It’s the responsibility of the chairperson to make sure the board is functioning properly and the CEO is fulfilling his or her duty and following the directives of the board. A conflict of interest is created if the CEO is also the chairperson of the board.

To staff any additional committees, such as nominating or governance, additional people may be necessary. However, having more than nine members may make the board too big to function effectively. (For background reading, see The Basics Of Corporate Structure.)

2. The Degree of Independence: Insiders and Outsiders
A key attribute of an effective board is that it is comprised of a majority of independent outsiders. While not necessarily true, a board with a majority of insiders is often viewed as being stacked with sycophants, especially in cases where the CEO is also the chairman of the board.

An outsider is someone who has never worked at the company, is not related to any of the key employees and has never worked for a major supplier, customer or service provider, such as lawyers, accountants, consultants, investment bankers, etc. While this definition of independent outsiders is clear, you’d be surprised at the number of times it is misapplied. Too often, the « outsider » label is given to the retired CEO or a relative when that person is actually an insider with conflicts of interest.The Wall Street Journal article found that independent outsiders made up 66% of all boards and 72% of Standard & Poor’s (S&P) boards. The larger the number of outside board members the better. This makes the board more independent and allows it to provide a higher level of corporate governance to shareholders, particularly if the position of chairman of the board is separated from the CEO and is held by an outsider.

3. Committees
There are four important board committees: executive, audit, compensation and nominating. There may be more committees depending on corporate philosophy, which is determined by an ethics committee and special circumstances relating to a particular company’s line of business. Let’s take a closer look at the four main committees:

  1. The Executive Committee
    The executive committee, is made up of a small number of board members that are readily accessible and easily convened, to decide on matters subject to board consideration but must be decided on expeditiously, such as a quarterly meeting. Executive committee proceedings are always reported to and reviewed by the full board. Just as with the full board, investors should prefer that independent directors make up the majority of an executive committee.
  2. The Audit Committee
    The audit committee works with the auditors to make sure that the books are correct and that there are no conflicts of interest between the auditors and the other consulting firms employed by the company. Ideally, the chair of the audit committee is a Certified Public Accountant (CPA). Often, a CPA is not on the audit committee, let alone on the board. The New York Stock Exchange (NYSE) requires that the audit committee include a financial expert, but this qualification is typically met by a retired banker, even though that person’s ability to catch fraud may be questionable. The audit committee should meet at least four times a year in order to review the most recent audit. An additional meeting should be held if there are other issues that need to be addressed
  3. The Compensation Committee.
    The compensation committee is responsible for setting the pay of top executives. It seems obvious that the CEO or other people with conflicts of interest should not be on this committee, but you’d be surprised at the number of companies that allow just that. It is important to check if the members of the compensation board are also on the compensation committees of other firms because of the potential conflict of interest. The compensation committee should meet at least twice a year. Having only one meeting may be a sign that the committee meets just to approve a pay package that was created by the CEO or a consultant without much debate. (To learn more, read Evaluating Executive Compensation.)
  4. The Nominating Committee
    This committee is responsible for nominating people to the board. The nomination process should aim to bring on people with independence and a skill set currently lacking on the board.M

4. Other Commitments and Time Constraints
The number of boards and committees a board member is on is a key consideration when judging the effectiveness of a member.

The following chart from the survey shows the time commitments of board members of the 1,700 largest U.S. public companies according the the study’s 2003 data. This indicates that the majority of board members sit on no more than three boards. What this data does not specify is the number of committees to which these people belong.

You’ll often find that independent board members serve on both the audit and compensation committees and are also on three or more other boards. You have to wonder how much time a board member can devote to a company’s business if the person is on multiple boards. This situation also raises questions about the supply of independent outside directors. Are these people pulling double duty because there’s a lack of qualified outsiders?

5. Related Transactions
Companies must disclose any transactions with executives and directors in a financial note entitled « Related Transactions. » This discloses actions or relationships that cause conflicts of interest, such as doing business with a director’s company or having relatives of the CEO receiving professional fees from the company.

The Bottom Line
The composition and performance of a board of directors says a lot about its responsibilities to a company’s shareholders. A board loses credibility if its objectivity and independence are compromised by material shortcomings in this checklist. Investors are poorly served by substandard governance practices.

Clarifications au sujet des deux principaux systèmes de gouvernance | One Tier vs Two Tier


Ici, en Amérique du Nord, on entend quelquefois parler des distinctions entre le modèle de gouvernance européen et le modèle de gouvernance à l’américaine. Vous trouverez, ci-dessous, une brève synthèse des particularités des modèles de gouvernance européens eu égard à la distinction one tier/two tier systèmes de gouvernance.

Cette conclusions est basée sur une recherche de type « Benchmarking » conduite par ecoDa* (The European Confederation of Directors Associations) auprès de ses membres des Instituts de gouvernance européens ainsi qu’auprès d’autres membres non-européens, tel que le Collège des administrateurs de sociétés (CAS).

À la suite de l’extrait présentant les grandes lignes de ces modèles de gouvernance, vous trouverez un portrait plus précis des principales différences entre les deux systèmes, dont les deux plus représentatifs (UK, One Tier; Allemagne, Two Tier).

Bonne lecture !

 

Although the European Union tries to undermine the differences, the corporate law and corporate governance is highly diversified throughout Europe, embedded in a long history of specific societal and economic approaches towards the organisation of the business world, aligning governance with these quite different societal priorities.IMG_20140520_212116

In the two tier system, supervisory board members control the strategy but don’t define it. In the two tier system, there is also a clear cut between management and control responsibilities. In the one tier system, the board governs the company e. g. controls the direction, defines the strategic options and can address any issues related to the performance of the company.

People advocating for the two tier model always point out that having distance between management and oversight creates independence that makes sense. People defending the one-tier system consider that having executives and non-executives on the same board provides a better flow of information and helps to overcome problems that boards can face in understanding what is going on in the company. The one-tier system would also enable the non-executive to see how executive operate together as a team. The non-executive would be more involved in forward-looking of the strategy. As a downside effect of the one tier system, it is difficult for non-executives to draw distinction between monitoring and oversight.

The one tier system is often seen as an English model while the two-tier system is more of a German style. But the reality is more complex than that over the different countries in the European Union. The Nordic Corporate Governance (CG) model is quite unique with a strictly hierarchical governance structure and a direct chain of command among the general meeting, the board and the CEO. The Italian CG model is also special with the distinction between the managing body (sole administrator or, in the collective form of a board of directors) and the controlling organ (so called “board of statutory auditors”)

 

One-tier board system Two-tier board system 
Organisation
A single board. A supervisory body and a management body.
Composition
Mixed, executive and non-executive directors may serve on the board. Separate, executive and non-executive directors serve on separate boards (i.e., a supervisory board composed exclusively of non-executive directors and a management board composed exclusively of executive directors).
Organisation
Unitary Binary
Committees
Mandatory or recommended Supervisory and advisory committees(Mandatory) oversight and advisory committees such as the audit committee, the remuneration committee and the nomination (appointments) committee, composed of a majority of non-executive directors, one or more of whom must be independent.Supervisory committee

Optional committee entrusted with supervising the company, composed of both executive and non-executive directors.

Usually differs slightly from a true supervisory board (as found in the two-tier system) in terms of powers, composition and role.

 

Mostly found in countries which present characteristics of a one-tier system while incorporating certain features of a two-tier system.

 

 OptionalHistorically not required but oversight and advisory committees are increasingly important in the two-tier system as well.
Roles
Board of directors Managerial roleDirection and executive actsDecision-taking, management and oversightPerformance enhancement

Supervisory role

Accountability

Strategic and financial oversight

 

 Management board Managerial roleDirection and executive actsDecision-taking and managementPerformance enhancement

Service and strategic role

 

Supervisory board

 

Supervisory role

Accountability

Decision-taking and oversight

Monitoring role

Strategic and financial oversight

 

 
CEO duality
Allowed.The same person can serve as both CEO and chair of the board of directors (although this is generally not recommended by corporate governance practices). 

 

 Restricted.No CEO duality (although the CEO can sometimes be a member or attend meetings of the supervisory board.)
Executive directors
Appointed by the general meeting of shareholders, based on a proposal by the board or appointments committee (if any).A director may be appointed by the board of directors when the term of office of another director comes to an end, in order to prevent the board from being paralyzed, for example if the board no longer has a sufficient number of members as required by law or the articles (co-optation procedure).The appointment of a co-opted director must be confirmed at the first general meeting of shareholders following his or her appointment.  Appointed by the supervisory board or the general meeting of shareholders, based on a proposal by the board or the appointments committee (if there is one).
Non-Executive (supervisory directors)
Idem. Appointed by the general meeting of shareholders or, based on a proposal by the supervisory board or the appointments committee (if there is one).
Conflicts perspective
Negatively associated with the separation of decision-management and decision-oversight roles due to its composition (a majority of executive directors) and unitary structure.Diffusion of tasks and responsibilities weakens the non-executive directors’ ability to oversee the implementation of decisions, especially where executive and non-executive directors face the same potential legal liability.Higher risk of conflicts of interest between management and shareholders. 

To avoid conflicts of interest, it is often recommended that the one-tier board be composed of a majority of non-executive directors, due to   (i)

their experience and knowledge, (ii) their contacts, which may enhance management’s ability to secure external resources, and (iii) their independence from the CEO.

 

In companies which have achieved a certain level of development, risks of conflicts of interest are often reduced through the creation of committees allowing these functions to be segregated. In addition, legal provisions aimed at preventing and resolving conflict of interest exist in most jurisdictions.

  		•  Positively associated with the separation of decision-management and decision-oversight roles, due to the composition of the supervisory board (independent directors) which ensures independence and its binary structure.No diffusion of tasks and responsibilities. 

    Lower risk of conflicts of interest between management and shareholders.

     

     

     

     

     

     

     

     

     

     

     

     
    (Dis)advantages
    AdvantagesSpirit of partnership and mutual respect between directors, which allows greater interaction amongst all board members.Non-executive directors have more contact with the company itself and are more involved in the decision-making process. Non-executive directors have direct access to information.

     

    Decision-making process is faster.

     

    A lighter administrative burden as only a single management body needs to hold meetings and only a single set of minutes need be drawn up.

     

    Board meetings take place more regularly.

     

    Disadvantages

    A single body is entrusted with both managing and supervising the company’s operations.

     

    More difficult to guarantee the independence of board members and there is a greater risk of non-executive directors aligning too much with executive directors.

     

    More liability for non-executive directors.

     

     

    		 Advantages Clear distinction between the supervisory and management functions within the company.Clear distinctions of liabilities between the members of the supervisory and management bodies.Supervisory board members are more independent.

     

    Clear separation of the roles of chairman and CEO.

     

     

     

     

     

     

     

    Disadvantages

    It is more difficult for directors to build relationships of trust, thereby potentially undermining communication between the two boards.

     

    Supervisory board members only receive limited information (from the management board) and at a later stage (decreased involvement). There is a heightened risk of the supervisory board not discovering shortcomings or discovering them too late.

     

    Decision-making process is delayed due to less frequent supervisory board meetings.

     

    Non-executive directors face several challenges which appear to be typical of the two-tier board model, such as difficulties (i) building relationships of trust, thereby potentially undermining communication and flows of information between the two boards, and (ii) fully understanding and ratifying strategic initiatives by the management board, thereby frustrating the decision-making processes.

     

    _______________________________________________

    ecoDa (The European Confederation of Directors Associations) is a not-for-profit association based in Brussels, which acts as the « European voice of directors » and represents around 60,000 board directors from across the European Union (EU) member states. The organisation acts as a forum for debate and public advocacy by influencing the public policy debate at EU level and by promoting appropriate director training, professional development and boardroom best practice.

    Les risques de gouvernance associés à l’OPA d’Alibaba


    , professeur de droit, d’économique et de finance, et directeur des programmes sur la gouvernance corporative à la Harvard law School vient de publier un article très important dans le New York Times.

    L’auteur met les investisseurs en garde contre de réels risques de gouvernance liés à l’offre publique d’achat (OPA) de l’entreprise chinoise Alibaba.

    Je crois qu’il est utile de mieux comprendre les enjeux de gouvernance avant d’investir dans cette immense OPA.

    Bonne lecture !

     

    Wall Street is eagerly watching what is expected to be one of the largest initial public offering in history: the offering of the Chinese Internet retailer Alibaba at the end of this week. Investors have been described by the media as “salivating” and “flooding underwriters with orders.” It is important for investors, however, to keep their eyes open to the serious governance risks accompanying an Alibaba investment.

    Several factors combine to create such risks. For one, insiders have a permanent lock on control of the company but hold only a small minority of the equity capital. Then, there are many ways to divert value to affiliated entities, but there are weak mechanisms to prevent this. Consequently, public investors should worry that, over time, a significant amount of the value created by Alibaba would not be shared with them.

    In Alibaba, control is going to be locked forever in the hands of a group of insiders known as the Alibaba Partnership. These are all managers in the Alibaba Group or related companies. The Partnership will have the exclusive right to nominate candidates for a majority of the board seats. Furthermore, if the Partnership fails to obtain shareholder approval for its candidates, it will be entitled “in its sole discretion and without the need for any additional shareholder approval” to appoint directors unilaterally, thus ensuring that its chosen directors always have a majority of board seats.

    Alibaba is scheduled to become a publicly traded company later this week.

    Many public companies around the world, especially in emerging economies, have a large shareholder with a lock on control. Such controlling shareholders, however, often own a substantial portion of the equity capital that provides them with beneficial incentives. In the case of Alibaba, investors need to worry about the relatively small stake held by the members of the controlling Alibaba Partnership.

    After the I.P.O., Alibaba’s executive chairman, Jack Ma, is expected to hold 7.8 percent of the shares and all the directors and executive officers will hold together 13.1 percent. Over time, insiders may well cash out some of their current holding, but Alibaba’s governance structure would ensure that directors chosen by the Alibaba Partnership will forever control the board, regardless of the size of the stake held by the Partnership’s members.

    With an absolute lock on control and a limited fraction of the equity capital, the Alibaba insiders will have substantial incentives to divert value from Alibaba to other entities in which they own a substantial percentage of the equity. This can be done by placing future profitable opportunities in such entities, or making deals with such entities on terms that favor them at the expense of Alibaba.

    Alibaba’s prospectus discloses information about various past “related party transactions,” and these disclosures reflect the significance and risks to public investors of such transactions. For example, in 2010, Alibaba divested its control and ownership of Alipay, which does all of the financial processing for Alibaba, and Alipay is now fully controlled and substantially owned by Alibaba’s executive chairman.

    Public investors should worry not only about whether the Alibaba’s divesting of Alipay benefited Mr. Ma at the expense of Alibaba, but also about the terms of the future transactions between Alibaba and Alipay. Because Alibaba relies on Alipay “to conduct substantially all of the payment processing” in its marketplace, these terms are important for Alibaba’s future success.

    Mr. Ma owns a larger fraction of Alipay’s equity capital than of Alibaba’s, so he would economically benefit from terms that would disfavor Alibaba. Indeed, given the circumstances, the I.P.O. prospectus acknowledges that Mr. Ma may act to resolve Alibaba-Alipay conflicts not in Alibaba’s favor.

    The prospectus seeks to allay investor concerns, however, by indicating that Mr. Ma intends to reduce his stake in in Alipay within three to five years, including by having shares in Alipay granted to Alibaba employees. But stating such an intention does not represent an irreversible legal commitment. Furthermore, transfers of Alipay ownership stakes from Mr. Ma to other members of the Alibaba Partnership would still leave the Partnership’s aggregate interest to be decidedly on the side of Alipay rather than Alibaba.

    Given the significant related party transactions that have already taken place, and the prospect of such transactions in the future, Alibaba tried to placate investors by putting in a “new related party transaction policy.” But this new policy hardly provides investors with solid protection. Unlike charter and bylaw provisions, corporate policies are generally not binding. Furthermore, Alibaba’s policy explicitly allows the board, where the nominees of Alibaba partnership will always have a majority, to approve any exceptions to the policy that the board chooses.

    Of course, the Alibaba partners might elect not to take advantage of the opportunities for diversion provided to them by Alibaba’s structure. And, even if the partners do use such opportunities, the future business success of Alibaba might be large enough to make up for the costs of diversions and leave public investors with good returns on their investment.

    Before jumping in, however, investors rushing to participate in the Alibaba I.P.O. must recognize the substantial governance risks that they would be taking. Alibaba’s structure does not provide adequate protections to public investors.

    __________________________________________

    Article relié :

    Alibaba Raises the Fund-Raising Target for Its I.P.O. to $21.8 Billion (Sept. 15, 2014)

    Les modèles de gouvernance fondés sur la prise en compte des intérêts des « Stakeholders » sont-ils efficaces ?


    Dans ce billet, nous attirons votre attention sur une étude remarquable, récemment publiée par Franklin Allen, professeur d’économie à l’Université de Pennsylvanie et à Imperial College, Londres; Elena Carletti, professeure de finance à l’université Bocconi ; et Robert Marquez, professeur de finance à l’Université de Californie (Davis), paru sur le blogue de Harvard Law School Forum on Corporate Governance.

    L’étude montre que les entreprises peuvent adopter deux modèles relativement distincts de gouvernance.

    Le premier modèle, celui qui règne dans les pays Anglo-Saxons, adopte la perspective de la théorie de l’agence selon laquelle il doit exister une nette séparation des pouvoirs entre les actionnaires-propriétaires et les dirigeants de l’organisation. Dans ces pays (U.S., Canada, UK, Australie), les lois précisent assez clairement que les actionnaires sont les propriétaires de l’entreprise et que les managers ont le devoir fiduciaire d’agir en fonction de leurs intérêts, tout comme les administrateurs qui sont les représentants élus des actionnaires.

    La situation canadienne est un peu particulière parce que certains jugements stipulent que les administrateurs doivent aussi tenir compte des conséquences des décisions sur les diverses parties prenantes.

    Il y a plusieurs pays qui adoptent un deuxième modèle de gouvernance, un modèle qui accorde une importance capitale aux parties prenantes (Stakeholders), plus particulièrement aux employés.

    Par exemple, en Allemagne, le système de cogestion exige un nombre égal de sièges d’actionnaires et d’employés au conseil de supervision. Les intérêts des parties prenantes sont également pris en compte par une représentation significative d’employés en Autriche, en France, aux Pays-Bas, au Danemark, en Suède.

    D’autres pays tels que la Chine et le Japon ont des modèles de gouvernance qui se fondent sur des normes se rapportant aux consensus sociaux.

    Quel modèle de gouvernance peut le mieux optimiser la performance des entreprises, tout en répondant aux impératifs de rentabilité, de compétitivité et de pérennité de ces dernières ?

    Vous ne serez peut-être pas étonnés d’apprendre que le modèle Anglo-Saxon, fondé sur la propriété des actionnaires, n’est pas nécessairement le plus efficace ! Mais pourquoi ?

    Voilà ce que cette étude examine en profondeur. Voici quelques extraits de l’article, dont la conclusion suivante :

    « If workers and shareholders are made better off by co-determination and consumers are made worse off, then it is still likely that co-determination will be implemented. The reason is that workers and shareholders are usually better organized and are in a position to lobby in favor of co-determination, whereas consumers are dispersed. Such a political economy approach can help shed light on the emergence of stakeholder governance. In turn, the present study illustrates one of the likely consequences of the adoption of a stakeholder approach to corporate governance ».

    Stakeholder Governance, Competition and Firm Value

     

    ….. These differences in firms’ corporate orientation are confirmed by the results of a survey of senior managers at a sample of major corporations in Japan, Germany, France, the US, and the UK, who were asked whether “A company exists for the interest of all stakeholders” or whether “Shareholder interest should be given the first priority” (Yoshimori, 2005). The results of the survey strongly suggest that stakeholders are considered to be very important in Japan, Germany and France, while shareholders’ interests represent the primary concern in the US and the UK. The same survey reports that firm continuity and employment preservation are important concerns for managers of corporations located in Japan, Germany and France, but not for those located in the US and the UK. All these considerations suggest that in many countries the legal system or social conventions have as a common objective the inclusion of parties beyond shareholders into firms’ decision-making processes. In particular, workers are seen as important stakeholders in the firm, with continuity of employment being an important objective.IMG_20140516_140943

    In our paper, Stakeholder Governance, Competition and Firm Value, forthcoming in the Review of Finance, we examine these issues, and provide an understanding of how imposing stakeholder governance affects firms’ behavior even when this involves a trade-off between the interests of shareholders and those of other stakeholders. Our main idea is that stakeholder firms internalize the effects of their behavior on stakeholders other than shareholders. In particular, they are concerned with the benefits that their stakeholders would lose should the firm not survive. As a consequence, stakeholder firms are more concerned with avoiding bankruptcy since this prevents their stakeholders from enjoying their benefits. The different concern for survival affects firms’ strategic behavior in the product market and, in particular, the way they behave in the presence of uncertainty.

    Specifically, we develop a model where firms compete in the product market with other firms, and have to choose the prices at which to sell their goods. Firms are subject to uncertainty, and can go bankrupt if they fail to turn a profit either because the expected sales did not quite materialize, or because costs turned out to be higher than anticipated. The possibility, and fear, of bankruptcy thus induces firms to be more conservative in their pricing policies, preferring to maintain a larger cushion between their revenues and their costs, than in seeking out (possibly) larger sales but at thinner margins.

    A concern for stakeholders makes a firm even more concerned about avoiding bankruptcy to the extent that it may lead to dislocation of its workers, and makes it even more conservative in its pricing policies. While the direct consequence of this is to move a firm away from the objective of maximizing profits and thus shareholder value, there is an indirect effect coming through the interaction between competing firms in the product market: when one firm becomes less aggressive, other firms have an incentive to follow suit. This reduction in aggression (i.e., competition) industry-wide benefits the stakeholder-oriented firm, so much so that shareholders may in fact be better off when their firm can commit to internalizing stakeholder concerns. In other words, stakeholders’, such as employees, and shareholders’ interests become aligned through the competitive interactions among firms, rather than being at odds as they would appear to be if one ignores firms’ product market interactions.

    We use this basic idea to study a number of issues ranging from state-mandated inclusion of stakeholders in corporate governance (e.g., the case of Germany), to globalization that makes it commonplace for firms from shareholder-oriented societies to compete with those from countries with a stakeholder orientation. We also study the implications of financial constraints for the capital structure of stakeholder-oriented firms, and show that the same conservative stance in the product market translates into more conservative capital structure.

    Our study raises a number of unanswered questions about the ultimate effect of stakeholders’ orientations on firm behavior and value, and suggests directions for future research. One of the interesting questions is why some countries adopt stakeholder governance while others do not, and why governments adopt such governance although it may benefit firms and employees at the expense of consumers. There is a growing literature on corporate governance and political economy that emphasizes that the political process plays a very important part in determining the corporate governance structure in a country (see, e.g., Pagano and Volpin, 2005; Perotti and von Thadden, 2006; and Perotti and Volpin, 2007). For example, if workers and shareholders are made better off by co-determination and consumers are made worse off, then it is still likely that co-determination will be implemented …..

    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.

    …..

    ____________________________________

    * 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.

    Deux capsules vidéos en gouvernance – Les médias sociaux et la planification stratégique


    Le Collège des administrateurs de sociétés est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance. Une capsule sera dévoilée chaque semaine.

    Deux nouvelles « capsules d’experts » sont maintenant en ligne; elles ont pour thèmes « Les médias sociaux » par M. Sylvain Lafrance, ASC, professeur au HEC Montréal et consultant en communications et « La planification stratégique » par M. Dominic Deneault, ASC , Trebora Conseil.

    Visionnez ces deux capsules d’experts :

    Les médias sociaux, par Sylvain Lafrance, ASC

     

    _____________________________________

     

    La planification stratégique, par Dominic Deneault

     

    Toute la lumière sur les attentes envers les C.A. | L’état de situation selon Lipton


    Aujourd’hui, je veux vous faire partager le point de vue de Martin Lipton*, expert dans les questions de fusion et d’acquisition ainsi que dans les affaires se rapportant à la gouvernance des entreprises, sur les enjeux des C.A.. L’auteur met l’accent sur les pratiques exemplaires en gouvernance et sur les comportements attendus des conseils d’administration.

    Ce texte, paru sur le blogue du Harvard Law School Forum on Corporate Governance,résume très bien les devoirs et les responsabilités des administrateurs de sociétés de nos jours et renforce la nécessité, pour les conseils d’administration, de gérer les situations d’offres hostiles.

    Bonne lecture ! Êtes-vous d’accord avec les attentes énoncées ? Vos commentaires sont les bienvenus.

    The Spotlight on Boards

     

    The ever evolving challenges facing corporate boards prompts an updated snapshot of what is expected from the board of directors of a major public company—not just the legal rules, but also the aspirational “best practices” that have come to have almost as much influence on board and company behavior.

    Boards are expected to:

    Establish the appropriate “Tone at the Top” to actively cultivate a corporate culture that gives high priority to ethical standards, principles of fair dealing, professionalism, integrity, full compliance with legal requirements and ethically sound strategic goals.IMG_20140523_112914

    Choose the CEO, monitor his or her performance and have a succession plan in case the CEO becomes unavailable or fails to meet performance expectations.

    Maintain a close relationship with the CEO and work with management to encourage entrepreneurship, appropriate risk taking, and investment to promote the long-term success of the company (despite the constant pressures for short-term performance) and to navigate the dramatic changes in domestic and world-wide economic, social and political conditions. Approve the company’s annual operating plan and long-term strategy, monitor performance and provide advice to management as a strategic partner.

    Develop an understanding of shareholder perspectives on the company and foster long-term relationships with shareholders, as well as deal with the requests of shareholders for meetings to discuss governance and the business portfolio and operating strategy. Evaluate the demands of corporate governance activists, make changes that the board believes will improve governance and resist changes that the board believes will not be constructive. Work with management and advisors to review the company’s business and strategy, with a view toward minimizing vulnerability to attacks by activist hedge funds.

    Organize the business, and maintain the collegiality, of the board and its committees so that each of the increasingly time-consuming matters that the board and board committees are expected to oversee receives the appropriate attention of the directors.

    Plan for and deal with crises, especially crises where the tenure of the CEO is in question, where there has been a major disaster or a risk management crisis, or where hard-earned reputation is threatened by a product failure or a socio-political issue. Many crises are handled less than optimally because management and the board have not been proactive in planning to deal with crises, and because the board cedes control to outside counsel and consultants.

    Determine executive compensation to achieve the delicate balance of enabling the company to recruit, retain and incentivize the most talented executives, while also avoiding media and populist criticism of “excessive” compensation and taking into account the implications of the “say-on-pay” vote.

    Face the challenge of recruiting and retaining highly qualified directors who are willing to shoulder the escalating work load and time commitment required for board service, while at the same time facing pressure from shareholders and governance advocates to embrace “board refreshment”, including issues of age, length of service, independence, gender and diversity. Provide compensation for directors that fairly reflects the significantly increased time and energy that they must now spend in serving as board and board committee members. Evaluate the board’s performance, and the performance of the board committees and each director.

    Determine the company’s reasonable risk appetite (financial, safety, cyber, political, reputation, etc.), oversee the implementation by management of state-of-the-art standards for managing risk, monitor the management of those risks within the parameters of the company’s risk appetite and seek to ensure that necessary steps are taken to foster a culture of risk-aware and risk-adjusted decision-making throughout the organization.

    Oversee the implementation by management of state-of-the-art standards for compliance with legal and regulatory requirements, monitor compliance and respond appropriately to “red flags.”

    Take center stage whenever there is a proposed transaction that creates a real or perceived conflict between the interests of stockholders and those of management, including takeovers and attacks by activist hedge funds focused on the CEO.

    Recognize that shareholder litigation against the company and its directors is part of modern corporate life and should not deter the board from approving a significant acquisition or other material transaction, or rejecting a merger proposal or a hostile takeover bid, all of which is within the business judgment of the board.

    Set high standards of social responsibility for the company, including human rights, and monitor performance and compliance with those standards.

    Oversee relations with government, community and other constituents.

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

    To meet these expectations, it will be necessary for major public companies

    (1) to have a sufficient number of directors to staff the requisite standing and special committees and to meet expectations for diversity;

    (2) to have directors who have knowledge of, and experience with, the company’s businesses, even if this results in the board having more than one director who is not “independent”;

    (3) to have directors who are able to devote sufficient time to preparing for and attending board and committee meetings;

    (4) to provide the directors with regular tutorials by internal and external experts as part of expanded director education; and

    (5) to maintain a truly collegial relationship among and between the company’s senior executives and the members of the board that enhances the board’s role both as strategic partner and as monitor.

    ________________________________________________

    * Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy

    Bulletin du Collège des administrateurs de sociétés (CAS) | Septembre 2014


    Vous trouverez, ci-dessous, le Bulletin du Collège des administrateurs de sociétés (CAS) du mois de septembre 2014.

    Seul programme de certification universitaire en gouvernance de sociétés offert au Québec, il s’adresse aux administrateurs siégeant à un conseil d’administration et disposant d’une expérience pertinente.

    Les administrateurs de sociétés certifiés (ASC) sont regroupés dans la Banque des ASC, un outil de recherche en ligne mis au point par le Collège, afin de faciliter le recrutement d’administrateurs sur les conseils d’administration.

    Bulletin du Collège des administrateurs de sociétés (CAS) | Septembre 2014

    _______________________

     

    RAPPORT D’ACTIVITÉ 2013-2014

     

    Rapport d'activité 2013-2014 du CASC’est avec plaisir que le Collège des administrateurs de sociétés vous présente son Rapport d’activité 2013-2014.

    Vous y trouverez un bilan positif de cette neuvième année, marquée par de nombreuses actions visant à diversifier notre offre de formation, à affirmer notre statut de leader de la formation des administrateurs et à promouvoir l’excellence en gouvernance au Québec.

    Consultez le rapport pour tous les détails [+]

     

     

    Banques des administrateurs de sociétés certifiés

     

    Le Collège est fier de mettre en ligne une nouvelle présentation de la Banque des Administrateurs de sociétés certifiés (ASC). La Banque des ASC est maintenant intégrée au site Web du Collège et propose un nouvel outil de recherche bonifié, ainsi qu’un design plus ergonomique.

    Plusieurs nouveautés ont été apportées à l’outil de recherche dans le but d’optimiser la recherche d’ASC selon les requêtes des recruteurs d’administrateurs.

    Consultez cette nouvelle Banque des ASC [+]

     

    DÉVOILEMENT DE LA 3E SÉRIE DE CAPSULES D’EXPERTS EN GOUVERNANCE

     

    3e série de capsules d'experts : les médias sociaux, par Sylvain LafranceLe CAS est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance.

    Une capsule sera dévoilée chaque semaine par bulletin électronique. À surveiller !

    Cette semaine : Les médias sociaux, par Sylvain Lafrance [+]

     Les programmes de formation du CAS

     

    Gouvernance des PME | 5 et 6 novembre 2014, à Québec

    Certification – Module 1 : Les rôles et responsabilités des administrateurs |  12, 13 et 14 février 2015, à Québec, et 26, 27 et 28 mars 2015, à Montréal

     

    Les événements en gouvernance auxquels le CAS est associé

     

    Inscription au programme « Réseau jeunes administrateurs » pour la cohorte d’automne | 8 septembre 2014, à Montréal

    Congrès national de l’IAS sur la gouvernance transformationnelle et Gala des Fellows | 18 septembre 2014, à Montréal

    Assemblée générale annuelle du Cercle des ASC et conférence « Un CA peut-il être trop avant-gardiste » par Mme Anne Darche, ASC | 23 septembre 2014, à Québec

    Conférence Prestige de l’Ordre des CPA du Québec, « Leadership éthique au 21e siècle » par Mme Cynthia Cooper | 1er octobre 2014, à Montréal

    Conférence Femmes Leaders par Les Affaires | 15 octobre 2014, à Québec

    Programme de l’ecoDa « New Governance Challenges for Board Members in Europe » | 21 et 22 octobre 2014, à Bruxelles

    NOMINATIONS ASC

     

    Serge Bouchard, ASC | Conseil régional de l’environnement du Centre-du-Québec

    Marlène Deveaux, ASC | CLD Saguenay

    Sylvie Tremblay, ASC | Chambre des notaires du Québec

    Richard Audet, ASC | Inforoute Santé du Canada

    Marc Duchesne, ASC | Nicorp inc.

    Vincent Dagnault, ASC | Signes d’Espoir

    Annick Mongeau, ASC | Groupe TVA inc.

    Jean-François Thuot, ASC | Société canadienne des directeurs d’association, section du Québec

    Sylvain Beaudry, ASC | Institut québécois de planification financière

    Lyne Laverdure, ASC | PharmaBio Développement

    Louise Dostie, ASC | Caisse de l’Administration et des Services publics

    Pauline D’Amboise, ASC | Solidarité rurale du Québec

    Jean-Paul Gagné, ASC | Metix inc.

    Denis Arcand, ASC | Caisse Desjardins Brossard

    Josée De La Durantaye, ASC | Ordre des comptables professionnels agréés du Québec

    Michel Verreault, ASC | Chambre des notaires du Québec

    Michel Sanschagrin, ASC | Fondation des Violons du Roy et Club musical de Québec

    Carl Viel, ASC | Palais Montcalm

    Luc Séguin, ASC | Hydrocarbures Anticosti

    Anne Darche, ASC     | Groupe Germain Hospitalité et Groupe St-Hubert

     

    DISTINCTIONS ASC et formateurs

     

    Marie Lavigne, ASC | Chevalière de l’Ordre national du Québec

    Claude Béland, formateur au CAS | Grand officier de l’Ordre national du Québec

    Maurice Gosselin, ASC     | Prix du ministre accordé par le ministère de l’Enseignement supérieur, de la Recherche et de la Science

    Boîte à outils pour administrateurs

     

    Nouvelle référence mensuelle en gouvernance : Rémunération des administrateurs et gouvernance : enjeux et défis, par l’IGOPP.

    La capsule d’expert du mois – NOUVEAUTÉ : Les médias sociaux, par Sylvain Lafrance.

    Top 5 des billets les plus consultés cet été (juin, juillet et août) du blogue Gouvernance | Jacques Grisé.

     

    Bonne lecture !

    ____________________________________________

    Collège des administrateurs de sociétés (CAS)

    Faculté des sciences de l’administration Pavillon Palasis-Prince

    2325, rue de la Terrasse, Université Laval Québec (Québec) G1V 0A6

    418 656-2630; 418 656-2624

    info@cas.ulaval.ca

     

    Devenez blogueur invité sur mon site en gouvernance


    Aimeriez-vous agir à titre d’auteur invité (« Invited guess ») sur mon blogue en gouvernance des sociétés ? Avez-vous un article déjà écrit ou souhaitez-vous m’aider en contribuant à l’écriture d’un court billet en gouvernance de sociétés ?

    Chaque jour, je publie un billet qui porte sur un sujet d’actualité récente en gouvernance; si vous êtes intéressés à ajouter de la valeur à ce blogue, vous êtes invités à me soumettre un article original portant sur un des multiples objets de la gouvernance des sociétés privées, publiques, OBNL, coopératives, PME, sociétés d’État, etc.

    Que retrouve-t-on dans ce blogue et quels en sont les objectifs ?

     

    Ce blogue fait l’inventaire des documents les plus pertinents et récents en gouvernance des entreprises. La sélection des billets, « posts », est le résultat d’une veille assidue des articles de revue, des blogues et sites web dans le domaine de la gouvernance, des publications scientifiques et professionnelles, des études et autres rapports portant sur la gouvernance des sociétés, au Canada et dans d’autres pays, notamment aux États-Unis, au Royaume-Uni, en France, en Europe, et en Australie. Chaque jour, je fais un choix parmi l’ensemble des publications récentes et pertinentes et je commente brièvement la publication.

    P1020968

     L’objectif de ce blogue est d’être la référence en matière de documentation en gouvernance dans le monde francophone, en fournissant au lecteur une mine de renseignements récents (les billets quotidiens) ainsi qu’un outil de recherche simple et facile à utiliser pour répertorier les publications en fonction des catégories les plus pertinentes.

     

     

    Devenez blogueur invité sur mon site en gouvernance

     

     

     

    Enquête 2014 sur le leadership du conseil d’administration | Korn Ferry


    Ce billet publié par Robert E. Hallagan et Dennis Carey, vice-présidents de Korn Ferry, présente une partie d’une étude conduite par l’Institut Korn Ferry portant sur le leadership du C.A.

    On constatera que la séparation des fonctions de président du conseil et de président et chef de la direction s’effectue lentement chez nos voisins du sud ! En effet, bien que tous les experts de la gouvernance reconnaissent le bien fondé d’avoir un président du conseil indépendant, on note un certain progrès à cet égard mais il y a encore loin de la coupe aux lèvres, surtout dans les grandes entreprises cotées aux ÉU.

    Voici un aperçu de l’introduction de cette étude. Je vous invite à lire le document complet pour avoir une meilleure idée des résultats de l’enquête. Bonne lecture !

    Survey of Board Leadership 2014

    This is our second annual report on board leadership.

    The numbers and trends are interesting but the subtleties and substance behind them are extremely valuable as the National Association of Corporate Directors (NACD) and Korn Ferry continue their study of high-performing boards. The thoughtful selection and performance of board leaders is one of two pillars of leadership that drive long-term shareholder value—the other being the CEO of the company.IMG_00000694

    There is universal agreement that each board must have an independent leader but how each company has achieved this takes many shapes.

    In this year’s report, we see continued evidence of a slow and deliberate trend toward separation of the roles, higher in mid-cap companies than the large-cap S&P 500. Key catalysts included activism, and a transition of CEO leadership that prompted the board to elect to separate the roles.

    …

    There is universal agreement that each board must have an independent leader but how each company has achieved this takes many shapes.

    In our first report we stated our commitment to remaining an honest broker of facts in the performance debate. Many proponents of separation claim it will enhance long-term shareholder value, yet no study to date has rendered conclusive evidence in either direction. We have now isolated companies that have made the change, documented their performance before and after, and will soon be comfortable debating the results. While we clearly understand the danger in relying solely on numbers and acknowledge that there are many potential ways to slice the data, we believe our attempt to get at the “facts” will generate engaged, healthy debate among our members and clients. We look forward to a rich dialogue at NACD conferences to come.

    Methodology and approach

    This study examined changes to and trends in board leadership structure for 900 US companies, namely the constituents of Standard & Poor’s Large Cap 500 Index (S&P 500) and the Mid-Cap Index (the S&P 400) as of December 31, 2012. Companies are added to the S&P 500 if they have unadjusted market capitalization of $4.6 billion or more, and to the S&P 400 if they have unadjusted market capitalization of between $1.2 billion and $5.1 billion. The S&P 500 Index represents a barometer of the state of the largest publicly traded US corporations, and the majority of the research and analysis in this study focuses on this group. To expand the scope beyond large-cap companies, and thus broaden the findings of the research, the constituents of the S&P 400 were also examined in detail.

    For each company, we looked at the type of board leadership structure in place at the time of its proxy filing for each year between 2008 and 2012. This report focuses primarily on the leadership structure in place as of year-end 2012, and examines each company’s overall leadership approach as it pertains to the roles of chairman, CEO, and lead director (if at all). Proxy filings, annual reports, and the corporate governance section of company websites comprise the source documents for these determinations. Please note that numbers shown in this report reflect actual statistics and not data projected from a random sampling of companies.

    In addition, each company that had a change in its leadership structure since January 1, 2003 (by replacing either the CEO or chairman) was investigated to understand the reason for the change, and additional details—such as tenure, age, education, committee responsibilities—were sought for the incoming chairman. Company and outside press reports and news articles were used to determine the reason for an executive’s departure, and executive biographical and company data were culled from secondary sources, including Reuters, Businessweek, MarketWatch, and Morningstar.

    The trend to separate roles continues to move steadily forward.

    Though board composition is not likely to be an area marked by rapid, significant change, the slow and steady trend to separate chairman and CEO roles continued in 2012. By the end of 2012, 56% of S&P 500 chairmen also held the position of CEO. This marks a significant departure from 2009, when 63% of all chairmen also held the company’s highest executive office. The change comes almost equally from increases in non-executive chairmen and chairmen who have some past affiliation with the company; additional analysis in this report will examine what types of companies are likely to favor the different approaches.

    fig1Click image to enlarge

    While it is reasonable to expect this gradual trend to continue, particularly as activist shareholders keep pushing for separation, some large companies, including IBM, Disney, and Urban Outfitters, are moving in the opposite direction and are recombining roles. In the case of IBM and Disney, the recombinations are part of longterm succession, though IBM Chairman-CEO Ginny Rometty added the Chairman role just 10 months after becoming CEO—faster than many expected. In the case of Urban Outfitters, founder Richard Hayne reclaimed the CEO role after his successor had difficulty maintaining the main brand’s appeal to young people. Our continued perspective is that there is no one-size-fits-all approach to board leadership and that careful analysis and trusted advisors should be leveraged to find the appropriate structure for each organization.

    In our opinion, chairmen must meet several criteria to qualify as truly “non-executive” or independent. They must not currently hold an executive role (CEO or other), must not be former executives, and must not be founders or family members of founders. From time to time, companies may characterize these types of chairmen as “non-executive” in the language of their proxy reports or even in the chairman’s title, but our analysis re-characterizes them per the criteria above. The idea of an independent chairman is that he or she can bring an impartial and objective perspective to the board, and our experience finds that founders, family members of founders, and former executives tend not to possess that objectivity. This particular debate on nomenclature is a classic case of saying it doesn’t make it so. Being independent in title is not necessarily a reflection of reality. An analysis of the types of chairmen found in the S&P 500 in 2012 is described in Figure 2.

    The trend toward separation of the chairman and CEO has been more pronounced over time within the mid-cap companies in the S&P 400 than it has been in the S&P 500. Separation rates in both groups rose by two points in 2012, to 44% in the S&P 500 and 55% in the S&P 400.

    ….

    Les C.A de petites tailles performent mieux !


    Selon une étude du The Wall Street Journal publié par Joann S. Lublin, les entreprises qui comptent moins d’administrateurs ont de meilleurs résultats que les entreprises de plus grandes tailles.

    Bien qu’il n’y ait pas nécessairement de relation de type cause à effet, il semble assez clair que la tendance est à la diminution de nombre d’administrateurs sur les conseils d’administration des entreprises publiques américaines. Pourquoi en est-il ainsi ?

    Il y a de nombreuses raisons dont l’article du WSJ, ci-dessous, traite. Essentiellement, les membres de conseils de petites tailles :

    1. sont plus engagés dans les affaires de l’entité
    2. sont plus portés à aller en profondeur dans l’analyse stratégique
    3. entretiennent des relations plus fréquentes et plus harmonieuses avec la direction
    4. ont plus de possibilités de communiquer entre eux
    5. exercent une surveillance plus étroite des activités de la direction
    6. sont plus décisifs, cohésif et impliqués.

    Les entreprises du domaine financier ont traditionnellement des conseils de plus grandes tailles mais, encore là, les plus petits conseils ont de meilleurs résultats.

    La réduction de la taille se fait cependant très lentement mais la tendance est résolument à la baisse. Il ne faut cependant pas compter sur la haute direction pour insister sur la diminution de la taille des C.A. car il semblerait que plusieurs PCD s’accommodent très bien d’un C.A. plus imposant !

    Il faut cependant réaliser que la réduction du nombre d’administrateurs peut constituer un obstacle à la diversité si l’on ne prend pas en compte cette importante variable. Également, il faut noter que le C.A. doit avoir un président du conseil expérimenté, possédant un fort leadership. Un conseil de petite taille, présidé par une personne inepte, aura des résultats à l’avenant !

    Voici deux autres documents, partagés par Richard Leblanc sur son groupe de discussion LinkedIn Boards and Advisors, qui pourraient vous intéresser :

    « Higher market valuation of companies with a small board of directors« : http://people.stern.nyu.edu/eofek/PhD/papers/Y_Higher_JFE.pdf

    « Larger Board Size and Decreasing Firm Value in Small Firms« : http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1403&context=facpub

    Je vous convie donc à la lecture de l’article du WSJ dont voici un extrait de l’article. Bonne lecture !

    Smaller Boards Get Bigger Returns

    Size counts, especially for boards of the biggest U.S. businesses.

    Companies with fewer board members reap considerably greater rewards for their investors, according to a new study by governance researchers GMI Ratings prepared for The Wall Street Journal. Small boards at major corporations foster deeper debates and more nimble decision-making, directors, recruiters and researchers said. Take Apple Inc. In the spring when BlackRock founding partner Sue Wagner was up for a seat on the board of the technology giant, she met nearly every director within just a few weeks. Such screening processes typically take months.

    But Apple directors move fast because there only are eight of them. After her speedy vetting, Ms. Wagner joined Apple’s board in July. She couldn’t be reached for comment.

    Smaller boards at major corporations have more nimble decision-making processes, directors, recruiters and academic researchers say. Eric Palma

    Among companies with a market capitalization of at least $10 billion, typically those with the smallest boards produced substantially better shareholder returns over a three-year period between the spring of 2011 and 2014 when compared with companies with the biggest boards, the GMI analysis of nearly 400 companies showed.

    Companies with small boards outperformed their peers by 8.5 percentage points, while those with large boards underperformed peers by 10.85 percentage points. The smallest board averaged 9.5 members, compared with 14 for the biggest. The average size was 11.2 directors for all companies studied, GMI said.

    « There’s more effective oversight of management with a smaller board, » said Jay Millen, head of the board and CEO practice for recruiters DHR International. « There’s no room for dead wood. »

    Many companies are thinning their board ranks to improve effectiveness, Mr. Millen said. He recently helped a consumer-products business shrink its 10-person board to seven, while bringing on more directors with emerging-markets expertise.

    GMI’s results, replicated across 10 industry sectors such as energy, retail, financial services and health care, could have significant implications for corporate governance.

    Small boards are more likely to dismiss CEOs for poor performance—a threat that declines significantly as boards grow in numbers, said David Yermack, a finance professor at New York University’s business school who has studied the issue.

    It’s tough to pinpoint precisely why board size affects corporate performance, but smaller boards at large-cap companies like Apple and Netflix Inc. appear to be decisive, cohesive and hands-on. Such boards typically have informal meetings and few committees. Apple directors, known for their loyalty to founder Steve Jobs, have forged close ties with CEO Tim Cook, according to a person familiar with the company. Mr. Cook frequently confers with individual directors between board meetings « to weigh the pros and cons of an issue, » an outreach effort that occurs quickly thanks to the board’s slim size, this person said.

    Mr. Cook took this approach while mulling whether to recruit Angela Ahrendts, then CEO of luxury-goods company Burberry Group PLC for Apple’s long vacant position of retail chief. Private chats with board members helped him « test the thought » of recruiting her, the person said. She started in April.

    Ms. Wagner, Apple’s newest director, replaced a retiring one. The board wants no more than 10 members to keep its flexibility intact, according to the person familiar with the company, adding that even « eye contact and candor change » with more than 10 directors.

    Apple returns outperformed technology sector peers by about 37 cumulative percentage points during the three years tracked by GMI. An Apple spokeswoman declined to comment.

    Netflix, with seven directors, demonstrated equally strong returns, outperforming sector peers by about 32 percentage points. Board members of the big video-streaming service debate extensively before approving important management moves, said Jay Hoag, its lead independent director.

    « We get in-depth, » he said. « That’s easier with a small group. »

    Netflix directors spent about nine months discussing a proposed price increase, with some pushing back hard on executives about the need for an increase, Mr. Hoag said. Netflix increased prices this spring for new U.S. customers of the company’s streaming video plan, its first price bump since 2011.

    A board twice as big wouldn’t have time for « diving deeper into the business on things that matter, » Mr. Hoag said.

    ….