La bonne gouvernance selon Munger, vice-président du C.A. de Berkshire *

Aujourd’hui, je vous propose une très intéressante lecture publiée par David F. Larcker et Brian Tayan, de la Stanford Graduate School of Business qui porte sur la conception que se fait Charles Munger de la bonne gouvernance des sociétés.

Les auteurs nous proposent de répondre à trois questions relatives à la position de Munger, vice-président du conseil de Berkshire :

1. Le système de gouvernance basé sur la confiance avancé par Munger pourrait-il s’appliquer à différents types d’organisations ?

2. Quelles pratiques de gouvernance sont-elles nécessaires et quelles pratiques sont-elles superflues ?

3. Comment s’assurer que la culture organisationnelle survivra à un processus de succession du PCD ?

À la suite de la lecture de l’article ci-dessous, quelles seraient vos réponses à ces questions.

Voici un résumé de la pensée de Munger, suivi d’un court extrait. Bonne lecture !

Berkshire Hathaway Vice Chairman Charlie Munger is well known as the partner of CEO Warren Buffett and also for his advocacy of “multi-disciplinary thinking” — the application of fundamental concepts from across various academic disciplines to solve complex real-world problems. One problem that Munger has addressed over the years is the optimal system of corporate governance.

Munger advocates that corporate governance systems become more simple, rather than more complex, and rely on trust rather than compliance to instill ethical behavior in employees and executives. He advocates giving more power to a highly capable and ethical CEO, and taking several steps to improve the culture of the organization to reduce the risk of self-interested behavior.

Corporate Governance According to Charles T. Munger

How should an organization be structured to encourage ethical behavior among organizational participants and motivate decision-making in the best interest of shareholders? His solution is unconventional by the standards of governance today and somewhat at odds with regulatory guidelines. However, the insights that Munger provides represent a contrast to current “best practices” and suggest the potential for alternative solutions to improve corporate performance and executive behavior.

Trust-Based Governance

The need for a governance system is based on the premise that individuals working in a firm are selfinterested and therefore willing to take actions to further their own interest at the expense of the organization’s interests. To discourage this tendency, companies implement a series of carrots (incentives) and sticks (controls). The incentives might be monetary, such as performance-based compensation that aligns the financial interest of executives with shareholders. Or they might be or cultural, such as organizational norms that encourage certain behaviors. The controls include policies and procédures to limit malfeasance and oversight mechanisms to review executive decisions.

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* En reprise

Grands courants de pensées en gouvernance | Propositions de réforme au cours des 60 dernières années *

Je vous propose la lecture d’un essai sur les principaux courants de pensées en gouvernance des sociétés au cours des soixante dernières années. Ce document, écrit par Douglas M. Branson de l’École de Droit de l’Université de Pittsburgh et paru dans le Social Science Research Network (SSRN), représente certainement l’un des points de vue les plus articulés sur la recherche d’une explication valable à la thèse de Berle et Means concernant la séparation de la propriété de celle du contrôle des firmes.

Bien que l’essai soit rédigé dans un style assez provocateur, il est fascinant à lire, pour peu que l’on soit familier avec la langue de Shakespeare et que l’on s’accommode des accents grinçants de l’auteur.

Je recommande fortement la lecture de ce texte à tout étudiant de la gouvernance; c’est un must pour comprendre le champ d’étude ! J’ai obtenu l’autorisation de Douglas Branson pour la traduction de ce document.

Voici les points saillants de l’essai de Branson (en anglais, à ce stade-ci) :

Logo of the American Law Institute. (Photo credit: Wikipedia)

In 1932, Adolph Berle and Gardiner Means documented the widespread dispersion of corporate shareholders, and the atomization of corporate shareholdings. They noted that in the then modern corporation “ownership has become depersonalized”. The result was that a new form of property had come into being. The person who owned the property no longer controlled it, as the farmer who owned the horse had to feed it, teach it pull the plow, and bury it when it died. “In the corporate system, the ‘owner’ of industrial wealth is left with a mere symbol of ownership while the power, the responsibility and the substance which have been an integral part of ownership in the past are being transferred to a separate group in whose hands lies control.” This was the fabled “separation of ownership from control.”
In one of the best known of his books (1956), American Capitalism : The Concept of Countervailing Power, Galbraith rhetorically posed a number of solutions to the problem of unchecked corporate power, including the separation of ownership from control, although he generally did not use the Berle & Means terminology. He did not propose nationalization, as the British had done. Instead, he theorized that, indeed, corporations had grown too large, their shareholders no longer controlled them, competitive market forces no longer constrained them, and the potential for abuse was great. That potential would be checked however by the growth of countervailing power inherent in the growth of labor unions, consumer groups and government agencies. Galbraith pointed to the growth and influence of consumer cooperatives which enjoyed great growth in Scandinavia, at least in the post-War years. Essentially, those newly empowered groups would supply the controls historically owners had provided.
The Corporate Social Responsibility Movement of the Early 70s called for government intervention, as the nationalization movement had, but on discrete fronts rather than on a plenary basis. One scholar urged replacement of the one share one vote standard prevalent in U.S. corporate law with a graduated scale so that with acquisition of addition shares owners, particularly institutional owners who were perceived to be excessively mercenary would receive less and less voting power. A “power to the people” mandate would augment the power of individual owners, who generally held fewer shares but were thought to be more socially conscious. Calls for required installation of public interest directors on publicly held corporations’ boards sometimes included sub-recommendations that legislation also require that the publicly minded be equipped with offices and staffs, at corporate expense. Others proposed requirements for social auditing and for mandatory disclosure of social audit results.
Toward the second half of the 1970s, The Corporate Accountability Research Group, created and promoted by consumer advocate Ralph Nader, gathered evidence, marshaled arguments, and advocated the other, more drastic reform of the 1970s, federal chartering of large corporations. In certain of its incarnations, chartering advocates expanded the proposal’s reach, from the 500 largest enterprises to the 2000 largest U.S. corporations by revenue, to any corporation which did a significant amount of business with the federal government, and to certain categories of companies whose businesses were thought to be infected with the public interest. Whatever the universe of such corporations, these companies would have to re-register with a new federal entity, the Federal Chartering Agency. In addition, these corporations would no longer have perpetual existence as they had under state law. Instead the new federal statute corporations would have only limited life charters, good for, say, 20 or 25 years limited.
A Seismic Shift: the Swift Rise of Law and Economics Jurisprudence of the 1980s. Perhaps only once in a lifetime will one see as pronounced a jurisprudential shift as that from the corporate social responsibility and federal chartering movements to the minimalist, non-invasive take of economics on corporate law and corporate governance. Law and economics pointed to a minimalist corporate jurisprudence the core theory of which was that market forces regulated corporate and managerial behavior much better than regulation, laws, or lawsuits ever could.
An Antidote: The Good Governance Movement. The American Law Institute (ALI) Corporate Governance Project of 1994 constituted an implicit rejection of, and an antidote to, the law and economics movement. Succinctly, the ALI evinced a strong belief that, yes, corporate law does have a role to play. That belief, sometimes characterized as the constitutionalist approach, in contrast to the contractarian approach, underline and buttresses the entire ALI Project. The ALI crafted recommended rules for corporate objectives; structure, including board composition and committee structure; duty of “fair dealing” (duty of loyalty); duty of care and the business judgment rule; roles of directors and shareholders in control transactions and tender offers; and shareholders’remedies, including the derivative action and appraisal remedies.
The Early 1990s: The Emphasis on Institutional Investor Activism. Traditionally, though, institutional investors followed the “Wall Street Rule,” meaning that if they developed an aversion to a portfolio company’s performance or governance, they simply sold the stock rather than becoming embroiled in a corporate governance issue. Institutions voted with their feet. That is, they did so until portfolio positions had become so large that if an institutional investor liquidated even a sizeable portion of the portfolio’s stake in a company, the institution’s sales alone would push down the stock’s price. Thus, in the modern era, institutional investors are faced with more of a buy and hold strategy than they otherwise might prefer. So was born an opening to push for yet another proposed reform which would fill the vacuum created by the separation of ownership from control, namely, institutional activism, or “agents watching agents.” The case for institutional oversight was that because “product, capital, labor, and corporate control constraints on managerial discretion are imperfect, corporate managers need to be watched by someone, and the institutions are the only institutions available.”
The Shift to an Emphasis on “Global” Convergence in Corporate Governance. In the second half of the 90s decade, the governance prognosticators did an abrupt about face, abandoning talk about the prospect of institutional shareholder activism in favor of pontification on the prospect of global convergence. The thesis went something like this. Through the process of globalization the world had become a much smaller place. Through use of media such as email and the Internet, governance advocates in Singapore now knew, or knew how to find out, what was happening on the corporate governance front in the United Kingdom and the United States. According to U.S. academics, the global model of good governance would replicate the U.S. model of corporate governance, of course…
Shift of the Emphasis to the Gatekeepers in 2001. Whatever the U.S. system was, it had a great many defects and it did not do the job for which it had been devised. In addition, of course, no sign existed that the convergence predicted had taken place. The Sarbanes-Oxley Act of 2002 (SOX) heads off in varying directions but a careful reader can discern that one of the legislation’s dominant themes is strengthening gatekeepers as a means of enhancing watchfulness over corporations. Thus, for example, SOX requires public corporations to have audit committees composed of independent directors, one or more of whom must be financial experts. Section 307 imposes whistleblowing duties upon attorneys who uncover wrongdoing. To enhance their independence, SOX requires that accountings firms which audit public companies no longer may provide a long list of lucrative consulting services for audit clients.
Emphasis on Independent Directors and Independent Board Committees. The movement for independent directors gathered steam with the 2002 SOX legislation, which required that SEC reporting companies, that is, most publicly held corporations, have an audit committee comprised exclusively of independent directors. The New York Stock Exchange followed by amendments to its Listing Manual that listed public companies have a majority of directors who are independent, making the 1994 ALI recommendation of good practice into a hard and fast requirement. In 2010, the Dodd-Frank Act jumped on the independent director bandwagon with its requirement that exchanges refuse to list the shares of corporations who disclose they do not have a compensation committee comprised of independent directors. Observers who have written about the issue assume that the Dodd-Frank disclosure requirement is a de facto requirement that corporations have compensation committees, albeit a backhanded sort of requirement.

L’extrait que je vous présente vous donnera une bonne idée de la teneur des propos de Branson. Vous pouvez télécharger le document de 25 pages.

Vos commentaires sont grandement appréciés. Bonne lecture.

Proposals for Corporate Governance Reform: Six Decades of Ineptitude and Counting

This article is a retrospective of corporate governance reforms various academics have authored over the last 60 years or so, by the author of the first U.S. legal treatise on the subject of corporate governance (Douglas M. Branson, Corporate Governance (1993)). The first finding is as to periodicity: even casual inspection reveals that the reformer group which controls the « reform » agenda has authored a new and different reform proposal every five years, with clock-like regularity. The second finding flows from the first, namely, that not one of these proposals has made so much as a dent in the problems that are perceived to exist. The third inquiry is to ask why this is so? Possible answers include the top down nature of scholarship and reform proposals in corporate governance; the closed nature of the group controlling the agenda, confined as it is to 8-10 academics at elite institutions; the lack of any attempt rethink or redefine the challenges which governance may or may not face; and the continued adhesion to the problem as the separation of ownership from control as Adolph Berle and Gardiner Means perceived it more than 80 years ago.

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* En reprise

Douze (12) tendances à surveiller en gouvernance | Jacques Grisé

Vous trouverez ci-dessous un article publié dans Lesaffaires.com le 31 mars 2014.

Dans cet entrevue, le journaliste me demande de faire une synthèse des tendances les plus significatives en gouvernance de sociétés. Bonne lecture !

Gouvernance : 12 tendances à surveiller

Une entrevue avec M. Jacques Grisé, auteur du blogue jacquesgrisegouvernance.com

Si la gouvernance des entreprises a fait beaucoup de chemin depuis quelques années, son évolution se poursuit. Afin d’imaginer la direction qu’elle prendra au cours des prochaines années, nous avons consulté l’expert Jacques Grisé, ancien directeur des programmes du Collège des administrateurs de sociétés, de l’Université Laval. Toujours affilié au Collège, M. Grisé publie depuis plusieurs années le blogue www.jacquesgrisegouvernance.com, un site incontournable pour rester à l’affût des bonnes pratiques et tendances en gouvernance.

Voici les 12 tendances dont il faut suivre l’évolution, selon Jacques Grisé :

1. Les conseils d’administration réaffirmeront leur autorité.

« Auparavant, la gouvernance était une affaire qui concernait davantage le management », explique M. Grisé. La professionnalisation de la fonction d’administrateur amène une modification et un élargissement du rôle et des responsabilités des conseils. Les CA sont de plus en plus sollicités et questionnés au sujet de leurs décisions et de l’entreprise.

2. La formation des administrateurs prendra de l’importance.

À l’avenir, on exigera toujours plus des administrateurs. C’est pourquoi la formation est essentielle et devient même une exigence pour certains organismes. De plus, la formation continue se généralise ; elle devient plus formelle.

3. L’affirmation du droit des actionnaires et celle du rôle du conseil s’imposeront.

Le débat autour du droit des actionnaires par rapport à celui des conseils d’administration devra mener à une compréhension de ces droits conflictuels. Aujourd’hui, les conseils doivent tenir compte des parties prenantes en tout temps.

4. La montée des investisseurs activistes se poursuivra.

L’arrivée de l’activisme apporte une nouvelle dimension au travail des administrateurs. Les investisseurs activistes s’adressent directement aux actionnaires, ce qui mine l’autorité des conseils d’administration. Est-ce bon ou mauvais ? La vision à court terme des activistes peut être néfaste, mais toutes leurs actions ne sont pas négatives, notamment parce qu’ils s’intéressent souvent à des entreprises qui ont besoin d’un redressement sous une forme ou une autre. Pour bien des gens, les fonds activistes sont une façon d’améliorer la gouvernance. Le débat demeure ouvert.

5. La recherche de compétences clés deviendra la norme.

De plus en plus, les organisations chercheront à augmenter la qualité de leur conseil en recrutant des administrateurs aux expertises précises, qui sont des atouts dans certains domaines ou secteurs névralgiques.

6. Les règles de bonne gouvernance vont s’étendre à plus d’entreprises.

Les grands principes de la gouvernance sont les mêmes, peu importe le type d’organisation, de la PME à la société ouverte (ou cotée), en passant par les sociétés d’État, les organismes à but non lucratif et les entreprises familiales.

7. Le rôle du président du conseil sera davantage valorisé.

La tendance veut que deux personnes distinctes occupent les postes de président du conseil et de PDG, au lieu qu’une seule personne cumule les deux, comme c’est encore trop souvent le cas. Un bon conseil a besoin d’un solide leader, indépendant du PDG.

8. La diversité deviendra incontournable.

Même s’il y a un plus grand nombre de femmes au sein des conseils, le déficit est encore énorme. Pourtant, certaines études montrent que les entreprises qui font une place aux femmes au sein de leur conseil sont plus rentables. Et la diversité doit s’étendre à d’autres origines culturelles, à des gens de tous âges et d’horizons divers.

9. Le rôle stratégique du conseil dans l’entreprise s’imposera.

Le temps où les CA ne faisaient qu’approuver les orientations stratégiques définies par la direction est révolu. Désormais, l’élaboration du plan stratégique de l’entreprise doit se faire en collaboration avec le conseil, en profitant de son expertise.

10. La réglementation continuera de se raffermir.

Le resserrement des règles qui encadrent la gouvernance ne fait que commencer. Selon Jacques Grisé, il faut s’attendre à ce que les autorités réglementaires exercent une surveillance accrue partout dans le monde, y compris au Québec, avec l’Autorité des marchés financiers. En conséquence, les conseils doivent se plier aux règles, notamment en ce qui concerne la rémunération et la divulgation. Les responsabilités des comités au sein du conseil prendront de l’importance. Les conseils doivent mettre en place des politiques claires en ce qui concerne la gouvernance.

11. La composition des conseils d’administration s’adaptera aux nouvelles exigences et se transformera.

Les CA seront plus petits, ce qui réduira le rôle prépondérant du comité exécutif, en donnant plus de pouvoir à tous les administrateurs. Ceux-ci seront mieux choisis et formés, plus indépendants, mieux rémunérés et plus redevables de leur gestion aux diverses parties prenantes. Les administrateurs auront davantage de responsabilités et seront plus engagés dans les comités aux fonctions plus stratégiques. Leur responsabilité légale s’élargira en même temps que leurs tâches gagnent en importance. Il faudra donc des membres plus engagés, un conseil plus diversifié, dirigé par un leader plus fort.

12. L’évaluation de la performance des conseils d’administration deviendra la norme.

La tendance est déjà bien ancrée aux États-Unis, où les entreprises engagent souvent des firmes externes pour mener cette évaluation. Certaines choisissent l’autoévaluation. Dans tous les cas, le processus est ouvert et si les résultats restent confidentiels, ils contribuent à l’amélioration de l’efficacité des conseils d’administration.

Vous désirez en savoir plus sur les bonnes pratiques de gouvernance ? Visitez le site du Collège des administrateurs de sociétés et suivez le blogue de Jacques Grisé.

Quel est le cadre juridique du fonctionnement d’un conseil consultatif de PME ? *

Quel est le cadre juridique du fonctionnement d’un conseil consultatif de PME ? Voici quelques éléments d’information en réponse à une question souvent posée dans le cadre de la formation en gouvernance de sociétés.

Cette question a été soumise à la considération de Me Raymonde Crête, professeure de droit à l’Université Laval et de Me Thierry Dorval, associé de Norton Rose.

Je reproduis ici la réponse de ces deux experts juridiques en gouvernance :

« Dans une PME, il est possible de créer un comité consultatif. Il n’existe pas de règles spécifiques concernant la création de ce type de comité. Les membres du comité consultatif ne sont pas, en principe, assujettis aux responsabilités qui incombent normalement aux administrateurs de sociétés, à moins qu’ils agissent, dans les faits, comme des administrateurs. Si les membres du comité consultatif agissent, dans les faits ou de facto, comme des administrateurs de sociétés, ils pourraient engager leur responsabilité, notamment en matière fiscale ou d’environnement. L’article 227.1 de la Loi de l’impôt sur le revenu impose aux administrateurs une responsabilité solidaire en cas de non-paiement de certains impôts. Pour éviter d’engager leur responsabilité, les membres du comité consultatif ne doivent donc pas exercer des fonctions analogues ou des pouvoirs similaires à ceux exercés par les membres d’un conseil d’administration, tels les pouvoirs décisionnels en matière d’émission d’actions, de déclaration de dividendes, etc ».

Concernant les responsabilités du conseil d’administration, vous pouvez consulter le document ci-dessous publié par Norton Rose.

Identification et gestion des risques que comporte le rôle d’administrateur de société

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* En reprise

Énoncés de principes de bonne gouvernance 2012 | Business Roundtable *

Voici un document publié par l’organisation américaire Business Roundtable qui est la plus importante association de PCD (CEO) aux É.U. et qui regroupe les plus grandes sociétés avec un total de $6 trillion en revenus annuels et plus de 12 million d’employés. Ce document présente le point de vue des hauts dirigeants de ces sociétés sur les pratiques de bonne gouvernance. Le rapport est représentatif de ce que les membres pensent que devraient être les pratiques exemplaires en matière de gouvernance. C’est une lecture vraiment très pertinente.

Principles of Corporate Governance – 2012

« Business Roundtable supports the following guiding principles:

First, the paramount duty of the board of directors of a public corporation is to select a chief executive officer and to oversee the CEO and senior management in the competent and ethical operation of the corporation on a day-to-day basis.

Second, it is the responsibility of management, under the oversight of the board, to operate the corporation in an effective and ethical manner to produce long-term value for shareholders. The board of directors, the CEO and senior management should set a “tone at the top” that establishes a culture of legal compliance and integrity. Directors and management should never put personal interests ahead of or in conflict with the interests of the corporation.

Third, it is the responsibility of management, under the oversight of the board, to develop and implement the corporation’s strategic plans, and to identify, evaluate and manage the risks inherent in the corporation’s strategy. The board of directors should understand the corporation’s strategic plans, the associated risks, and the steps that management is taking to monitor and manage those risks. The board and senior management should agree on the appropriate risk profile for the corporation, and they should be comfortable that the strategic plans are consistent with that risk profile.

Fourth, it is the responsibility of management, under the oversight of the audit committee and the board, to produce financial statements that fairly present the financial condition and results of operations of the corporation and to make the timely disclosures investors need to assess the financial and business soundness and risks of the corporation.

Fifth, it is the responsibility of the board, through its audit committee, to engage an independent accounting firm to audit the financial statements prepared by management and issue an opinion that those statements are fairly stated in accordance with Generally Accepted Accounting Principles, as well as to oversee the corporation’s relationship with the outside auditor.

Sixth, it is the responsibility of the board, through its corporate governance committee, to play a leadership role in shaping the corporate governance of the corporation and the composition and leadership of the board. The corporate governance committee should regularly assess the backgrounds, skills and experience of the board and its members and engage in succession planning for the board.

Seventh, it is the responsibility of the board, through its compensation committee, to adopt and oversee the implementation of compensation policies, establish goals for performance-based compensation, and determine the compensation of the CEO and senior management. Compensation policies and goals should be aligned with the corporation’s long-term strategy, and they should create incentives to innovate and produce long-term value for shareholders without excessive risk. These policies and the resulting compensation should be communicated clearly to shareholders.

Eighth, it is the responsibility of the corporation to engage with longterm shareholders in a meaningful way on issues and concerns that are of widespread interest to long-term shareholders, with appropriate involvement from the board of directors and management.

Ninth, it is the responsibility of the corporation to deal with its employees, customers, suppliers and other constituencies in a fair and equitable manner and to exemplify the highest standards of corporate citizenship.

These responsibilities and others are critical to the functioning of the modern public corporation and the integrity of the public markets. No law or regulation can be a substitute for the voluntary adherence to these principles by corporate directors and management in a manner that fits the needs of their individual corporations ».

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* En reprise

Articles reliés au sujet :

Histoire récente de l’essor des investisseurs activistes | Conditions favorables et avenir prévisible ? *

Ce matin, je vous convie à une lecture révélatrice des facteurs qui contribuent aux changements de fond observés dans la gouvernance des grandes sociétés cotées, lesquels sont provoqués par les interventions croissantes des grands investisseurs activistes.

Cet article de quatre pages, publié par John J. Madden de la firme Shearman & Sterling, et paru sur le blogue du Harvard Law School Forum on Corporate Governance and Financial Regulation, présente les raisons de l’intensification de l’influence des investisseurs dans la stratégie et la direction des entreprises, donc de la gouvernance, un domaine du ressort du conseil d’administration, représentants des actionnaires … et des parties prenantes.

English: Study on alternative investments by i... — English: Study on alternative investments by institutional investors. (Photo credit: Wikipedia)

Après avoir expliqué l’évolution récente dans le monde de la gouvernance, l’auteur brosse un tableau plutôt convainquant des facteurs d’accélération de l’influence des activistes eu égard aux orientations stratégiques.

Les raisons qui expliquent ces changements peuvent être résumées de la manière suivante :

Un changement d’attitude des grands investisseurs, représentant maintenant 66 % du capital des grandes corporations, qui conduit à des intérêts de plus en plus centrés sur l’accroissement de la valeur ajoutée pour les actionnaires;
Un nombre accru de campagnes (+ de 50 %) initiées par des activistes lesquelles se traduisent par des victoires de plus en plus éclatantes;
Un retour sur l’investissement élevé (13 % entre 2009 et 2012) accompagné par des méthodes analytiques plus sophistiquées et plus crédibles (livres blancs);
Un accroissement du capital disponible notamment par l’apport de plus en plus grand des investisseurs institutionnels (fonds de pension, compagnies d’assurance, fonds commun de placement, caisses de retraite, etc.);
Un affaiblissement dans les moyens de défense des C.A. et une meilleure communication entre les actionnaires;
Un intérêt de plus en plus marqué des C.A. et de la direction par un engagement avec les investisseurs activistes.

À l’avenir, les activistes vont intensifier leurs efforts pour exiger des changements organisationnels significatifs (accroissement des dividendes, réorganisation des unités d’affaires, modification des règles de gouvernance, présence sur les conseils, séparation des rôles de PCD et PCA, alignement de la rémunération des dirigeants avec la performance, etc.).

Ci-dessous, un extrait des passages les plus significatifs. Bonne lecture !

The Evolving Direction and Increasing Influence of Shareholder Activism

One of the signal developments in 2012 was the emerging growth of the form of shareholder activism that is focused on the actual business and operations of public companies. We noted that “one of the most important trendline features of

2012 has been the increasing amount of strategic or operational activism. That is, shareholders pressuring boards not on classic governance subjects but on the actual strategic direction or management of the business of the corporation.”… Several of these reform initiatives of the past decade continue to be actively pursued. More recently, however, the most significant development in the activism sphere has been in strategically-focused or operationally-focused activism led largely by hedge funds.

The 2013 Acceleration of “Operational” Activism

Some of this operational activism in the past few years was largely short-term return focused (for example, pressing to lever up balance sheets to pay extraordinary dividends or repurchase shares), arguably at the potential risk of longer-term corporate prosperity, or simply sought to force corporate dispositions; and certainly there continues to be activism with that focus. But there has also emerged another category of activism, principally led by hedge funds, that brings a sophisticated analytical approach to critically examining corporate strategy and capital management and that has been able to attract the support of mainstream institutional investors, industry analysts and other market participants. And this growing support has now positioned these activists to make substantial investments in even the largest public companies. Notable recent examples include ValueAct’s $2.2 billion investment in Microsoft (0.8%), Third Point’s $1.4 billion investment in Sony (7%), Pershing Square’s $2 billion investment in Procter & Gamble (1%) and its $2.2 billion investment in Air Products & Chemicals (9.8%), Relational Investor’s $600 million investment in PepsiCo (under 1%), and Trian Fund Management’s investments of $1.2 billion in DuPont (2.2%) and of more than $1 billion in each of PepsiCo and Mondelez. Interestingly, these investors often embark on these initiatives to influence corporate direction and decision-making with relatively small stakes when measured against the company’s total outstanding equity—as in Microsoft, P&G, DuPont and PepsiCo, for example; as well as in Greenlight Capital’s 1.3 million share investment in Apple, Carl Icahn’s 5.4% stake in Transocean, and Elliot Management’s 4.5% stake in Hess Corp.

In many cases, these activists target companies with strong underlying businesses that they believe can be restructured or better managed to improve shareholder value. Their focus is generally on companies with underperforming share prices (often over extended periods of time) and on those where business strategies have failed to create value or where boards are seen as poor stewards of capital.

Reasons for the Current Expansion of Operational Activism

Evolving Attitudes of Institutional Investors.

… Taken together, these developments have tended to test the level of confidence institutional investors have in the ability of some boards to act in a timely and decisive fashion to adjust corporate direction, or address challenging issues, when necessary in the highly competitive, complex and global markets in which businesses operate. And they suggest a greater willingness of investors to listen to credible external sources with new ideas that are intelligently and professionally presented.

Tangible evidence of this evolution includes the setting up by several leading institutional investors such as BlackRock, CalSTRS and T. Rowe Price of their own internal teams to assess governance practices and corporate strategies to find ways to improve corporate performance. As the head of BlackRock’s Corporate Governance and Responsible Investor team recently commented, “We can have very productive and credible conversations with managements and boards about a range of issues—governance, performance and strategy.”

Increasing Activist Campaigns Generally; More Challenger Success. The increasing number of activist campaigns challenging incumbent boards—and the increasing success by challengers—creates an encouraging market environment for operational activism. According to ISS, the resurgence of contested board elections, which began in 2012, continued into the 2013 proxy season. Proxy contests to replace some or all incumbent directors went from 9 in the first half of 2009 to 19 in the first half of 2012 and 24 in the first half of 2013. And the dissident win rate has increased significantly, from 43% in 2012 to 70% in 2013. Additionally, in July 2013, Citigroup reported that the number of $1 billion + activist campaigns was expected to reach over 90 for 2013, about 50% more than in 2012.

Attractive Investment Returns; Increasing Sophistication and Credibility. While this form of activism has certainly shown mixed results in recent periods (Pershing Square’s substantial losses in both J.C. Penney and Target have been among the most well-publicized examples of failed initiatives), the overall recent returns have been strong. Accordingly to Hedge Fund Research in Chicago, activist hedge funds were up 9.6% for the first half of 2013, and they returned an average of nearly 13% between 2009 and 2012.

In many instances, these activists develop sophisticated and detailed business and strategic analyses—which are presented in “white papers” that are provided to boards and managements and often broadly disseminated—that enhance their credibility and help secure the support, it not of management, of other institutional shareholders.

Increasing Investment Capital Available; Greater Mainstream Institutional Support. The increasing ability of activist hedge funds to raise new money not only bolsters their firepower, but also operates to further solidify the support they garner from the mainstream institutional investor community (a principal source of their investment base). According to Hedge Fund Research, total assets under management by activist hedge funds has doubled in the past four years to $84 billion today. And through August this year their 2013 inflows reached $4.7 billion, the highest inflows since 2006. Particularly noteworthy in this regard, Pershing Square’s recent $2.2 billion investment in Air Products & Chemicals was funded in part with capital raised for a standalone fund dedicated specifically to Air Products, without disclosing the target’s name to investors.

In addition to making capital available, mainstream institutions are demonstrating greater support for these activists more generally. In a particularly interesting vote earlier this year, at the May annual meeting of Timken Co., 53% of the shareholders voting supported the non-binding shareholder proposal to split the company in two, which had been submitted jointly by Relational Investors (holding a 6.9% stake) and pension fund CalSTRS (holding 0.4%). To build shareholder support for their proposal, Relational and CalSTRS reached out to investors both in person and through the internet. Relational ran a website (unlocktimken . com) including detailed presentations and supportive analyst reports. They also secured the support of ISS and Glass Lewis. Four months after the vote, in September, Timken announced that it had decided to spin off its steel-making business.

The Timken case is but one example of the leading and influential proxy advisory firms to institutional investors increasingly supporting activists. Their activist support has been particularly noticeable in the context of activists seeking board representation in nominating a minority of directors to boards.

These changes suggest a developing blurring of the lines between activists and mainstream institutions. And it may be somewhat reminiscent of the evolution of unsolicited takeovers, which were largely shunned by the established business and financial communities in the early 1980s, although once utilized by a few blue-chip companies they soon became a widely accepted acquisition technique.

Weakened Board-Controlled Defenses; Increasing Communication Among Shareholders. The largely successful efforts over the past decade by certain pension funds and other shareholder-oriented organizations to press for declassifying boards, redeeming poison pills and adopting majority voting in director elections have diminished the defenses available to boards in resisting change of control initiatives and other activist challenges. Annual board elections and the availability of “withhold” voting in the majority voting context increases director vulnerability to investor pressure.

And shareholders, particularly institutional shareholders and their representative organizations, are better organized today for taking action in particular situations. The increasing and more sophisticated forms of communication among shareholders—including through the use of social media—is part of the broader trend towards greater dialogue between mainstream institutions and their activist counterparts. In his recent op-ed article in The Wall Street Journal, Carl Icahn said he would use social media to make more shareholders aware of their rights and how to protect them, writing that he had set up a Twitter account for that purpose (with over 80,000 followers so far) and that he was establishing a forum called the Shareholders Square Table to further these aims.

Corporate Boards and Managements More Inclined to Engage with Activists. The several developments referenced above have together contributed to the greater willingness today of boards and managements to engage in dialogue with activists who take investments in their companies, and to try to avoid actual proxy contests.

One need only look at the recent DuPont and Microsoft situations to have a sense of this evolution toward engagement and dialogue. After Trian surfaced with its investment in DuPont, the company’s spokesperson said in August 2013: “We are aware of Trian’s investment and, as always, we routinely engage with our shareholders and welcome constructive input. We will evaluate any ideas Trian may have in the context of our ongoing initiatives to build a higher value, higher growth company for our shareholders.” Also in August, Microsoft announced its agreement with ValueAct to allow the activist to meet regularly with the company’s management and selected directors and give the activist a board seat next year; thereby avoiding a potential proxy contest for board representation by ValueAct. Soon thereafter, on September 17, Microsoft announced that it would raise its quarterly dividend by 22% and renew its $40 billion share buyback program; with the company’s CFO commenting that this reflected Microsoft’s continued commitment to returning cash to its shareholders.

What to Expect Ahead

The confluence of the factors identified above has accelerated the recent expansion of operational activism, and there is no reason in the current market environment to expect that this form of activism will abate in the near term. In fact, the likelihood is that it will continue to expand… Looking ahead, we fully expect to see continuing efforts to press for the structural governance reforms that have been pursued over the past several years. Campaigns to separate the Chair and CEO roles at selected companies will likely continue to draw attention as they did most prominently this year at JPMorgan Chase. And executive compensation will remain an important subject of investor attention, and of shareholder proposals, at many companies where there is perceived to be a lack of alignment between pay and performance. We can also expect that the further development of operational activism, and seeing how boards respond to it, will be a central feature of the governance landscape in the year ahead.

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* En reprise

Finding Value in Shareholder Activism (clsbluesky.law.columbia.edu)

The Corporate Social Responsibility Report and Effective Stakeholder Engagement (venitism.blogspot.com)

The Evolving Direction and Increasing Influence of Shareholder Activism (blogs.law.harvard.edu)

Shareholder activism on the rise in Canada (business.financialpost.com)

Dealing With Activist Hedge Funds (blogs.law.harvard.edu)

American Activist Investors Get Ready To Invade Europe (forbes.com)

Activist Investors Help Companies, Not Workers – Bloomberg (bloomberg.com)

The Separation of Ownership from Ownership (blogs.law.harvard.edu)

Réflexions capitales pour les Boards en 2014 – The Harvard Law School (jacquesgrisegouvernance.com)

Shareholder Activism as a Corrective Mechanism in Corporate Governance by Paul Rose, Bernard S. Sharfman (togovern.wordpress.com)

Dix leçons tirées d’une multitude d’entrevues avec des PCD de PME **

Quelles leçons peut-on tirer des entrevues avec les PCD (CEO) d’entreprises de petites capitalisations. C’est ce que nous présente Adam J. Epstein*, un spécialiste de « hedge fund » qui investit des centaines de millions de dollars dans les petites entreprises. L’article a été publié dans mc2MicroCap par Ian Cassel.

J’ai trouvé les conseils très pertinents pour les personnes intéressées à connaître la réalité des évaluations d’entreprises par des investisseurs privés. Qu’en pensez-vous ?

10 Lessons Learned from Interviewing Hundreds of MicroCap CEOs

1)    Preparation – there is no reason to waste your time and someone else’s by sitting down with a CEO to discuss their company without preparing – really preparing. To me, “really preparing” doesn’t mean looking at Yahoo Finance for a few minutes in the taxi on the way to the meeting, or flipping through the company’s PowerPoint on your phone. That kind of preparation is akin to walking up a few flights of stairs with some grocery bags to get ready for climbing Mt. Rainier. To be really prepared for a first meeting means reading/skimming the most recent 10K, the most recent 10Q, the most recent proxy filing, the management presentation, any previous management presentations (more on this later), a recent sell-side company or industry report, and an Internet search of the management team’s backgrounds (with particular emphasis on any prior SEC, NASD, or other state/federal legal problems). It’s hard to overemphasize how many would-be micro-cap investing disasters can be headed off at the pass by reading what’s said, and not said, and then having the opportunity to ask the CEO directly about what you’ve found.

2)    Non-Starters – for better or worse, the micro-cap world is home to some “colorful” management teams. After all of the time served in this regard, absolutely nothing surprises me anymore. I have found CEOs who were simultaneously running 3 companies, CEOs who were banned from running a public company by the SEC, management presentations that were largely plagiarized, CEOs who shouted profanities in response to basic questions about their “skin in the game,” and CEOs who not only didn’t understand Reg. FD, but clearly didn’t even know it existed. When in doubt, it’s much better not to invest at all than to make a bad investment; fortunately there are always thousands of other companies to consider.

3)    Company .PPT – these presentations speak volumes about what kind of company you are dealing with if you’re paying attention: a) my colleagues and I came up with a golden rule during my institutional investing tenure, namely that the length of a .ppt presentation is, more often than not, inversely proportional to the quality of the micro-cap company being presented (i.e., any micro-cap company that can’t be adequately presented in less than 20 slides is a problem, and 15 is even better); b) if the slides are too complex to understand on a standalone basis then either the company has a problem or you’re about to invest in something you don’t sufficiently understand – neither is good; c) NEO bios, market information, service/product/IP, strategy, financials, and use of proceeds should all receive equal billing (when buying a house, would you go and visit a house with an online profile that only features pictures of the front yard and the garage?); d) .ppt formatting and spelling/syntax problems are akin to showing up at an important job interview with giant pieces of spinach in your teeth; e) when reviewing use of proceeds (for a prospective financing) or milestones, look up prior investor presentations to see how well they did with prior promises – history often repeats itself; f) treat forward looking projections for what they typically are – fanciful at best, and violations of Reg. FD at worst; and g) micro-cap companies that flaunt celebrities as directors, partners, or investors should be approached cautiously.

4)    NEO Bios – as Ian Cassel often points out quite rightly in my opinion, micro-cap investing is an exercise in wagering on jockeys more than horses. One of the principal ways prospective investors have to assess jockeys is the manner in which professional backgrounds are set forth; i.e., management bios. Like a company .ppt, bios of named executive officers speak volumes about the people being described. Here are some things to look out for: a) bios that don’t contain specific company names (at least for a 10 year historic period) typically don’t for a reason, and it’s unlikely to be positive (e.g., “Mr. Smith has held senior management roles with several large technology companies”); b) it’s a good idea to compare SEC bios with bios you might find for the same people on other websites (remember the “three company CEO” referred to earlier?); c) bios that don’t contain any educational references or only highlight executive programs at Harvard, Wharton, Stanford, etc.; d) company websites that don’t have any management/director bios (surprising how many there are); and e) CEOs and CFOs who have never held those jobs before in a public company (to be clear, lots of micro-cap NEOs are “first-timers,” but it’s something you should at least factor into the risk profile of the investment).

5)    Management Conduct – just as management bios speak volumes, so does their conduct at in person one-on-one meetings. More specifically: a) organized, professional corporate leaders rarely look disheveled or have bad hygiene; b) service providers chosen by companies also represent the company, so the previous observation applies to bankers/lawyers as well; c) CEOs who are overly chatty about non-business issues might not be keen to talk about their companies; d) if a CEO seems glued to their .ppt presentation (i.e., essentially just reading you the slides), tell them to close their laptops and just talk about the company with no visual aids – you will learn an awful lot about them in the ensuing 5 minutes; e) be on the lookout for NEOs or service providers cutting each other off, disagreeing with each other, or talking over one another; f) when asking questions of the CEO or CFO watch their body language – moving around in their seats, running hands through their hair, perspiration, and less eye contact are nonverbal signs of duress (it’s one of the reasons why in-person meetings with management are always preferable to phone calls); g) if there are more than one NEOs in attendance, are they listening to each other (it’s rarely a great sign when other execs are looking at their phones during meetings); h) is the CEO providing careful, thoughtful answers or are they shooting from the hip – loose lips virtually always sink ships; i) did the CEO answer any questions with “I don’t know” – even great CEOs can’t possibly know the answer to every question about their companies; and j) something partially tongue-in-cheek just to think about – we know from everyday life that when someone starts a sentence with “with all due respect” what inevitably follows is, well, something disrespectful, and when a CEO repeatedly says “to be honest” what inevitably follows is….

6)    Service Providers – micro-cap service providers (bankers, lawyers, auditors, IR firms, etc.) can run the gamut from highly professional to so bad that they can actually jeopardize companies with their advice. While it certainly can take a while to learn “the good, the bad, and the ugly” in the micro-cap ecosystem, you can learn a lot about the CEO by asking him/her to take a few minutes to explain why the company’s service providers are the best choices for the shareholders. It perhaps goes without saying that if a CEO can’t speak artfully, and convincingly in this regard, then buyer beware.

7)    Corporate Governance – spans the full continuum in micro-cap companies from top-notch to nothing more than a mirage. One way to quickly ferret out which flavor of governance you’re dealing with is to ask a CEO to succinctly set forth the company’s strategy (i.e., goals, risks, opportunities, customers, etc.), and subsequently ask the CEO to describe how each seated director assists with the fundamental elements of achieving that strategy. Though oversimplified, material disconnects in this regard are very likely to illustrate some governance challenges. Also, ask the CEO how each of the directors came to the company; if all of the directors were brought to the company by the CEO, it’s fair to ask the CEO how confident an investor should be that the board is suitably independent to monitor the CEOs performance (one of the principal roles of all boards).

8)    Public Company IQ – easily one of the biggest problems with investing in the micro-cap arena is the conspicuous lack of (relevant, successful) capital markets and corporate finance experience in boardrooms and C-suites. As alluded to earlier, it’s a fact of life that a large percentage of micro-cap officers and directors lack appreciable tenures in shepherding small public companies (to be clear, this doesn’t mean they aren’t smart, successful, and sophisticated, it just means they haven’t had lots of experience in small public companies). Unlike larger public companies, small public companies can execute relatively well, and still toil in obscurity creating little or no value for shareholders.   It’s a good idea to evaluate the same when meeting with management, because companies with low “public company IQs” are more likely to underperform all else being equal. Be on the lookout for CEOs who: a) can’t articulate a sensible strategy for maintaining or increasing trading volume; b) seem to regularly undertake financings that are more dilutive than similarly situated peer companies; c) frequently authorize the issuance of press releases that don’t appear to contain material information; d) blame some or all of their capital markets challenges on short-seller/market-making conspiracy theories; and e) can’t name the company’s largest 5 shareholders, their approximate holdings, and the last time he/she spoke to each.

9)    Follow-Up – CEOs who promise to follow-up after meetings with clarified answers, customer references, or more information but don’t are tacitly underscoring for you that they are either disorganized, disingenuous, don’t care about investors or all three. The opposite is also not good; for example, if the company’s internal or external IR professionals subsequently convey information that seems inappropriate (from a Reg. FD standpoint) – it probably is.

10) Cautionary Note – Bernard Madoff undoubtedly would have passed these tests and a lot more with flying colors. Sometimes the “bad guys” are really smart and charming and you’re going to either lose most of your money or get defrauded, or both. It’s happened to me, and it’s maddening and humbling at the same time. Hence, the apt phrase: high risk, high return.

It’s easy, in my experience anyway, to get so skeptical about micro-cap companies that it can be paralyzing. But, just when you’re about to throw in the towel, along comes a compelling growth prospect run by management with as much integrity and skill as the day is long, and it serves as a poignant reminder of everything that’s great about investing in small public companies.

Like most “best-of” lists, this isn’t intended to be exhaustive by any stretch of the imagination. In addition to making money and promoting US jobs/innovation, one of the best parts of investing in small public companies in my opinion is continuing to hone the craft, and learn from other investors and their experiences. Accordingly, add/subtract per your own experiences, and happy hunting.

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*Adam J. Epstein advises small-cap boards through his firm, Third Creek Advisors, LLC, is a National Association of Corporate Directors Board Leadership Fellow, and the author of The Perfect Corporate Board: A Handbook for Mastering the Unique Challenges of Small-Cap Companies, (McGraw Hill, 2012). He was co-founder and principal of Enable Capital Management, LLC.

** En reprise

Even micro-cap companies not immune to proxy battles

Vent de changement dans les pratiques de vote des actionnaires !

Toute l’attention portée à la propriété et à la gouvernance des entreprises au cours des dernières années a menée à une réaffirmation du pouvoir du vote des actionnaires lors des assemblées annuelles des sociétés. Les actionnaires font entendre leurs voix de multiples manières auprès de la direction des entreprises et des conseils d’administration. La montée de l’actionnariat activiste est sûrement l’une des raisons de cette recrudescence.

La théorie de l’agence – qui veut que les actionnaires choisissent leurs agents/représentants (i.e. les administrateurs) et que ces derniers soient tenus responsables de la direction de l’organisation – semble mise à mal par les nouvelles intrusions des actionnaires dans la gestion de l’entreprise.

Les auteurs Paul H. Edelman et Randall S. Thomas, professeurs à Vanderbilt University, et Robert Thompson, professeur à Georgetown University Law Center, ont publié un document de recherche captivant portant sur le renouvellement des pratiques de votation dans une ère de « capitalisme intermédiaire ».

Quels sont les implications de ces changements pour la gouvernance des entreprises ? Assiste-t-on à un séisme dans le monde de la gouvernance ? Quelle sera la place des administrateurs dans la conduite des organisations si les actionnaires veulent faire la loi et exercer leur volonté en tout temps ?

Voici un résumé du document tel qu’il est présenté sur le site du Harvard Law School Forum. Vos commentaires sont bienvenus. Bonne lecture !

Shareholder Voting in an Age of Intermediary Capitalism

Shareholder voting, once given up for dead as a vestige or ritual of little practical importance, has come roaring back as a key part of American corporate governance. Where once voting was limited to uncontested annual election of directors, it is now common to see short slate proxy contests, board declassification proposals, and “Say on Pay” votes occurring at public companies. The surge in the importance of shareholder voting has caused increased conflict between shareholders and directors, a tension well-illustrated in recent high profile voting fights in takeovers (e.g. Dell) and in the growing role for Say on Pay votes. Yet, despite the obvious importance of shareholder voting, none of the existing corporate law theories coherently justify it.

Vote (Photo credit: Alan Cleaver)

Traditional theory about shareholder voting, rooted in concepts of residual ownership and a principal/agent relationship, does not easily fit with the long-standing legal structure of corporate law that generally cabins the shareholder role in corporate governance. Nor do those theories reflect recent fundamental changes as to who shareholders are and their incentives to vote (or not vote). Most shares today are owned by intermediaries, usually holding other people’s money within retirement plans and following business plans that gives the intermediaries little reason to vote those shares or with conflicts that may distort that vote. Yet three key developments have countered that reality and opened the way for voting’s new prominence. First, government regulations now require many institutions to vote their stock in the best interests of their beneficiaries. Second, subsequent market innovations led to the birth of third party voting advisors, including Institutional Shareholder Services (ISS), which help address the costs of voting and the collective action problems inherent in coordinated institutional shareholder action. And third, building on these developments, hedge funds have aggressively intervened in corporate governance at firms seen as undervalued, making frequent use of the ballot box to pressure targeted firms to create shareholder value, thereby giving institutional shareholders a good reason to care about voting. In a parallel way outside of the hedge fund space, institutional investors have made dramatically greater use of voting in Say on Pay proposals, Rule 14a-8 corporate governance proposals and majority vote requirements for the election of directors.

The newly invigorated shareholder voting is not without its critics though. Corporate management has voiced fears about the increase in shareholders’ voting power, as well as about third party voting advisors’ perceived conflicts of interest. The Securities and Exchange Commission (SEC) has asked for public comments on the possible undue influence of proxy advisors over shareholder voting. Even institutional investors have varying views on the topic. Can we trust the vote to today’s intermediaries and their advisors?

In our article, Shareholder Voting in an Age of Intermediary Capitalism, we first develop our theory of shareholder voting. We argue that shareholders (and only shareholders) have been given the right to vote because they are the only corporate stakeholder whose return on their investment is tied directly to the company’s stock price; if stock price is positively correlated with the residual value of the firm, shareholders will want to maximize the firm’s residual value and vote accordingly. Thus, shareholder voting should lead to value maximizing decisions for the firm as a whole.

But that does not mean that shareholders should vote for everything. Economic theory and accepted principles of corporate law tell us that corporate officers exercise day to day managerial power at the public firm with boards of directors having broad monitoring authority over them. In this framework, shareholder voting is explained by its comparative value as a monitor. We would expect a shareholder vote to play a supplemental monitoring role if the issue being decided affects the company’s stock price, or long term value, and if the shareholder vote is likely to be superior, or complementary, to monitoring by the board or the market. This is particularly likely where the officers or directors of the company suffer from a conflict of interest, or may otherwise be seeking private benefits at the expense of the firm. Thus shareholder voting can play a negative role as a monitoring device by helping stop value-decreasing transactions.

Monitoring is not the only theoretical justification for shareholders voting. We posit two additional theories that provide positive reasons for corporate voting because they enhance decision-making beyond monitoring. Shareholder voting can provide: (1) a superior information aggregation device for private information held by shareholders when there is uncertainty about the correct decision; and (2) an efficient mechanism for aggregating heterogeneous preferences when the decision differentially affects shareholders.

We also explore whether contemporary shareholders have the characteristics that permit them to play the roles our theory contemplates. In particular, we examine the business plan that gives today’s intermediaries reasons not to vote or conflicts that can distort their vote. Similar attention is given to the regulatory and market changes that have grown up in response to this reality: government-required voting by intermediaries; third party proxy advisory firms to let this voting occur more efficiently; and hedge fund strategies to make voting pay, for themselves and for other intermediaries such as mutual funds and pension funds.

Finally, we use our theory to illuminate when shareholder voting is justified. We focus on the role of corporate voting where the issue is a high dollar, “big ticket” decision. We use hedge fund activism as an example of this scenario and show how it fits with each of the prongs of our voting theory. Here we see voting performing the monitoring role anticipated by our theory, but there is also an important role for aggregating heterogeneous preferences among shareholders as mutual funds decide whether to follow hedge fund initiatives. In addition, we make the less obvious case for shareholder voting where hedge funds drop out of the equation–on decisions that have a smaller effect on stock prices, or the company’s long term value, such as Say on Pay, majority voting proposals, and board declassification proposals.

In sum, this article presents a positive theory of corporate voting as it exists today. In doing so, it directly addresses the vast shifts in stock ownership that have created intermediary capitalism and the important role of government regulations and market participants in making corporate voting effective. At the same time, it preserves for corporate management the lion’s share of corporate decision making, subject to active shareholder monitoring using corporate voting in conflict situations that affect stock price.

The full paper is available for download here.

Commentaire de l’IAS-ICD à l’attention de la CVMO | Amendements proposés aux pratiques de divulgation en matière de gouvernance

Voici un communiqué de l’Institut des administrateurs de sociétés (IAS-ICD) qui fait état de sa position auprès de la Commission des valeurs mobilières de l’Ontario (CVMO), en réponse à la sollicitation de commentaires sur des amendements proposés aux pratiques de divulgation en matière de gouvernance (Formulaire 58-101F1 et Règlement 58-101).

Dans cette lettre, l’IAS salue la CVMO et la Province de l’Ontario pour leurs initiatives visant à favoriser la diversité des genres et enjoint la CVMO à travailler en collaboration avec les Autorités canadiennes en valeurs mobilières afin d’élaborer une initiative nationale sur la diversité des genres.

L’IAS souligne également qu’il s’est fait depuis longtemps, lors de consultations auprès du gouvernement et des autorités réglementaires, un promoteur du régime « se conformer ou s’expliquer ». La lettre comprend également les suggestions suivantes pour améliorer la diversité des genres au sein des conseils d’administration :

Les émetteurs devraient divulguer des cibles concernant la représentation des femmes au conseil et la manière dont ils entendent mesurer leur progrès au fil du temps. S’il n’y a pas de cibles, on devrait pouvoir exiger de l’émetteur qu’il divulgue comment il entend s’y prendre pour favoriser la diversité.

De nouvelles exigences devraient être instaurées au même moment pour tous les émetteurs non émergents, sans égard à leur capitalisation boursière ou à leur indice de société.

La question des limites de mandat a une portée beaucoup plus large et complexe que son seul rapport à la diversité et devrait donc être envisagée dans le cadre d’une consultation distincte. L’IAS favorise l’amélioration continue des conseils d’administration, mais ne croit pas que le renouvellement des conseils se résume simplement à une question de compte.

Les exigences proposées de divulgation du nombre et de la proportion de femmes parmi les cadres dirigeants des filiales de l’émetteur ne sont pas nécessaires, seraient trop lourdes et ne devraient donc pas figurer parmi les amendements.

Veuillez cliquer ici pour lire l’intégralité de la lettre de commentaires. Les membres peuvent transmettre leur rétroaction sur cette prise de position de politique et d’autres initiatives à l’adresse de courriel comments@icd.ca.

Huit pièges à éviter en matière de diversité des C.A. !

Document de consultation de l’OCDE sur la révision des principes de gouvernance |2014

Voici le document de consultation de l’OCDE sur la révision des principes de gouvernance |2014, présenté à Paris le 17 mars 2014. Ce document est en version anglaise seulement. Après la révision, l’OCDE produira des versions dans toutes les langues !

Celui-ci explicite les objectifs de politiques publiques en gouvernance, explore le nouveau paysage qui commande des changements en gouvernance et suggère sept (7) domaines susceptibles d’engendrer des changements importants au document Principe de gouvernance de 2004 (OECD Principles of Corporate Governance).

Je vous invite à participer à cette consultation si vous croyez utile de le faire. Ci-dessous, une introduction, suivie des 7 développements qui influeront sur la nouvelle version des principes de gouvernance de l’OCDE.

The OECD Principles of Corporate Governance is a public policy instrument intended to assist governments in their efforts to evaluate and improve the legal, regulatory and institutional framework for corporate governance. As formulated in the mandate that was given to the OECD Corporate Governance Committee in 2010, the objective is to contribute to « economic efficiency, sustainable growth and financial stability ». In practice, this objective is achieved by formulating principles for policies that give market participants sound economic incentives to perform their respective roles within a framework of checks and balances where transparency, supervision and effective enforcement provides confidence in market practices and institutions.

English: The logo of the Organisation for Economic Co-operation and Development (OECD). (Photo credit: Wikipedia)

While the Principles may inspire voluntary initiatives and influence practices in individual companies, the Principles do not aspire to include a shopping list of what individual market participants, such as shareholders, boards, managers and other stakeholders, from their unique perspectives, may consider good business judgment or sound commercial practices. What works in one company or for one investor may not necessarily be generally applicable as public policy or of systemic economic importance to society.

In order to be relevant and effective, the legal and regulatory framework must be shaped with respect to the economic reality in which it will be implemented. This is true also for the recommendations made in the Principles. And since they were last revised in 2004, the world has experienced a number of important events and structural developments in both the financial and corporate sectors. This obviously includes the financial crisis. But equally important for the review of the Principles are the far reaching changes in corporate ownership and investment practices. In some respects, these changes have come to challenge conventional wisdom and the relevance of current corporate governance standards. Several of these developments have been documented and analysed by the Corporate Governance Committee and the Regional Corporate Governance Roundtables and some of the background reports that have been written to support the review are annexed to this note for reference.

Seven main events and developments of importance to the review of the Principles can be identified:

The financial crisis.

The financial crisis revealed severe shortcomings in corporate governance. When most needed, existing standards failed to provide the checks and balances that companies need in order to cultivate sound business practices. Corporate governance weaknesses in remuneration, risk management, board practices and the exercise of shareholder rights played an important role in the development of the financial crisis and such weaknesses extended not only to the financial sector, but to companies more generally. The lessons from the financial crisis are discussed in the Committee’s report « Corporate Governance and the Financial Crisis: Conclusions and Emerging Good Practices to Enhance Implementation of the Principles » (2010).

Developments in institutional ownership, investment strategies and trading techniques.

Since the Principles were revised in 2004, assets under management by institutional investors have increased considerably. We have also seen a surge in new types of institutional investors, investment vehicles and trading techniques. Taken together, these developments have affected the character and quality of ownership engagement. Many of the largest institutional investors, such as pension funds, insurance companies and mutual funds use indexing as the prime investment strategy. A special, and increasingly popular, version of indexing is the use of Exchange Traded Funds (ETFs), which increased by more than 1000 percent between 2004 and 2011. A common characteristic of these investment practices is that they motivate investors to pay little or no attention to the fundamentals of individual companies, since the composition of the index is pre-defined and adjustments in the portfolio is not by active choice but rather a result of the index weighting. The same effect results from the surge in so-called high frequency trading where the investment strategy and ultra-short holding periods do not motivate any corporate specific analysis or ownership engagement. A fourth development that has attracted a lot of interest and debate is co-location of brokers, data vendors and other participants’ computer capacity within the stock exchanges’ data centres. This has raised concerns about confidence in a level playing field among different categories of investors with respect to market information. These developments and their implications for the economic incentives for ownership engagement among institutional investors are further discussed in « Institutional Investors as Owners – Who Are They and What Do They Do? » (2013).

Developments in the investment chain and the use of service providers.

The real world of ownership characterised by institutional (or intermediary) investors is a very different reality than the model textbook world of company law and economics, which assumes a strict and uncompromised alignment of interest between the performance of the company and the income of the ultimate shareholder. Instead of a straight line from « from profit to pocket », which is assumed in theory, we have an extended and sometimes very complex investment chain where different actors may have different incentives. The implications for the quality of ownership engagement are discussed in the background report « Institutional Investors as Owners – Who Are They and What Do They Do? » (2013). Among other aspects, the report highlights the possible implications of cross-investments between different institutional investors and the extensive use of proxy advisers, which is sometimes argued to impose a box ticking culture of « one-size-fits-all ». The last couple of decades have also seen an increase in outsourcing of asset management to external asset managers who may also be charged with carrying out the ownership functions. The complexity of the investment chain is also influenced by changes in stock market structures, trading practices and investment strategies. One example is the increased use of dark pools and off-exchange trading platforms that has increased concerns about the quality of the price discovery process and equal access to market information, which is so essential for efficient allocation of capital.

Developments in shareholder rights and participation.

Since the last review of the Principles, shareholder rights in many countries have been strengthened and there is a general trend to empower the shareholder meeting in the corporate decision-making process, particularly with respect to board nomination and remuneration policies. Technological advancements have also contributed to facilitating shareholder participation in the shareholder meetings. As documented in the report « Who Cares? Corporate Governance in Today’s Equity Markets » (2013), several studies illustrate a relatively high level of participation in shareholder meetings in most OECD countries, including the United Kingdom and the United States that have predominantly dispersed ownership at corporate level. Today, the discussion on shareholder participation is mainly focused on the actual quality of shareholder monitoring and engagement, with the exception of issues related to shareholder co-operation. In some countries, particularly in emerging market economies, it is also argued that ownership engagement is impeded by difficulties with respect to placing items on the agenda of the shareholders’ meeting; the rules for convening shareholders’ meetings; limited access to relevant documentation and restrictions on share ownership by institutional investors.

Developments in corporate characteristics and business models.

Investments in fixed assets, such as machinery and buildings, have for decades been seen as the main source of capital formation. A recent OECD study1, however, shows that business investment in intangible assets has been increasing faster than investments in fixed assets for a number of years in many OECD countries and already accounts for more than half of the total business investment in some countries. The result is an increased dependence on human capital and intangible assets for innovation and value creation at firm level. At the same time, there has been significant number of acquisitions by some large established companies in more intangible-asset-intensive industries, partly through their venture units. Together with the decrease in the number of new listings in advanced stock markets, these developments have raised concerns about the ability of growth companies to develop and expand as independent companies. One preliminary indicator is the decrease in the share of young companies as percentage of the total number of companies in the US by 16% over the last decade. Another important development in terms of corporate characteristics and business models is the creation and surge of alternative corporate structures, mainly in the form of partnerships. This includes publicly traded partnerships (PTPs) and master limited partnerships (MSPs) that trade on securities exchanges.

Developments in corporate ownership.

Traditionally, the international corporate governance debate has focused on situations with dispersed ownership where the conflict is a zero sum game between dispersed owners on the one hand and incumbent management on the other hand. This « agency » approach has its merits but it also has important weaknesses. One important weakness is that most listed companies around the world are not characterized by dispersed ownership. Rather, they have a controlling or dominant owner. This is particularly true in emerging markets. But controlling owners are also common in most advanced economies, including the US and continental Europe. It has been argued that the focus on dispersed ownership is of limited help when addressing corporate governance issues in companies that have a controlling owner. The presence of controlling owners is generally assumed to provide strong incentives for informed ownership engagement and to overcome the fundamental agency problem between shareholders and managers. There are also arguments that the incentives for controlling owners to assume the costs for this ownership engagement are weakened by restrictions on the possibilities of controlling owners to exercise their rights and be properly compensated for their efforts to monitor. Some of these are discussed in the background paper « The Law and Economics of Controlling Owners in Corporate Governance » (2013). At the same time, there are concerns that controlling owners in a weak regulatory framework may take advantage of minority shareholders through abusive related party transactions. This is discussed in the report « Related Party Transactions and Minority Shareholder Rights » (2012).

Developments in the functioning of public stock markets.

Corporate governance policies are focused on companies that are traded on the public stock market. To understand the functioning and structure of public stock markets is therefore essential for getting the corporate governance rules right. And today, stock markets look very different from what they did when the OECD Principles were first established. The developments are well documented in the background reports « Who Cares? Corporate Governance in Today’s Equity Markets » (2013) and « Making Stock markets Work to Support Economic Growth » (2013), which address issues such as market fragmentation, increased use of dark pools, changes in « tick-size », high-frequency trading and co-location. The reports also show that during the last decade, some of the leading stock markets in the world have lost as much as half of their listed companies and that the average size of companies that find their way to the stock market has increased. At the same time, stock exchanges in emerging markets, notably in Asia, have increased the number of listed companies significantly. Between 2008 and 2012 a majority of all new listings in the world were in emerging markets. Since the free float (the portion of outstanding shares regularly available for public trading) is relatively small in these markets, one consequence of this development is an increase in the number of publicly traded companies that have a controlling owner. Another important development is the occurrence of cross-listings and secondary listings, which raises issues related to the standards and procedures for recognizing of corporate governance standards in primary listing venues and the allocation of supervisory obligations between listing stock exchanges. We have also seen a development where stock exchanges have demutualised and become listed companies on themselves; so called self-listing. At the same time, there has been a certain degree of consolidation through mergers of regulated exchanges both at national and international level, which was coupled with the emergence of new venues for trading; such as alternative trading venues and dark pools.

2014 Review of the OECD Principles of Corporate Governance

First released in May 1999 and last revised in 2004, the OECD Corporate Governance Committee has launched a further review of the OECD Principles of Corporate Governance. The review process starts in 2014 with the objective of conclusion within one year.

The OECD Principles are one of the 12 key standards for international financial stability of the Financial Stability Board (FSB) and form the basis for the corporate governance component of the Report on the Observance of Standards and Codes of the World Bank Group.

The rationale for the review is to ensure the continuing high quality, relevance and usefulness of the Principles taking into account recent developments in the corporate sector and capital markets. The outcome should provide policy makers, regulators and other rule-making bodies with a sound benchmark for establishing an effective corporate governance framework.

The basis for the review will be the 2004 version of the Principles, which embrace the shared understanding that a high level of transparency, accountability, board oversight, and respect for the rights of shareholders and role of key stakeholders is part of the foundation of a well-functioning corporate governance system. These core values should be maintained and, as appropriate, be strengthened to reflect experiences since 2004.

As the Principles are a global standard also adopted by the FSB, all FSB member jurisdictions are invited to participate in the review as Associates and have the same decision-making rights as OECD members.

The review will benefit from consultations with stakeholders, including the business sector, investors, professional groups at national and international levels, trade unions, civil society organisations and other international standard setting bodies.

Peer reviews – In response to the corporate governance challenges that came into focus in the wake of the financial crisis, the Corporate Governance Committee launched a thematic review process designed to facilitate the effective implementation of the OECD Principles and to assist market participants and policy makers to respond to emerging corporate governance risks. These peer reviews will provide valuable background support to the review.

OECD Forecasts During and After the Financial Crisis: A Post Mortem

Dix (10) activités que les conseils d’administration devraient éviter de faire !

Voici le condensé d’un article publié par Deloitte en 2011 et que j’ai relayé à mes premiers abonnés au début de la création de mon blogue.

En revisitant mes billets, j’ai été en mesure de constater que plusieurs parutions étaient encore d’une grande pertinence. Ainsi, afin de revenir sur mes débuts comme blogueur, je vous présente un document de la firme Deloitte qui énumère dix (10) activités que les conseils d’administration doivent éviter de faire.

Les suggestions sont toujours aussi d’actualité. Bonne relecture !

Avoid presentation overload

Presentations should not dominate board meetings. If your board meetings consist of a scripted agenda packed with one presentation after another, there may not be sufficient time for substantive discussions. The majority of board meetings should be focused on candid dialogue about the critical strategic issues facing the company. The advance meeting materials should comprise information that provides the basis for the discussions held during the meeting. Management should feel confident that the board will read these pre-meeting materials, and the board must commit an adequate amount of time in advance of the meeting to do so.

Avoid understating the importance of compliance

There is no room for a culture of complacency when it comes to compliance with laws and regulations. As noted in the Deloitte publication

Avoid postponing the CEO succession discussion

CEO succession planning is one of the primary roles of the board. With the changing governance landscape and new and proposed regulations, the board has a full agenda these days. However, it is important to occasionally take a step back to ensure the board is addressing this important responsibility. During this time of rebuilding and prior to the implementation of new regulations, boards should assess where time is being spent and perhaps redirect focus on succession.

It is important to note that the succession planning process is continual and doesn’t end when a new CEO is selected. As the company evolves, its needs change, as do the skills required of the leadership team. The board needs to ensure that a leadership pipeline is developed and that its members have ample opportunity to connect with the next generation of leaders.

Avoid the trap of homogeneity

The topic of board composition and having the « right » people on the board continues to receive much attention. The SEC has proposed rules that would require more disclosure about director qualifications, including what makes each director qualified to participate on certain board committees. The shift to independent board members facilitated a move away from a « friends on the board » approach to a new mix. However, the board needs to assess whether this new mix translates into a positive and productive board dynamic. Boards should take a closer look at the expertise, experience and other qualities of each member to ensure the board that can provide the right expertise. Diversity of thought provides the perspectives needed to effectively address critical topics, which can contribute to greater productivity and ultimately a stronger board.

Avoid excessive short-term focus

Perpetual existence is one of the principal reasons for the initial development of a corporation. However, recent history offers many examples of modern corporate entities managing to reach short-term results at the expense of long-term prosperity. The board can demonstrate its leadership by being the voice of reason and openly discussing the sustainability of strategic initiatives. This can result in a well-governed company with a greater chance of achieving long-term, sustainable success.

Avoid approvals if you don’t understand the issue

Complex issues can have significant implications for the survival of an organization. It is up to directors to make sure that they understand issues that can alter the future of an enterprise before a vote is taken. This doesn’t require dissecting every detail, but it should consist of a thorough investigation and assessment of the risks and rewards of proposed transactions. If you don’t adequately understand the issue, ask for more education from management or external experts. It comes down to being able to ask the tough questions of management and probing further if things do not make sense. Consensus doesn’t mean going along with the crowd. True consensus results from a thorough debate and airing of the issues before the board, resulting in a more informed vote by directors.

Avoid discounting the value of experience

As a director, it is important to recognize the value that your experience can bring to the issues at hand. Good governance doesn’t mean checking all the right boxes. Rather, it is bringing together the diverse skills and experiences of each director to lead the company through challenges. Directors can provide greater insight by being ‘situationally aware’ when evaluating events and courses of action to take. Just as the captain of a ship needs to understand the various environmental factors that influence navigation, boards need to understand the external risks that may have an impact on the navigation of the company. Consider the context of the current issue, how it is similar to, or different from, previous experiences, what alternatives could be considered, and how outside forces may impede a successful outcome. Don’t discount the value of experience just because it was gained outside the boardroom.

Avoid stepping over the line into management’s role

A board that makes management decisions will find it difficult to hold the CEO accountable for the outcome. A director’s role is to oversee the efforts of management rather than stepping into management’s shoes. Directors must make a concentrated effort to ensure that they have clarity on management’s role, which is to operate the company. The distinction between the board and management is often blurred by directors who forget that they are not charged with running the day-to-day operations of an enterprise. This doesn’t prevent a director from getting into the details of an issue facing the company, but it does mean that directors should avoid stepping over the line.

Avoid ignoring shareholders

A company’s shareholders are among the most important and potentially vocal constituents of the enterprise. Concerns can sometimes be addressed by providing shareholders an audience with the board to air their concerns. Historically, compliance with the SEC Regulation Fair Disclosure (Reg FD) rules has been perceived as a hindrance to directors engaging in shareholder dialogue and meetings. As outlined in the Millstein Center for Corporate Governance and Performance policy briefing.

Avoid a bias to risk aversion

With the recent focus on excessive risk-taking and its impact on the credit crisis, there is concern that companies and boards may become risk-averse.

New Deloitte survey on risk management effectiveness

Placer les actionnaires-investisseurs au cœur du processus de nomination des administrateurs | Qu’en pensez-vous ?

Il est toujours intéressant de lire des articles qui font des propositions audacieuses sur la gouvernance des sociétés. En effet, c’est assez rare dans ce domaine qu’on se hasarde à présenter de nouvelles façons d’exercer la gouvernance.

Voici un article original et provocant publié par Emil Redding* dans CITYA.M.com qui suggère une nouvelle manière de nommer des administrateurs afin de tenir compte d’une plus grande diversité, mais aussi d’une plus grande volonté d’engagement des grands actionnaires-investisseurs dans la composition des comités de gouvernance et de mise en nomination !

Voici un extrait de l’article. Que pensez-vous de la proposition de l’auteure ?

Shareholders must be involved at an earlier stage of the process to have a real say over who is chosen. Instead of the Nominations Committee being made up of part of the current board, usually including the chair and often the chief executive, there should be a majority of “investor representatives” chosen by the body of shareholders. They would then have a vital say in who was put forward for final selection, and for “election” at the AGM.

Once the right non-executive directors (NEDs) are being appointed, they should be treated as more professional, held to account and rewarded accordingly. The recruitment of NEDs should become more formal and include psychometric testing. But the evaluation of NEDs also needs to become more in-depth. Pay should form an automatic part of board evaluations, and sector average pay levels should be published by the Financial Reporting Council to increase transparency.

By encouraging the owners of companies to take more responsibility, the UK corporate governance framework will be strengthened …

The boardroom debate needs to move beyond gender

WEAK and ineffectual boards are a risk to the health of their companies and to the whole UK economy. As the Flowers chairmanship of Co-op Bank showed, a board that does not contain the right mix of skills and experience will not be able to prevent mistakes from happening. We need financial and technical experts holding boardroom bosses to account. Yet the British corporate governance debate has been dominated by gender diversity. While it is vitally important that boards become more representative, this also skews attention away from where it should be – how to appoint directors with a diversity of skills and experience. So how can it be achieved? As my report today recommends, instead of executive search firms expanding shortlists to include more women, their attention should be on including people with different skills and experiences to those traditionally head-hunted. In the annual report, the skills and experiences of each board member should be emphasised, rather than their gender, so that focus shifts onto what that person brings to the monitoring and steering of the firm. Engaging shareholders is another necessary step. The 2012 Kay Review rightly identified lack of investor oversight as a crucial flaw, but the proposal to set up an Investor Forum, where shareholders meet to encourage collective engagement, and vague recommendations that investors be consulted over major appointments, will do little to improve the relationship between shareholders and the firms they own. Investors do have a say, by voting at the AGM. Yet the board typically puts forward the people they want, and shareholders unanimously waive the appointments through. Shareholders must be involved at an earlier stage of the process to have a real say over who is chosen. Instead of the Nominations Committee being made up of part of the current board, usually including the chair and often the chief executive, there should be a majority of “investor representatives” chosen by the body of shareholders. They would then have a vital say in who was put forward for final selection, and for “election” at the AGM. Once the right non-executive directors (NEDs) are being appointed, they should be treated as more professional, held to account and rewarded accordingly. The recruitment of NEDs should become more formal and include psychometric testing. But the evaluation of NEDs also needs to become more in-depth. Pay should form an automatic part of board evaluations, and sector average pay levels should be published by the Financial Reporting Council to increase transparency. By encouraging the owners of companies to take more responsibility, the UK corporate governance framework will be strengthened. This is the best insurance we can have against governance failures such as at Co-Op Bank.

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*Emily Redding is author of Policy Exchange’s report Board Rules: Improving Corporate Governance.

Comment se préparer aux agissements plus audacieux des actionnaires activistes ?

Joseph Cyriac, Ruth De Backer, et Justin Sanders de la firme McKinsey Insights ont produit un formidable document de recherche sur la contribution et sur l’impact des activités des actionnaires activistes. Ceux-ci ciblent de plus en plus d’entreprises … et des entreprises de plus en plus grandes.

Une recherche empirique conduite par les auteurs indique :

(1) les types de facteurs susceptibles de les attirer

(2) comment les directions et les conseils d’administration doivent réagir à l’annonce de l’intérêt.

Voici trois constats qui découlent de l’étude :

1. Les campagnes menées par les activistes génèrent, en moyenne, un accroissement de la valeur des actions

2. L’issue d’un arrangement négocié tend à produire un rendement aux actionnaires plus élevé sur une période de trois ans

3. La plupart des campagnes débutent de manière collaborative mais tournent à « l’hostilité ».

Voici un court extrait d’un article que je vous invite à lire au complet pour une meilleure compréhension de ce qu’il faut faire lorsqu’une entreprise est approchée par un investisseur activiste.

Bonne lecture !

Preparing for bigger, bolder shareholder activists !

Activist investors¹ are getting ever more adventurous. Last year, according to our analysis, the US-listed companies that activists targeted had an average market capitalization of $10 billion—up from $8 billion just a year earlier and less than $2 billion at the end of the last decade. They’ve also been busier, launching an average of 240 campaigns in each of the past three years—more than double the number a decade ago. And even though activists are a relatively small group, with only $75 billion in combined assets under management compared with the $2.5 trillion hedge-fund industry overall, they’ve enjoyed a higher rate of asset growth than hedge funds and attracted new partnerships with traditional investors. As a result, they have both the capital and the leverage to continue engaging largecap companies.

Shareholders generally benefit. Our analysis of 400 activist campaigns (out of 1,400 launched against US companies over the past decade) finds that, among large companies for which data are available, the median activist campaign reverses a downward trajectory in target-company performance and generates excess shareholder returns that persist for at least 36 months (Exhibit 1).²

Exhibit 1 : Activist campaigns, on average, generate a sustained increase in shareholder returns

La petite histoire de l’évolution des rémunérations des hauts dirigeants

Voici un article de DEBORAH HARGREAVES sur la petite histoire de l’évolution des rémunérations des hauts dirigeants paru dans la section Opiniator du New York Times. L’expérience européenne est particulièrement instructive à cet égard.

Je vous invite à prendre connaissance de cet historique afin de mieux comprendre les restrictions qui seront éventuellement mises en place pour remédier aux excès en matière de rémunération des dirigeants (en relation avec les salaires moyens payés).

Vos commentaires sont les bienvenus. Bonne lecture !

Can We Close the Pay Gap ?

The issue of pay ratios has become the latest front in a worldwide debate about inequality and the widening gap between the top 1 percent and everyone else. In the United States, the financial reforms of the Dodd-Frank Act contained a provision that would force American companies to disclose the ratio of the compensation of their chief executive officer to the median compensation of their employees. Yet fierce criticism from the business sector has succeeded in delaying this measure for four years — and counting.

Now the European Commission in Brussels has weighed in, with a proposal currently under discussion that the European Union’s 10,000 listed companies reveal their pay ratios and allow shareholders to vote on whether they are appropriate. This has unleashed howls of protest against the European Union’s unpopular, unelected commissioners. Fund managers have called the plan weird, and business leaders have objected that shareholders don’t want such power.

Pay ratio proposals, in fact, have a venerable history. In his 1941 essay “The Lion and the Unicorn: Socialism and the English Genius,” George Orwell advocated a limitation of incomes so that the best-paid would earn no more than 10 times the lowest-paid. But this was controversial territory, even for Orwell. A few paragraphs on, he retreated and wrote: “In practice it is impossible that earnings should be limited quite as rigidly as I have suggested.”

Several decades earlier, that Gilded Age titan John Pierpoint Morgan had endorsed a 20 to 1 ratio between the head of a company and its average worker. That same ratio was recommended in the 1970s by the American management guru Peter F. Drucker.

Yet look where we are now: In 2012, the compensation received by chief executives of companies in the S.&P. 500 index was 354 times that of rank-and-file staff.

Companies are sensitive about revealing the pay differential between the bosses and the work force partly because the gap has become so extreme. Business leaders argue that they have to offer high rewards in order to compete in a global talent pool for well-qualified executives.

After big corporations threatened to quit the country, voters in Switzerland last year rejected a referendum that would have restricted the pay gap to a ratio of 12 to 1. But the proposition still garnered 35 percent support amid a heated campaign.

The idea of a global talent pool for chief executives is, however, largely a myth. Not one of the chief executives heading up the 142 American companies in the Fortune Global 500 at the end of 2012, for example, was an external hire from overseas. There was a little movement within Europe, but over all, poaching of chief executives from abroad accounted for only 0.8 percent of C.E.O. appointments in the Fortune Global 500.

Business leaders also argue that senior managers need incentives to drive the business forward, so their compensation must be linked to the performance of the corporation, usually through the offer of big share awards for meeting certain targets. The argument that chief executive pay must be linked to the performance of the company has driven share awards ever higher — in Britain, as high as 700 percent of salary. But there is scant evidence to show a definite link between executive remuneration and a company’s success.

On the contrary, some economists say that the practice of rewarding chief executives for boosting the share price (and consequently their own compensation) makes them too short-term in their focus. The way they are paid is thus at odds with the long-term success of the company.

Moreover, the manner in which chief executives are rewarded means that it is in their interests to keep work-force wages low, in order to contain costs. This may help to explain why we have seen executive remuneration continue to rise sharply during and after the financial crisis, while work-force wages have stagnated, struggling to keep up with inflation.

Last year, the top 10 most highly paid chief executives in the United States took home more than $100 million each; most of these rewards came from shares or stock options. The survey of 2,259 American chief executives found that, on average, their remuneration had risen by 8.47 percent. At the same time, the average family income was $51,017 — little changed from the year before, and 9 percent less than its inflation-adjusted peak in 1999 of $56,080.

According to a report by the French academic Thomas Piketty and Emmanuel Saez of the University of California, Berkeley, incomes for the top 1 percent in the United States grew by 31.4 percent from 2009 to 2012, but the bottom 99 percent saw their wages go up by only 0.4 percent during the same period. The economists conclude that the top 1 percent captured 95 percent of the income gains in the first two years of the recovery.

Widening pay gaps have added to concerns about inequality and economic instability. This is one reason regulators are struggling to find ways of making remuneration fairer or, failing that, enforcing disclosure that shows how unfair it is.

Brussels has tried to do this by introducing a law that comes into effect next year that will cap bankers’ bonuses. Europe’s highest-paid bankers will have their bonuses restricted to 100 percent of salary, or 200 percent with prior approval of shareholders. This is largely a British issue, since most of Europe’s best-paid bankers reside in Britain.

But the bank bonus rule has seen banks making big efforts to get around it by allocating monthly allowances to their top bankers and executives to make up for lost bonuses. Banks argue that without global action on bonuses, they risk losing their top performers to Wall Street or Hong Kong.

There is probably some truth in this since bankers specifically tend to be more mobile than corporate chief executives. There is, however, a counterargument that bankers will now be more attracted to working in the European Union since their pay will generally be just as high and far more predictable than an annual bonus.

The European Union bonus saga is helpful in illustrating the often perverse consequences of trying to impose laws and regulations to limit top remuneration. In a similar fashion, President Bill Clinton’s campaign pledge in 1991 to restrict top salaries to $1 million is often cited as the point at which chief executive pay started to skyrocket in America — precisely because companies introduced payments of stock options to circumvent the rule.

A regulatory crackdown on high pay ratios can also hurt the very people it is trying to help. The imposition of a maximum pay ratio, for example, might see companies outsourcing the work of their lowest-paid employees, purely to make their figures look better.

But business is not immune to the public debate about inequality and pay distribution. There is evidence that big pay gaps can undermine employee morale, leading to strikes, more sick days and higher staff turnover. And pressure on corporate leaders to address large pay disparities because it would help their business perform more effectively can be persuasive.

There is an outside chance that business will reform itself, as some business leaders bemoan the pay scandals for inflicting damage on their sector’s reputation. But expecting multimillionaires to take a voluntary pay cut is a long shot. It might be more effective to introduce structures that will tackle egregious pay awards before they are made.

In Germany, for example, the unusual system of a two-tier board structure for company governance has helped prevent top pay rising as fast as it has in other developed nations. A supervisory board, consisting half of shareholders and half of employees elected by the work force, has the ultimate power over executives and sets top pay.

In 2012, employee board members at Volkswagen forced through a 20 percent pay cut for the chief executive even though the company was making record profits. They felt the C.E.O.’s pay was too high, his bonus targets too easy and that work-force wages had been held down. This was widely seen in Germany as a response to the controversy over inequality after the financial crisis.

There is a growing chorus of voices in Britain arguing for the election of employees onto company boards or remuneration committees. This could become an important theme in the run-up to the next general election in 2015, given the way public debate has already focused on falling living standards.

Top chief executives worldwide often take home far more in one year than most people will earn in their entire lifetime. Yet the International Monetary Fund has recognized that reducing inequality leads to “faster and more durable growth.” It is important that we put pressure on businesses and policy makers to develop measures to stop pay gaps opening up even further, and to share the rewards of success more fairly — for everyone’s benefit.

__________________________________

*Deborah Hargreaves is the director of the London-based campaign group the High Pay Centre.

Gouvernance : 12 tendances à surveiller

Vous trouverez ci-dessous un article publié dans Lesaffaires.com le 31 mars 2014. Dans cet entrevue, le journaliste me demande de faire une synthèse des tendances les plus significatives en gouvernance de sociétés. Bonne lecture !

Gouvernance : 12 tendances à surveiller

Une entrevue avec M. Jacques Grisé, auteur du blogue jacquesgrisegouvernance.com

Si la gouvernance des entreprises a fait beaucoup de chemin depuis quelques années, son évolution se poursuit. Afin d’imaginer la direction qu’elle prendra au cours des prochaines années, nous avons consulté l’expert Jacques Grisé, ancien directeur des programmes du Collège des administrateurs de sociétés, de l’Université Laval. Toujours affilié au Collège, M. Grisé publie depuis plusieurs années le blogue www.jacquesgrisegouvernance.com, un site incontournable pour rester à l’affût des bonnes pratiques et tendances en gouvernance.

Voici les 12 tendances dont il faut suivre l’évolution, selon Jacques Grisé :

1. Les conseils d’administration réaffirmeront leur autorité.

« Auparavant, la gouvernance était une affaire qui concernait davantage le management », explique M. Grisé. La professionnalisation de la fonction d’administrateur amène une modification et un élargissement du rôle et des responsabilités des conseils. Les CA sont de plus en plus sollicités et questionnés au sujet de leurs décisions et de l’entreprise.

2. La formation des administrateurs prendra de l’importance.

À l’avenir, on exigera toujours plus des administrateurs. C’est pourquoi la formation est essentielle et devient même une exigence pour certains organismes. De plus, la formation continue se généralise ; elle devient plus formelle.

3. L’affirmation du droit des actionnaires et celle du rôle du conseil s’imposeront.

Le débat autour du droit des actionnaires par rapport à celui des conseils d’administration devra mener à une compréhension de ces droits conflictuels. Aujourd’hui, les conseils doivent tenir compte des parties prenantes en tout temps.

4. La montée des investisseurs activistes se poursuivra.

L’arrivée de l’activisme apporte une nouvelle dimension au travail des administrateurs. Les investisseurs activistes s’adressent directement aux actionnaires, ce qui mine l’autorité des conseils d’administration. Est-ce bon ou mauvais ? La vision à court terme des activistes peut être néfaste, mais toutes leurs actions ne sont pas négatives, notamment parce qu’ils s’intéressent souvent à des entreprises qui ont besoin d’un redressement sous une forme ou une autre. Pour bien des gens, les fonds activistes sont une façon d’améliorer la gouvernance. Le débat demeure ouvert.

5. La recherche de compétences clés deviendra la norme.

De plus en plus, les organisations chercheront à augmenter la qualité de leur conseil en recrutant des administrateurs aux expertises précises, qui sont des atouts dans certains domaines ou secteurs névralgiques.

6. Les règles de bonne gouvernance vont s’étendre à plus d’entreprises.

Les grands principes de la gouvernance sont les mêmes, peu importe le type d’organisation, de la PME à la société ouverte (ou cotée), en passant par les sociétés d’État, les organismes à but non lucratif et les entreprises familiales.

7. Le rôle du président du conseil sera davantage valorisé.

La tendance veut que deux personnes distinctes occupent les postes de président du conseil et de PDG, au lieu qu’une seule personne cumule les deux, comme c’est encore trop souvent le cas. Un bon conseil a besoin d’un solide leader, indépendant du PDG.

8. La diversité deviendra incontournable.

Même s’il y a un plus grand nombre de femmes au sein des conseils, le déficit est encore énorme. Pourtant, certaines études montrent que les entreprises qui font une place aux femmes au sein de leur conseil sont plus rentables. Et la diversité doit s’étendre à d’autres origines culturelles, à des gens de tous âges et d’horizons divers.

9. Le rôle stratégique du conseil dans l’entreprise s’imposera.

Le temps où les CA ne faisaient qu’approuver les orientations stratégiques définies par la direction est révolu. Désormais, l’élaboration du plan stratégique de l’entreprise doit se faire en collaboration avec le conseil, en profitant de son expertise.

10. La réglementation continuera de se raffermir.

Le resserrement des règles qui encadrent la gouvernance ne fait que commencer. Selon Jacques Grisé, il faut s’attendre à ce que les autorités réglementaires exercent une surveillance accrue partout dans le monde, y compris au Québec, avec l’Autorité des marchés financiers. En conséquence, les conseils doivent se plier aux règles, notamment en ce qui concerne la rémunération et la divulgation. Les responsabilités des comités au sein du conseil prendront de l’importance. Les conseils doivent mettre en place des politiques claires en ce qui concerne la gouvernance.

11. La composition des conseils d’administration s’adaptera aux nouvelles exigences et se transformera.

Les CA seront plus petits, ce qui réduira le rôle prépondérant du comité exécutif, en donnant plus de pouvoir à tous les administrateurs. Ceux-ci seront mieux choisis et formés, plus indépendants, mieux rémunérés et plus redevables de leur gestion aux diverses parties prenantes. Les administrateurs auront davantage de responsabilités et seront plus engagés dans les comités aux fonctions plus stratégiques. Leur responsabilité légale s’élargira en même temps que leurs tâches gagnent en importance. Il faudra donc des membres plus engagés, un conseil plus diversifié, dirigé par un leader plus fort.

12. L’évaluation de la performance des conseils d’administration deviendra la norme.

La tendance est déjà bien ancrée aux États-Unis, où les entreprises engagent souvent des firmes externes pour mener cette évaluation. Certaines choisissent l’autoévaluation. Dans tous les cas, le processus est ouvert et si les résultats restent confidentiels, ils contribuent à l’amélioration de l’efficacité des conseils d’administration.

Vous désirez en savoir plus sur les bonnes pratiques de gouvernance ? Visitez le site du Collège des administrateurs de sociétés et suivez le blogue de Jacques Grisé.

Un argumentaire en faveur du choix d’administrateurs externes au C.A.*

La gouvernance dans tous ses états | Huit articles parus dans Lesaffaires.com

Voici une série de huit articles, publiés le 31 mars 2014 par les experts du Collège des administrateurs de sociétés (CAS) dans le volet Dossier de l’édition Les Affaires.com

Découvrez comment les entreprises et les administrateurs doivent s’adapter afin de tirer profit des meilleures pratiques. Vos commentaires sont appréciés. Bonne lecture !

La gouvernance dans tous ses états | Huit articles parus dans Lesaffaires.com

Présenté par

Une bonne gouvernance, c’est aussi pour les PME

Une entrevue avec M. Réjean Dancause, président et directeur général du Groupe Dancause et Associés inc.

Les défis de la gouvernance à l’ère du numérique

Une entrevue avec M. Gilles Bernier, directeur des programmes du Collège des administrateurs de sociétés

La montée de l’activisme des actionnaires en six questions

Une entrevue avec M. Jean Bédard, titulaire de la Chaire de recherche en gouvernance de sociétés, Université Laval

Gouvernance : 12 tendances à surveiller

Une entrevue avec M. Jacques Grisé, auteur du blogue jacquesgrisegouvernance.com

Gouvernance : huit principes à respecter

Une entrevue avec M. Richard Drouin, avocat-conseil, McCarthy Tétrault

Conseils d’administration : la diversité, mode d’emploi

Une entrevue avec Mme Nicolle Forget, administratrice de sociétés

Les administrateurs doivent-ils développer leurs compétences?

Une entrevue avec Mme Louise Champoux-Paillé, administratrice de sociétés et présidente du …

Vous souhaitez occuper un poste sur un conseil d’administration ?

Une entrevue avec M. Richard Joly, président de Leaders et Cie

Pourquoi les entreprises choisissent le Delaware pour s’incorporer ?

Faire affaires avec l’état du Delaware pour incorporer une entreprise comporte sûrement de nombreux avantages puisque plus d’un million d’entreprises ont choisi cette voie. On entend beaucoup parler des entreprises québécoises qui ont fait ce choix, mais on ne saisit pas toujours les principales raisons qui les ont amenés à agir ainsi.

Le site officiel (en français) du Delaware (Droit des Sociétés du Delaware) nous explique pourquoi 60 % des sociétés listées dans Fortune 500 sont constituées au Delaware. Il faut noter que les particularités du droit des sociétés du Delaware n’intéressent pas seulement les entreprises cotées en bourses aux États-Unis, mais aussi une multitude de grandes corporations internationales, dont plusieurs entreprises québécoises telles que Domtar, Vidéotron, Archambault, Sun Media, Cirque du Soleil, Desjardins, Jean Coutu, Gaz Métro, Bombardier, pour ne nommer que celles-ci. La liste inclue également des OBNL telles que la Croix-Rouge et Greenpeace.

Le site du State of Delaware présente cinq avantages à s’incorporer dans cet état. Dans l’ensemble, la règlementation offre des conditions « facilitantes » aux entreprises, notamment la primauté accordée aux décisions des conseils d’administration et l’application de la règle de l’appréciation commerciale (« Business judgment rule »), c’est-à-dire, la « consécration légale de l’idée que des juges avec de l’expérience juridique ne devraient pas remettre en cause les décisions de gestion que des administrateurs ont prises de bonne foi et de manière réfléchie », même si celles-ci s’avèrent avoir des conséquences financières malheureuses.

Puisque la constitution d’une entreprise au Delaware peut être considéré comme un moyen de défense pour les administrateurs de sociétés – et que le thème est d’actualité – j’ai pensé que les lecteurs seraient intéressés à connaître les raisons de cet engouement. Voici un extrait du site de l’état du Delaware portant sur le sujet. Vos commentaires sont les bienvenus.

Pourquoi les entreprises choisissent le Delaware pour s’incorporer ?

La question est souvent posée—pourquoi le Delaware? Pourquoi ce petit état (le second plus petit aux États-Unis) occupe-t-il une place si grande dans le monde des entreprises? La question a plusieurs réponses, mais la plupart de ces réponses ne correspondent pas à ce que les gens pensent. Par exemple, le Delaware n’est pas un paradis fiscal, le Delaware ne permet pas à des sociétés secrètes d’être exemptées de toute notoriété et d’enquête publique, et le Delaware n’est généralement pas l’option la moins onéreuse pour une constitution. Nous sommes beaucoup plus comme Bergdorf Goodman ou Tiffany que comme Dollar Store. Vous payez pour la qualité et le service.

State Seal of Delaware. (Photo credit: Wikipedia)

Le Delaware n’est ni un « ami pour les dirigeants » ni un « ami pour les actionnaires »; son but est de conférer aux dirigeants et aux investisseurs des lois optimales pour exercer des activités éthiques et rentables, en opérant un équilibre entre le besoin de flexibilité managériale et les outils forts pour responsabiliser les dirigeants et user de cette flexibilité pour avancer dans le meilleur intérêt des investisseurs. Les juges du Delaware sont impartiaux et ne sont pas influencés par des donateurs aux intérêts particuliers ni par l’évolution des courants politiques. Contrairement à de nombreux autres états, les procès en matière de droit des sociétés sont traités au Delaware exclusivement par des juges professionnels, et non par des jurys.

Le Delaware est l’état de premier plan pour la constitution d’entreprises depuis le début des années 1990. Aujourd’hui, plus d’un million d’entreprises se sont constituées au Delaware. Bien que le nombre d’entreprises constituées au Delaware soit impressionnant, encore plus important est le fait que de nombreuses grandes sociétés importantes dont les actions sont cotées sur un marché financier majeur sont constituées au Delaware. En effet, plus de 60 pourcent des sociétés listées dans Fortune 500 sont constituées au Delaware. Cependant, la constitution au Delaware est ouverte non seulement aux entités américaines—les sociétés du monde entier peuvent tirer bénéfice des avantages du Delaware. [Voir Au-delà des Frontières: les Avantages du Delaware pour les Entreprises Internationales.]

La primauté du Delaware en matière de constitution de personnes morales résulte d’un certain nombre de facteurs.

Premièrement, la loi—la Delaware General Corporation Law (« DGCL ») est la base sur laquelle repose la législation du Delaware en matière de droit des sociétés. [Voir Les Lois Habilitantes et Solides du Delaware.] La DGCL offre de la prévisibilité et de la stabilité. Elle est conçue par des experts du droit des sociétés et est protégée de l’influence de groupes aux intérêts particuliers. Le législateur du Delaware revoit annuellement la DGCL pour s’assurer de sa capacité à rencontrer les problèmes actuels.

La DGCL est également une loi habilitante. Le droit des sociétés du Delaware ne fournit pas un corps de règles détaillées, normatives comme dans d’autres états. A la place, la DGCL comporte quelques exigences impératives importantes pour protéger les investisseurs et, par ailleurs, procure de la flexibilité aux sociétés pour mener leurs affaires. Le Delaware s’est également inspiré des principes de la DGCL pour créer des lois applicables à des personnes morales autres que les sociétés. [Voir Les Alternatives du Delaware aux Sociétés.]

Deuxièmement, les cours—aussi importants que la loi elle-même car les cours l’interprètent. Le Delaware est mondialement connu pour son système juridictionnel et ses juges expérimentés et impartiaux qui tranchent les affaires en matière de droit des sociétés. [Voir La Résolution des Litiges à la Delaware Court of Chancery et la Delaware Supreme Court.] La Delaware Court of Chancery est une cour qui applique les principes d’equity qui a une compétence particulière en matière de litiges en droit des sociétés. Dépourvue de jurys, et composée de seulement cinq juristes experts sélectionnés via un processus de sélection bipartisan, basé sur le mérite, la Court of Chancery est flexible, réceptive, appliquée et efficace. Les litiges soumis à la Court of Chancery peuvent directement faire l’objet d’un appel devant la Delaware Supreme Courte, laquelle détient le dernier mot sur le droit du Delaware. La Supreme Court a cinq juges, chacun d’entre eux ayant une expérience considérable en matière de droit des affaires du Delaware. Les cours du Delaware offrent également un certain nombre d’options pour résoudre les conflits en dehors du procès. [Voir Les Options du Delaware en Matière de Modes Alternatifs de Résolution des Conflits.]

Troisièmement, la jurisprudence—la Court of Chancery et la Delaware Supreme Court ont toutes deux une tradition historique de rendre des opinions écrites réfléchies à l’appui de leurs décisions, permettant ainsi à un important corpus de jurisprudence de s’accumuler pendant des décennies. Des juges, et non des jurys, tranchent tous les litiges en matière de droit des sociétés et doivent motiver leurs décisions. La jurisprudence qui en résulte constitue un guide détaillé et substantiel pour les sociétés et leurs conseils.

L’un des principes clés mis en place par la jurisprudence du Delaware est la « business judgment rule« , qui est une consécration légale de l’idée que des juges avec de l’expérience juridique ne devraient pas remettre en cause les décisions de gestion que des administrateurs ont prises de bonne foi et de manière réfléchie—alors même qu’elles tournent mal. A côté de cette « business judgment rule », la jurisprudence prévoit des lignes directrices pour les administrateurs pour assurer le respect de leurs obligations fiduciaires de loyauté et de précaution. [Voir La Méthode du Delaware: Respect des Décisions Commerciales des Administrateurs qui Agissent avec Loyauté et Précaution.]

Quatrièmement, la tradition légale—combiné à un système judiciaire sophistiqué, le Delaware a une réserve d’avocats experts en droit des sociétés du Delaware. Les lois et la jurisprudence du Delaware fournissent une base de connaissance pour les avocats qui se spécialisent dans les questions transactionnelles au Delaware et qui pratiquent devant les cours du Delaware. Ces professionnels aident également le législateur en révisant de manière continue les lois en matière de droit des affaires et en proposant annuellement des modifications afin de maintenir à jour le droit du Delaware. [Voir Les Lois Habilitantes et Solides du Delaware.] Peu importe l’endroit où une entité du Delaware a son siège social, elle peut trouver au Delaware des avocats experts afin de l’aider à naviguer à travers les difficultés inhérentes au droit du Delaware.

Cinquièmement, le Delaware Secretary of State—la Division of Corporations du Delaware Secretary of State’s Office existe pour fournir aux sociétés et à leurs conseils un service rapide et efficace. Les constitutions de sociétés constituent la majeure parties des revenus de l’Etat, le Delaware prend donc son rôle au sérieux. Les fonctionnaires du Département des Sociétés se comportent comme les employés d’un service commercial, et la Division of Corporations remplit les standards internationaux de qualité comme en témoigne sa certification ISO 9001.

La Division of Corporations du Delaware est ouvert 15 heures par jour afin de répondre aux demandes de dépôt provenant du monde entier; il offre des services personnalisés et accélérés (en ce compris des services en une heure, deux heures, et 24 heures) pour des dossiers urgents et dont le timing est une question sensible. [Voir Constituer une Société au Delaware.] La Division of Corporations, conjointement avec des avocats experts et expérimentés venant du Delaware qui sont au soutien des entreprises tels que les intermédiaires enregistrés du Delaware, peuvent gérer presque toutes les situations.

Cinq raisons qui expliquent les réticences des administrateurs de sociétés à communiquer avec leurs actionnaires

Voici un court article publié par Jennifer Lunde sur le site de Enlight Research qui présente cinq raisons qui peuvent expliquer les réticences des administrateurs de sociétés à communiquer directement avec les actionnaires.

Comment composer avec les tendances qui se dessinent à l’horizon, c’est-à-dire (1) les pressions accrues des investisseurs activistes sur la gouvernance des sociétés et (2) l’attention de plus en plus marquée des entreprises accordée aux questions de gouvernance.

Ci-dessous, un extrait de l’article sur le sujet. Bonne lecture !

5 Reasons Directors are Hesitant to Engage Shareholders

Stringent corporate regulations: Potential infractions of the SEC’s Regulation Fair Disclosure (Regulation FD) policyresulting from shareholder engagement can be off-putting for some boards. This policy mandates that all publicly traded companies are prohibited from selectively disclosing information to only certain shareholders.As it can be difficult to ensure that all shareholders are privy to the same information following direct engagements, some directors believe that the risk of violating Regulation FD is too great and likely outweighs any benefits of productive shareholder engagement.

Shareholder-director disconnect: Major discrepancies between what shareholders and directors find appropriate to discuss may create tension and consequently, reduce likelihood of future engagements.For example, a 2013 PwC report revealed that though 91% of investors find company strategy to be at least somewhat appropriate for discussion with the board, only 45% of directors are of the same mindset. Without agreeing on which topics are appropriate and pertinent, interactions can often be unproductive and result in frustration from both perspectives.

Lack of effective methodology: According to Merck & Co. board member Les Brun, the lack of methodology in place to effectively foster interaction has been a primary challenge in increasing shareholder engagement. Given the diversity inherent in companies’ shareholder bases, a comprehensive and tailored approach must be developed and/or easily accessible to engage unique groups. Though emerging platforms like Shareholder-Director Exchange and the ISS’s Governance Exchange may mitigate this challenge, continued development is necessary before these systems become ubiquitous.

Absence of relevant company policy: Nearly half of directors say their boards have no policy addressing communication protocols with stakeholders or have one that isn’t useful. This lapse can lead to confusion as to where responsibility falls between directors and management, and subsequently, miscommunications to shareholders.

Time: To effectively and appropriately engage with multiple shareholder groups, boards must dedicate significant time and resources to produce and execute a well-developed engagement process, and in doing so, will lose valuable time that could have been spent on other activities. As a result, many firms tend to postpone shareholder engagement (and avoid related challenges) until absolutely necessary.

La gouvernance dans tous ses états | Première série d’articles

Voici les quatre premiers articles, d’une série de huit, publiés le 17 mars 2014 par les experts du Collège des administrateurs de sociétés (CAS) dans le volet Dossier de l’édition Les Affaires.com

Découvrez comment les entreprises et les administrateurs doivent s’adapter afin de tirer profit des meilleures pratiques

La gouvernance dans tous ses états | Première série d’articles

Présenté par

CAS

Dossier à suivre

Gouvernance : huit principes à respecter

Une entrevue avec M. Richard Drouin, avocat-conseil, McCarthy Tétrault

Conseils d’administration : la diversité, mode d’emploi

Une entrevue avec Mme Nicolle Forget, administratrice de sociétés

Les administrateurs doivent-ils développer leurs compétences?

Une entrevue avec Mme Louise Champoux-Paillé, administratrice de sociétés et présidente du …

Vous souhaitez occuper un poste sur un conseil d’administration ?

Une entrevue avec M. Richard Joly, président de Leaders et Cie

Lettre de l’Institut français des administrateurs (IFA) | Mars 2014

Voici un extrait de la lettre de l’Institut français des administrateurs (IFA) que je vous invite à lire afin de mieux vous familiariser avec la réalité de la gouvernance françaises. Ci-dessous le message du président de l’IFA, M. Daniel Lebègue.

Lettre de l’Institut français des administrateurs (IFA) | Mars 2014

administrateur @ la vie de l’IFA – Mars 2014 – n°59

L’IFA a salué la publication en Juin 2013 de la version révisée du code de gouvernement d’entreprise des sociétés cotées. Sur la méthode comme sur le fond, ce texte marque en effet des avancées qui s’inscrivent dans le sens des recommandations formulées depuis plusieurs années par notre Institut.

Sur la méthode d’abord, nous nous félicitons du choix qui a été fait par les Pouvoirs publics et l’ensemble des organisations professionnelles concernées de privilégier la « soft law », le code de gouvernance plutôt que de recourir à la loi. Cette approche est à la fois plus pragmatique, plus souple, plus responsabilisante pour les acteurs. Elle est d’ailleurs retenue par l’ensemble de nos partenaires de l’Union Européenne et elle fait consensus entre tous les instituts d’administrateurs regroupés au sein d’Ecoda. L’intervention du législateur, au niveau européen ou au plan national, reste justifiée dès lors que l’on traite de droits fondamentaux, par exemple l’exercice de leur droit de propriété par les actionnaires, l’audit légal des comptes, l’obligation pour les sociétés cotées de publier certaines informations dans leur rapport annuel ou dans le document de référence soumis à l’autorité de marché. Mais cette intervention de la loi doit demeurer exceptionnelle. La régulation des pratiques de gouvernance, et en particulier tout ce qui a trait au fonctionnement des conseils d’administration, doit relever de l’autorégulation.

Le nouveau code se réfère d’ailleurs à une autorégulation « exigeante et contrôlée ». C’est la combinaison de la « soft law » et du principe, énoncé pour la première fois dans le code français, « comply or explain » (appliquer ou s’expliquer) qui donne toute sa portée et son efficacité au dispositif. Il s’y ajoute la mise en place d’un Haut Comité chargé de contrôler l’application du code et en particulier le respect effectif par les sociétés du comply or explain.

Ce nouveau dispositif de place pourra à l’expérience être amélioré sur certains points.

Le code de gouvernance des sociétés cotées devrait émaner clairement de l’ensemble des parties prenantes professionnelles – émetteurs, administrateurs, investisseurs, professionnels du droit et de l’audit, experts – qui seraient non seulement consultées, mais pleinement associées à l’élaboration des règles et bonnes pratiques de place et au contrôle de leur mise en oeuvre. Le choix des membres du Haut Conseil gagnerait à être fait suivant le même principe d’association, comme c’est le cas notamment au Royaume Uni. Il est également important que le Haut Conseil soit doté de moyens d’action en propre et publie un rapport annuel qui recense à la fois les bonnes pratiques et les progrès qui restent à accomplir.

Découvrez aussi la Newsletter du Club recherche

Sur le fond, l’IFA se félicite que des recommandations que nous avions formulées depuis plusieurs années, en particulier dans les « 40 recommandations de l’IFA » rendues publiques en 2006, soient désormais intégrées dans le code : transparence sur tous les éléments de la rémunération des dirigeants ; limitation du nombre de mandats d’administrateurs à deux pour les dirigeants exécutifs et à cinq (y compris les mandats exercés à l’étranger) pour les administrateurs indépendants ; rôle et moyens d’action des administrateurs salariés ; désignation éventuelle d’un administrateur référent.

Avec ce nouveau code, la France dispose aujourd’hui d’un des codes de gouvernance les plus complets et les plus exigeants en Europe. Mais la matière de la gouvernance évoluant et s’enrichissant constamment, on voit déjà émerger des thématiques et des pratiques qui devront sans doute être intégrées demain dans des versions actualisées du code. Je pense en particulier à l’importance de la formation, de la certification et d’un recrutement plus professionnel des administrateurs ainsi qu’à une plus large prise en compte de la performance extra-financière et de la RSE dans l’agenda des réunions du conseil, l’évaluation des dirigeants et le reporting aux actionnaires. Pour tous les acteurs de la place, il reste du grain à moudre – et c’est une bonne nouvelle – pour que la qualité de la gouvernance contribue toujours davantage à la compétitivité de nos entreprises et à l’attractivité du site France.

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Une entrevue avec M. Jacques Grisé, auteur du blogue jacquesgrisegouvernance.com

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