Voici un article qui devrait inciter les entreprises à adopter de meilleures pratiques eu égard à la contribution des membres du conseil d’administration.
L’article a été publié sur le Forum de Harvard Law School par deux experts des questions stratégiques.
Jeffrey Greene est conseiller principal chez Fortuna Advisors et Sharath Sharma est le leader d’EY Americas pour les transformations stratégiques.
Je vous soumets la version française de l’introduction de la publication, en utilisant l’outil de traduction de Google, lequel est certainement perfectible.
Les équipes de direction n’ont pas à affronter seules les défis redoutables de la pandémie. Alors qu’ils passent de la stabilisation des flux de trésorerie et de la réingénierie des lieux de travail à la création d’un peu de répit — à la fois financièrement et mentalement — les PDG et la haute direction devraient réfléchir à la manière de déployer leurs conseils d’administration le plus efficacement possible.
Quelle que soit la situation de la performance de l’entreprise sur le spectre — de la difficulté (détaillants physiques) à la prospérité (logiciel de vidéoconférence), les dirigeants peuvent améliorer les résultats en :
Impliquer systématiquement les administrateurs dans les décisions critiques sur la stratégie, la culture, le renforcement de la résilience, la communication avec les investisseurs et la rémunération ;
Mettre l’accent sur la formation des administrateurs, notamment en approfondissant les connaissances de l’entreprise et de ses marchés ;
Tirer pleinement parti de l’expérience collective du conseil d’administration, des perspectives diverses, des connaissances en temps réel et des réseaux étendus.
La direction et les actionnaires ne peuvent pas se permettre de sous-utiliser le conseil d’administration pour faire face à cette crise, pour laquelle il n’existe pas de livres de recettes, ou à ses conséquences, qui ne ressembleront probablement pas aux reprises antérieures.
Les entreprises sont confrontées à des défis dans de multiples dimensions — science médicale, soins de santé, marchés financiers, économie, chaînes d’approvisionnement et géopolitique — pour lesquels leur seule approche viable est un processus de résolution de problèmes adaptatif, rapide et décisif, mais itératif, à mesure que de nouvelles informations apparaissent.
Les incertitudes accrues et évolutives dans chaque domaine signifient que les dirigeants doivent résoudre les tensions persistantes entre (1) faire face aux événements à court terme et (2) se préparer à d’éventuelles phases de reprise. La contribution des administrateurs est cruciale pour faciliter l’obtention d’un équilibre raisonnable.
Le tableau ci-dessous montre l’étendue des contributions des administrateurs en cette période critique.
Figure 1: Améliorer le rendement grâce à l’engagement actif du conseil
Une étude de cas pour mieux saisir l’engagement accru des administrateurs dans l’exercice de leurs rôles de fiduciaires
Pour décider comment éduquer, informer et impliquer les administrateurs dans l’environnement actuel, les pratiques de gouvernance de Netflix nous fournissent une étude de cas instructive :
Les administrateurs assistent régulièrement aux réunions de la haute direction à titre d’observateurs ;
Avant chaque réunion du conseil, les administrateurs reçoivent une note narrative de 20 à 40 pages décrivant les performances, les tendances du secteur et les développements des concurrents, avec des liens vers les données sous-jacentes et l’analyse à l’appui ;
Les administrateurs ont accès à toutes les informations sur les systèmes internes de l’entreprise ;
Les membres du conseil sont habilités à assurer un suivi individuel avec le PDG et les autres dirigeants.
Ces pratiques ont vu le jour afin d’inciter les administrateurs à mieux comprendre les plans à long terme de la direction. Les administrateurs créditent la direction pour la transparence et pour la volonté de débattre des décisions de gestion, en toute confiance.
Il y a tellement d’étapes de transformation radicales majeures que Netflix a accomplies depuis que je suis membre du conseil d’administration : distribution de DVD en diffusion continue sur le Web, passage à l’international, engagement de millions de dollars en contenu…
L’équipe de direction est si réfléchie et ouverte aux différents points de vue dans le processus de prise de décision que cela rend les décisions très difficiles relativement plus aisées en raison de la rigueur du processus.
Chaque action pourrait s’appliquer directement aux défis de gestion de crise, de reprise et de croissance future auxquels chaque entreprise doit s’adapter aujourd’hui.
Des administrateurs bien informés avec des canaux de communication ouverts à la direction peuvent débattre des problèmes en temps réel et tester les hypothèses qui sous-tendent les recommandations des dirigeants.
Quelles sont les lignes directrices énoncées par les firmes de conseil en vote américaines eu égard au nombre de conseils d’administration sur lesquels les administrateurs devraient siéger ?
L’article de Krystal Berrini * publié sur le site de Harvard Law School Forum on Corporate Governance, présente un très bon résumé des politiques mises de l’avant par les firmes de conseil en vote.
Voici une traduction Google révisée du court texte publié récemment.
Au cours des dernières années, de grands investisseurs institutionnels ont répondu à leurs préoccupations croissantes concernant les demandes de services au conseil en adoptant ou en renforçant des politiques concernant le nombre total d’engagements d’un administrateur.
Cette tendance a entraîné une baisse importante du soutien au vote pour certains administrateurs jugés « Overboard » selon ces lignes directrices nouvelles ou resserrées. Dans de nombreux cas, ces politiques sont plus strictes que celles des principaux conseillers en vote.
À l’approche de la saison des procurations 2020, trois investisseurs institutionnels, State Street Global Advisors (SSGA), T. Rowe Price et AllianceBernstein, ont resserré leurs politiques d’engagement des administrateurs.
Grâce à ces politiques d’investisseurs renforcées, les administrateurs non exécutifs qui siègent à plus de quatre conseils d’administration et les PDG qui siègent à plus d’un conseil d’administration externe peuvent s’attendre à voir une diminution du soutien des actionnaires par rapport aux années précédentes.
La pandémie de COVID-19 a concentré l’attention des investisseurs sur une gamme de sujets de gouvernance et de surveillance du conseil d’administration, y compris la gestion des risques, la continuité des activités et la gestion des ressources humaines. Au cours des dernières semaines, un certain nombre d’investisseurs, dont BlackRock et SSGA, ont réitéré leur engagement à tenir les entreprises responsables de leurs pratiques ESG à long terme pendant cette période difficile.
Il est peu probable que les investisseurs s’écartent des directives sur les pratiques existantes, y compris les engagements du conseil. La crise actuelle de COVID-19, qui impose des contraintes supplémentaires au temps consenti par les administrateurs, renforcera probablement encore davantage les points de vue des investisseurs sur l’importance d’avoir la capacité de s’engager pleinement dans tous leurs engagements au sein du conseil en temps de crise.
Vous trouverez ci-dessous un résumé des mises à jour récentes des politiques des investisseurs et des conseillers en matière de procuration sur la participation excessive des administrateurs.
Le tableau indique le nombre de conseils auxquels un administrateur recevra généralement une recommandation ou un vote négatifs. En règle générale, les investisseurs et les conseillers en vote ne s’opposent aux administrateurs exécutifs (PDG) qu’en ce qui concerne leurs engagements comme administrateurs externes.
Les informations concernant les politiques de conseil aux investisseurs et aux procurations sont obtenues à partir des politiques américaines publiées qui peuvent être consultées sur leurs sites Web respectifs.
Depuis le début de la crise de santé publique et économique causée par la COVID-191, la tentation peut être grande pour les administrateurs de s’immiscer dans la gestion quotidienne de la société ou se substituer à la direction, surtout s’ils portent également le chapeau d’actionnaire. Or, c’est le comité de gestion de crise, souvent composé de dirigeants exécutifs, qui a la responsabilité de gérer la crise au quotidien. Néanmoins, les administrateurs ont eux aussi un rôle à jouer : ils ont le devoir de s’assurer de la bonne gouvernance de la société à court, moyen et long terme2.
Cette responsabilité s’accroît face à la crise et commande une réflexion pour les administrateurs de sociétés qui devront, d’une part, examiner attentivement la manière de gérer les risques actuels au sein de l’organisation ainsi que les risques collatéraux qui pourraient en découler et, d’autre part, prendre note des éléments à améliorer pour le futur.
Dans le cadre de cet article sur la gouvernance de sociétés en période de crise, nous nous penchons plus spécifiquement sur les réflexes de gouvernance à adopter dans le contexte actuel, tout en ne perdant pas de vue l’après COVID-19.
Voici dix éléments qui doivent être pris en considération au moment où toutes les entreprises sont préoccupées par la crise du COVID-19.
Cet article très poussé a été publié sur le forum du Harvard Law School of Corporate Governance hier.
Les juristes Holly J. Gregory et Claire Holland, de la firme Sidley Austin font un tour d’horizon exhaustif des principales considérations de gouvernance auxquelles les conseils d’administration risquent d’être confrontés durant cette période d’incertitude.
Je vous souhaite bonne lecture. Vos commentaires sont appréciés.
The 2019 novel coronavirus (COVID-19) pandemic presents complex issues for corporations and their boards of directors to navigate. This briefing is intended to provide a high-level overview of the types of issues that boards of directors of both public and private companies may find relevant to focus on in the current environment.
Corporate management bears the day-to-day responsibility for managing the corporation’s response to the pandemic. The board’s role is one of oversight, which requires monitoring management activity, assessing whether management is taking appropriate action and providing additional guidance and direction to the extent that the board determines is prudent. Staying well-informed of developments within the corporation as well as the rapidly changing situation provides the foundation for board effectiveness.
We highlight below some key areas of focus for boards as this unprecedented public health crisis and its impact on the business and economic environment rapidly evolves.
1. Health and Safety
With management, set a tone at the top through communications and policies designed to protect employee wellbeing and act responsibly to slow the spread of COVID-19. Monitor management’s efforts to support containment of COVID-19 and thereby protect the personal health and safety of employees (and their families), customers, business partners and the public at large. Consider how to mitigate the economic impact of absences due to illness as well as closures of certain operations on employees.
2. Operational and Risk Oversight
Monitor management’s efforts to identify, prioritize and manage potentially significant risks to business operations, including through more regular updates from management between regularly scheduled board meetings. Depending on the nature of the risk impact, this may be a role for the audit or risk committee or may be more appropriately undertaken by the full board. Document the board’s consideration of, and decisions regarding, COVID-19-related matters in meeting minutes. Maintain a focus on oversight of compliance risks, especially at highly regulated companies. Watch for vulnerabilities caused by the outbreak that may increase the risk of a cybersecurity breach.
3. Business Continuity
Consider whether business continuity plans are in place appropriate to the potential risks of disruption identified, including through a discussion with management of relevant contingencies, and continually reassess the adequacy of the plans in light of developments. Key issues to consider include:
Employee/Talent Disruption. As more employees begin working remotely or are unable to work due to disruptions caused by COVID-19, continually assess what minimum staffing levels and remote work technology will be required to maintain operations. (Also, as noted above, consider how to mitigate the economic impact of absences due to illness as well as closures of certain operations on employees.)
Supply Chain and Production Disruption. Review with management the risks that a disruption in the supply chain will cause interruptions in operations and how to protect against such risks, including the availability of alternate sources of supply. Ask management to assess the risks that the company will have difficulty in fulfilling its contractual obligations and how management is preparing to address those risks, including through review of relevant provisions in customer contracts (e.g., force majeure, events of default and termination) to determine what recourse is available.
Financial Impact and Liquidity. Review with management the near-term and longer term financial impact (including the ability to meet obligations) of the COVID-19 pandemic and the related impact of the extreme volatility in the financial markets. Understand the assumptions underlying management’s assessment and discuss the likely outcome if those assumptions prove incorrect. Consider the need to seek additional financing or amend the terms of existing debt arrangements.
Internal Controls and Audit Function. Consider whether COVID-19 may have an impact on the functioning of internal controls and audit. For publicly-traded companies, remember that any material changes in internal control over financial reporting will require disclosure in the next periodic report.
Recent Securities Exchange Commission (SEC) guidance: In a March 4, 2020 press release, SEC Chair Jay Clayton urged companies to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are sufficiently robust to enable them to meet their obligations under the federal securities laws in the current environment.
Key Person Risks and Emergency Succession Plans. Consider whether an up-to-date emergency succession plan is in place that identifies a person who can step in immediately as interim CEO in the event the CEO contracts COVID-19. Consider the need to implement similar plans for other key persons.
Incentives. Consider whether incentive plans need to be reworked in light of the circumstances, to ensure that appropriate behaviors are encouraged. Consider delaying setting incentive plan goals until the uncertainty has subsided or try to build in flexibility with respect to any goals set.
Board/Governance Continuity. Consider whether the board is appropriately positioned to provide guidance and oversight as the COVID-19 threat expands. Consider scheduling in advance special board meetings and/or information conference calls over the next three to four months, which can be cancelled if not needed. Decide whether to replace in-person meetings with conference calls to help limit the threat of contagion. Consider whether contingencies are in place if a board quorum is not available. Continue to meet regularly in executive session to discuss assessment of how management is managing the crisis.
4. Crisis Management
During this turbulent time, employees, shareholders and other stakeholders will look to boards to take swift and decisive action when necessary. Consider whether an up-to-date crisis management plan is in place and effective. A well-designed plan will assist the company to react appropriately, without either under- or over-reacting. Elements of an effective crisis management plan include:
Cross-Functional Team. Crisis response teams typically include key individuals from management, public relations, human resources, legal and finance. Identify these individuals now and begin meeting so that they are prepared to respond quickly as the crisis develops. The team should be in regular contact with the board (or a designated board member or committee) as the COVID-19 pandemic evolves.
Quick and Decisive Deployment. The plan should include crisis response procedures, communications templates, checklists and manuals that can be readily adapted to a variety of situations for effective, time-critical and agile deployment. The crisis response team should be familiar with the elements of the plan and ready to implement it at a moment’s notice.
Contingency Plans. A crisis is inherently unpredictable. However, the company should endeavor to anticipate all potential crises to which it is vulnerable and develop contingency plans to deal with those crises to minimize on-the-fly decision-making.
Examples of scenarios to prepare for: What will our response be if there is a confirmed case of COVID-19 within the company? How will we notify employees of a confirmed case and what privacy implications do we need to consider? What planning (e.g., IT training) is required if we need to mandate that our employees work remotely?
Thoughtful Communications. The board should oversee the company’s communication strategy. Clear communication and planning within the crisis response team will allow the company to communicate internally and externally in a calm and thoughtful manner, which will help build confidence during a volatile situation.
5. Oversight of Public Reporting and Disclosure for Publicly-Traded Companies
Companies must consider whether they are making sufficient public disclosures about the actual and expected impacts of COVID-19 on their business and financial condition. The level of disclosure required will depend on many factors, such as whether a company has significant operations in China or is in a highly affected industry (e.g., airlines and hospitality companies). In any event, boards should monitor to ensure that corporate disclosures are accurate and complete and reflect the changing circumstances.
Because the COVID-19 pandemic is unprecedented and changing by the day, the SEC acknowledges that it is challenging to provide accurate information about the impact it could have on future operations.
Recent SEC guidance: “We recognize that [the current and potential effects of COVID-19] may be difficult to assess or predict with meaningful precision both generally and as an industry- or issuer-specific basis.” Statement by SEC Chairman Jay Clayton on January 30, 2020.
Earnings Guidance. Consider whether previously issued earnings guidance should be downgraded to reflect the actual or likely impact of COVID-19 and, if so, how to describe the reason for the revision. Due to the current unpredictability of COVID-19’s impact, consider withdrawing previously-issued earnings guidance altogether or refraining from issuing guidance in the near term.
Risk Factor Disclosure. Consider how the COVID-19 pandemic may require additions or revisions to risk factor disclosures.
Recent SEC guidance: “We also remind all companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments.” SEC March 4, 2020 press release.
Potential topics for risk factor disclosure include:
Disruptions to business operations whether from travel restrictions, mandated quarantines or voluntary “social distancing” that affects employees, customers and suppliers, production delays, closures of manufacturing facilities, warehouses and logistics supply and distribution chains and staffing shortages
Uncertainty regarding global macroeconomic conditions, particularly the uncertainty related to the duration and impact of the COVID-19 pandemic, and related decreases in customer demand and spending
Credit and liquidity risk, loan defaults and covenant breaches
Inventory writedowns and impairment losses
Ensure that risk factor disclosure is consistent with the board’s conversations with management about material risks.
Recent SEC guidance: “One analytical tool to evaluate disclosure in this context is to consider how management discusses … risks with its board of directors. Obviously not all discussions between management and the board are appropriate for disclosure in public filings, but there should not be material gaps between how the board is briefed and how shareholders are informed.” Statement by SEC Director, Division of Corporation Finance William Hinman on March 15, 2019.
As always, risk factor disclosure should be specific to a company’s individual circumstances and avoid generic language. Finally, be careful not to describe a risk related to COVID-19 as hypothetical if it has actually occurred.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Consider whether the actual or likely impact of COVID-19 on a company’s business (including its supply chain), financial condition, liquidity, results of operations and/or prospects would be deemed material to an investment decision in the company’s securities and require disclosure. Consider whether the impact or potential impact of COVID-19 on the company is a “known trend or uncertainty” requiring disclosure in the MD&A of the next periodic report. Tailor any MD&A disclosures to the impact of COVID-19 on the company’s business in particular. Consider whether disclosures appropriately address the potential impact of the COVID-19 pandemic on future results of operations.
Subsequent Events. A joint statement by SEC and Public Company Accounting Oversight Board (PCAOB) leadership on February 19, 2020 specific to COVID-19 reporting considerations encouraged companies to consider the need to potentially disclose subsequent events in the notes to the financial statements in accordance with guidance included in Accounting Standards Codification 855, Subsequent Events.
Forward-Looking Statements. Consider whether the company’s forward-looking statement disclaimer language adequately protects the company for statements it makes regarding the expected impacts of COVID-19. It should be specific and consistent with updates made to the risk factors and other public disclosures.
Recent SEC guidance: “Companies providing forward-looking information in an effort to keep investors informed about material developments, including known trends or uncertainties regarding the coronavirus, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for this information.” SEC March 4, 2020 press release.
Updates. Consider whether prior disclosures should be revised to ensure they are accurate and complete. While there is no express duty to update a forward-looking statement, courts are divided as to whether a duty to update exists for a forward-looking statement that becomes inaccurate or misleading after the passage of time (from the perspective of claim under Exchange Act Section 10(b) and Rule 10b-5).
Recent SEC guidance: “Depending on a company’s particular circumstances, it should consider whether it may need to revisit, refresh, or update previous disclosure to the extent that the information becomes materially inaccurate.” SEC March 4, 2020 press release.
Proxy Statements. Given the SEC’s emphasis on discussion of how boards oversee the management of material risks, consider expanding the proxy statement disclosure of board oversight of COVID-19-related risks where material to the business. 5Recent SEC guidance: “To the extent a matter presents a material risk to a company’s business, the company’s disclosure should discuss the nature of the board’s role in overseeing the management of that risk. The Commission last noted this in the context of cybersecurity, when it stated that disclosure about a company’s risk management program and how the board engages with the company on cybersecurity risk management allows investors to better assess how the board is discharging its risk oversight function. Parallels may be drawn to other areas where companies face emerging or uncertain risks, so companies may find this guidance useful when preparing disclosures about the ways in which the board manages risks, such as those related to sustainability or other matters.” Statement by SEC Director, Division of Corporation Finance William Hinman on March 15, 2019.
Also, consider cautioning stockholders that the annual meeting date and logistics are subject to change.
Current Reports. Consider the need to file a Form 8-K for material developments such as if the CEO or another key person or a significant portion of the workforce contracts COVID-19.
Conditional Filing Relief. Companies that anticipate filing delays due to COVID-19 should consider taking advantage of the SEC’s March 4, 2020 order granting an additional 45 days to meet Exchange Act reporting obligations for reports due between March 1 and April 30, 2020. See the Sidley Update available here for more details.
6. Compliance with Insider Trading Restrictions and Regulation FD for Publicly-Traded Companies
Insider Trading. Closely monitor and consider further restricting trading in company securities by insiders who may have access to material nonpublic information related to COVID-19 impacts (e.g., by requiring additional training, imposing blackout periods or enhancing preclearance procedures).
Recent SEC guidance: If a company “become[s] aware of a risk related to the coronavirus that would be material to its investors, it should refrain from engaging in securities transactions with the public and … take steps to prevent directors and officers (and other corporate insiders who are aware of these matters) from initiating such transactions until investors have been appropriately informed about the risk.” SEC March 4, 2020 press release.
Carefully consider whether the company should potentially buy back stock to take advantage of significantly depressed stock prices.
Regulation FD. Be mindful of Regulation FD requirements, particularly if sharing information related to the impact of COVID-19 with customers and other stakeholders.
Recent SEC guidance: “When companies do disclose material information related to the impacts of the coronavirus, they are reminded to take the necessary steps to avoid selective disclosures and to disseminate such information broadly.” SEC March 4, 2020 press release.
7.Annual Shareholder Meeting
With the Center for Disease Control recommending that gatherings of 50 or more persons be avoided to assist in containment of the virus, consider with management whether to hold a virtual-only shareholders meeting or a hybrid meeting that permits both in-person and online attendance. Public companies that are considering changing the date, time and/or location of an annual meeting, including a switch from an in-person meeting to a virtual or hybrid meeting, will need to review applicable requirements under state law, stock exchange rules and the company’s charter and bylaws. Companies that change the date, time and/or location of an annual meeting should comply with the March 13, 2020 guidance issued by the Staff of the SEC’s Division of Corporation Finance and the Division of Investment Management. See the Sidley Update available here for more details.
8. Shareholder Relations
Activism and Hostile Situations. Continue to ensure communication with, and stay attuned to the concerns of, significant shareholders, while monitoring for changes in stock ownership. Capital redemptions at small- and mid-sized funds may lead to fewer shareholder activism campaigns and proxy contests in the next several months. However, expect well-capitalized activists to exploit the enhanced vulnerability of target companies. The same applies to unsolicited takeovers bids by well-capitalized strategic buyers. If they have not already done so, boards should update or activate defense preparation plans, including by identifying special proxy fight counsel, reviewing structural defenses, putting a poison pill “on the shelf” and developing a “break the glass” communications plan.
9. Strategic Opportunities
Consider with management whether and if so where opportunities are likely to emerge that are aligned with the corporation’s strategy, for example, opportunities to fulfill an unmet need occasioned by the pandemic or opportunities for growth through distressed M&A.
10. Aftermath
Consider with management whether the changes in behavior occasioned by the pandemic will have any potential lasting effects, for example on employee and consumer behavior and expectations. Also, be prepared when the crisis abates to assess the corporation’s handling of the situation and identify “lessons learned” and actionable ideas for improvement.
Voici un cas publié sur le site de Julie McLelland qui aborde une situation où Trevor, un administrateur indépendant, croyait que le grand succès de l’entreprise était le reflet d’une solide gouvernance.
Trevor préside le comité d’audit et il se soucie de mettre en place de saines pratiques de gouvernance. Cependant, cette société cotée en bourse avait des failles en matière de gestion des risques numériques et de cybersécurité.
De plus, le seul administrateur indépendant n’a pas été informé qu’un vol de données très sensibles avait été fait et que des demandes de rançons avaient été effectuées.
L’organisation a d’abord nié que les informations subtilisées provenaient de leurs systèmes, avant d’admettre que les données avaient été fichées un an auparavant ! Les résultats furent dramatiques…
Trevor se demande comment il peut aider l’organisation à affronter la tempête !
Le cas a d’abord été traduit en français en utilisant Google Chrome, puis, je l’ai édité et adapté. On y présente la situation de manière sommaire puis trois experts se prononcent sur le cas.
Bonne lecture ! Vos commentaires sont toujours les bienvenus.
Trevor est administrateur d’une société cotée qui a été un «chouchou du marché». La société fournit des évaluations de crédit et une vérification des données. Les fondateurs ont tous deux une solide expérience dans le secteur et un solide réseau de contacts et à une liste de clients qui comprenait des gouvernements et des institutions financières.
Après l’entrée en bourse, il y a deux ans, la société a atteint ou dépassé les prévisions et Trevor est fier d’être le seul administrateur indépendant siégeant au conseil d’administration aux côtés des deux fondateurs et du PDG. Il préside le comité d’audit et, officieusement, il a été l’initiateur des processus de gouvernance et de sa documentation.
Les fondateurs sont restés très actifs dans l’entreprise et Trevor s’est parfois inquiété du fait que certaines décisions stratégiques n’avaient pas été portées à son attention avant la réunion du conseil d’administration. Comme l’expérience de Trevor est l’audit et l’assurance, il suppose qu’il n’aurait pas ajouté de valeur au-delà de la garantie d’un processus sain et de la tenue de registres.
Il y a trois semaines, tout a changé. Une grande partie des données de l’entreprise ont été subtilisées et transférées sur le « dark web ». Ce vol comprenait les données financières des personnes qui avaient été évaluées ainsi que des données d’identification tels que les numéros de dossier fiscal et les adresses résidentielles. Pire, la société a d’abord affirmé que les informations ne provenaient pas de leurs systèmes, puis a admis avoir reçu des demandes de rançon indiquant que les données avaient été fichées jusqu’à un an avant cette catastrophe.
Plusieurs clients ont fermé leur compte, les actionnaires sont consternés, le cours de l’action est en chute libre et la presse réclame plus d’informations.
Comment Trevor devrait-il aider l’entreprise à surmonter cette tempête ?
This is a critical time for Trevor legally and reputationally, it is also a time when being an independent director carries additional responsibility to the company, the shareholders, the staff and the customers.
All Directors and Executives can only have one response to a blackmail attempt. That is to immediately report it to the police and not respond to the ransomware demands. Secondly the company should have had a crisis management plan in place ready for such an eventuality. In this day and age, no company should operate without a cybercrime contingency plan.
In this case it is unclear, but it appears that the authorities were not informed and that Trevor’s company was unprepared for a data breach or ransomware demands.
There are 2 scenarios open to Trevor:
1) If Trevor was not informed straight away of the ransom demands and the CEO and founding Executive Directors knew but did not brief him on the ransom issue and the company’s response, then his independent status has been compromised and he should resign.
2) If Trevor was informed and the whole Board was involved in the response, then Trevor must remain and help the company ride out the storm. This will involve working with the police, the ASX and crisis management guidance from external suppliers – technical and PR.
The rule to follow is full transparency and speedy action.
Trevor should refer to the recent ransomware attack on Toll Logistics and their response which was exemplary.
Adam Salzer OAM is the Chair and Global Designer for Whitewater Transformations. His other board experience includes Australian Transformation and Turnaround Association (AusTTA), Asian Transformation and Turnaround Association (ATTA), Australian Deafness Council, Bell Shakespeare Company, and NSW Deaf Society. He is based in Sydney, Australia.
Julie’s Answer
This is a listed company; Trevor must ensure appropriate disclosure. A trading halt may give the company time to investigate, and respond to, the events and then give the market time to disseminate the information. His customer liaison at the stock exchange should assist with implementing a halt and issuing a brief statement saying what has happened and that the company will issue more information when it becomes available.
This will be a costly and distracting exercise that could derail the company from its current successful track.
Three of the four board members are executives. That doesn’t mean the fourth can rely on their efforts. Trevor must add value by asking intelligent questions that people involved in the operations will possibly not think to ask. This board must work as a team rather than a group of individuals who each contribute their own expertise and then come together to document decisions that were not made rigorously or jointly.
Trevor has now learnt that there is more to good governance than just having meetings and documenting processes. He needs to get involved and truly understand the business. If his fellow directors do not welcome this, he needs to consider whether they are taking him seriously or just using him as window-dressing. He should ensure that the whole board is never again left out of the information flow when something important happens (or even when it perhaps might happen).
He should also take the lead on procuring legal advice (they are going to need it), liaising with the regulators, and establishing crisis communications. Engaging a specialist communications firm may help.
Julie Garland McLellan is a non-executive director and board consultant based in Sydney, Australia.
Jinan’s Answer
I recommend three separate parallel streams of work for Trevor.
1. Immediate public facing actions Immediately apologize and state your commitment to your customers. Hire a PR firm and have the most public facing person issue an apology. The person selected to issue the apology has to be selected carefully (cannot be the person responsible for leak, and has potential to become the new trusted CEO)
2. Tactical internal actions Assess the damage and contain the incident. Engage an incident response firm to assess how the breach happened, when it happened, what was stolen. Confirm that leak doors are closed. Select your IR firm carefully – the better reputed they are, the better you will look in litigation. Conduct an immediate audit and investigation. You need to understand who knew, when and why this was buried for a year. Take disciplinary action against anyone who was part of the breach. Post audit, either allow them to keep their equity or buy them out.
3. Strategic actions Review and update your cybersecurity incident response process. This includes your ransomware processes (e.g. will you pay, how you pay, etc.), and how you communicate incidents. Build cybersecurity awareness, behavior and culture up, down and across your company. Ensure that everyone from the board down are educated, enabled and enthusiastic about their own and your company’s cyber-safety. This is a journey not a one-off miracle. Extend cybersecurity engagement to your customers. Be proactive not only on the status of this incident, but also on how you are keeping their data safe. Go a step further and offer them help in their own cyber-safety. Create a forward thinking, business and risk-aligned cybersecurity strategy. Understand your current people, process and technology gaps which led to this decision and how you’ll fix them. Elevate the role of cybersecurity leadership. You will need a chief information security officer who is empowered to execute the strategy, and has a regular and independent seat at the board table.
Jinan Budge is Principal Analyst Serving Security and Risk Professionals at Forrester and a former Director Cyber Security, Strategy and Governance at Transport for NSW. She is based in Sydney, New South Wales, Australia.
En gouvernance des sociétés, il existe un certain nombre de responsabilités qui relèvent impérativement d’un conseil d’administration.
À la suite d’une décision rendue par la Cour Suprême du Delaware dans l’interprétation de la doctrine Caremark (voir ici),il est indiqué que pour satisfaire leur devoir de loyauté, les administrateurs de sociétés doivent faire des efforts raisonnables (de bonne foi) pour mettre en œuvre un système de surveillance et en faire le suivi.
Without more, the existence of management-level compliance programs is not enough for the directors to avoid Caremark exposure.
L’article de Martin Lipton *, paru sur le Forum de Harvard Law School on Corporate Governance, fait le point sur ce qui constitue les meilleures pratiques de gouvernance à ce jour.
Recognize the heightened focus of investors on “purpose” and “culture” and an expanded notion of stakeholder interests that includes employees, customers, communities, the economy and society as a whole and work with management to develop metrics to enable the corporation to demonstrate their value;
Be aware that ESG and sustainability have become major, mainstream governance topics that encompass a wide range of issues, such as climate change and other environmental risks, systemic financial stability, worker wages, training, retraining, healthcare and retirement, supply chain labor standards and consumer and product safety;
Oversee corporate strategy (including purpose and culture) and the communication of that strategy to investors, keeping in mind that investors want to be assured not just about current risks and problems, but threats to long-term strategy from global, political, social, and technological developments;
Work with management to review the corporation’s strategy, and related disclosures, in light of the annual letters to CEOs and directors, or other communications, from BlackRock, State Street, Vanguard, and other investors, describing the investors’ expectations with respect to corporate strategy and how it is communicated;
Set the “tone at the top” to create a corporate culture that gives priority to ethical standards, professionalism, integrity and compliance in setting and implementing both operating and strategic goals;
Oversee and understand the corporation’s risk management, and compliance plans and efforts and how risk is taken into account in the corporation’s business decision-making; monitor risk management ; respond to red flags if and when they arise;
Choose the CEO, monitor the CEO’s and management’s performance and develop and keep current a succession plan;
Have a lead independent director or a non-executive chair of the board who can facilitate the functioning of the board and assist management in engaging with investors;
Together with the lead independent director or the non-executive chair, determine the agendas for board and committee meetings and work with management to ensure that appropriate information and sufficient time are available for full consideration of all matters;
Determine the appropriate level of executive compensation and incentive structures, with awareness of the potential impact of compensation structures on business priorities and risk-taking, as well as investor and proxy advisor views on compensation;
Develop a working partnership with the CEO and management and serve as a resource for management in charting the appropriate course for the corporation;
Monitor and participate, as appropriate, in shareholder engagement efforts, evaluate corporate governance proposals, and work with management to anticipate possible takeover attempts and activist attacks in order to be able to address them more effectively, if they should occur;
Meet at least annually with the team of company executives and outside advisors that will advise the corporation in the event of a takeover proposal or an activist attack;
Be open to management inviting an activist to meet with the board to present the activist’s opinion of the strategy and management of the corporation;
Evaluate the individual director’s, board’s and committees’ performance on a regular basis and consider the optimal board and committee composition and structure, including board refreshment, expertise and skill sets, independence and diversity, as well as the best way to communicate with investors regarding these issues;
Review corporate governance guidelines and committee workloads and charters and tailor them to promote effective board and committee functioning;
Be prepared to deal with crises; and
Be prepared to take an active role in matters where the CEO may have a real or perceived conflict, including takeovers and attacks by activist hedge funds focused on the CEO.
Afin de satisfaire ces attentes, les entreprises publiques doivent :
Have a sufficient number of directors to staff the requisite standing and special committees and to meet investor expectations for experience, expertise, diversity, and periodic refreshment;
Compensate directors commensurate with the time and effort that they are required to devote and the responsibility that they assume;
Have directors who have knowledge of, and experience with, the corporation’s businesses and with the geopolitical developments that affect it, even if this results in the board having more than one director who is not “independent”;
Have directors who are able to devote sufficient time to preparing for and attending board and committee meetings and engaging with investors;
Provide the directors with the data that is critical to making sound decisions on strategy, compensation and capital allocation;
Provide the directors with regular tutorials by internal and external experts as part of expanded director education and to assure that in complicated, multi-industry and new-technology corporations, the directors have the information and expertise they need to respond to disruption, evaluate current strategy and strategize beyond the horizon; and
Maintain a truly collegial relationship among and between the company’s senior executives and the members of the board that facilitates frank and vigorous discussion and enhances the board’s role as strategic partner, evaluator, and monitor.
Martin Lipton* is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton and is part of the Delaware law series; links to other posts in the series are available here.
En gouvernance des sociétés, il existe un certain nombre de responsabilités qui relèvent impérativement d’un conseil d’administration.
À la suite d’une décision rendue par la Cour Suprême du Delaware dans l’interprétation de la doctrine Caremark (voir ici),il est indiqué que pour satisfaire leur devoir de loyauté, les administrateurs de sociétés doivent faire des efforts raisonnables (de bonne foi) pour mettre en œuvre un système de surveillance et en faire le suivi.
Without more, the existence of management-level compliance programs is not enough for the directors to avoid Caremark exposure.
L’article de Martin Lipton *, paru sur le Forum de Harvard Law School on Corporate Governance, fait le point sur ce qui constitue les meilleures pratiques de gouvernance à ce jour.
Recognize the heightened focus of investors on “purpose” and “culture” and an expanded notion of stakeholder interests that includes employees, customers, communities, the economy and society as a whole and work with management to develop metrics to enable the corporation to demonstrate their value;
Be aware that ESG and sustainability have become major, mainstream governance topics that encompass a wide range of issues, such as climate change and other environmental risks, systemic financial stability, worker wages, training, retraining, healthcare and retirement, supply chain labor standards and consumer and product safety;
Oversee corporate strategy (including purpose and culture) and the communication of that strategy to investors, keeping in mind that investors want to be assured not just about current risks and problems, but threats to long-term strategy from global, political, social, and technological developments;
Work with management to review the corporation’s strategy, and related disclosures, in light of the annual letters to CEOs and directors, or other communications, from BlackRock, State Street, Vanguard, and other investors, describing the investors’ expectations with respect to corporate strategy and how it is communicated;
Set the “tone at the top” to create a corporate culture that gives priority to ethical standards, professionalism, integrity and compliance in setting and implementing both operating and strategic goals;
Oversee and understand the corporation’s risk management, and compliance plans and efforts and how risk is taken into account in the corporation’s business decision-making; monitor risk management ; respond to red flags if and when they arise;
Choose the CEO, monitor the CEO’s and management’s performance and develop and keep current a succession plan;
Have a lead independent director or a non-executive chair of the board who can facilitate the functioning of the board and assist management in engaging with investors;
Together with the lead independent director or the non-executive chair, determine the agendas for board and committee meetings and work with management to ensure that appropriate information and sufficient time are available for full consideration of all matters;
Determine the appropriate level of executive compensation and incentive structures, with awareness of the potential impact of compensation structures on business priorities and risk-taking, as well as investor and proxy advisor views on compensation;
Develop a working partnership with the CEO and management and serve as a resource for management in charting the appropriate course for the corporation;
Monitor and participate, as appropriate, in shareholder engagement efforts, evaluate corporate governance proposals, and work with management to anticipate possible takeover attempts and activist attacks in order to be able to address them more effectively, if they should occur;
Meet at least annually with the team of company executives and outside advisors that will advise the corporation in the event of a takeover proposal or an activist attack;
Be open to management inviting an activist to meet with the board to present the activist’s opinion of the strategy and management of the corporation;
Evaluate the individual director’s, board’s and committees’ performance on a regular basis and consider the optimal board and committee composition and structure, including board refreshment, expertise and skill sets, independence and diversity, as well as the best way to communicate with investors regarding these issues;
Review corporate governance guidelines and committee workloads and charters and tailor them to promote effective board and committee functioning;
Be prepared to deal with crises; and
Be prepared to take an active role in matters where the CEO may have a real or perceived conflict, including takeovers and attacks by activist hedge funds focused on the CEO.
Afin de satisfaire ces attentes, les entreprises publiques doivent :
Have a sufficient number of directors to staff the requisite standing and special committees and to meet investor expectations for experience, expertise, diversity, and periodic refreshment;
Compensate directors commensurate with the time and effort that they are required to devote and the responsibility that they assume;
Have directors who have knowledge of, and experience with, the corporation’s businesses and with the geopolitical developments that affect it, even if this results in the board having more than one director who is not “independent”;
Have directors who are able to devote sufficient time to preparing for and attending board and committee meetings and engaging with investors;
Provide the directors with the data that is critical to making sound decisions on strategy, compensation and capital allocation;
Provide the directors with regular tutorials by internal and external experts as part of expanded director education and to assure that in complicated, multi-industry and new-technology corporations, the directors have the information and expertise they need to respond to disruption, evaluate current strategy and strategize beyond the horizon; and
Maintain a truly collegial relationship among and between the company’s senior executives and the members of the board that facilitates frank and vigorous discussion and enhances the board’s role as strategic partner, evaluator, and monitor.
Martin Lipton* is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton and is part of the Delaware law series; links to other posts in the series are available here.
Les auteures ont une solide expérience de consultation dans plusieurs grandes sociétés et sont associées de la firme Arsenal Conseils, spécialisée en gouvernance et en stratégie.
Elles sont aussi régulièrement invitées comme conférencières et formatrices dans le domaine de la stratégie et de la gouvernance.
Dans ce billet, qui a d’abord été publié dans le Journal Les Affaires, elles abordent une situation vraiment difficile pour tout conseil d’administration : le congédiement de son directeur général.
Les auteures discutent des motifs liés au congédiement, de l’importance d’une absolue confidentialité et du courage requis de la part des administrateurs.
La publication de ce billet sur mon blogue a été approuvée par les auteurs.
Bonne lecture ! Vos commentaires sont les bienvenus.
De plus en plus de PDG congédiés pour des manquements à l’éthique
Peu importe le motif, le congédiement du PDG demeure une des décisions les plus difficiles à prendre pour un conseil d’administration. Selon notre expérience, aucun CA n’est jamais tout à fait prêt à faire face à cette situation. Toutefois, certains facteurs peuvent faciliter la gestion de cette crise.
Le motif de congédiement influence la rapidité de réaction du conseil d’administration
Selon une étude américaine, les administrateurs sont plus prompts et rapides à congédier un PDG qu’autrefois, et ils le font de plus en plus pour des raisons éthiques.
Bien entendu, la décision de congédier le PDG sera plus facile à prendre lorsque le comportement du PDG pose un risque réputationnel pour l’entreprise. C’est notamment le cas en présence de comportements inadéquats, de fraude ou de perte de confiance des clients.
À titre d’exemple, la triste histoire de Brandon Truaxe, qualifié de génie des cosmétiques et fondateur de la marque de cosmétique canadienne The Ordinary, véritable phénomène mondial. L’automne dernier, les actionnaires et administrateurs de Deciem, groupe duquel fait partie la marque ont demandé et obtenu sa destitution, à titre d’administrateur et de PDG de Deciem. Le Groupe Estée Lauder, actionnaire minoritaire et dont un représentant est administrateur, estimait alors que le comportement erratique du PDG, qui a annoncé sans fondement la fermeture de son entreprise et qualifié ses employés de criminels, nuisait à la réputation de son entreprise, de ses administrateurs et de ses actionnaires en plus de compromettre le futur de l’entreprise.
À l’opposé, les administrateurs tergiversant plus longuement lorsque la situation est plus ambiguë et moins cristalline. Stratégie défaillante, équipe de gestion inadéquate ou mise à niveau technologique mal gérée, ces situations ne font pas toujours l’unanimité au sein du conseil à savoir si elles constituent ou non des motifs suffisants de congédiement. Dans ces cas, les discussions seront souvent plus longues et plus partagées.
Une bonne dynamique au sein du conseil d’administration facilite la tâche des administrateurs lorsque survient une crise. Dans ces circonstances, il est essentiel que les administrateurs placent l’intérêt supérieur de l’organisation au sommet de leurs préoccupations. Les intérêts personnels doivent demeurer au vestiaire. Pas toujours facile lorsque le conseil a appuyé un PDG pendant plusieurs années, que celui-ci a contribué à notre recrutement comme administrateur ou que l’entreprise se porte généralement bien, mais que le conseil d’administration juge que le PDG n’est plus la bonne personne pour mener l’organisation vers ses nouveaux défis.
Un CA mobilisé fait une différence lors des prises de décisions difficiles. Cette mobilisation se prépare de longue date. Elle n’apparaît pas de façon spontanée en période de haute tension.
Par ailleurs, les conseils qui mènent, sur une base annuelle, des exercices de simulation de crise sont également plus efficaces dans la prise de décisions difficiles, et sous-pression, tel le congédiement du PDG.
Confidentialité absolue
Une fois saisi de la question du congédiement du PDG, le conseil d’administration, même sous pression, doit agir rapidement tout en prenant le temps requis pour délibérer. Délicat équilibre à trouver ! Choisir de se départir du PDG est une décision fondamentale qui ne doit pas être prise à la légère. Pour ce faire, certains CA choisissent de mandater le comité exécutif ou un comité ad hoc pour évaluer en profondeur les tenants et aboutissants de la situation. Le CA sera par la suite mis au fait de leurs travaux et en discutera en plénière. Trois choix possibles : supporter, coacher ou congédier.
Dans tous les cas, aucun compromis possible sur la confidentialité des échanges ! Rien de pire qu’une décision de cette nature qui s’ébruite ou qui traîne en longueur. Parlez-en à cette PME des Laurentides dont le sujet du congédiement du PDG a alimenté les discussions de corridor et miné le moral des employés pendant quelques semaines alors que les rencontres du CA sur le sujet se tenaient dans une salle à l’insonorisation sonore…
Congédier le PDG est une chose, choisir son successeur en est une autre. Peu importe qu’une solution par intérim ou permanente soit retenue, le conseil d’administration doit prévoir le futur et la continuité des opérations. Il doit impérativement développer un plan pour la succession du PDG ou activer celui déjà en place. Pendant cette période de transition, les administrateurs doivent être conscients que leur engagement envers l’entreprise pourrait être plus soutenu.
Faire face à la musique
Enfin, le CA doit s’assurer d’une stratégie de communication impeccable pour le congédiement du PDG. Employés, clients, autorités gouvernementales, les parties prenantes de l’entreprise devront tôt ou tard être mises au fait de ce changement à la tête de l’entreprise. Assurez-vous de développer des messages cohérents et de choisir les bons canaux de communication.
Sophie-Emmanuelle Chebin*, LL.L, MBA, IAS.A, accompagne depuis 20 ans les équipes de direction et les conseils d’administration dans l’élaboration et le déploiement de leurs stratégies d’affaires. Au fil des ans, elle a développé une solide expertise dans les domaines des stratégies de croissance, de la gouvernance et de la gestion des parties prenantes. Joanne Desjardins**, LL.B., MBA, ASC, CRHA, possède une solide expérience comme administratrice de sociétés ; elle rédige actuellement un livre sur la stratégie des entreprises. Elle blogue régulièrement sur la stratégie et la gouvernance.
Cette semaine, nous renouons avec notre habitude de collaboration avec des experts avisés en matière de gouvernance et d’éthique. Ainsi, à l’occasion du colloque du réseau d’éthique organisationnel du Québec (RÉOQ) intitulé « Vivre l’éthique au quotidien dans son organisation : entre le rêve et la réalité », j’ai demandé à René Villemure*, conférencier d’honneur du colloque, d’agir à titre d’auteur invité sur mon blogue, et de jeter un regard philosophique sur une réalité avec laquelle tout administrateur et tout gestionnaire est confronté : le courage.
En tant qu’administrateur de société, faire preuve de courage, c’est de poser les bonnes questions, en temps opportun, et en lien avec nos valeurs profondes.
Voici donc la réflexion que nous livre René Villemure à ce sujet. Vous pouvez visiter son site à www.ethique.net pour mieux connaître ses champs d’intérêt et consulter ses nombreux bulletins réflexifs.
Le courage c’est l’exception, c’est automatiquement la solitude ; quel vide autour du courage ! — Jean Giono
Tant dans la direction des entreprises que lors de conseils d’administration, on parle peu de courage, sinon que pour citer ce vague courage managérial qui, au fond, ne signifie, au mieux, que l’on fera les choix qui doivent être faits afin de faire son boulot comme attendu.
Si un mot est la construction d’un son et d’un sens, il semblerait que le courage ne soit devenu qu’un son sans le sens, c’est-à-dire que l’on reconnaît le mot lorsqu’on l’entend, lorsque certains l’évoquent, mais que, au fond, personne ne sait réellement ce en quoi il consiste.
On aura beau créer des formations universitaires en gouvernance, en administration des affaires ou en management, le courage n’est pas une valeur qui se codifie ou qui s’enseigne.
Le courage ne consiste pas à faire son travail tel qu’on l’attend de vous, ce qui n’est que compétence. Non, le courage est une qualité du cœur qui porte à réfléchir et à agir contre la facilité, avec sagesse, dans des circonstances difficiles. Le courage n’existe pas en théorie, il ne peut se démontrer que dans l’action.
Tout comme l’éthique, le courage exige un peu moins de soi et un peu plus des autres. La personne courageuse mettra de côté son intérêt personnel à court terme en vue de réaliser la raison d’être de l’entreprise.
Dans la conduite des affaires, combien de personnes, devant l’adversité, préféreront détourner le regard, se voiler les yeux, ou dire que cela ne me regarde pas ? Combien préféreront la facilité ? Combien diront que c’est imposé et que je n’ai pas le choix ?
Il importe de savoir que le courage ne signifie pas l’absence de peur ; la personne courageuse peut avoir peur dans des circonstances difficiles. Toutefois, la personne courageuse mesurera le danger, évaluera les actions qui peuvent être entreprises, surmontera sa peur et fera ce qui peut être fait dans les circonstances. Le courage se distingue de la témérité, qui n’est après tout que de foncer sans réfléchir. La témérité n’est qu’un excès de courage — sans-réflexion.
Comme dirigeants, comme administrateurs, vous avez toujours le choix. Vous avez d’ailleurs été nommés afin d’exercer ce choix. La question n’est donc pas de savoir si vous avez ou non le choix, mais, plutôt, si vous aurez le courage d’exercer ce choix. Pour le dire autrement : aurez-vous assez de cœur afin de faire ce qui doit être fait ?
Malheureusement, l’observation de la vie des organisations nous offre de [trop] nombreux exemples où plusieurs ont préféré le confort au courage. Confort, c’est un joli mot, mais en réalité, ce confort n’est que lâcheté qui n’ose dire son nom. Certes, lâcheté, c’est moins joli, mais c’est plus exact.
Lorsque l’on y pense un instant, sans courage, on devient sans-cœur.
Dans une société qui change rapidement, on a plus besoin de modèles et de héros que de mercenaires à la fidélité douteuse. C’est pourquoi, dans la conduite des affaires, il convient de réhabiliter le courage, de comprendre sa distinction d’avec la témérité et d’agir de manière juste.
Avec courage.
Avec cœur.
Si le courage mène à l’héroïsme, le manque de courage mène au cynisme.
*René Villemure est Éthicien et Chasseur de tendances. Il a fondé l’Institut québécois d’éthique appliquée en 1998 et Éthikos en 2003. Il a été le premier éthicien au Canada à s’intéresser à la gestion éthique des organisations à l’époque où personne ne connaissait les termes « gouvernance », « responsabilité sociétale des entreprises », « développement durable » et « gestion éthique ». Il croyait que ces sujets étaient cruciaux, fondamentaux, incontournables, et ne devaient pas demeurer dans l’ombre ou le privilège de quelques experts et éthiciens d’occasion.
Éthicien depuis 1998, son point de vue est recherché par les gouvernements et les dirigeants de grandes sociétés publiques et privées tant en Amérique qu’en Europe et en Afrique. Il a, à ce jour, prononcé plus de 675 conférences et formé plus de 65 000 personnes, autour du monde, dans plus de 700 organisations puis a participé à plus de 375 entrevues dans les médias francophones et anglophones. Ses interventions sur l’éthique touchent des domaines aussi variés que le monde de l’entreprise, la santé, l’éducation, l’industrie du luxe, l’agroalimentaire, les relations internationales que la culture ou encore l’intelligence artificielle.
Voici un article qui met en garde les structures de gouvernance telles que Facebook.
L’article publié sur le site de Directors&Boards par Eve Tahmincioglu soulève plusieurs questions fondamentales :
(1) L’actionnariat à vote multiple conduit-il à une structure de gouvernance convenable et acceptable ?
(2) Pourquoi le principe de gouvernance stipulant une action, un vote, est-il bafoué dans le cas de plusieurs entreprises de la Silicone Valley ?
(3) Quel est le véritable pouvoir d’un conseil d’administration où les fondateurs sont majoritaires par le jeu des actions à classe multiple ?
(4) Doit-on réglementer pour rétablir la position de suprématie du conseil d’administration dirigé par des administrateurs indépendants ?
(5) Dans une situation de gestion de crise comme celle qui confronte Facebook, quel est le rôle d’un administrateur indépendant, président de conseil ?
(6) Les médias cherchent à connaître la position du PDG sans se questionner sur les responsabilités des administrateurs. Est-ce normal en gestion de crise ?
Je vous invite à lire l’article ci-dessous et à exprimer vos idées sur les principes de bonne gouvernance appliqués aux entreprises publiques contrôlées par les fondateurs.
Facebook is arguably facing one of the toughest challenges the company has ever faced. But the slow and tepid response from leadership, including the boards of directors, concerns governance experts.
The scandal involving data-mining firm Cambridge Analytica allegedly led to 50 million Facebook users’ private information being compromised but a public accounting from Facebook’s CEO and chairman Mark Zuckerberg has been slow coming.
Could this be a governance breakdown?
“This high-powered board needs to engage more strongly,” says Steve Odland, CEO of the Committee for Economic Development and a board member for General Mills, Inc. and Analogic Corporation. Facebook’s board includes Netflix’s CEO Reed Hastings; Susan D. Desmond-Hellmann, CEO of The Gates Foundation; the former chairman of American Express Kenneth I. Chenault; and PayPal cofounder Peter A. Thiel, among others.
Odland points out that Facebook has two powerful and well-known executives, Zuckerberg and Facebook COO Sheryl Sandberg, who have been publicly out there on every subject, but largely absent on this one.
“They need to get out and publicly talk about this quickly,” Odland maintains. “They didn’t have to have all the answers. But this vacuum of communications gets filled by others, and that’s not good for the company.”
Indeed, politicians, the Federal Trade Commission and European politicians are stepping in, he says, “and that could threaten the whole platform.”
Typically, he adds, it comes back to management to engage and use the board, but “I don’t think Zuckerberg is all that experienced in that regard. This is where the board needs to help him.”
But how much power does the board have?
Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance, sees the dual-class ownership structure of Facebook that gives the majority of voting power to Zuckerberg and thus undermines shareholders and the board’s power.
“It’s his board because of the dual-class stock. There is nothing [directors] can do; neither can the shareholders and a lawsuit would yield really nothing,” he explains.
Increasingly, company founders have been opting to shore up control by creating stock ownership structures that undercut shareholder voting power, where only a decade ago almost all chose the standard and accepted one-share, one-vote model.
Now the Snap Inc. initial public offering (IPO) takes it even further with the first-ever solely non-voting stock model. It’s a stock ownership structure that further undercuts shareholder influence, undermines corporate governance and will likely shift the burden of investment grievances to the courts.
By offering stock in the company with no shareholder vote at all, Snap — the company behind the popular mobile-messaging app Snapchat that’s all about giving a voice to the many — has acknowledged that public voting power at companies with a hierarchy of stock ownership classes is only a fiction. And it begs the question: Why does Snap even need a board?
Alas, Facebook’s shares have tanked as a result of the Cambridge Analytica revelations, and it’s unclear what’s happening among the leaders at Facebook to deal with the crisis.
Facebook’s board, advises Odland, needs to get involved and help create privacy policies and if those are violated, they need to follow up.
“This is a relatively young company in a relatively young industry that has grown to be a powerhouse and incredibly important,” he explains. Given that, he says, there are “new forms of risk management this board needs to tackle.”
Nous avons demandé à Richard Thibault *, président de RTCOMM, d’agir à titre d’auteur invité. Son billet présente sept leçons tirées de son expérience comme consultant en gestion de crise.
En tant que membres de conseils d’administration, vous aurez certainement l’occasion de vivre des crises significatives et il est important de connaître les règles que la direction doit observer en pareilles circonstances.
Voici donc l’article en question, reproduit ici avec la permission de l’auteur. Vos commentaires sont appréciés. Bonne lecture.
Sept leçons apprises en matière de communications de crise
Par Richard Thibault*
La crise la mieux gérée est, dit-on, celle que l’on peut éviter. Mais il arrive que malgré tous nos efforts pour l’éviter, la crise frappe et souvent, très fort. Dans toute situation de crise, l’objectif premier est d’en sortir le plus rapidement possible, avec le moins de dommages possibles, sans compromettre le développement futur de l’organisation.
Voici sept leçons dont il faut s’inspirer en matière de communication de crise, sur laquelle on investit généralement 80% de nos efforts, et de notre budget, en de telles situations.
The Deepwater Horizon oil spill as seen from space by NASA’s Terra satellite on May 24, 2010 (Photo credit: Wikipedia)
(1) Le choix du porte-parole
Les médias voudront tout savoir. Mais il faudra aussi communiquer avec l’ensemble de nos clientèles internes et externes. Avoir un porte-parole crédible et bien formé est essentiel. On ne s’improvise pas porte-parole, on le devient. Surtout en situation de crise, alors que la tension est parfois extrême, l’organisation a besoin de quelqu’un de crédible et d’empathique à l’égard des victimes. Cette personne devra être en possession de tous ses moyens pour porter adéquatement son message et elle aura appris à éviter les pièges. Le choix de la plus haute autorité de l’organisation comme porte-parole en situation de crise n’est pas toujours une bonne idée. En crise, l’information dont vous disposez et sur laquelle vous baserez vos décisions sera changeante, contradictoire même, surtout au début. Risquer la crédibilité du chef de l’organisation dès le début de la crise peut être hasardeux. Comment le contredire ensuite sans nuire à son image et à la gestion de la crise elle-même ?
(2) S’excuser publiquement si l’on est en faute
S’excuser pour la crise que nous avons provoqué, tout au moins jusqu’à ce que notre responsabilité ait été officiellement dégagée, est une décision-clé de toute gestion de crise, surtout si notre responsabilité ne fait aucun doute. En de telles occasions, il ne faut pas tenter de défendre l’indéfendable. Ou pire, menacer nos adversaires de poursuites ou jouer les matamores avec les agences gouvernementales qui nous ont pris en défaut. On a pu constater les impacts négatifs de cette stratégie utilisée par la FTQ impliquée dans une histoire d’intimidation sur les chantiers de la Côte-Nord, à une certaine époque. Règle générale : mieux vaut s’excuser, être transparent et faire preuve de réserve et de retenue jusqu’à ce que la situation ait été clarifiée.
(3) Être proactif
Dans un conflit comme dans une gestion de crise, le premier à parler évite de se laisser définir par ses adversaires, établit l’agenda et définit l’angle du message. On vous conseillera peut-être de ne pas parler aux journalistes. Je prétends pour ma part que si, légalement, vous n’êtes pas obligés de parler aux médias, eux, en contrepartie, pourront légalement parler de vous et ne se priveront pas d’aller voir même vos opposants pour s’alimenter. En août 2008, la canadienne Maple Leaf, compagnie basée à Toronto, subissait la pire crise de son histoire suite au décès et à la maladie de plusieurs de ses clients. Lorsque le lien entre la listériose et Maple Leaf a été confirmé, cette dernière a été prompte à réagir autant dans ses communications et son attitude face aux médias que dans sa gestion de la crise. La compagnie a très rapidement retiré des tablettes des supermarchés les produits incriminés. Elle a lancé une opération majeure de nettoyage, qu’elle a d’ailleurs fait au grand jour, et elle a offert son support aux victimes. D’ailleurs, la gestion des victimes est généralement le point le plus sensible d’une gestion de crise réussie.
(4) Régler le problème et dire comment
Dès les débuts de la crise, Maple Leaf s’est mise immédiatement au service de l’Agence canadienne d’inspection des aliments, offrant sa collaboration active et entière pour déterminer la cause du problème. Dans le même secteur alimentaire, tout le contraire de ce qu’XL Foods a fait quelques années plus tard. Chez Maple Leaf, tout de suite, des experts reconnus ont été affectés à la recherche de solutions. On pouvait reprocher à la compagnie d’être à la source du problème, mais certainement pas de se trainer les pieds en voulant le régler. Encore une fois, en situation de crise, camoufler sa faute ou refuser de voir publiquement la réalité en face est décidément une stratégie à reléguer aux oubliettes. Plusieurs années auparavant, Tylenol avait montré la voie en retirant rapidement ses médicaments des tablettes et en faisant la promotion d’une nouvelle méthode d’emballage qui est devenue une méthode de référence aujourd’hui.
(5) Employer le bon message
Il est essentiel d’utiliser le bon message, au bon moment, avec le bon messager, diffusé par le bon moyen. Les premiers messages surtout sont importants. Ils serviront à exprimer notre empathie, à confirmer les faits et les actions entreprises, à expliquer le processus d’intervention, à affirmer notre désir d’agir et à dire où se procurer de plus amples informations. Si la gestion des médias est névralgique, la gestion de l’information l’est tout autant. En situation de crise, on a souvent tendance à s’asseoir sur l’information et à ne la partager qu’à des cercles restreints, ou, au contraire, à inonder nos publics d’informations inutiles. Un juste milieu doit être trouvé entre ces deux stratégies sachant pertinemment que le message devra évoluer en même temps que la crise.
(6) Être conséquent et consistant
Même s’il évolue en fonction du stade de la crise, le message de base doit pourtant demeurer le même. Dans l’exemple de Maple Leaf évoqué plus haut, bien que de nouveaux éléments aient surgi au fur et à mesure de l’évolution de la crise, le message de base, à savoir la mise en œuvre de mesures visant à assurer la santé et la sécurité du public, a été constamment repris sur tous les tons. Ainsi, Maple Leaf s’est montrée à la fois consistante en respectant sa ligne de réaction initiale et conséquente, en restant en phase avec le développement de la situation.
(7) Être ouvert d’esprit
Dans toute situation de crise, une attitude d’ouverture s’avérera gagnante. Que ce soit avec les médias, les victimes, nos employés, nos partenaires ou les agences publiques de contrôle, un esprit obtus ne fera qu’envenimer la situation. D’autant plus qu’en situation de crise, ce n’est pas vraiment ce qui est arrivé qui compte mais bien ce que les gens pensent qui est arrivé. Il faut donc suivre l’actualité afin de pouvoir anticiper l’angle que choisiront les médias et s’y préparer en conséquence.
En conclusion
Dans une perspective de gestion de crise, il est essentiel de disposer d’un plan d’action au préalable, même s’il faut l’appliquer avec souplesse pour répondre à l’évolution de la situation. Lorsque la crise a éclaté, c’est le pire moment pour commencer à s’organiser. Il est essentiel d’établir une culture de gestion des risques et de gestion de crise dans l’organisation avant que la crise ne frappe. Comme le dit le vieux sage, » pour être prêt, faut se préparer ! »
* Richard Thibault, ABCP
Président de RTCOMM, une entreprise spécialisée en positionnement stratégique et en gestion de crise
Menant de front des études de Droit à l’Université Laval de Québec, une carrière au théâtre, à la radio et à la télévision, Richard Thibault s’est très tôt orienté vers le secteur des communications, duquel il a développé une expertise solide et diversifiée. Après avoir été animateur, journaliste et recherchiste à la télévision et à la radio de la région de Québec pendant près de cinq ans, il a occupé le poste d’animateur des débats et de responsable des affaires publiques de l’Assemblée nationale de 1979 à 1987.
Richard Thibault a ensuite tour à tour assumé les fonctions de directeur de cabinet et d’attaché de presse de plusieurs ministres du cabinet de Robert Bourassa, de conseiller spécial et directeur des communications à la Commission de la santé et de la sécurité au travail et de directeur des communications chez Les Nordiques de Québec.
En 1994, il fonda Richard Thibault Communications inc. (RTCOMM). D’abord spécialisée en positionnement stratégique et en communication de crise, l’entreprise a peu à peu élargi son expertise pour y inclure tous les champs de pratique de la continuité des affaires. D’autre part, reconnaissant l’importance de porte-parole qualifiés en période trouble, RTCOMM dispose également d’une école de formation à la parole en public. Son programme de formation aux relations avec les médias est d’ailleurs le seul programme de cette nature reconnu par le ministère de la Sécurité publique du Québec, dans un contexte de communication d’urgence. Ce programme de formation est aussi accrédité par le Barreau du Québec.
Richard Thibault est l’auteur de Devenez champion dans vos communications et de Osez parler en public, publié aux Éditions MultiMondes et de Comment gérer la prochaine crise, édité chez Transcontinental, dans la Collection Entreprendre. Praticien reconnu de la gestion des risques et de crise, il est accrédité par la Disaster Recovery Institute International (DRII).
Spécialités : Expert en positionnement stratégique, gestion des risques, communications de crise, continuité des affaires, formation à la parole en public.
Aujourd’hui, je vous présente un formidable guide, publié par McCarthyTetrault, sur les risques associés aux questions de la cybersécurité dans les entreprises.
Vous y trouverez une information complète ainsi que divers outils de diagnostic essentiels aux conseils d’administration qui doivent se préparer à affronter des attaques de nature cybernétique, lesquelles sont de plus en plus fréquentes.
Cet excellent document a été porté à mon attention par Joanne Desjardins, LL.B., MBA, CRHA, ASC, associée de la firme Arsenal conseils, spécialisés en gouvernance et en stratégie.
L’ouvrage est divisé en quatre parties :
(1) une mise en contexte de la situation ;
(2) Pourquoi se préparer aux risques ;
(3) Le programme de préparation aux cyberrisques ;
(4) L’exécution efficace du plan d’intervention.
Voici un aperçu de l’introduction. Je vous invite à prendre connaissance de ce document très bien conçu.
Bonne lecture ! Vos commentaires sont les bienvenus.
Qui dit données dit possibilité de perte de données. La façon dont une organisation se prépare à une atteinte à la protection des données — et la gère si elle se produit – a un effet mesurable sur les répercussions d’une telle atteinte. En gérant efficacement un tel incident, qui peut coûter des millions de dollars et ruiner la réputation d’une organisation, on peut le maîtriser et réduire considérablement la gravité de ses conséquences. Par exemple, à la suite d’une atteinte très médiatisée à la protection des données par un logiciel malveillant installé sur les caisses en libre-service de Home Depot, deux sociétés canadiennes ont entamé des actions collectives, réclamant une indemnisation de 500 millions de dollars ; les recours ont finalement été réglés pour un montant de 400 000 $. Cette réduction importante est justifiée, dit le juge, au vu de la réponse « exemplaire » de Home Depot & NBSP ; : 1
Dans l’affaire en question, attendu : a) que Home Depot n’a apparemment commis aucun acte répréhensible ; b) qu’elle a réagi rapidement et d’une manière responsable, généreuse et exemplaire aux actes criminels perpétrés contre elle par les pirates informatiques ; c) que le comportement de Home Depot n’avait nul besoin d’être géré ; d) que la probabilité que les membres du groupe aient gain de cause contre Home Depot tant sur le plan de la responsabilité que de la preuve de dommages consécutifs était négligeable, voire nulle ; et e) que le risque d’échec devant les tribunaux et les frais de litige connexes étaient importants et immédiats, j’aurais approuvé l’abandon de l’action collective proposé par M. Lozanski, avec ou sans dépens et sans aucun avantage pour les membres du groupe présumés. [traduction libre].
Prolifération des données
Les renseignements personnels se définissent comme les données pouvant servir à identifier une personne, et leur collecte crée des obligations de protection de la vie privée (expliquant l’existence de lois sur la protection de la vie privée). Avec les progrès technologiques, les organisations recueillent, conservent et transfèrent plus de renseignements personnels sur les consommateurs, les professionnels, les patients et les employés que jamais auparavant. L’accumulation de grandes quantités de renseignements personnels dans d’immenses bases de données augmente le risque d’accès non autorisé à ces informations ainsi que les conséquences qui peuvent en découler. Une seule atteinte à la protection des données personnelles peut aujourd’hui toucher des millions de personnes.
L’adoption croissante d’identifiants biométriques (empreintes digitales ou vocales, reconnaissance faciale, etc.) par les entreprises crée aujourd’hui de nouveaux risques, soit la perte ou la mauvaise utilisation de ces éléments d’identification immuables.
Incidents de plus en plus importants et sophistiqués
Si les incidents connaissent une augmentation croissante, le problème le plus important est leur sophistication grandissante. Les modèles d’affaires des malfaiteurs ont évolué et, en plus de recourir à des méthodes toujours plus complexes, leurs cibles ont changé. Autrefois, le modus operandi consistait à voler des renseignements de cartes de crédit pour effectuer des transactions non autorisées. Aujourd’hui, les cyberadversaires utilisent des méthodes d’ingénierie sociale (comme l’hameçonnage au moyen de courriels frauduleux visant à amener par la tromperie des employés à fournir des informations confidentielles ou sensibles) pour obtenir des renseignements de valeur pour l’entreprise. Ces renseignements sont ensuite monnayés directement par leur utilisation dans le cadre de délits d’initiés, vendus à des concurrents (dans le cas d’une propriété intellectuelle ou d’un secret commercial) ou utilisés pour exiger une rançon.
Les hauts dirigeants d’entreprise craignent de plus en plus les atteintes à la protection des données, et il est désormais communément admis que les sociétés ne doivent pas se demander si un tel incident se produira, mais quand ?
Incidents de plus en plus coûteux
Les atteintes à la protection des données deviennent de plus en plus coûteuses. Si de nouveaux produits (comme les assurances contre les cyberrisques) contribuent à en défrayer les coûts, la réaction la plus fréquente au signalement d’un incident est une poursuite en justice (le plus souvent une action collective). Les dommages-intérêts octroyés ont certes été jusqu’ici relativement minimes, mais les coûts de gestion d’une atteinte à la protection des données peuvent être incroyablement élevés.
La réglementation en la matière a un coût. De récentes modifications apportées à la Loi sur la protection des renseignements personnels et les documents électroniques (LPRPDE) du Canada ont introduit l’obligation de notification d’une atteinte et une amende de 100 000 $ CA par atteinte en cas de non-respect de cette exigence — s’ajoutant aux frais financiers et aux coûts des atteintes à la réputation qu’engendrent les incidents liés à la confidentialité des données.
Les coûts ne se limitent pas aux dommages : la responsabilité des atteintes à la protection des données peut être imputée au conseil d’administration. Gregg Steinhafel, chef de la direction et président du conseil de Target, a démissionné tout juste après l’incident dont son entreprise a été victime. Un sort similaire a frappé Amy Pascal, qui a quitté ses fonctions de chef de Sony Pictures dans la foulée du piratage de Sony.
Les coûts ne se limitent pas aux dommages : la responsabilité des atteintes à la protection des données peut être imputée au conseil d’administration. Gregg Steinhafel, chef de la direction et président du conseil de Target, a démissionné tout juste après l’incident dont son entreprise a été victime. Un sort similaire a frappé Amy Pascal, qui a quitté ses fonctions de chef de Sony Pictures dans la foulée du piratage de Sony.
Lorsqu’un PDG d’une grande entreprise démissionne ou se retire, l’organisation se retrouve souvent en mode de gestion de crise. C’est alors que certains CA optent pour la nomination d’un de leurs membres comme premier dirigeant, pour une période plus ou moins longue ! C’est l’objet de l’étude du professeur Larker.
Le nouveau PDG connaît déjà très bien l’organisation et, puisqu’il n’est pas membre du cercle fermé des hauts dirigeants, il est bien placé pour orchestrer les changements nécessaires ou pour poursuivre une stratégie qui s’était avérée efficace.
L’étude effectuée montre que sur les entreprises du Fortune 1000, 58 étaient dirigées par un ex-administrateur. Les deux tiers des cas étaient liés à une démission soudaine du PDG. Seulement, un tiers des nouveaux PDG avait fait l’objet d’une succession planifiée.
Également, l’étude révèle que 64 % des administrateurs nommés comme PDG l’étaient à la suite d’un problème de performance.
Il appert que les nominations se font très rapidement, souvent le même jour de la démission du PDG. Les nominations se font par intérim dans 45 % des cas, et permanente dans 55 % des cas, ce qui est un peu surprenant étant donné que l’engagement se fait sans les formalités de recrutement habituelles.
Enfin, il ressort de cela que les administrateurs nommés restent en fonction seulement 3,3 ans, comparativement à 8 ans pour les PDG des grandes sociétés du Fortune 1000.
Enfin, les deux tiers des administrateurs nommés avaient une expérience de PDG dans une autre entreprise auparavant. La performance de ces nouveaux administrateurs nommés n’est pas jugée supérieure.
Je vous invite à lire cet article si vous souhaitez avoir plus de détails.
Many observers consider the most important responsibility of the board of directors its responsibility to hire and fire the CEO. To this end, an interesting situation arises when a CEO resigns and the board chooses neither an internal nor external candidate, but a current board member as successor.
Why would a company make such a decision? The benefit of appointing a current director to the CEO position is that the director can act as a hybrid “inside-outside” CEO. He or she is likely well versed in all aspects of the company, including strategy, business model, and risk-management practices. A current director likely also has personal relationships with the executive team and fellow board members, making it easier to determine cultural fit prior to hiring. At the same time, this individual is not a member of the current senior management team, and therefore has greater freedom to make organizational changes if needed. On the other hand, appointing a current director as CEO has potential drawbacks. The most obvious of these is that it signals a lack of preparedness on the company’s part to groom internal talent.
To understand the circumstances in which a company appoints a current board member as CEO, we conducted a search of CEO successions among Fortune 1000 companies between 2005 and 2016 and identified 58 instances where a non-executive (outside) director became CEO. Some companies made this decision more than once during the measurement period, and so our final sample includes 58 directors-turned-CEO at 50 companies.
Most director-turned-CEO appointments occur following a sudden resignation of the outgoing CEO. Over two-thirds (69 percent) follow a sudden resignation; whereas only one-third (31 percent) appear to be part of planned succession. Furthermore, director-turned-CEO appointments have an above average likelihood of following termination of a CEO for performance. Half (52 percent) of the outgoing CEOs in our sample resigned due to poor performance and an additional 12 percent resigned as part of a corporate-governance crisis, such as accounting restatement or ethical violation. That is, 64 percent of director-turned-CEO appointments followed a performance-driven turnover event compared to an estimated general market average of less than 40 percent.
Shareholders do not appear to be active drivers of these successions. In over three-quarter (78 percent) of the incidents in our sample, we failed to detect any significant press coverage of shareholder pressure for the outgoing CEO to resign. (This does not rule out the possibility that shareholders privately pressed the board of directors for change.) In 13 of 58 incidents (23 percent), a hedge fund, activist investor, or other major blockholder played a part in instigating the transition.
In most cases, companies name the director-turned-CEO as successor on the same day that the outgoing CEO resigns. In 91 percent of the incidents in our sample, the director was hired on the same day that the outgoing CEO stepped down; in only 9 percent of the incidents was there a gap between these announcements. When a gap did occur, the average number of days between the announcement of the resignation and the announcement of the successor was approximately four months (129 days). These situations included a mix of orderly successions and performance- or crisis-driven turnover.
The stock market reaction to the announcement of a director-turned-CEO is modest and not significantly different from zero. Because the outgoing CEO resignation tends to occur on the same day that the successor is named it is not clear how the market weighs the hiring decision of the director-turned-CEO relative to the news of the outgoing CEO resignation. In the small number of cases where the outgoing CEO resigned on a different date than the successor was appointed, we observe positive abnormal returns both to the resignation (2.4 percent) and to the succession (3.2 percent), suggesting that in these cases the market viewed these decisions favorably.
A large minority of director-turned-CEO appointments appear to be “emergency” appointments. In 45 percent of cases, directors were appointed CEO on an interim basis, although in a quarter of these the director was subsequently named permanent CEO. In the remaining 55 percent of cases, the director was named permanent CEO at the initial announcement date.
In terms of background, most directors-turned-CEO have significant experience with the company, with the industry, or as CEO of another company. Fifty-seven percent of directors-turned-CEO in our sample were recruited to the board during their predecessor’s tenure and served for an average of 6.9 years before being named CEO. Two-thirds (67 percent) had prior CEO experience at another company, and almost three-quarters (72 percent) had direct industry experience. Of note, only 9 percent had neither industry nor CEO experience.
Of note, directors-turned-CEO do not remain in the position very long, regardless of whether they are named permanently to the position or on an interim basis. We found that the directors-turned-CEO who served on an interim basis remained CEO for 174 days (just shy of 6 months) on average; directors permanently named to the CEO position remained CEO for only 3.3 years on average, compared to an average tenure of 8 years among all public company CEOs. It might be that their shorter tenure was driven by more challenging operating conditions at the time of their appointment, as indicated by the higher likelihood of performance-driven turnover preceding their tenure.
Finally, we do not find evidence that directors-turned-CEO exhibit above-average performance. Across our entire sample, we find slightly negative cumulative abnormal stock price returns (-2.3 percent) for companies who hire a director as CEO, relative to the S&P 500 Index. The results are similar when interim and permanent CEOs are evaluated separately. This suggests that the nature of the succession, rather than the choice of director as successor, is likely the more significant determinant of performance among these companies.
The complete paper is available for download here.
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David Larcker is Professor of Accounting at Stanford Graduate School of Business. This post is based on a paper authored by Professor Larcker and Brian Tayan, Researcher with the Corporate Governance Research Initiative at Stanford Graduate School of Business.
La scène de l’activisme actionnarial a drastiquement évolué au cours des vingt dernières années. Ainsi, la perception négative de l’implication des « hedge funds » dans la gouvernance des organisations a pris une tout autre couleur au fil des ans.
Les fonds institutionnels détiennent maintenant 63 % des actions des corporations publiques. Dans les années 1980, ceux-ci ne détenaient qu’environ 50 % du marché des actions.
L’engagement actif des fonds institutionnels avec d’autres groupes d’actionnaires activistes est maintenant un phénomène courant. Les entreprises doivent continuer à perfectionner leur préparation en vue d’un assaut éventuel des actionnaires activistes.
L’article de Merritt Moran* publié sur le site du Harvard Law School Forum on Corporate Governance, est d’un grand intérêt pour mieux comprendre les changements amenés par les actionnaires activistes, c’est-à-dire ceux qui s’opposent à certaines orientations stratégiques des conseils d’administration, ainsi qu’à la toute-puissance des équipes de direction des entreprises.
L’auteure présente dix activités que les entreprises doivent accomplir afin de décourager les activistes, les incitant ainsi à aller voir ailleurs !
Voici la liste des étapes à réaliser afin d’être mieux préparé à faire face à l’adversité :
Préparez un plan d’action concret ;
Établissez de bonnes relations avec les investisseurs institutionnels et avec les actionnaires ;
La direction doit entretenir une constante communication avec le CA ;
Mettez en place de solides pratiques de divulgations ;
Informez et éduquez les parties prenantes ;
Faites vos devoirs et analysez les menaces et les vulnérabilités susceptibles d’inviter les actionnaires activistes ;
Communiquez avec les actionnaires activistes et tentez de comprendre les raisons de leurs intérêts pour le changement ;
Comprenez bien tous les aspects juridiques relatifs à une cause ;
Explorez les différentes options qui s’offrent à l’entreprise ciblée ;
Apprenez à connaître le rôle des autorités réglementaires.
J’espère vous avoir sensibilisé à l’importance de la préparation stratégique face à d’éventuels actionnaires activistes.
Shareholder activism is a powerful term. It conjures the image of a white knight, which is ironic because these investors were called “corporate raiders” in the 1980s. A corporate raider conjures a much different image. As much as that change in terminology may seem like semantics, it is critical to understanding how to deal with proxy fights or hostile takeovers. The way someone is described and the language used are crucial to how that person is perceived. The perception of these so-called shareholder activists has changed so dramatically that, even though most companies’ goals are still the same, the playbook for dealing with activists is different than the playbook for corporate raiders. As such, a corresponding increase in the number of activist encounters has made that playbook required reading for all public company officers and directors. In fact, there have been more than 200 campaigns at U.S. public companies with market capitalizations greater than $1 billion in the last 10 quarters alone. [1]
It’s not just the terminology concerning activists that has changed, though. Technologies, trading markets and the relationships activists have with other players in public markets have changed as well. Yet, some things have not changed.
The 1980s had arbitrageurs that would often jump onto any opportunity to buy the stock of a potential target company and support the plans and proposals raiders had to “maximize shareholder value.” Inside information was a critical component of how arbs made money. Ivan Boesky is a classic example of this kind of trading activity—so much so that he spent two years in prison for insider trading, and is permanently barred from the securities business. Arbs have now been replaced by hedge funds, some of which comprise the 10,000 or so funds that are currently trying to generate alpha for their investors. While arbitrageurs typically worked inside investment banks, which were highly regulated institutions, hedge funds now are capable of operating independently and are often willing allies of the 60 to 80 full time “sophisticated” activist funds. [2] Information is just as critical today as it was in the 1980s.
Institutions now occupy a far greater percentage of total share ownership today, with institutions holding about 63% of shares outstanding of the U.S. corporate equity market. In the 1980s, institutional ownership never crossed 50% of shares outstanding. [3] Not only has this resulted in an associated increase of voting power for institutions by the same amount, but also a change in their behavior and posture toward the companies in which they invest, at least in some cases. Thirty years ago, the idea that a large institutional investor would publicly side with an activist (formerly known as a “corporate raider”) would be a rare event. Today, major institutions have frequently sided with shareholder activists, and in some cases privately issued a “Request for Activism”, or “RFA” for a portfolio company, as it has become known in the industry.
It seldom, if ever, becomes clear as to whether institutions are seeking change at a company or whether an activist fund identifies a target and then seeks institutional support for its agenda. What is clear is that in today’s form of shareholder activism, the activist no longer needs to have a large stake in the target in order to provoke and drive major changes.
For example, in 2013, ValueAct Capital held less than 1% of Microsoft’s outstanding shares. Yet, ValueAct President, G. Mason Morfit forced his way onto the board of one of the world’s largest corporations and purportedly helped force out longtime CEO Steve Ballmer. How could a relatively low-profile activist—at the time at least—affect such dramatic change? ValueAct had powerful allies, which held many more shares of Microsoft than the fund itself who were willing to flex their voting muscle, if necessary.
The challenge of shareholder activism is similar to, yet different from, that which companies faced in the 1980s. Although public markets have changed tremendously since the 1980s, market participants are still subject to the same kinds of incentives today as they were 30 years ago.
It has been said that even well performing companies, complete with a strong balance sheet, excellent management, a disciplined capital allocation record and operating performance above its peers are not immune. In our experience, this is true. When the amount of capital required to drive change, perhaps unhealthy change, is much less costly than it is to acquire a material equity position for an activist, management teams and boards of directors must navigate carefully.
Below are 10 building blocks that we believe will help position a company to better equip itself to handle the stresses and pressures from the universe of activist investors and hostile acquirers, which may encourage the activists to instead knock at the house next door.
Building Block 1: Be Prepared
Develop a written plan before the activist shows up. By the time a Schedule 13-D is filed, an activist already has the benefit of sufficient time to study a target company, develop a view of its weaknesses and build a narrative that can be used to put a management team and board of directors on the defensive. Therefore, a company’s plan must have balance and must contemplate areas that require attention and improvement. While some activists are akin to 1980s-style corporate raiders with irrational ideas designed only to bump up the stock over a very short period, there are also very sophisticated activists who are savvy and have developed constructive, helpful ideas. A company’s plan and response protocol need to be well thought through and in place before an activist appears. In some cases, the activist response plan can be built into a company’s strategic plan.
The plan needs inclusion and buy-in from the board of directors and senior management. Some subset of this group needs to be involved in developing the plan, not only substantively, but also in the tactical aspects of implementing the plan and communicating with shareholders, including activists, if and when an activist appears.
This preparatory building block extends beyond simply having a process in place to react to shareholder activism. It should complement the company’s business plan and include the charter and bylaws and consideration of traditional takeover defense strategies. It should provide for an advisory team, including lawyers, bankers, a public relations firm and a forensic accounting firm. We believe that the plan should go to a level of detail that includes which members of management and the board are authorized by the board to communicate with the activist and how those communications should occur.
Building Block 2: Promote Good Shareholder Relations with Institutions and Individual Shareholders
If the lesson of the first block was “put your own house in order,” then the second lesson is, “know your tenants, what they want, and how they prefer to live in your building.” This goes well beyond the typical investor relations function. This is where in-depth shareholder research comes into play. We recommend conducting a detailed perception study that can give boards and management teams a clear picture of what the current shareholder base wants, as well as how former and prospective shareholders’ perceptions of the company might differ from the way management and the board see the company itself.
In a takeover battle or proxy contest, facts are ammunition. Suppositions and assumptions of what management thinks shareholders want are dangerous. It is critical to understand how shareholders feel about the dividend policy and the capital allocation plans, for example. Understand how they view the executive compensation or the independence of the board. Do not assume. Ask candidly and revise periodically.
Building Block 3: Inform, Teach and Consult with the Board
Good governance is not something that can be achieved in a reactive sort of manner or when it becomes known that an activist is building a position. Without shareholder-friendly corporate governance practices, the odds of securing good shareholder relations in a contest for control drops significantly and creates the wrong optics.
There are governance issues that can cause institutional shareholders to act, or at least think, akin to activists. Recently, there have been various shareholder rebellions against excessive executive compensation packages—or say-on-pay votes. In fact, Norges, the world’s largest sovereign wealth fund, has launched a public campaign targeting what it views as excessive executive compensation. The fund’s chief executive told the Financial Times that, “We are looking at how to approach this issue in the public space.” He is speaking for an $870 billion dollar fund. The way those votes are cast can mean the difference between victory and defeat in a proxy contest.
Building Block 4: Maintain Transparent Disclosure Practices
While this building block relates to maintaining good shareholder relations, it also recognizes that activists are smart, well informed, motivated and relentless. If a company makes a mistake, and no company is perfect, the activist will likely find it. Companies have write-downs, impairments, restatements, restructurings, events of change or challenges that affect operating performance. While any one of these events may invite activist attention, once a contest for control begins, an activist will find and use every mistake the company ever made and highlight the material ones to the marketplace.
A company cannot afford surprises. One “whoops” event can be all it takes to turn the tide of a proxy vote or a hostile takeover. That is why it is critical to disclose the good and the bad news before the contest begins rather than during the takeover attempt. It may be painful at the time, but with a history of transparency, the marketplace will trust a company that tells them the activist is in it for its own personal benefit and that the proposal the activist is making will not maximize shareholder value, but will only increase the activist’s short-term profit for its investors. Developing that kind of trust and integrity over time can be a critical factor in any contest for corporate control, especially when research shows that the activist has not been transparent in its prior transactions or has misled investors prior to or after achieving its intended result.
When a company has established good corporate governance policies, has been open and transparent, has financial statements consistent with GAAP and effective internal control over financial reporting and knows its shareholder base cold, what is the next step in preparing for the challenge of an activist shareholder?
Building Block 5: Educate Third Parties
Prominent sell-side analysts and financial journalists can, and do, move markets. In a contest for corporate control, or even in a short slate proxy contest, they can be invaluable allies or intractable adversaries. As with the company’s shareholder base, one must know the key players, have established relationships and trust long before a dispute, and have the confidence that the facts are on the company’s side. But winning them over takes time and research, and is another area where an independent forensic accounting firm can be of assistance.
For example, when our client, Allergan, was fighting off a hostile bid from Valeant and Pershing Square, we identified that Valeant’s “double-digit” sales growth came from excluding discontinued products and those with declining sales from its calculation. This piece of information served as key fodder for journalists, who almost unanimously sided against Valeant for this and other reasons. Presentations, investor letters and analyst days can make the difference in creating a negative perception of the adversary and spreading a company’s message.
Building Block 6: Do Your Homework
Before an activist appears, a company needs to understand what vulnerabilities might attract an activist in the first place. This is where independent third parties can be crucial. Retained by a law firm to establish the privilege, they can do a vulnerability assessment of the company compared to its peers.
This is a different sort of assessment than what building block two entails, essentially asking shareholders to identify perceived weaknesses. Here, a company needs to look for the types of vulnerabilities that institutional shareholders might not see—but that an activist surely will. When these vulnerabilities such as accounting practices or obscure governance structures are not addressed, an activist will use them on the offensive. Even worse are the vulnerabilities that are not immediately apparent. In any activist engagement, it is best to minimize surprises as much as possible.
Building Block 7: Communicate With the Activist
Before deciding whether to communicate, know the other players.
This includes a deep dive into the activist’s history—what level of success has the activist had in the past? Have they targeted similar companies? What strategies have they used? How do they negotiate? How have other companies reacted and what successes or failures have they experienced?
If the activist commences a proxy contest or a consent solicitation, turn that intelligence apparatus on the slate of board nominees the activist is proposing. Find out about their vulnerabilities and paint the full picture of their business record. Do they know the industry? Are they responsible fiduciaries? What is their personal track record? These are important questions that investigators can help answer.
Armed with information about the activist and having consulted with management, the board has to decide whether to communicate with the activist, and if so, what the rules of the road are for doing so. What are the objectives and goals and what are the pros and cons of even starting that communication process? If a decision is made to start communications with the activist, make sure to pick the time to do so and not just respond to what the media hype might be promoting. Poison pills can provide breathing room to make these determinations.
Always keep in mind that communications can lead to discussions, which in turn can lead to negotiations, which may result in a deal.
Before reaching a settlement deal, a company must be sure to have completed the preceding due diligence. More companies seem to be choosing to appease activists by signing voting agreements and/or granting board seats. Although this will likely buy more time to deal with the activist in private, it may simply delay an undesirable outcome rather than circumvent the issue. Whether or not the company signs a voting agreement with the activist, management and the board of directors should know the activist’s track record and current activities with other companies in great detail as the initial step in considering whether to reach any accommodation with the activist.
Building Block 8: Understand the Role of Litigation
Most of the building blocks thus far have involved making a business case to the marketplace and supporting that case with candid communications. But in many activist campaigns—especially the really adversarial ones—there will come a time when the company needs to make its case to a court or a regulator or both.
As with other building blocks, litigation goes to one of the most valuable commodities in a contest for corporate control: TIME. In most situations, the more time the target has to maintain the campaign, the better. The company’s legal team needs to work with the forensic accountants to understand and identify issues that relate to the activist’s prior transactions and business activities, while ensuring that the company is not living in a glass house when it throws stones. Armed with the facts, lawyers will do the legal analysis to determine whether the activist has complied with or broken state, federal or international law or regulation. If there are causes of action, then one way to resolve them is to litigate.
Building Block 9: Factor in Contingencies and Options
Contingencies can include additional activists, M&A and small issues that can become big issues. This building block is about understanding the environment in which the company is operating.
For example, are there hedge funds targeting the same company in a “wolfpack”, as the industry has coldly nicknamed them? If two or more hedge funds are acting in concert to acquire, hold, vote or dispose of a company’s securities, they can be treated as a group triggering the requirement to file a Schedule 13-D as such. Under certain circumstances, the remedy the SEC has secured for violating Section 13(d) of the Williams Act is to sterilize the vote of the shares held by the group’s members. So, if there is evidence indicating that funds are working together which have not jointly filed a Schedule 13-D, the SEC may be able to help. Or better yet, think about building block eight and litigate.
In the case of a hostile acquisition, consider whether there is an activist already on the board of the potential acquirer? Has the activist been a board member in prior transactions? If so, what kind of fiduciary has that activist shown himself to be?
Another contingency is exploring “strategic alternatives.”
Building Block 10: Understand the Role of Regulators
Despite the passage of the Dodd-Frank Act, regulators today may be less inclined to intervene in these kinds of issues than they were 30 years ago.
When an activist is engaging in questionable or illegal practices, contacting regulators should be considered. But this requires being proactive.
The best way to approach the regulators is to present a complete package of evidence that is verified by independent third parties. Determine the facts, apply legal analysis to those facts and have conclusions that show violations of the law. Do not just show one side of the case; show both sides, the pros and the cons of a possible violation. Why? Because if the package is complete and has all the work that the regulator would want to do under the circumstances, two things will happen. First, the regulator will understand that there is an issue, a potential harm to shareholders and the public interest which the regulator is sworn to protect. Second, the regulator will save time when it presents the case for approval to act.
Using forensic accountants before and when an activist appears is one of the major factors that can assist companies today and also help the lawyers who are advising the target company. If other advisors are conflicted, the company needs a reputable, independent third party who can help the company ascertain facts on a timely basis to make informed decisions, and if the determination is made to oppose the activist, make the case to shareholders, to analysts, to media, to regulators and to the courts.
Each of these buildings blocks is important. While they have remained mostly the same since the 1980s, tactics, strategies and the marketplace have changed. Even though activists may appear to act the same way, each is different and each activist approach has its own differences from all the others.
3The Wall Street Journal, Federal Reserve and Goldman Sachs Global Investment Research.(go back)
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*Merritt Moran is a Business Analyst at FTI Consulting. This post is based on an FTI publication by Ms. Moran, Jason Frankl, John Huber, and Steven Balet.
Au lendemain du référendum mené en Grande-Bretagne (GB), on peut se demander quelles sont les implications juridiques d’une telle décision. Celles-ci sont nombreuses ; plusieurs scénarios peuvent être envisagés pour prévoir l’avenir des relations entre la GB et l’Union européenne (UE).
Ben Perry de la firme Sullivan & Cromwell et Simon Witty de la firme Davis Polk & Wardwell ont exploré toutes les facettes légales de cette nouvelle situation dans deux articles parus récemment sur le site du Harvard Law School Forum on Corporate Governance.
Ce sont deux articles très approfondis sur les répercussions du Brexit. On doit admettre que le processus de retrait de l’UE est complexe, qu’il y a plusieurs modèles dont la GB peut s’inspirer (Suisse, Norvégien, Islandais, Liechtenstein), et que le vote n’a pas d’effets légaux immédiats. En fait, le processus de sortie et de renégociation peut durer trois ans !
Je vous invite à prendre connaissance de ces deux articles afin d’être mieux informés sur les principales avenues conséquentes au retrait de la GB de l’UE.
Le 25 juin, je vous ai déjà présenté l’article de Perry qui a suscité beaucoup d’intérêt (Brexit: Legal Implications).
Aujourd’hui, je vous présente le texte de l’article de Witty (The Legal Consequences of Brexit) qui met l’accent sur les répercussions prévisibles qu’aura ce retrait sur le marché des capitaux, les fusions et acquisitions, les différends liés aux contrats, les lois antitrusts, les services financiers et les mesures de taxation.
On June 23, 2016, the UK electorate voted to leave the European Union. The referendum was advisory rather than mandatory and does not have any immediate legal consequences. It will, however, have a profound effect. With any next steps being driven by UK and EU politics, it is difficult to predict the future of the UK’s relationship with the EU. This post discusses the process for Brexit, the alternative models of relationship that the UK may seek to adopt, and certain implications for the capital markets, mergers and acquisitions, contractual disputes and enforcement, anti-trust, financial services and tax.
The process for exiting the EU
The treaties that govern the EU expressly contemplate a member state leaving. Under Article 50 of the Treaty on European Union, the UK must notify the European Council of its intention to withdraw from the EU. Once notice is given, the UK has two years to negotiate the terms of its withdrawal. Any extension of the negotiation period will require the consent of all 27 remaining member states. When to invoke the Article 50 mechanism is, therefore, a strategically important decision. In a statement announcing his intention to resign as Prime Minister of the UK, David Cameron stated that the decision to provide notice under Article 50 to the European Council should be taken by the next Prime Minister, who is expected to be in place by October 2016.
Waving United Kingdom and European Union Flag
Any negotiated agreement will require the support of at least 20 out of the 27 remaining member states, representing at least 65% of the EU’s population, and the approval of the European Parliament. If no agreement is reached or no extension is agreed, the UK will automatically exit the EU two years after the Article 50 notice is given, even if no alternative trading model or arrangement has been negotiated. The UK continues to be a member of the EU in the interim period, subject to all EU legislation and rules.
Alternative models of relationship
It is not clear what model of relationship the UK will seek to negotiate with the EU. In the run-up to the referendum, a number of options were suggested. Politicians in favor of withdrawing from the EU did not coalesce around a specific alternative. It is, therefore, unclear what model will ultimately be followed or whether any of the models could be achieved through the Article 50 process. The principal options are outlined below.
The Norwegian model. The UK might seek to join the European Economic Area, as Norway has. The UK would have considerable access to the internal market, i.e., the association of European countries trading with each other without restrictions or tariffs, including in financial services. The UK would have limited access to the internal market for agriculture and fisheries; and it would not benefit from or be bound by the EU’s external trade agreements. In addition, the UK would have to make significant financial contributions to the EU and continue to allow free movement of persons. It would also have to apply EU law in a number of fields, but the UK would no longer participate in policymaking at the EU level, and would be excluded from participation in the European Supervisory Authorities, the key architects of secondary legislation in the financial services sphere. To adopt this model, the UK would require the agreement of all 27 remaining EU member states, plus Iceland, Liechtenstein and Norway.
Negotiated bilateral agreements. Like Switzerland, the UK might seek to enter into various bilateral agreements with the EU to obtain access to the internal market in specific sectors (rather than the market as a whole, which would be the case under the Norwegian model). This model would likely require the UK to accept some of the EU’s rules on free movement of persons and comply with particular EU laws. Again, the UK would not participate formally in the drafting of those laws. The UK would also have to make financial contributions to the EU. Negotiating these bilateral agreements would be a difficult and time-consuming process. Switzerland, for instance, has negotiated more than 100 individual agreements with the EU to cover market access in different sectors. As a result of its complexity, it is unclear whether the EU would work with the UK to negotiate this model within the Article 50 timeframe.
Customs union. A customs union is currently in place between the EU and Turkey in respect of trade in goods, but not services. Under this model, Turkey can export goods to the EU without having to comply with customs restrictions or tariffs. Its external tariffs are also aligned with EU tariffs. The UK might seek to negotiate a similar arrangement with the EU. Under such an arrangement, and unless separately negotiated, UK financial institutions (including UK subsidiaries of US holding companies) would not be able to provide financial and professional services into the EU on equal terms with EU member state firms. For example, the EU passporting regime would not be available, meaning UK firms would have to seek separate licensing in each EU member state to provide certain financial services. Furthermore, in areas where the UK would have access to the internal market, it would likely be required to enforce rules that are equivalent to those in the EU. The UK would not be required to make any financial contributions to the EU, nor would it be bound by the majority of EU law.
Free trade agreement. The UK might seek to negotiate a free trade agreement with the EU, which would cover goods and services. To do so, it may look to the agreement that was recently agreed between the EU and Canada after seven years of negotiations. This agreement removes tariffs in respect of trade in goods, as well as certain non-tariff barriers in respect of trade in goods and services. Although the UK would not be required to contribute to the EU budget, its exports to the EU would have to comply with the applicable EU standards.
WTO membership. Under this model, the UK would not have any preferential access to the internal market or the 53 markets with which the EU has negotiated free trade agreements. Tariffs and other barriers would be imposed on goods and services traded between the UK and the EU, although, under WTO rules, certain caps would apply on tariffs applicable to goods, and limits would be imposed on particular non-tariff barriers applicable to goods and services. The UK would no longer be required to make any financial contributions to the EU, nor would it be bound by EU laws (although it would have to comply with certain rules in order to trade with the EU).
Implications for UK legislation
Regardless of which model it adopts, the UK will no longer be required to apply some (if not all) EU legislation. The UK has implemented certain EU laws (generally, EU directives) via primary legislation that will continue to be part of English law, unless these are amended or repealed. Other EU laws (generally, EU regulations) have direct applicability in the UK without the need for implementation, which means that these laws would fall away once the UK withdraws from the EU, unless they are transposed into UK law. Finally, thousands of statutory instruments have been made pursuant to the European Communities Act 1972. If this act is repealed upon the UK’s withdrawal from the EU, then, unless transposed into UK law, these statutory instruments will cease to apply as well. Therefore, the UK will have to perform a complex exercise to determine which EU laws and EU-derived laws it wishes to retain, amend or repeal, driven in part by the nature of any agreement reached with the EU during exit negotiations.
How may Brexit affect you?
The UK’s withdrawal from the EU will impact countless areas of the economy. The following section discusses a number of Brexit’s potential implications for the capital markets, mergers and acquisitions, contractual disputes and enforcement, anti-trust, financial services and tax. The extent to which these areas will be affected by the UK’s withdrawal from the EU will depend on the model of relationship that the UK and the EU adopt following the Brexit negotiations.
Capital Markets
The financial markets will likely continue to be volatile, particularly during the Brexit negotiations. This may affect the timing of transactions or their ability to be consummated.
The EU Prospectus Directive, which has been transposed into UK law, governs the content, format, approval and publication of prospectuses throughout the EU. Following eventual Brexit, the UK may no longer be bound by the Prospectus Directive and, thus, may seek to amend its prospectus legislation. For example, the Prospectus Directive provides that a company incorporated in an EU member state must prepare a prospectus if it wishes to offer shares to the public and/or request that shares be admitted to trading in the EU, subject to certain exemptions. The UK may wish to expand these exemptions, so that more offers can be made in the UK without a prospectus. Significantly, the Prospectus Directive also provides for the passporting of prospectuses throughout the EU. This means that a company can use a prospectus that has been approved in one member state to offer shares in any other EU member state. Without this passporting regime, UK companies will have to have their prospectuses approved both in the UK and at least one other member state where they wish to offer their shares, which may be particularly costly and time-consuming if the UK amends, for instance, the content requirements for prospectuses following Brexit, so that these no longer align with those prescribed by the Prospectus Directive.
During the Brexit negotiations, transaction documents may need to include specific Brexit provisions, for example to address the uncertainty around the model of relationship to be adopted.
M&A
As a result of ongoing uncertainty around the future of the UK’s relationship with the EU, a number of transactions with a UK nexus may be affected pending the Brexit negotiations.
Share sale transactions generally are not subject to much EU law or regulation. Asset and business sales, however, may be more affected by Brexit. For example, the regulations that protect the rights of employees on a business transfer stem from a European directive. When the UK withdraws from the EU, it may no longer be bound by this directive, and, therefore, the UK may wish to amend or repeal the regulations.
Contractual Disputes and Enforcement
As a member of the EU, the UK is part of a framework for deciding jurisdiction in disputes, recognizing judgments of other member states (and having its own courts’ judgments recognized and enforced throughout the EU) and deciding the governing law of contracts. Following Brexit, the UK may no longer be part of this framework which may affect jurisdiction and governing law choices in transaction documents.
Anti-trust
Currently, mergers that fall within the scope of the EU Merger Regulation can receive EU-wide clearance, which means that they are not also required to be cleared by individual member states. Following Brexit, mergers with a UK nexus may need to be reviewed by the UK’s Competition and Markets Authority separately.
More generally, UK anti-trust legislation is currently based on, and interpreted in line with, EU law, including decisions of the European Commission and the European Court of Justice. Given that UK courts may no longer be required to interpret national law consistently with EU law once the UK withdraws from the EU, businesses face the prospect of having to comply with divergent systems.
Financial Services
Much of the UK’s financial services regulation is based on EU law. This includes legislation such as the Markets in Financial Instruments Directive (MiFID), which regulates investment services and trading venues, the European Market Infrastructure Regulation, which regulates the derivatives market, the Alternative Investment Fund Managers Directive, which regulates hedge funds and private equity, and the Capital Requirements Directive and the Capital Requirements Regulation, which together represent the EU’s implementation of the international Basel III accords for the prudential regulation of banks. The Bank Recovery and Resolution Directive (“BRRD”) has been implemented into UK law via the Banking Act 2009, so the fundamental bank resolution regime should initially survive Brexit. That said, substantial further EU legislative work is expected in this area to modify BRRD (e.g., in relation to the implementation of the TLAC standard), so it is possible that the regimes could diverge rapidly after Brexit. In general with financial services legislation, an assessment will need to be made whether to align with EU legislation or diverge; the greater the divergence, the more the dual burdens on cross-border firms.
As mentioned above, the UK will likely not be part of the European Supervisory Authorities framework and will have no influence in the development of primary or secondary EU legislation and guidance. The UK has been a significant force in the area of financial services legislation and has driven the introduction of, for instance, the BRRD. The UK’s withdrawal may impact the legislative agenda and ultimately the quality of the legislation produced.
Financial institutions established in EEA member states can obtain a “passport” that allows them to access the markets of other EEA member states without being required to set up a subsidiary and obtain a separate license to operate as a financial services institution in those member states. Following Brexit, UK financial services institutions, including subsidiaries of US and other non-EU parent companies, would no longer be able to benefit from passporting (unless the UK were to join the EEA pursuant to the Norway option described above).
Although the UK will likely remain a member of the EU for a substantial period while negotiations are ongoing, there are pressing questions as to how the UK will engage with the ongoing legislative processes that affect the UK financial services industry. There are a number of areas where framework legislation has been passed already, but key secondary legislation is being developed or revised. These areas include the complete overhaul of MiFID and the Payment Services Directive. Even before the UK leaves the EU, we can expect to see a diminished role for the UK Government, UK regulators and UK market participants in shaping the detailed policies and procedures in those areas.
We expect larger financial institutions in the UK, or those based outside the UK that have significant operations in the UK, will wish to contribute to the negotiation process between the EU and UK. In particular, to the extent a unique model for trading relationships is proposed, these institutions may wish to engage with policymakers to minimize disruption and damage to their EU business model.
Tax
The EU has influenced many areas of the UK’s tax system. In some cases, this has been through EU legislation which applies directly in the UK; in other cases, EU rules have been adopted through UK legislation (for example, the UK’s VAT legislation is based on principles which apply across the EU); and, in still other cases, decisions of the European Court of Justice have either influenced the development of UK tax rules, or have prevented the UK’s tax authority from enforcing aspects of the UK’s domestic tax code. This complicated backdrop means that the tax impact of Brexit will be varied and difficult to predict.
Areas to watch include the following:
Direct tax: although the UK has an extensive double tax treaty network, not all treaties provide for zero withholding tax on interest and royalty payments. Accordingly, corporate groups should consider the extent to which existing structures rely on EU rules such as the Parent-Subsidiary Directive or the Interest and Royalties Directive to secure tax efficient payment flows. Similarly, corporate groups proposing to undertake cross border reorganisations would need to consider the extent to which existing cross-EU border merger tax reliefs will survive intact. It should also be borne in mind that, even if Brexit occurs, the UK is likely to continue vigorously supporting the OECD’s BEPS initiative such that there may well be considerable constraints and complexities associated with locating businesses outside the UK.
VAT: although VAT is an EU-wide tax regime, it seems inconceivable that VAT will be abolished. However, it is likely that, over time, there will be a divergence between UK VAT rules and EU VAT rules, including as to input VAT recovery on supplies made to non-UK customers. Additionally, UK companies may lose the administrative benefit of the “one stop shop” for businesses operating in Europe.
Customs duty: if the UK left the customs union, exports to and imports from EU countries may become subject to tariffs or other import duties (as well as additional compliance requirements).
Transfer taxes: it seems that the UK would, at least in principle, be able to (re)impose the 1.5% stamp duty/stamp duty reserve tax charge in respect of UK shares issued or transferred into a clearance or depositary receipt system. Accordingly, the position for UK-headed corporate groups seeking to list on the NYSE or Nasdaq may become less certain.
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*Ben Perry is a partner in the London office of Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell publication.
*Simon Witty is a partner in the Corporate Department at Davis Polk & Wardwell LLP. This post is based on a Davis Polk memorandum.
Cette semaine, nous avons demandé à Richard Thibault*, président de RTCOMM, d’agir à titre d’auteur invité. Son billet présente sept leçons tirées de son expérience comme consultant en gestion de crise. En tant que membres de conseils d’administration, vous aurez certainement l’occasion de vivre des crises significatives et il est important de connaître les règles que la direction doit observer en pareilles circonstances.
Voici donc l’article en question, reproduit ici avec la permission de l’auteur. Vos commentaires sont appréciés. Bonne lecture.
Sept leçons apprises en matière de communications de crise
Par Richard Thibault*
La crise la mieux gérée est, dit-on, celle que l’on peut éviter. Mais il arrive que malgré tous nos efforts pour l’éviter, la crise frappe et souvent, très fort. Dans toute situation de crise, l’objectif premier est d’en sortir le plus rapidement possible, avec le moins de dommages possibles, sans compromettre le développement futur de l’organisation.
Voici sept leçons dont il faut s’inspirer en matière de communication de crise, sur laquelle on investit généralement 80% de nos efforts, et de notre budget, en de telles situations.
(1) Le choix du porte-parole
Les médias voudront tout savoir. Mais il faudra aussi communiquer avec l’ensemble de nos clientèles internes et externes. Avoir un porte-parole crédible et bien formé est essentiel. On ne s’improvise pas porte-parole, on le devient. Surtout en situation de crise, alors que la tension est parfois extrême, l’organisation a besoin de quelqu’un de crédible et d’empathique à l’égard des victimes. Cette personne devra être en possession de tous ses moyens pour porter adéquatement son message et elle aura appris à éviter les pièges. Le choix de la plus haute autorité de l’organisation comme porte-parole en situation de crise n’est pas toujours une bonne idée. En crise, l’information dont vous disposez et sur laquelle vous baserez vos décisions sera changeante, contradictoire même, surtout au début. Risquer la crédibilité du chef de l’organisation dès le début de la crise peut être hasardeux. Comment le contredire ensuite sans nuire à son image et à la gestion de la crise elle-même ?
(2) S’excuser publiquement si l’on est en faute
S’excuser pour la crise que nous avons provoqué, tout au moins jusqu’à ce que notre responsabilité ait été officiellement dégagée, est une décision-clé de toute gestion de crise, surtout si notre responsabilité ne fait aucun doute. En de telles occasions, il ne faut pas tenter de défendre l’indéfendable. Ou pire, menacer nos adversaires de poursuites ou jouer les matamores avec les agences gouvernementales qui nous ont pris en défaut. On a pu constater les impacts négatifs de cette stratégie utilisée par la FTQ impliquée dans une histoire d’intimidation sur les chantiers de la Côte-Nord, à une certaine époque. Règle générale : mieux vaut s’excuser, être transparent et faire preuve de réserve et de retenue jusqu’à ce que la situation ait été clarifiée.
(3) Être proactif
Dans un conflit comme dans une gestion de crise, le premier à parler évite de se laisser définir par ses adversaires, établit l’agenda et définit l’angle du message. On vous conseillera peut-être de ne pas parler aux journalistes. Je prétends pour ma part que si, légalement, vous n’êtes pas obligés de parler aux médias, eux, en contrepartie, pourront légalement parler de vous et ne se priveront pas d’aller voir même vos opposants pour s’alimenter. En août 2008, la canadienne Maple Leaf, compagnie basée à Toronto, subissait la pire crise de son histoire suite au décès et à la maladie de plusieurs de ses clients. Lorsque le lien entre la listériose et Maple Leaf a été confirmé, cette dernière a été prompte à réagir autant dans ses communications et son attitude face aux médias que dans sa gestion de la crise. La compagnie a très rapidement retiré des tablettes des supermarchés les produits incriminés. Elle a lancé une opération majeure de nettoyage, qu’elle a d’ailleurs fait au grand jour, et elle a offert son support aux victimes. D’ailleurs, la gestion des victimes est généralement le point le plus sensible d’une gestion de crise réussie.
(4) Régler le problème et dire comment
Dès les débuts de la crise, Maple Leaf s’est mise immédiatement au service de l’Agence canadienne d’inspection des aliments, offrant sa collaboration active et entière pour déterminer la cause du problème. Dans le même secteur alimentaire, tout le contraire de ce qu’XL Foods a fait quelques années plus tard. Chez Maple Leaf, tout de suite, des experts reconnus ont été affectés à la recherche de solutions. On pouvait reprocher à la compagnie d’être à la source du problème, mais certainement pas de se trainer les pieds en voulant le régler. Encore une fois, en situation de crise, camoufler sa faute ou refuser de voir publiquement la réalité en face est décidément une stratégie à reléguer aux oubliettes. Plusieurs années auparavant, Tylenol avait montré la voie en retirant rapidement ses médicaments des tablettes et en faisant la promotion d’une nouvelle méthode d’emballage qui est devenue une méthode de référence aujourd’hui.
(5) Employer le bon message
Il est essentiel d’utiliser le bon message, au bon moment, avec le bon messager, diffusé par le bon moyen. Les premiers messages surtout sont importants. Ils serviront à exprimer notre empathie, à confirmer les faits et les actions entreprises, à expliquer le processus d’intervention, à affirmer notre désir d’agir et à dire où se procurer de plus amples informations. Si la gestion des médias est névralgique, la gestion de l’information l’est tout autant. En situation de crise, on a souvent tendance à s’asseoir sur l’information et à ne la partager qu’à des cercles restreints, ou, au contraire, à inonder nos publics d’informations inutiles. Un juste milieu doit être trouvé entre ces deux stratégies sachant pertinemment que le message devra évoluer en même temps que la crise.
(6) Être conséquent et consistant
Même s’il évolue en fonction du stade de la crise, le message de base doit pourtant demeurer le même. Dans l’exemple de Maple Leaf évoqué plus haut, bien que de nouveaux éléments aient surgi au fur et à mesure de l’évolution de la crise, le message de base, à savoir la mise en œuvre de mesures visant à assurer la santé et la sécurité du public, a été constamment repris sur tous les tons. Ainsi, Maple Leaf s’est montrée à la fois consistante en respectant sa ligne de réaction initiale et conséquente, en restant en phase avec le développement de la situation.
(7) Être ouvert d’esprit
Dans toute situation de crise, une attitude d’ouverture s’avérera gagnante. Que ce soit avec les médias, les victimes, nos employés, nos partenaires ou les agences publiques de contrôle, un esprit obtus ne fera qu’envenimer la situation. D’autant plus qu’en situation de crise, ce n’est pas vraiment ce qui est arrivé qui compte mais bien ce que les gens pensent qui est arrivé. Il faut donc suivre l’actualité afin de pouvoir anticiper l’angle que choisiront les médias et s’y préparer en conséquence.
En conclusion
Dans une perspective de gestion de crise, il est essentiel de disposer d’un plan d’action au préalable, même s’il faut l’appliquer avec souplesse pour répondre à l’évolution de la situation. Lorsque la crise a éclaté, c’est le pire moment pour commencer à s’organiser. Il est essentiel d’établir une culture de gestion des risques et de gestion de crise dans l’organisation avant que la crise ne frappe. Comme le dit le vieux sage, » pour être prêt, faut se préparer ! »
*Richard Thibault, ABCP
Président de RTCOMM, une entreprise spécialisée en positionnement stratégique et en gestion de crise
Menant de front des études de Droit à l’Université Laval de Québec, une carrière au théâtre, à la radio et à la télévision, Richard Thibault s’est très tôt orienté vers le secteur des communications, duquel il a développé une expertise solide et diversifiée. Après avoir été animateur, journaliste et recherchiste à la télévision et à la radio de la région de Québec pendant près de cinq ans, il a occupé le poste d’animateur des débats et de responsable des affaires publiques de l’Assemblée nationale de 1979 à 1987.
Richard Thibault a ensuite tour à tour assumé les fonctions de directeur de cabinet et d’attaché de presse de plusieurs ministres du cabinet de Robert Bourassa, de conseiller spécial et directeur des communications à la Commission de la santé et de la sécurité au travail et de directeur des communications chez Les Nordiques de Québec.
En 1994, il fonda Richard Thibault Communications inc. (RTCOMM). D’abord spécialisée en positionnement stratégique et en communication de crise, l’entreprise a peu à peu élargi son expertise pour y inclure tous les champs de pratique de la continuité des affaires. D’autre part, reconnaissant l’importance de porte-parole qualifiés en période trouble, RTCOMM dispose également d’une école de formation à la parole en public. Son programme de formation aux relations avec les médias est d’ailleurs le seul programme de cette nature reconnu par le ministère de la Sécurité publique du Québec, dans un contexte de communication d’urgence. Ce programme de formation est aussi accrédité par le Barreau du Québec.
Richard Thibault est l’auteur de Devenez champion dans vos communications et de Osez parler en public, publié aux Éditions MultiMondes et de Comment gérer la prochaine crise, édité chez Transcontinental, dans la Collection Entreprendre. Praticien reconnu de la gestion des risques et de crise, il est accrédité par la Disaster Recovery Institute International (DRII).
Spécialités :Expert en positionnement stratégique, gestion des risques, communications de crise, continuité des affaires, formation à la parole en public.
Au lendemain du référendum mené en Grande-Bretagne (GB), on peut se demander quelles sont les implications juridiques d’une telle décision. Celles-ci sont nombreuses ; plusieurs scénarios peuvent être envisagés pour prévoir l’avenir des relations entre la GB et l’Union européenne (UE).
Ben Perry de la firme Sullivan & Cromwell et Simon Witty de la firme Davis Polk & Wardwell ont exploré toutes les facettes légales de cette nouvelle situation dans deux articles parus récemment sur le site du Harvard Law School Forum on Corporate Governance.
Ce sont deux articles très approfondis sur les répercussions du Brexit. On doit admettre que le processus de retrait de l’UE est complexe, qu’il y a plusieurs modèles dont la GB peut s’inspirer (Suisse, Norvégien, Islandais, Liechtenstein), et que le vote n’a pas d’effets légaux immédiats. En fait, le processus de sortie et de renégociation peut durer trois ans !
Je vous invite à prendre connaissance de ces deux articles afin d’être mieux informés sur les principales avenues conséquentes au retrait de la GB de l’UE.
Le 25 juin, je vous ai déjà présenté l’article de Perry qui a suscité beaucoup d’intérêt (Brexit: Legal Implications).
Aujourd’hui, je vous présente le texte de l’article de Witty (The Legal Consequences of Brexit) qui met l’accent sur les répercussions prévisibles qu’aura ce retrait sur le marché des capitaux, les fusions et acquisitions, les différends liés aux contrats, les lois antitrusts, les services financiers et les mesures de taxation.
On June 23, 2016, the UK electorate voted to leave the European Union. The referendum was advisory rather than mandatory and does not have any immediate legal consequences. It will, however, have a profound effect. With any next steps being driven by UK and EU politics, it is difficult to predict the future of the UK’s relationship with the EU. This post discusses the process for Brexit, the alternative models of relationship that the UK may seek to adopt, and certain implications for the capital markets, mergers and acquisitions, contractual disputes and enforcement, anti-trust, financial services and tax.
The process for exiting the EU
The treaties that govern the EU expressly contemplate a member state leaving. Under Article 50 of the Treaty on European Union, the UK must notify the European Council of its intention to withdraw from the EU. Once notice is given, the UK has two years to negotiate the terms of its withdrawal. Any extension of the negotiation period will require the consent of all 27 remaining member states. When to invoke the Article 50 mechanism is, therefore, a strategically important decision. In a statement announcing his intention to resign as Prime Minister of the UK, David Cameron stated that the decision to provide notice under Article 50 to the European Council should be taken by the next Prime Minister, who is expected to be in place by October 2016.
Waving United Kingdom and European Union Flag
Any negotiated agreement will require the support of at least 20 out of the 27 remaining member states, representing at least 65% of the EU’s population, and the approval of the European Parliament. If no agreement is reached or no extension is agreed, the UK will automatically exit the EU two years after the Article 50 notice is given, even if no alternative trading model or arrangement has been negotiated. The UK continues to be a member of the EU in the interim period, subject to all EU legislation and rules.
Alternative models of relationship
It is not clear what model of relationship the UK will seek to negotiate with the EU. In the run-up to the referendum, a number of options were suggested. Politicians in favor of withdrawing from the EU did not coalesce around a specific alternative. It is, therefore, unclear what model will ultimately be followed or whether any of the models could be achieved through the Article 50 process. The principal options are outlined below.
The Norwegian model. The UK might seek to join the European Economic Area, as Norway has. The UK would have considerable access to the internal market, i.e., the association of European countries trading with each other without restrictions or tariffs, including in financial services. The UK would have limited access to the internal market for agriculture and fisheries; and it would not benefit from or be bound by the EU’s external trade agreements. In addition, the UK would have to make significant financial contributions to the EU and continue to allow free movement of persons. It would also have to apply EU law in a number of fields, but the UK would no longer participate in policymaking at the EU level, and would be excluded from participation in the European Supervisory Authorities, the key architects of secondary legislation in the financial services sphere. To adopt this model, the UK would require the agreement of all 27 remaining EU member states, plus Iceland, Liechtenstein and Norway.
Negotiated bilateral agreements. Like Switzerland, the UK might seek to enter into various bilateral agreements with the EU to obtain access to the internal market in specific sectors (rather than the market as a whole, which would be the case under the Norwegian model). This model would likely require the UK to accept some of the EU’s rules on free movement of persons and comply with particular EU laws. Again, the UK would not participate formally in the drafting of those laws. The UK would also have to make financial contributions to the EU. Negotiating these bilateral agreements would be a difficult and time-consuming process. Switzerland, for instance, has negotiated more than 100 individual agreements with the EU to cover market access in different sectors. As a result of its complexity, it is unclear whether the EU would work with the UK to negotiate this model within the Article 50 timeframe.
Customs union. A customs union is currently in place between the EU and Turkey in respect of trade in goods, but not services. Under this model, Turkey can export goods to the EU without having to comply with customs restrictions or tariffs. Its external tariffs are also aligned with EU tariffs. The UK might seek to negotiate a similar arrangement with the EU. Under such an arrangement, and unless separately negotiated, UK financial institutions (including UK subsidiaries of US holding companies) would not be able to provide financial and professional services into the EU on equal terms with EU member state firms. For example, the EU passporting regime would not be available, meaning UK firms would have to seek separate licensing in each EU member state to provide certain financial services. Furthermore, in areas where the UK would have access to the internal market, it would likely be required to enforce rules that are equivalent to those in the EU. The UK would not be required to make any financial contributions to the EU, nor would it be bound by the majority of EU law.
Free trade agreement. The UK might seek to negotiate a free trade agreement with the EU, which would cover goods and services. To do so, it may look to the agreement that was recently agreed between the EU and Canada after seven years of negotiations. This agreement removes tariffs in respect of trade in goods, as well as certain non-tariff barriers in respect of trade in goods and services. Although the UK would not be required to contribute to the EU budget, its exports to the EU would have to comply with the applicable EU standards.
WTO membership. Under this model, the UK would not have any preferential access to the internal market or the 53 markets with which the EU has negotiated free trade agreements. Tariffs and other barriers would be imposed on goods and services traded between the UK and the EU, although, under WTO rules, certain caps would apply on tariffs applicable to goods, and limits would be imposed on particular non-tariff barriers applicable to goods and services. The UK would no longer be required to make any financial contributions to the EU, nor would it be bound by EU laws (although it would have to comply with certain rules in order to trade with the EU).
Implications for UK legislation
Regardless of which model it adopts, the UK will no longer be required to apply some (if not all) EU legislation. The UK has implemented certain EU laws (generally, EU directives) via primary legislation that will continue to be part of English law, unless these are amended or repealed. Other EU laws (generally, EU regulations) have direct applicability in the UK without the need for implementation, which means that these laws would fall away once the UK withdraws from the EU, unless they are transposed into UK law. Finally, thousands of statutory instruments have been made pursuant to the European Communities Act 1972. If this act is repealed upon the UK’s withdrawal from the EU, then, unless transposed into UK law, these statutory instruments will cease to apply as well. Therefore, the UK will have to perform a complex exercise to determine which EU laws and EU-derived laws it wishes to retain, amend or repeal, driven in part by the nature of any agreement reached with the EU during exit negotiations.
How may Brexit affect you?
The UK’s withdrawal from the EU will impact countless areas of the economy. The following section discusses a number of Brexit’s potential implications for the capital markets, mergers and acquisitions, contractual disputes and enforcement, anti-trust, financial services and tax. The extent to which these areas will be affected by the UK’s withdrawal from the EU will depend on the model of relationship that the UK and the EU adopt following the Brexit negotiations.
Capital Markets
The financial markets will likely continue to be volatile, particularly during the Brexit negotiations. This may affect the timing of transactions or their ability to be consummated.
The EU Prospectus Directive, which has been transposed into UK law, governs the content, format, approval and publication of prospectuses throughout the EU. Following eventual Brexit, the UK may no longer be bound by the Prospectus Directive and, thus, may seek to amend its prospectus legislation. For example, the Prospectus Directive provides that a company incorporated in an EU member state must prepare a prospectus if it wishes to offer shares to the public and/or request that shares be admitted to trading in the EU, subject to certain exemptions. The UK may wish to expand these exemptions, so that more offers can be made in the UK without a prospectus. Significantly, the Prospectus Directive also provides for the passporting of prospectuses throughout the EU. This means that a company can use a prospectus that has been approved in one member state to offer shares in any other EU member state. Without this passporting regime, UK companies will have to have their prospectuses approved both in the UK and at least one other member state where they wish to offer their shares, which may be particularly costly and time-consuming if the UK amends, for instance, the content requirements for prospectuses following Brexit, so that these no longer align with those prescribed by the Prospectus Directive.
During the Brexit negotiations, transaction documents may need to include specific Brexit provisions, for example to address the uncertainty around the model of relationship to be adopted.
M&A
As a result of ongoing uncertainty around the future of the UK’s relationship with the EU, a number of transactions with a UK nexus may be affected pending the Brexit negotiations.
Share sale transactions generally are not subject to much EU law or regulation. Asset and business sales, however, may be more affected by Brexit. For example, the regulations that protect the rights of employees on a business transfer stem from a European directive. When the UK withdraws from the EU, it may no longer be bound by this directive, and, therefore, the UK may wish to amend or repeal the regulations.
Contractual Disputes and Enforcement
As a member of the EU, the UK is part of a framework for deciding jurisdiction in disputes, recognizing judgments of other member states (and having its own courts’ judgments recognized and enforced throughout the EU) and deciding the governing law of contracts. Following Brexit, the UK may no longer be part of this framework which may affect jurisdiction and governing law choices in transaction documents.
Anti-trust
Currently, mergers that fall within the scope of the EU Merger Regulation can receive EU-wide clearance, which means that they are not also required to be cleared by individual member states. Following Brexit, mergers with a UK nexus may need to be reviewed by the UK’s Competition and Markets Authority separately.
More generally, UK anti-trust legislation is currently based on, and interpreted in line with, EU law, including decisions of the European Commission and the European Court of Justice. Given that UK courts may no longer be required to interpret national law consistently with EU law once the UK withdraws from the EU, businesses face the prospect of having to comply with divergent systems.
Financial Services
Much of the UK’s financial services regulation is based on EU law. This includes legislation such as the Markets in Financial Instruments Directive (MiFID), which regulates investment services and trading venues, the European Market Infrastructure Regulation, which regulates the derivatives market, the Alternative Investment Fund Managers Directive, which regulates hedge funds and private equity, and the Capital Requirements Directive and the Capital Requirements Regulation, which together represent the EU’s implementation of the international Basel III accords for the prudential regulation of banks. The Bank Recovery and Resolution Directive (“BRRD”) has been implemented into UK law via the Banking Act 2009, so the fundamental bank resolution regime should initially survive Brexit. That said, substantial further EU legislative work is expected in this area to modify BRRD (e.g., in relation to the implementation of the TLAC standard), so it is possible that the regimes could diverge rapidly after Brexit. In general with financial services legislation, an assessment will need to be made whether to align with EU legislation or diverge; the greater the divergence, the more the dual burdens on cross-border firms.
As mentioned above, the UK will likely not be part of the European Supervisory Authorities framework and will have no influence in the development of primary or secondary EU legislation and guidance. The UK has been a significant force in the area of financial services legislation and has driven the introduction of, for instance, the BRRD. The UK’s withdrawal may impact the legislative agenda and ultimately the quality of the legislation produced.
Financial institutions established in EEA member states can obtain a “passport” that allows them to access the markets of other EEA member states without being required to set up a subsidiary and obtain a separate license to operate as a financial services institution in those member states. Following Brexit, UK financial services institutions, including subsidiaries of US and other non-EU parent companies, would no longer be able to benefit from passporting (unless the UK were to join the EEA pursuant to the Norway option described above).
Although the UK will likely remain a member of the EU for a substantial period while negotiations are ongoing, there are pressing questions as to how the UK will engage with the ongoing legislative processes that affect the UK financial services industry. There are a number of areas where framework legislation has been passed already, but key secondary legislation is being developed or revised. These areas include the complete overhaul of MiFID and the Payment Services Directive. Even before the UK leaves the EU, we can expect to see a diminished role for the UK Government, UK regulators and UK market participants in shaping the detailed policies and procedures in those areas.
We expect larger financial institutions in the UK, or those based outside the UK that have significant operations in the UK, will wish to contribute to the negotiation process between the EU and UK. In particular, to the extent a unique model for trading relationships is proposed, these institutions may wish to engage with policymakers to minimize disruption and damage to their EU business model.
Tax
The EU has influenced many areas of the UK’s tax system. In some cases, this has been through EU legislation which applies directly in the UK; in other cases, EU rules have been adopted through UK legislation (for example, the UK’s VAT legislation is based on principles which apply across the EU); and, in still other cases, decisions of the European Court of Justice have either influenced the development of UK tax rules, or have prevented the UK’s tax authority from enforcing aspects of the UK’s domestic tax code. This complicated backdrop means that the tax impact of Brexit will be varied and difficult to predict.
Areas to watch include the following:
Direct tax: although the UK has an extensive double tax treaty network, not all treaties provide for zero withholding tax on interest and royalty payments. Accordingly, corporate groups should consider the extent to which existing structures rely on EU rules such as the Parent-Subsidiary Directive or the Interest and Royalties Directive to secure tax efficient payment flows. Similarly, corporate groups proposing to undertake cross border reorganisations would need to consider the extent to which existing cross-EU border merger tax reliefs will survive intact. It should also be borne in mind that, even if Brexit occurs, the UK is likely to continue vigorously supporting the OECD’s BEPS initiative such that there may well be considerable constraints and complexities associated with locating businesses outside the UK.
VAT: although VAT is an EU-wide tax regime, it seems inconceivable that VAT will be abolished. However, it is likely that, over time, there will be a divergence between UK VAT rules and EU VAT rules, including as to input VAT recovery on supplies made to non-UK customers. Additionally, UK companies may lose the administrative benefit of the “one stop shop” for businesses operating in Europe.
Customs duty: if the UK left the customs union, exports to and imports from EU countries may become subject to tariffs or other import duties (as well as additional compliance requirements).
Transfer taxes: it seems that the UK would, at least in principle, be able to (re)impose the 1.5% stamp duty/stamp duty reserve tax charge in respect of UK shares issued or transferred into a clearance or depositary receipt system. Accordingly, the position for UK-headed corporate groups seeking to list on the NYSE or Nasdaq may become less certain.
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*Ben Perry is a partner in the London office of Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell publication.
*Simon Witty is a partner in the Corporate Department at Davis Polk & Wardwell LLP. This post is based on a Davis Polk memorandum.
Aujourd’hui, je vous propose la lecture d’un article paru dans la revue European Journal of Risk Regulation (EJRR) qui scrute le scandale de Volkswagensous l’angle juridique, mais, surtout, sous l’angle des manquements à la saine gouvernance.
Le texte se présente comme un cas en gouvernance et en management. Celui-ci devrait alimenter les réflexions sur l’éthique, les valeurs culturelles et les effets des pressions excessives à la performance.
Vous trouverez, ci-dessous, l’intégralité de l’article avec le consentement de l’auteure. Je n’ai pas inclus les références, qui sont très abondantes et qui peuvent être consultées sur le site de la maison d’édition lexxion.
Like some other crises and scandals that periodically occur in the business community, the Volkswagen (“VW”) scandal once again highlights the devastating consequences of corporate misconduct, once publicly disclosed, and the media storm that generally follows the discovery of such significant misbehaviour by a major corporation. Since the crisis broke in September 2015, the media have relayed endless détails about the substantial negative impacts on VW on various stakeholder groups such as employees, directors, investors, suppliers and consumers, and on the automobile industry as a whole (1)
The multiple and negative repercussions at the economic, organizational and legal levels have quickly become apparent, in particular in the form of resignations, changes in VW’s senior management, layoffs, a hiring freeze, the end to the marketing of diesel-engined vehicles, vehicle recalls, a decline in car sales, a drop in market capitalization, and the launching of internal investigations by VW and external investigations by the public authorities. This comes in addition to the threat of numerous civil, administrative, penal and criminal lawsuits and the substantial penalties they entail, as well as the erosion of trust in VW and the automobile industry generally (2).
FILE PHOTO: Martin Winterkorn, chief executive officer of Volkswagen AG, reacts during an earnings news conference at the company’s headquarters in Wolfsburg, Germany, on Monday, March 12, 2012. Volkswagen said 11 million vehicles were equipped with diesel engines at the center of a widening scandal over faked pollution controls that will cost the company at least 6.5 billion euros ($7.3 billion). Photographer: Michele Tantussi/Bloomberg *** Local Caption *** Martin Winterkorn
A scandal of this extent cannot fail to raise a number of questions, in particular concerning the cause of the alleged cheating, liable actors, the potential organizational and regulatory problems related to compliance, and ways to prevent further misconduct at VW and within the automobile industry. Based on the information surrounding the VW scandal, it is premature to capture all facets of the case. In order to analyze inmore depth the various problems raised, we will have to wait for the findings of the investigations conducted both internally by the VW Group and externally by the regulatory authorities.
While recognizing the incompleteness of the information made available to date by VW and certain commentators, we can still use this documentation to highlight a few features of the case that deserve to be studied from the standpoint of corporate governance.
This Article remains relatively modest in scope, and is designed to highlight certain organizational factors that may explain the deviant behaviour observed at VW. More specifically, it submits that the main cause of VW’s alleged wrongdoing lies in the company’s ambitious production targets for the U.S. market and the time and budget constraints imposed on employees to reach those targets. Arguably, the corporate strategy and pressures exerted on VW’s employees may have led them to give preference to the performance priorities set by the company rather than compliance with the applicable legal and ethical standards. And this corporate misconduct could not be detected because of deficiencies in the monitoring and control mechanisms, and especially in the compliance system established by the company to ensure that legal requirements were respected.
Although limited in scope, this inquiry may prove useful in identifying means to minimize, in the future, the risk of similar misconduct, not only at VW but wihin other companies as well (3). Given the limited objectives of the Article, which focuses on certain specific organizational deficiencies at VW, the legal questions raised by the case will not be addressed. However, the Article will refer to one aspect of the law of business corporations in the United States, Canada and in the EU Member States in order to emphasize the crucial role that boards in publicly-held companies must exercise to minimize the risk of misconduct (4).
II. A Preliminary Admission by VW: Individual Misconduct by a few Software Engineers
When a scandal erupts in the business community following a case of fraud, embezzlement, corruption, the marketing of dangerous products or other deviant behaviour, the company concerned and the regulatory authorities are required to quickly identify the individuals responsible for the alleged misbehaviour. For example, in the Enron, WorldCom, Tyco and Adelphia scandals of the early 2000s, the investigations revealed that certain company senior managers had acted fraudulently by orchestrating accounting manipulations to camouflage their business’s dire financial situation (5).
These revelations led to the prosecution and conviction of the officers responsible for the corporations’ misconduct (6). In the United States, the importanace of identifying individual wrongdoers is clearly stated in the Principles of Federal Prosecutions of Business Organizations issued by the U.S. Department of Justice which provide guidelines for prosecutions of corporate misbehaviour (7). On the basis of a memo issued in 2015 by the Department of Justice (the “Yatesmemo”) (8), these principles were recently revised to express a renewed commitment to investigate and prosecute individuals responsible for corporate wrongdoing.While recognizing the importance of individual prosecutions in that context, the strategy is only one of the ways to respond to white-collar crime. From a prevention standpoint, it is essential to conduct a broader examination of the organizational environment in which senior managers and employees work to determine if the enterprise’s culture, values, policies, monitoring mechanisms and practices contribute or have contributed to the adoption of deviant behaviour (9).
In the Volkswagen case, the company’s management concentrated first on identifying the handful of individuals it considered to be responsible for the deception, before admitting few weeks later that organizational problems had also encouraged or facilitated the unlawful corporate behaviour. Once news broke of the Volkswagen scandal, one of VW’s officers quickly linked the wrongdoing to the actions of a few employees, but without uncovering any governance problems or misbehaviour at the VW management level (10).
In October 2015, the President and Chief Executive Officer of the VW Group in the United States, Michael Horn, stated in testimony before a Congressional Subcommittee: “[t]his was a couple of software engineers who put this for whatever reason » […]. To my understanding, this was not a corporate decision. This was something individuals did » (11). In other words, the US CEO considered that sole responsibility for the scandal lay with a handful of engineers working at the company, while rejecting any allegation tending to incriminate the company’s management.
This portion of his testimony failed to convince the members of the Subcommittee, who expressed serious doubts about placing sole blame on the misbehaviour of a few engineers, given that the problem had existed since 2009. As expressed in a sceptical response from one of the committee’s members: « I cannot accept VW’s portrayal of this as something by a couple of rogue software engineers […] Suspending three folks – it goes way, way higher than that » (12).
Although misconduct similar to the behaviour uncovered at Volkswagen can often be explained by the reprehensible actions of a few individuals described as « bad apples », the violation of rules can also be explained by the existence of organizational problems within a company (13).
III. Recognition of Organizational Failures by VW
In terms of corporate governance, an analysis of misbehaviour can highlight problems connected with the culture, values, policies and strategies promoted by a company’s management that have a negative influence on the behaviour of senior managers and employees. Considering the importance of the organizational environment in which these players act, regulators provide for several internal and external governance mechanisms to reduce the risk of corporate misbehaviour or to minimize agency problems (14). As one example of an internal governance mechanism, the law of business corporations in the U.S., Canada and the EU Member States gives the board of directors (in a one-tier board structure, as prescribed Under American and Canadian corporation law) and the management board and supervisory board (in a two tier board structure, as provided for in some EU Member States, such as Germany) a key role to play in monitoring the company’s activities and internal dealings (15). As part of their monitoring mission, the board must ensure that the company and its agents act in a diligent and honest way and in compliance with the regulations, in particular by establishing mechanisms or policies in connection with risk management, internal controls, information disclosure, due diligence investigation and compliance (16).
When analysing the Volkswagen scandal from the viewpoint of its corporate governance, the question to be asked is whether the culture, values, priorities, strategies and monitoring and control mechanisms established by the company’s management board and supervisory board – in other words « the tone at the top »-, created an environment that contributed to the emergence of misbehaviour (17).
In this saga, although the initial testimony given to the Congressional Subcommittee by the company’s U.S. CEO, Michael Horn, assigned sole responsibility to a small circle of individuals, « VW’s senior management later recognized that the misconduct could not be explained simply by the deviant behaviour of a few people, since the evidence also pointed to organizational problems supporting the violation of regulations (18). In December 2015, VW’s management released the following observations, drawn from the preliminary results of its internal investigation:
« Group Audit’s examination of the relevant processes indicates that the software-influenced NOx emissions behavior was due to the interaction of three factors:
– The misconduct and shortcomings of individual employees
– Weaknesses in some processes
– A mindset in some areas of the Company that tolerated breaches of rules » (19).
Concerning the question of process,VW released the following audit key findings:
« Procedural problems in the relevant subdivisions have encouraged misconduct;
Faults in reporting and monitoring systems as well as failure to comply with existing regulations;
IT infrastructure partially insufficient and antiquated. » (20)
More fundamentally, VW’s management pointed out at the same time that the information obtained up to that point on “the origin and development of the nitrogen issue […] proves not to have been a one-time error, but rather a chain of errors that were allowed to happen (21). The starting point was a strategic decision to launch a large-scale promotion of diesel vehicles in the United States in 2005. Initially, it proved impossible to have the EA 189 engine meet by legal means the stricter nitrogen oxide requirements in the United States within the required timeframe and budget » (22).
In other words, this revelation by VW’s management suggests that « the end justified the means » in the sense that the ambitious production targets for the U.S. market and the time and budget constraints imposed on employees encouraged those employees to use illegal methods in operational terms to achieve the company’s objective. And this misconduct could not be detected because of deficiencies in the monitoring and control mechanisms, and especially in the compliance system established by the company to ensure that legal requirements were respected. Among the reasons given to explain the crisis, some observers also pointed to the excessive centralization of decision-making powers within VW’s senior management, and an organizational culture that acted as a brake on internal communications and discouraged mid-level managers from passing on bad news (23).
IV. Organizational Changes Considered as a Preliminary Step
In response to the crisis, VW’s management, in a press release in December 2015, set out the main organizational changes planned to minimize the risk of similar misconduct in the future. The changes mainly involved « instituting a comprehensive new alignment that affects the structure of the Group, as well as is way of thinking and its strategic goals (24).
In structural terms, VW changed the composition of the Group’s Board of Management to include the person responsible for the Integrity and Legal Affairs Department as a board member (25). In the future, the company wanted to give « more importance to digitalization, which will report directly to the Chairman of the Board of Management, » and intended to give « more independence to brand and divisions through a more decentralized management (26). With a view to initiating a new mindset, VW’s management stated that it wanted to avoid « yes-men » and to encourage managers and engineers « who are curious, independent, and pioneering » (27). However, the December 2015 press release reveals little about VW’s strategic objectives: « Strategy 2025, with which Volkswagen will address the main issues for the future, is scheduled to be presented in mid 2016 » (28).
Although VW’s management has not yet provided any details on the specific objectives targeted in its « Strategy 2025 », it is revealing to read the VW annual reports from before 2015 in which the company sets out clear and ambitious objectives for productivity and profitability. For example, the annual reports for 2007, 2009 and 2014 contained the following financial objectives, which the company hoped to reach by 2018.
In its 2007 annual report,VW specified, under the heading « Driving ideas »:
“Financial targets are equally ambitious: for example, the Volkswagen Passenger Cars brand aims to increase its unit sales by over 80 percent to 6.6 million vehicles by 2018, thereby reaching a global market share of approximately 9 percent. To make it one of the most profitable automobile companies as well, it is aiming for an ROI of 21 percent and a return on sales before tax of 9 percent.” (29).
Under the same heading, VW stated in its 2009 annual report:
“In 2018, the Volkswagen Group aims to be the most successful and fascinating automaker in the world. […] Over the long term, Volkswagen aims to increase unit sales to more than 10 million vehicles a year: it intends to capture an above-average share as the major growth markets develop (30).
And in its 2014 annual report, under the heading « Goals and Strategies », VW said:
“The goal is to generate unit sales of more than 10 million vehicles a year; in particular, Volkswagen intends to capture an above-average share of growth in the major growth markets.”
Volkswagen’s aim is a long-term return on sales before tax of at least 8% so as to ensure that the Group’s solid financial position and ability to act are guaranteed even in difficult market periods (31).
Besides these specific objectives for financial performance, the annual reports show that the company’s management recognized, at least on paper, the importance of ensuring regulatory compliance and promoting corporate social responsibility (CSR) and sustainability (31). However, after the scandal broke in September 2015, questions can be asked about the effectiveness of the governance mechanisms, especially of the reporting and monitoring systems put in place by VW to achieve company goals in this area (33). In light of the preliminary results of VW’s internal investigation (34), as mentionned above, it seems that, in the organizational culture, the commitment to promote compliance, CSR and sustainability was not as strong as the effort made to achieve the company’s financial performance objectives.
Concerning the specific and challenging priorities of productivity and profitability established by VW’s management in previous years, the question is whether the promotion of financial objectives such as these created a risk because of the pressure it placed on employees within the organizational environment. The priorities can, of course, exert a positive influence and motivate employees to make an even greater effort to achieve the objectives (35). On the other hand, the same priority can exert a negative influence by potentially encouraging employees to use all means necessary to achieve the performance objectives set, in order to protect their job or obtain a promotion, even if the means they use for that purpose contravene the regulations. In other words, the employees face a « double bind » or dilemma which, depending on the circumstances, can lead them to give preference to the performance priorities set by the company rather than compliance with the applicable legal and ethical standards.
In the management literature, a large number of theoretical and empirical studies emphasize the beneficial effects of the setting of specific and challenging goals on employee motivation and performance within a company (36). However, while recognizing these beneficial effects, some authors point out the unwanted or negative side effects they may have.
As highlighted by Ordóñez, Schweitzer, Galinsky and Bazerman, specific goal setting can result in employees focusing solely on those goals while neglecting other important, but unstated, objectives (37). They also mention that employees motivated by « specific, challenging goals adopt riskier strategies and choose riskier gambles than do those with less challenging or vague goals (38). As an additional unwanted side effet, goal setting can encourage unlawful or unethical behaviour, either by inciting employees to use dishonest methods to meet the performance objectives targeted, or to “misrepresent their performance level – in other words, to report that they met a goal when in fact they fell short (39). Based on these observations, the authors suggest that companies should set their objectives with the greatest care and propose various ways to guard against the unwanted side effects highlighted in their study. This approach could prove useful for VW’s management which will once again, at some point, have to define its objectives and stratégies.
V. Conclusion
In the information released to the public after the emissions cheating scandal broke, as mentioned above, VW’s management quickly stated that the misconduct was directly caused by the individual misbehaviour of a couple of software engineers. Later, however, it admitted that the individual misconduct of a few employees was not the only cause, and that there were also organizational deficiencies within the company itself.
Although the VW Group’s public communications have so far provided few details about the cause of the crisis, the admission by management that both individual and organizational failings were involved constitutes, in our opinion, a lever for understanding the various factors that may have led to reprehensible conduct within the company. Based on the investigations that will be completed over the coming months, VW’s management will be in a position to identify more precisely the nature of these organizational failings and to propose ways to minimize the risk of future violations. During 2016, VW’s management will also announce the objectives and stratégies it intends to pursue over the next few years.
This is a critical time for Trevor legally and reputationally, it is also a time when being an independent director carries additional responsibility to the company, the shareholders, the staff and the customers.
This is a listed company; Trevor must ensure appropriate disclosure. A trading halt may give the company time to investigate, and respond to, the events and then give the market time to disseminate the information. His customer liaison at the stock exchange should assist with implementing a halt and issuing a brief statement saying what has happened and that the company will issue more information when it becomes available.
I recommend three separate parallel streams of work for Trevor. 
Gouvernance | Jacques Grisé 