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 « le comité de gouvernance » par M. Richard Joly, président, Leaders & Cie et «l’auditeur externe» par MmeLily Adam, associée, Services de certification, EY.
L’étude de Mathias Kronlund, professeur au département de finance de l’Université de l’Illinois à Urbana-Champaign et Shastri Sandy, professeur au département de finance de l’Université du Missouri à Columbia, aborde un sujet dont nous avons beaucoup parlé au cours des cinq dernières années : le Say-on-Pay.
Il est temps de revisiter les résultats de ce mode de consultation des actionnaires à propos des rémunérations globales des hauts dirigeants. Les auteurs font une analyse très fine des conséquences liées au Say-on-Pay.
Dans l’ensemble, les résultats montrent que cette mesure a eu des effets positifs sur les décisions des comités de rémunération qui proposent des schèmes de rémunération plus en ligne avec la performance organisationnelle.
« The net effect on total CEO pay from these changes in various pay components is positive. In other words, firms increase total CEO compensation when they face increased scrutiny, mainly as a result of the higher stock awards. Thus, to the extent that the goal of the say-on-pay mandate was to reduce total executive pay, this regulation has had the opposite effect. We generally find much weaker results among non-CEO executives compared with CEOs, which is consistent with CEO pay receiving the most scrutiny around say-on-pay votes ».
As a result of the Dodd-Frank Act of 2010, public firms must periodically hold advisory shareholder votes on executive compensation (“say on pay”). One of the main goals of the say-on-pay mandate is to increase shareholder scrutiny of executive pay, and thus alleviate perceived governance problems when boards decide on executive compensation. In our paper, Does Shareholder Scrutiny Affect Executive Compensation? Evidence from Say-on-Pay Voting, which was recently made publicly available on SSRN, we examine how firms change the structure and level of executive compensation depending on whether the firm will face a say-on-pay vote or not.
The theoretical impact of having a say-on-pay vote on executive compensation is ambiguous. On the one hand, it is possible that having a vote results in more efficient compensation practices, for example, in the form of stronger alignment between pay and performance, or in the form of lower pay if past pay was excessive. Say-on-pay may also improve compensation practices simply because directors pay more attention to executive compensation when they know that the pay packages they award face increased scrutiny. On the other hand, it is also possible that say-on-pay results in less efficient compensation practices. For example, having a say-on-pay vote may lead firms to excessively conform to the guidelines of proxy advisors, who tend to prefer specific pay practices that may not sufficiently account for each firm’s unique circumstances. Finally, it is possible that say-on-pay has no effect at all, either because governance problems are so severe that say-on-pay is an insufficient mechanism to improve firms’ pay practices, or conversely, because firms already have optimal pay practices and therefore have no reason to change them in response to increased scrutiny.
To examine the effect of say-on-pay on executive compensation, our identification strategy exploits within-firm variation regarding when (i.e., in which years) firms hold say-on-pay votes based on a pre-determined cyclical schedule. Specifically, many firms have elected to hold votes in cycles of every two or three years rather than every year, resulting in predictable year-to-year variation in whether a vote is held or not. Our empirical strategy then compares executive compensation across years when, according to its voting cycle, a firm is expected to hold a vote, versus the same firm in years when it is expected to not hold a vote.
Our results show that in years when firms are expected to hold a say-on-pay vote, they decrease CEO salaries, and increase stock awards. We also find that firms are significantly less likely to have change-in-control payments (“golden parachutes”) for their CEOs in years with a vote. These results are consistent with altering pay practices to better comply with proxy advisors’ guidelines. Further, deferred compensation and pension balances are higher in years with a vote, which is consistent with say-on-pay resulting in increased use of less-scrutinized components of pay.
The net effect on total CEO pay from these changes in various pay components is positive. In other words, firms increase total CEO compensation when they face increased scrutiny, mainly as a result of the higher stock awards. Thus, to the extent that the goal of the say-on-pay mandate was to reduce total executive pay, this regulation has had the opposite effect. We generally find much weaker results among non-CEO executives compared with CEOs, which is consistent with CEO pay receiving the most scrutiny around say-on-pay votes.
We also find economically large, but statistically weaker, evidence that executives choose to exercise fewer options in years when they face say-on-pay votes. Executives thus appear to shift realized pay from voting years to non-voting years—which suggests that executives believe that observers of pay (e.g., shareholders, news media) do not distinguish between awarded pay and ex-post realized pay.
One goal of the say-on-pay regulation was to foster more transparent CEO compensation and better alignment of CEO incentives with the interests of shareholders. Overall, our results show that holding a say-on-pay vote does cause firms to change how they pay executives. But despite the law’s intention of improving executive pay practices, the say-on-pay mandate has not unambiguously resulted in more efficient CEO compensation. And contrary to the goals of the say-on-pay regulation, the net result of these changes may be higher, not lower, total compensation. The fact that salaries are lower but stock awards higher is consistent with firms being particularly concerned about the optics of pay (Bebchuk and Fried (2004)) in years when compensation will be put to a vote, but is also consistent with models of optimal pay as in Dittmann and Maug (2007). Because CEOs receive more stock awards in voting years, which in turn will make their wealth more closely aligned with that of shareholders going forward, it is possible that pay in these years is more efficient, despite being higher. The fact that firms change pay practices between years with and without votes further is evidence that pay practices are not always perfectly optimal. If they were, whether a vote is held or not should be irrelevant for pay.
Le guide Responsabilités des administrateurs au Canada, issu de la collaboration entre Osler et l’Institut des administrateurs de sociétés, est un outil de référence de choix dont tous les administrateurs ont besoin pour comprendre les pratiques exemplaires en matière de gouvernance et pour s’acquitter de leurs responsabilités, dans le contexte actuel des tendances commerciales en constante évolution et des changements dans le marché.
Le guide couvre :
les devoirs et l’obligation de rendre compte des administrateurs, et le rôle des actionnaires
les questions de gouvernance, y compris les conflits d’intérêts des administrateurs, les lois sur les valeurs mobilières et les exigences des marchés boursiers
les obligations d’information des sociétés ouvertes
les questions de financement, de marchés des capitaux et d’offres publiques d’achat
les responsabilités imposées par la loi, y compris les opérations d’initiés, la législation sur l’environnement et les questions d’ordre fiscal
la responsabilité pour les infractions en vertu des lois sur les sociétés
la gestion du risque
Inscrivez-vous pour obtenir un exemplaire en cliquant sur le lien ci-dessous. Il vous sera envoyé par courriel dès sa publication.
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 gouvernance des PME » par Mme Anne-Marie Croteau, ASC, vice-doyenne responsable des relations externes à l’École de gestion John-Molson et professeure titulaire, Université Concordia, et « La présidence du CA » par M. Michel Clair, ASC, président et chef de la direction, Groupe Santé Sedna.
Aujourd’hui, nous abordons le thème de l’évaluation du fonctionnement du conseil d’administration. Il n’y a pas de doute que le processus d’évaluation est un moyen très efficace pour l’amélioration de la gouvernance des sociétés.
La presque totalité des entreprises, et toutes celles du NYSE, ont mises en place des mécanismes d’évaluation sur une base annuelle; mais encore faut-il que cette activité soit conduite avec beaucoup de compétence et de doigté par le président du conseil, ce qui n’est pas nécessairement le cas puisque beaucoup d’administrateurs ne prennent pas encore cet exercice assez au sérieux.
En effet, plusieurs études montrent que l’on ne se contente trop souvent que d’une autoévaluation sommaire, produite dans le but de satisfaire aux exigences réglementaires. Le sujet est délicat … les administrateurs sont relativement réticents à se faire évaluer … et à évaluer le travail de leurs pairs !
Jordan Temple, dans un article paru sur le blogue de Securities & Corporate Governance Group, nous présente un rappel de l’importance de bien concevoir l’évaluation du conseil d’administration.
Il expose les principales étapesde l’évaluation, donne un exemple d’une plus grande divulgation du processus, et insiste sur l’exploitation des résultats et sur la nécessité de faire le suivi, tout en soulevant l’épineux problème de la conservation des données et des risques légaux associés à leur divulgation.
Bonne lecture ! Vos commentaires relatifs à l’activité d’évaluation dans vos conseils sont les bienvenus.
Board evaluations have long been standard practice among public companies. With shareholder interest in corporate governance practices at an all-time high, the focus on board evaluations is expected to increase. Given that board evaluations can be an effective tool to improve board and company performance, now may be a good time to review your company’s current board evaluation process and the disclosure of that process.
The Evaluation Process
A recent study by PwC found that 63% of directors believe self-evaluations are mostly a “check the box” exercise. This attitude may stem from the fact that NYSE listed companies are required to conduct evaluations on an annual basis. (See NYSE Rule 303A.09; NASDAQ does not require an annual evaluation.) That means that a significant number of boards may be missing out on a valuable opportunity to identify issues with and improve on various board functions. Evaluations may provide helpful information about how the board conducts its meetings and interacts with management, what type of board education programs are needed in the upcoming year and whether the current structure of the board is appropriate in guiding and executing the company’s strategy. The evaluations may identify small changes, like changing the order of items on board meeting agendas, or more substantive areas for improvement, like a gap in expertise and the need to add a new director.
Because the process should fit the board’s culture, there is no one-size-fits-all approach to designing effective board evaluations. Furthermore, a process designed years ago may no longer fit the company’s current culture and strategic goals. Therefore, it is necessary to re-evaluate from time to time the effectiveness of the process and implement any necessary changes.
In taking on this challenge, you should consider the following:
What is the current culture? Are director interactions formal or informal? Are there clear leaders and followers? Does anyone unduly dominate the meetings? Are there factions (activist investor or private equity fund designees, long-tenured versus recently elected, etc.)? Do some directors seem passive or prefer anonymity?
What are the objectives? Has an area of concern (like lack of board alignment) been identified? Or is the board engaging in the process to determine what, if anything, might be done better?
Who will be evaluated? The board as a whole? Each committee? Will individual directors review each other? Will individual directors perform a self-evaluation? Will the board solicit the opinion of members of management that have regular contact with the board?
Who will do the evaluating?Recent trends show a slight increase in the retention of external advisors to conduct the evaluations, but the majority of public companies still employ an internally driven process lead by either the Chairman, Lead Independent Director, Chair of the Nominating and Corporate Governance Committee or General Counsel.
How will they be evaluated? Typically, evaluations are conducted using written questionnaires or interviews. Written questionnaires may include any combination of a standardized survey of questions, comment sections meant to facilitate the explanation of the standard survey of questions and open-ended questions intended to solicit feedback. Interviews may be conducted on an individual basis or in a group setting. The objectives of the evaluation will dictate the content of questions being solicited. And the questions should be refreshed on an annual basis to ensure they are relevant and effective.
What will be done with the results of the evaluations? This will partially depend on the method of evaluation but may include a discussion of the results, a memo summarizing the results or an individual meeting with each director. The company should also use the results of the evaluations to resolve issues, make changes and achieve goals.
While the benefits of board evaluation are widely accepted, it is important to consider how such evaluations may impact the collegiality and trust that is vital for board room discussions, along with what, if any, impact the board evaluation process may have on director candidates. Another consideration in designing the process is how evaluation material could be used in litigation and what the board can do to mitigate that risk. On one hand, it is important for the board to develop a written record that demonstrates that the board acted deliberately in conducting evaluations. On the other hand, questionnaires and other evaluation material are discoverable and may contain damaging information regarding board performance. Accordingly, it is important to consider whether questionnaires and other evaluation material need to be retained after the evaluations have taken place. Regardless of whether the evaluation material is retained or not, it is important that the board apply this policy consistently for all evaluations – good or bad – year after year.
Enhancing Disclosure of Board Evaluation
While most U.S. public companies have a board evaluation process in place, the disclosure explaining the evaluation process (whether in the proxy statement of corporate governance guidelines) is minimal. Recently, however, the Council of Institutional Investors released a report entitled Best Disclosure: Board Evaluation, which delineates two approaches for disclosing board evaluations that the Council believes are helpful to investors. The first approach describes the board evaluation process and the mechanics of the board’s self-evaluations. The second approach provides not only a description of the process employed to evaluate the board, but also the takeaways and results of the evaluation.
One U.S company that has presented a more in-depth description of its board evaluation process is General Electric. The disclosure does not appear in the company’s proxy statement, but instead it is contained in its “Governance and Public Affairs Committee Key Practices” document. General Electric’s proxy statement provides a high-level overview of the process and directs shareholders to the “Governance and Public Affairs Committee Key Practices” document by providing a link. An excerpt from the disclosure is provided below:
Method of Evaluating Board and Committee Effectiveness. The committee will oversee the following self-evaluation process, which will be used by the board and by each committee of the board to determine their effectiveness and opportunities for improvement. All of the board and committee self-evaluations should be done annually at the November board and committee meetings. Every October, an independent expert in corporate governance will contact each director soliciting comments with respect to both the full board and any committee on which the director serves, as well as director performance and board dynamics. These comments will relate to the large question of how the board can improve its key functions of overseeing personnel development, financials, other major issues of strategy, risk, integrity, reputation and governance. In particular, for both the board and the relevant committee, the process will solicit ideas from directors about:
a. improving prioritization of issues;
b. improving quality of written, chart and oral presentations from management;
c. improving quality of board or committee discussions on these key matters;
d. identifying how specific issues in the past year could have been handled better;
e. identifying specific issues which should be discussed in the future; and
f. identifying any other matter of importance to board functioning.
The independent expert in corporate governance will then work with the committee chairs and the lead director to organize the comments received around options for changes at either board or committee level. At the November board and committee meetings, time will be allocated to a discussion of – and decisions relating to – the actionable items.
Robust disclosure of the board evaluation process is not yet common practice. However, shareholders value the board evaluation process and are eager for details about the process, what the board has learned from the process and how the board intends to address issues or objectives identified in the process. Accordingly, companies should expect to receive more interest (or pressure) to adopt a more formal evaluation process and provide more robust disclosure about the process.
Whether to address existing board effectiveness issues, to simply update outdated processes or to anticipate increased shareholder interest in board functionality, now is a good time to review your company’s board evaluation process and related public disclosures.
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.
Les paramètres de la gouvernance évoluent
Fusions et acquisitions : une bonne gouvernance à toutes les étapes du processus
Gestion de crise : le manque de préparation représente clairement un risque
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.
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 !
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*, 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.
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… »
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.)
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:
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.
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?
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*Mike Jacka, CIA, CPA, CPCU, CLU, worked in internal audit for nearly 30 years at Farmers Insurance Group.
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.
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 !
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:
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:
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.
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
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.)
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.
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.
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 recommendedSupervisory 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 directorsManagerial roleDirection and executive actsDecision-taking, management and oversightPerformance enhancement
Supervisory role
Accountability
Strategic and financial oversight
Management boardManagerial 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.
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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.
Ce matin, je porte à votre attention une courte vidéo produite par la chaîne française Xerfi Canal qui aborde le sujet du « Say on Pay », une importation du système réglementaire américain.
Entendez le point de vue de l’expert français Philippe Portier, avocat-associé au cabinet JeantetAssociés, qui répond aux questions Thibault Lieurade sur l’efficacité de ce dispositif appliqué au système de gouvernance français.
Quel est votre avis sur l’application de certaines mesures de gouvernance dans un contexte culturel différent ?
Voici une brève description du contenu. Bon visionnement !
Depuis la mi-2013 en France, les actionnaires des entreprises cotées assujetties au code de gouvernance AFEP-MEDEF émettent un avis sur les rémunérations des dirigeants. C’est le principe du Say on Pay.
L’objectif théorique est double :
(1) limiter l’inflation jugée inacceptable socialement des rémunérations des dirigeants et
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.
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 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.
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.
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* Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy
Michael Evans, l’auteur de ce court article publié dans Forbes, montre les nombreux avantages des entreprises (jeunes, petites, familiales, entrepreneuriales …) à recruter un ou quelques administrateurs externes au conseil d’administration.
Les administrateurs externes doivent être judicieusement choisis afin de compter sur leurs expériences du domaine d’affaires ainsi que sur leurs capacités à exposer plus de perspective et de vision.
L’auteur présente également les quatre rôles fondamentaux que les administrateurs externes peuvent contribuer à clarifier.
Voici un extrait de la première partie de l’article. Bonne lecture !
Middle-market companies often operate as small fiefdoms under the control of the king, or to use a business term, the CEO. Very few mid-sized companies have a formal board of directors and for those that do have boards, CEOs tend to populate them with family, friends, and internal management. The theory is that board members do not know the business of the company, cost too much, and often do not provide value. In some cases, those conclusions are often true. But in many cases, the establishment of an effective board and the inclusion of outside board members have saved many a company from ruin.
It is estimated that less than 5 percent of middle-market companies have an established board or advisory board, the primary reason for such a low percentage is that small- and middle-market businesses believe they are smart enough not to need a board, think it is too expensive, or believe it would constrain their decision-making abilities.
With the demands on CEOs — including ongoing regulatory changes, pressure from family and other founders, the rise of new competitors and business models, and the need to transform businesses at an ever-quickening pace — it may be time for you to get some help and add an outside director to your board.
Outside directors bring outside experience and perspective to the board. They keep a watchful eye on the inside directors and on the way the organization is run, and provide guidance as to risk management and good corporate governance practices. Outside directors are often useful in handling disputes between inside directors, or between shareholders and the board.
Dans quelles circonstances les administrateurs doivent-ils intervenir directement auprès des actionnaires lorsque vient le temps de discuter des paramètres de la rémunération des hauts dirigeants ?
Quelles modalités doivent encadrer les activités de communication des administrateurs avec les actionnaires et les investisseurs ?
L’article de Jeremy L. Goldstein, paru sur le blogue du Harvard Law School Forum on Corporate Governance, aborde ces questions en présentant la problématique particulière de l’implication des administrateurs et en proposant des balises à considérer dans le choix des représentants.
Depuis que les entreprises ont l’obligation de consulter les actionnaires sur l’acceptabilité du plan de rémunération globale des hauts dirigeants (Say on Pay), il devient de plus en plus important de bien informer les actionnaires sur ces questions et d’entretenir des liens plus étroits avec ceux-ci. Bonne lecture !
Since the implementation of the mandatory advisory vote on executive compensation, shareholder engagement has become an increasingly important part of the corporate landscape. In light of this development, many companies are struggling to determine whether, when and how corporate directors should engage with shareholders on issues of executive compensation. Set forth below are considerations for companies grappling with these issues.
As a general matter, the chief executive officer of the company should be the corporation’s primary spokesperson. Having the chief executive officer speak with investors and other constituencies helps ensure that the company has a consistent message expressed by its primary architect. However, engaging on executive pay may be different than engaging on other topics for several reasons. Executive pay in general, and CEO pay in particular, is ultimately approved by the board and, accordingly, board members may be best suited to discuss it. In addition, investors sometimes perceive chief executives as being interested in issues of executive compensation. By engaging with shareholders, board members can help add credibility to, and show support for, the company’s programs and can demonstrate to investors that they are exercising their key oversight function. For these reasons, depending on the corporation’s particular facts and circumstances, board members may be best suited to engage with shareholders on issues of executive compensation.
Companies should take into account the following factors in determining whether a board member is the appropriate spokesperson on matters of executive pay:
Knowledge of the Pay Programs: The single most important consideration is whether a director has a strong command of the matters at issue. The purpose of shareholder engagement is to enhance credibility and build trust. These goals are best achieved by the selection of a spokesperson who understands the company’s executive pay program and communicates most effectively the rationale behind it.
Subject Matter to be Addressed: Discussions of CEO pay or similar matters may militate in favor of having a director speak with investors. If, however, the discussions are expected to focus on general compensation policy, other representatives may be better suited to the task.
Preference of the Shareholder: Different shareholders may prefer to speak with different company representatives. Some shareholders may prefer to speak with compensation committee members, while others may not wish to engage with the board at all. Understanding the desires of the investor base and accommodating those desires, where possible, is key to successful shareholder engagement.
Relationship of Individual with Shareholder: It is generally the case that either the lead director/independent chairman or a member of the compensation committee will be the spokesperson for the board on matters of executive pay. While the compensation committee chair might seem like the most logical choice for pay discussions because the compensation committee approves executive pay, selecting a lead director who is engaging with shareholders on other issues may help ensure consistency of message and messenger. A lead director/independent chairman who is also a member of the compensation committee may be an ideal choice.
If a corporation decides to have director engagement on matters of executive pay, such discussions should be integrated into the corporation’s overall communications strategy. Many companies have established a formal protocol for circumstances under which directors receive shareholder inquiries where requests for engagement are routed through the corporate secretary, or if the company has one, the company’s director of corporate governance. In addition, there should be a clear and fully developed understanding between management and the board regarding the nature of the topics to be discussed. Discussions should be limited to agenda items and directors should generally avoid allowing investors to move the conversation into matters of corporate strategy and financial performance unless expressly agreed in advance. Management should ensure that (1) it is fully aware of board engagement activities and (2) directors have appropriate information to respond to investor questions and deliver messages that are consistent with other corporate communications.
Companies should consider whether members of management should be present for the meetings with investors. Under most circumstances this is advisable to ensure that management is informed of the nature of the dialogue. The most likely candidates for attendance at such meetings are the general counsel, director of corporate governance, human resources executives and the head of investor relations. Whether or not these individuals attend, directors engaging with investors should provide the management team with investor feedback received during engagement so that the benefits of engagement may be fully realized. Finally, directors engaging with shareholders should be familiar with Regulation F-D so that information is not revealed to individual investors at a time that it is not disclosed to other market participants in a manner that violates the securities laws.
Shareholder outreach has for many companies become a year-round endeavor. Engaging with investors outside of the regular proxy season enables companies to establish relationships with shareholders before a crisis erupts at a time when investors are not inundated with requests for meetings. Year-round dialogue between directors and shareholders under appropriate circumstances can help a company build credibility, foster investor relations, enhance transparency and avoid surprises during proxy season when it may be too late to change investor sentiment.
Vous trouverez ci-dessous un article publié par Naomi Snyder* dans BankDirector.com qui présente une synthèse des caractéristiques des comités d’audit performants dans le domaine bancaire.
Bien sûr, ces pratiques peuvent aussi s’appliquer à tout autre comité d’audit. Bonne lecture !
Serving on the audit committee can be one of the toughest jobs on the board, which is why audit committee members often are paid more than what members of other committees receive. Audit committee members have more duties than ever before, thanks to heightened regulatory scrutiny that banks have received in recent years, and are under more pressure than ever to get it right.
Sal Inserra, a partner at accounting and advisory firm Crowe Horwath LLP, spoke at Bank Director’s Bank Audit Committee Conference in Chicago recently, and laid out some of the qualities of highly functioning audit committee members. This is not his list, but was created based on his talk.
Be a skeptic.
“If you notice inconsistencies, ask the question,’’ Inserra said. “It’s not necessarily wrong. You are just trying to find out.”
Understand your business.
If you enter a new business line, you must understand that new line of business. Trust departments present banks with a minefield of compliance issues, for example.
Meet with regulators.
Examiners are more likely now to have a discussion with board members than years past. Regulators are interested in learning about the audit committee’s understanding of the risks in the organization. Attend some meetings with examiners to get a flavor for the bank’s relationship with its regulators and to prepare you for any problems ahead of time.
Support the internal audit department and its findings.
Make sure the department is adequately funded and staffed. “I have seen way too many situations where internal audit was not a functional unit of the bank because no one respected them,’’ Inserra said. The internal audit chief should report directly to the audit committee chairman.
Look for red flags.
Red flags include when management delivers the audit committee book without sufficient time for members to digest it before the audit committee meetings. Other red flags include problematic findings that remain unaddressed between audits.
Take control of the audit committee meetings.
Don’t let management control the meeting agenda by burying you under a mountain of detail. It’s your meeting. Put the priorities at the beginning of the meeting, instead of starting with the easiest things. Get summaries of reports with the most important points highlighted. Who can read a 600 page audit in two nights?
Make sure every member is contributing.
Three to six people should serve on the audit committee. If it’s politically problematic to remove someone who is no longer contributing, add people you do need on the audit committee.
Hold management accountable.
Actively monitor management’s action plans. If remediation plans aren’t followed or completed on time, why not?
Communicate with internal and external auditors.
Be proactive. Have executive sessions with members of the internal auditing staff on a regular basis, as well as with external auditors.
Improve the committee’s knowledge of technology by recruiting an IT expert to be a member, or hire a consultant to advise the board.
If you are getting third party reports on your bank’s information security you don’t fully understand, then you need help.
Of course, there are many more aspects of being a great audit committee member. This is just a small sample. But at a time when audit committees have an increasing amount of responsibilities, it is important that the audit committee performs at the top of its game.
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*Naomi Snyder is the managing editor for Bank Director, an information resource for directors and officers of financial companies.
Vous trouverez, ci-dessous, l’extrait d’un article très pertinent publié par Dina Medland , laquelle couvre le domaine de la gouvernance dans Forbes, qui fait état d’une entrevue conduite avec le professeur de Gouvernance Andrew Kakabadse, de la Henley Business School de Grande-Bretagne.
L’article met le doigt sur le conservatisme (et le traditionalisme) crasse des administrateurs qui siègent sur les conseils d’administration en Grande-Bretagne. L’attitude de non-intervention de plusieurs administrateurs conduit à un sérieux manque d’innovation dans la gouvernance des entreprises anglaises (UK).
Trouve-t-on le même laxisme et la même résistance aux changements dans nos organisations nord-américaines ?
Personnellement, je ne crois pas que ce soit à la même échelle mais les conseils d’administration souffrent beaucoup du manque de questionnement de leurs membres. Il y a, ici aussi, trop de passivité eu égard aux questions d’orientation de l’entreprise ainsi qu’aux actions de la direction.
Je vous invite donc à lire ce court article et à partager votre point de vue sur le sujet. Bonne lecture !
Andrew Kakabadse has built a reputation for sharp, insightful commentary on the boardrooms of publicly listed companies. Professor of Governance and Leadership at Henley Business School since last summer, he has spoken out before now on the declining worth of non-executive directors.
In an interview with me in April 2013, he suggested many non-executive directors in the UK’s boardrooms were ‘of little or no value to the business.’ Particularly scathing about the UK, he said : “We have a culture where we don’t ask questions.”
Dina Medland, Contributrice pour Forbes
We also have a boardroom culture in the UK where we believe that “if it has worked fine for hundreds of years, why change it?” It is part and parcel, it seems of a national love of ritual – at which we clearly excel. The world’s love for very British celebrations -often involving members of the Royal family, horses, logistical feats of military planning and discipline and split-second timing- bears testimony to that. But the flip side of that seems to be that innovation is both rare, and resisted.
It is worth noting, therefore, that ICSA, the professional body for company secretaries – who are required for listed companies in the UK – chose Professor Kakabadse to undertake a piece of research on The Company Secretary, with a view to finding a way to progress the value of the role. (Note: for transparency, the software arm of ICSA which provides technology solutions for the boardroom is the commercial sponsor of my blog Board Talk but has no editorial control on input).
“On average, UK boards consist of 9 to 11 members, if whom the majority are over the age of 50. Fewer than half of these board members had had a job description and the chairman is very likely to be white, male and over the age of 60. Barriers to diversity remain firmly set throughout most boardrooms in the country” says the report.
It says the management and governance realities of boards indicate “animosity, a lack of intimacy with strategy, and poor communication” when it comes to top team strategy. Board and executive relations are “non-cohesive” when it comes to “shaping/negotiation of strategy, open interaction and trust.” Board members are described as “out of touch” – with “reality, markets and employees, unclear member role and contribution, productivity of meetings, engagement with the executive.”
Je vous invite à prendre connaissance de la lettre informative (Newsletter) du mois d’août 2014 de la firme de consultation The Brown Governance intitulée Consensus and Dissent.
Les auteurs traitent de la pratique de la décision par consensus, un sujet vraiment crucial pour la bonne gestion d’un conseil d’administration. Voici un extrait de cette lettre. Vous pouvez vous inscrire par la recevoir à chaque mois.
Également, sur le site de Brown Governance, vous pourrez visionner une vidéo de David Brown qui explique la mécanique des huis clos afin d’éviter que ceux-ci traînent en longueur.
Building Consensus by Addressing the Roots of Dissent
Boards today often strive to make decisions by consensus, which is both healthy and sustainable compared to forced votes; how to build consensus while honouring dissent is the subject of this Brown Governance newsletter. How Boards deal with dissent is one of the biggest changes in boardroom governance in the past generation – instead of ignoring, discouraging or quashing dissent, high performance boards seek to understand and deal with dissent. Here we will explore the typical roots of dissent as a tool to help Chairs and Board members to understand, identify and so address dissent more effectively:
Information gap
Knowledge gap
Direction gap
Strategy gap
Political gap
Personal gap
What is Consensus anyway?
Consensus does not necessarily mean unanimity. Consensus means reaching a point that different viewpoints have been listened to, and no one is going to stand in the way of us moving forward. Everyone “consents” to move forward, not necessarily everyone in agreement with the specific direction. “Consensus” comes from the Latin, “feeling together”. It may be that everyone is of one accord, or it may be that dissenting views have been dealt with to the satisfaction of the dissenters: consensus means “unity not unanimity”. Consensus decision-making is a group decision-making process that seeks the consent of all participants.
Consensus may be defined professionally as an acceptable resolution, one that can be supported, even if not the « favourite » of each individual. It may seem counter intuitive that two of the most visible trends in modern governance are to strive for decision-making by consensus rather than just a majority vote, and to encourage dissent and divergent views from the one being proposed.
Yet these two potentially conflicting forces can be brought into harmony, by exploring and better understanding the root causes behind the dissenting view, and using the most effective tool to address and deal with each, to bring the dissenter into the consensus. Here is how Board and Committee Chairs and Members can use this in practice during meetings:
Have the proposed solution (e.g. strategy, decision, problem or issue) presented briefly;
Invite Board members to express any additional or different perspectives;
Once these divergent views have been expressed, move on to convergent thinking (consensus building) by exploring the root causes of each divergent view (the Chair may need to “name” or explicitly articulate the divergent view since the stated dissent is often not the underlying cause), and proposing that each be dealt with based on addressing its root, including amending and revising the proposed solution;
Probe and test for consensus: do we have consent to move forward on this path?
Gouvernance | Jacques Grisé 