Quelle est la rémunération globale des administrateurs canadiens ?

C’est une question que beaucoup de personnes me posent, et qui n’est pas évidente à répondre !

L’article ci-dessous, publié par Martin Mittelstaedt, chercheur et ex-rédacteur au Globe and Mail, apporte un éclairage très intéressant sur la question de la rémunération des administrateurs canadiens.

Les études sur le sujet sont rares et donnent des résultats différents compte tenu de la taille, de la nature privée ou publique des entreprises, du secteur d’activité, des différentes composantes de la rémunération globale, etc.

De manière générale, il semble que les rémunérations des administrateurs canadiens et américains soient similaires et que les postes d’administrateurs des entreprises publiques commandent une rémunération globale d’environ quatre fois la rémunération offerte par les entreprises privées.

Une étude montre que la base médiane de la rémunération des administrateurs de sociétés privées au Canada est de 25 000 $, avec un jeton de présence de 1 500 $ et quatre réunions annuelles. Le nombre d’administrateurs est de six, incluant trois administrateurs indépendants et une femme ! La somme de la rémunération globale s’établirait à environ 31 000 $ US. Mais on parle ici de grandes entreprises privées…

Le montant de la rémunération dépend aussi beaucoup des plans de distribution d’actions, des privilèges, des bonis, etc.

Évidemment, pour toute entreprise publique, il est facile de connaître la rémunération détaillée des administrateurs et des cinq hauts dirigeants puisque ces renseignements se retrouvent dans les circulaires aux actionnaires.

Je vous encourage à lire cet article. Vous en saurez plus long sur les raisons qui font que les informations sont difficiles à obtenir dans le secteur privé.

Bonne lecture !

How much is a director worth ?

Determining director compensation at private companies is more of an art than a science, with a wide range of practices and no one-size-fits-all formula.

Unlike publicly traded companies, where detailed information about director remuneration is as close as the nearest proxy circular, compensation at private boards is like “a black box,” according to Steve Chan, principal at Hugessen Consulting, who says retainers, meeting fees and share-based awards “are all over the map.”

Not much is known about private director compensation “for good reason,” observes David Anderson, president of Anderson Governance Group. “There is not a lot of data out there.”

PRIVATELY UNDERPAID?

Private company directorships can be prized assignments because they don’t involve the heavy compliance and regulatory burdens that occupy increasing amounts of time at public company boards.

But what private boards should be paid is difficult to determine, when there is little research to guide individual directors or companies. Some of the available data suggest private directors are being underpaid, at least relative to their public counterparts. But this information does not include the fact that the work may be different and much of the compensation at public boards may not ultimately pay off because it is linked to share price performance.

It is difficult to benchmark best practices with so little hard data, making it unsurprising that how best to set private company directors’ compensation is the most frequently asked question made by members to the ICD.

One of the few ongoing attempts to analyze compensation indicates remuneration is far higher at public boards, about four times higher in fact, although the amounts are skewed by the heavy use of stock-linked awards at publicly traded companies.

The private company survey, by Lodestone Global, was based on a questionnaire posed to members of the Young Presidents’ Organization, an international group of corporate présidents and CEOs, including many from Canada.

The Lodestone survey looked at medium-sized family or closely held firms, companies that are more established than early-stage startups, but smaller than large global corporations.

“The survey is not casually designed. The data is pretty rigorous and it’s global,” says Bernard Tenenbaum, managing partner at Princeton, N.J.-based Lodestone.

Tenenbaum says he started investigating private company board compensation because of the paucity of data on the subject. No one seemed to know what was going on. “People kept asking me, ‘Well how much should we pay directors?’ I’d say: ‘I don’t know. How much do you pay them now?’ And I started surveying.”

The firm’s most recent survey, based on 2014 data, had responses from more than 250 private companies, including 19 from Canada. The median revenue at the Canadian companies was $100-million, with the median number of employees at 325.

According to Tenenbaum, the median Canadian retainer was $25,000, with a $1,500 meeting fee and four meetings annually. The median number of directors was six, with three independent and one woman. The total of fees and retainers came to $31,000 (all dollar figures U.S.)

Interestingly, the overall U.S. compensation figure matched the Canadian one, but with a different composition. The median U.S. retainer was lower at $21,000, but the meeting fee was higher at $2,500. Including a few other miscellaneous items, like teleconference fees, U.S. compensation was $33,000, compared to $32,250 in Canada, a closeness that Tenenbaum termed “a kissing distance.”

The Lodestone figures give an indication of director compensation, although it is worth cautioning that the sample size is small, the figures are based on the median or middle-ranked firm, and there was a wide variety in size among the companies, given that they included a few smaller tech and industrial firms.

To benchmark private company director compensation, it is worthwhile to look at what comparable publicly traded companies are paying. One useful comparator is the smaller companies embedded in the BDO 600 survey of director compensation at medium-sized public companies. It has access to highly accurate data based on shareholder proxy circulars.

BDO’s 2014 survey found that among firms with revenue between $25-million and $325-million, cash compensation through retainer and committee fees averaged $54,000, while directors typically received another $65,000 in stock awards and options for a total of $119,000.

There is a small amount of information available in Canada on private board compensation, but the amount of data isn’t large enough to make generalized statements on remuneration and involves larger companies.

For example, in its director compensation, Canadian Tire Corp. breaks out amounts paid to the company’s non-publicly traded banking subsidiary, Canadian Tire Bank. In 2014, three directors on both boards were paid about $55,000 each for retainers and meeting fees for serving at the bank. Similarly, Loblaw Companies Ltd. paid $58,000 to a director who also served on President’s Choice Bank, a privately-held subsidiary.

The amounts are relatively low for blue-chip Canadian companies, but both banks are far smaller than their parent companies, with Canadian Tire Bank at $5.6-billion in assets and PC Bank at $3.3-billion.

Hugessen’s Chan says that in his experience, the larger, family-run private companies that have global operations compensate directors at roughly the same amounts as similarly sized public firms.

“Among the larger public companies versus the private companies, they’re comparable,” Chan says.

PUBLICLY EXPOSED

Tenenbaum says that based on his research and the figures from BDO, directors are being paid about $20,000 annually for taking on the added hassle of serving on a public company. He discounted the value of the stock-based compensation because it is conditional on share-price performance.

“There is a premium that you pay a director for taking the risk” of public company exposure, Tenenbaum says.

Directors also need to take into account some of the non-monetary factors of the board experience. Given that so much time on a public board is spent on compliance with regulatory requirements, being freed of this responsibility has value.

“When you’re on a private board, you don’t need to worry about all of the compliance that you have to worry about on a public company board,” says Larry Macdonald, who has served on both types of boards in the oil and gas sector. “You can spend more time on the issues which are probably more important to the company on a private board than you can on public board.”

Macdonald currently chairs publicly-traded Vermilion Energy Inc., but has also served on several private and volunteer boards.

One consequence of the difference in focus is that private boards can often have fewer members because directors can be more focused on company business needs, rather than on compliance requirements. Decision making can also be quicker and easier.

Macdonald says a public board may need eight to 10 people to handle the volume of work, compared to only five or six on a similar private company. As an example of the efficiency of a private board, a company that has a particularly good year and wants to pay employees a bonus can easily decide to do so.

At a public company, however, making this payment wouldn’t be as straightforward. Directors would have to compile a detailed explanation of why they wanted to pay the bonus and include it in shareholder circulars.

While some companies are downgrading the importance of meeting fees, Macdonald thinks they are necessary, with a range of $1,000 to $1,500 being sufficient. “There should be a permeeting fee. You want your directors to show up in person, if at all possible, and if you’re not going to give them a permeeting fee they’re going to be phoning it in or not showing up, so you’ve got to keep everybody interested,” he says.

EQUITY COMPENSATION

He would set the retainer with an eye to any equity compensation. “If there is a pretty good option plan, I would think that $10,000 a year would be adequate, but if the option plan is weaker, you have to up the annual fee,” Macdonald says.

The amount of equity reserved for directors in private companies is a disputed topic. Tenenbaum says equity compensation at private companies, in his experience, is rare. But Chan says a figure often used is to allocate 10 percent of the equity for directors and executives.

If the director is “pounding the pavement with the CEO, a big chunk ofthe [equity] pool might go to directors,” Chan says.

The amount of equity reserved for executives and the board could be as high as 20 percent to 30 percent in the early life of a technology company, but lower than 10 percent in a capital intensive business. “It all depends on size. You’re not going to give 10 percent away of a $1-billion company,” he says.

Macdonald considers the 10 percent of stock reserved for management and directors a good ball park figure. The bulk of the stock typically goes to management, with one or two percent earmarked for directors, he says.

RICHER REWARDS

Public boards are typically egalitarian, with all directors receiving the same base compensation. Private boards, however, can and do pay differing amounts, depending on the specialized skills companies are trying to assemble among their directors. Macdonald says a private oil company looking to pick up older fields, which may have environmental issues, might award extra compensation to attract a director with recognized skills in health, safety and environment.

To be sure, compensation is only one factor in attracting directors to a board. Tenenbaum says academic research has found that the reasons directors cite to join boards are led by the quality of top management, the opportunity to learn and to be challenged. Personal prestige, compensation and stock ownership are far down the list.

These factors may explain why many people want to serve on private boards. “The qualitative experience of private company directors is quite different from public company directors,” says Anderson.

“They avoid a lot of the perceived risk of public company boards and they get the benefit of doing what, as business people, they really like doing, which is thinking about the business and applying their knowledge and experience to business problems.”

This article originally appeared in the Director Journal, a publication of the Institute of Corporate Directors (ICD). Permission has been granted by the ICD to use this article for non-commercial purposes including research, educational materials and online resources. Other uses, such as selling or licensing copies, are prohibited.

Deux livres phares sur la gouvernance d’entreprise

On me demande souvent de proposer un livre qui fait le tour de la question eu égard à ce qui est connu comme statistiquement valide sur les relations entre la gouvernance et le succès des organisations (i.e. la performance financière !)

Le volume publié par David F. Larcker et Brian Tayan, professeurs au Graduate School de l’Université Stanford, en est à sa deuxième édition et il donne l’heure juste sur l’efficacité des principes de gouvernance.

Je vous recommande donc vivement ce volume.

Également, je profite de l’occasion pour vous indiquer que je viens de recevoir la dernière version des Principes de gouvernance d’entreprise du G20 et de l’OCDE en français et j’ai suggéré au Collège des administrateurs de sociétés (CAS) d’inclure cette publication dans la section Nouveauté du site du CAS.

Il s’agit d’une publication très attendue dans le monde de la gouvernance. La documentation des organismes internationaux est toujours d’abord publiée en anglais. Ce document en français de l’OCDE sur les principes de gouvernance est la bienvenue !

Voici une brève présentation du volume de Larcker. Bonne lecture !

Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (2nd edition)

This is the most comprehensive and up-to-date reference for implementing and sustaining superior corporate governance. Stanford corporate governance experts David Larcker and Bryan Tayan carefully synthesize current academic and professional research, summarizing what is known and unknown, and where the evidence remains inconclusive.

Corporate Governance Matters, Second Edition reviews the field’s newest research on issues including compensation, CEO labor markets, board structure, succession, risk, international governance, reporting, audit, institutional and activist investors, governance ratings, and much more. Larcker and Tayan offer models and frameworks demonstrating how the components of governance fit together, with updated examples and scenarios illustrating key points. Throughout, their balanced approach is focused strictly on two goals: to “get the story straight,” and to provide useful tools for making better, more informed decisions.

This edition presents new or expanded coverage of key issues ranging from risk management and shareholder activism to alternative corporate governance structures. It also adds new examples, scenarios, and classroom elements, making this text even more useful in academic settings. For all directors, business leaders, public policymakers, investors, stakeholders, and MBA faculty and students concerned with effective corporate governance.

Selected Editorial Reviews

An outstanding work of unique breadth and depth providing practical advice supported by detailed research.

Alan Crain, Jr., Senior Vice President and General Counsel, Baker Hughes

Extensively researched, with highly relevant insights, this book serves as an ideal and practical reference for corporate executives and students of business administration.

Narayana N.R. Murthy, Infosys Technologies

Corporate Governance Matters is a comprehensive, objective, and insightful analysis of academic and professional research on corporate governance.

Professor Katherine Schipper, Duke University, and former member of the Financial Accounting Standards Board

Les CEO adoptent une vision à long terme, mais ils doivent souvent rechercher des objectifs à court terme pour y arriver !

Cet article récemment publié par Richard T. Thakor*, dans le Harvard Law School Forum on Corporate Governance, aborde une problématique très singulière des projets organisationnels de nature stratégique.

L’auteur tente de prouver que même si les CEO ont généralement une vision à long terme de l’organisation, ils doivent adopter des positions qui s’apparentent à des comportements courtermistes pour pouvoir évoluer avec succès dans le monde des affaires. Ainsi, l’auteur insiste sur l’efficacité de certaines actions à court terme lorsque la situation l’exige pour garantir l’avenir à long terme.

Aujourd’hui, le courtermisme a mauvaise presse, mais il faut bien se rendre à l’évidence que c’est très souvent l’approche poursuivie…

L’étude montre qu’il existe deux situations susceptibles d’exister dans toute entreprise :

il y a des circonstances qui amènent les propriétaires à choisir des projets à court terme, même si ceux-ci auraient plus de valeur s’ils étaient effectués avec une vision à long terme. L’auteur insiste pour avancer qu’il y a certaines situations qui retiennent l’attention des propriétaires pour des projets à long terme.
ce sont les gestionnaires détestent les projets à court terme, même si les propriétaires les favorisent. Pour les gestionnaires, ils ne voient pas d’avantages à faire carrière dans un contexte de court terme.

L’auteur donne des exemples de situations qui favorisent l’une ou l’autre approche. Ou les deux !

Bonne lecture. Vos commentaires sont les bienvenus.

A Theory of Efficient Short-Termism

In the area of corporate investment policy and governance, one of the most widely-studied topics is corporate “short-termism” or “investment myopia”, which is the practice of preferring lower-valued short-term projects over higher-valued long-term projects. It is widely asserted that short-termism is responsible for numerous ills, including excessive risk-taking and underinvestment in R&D, and that it may even represent a danger to capital quiism itself. Yet, short-termism continues to be widely practiced, exhibits little correlation with firm performance, and does not appear to be used only by incompetent or unsophisticated managers (e.g. Graham and Harvey (2001)). In A Theory of Efficient Short-termism, I challenge the notion that short-termism is inherently a misguided practice that is pursued only by self-serving managers or is the outcome of a desire to cater to short-horizon investors, and theoretically ask whether there are circumstances in which it is economically efficient.

I highlight two main findings related to this question. First, there are circumstances in which the owners of the firm prefer short-term projects, even though long-term projects may have higher values. There are other circumstances in which the firm’s owners prefer long-term projects. Moreover, this is independent of any stock market inefficiencies or pressures. Second, it is the managers with career concerns who dislike short-term projects, even when the firm’s owners prefer them.

These results are derived in the context of a model of internal governance and project choice, with a CEO who must approve projects that are proposed by a manager. The projects are of variable quality—they can be good (positive NPV) projects or bad (negative NPV) projects. The manager knows project quality, but the CEO does not. Regardless of quality, the project can be (observably) chosen to be short-term or long-term, and a long-term project has higher intrinsic value. The probability of success for any good project depends on managerial ability, which is ex ante unknown to everybody.

In this setting, the manager has an incentive to propose only long-term projects, because shorter projects carry with them a risk of revealing negative information about the manager’s ability in the interim. Put differently, by investing in a short-term project that reveals early information about managerial ability, the manager gives the firm (top management) the option of whether to give him a second-period project with managerial private benefits linked to it, whereas with the long-term project the manager keeps this option for himself. The option has value to the firm and to the manager. Thus, the manager prefers to retain the option rather than surrendering it to the firm.

The CEO recognizes the manager’s incentive, and may thus impose a requirement that any project that is funded in the first period must be a short-term project. This makes investing in a bad project in the first period more costly for the manager because adverse information is more likely to be revealed early about the project and hence about managerial ability. The manager’s response may be to not request first-period funding if he has only a bad project. Such short-termism generates another benefit to the firm in that it speeds up learning about the manager’s a priori unknown ability, permitting the firm to condition its second-period investment on this learning.

There are a number of implications of the analysis. First, not all firms will practice short-termism. For example, firms for which the value of long-term projects is much higher than that of short-term projects—such as some R&D-intensive firms—will prefer long-term projects, so not all firms will display short-termism. Second, since short-termism is intended to prevent lower-level managers from investing in bad projects, its use should be greater for managers who typically propose “routine” projects and less for top managers (like the CEO) who would typically be involved in more strategic projects. Related to this, since it is more difficult to ascertain an individual employee’s impact on a project’s payoffs at lower levels of the hierarchy, this suggests that the firm is more likely to impose a short-termism constraint on lower-level managers. Third, the analysis may be particularly germane for managers who care about how their ability is perceived prior to the realization of project payoffs. As an example of this, it is not uncommon for a manager to enter a job with the intention or expectation of finding a new job within a few years. The analysis then suggests that the manager would rather not jeopardize future employment opportunities by allowing (potentially risky) project outcomes to be revealed in the short-term, instead preferring that those outcomes be revealed at a time when the manager need not be concerned about the result (i.e. in a different job).

Overall, the most robust result from this analysis is that informational frictions may bias the investment horizons of firms, and that the bias towards short-termism may, in fact, be value-maximizing in the presence of such frictions. This means that castigating short-termism as well as the rush to regulate CEO compensation to reduce its emphasis on the short term may be worth re-examining. Indeed, not engaging in short-termism may signal an inability or unwillingness on the CEO’s part to resolve intrafirm agency problems and thus adversely affect the firm’s stock price. This is not to suggest that short-termism is necessarily always a value-maximizing practice, since some of it may be undertaken only to boost the firm’s stock price. The point of this paper is simply that some short-termism reduces agency costs and benefits the shareholders.

For example, the project horizon for a beer brewery is typically 15-20 years. Similarly, R&D investments by drug companies have payoff horizons typically exceeding 10 years.

The paper is available for download here.

References

Graham, John R., and Campbell R. Harvey, 2001, “The Theory and Practice of Corporate Finance: Evidence from the Field”. Journal of Financial Economics, 60 (2-3), 187-243.

This is in line with Roe (2015), who states: “Critics need to acknowledge that short-term thinking often makes sense for U.S. businesses, the economy and long-term employment … it makes no sense for brick-and-mortar retailers, say, to invest in long-term in new stores if their sector is likely to have no future because it will soon become a channel for Internet selling.”

One can think about the long-term and short-term projects concretely through examples. Within each firm, there are typically both short-term and long-term projects. For example, for an appliance manufacturer, investing in modifying some feature of an existing appliance, say the size of the freezer section in a refrigerator, would be a short-term project. By contrast, building a plant to make an entirely new product—say a high-technology blender that does not exist in the company’s existing product portfolio—would be a long-term project. The long-term project will have a longer gestation period, with not only a longer time to recover the initial investment through project cash flows, but also a longer time to resolve the uncertainty about whether the project has positive NPV in an ex post sense. There may also be industry differences that determine project duration. For example, long-distance telecom companies (e.g. AT&T) will typically have long-duration projects, whereas consumer electronics firms will have short-duration projects.

*Richard T. Thakor, Assistant Professor of Finance at the University of Minnesota Carlson School of Management.

Assurer une efficacité supérieure du conseil d’administration

Aujourd’hui, je cède la parole à Johanne Bouchard* qui agit, de nouveau, à titre d’auteure invitée sur mon blogue en gouvernance.

Celle-ci a une solide expérience d’interventions de consultation auprès de conseils d’administration de sociétés américaines ainsi que d’accompagnements auprès de hauts dirigeants de sociétés publiques (cotées), d’organismes à but non lucratif (OBNL) et d’entreprises en démarrage.

Dans cet article publié dans la revue Ethical Boardroom, Achieving higher board effectiveness, elle aborde un sujet qui lui tient particulièrement à cœur : Assurer une efficacité supérieure du conseil d’administration.

L’auteure insiste sur les points suivants :

Le suivi des réunions du CA par le président du conseil
L’intégration des nouveaux membres du conseil
La formation en gouvernance et l’apprentissage des rouages de l’entreprise
Les sessions de planification stratégique
L’évaluation du leadership du CEO, du conseil et du management

L’expérience de Johanne Bouchard auprès d’entreprises cotées en bourse est soutenue ; elle en tire des enseignements utiles pour tous les types de conseils d’administration.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Achieving higher board effectiveness

« Achieving higher board effectiveness goes well beyond adhering to rules, regulations, legal and ethical compliance. While there are many experts who address the regulatory requirements, an aspect that requires the utmost attention, and is often underestimated and even ignored, is the human element »

That is the basic and subtle dynamics and the complexities inherent in having individuals with diverse experience, different views and perspective, and varied cultural and personal backgrounds gathering a few times a year to serve an entity to which they are not privy on a day-to-day basis. It’s further complicated by the fact that these individuals often don’t know each other outside of their board service.

How can a board maintain its independence, make critical decisions, provide valuable and timely insights to management and be effective as a group of individuals if they have minimal access to the ins and outs of an organisation? How can they truly assess the leadership potential of the CEO, the board and management and effectively minimise vulnerabilities and risk when they’re outsiders?

There are initiatives that a board should commit to that can heighten the potential of every director within the context of their roles and responsibilities, allowing them collectively to achieve higher effectiveness. It is fundamentally critical to the board’s ability to stay current, effective and focussed in enhancing long-term shareholder value.

These initiatives include: board meeting follow-ups with the chair and the CEO; on-boarding and integration of new directors; educational sessions; strategic planning sessions; and CEO, board and management leadership effectiveness assessments.

Board meeting follow-ups with the chair and CEO

Whenever directors come together to meet to fulfill their roles and responsibilities, the chair and the CEO can’t assume that the directors have felt that they’ve made their optimal contributions; that they didn’t feel intimidated or even shy to share their insights. That they felt at ease with the dynamics of the meeting, were satisfied with the results of the board meeting and were comfortable with the way the chair led the meeting and the CEO interacted as an executive director. It is important for a chair and for the CEO to take the initiative of reaching out to all directors immediately after the meeting to do a simple check-in.

This provides an opportunity to gain input about the meeting’s outcomes as well as following up with each director on a one-on-one basis to seek their views about the meeting. It’s an opportunity to constructively share their expectations about the director for that meeting and his/her level of preparedness for that meeting and any committee duties, rather than not addressing it or postponing it to an annual board effectiveness assessment. The individual directors’ effectiveness (including the CEO) as well as the chair’s, are too important not to be handled after each meeting. These check-ins are significant to ensure that the possible ‘elephants in the boardroom’ are promptly addressed. They also enable each director and the chair, and each director and the CEO to get to know each other better.

In any relationship, it is important to have the ability to readily share what works, what is missing and what could have been done better. It takes time and, from my experiences with boards, it makes a great difference when every director is prepared to allocate time between meetings to evaluate the prior meeting before attending the next one. These frank exchanges benefit the chair in preparing the agenda for the next meeting and in leading the board meeting itself. Furthermore, it is also the chair’s responsibility to poll each director, in person or over the phone, to get a pulse about his/her ability to stay abreast of the strategy.

On-boarding and integration

It is tempting to let a director join a board and attend his/her first meeting without proper on-boarding. A board can’t afford for a new director to join for his/her first board meeting without a formal on-boarding process. A director is a human being who is being asked to participate, not to simply fill in a seat. A formal on-boarding can include a meeting with the chair and the CEO shortly after the director has been voted in by the board to formally welcome him/her, confirm their expectations and his/her expectations in having joined the board; bring the director up to date with any crisis, strategic priorities and networking opportunities where he/she could specifically provide insights; and to update the director about board governance processes the directors need to understand.

It is good business, tactful and sensible to acknowledge the need to create a proper introduction of the board and the organisation for all new directors as well as introducing and integrating the incoming directors within the board integration event can last 30 minutes to an hour and is planned and professionally facilitated, thus ensuring that the board doesn’t create a climate of ‘us and them’ as the board augments and/or is refreshed. Proper on-boarding and integration enables new directors to quickly get to know the rest of the board and enables all board directors to further connect, respect and trust each other. While a brief session, it is very powerful to welcoming an incoming director and to further integrating all existing directors within the board.

Educational sessions

Our business ecosystem is becoming more complex and is being intermittently disrupted. A board can’t afford not to be current on the trends that can affect their organisation, even if, at a glance, the trend might not appear to have any potential impact on their strategic roadmap. It is important for a CEO with his/her chair to be on top of trends and to identify specific topics that need to be addressed internally at a high level to keep the board informed as a group – but not necessarily within the scheduled meeting, due to time constraints.

I have written in the past about ‘the four pillars’ that make a great relationship between a chair and a CEO. One of the pillars is communication. It is crucial for the chair and CEO to take the time to speak in person, or at least on the phone, or remotely via video-conferencing tools to check in about their relationship, their effectiveness in their respective roles and to ensure that together they address how to keep the board current about market and industry dynamics. Topics can include how the digital economy is impacting the organisation; the cybersecurity evolution and its associated threats; new strategic considerations for the organisation, vis-à-vis corporate social responsibility; shifting the organisation’s focus from shareholders to stakeholders; making an organisational commitment to sustainability, etc.

There is a plethora of topics that a board must address and can’t realistically address within their formal meetings. This creates an opportunity for the board to further align on strategic priorities, to further ascertain how vulnerable the composition of its board may or may not be and whether the board composition needs to be refreshed or augmented. Industry and expert speakers can be invited to present and conduct small roundtables at these educational sessions.

Strategic planning sessions

Since the National Association of Corporate Directors (NACD) in the United States stipulates that boards have the responsibility to engage in the development and amendment of strategy, it is imperative for boards to participate in an annual strategic planning session – in addition to each director staying current about the industry trends. Not only are strategic planning sessions important to aligning the board on strategy, but they also contribute to evaluating human behaviour dynamics and assessing the entire leadership potential of the board.

Directors must be and stay fully informed about the organisation they serve. In particular, when directors are independent, they must have knowledge of the industry and about the business they commit to serve, given that they are not connected to the business, meeting only four-to-six times a year. Better aligned boards can be more effective in assessing the accuracy, completeness, relevance and validity of information presented to them.

A board has an opportunity to really see in action the effectiveness of their CEO when participating in the annual strategic planning session. Likewise, a CEO gets the same opportunity to experience first-hand the agility of its board during such sessions.

The chair (and CEO) should commit to an annual strategic planning session. This initiative ensures that:

■ Board effectiveness is not affected by information asymmetry that would impede its ability to adequately provide guidance, make decisions and constructively challenge the executive team. The board must be continually informed about industry dynamics, the competitive landscape, the organisation’s business model, its value proposition and its strategic milestones. It is unrealistic that a board can approve financial projections, detect overly ambitious production targets and ascertain budgets and profitability objectives without a clear understanding of strategy and key strategic performance indicators

■ The board is exposed to organisational dynamics and to the dynamics of the CEO with selected or most key executive members, which will assist with its identifying warning flags about the company’s strategic priorities and help reconsider performance indicators as needed

The adoption of strategic planning enables the CEO to share more openly among themselves, with the CEO and with management. I have often seen as a result of these sessions healthier effectiveness within the entire Pivotal Leadership Trio (Board, CEO and Executive Team).

CEO, board and management leadership effectiveness assessment

The effectiveness of a board is highly dependent on having the right leader for the organisation during major and critical strategic inflection points of the organisation, having the right leader of the board with the optimal board composition, and the right leadership in all functional areas of the organisation.

A board needs to know when the CEO can’t step up to leadership and organisational challenges, as well as when any board director or member of the management team can’t fulfil their role.

CEO leadership effectiveness assessment

For the board to adequately fulfil its duty of addressing CEO succession, it has a responsibility to evaluate the CEO’s leadership effectiveness. A board can’t assume that the CEO has the skill set, experience and leadership maturity to lead the organisation through different stages of growth, crisis and changes.

This initiative should be conducted by an objective third party. The process should include:

■ A custom and comprehensive inquiry, specifically created to evaluate the CEO of the organisation that the board serves

■ A custom inquiry to address the CEO’s role as an executive director on the board

■ In-person meetings conducted between the CEO and a third-party professional, and between each direct report to the CEO and the third-party professional and each director of the board and the third-party professional

■ Presentation of the CEO’s leadership effectiveness results to the CEO and the chair before being presented to the board as a group

Board and management leadership effectiveness assessments

The evaluation of the directors and the management team also needs to be conducted annually to appropriately support overall succession planning. These should ideally be conducted at the same time as the CEO’s to maximise everyone’s time. For the board assessments, the process should include:

■ A custom and comprehensive inquiry, specifically created to evaluate the board thoroughly

■ In-person meetings between directors and the third-party professional

■ Custom inquiries to capture the insights of the CFO, the CHRO and the general counsel

■ In-person individual meetings between the CFO, the CHRO, the general counsel and the third-party professional

■ Presentation of the board leadership assessment results to the chair and the governance chair before they’re presented to the board as a group

A similar process needs to be adopted for the management team.

It is good practice for the board assessment inquiry to include a director self-assessment, a peer review and an examination of the governance practices.

Leadership effectiveness assessments are natural processes and need to be positioned as such and should not be threatening.

Achieving higher board effectiveness has to be intentional by all directors, individually and collectively as a board, beyond check lists and formal systematic processes. Without a conscious intention, a board will not raise the bar of its effectiveness to the level where it can and should operate. While maintaining independence, the board has to be cognisant of the importance of not assuming anything at any time, not overlooking the need to coalesce on priorities, calibrating and stepping back afresh each time it works together, being in alignment on strategic priorities and refreshing leadership as needed.

Directors can’t afford to underestimate the cultural and values tone they are establishing with their CEO. The board has to pause and ask itself every time it gathers if it is as effective as it should be.

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*Johanne Bouchard est consultante auprès de conseils d’administration, de chefs de la direction et de comités de direction. Johanne a développé une expertise au niveau de la dynamique et de la composition de conseils d’administration. Après l’obtention de son diplôme d’ingénieure en informatique, sa carrière l’a menée à œuvrer dans tous les domaines du secteur de la technologie, du marketing et de la stratégie à l’échelle mondiale.

La relève dans une entreprise familiale | Une possibilité de conflits de rôles !

Voici un cas de gouvernance publié sur le site de Julie Garland McLellan* qui concerne les relations entre la présidente du conseil et sa fille nouvellement nommée comme CEO de cette entreprise privée de taille moyenne.

Le cas illustre le processus de transition familiale et les efforts à exercer afin de ne pas interférer avec les affaires de l’entreprise.

Il s’agit d’un cas très fréquent dans les entreprises familiales. Comment Hannah peut-elle continuer à faire profiter sa fille de ses conseils tout en s’assurant de ne pas empiéter sur ses responsabilités ?

Le cas présente la situation de manière assez succincte, mais explicite ; puis, trois experts en gouvernance se prononcent sur le dilemme qui se présente aux personnes qui vivent des situations similaires.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Cas de relève familiale

Hannah prepared for the transition. She did a course of director education and understands her duties as a non-executive. She loves her daughter, trusts her judgement as CEO and genuinely wants to see her succeed. Nothing is going wrong but Hannah can’t help interfering. She is bored and longs for the days when she could visit customers or sit and strategise with her management team.

Once a week she has a formal meeting with the CEO in her office. In between times she is in frequent contact. Although by mutual agreement these contacts should be purely social or family oriented Hannah finds herself talking business and is hurt when her daughter suggests they leave it for the weekly meeting or put it onto the board agenda.

Over the past few months Hannah has improved governance, record-keeping, training and succession planning systems but she is running out of projects she can do without undermining her daughter. She also recognises that, as a medium sized unlisted business, the company does not need any more governance structures.

How can Hannah find fulfilment in her new role?

Paul’s Answer …..

Julie’s Answer ….

Jakob’s Answer ….

*Julie Garland McLellan is a practising non-executive director and board consultant based in Sydney, Australia.

L’efficacité du rôle du président du conseil

Nous publions ici un quatrième billet de Danielle Malboeuf* laquelle nous a soumis ses réflexions sur les grands enjeux de la gouvernance des institutions d’enseignement collégial les 23 et 27 novembre 2013, à titre d’auteure invitée.

Dans un premier billet, publié le 23 novembre 2013 sur ce blogue, on insistait sur l’importance, pour les CA des Cégep, de se donner des moyens pour assurer la présence d’administrateurs compétents dont le profil correspond à celui recherché.

D’où les propositions adressées à la Fédération des cégeps et aux CA pour préciser un profil de compétences et pour faire appel à la Banque d’administrateurs certifiés du Collège des administrateurs de sociétés (CAS), le cas échéant. Un autre enjeu identifié dans ce billet concernait la remise en question de l’indépendance des administrateurs internes.

Le deuxième billet publié le 27 novembre 2013 abordait l’enjeu entourant l’exercice de la démocratie par différentes instances au moment du dépôt d’avis au conseil d’administration.

Le troisième billet portait sur l’efficacité du rôle du président du conseil d’administration (PCA).

Ce quatrième billet est une mise à jour de son dernier article portant sur le rôle du président de conseil.

Voici donc l’article en question, reproduit ici avec la permission de l’auteure.

Vos commentaires sont appréciés. Bonne lecture.

________________________________________

LE RÔLE DU PRÉSIDENT DU CONSEIL D’ADMINISTRATION | LE CAS DES INSTITUTIONS D’ENSEIGNEMENT COLLÉGIAL

par Danielle Malboeuf*

Il y a deux ans, je publiais un article sur le rôle du président du conseil d’administration (CA) [1]. J’y rappelais le rôle crucial et déterminant du président du CA et j’y précisais, entre autres, les compétences recherchées chez cette personne et l’enrichissement attendu de son rôle.

Depuis, on peut se réjouir de constater qu’un nombre de plus en plus élevé de présidents s’engagent dans de nouvelles pratiques qui améliorent la gouvernance des institutions collégiales. Ils ne se limitent plus à jouer un rôle d’animateurs de réunions, comme on pouvait le constater dans le passé.

Notons, entre autres, que les présidents visent de plus en plus à bien s’entourer, en recherchant des personnes compétentes comme administrateurs. D’ailleurs, à cet égard, les collèges vivent une situation préoccupante. La Loi sur les collèges d’enseignement général et professionnel prévoit que le ministre [2] nomme les administrateurs externes. Ainsi, en plus de connaître des délais importants pour la nomination de nouveaux administrateurs, les collèges ont peu d’influence sur leur choix.

Présentement, les présidents et les directions générales cherchent donc à l’encadrer. Ils peuvent s’inspirer, à cet égard, des démarches initiées par d’autres organisations publiques en établissant, entre autres, un profil de compétences recherchées qu’ils transmettent au ministre. Ils peuvent ainsi tenter d’obtenir une complémentarité d’expertise dans le groupe d’administrateurs.

Une fois les administrateurs nommés, les présidents doivent se préoccuper d’assurer leur formation continue pour développer les compétences recherchées. Ils se donnent ainsi l’assurance que ces personnes comprennent bien leur rôle et leurs responsabilités et qu’elles sont outillées pour remplir le mandat qui leur est confié. De plus, ils doivent s’assurer que les administrateurs connaissent bien l’organisation, qu’ils adhèrent à sa mission et qu’ils partagent les valeurs institutionnelles. En présence d’administrateurs compétents, éclairés, et dont l’expertise est reconnue, il est plus facile d’assurer la légitimité et la crédibilité du CA et de ses décisions.

Un président performant démontrera aussi de grandes qualités de leadership. Il fera connaître à toutes les instances du milieu le mandat confié au CA. Il travaillera à mettre en place un climat de confiance au sein du CA et avec les gestionnaires de l’organisation. Il cherchera à exploiter l’ensemble des compétences et à faire jouer au CA un rôle qui va au-delà de celui de fiduciaire, soit celui de contribuer significativement à la mission première du cégep : donner une formation pertinente et de qualité où l’étudiant et sa réussite éducative sont au cœur des préoccupations.

Plusieurs ont déjà fait le virage… c’est encourageant ! Les approches préconisées par l’Institut sur la gouvernance des organismes publics et privés (IGOPP) et le Collège des administrateurs de sociétés (CAS) puis reprises dans la loi sur la gouvernance des sociétés d’État ne sont sûrement pas étrangères à cette évolution. En fournissant aux présidents de CA le soutien, la formation et les outils appropriés pour améliorer leur gouvernance, le Centre collégial des services regroupés (CCSR) [3] contribue à assurer le développement des institutions collégiales dans un contexte de saine gestion.

Un CA performant est guidé par un président compétent.

[1] https://jacquesgrisegouvernance.com/2014/01/24/le-role-du-president-du-conseil-dadministration-pca-le-cas-des-cegep/

[2] Ministre de l’Enseignement supérieur, de la Recherche, de la Science et de la Technologie

[3] Formation développée en partenariat avec l’Institut sur la gouvernance des organisations privées et publiques (IGOPP)

_______________________________

*Danielle Malboeuf est consultante et formatrice en gouvernance ; elle possède une grande expérience dans la gestion des CEGEP et dans la gouvernance des institutions d’enseignement collégial et universitaire. Elle est CGA-CPA, MBA, ASC, Gestionnaire et administratrice retraité du réseau collégial et consultante.

Articles sur la gouvernance des CEGEP

(1) Les grands enjeux de la gouvernance des institutions d’enseignement collégiaux

(2) L’exercice de la démocratie dans la gouvernance des institutions d’enseignement collégiaux

(3) LE RÔLE DU PRÉSIDENT DU CONSEIL D’ADMINISTRATION (PCA) | LE CAS DES CÉGEP

Dix thèmes majeurs pour les administrateurs en 2016 | Harvard Law School Forum on Corporate Governance

Vous trouverez, ci-dessous, les dix thèmes les plus importants pour les administrateurs de sociétés selon Kerry E. Berchem, associé du groupe de pratiques corporatives à la firme Akin Gump Strauss Hauer & Feld LLP. Cet article est paru aujourd’hui sur le blogue le Harvard Law School Forum on Corporate Governance.

Bien qu’il y ait peu de changements dans l’ensemble des priorités cette année, on peut quand même noter :

(1) l’accent crucial accordé au long terme ;

(2) Une bonne gestion des relations avec les actionnaires dans la foulée du nombre croissant d’activités menées par les activistes ;

(3) Une supervision accrue des activités liées à la cybersécurité…

Pour plus de détails sur chaque thème, je vous propose la lecture synthèse de l’article ci-dessous.

Bonne lecture !

Ten Topics for Directors in 2016 | Harvard Law School Forum on Corporate Governance

U.S. public companies face a host of challenges as they enter 2016. Here is our annual list of hot topics for the boardroom in the coming year:

Oversee the development of long-term corporate strategy in an increasingly interdependent and volatile world economy

Cultivate shareholder relations and assess company vulnerabilities as activist investors target more companies with increasing success

Oversee cybersecurity as the landscape becomes more developed and cyber risk tops director concerns

Oversee risk management, including the identification and assessment of new and emerging risks

Assess the impact of social media on the company’s business plans

Stay abreast of Delaware law developments and other trends in M&A

Review and refresh board composition and ensure appropriate succession

Monitor developments that could impact the audit committee’s already heavy workload

Set appropriate executive compensation as CEO pay ratios and income inequality continue to make headlines

Prepare for and monitor developments in proxy access

Strategic Planning Considerations

Strategic planning continues to be a high priority for directors and one to which they want to devote more time. Figuring out where the company wants to—and where it should want to—go and how to get there is not getting any easier, particularly as companies find themselves buffeted by macroeconomic and geopolitical events over which they have no control.

In addition to economic and geopolitical uncertainty, a few other challenges and considerations for boards to keep in mind as they strategize for 2016 and beyond include:

finding ways to drive top-line growth

focusing on long-term goals and enhancing long-term shareholder value in the face of mounting pressures to deliver short-term results

the effect of low oil and gas prices

figuring out whether and when to deploy growing cash stockpiles

assessing the opportunities and risks of climate change and resource scarcity

addressing corporate social responsibility.

Shareholder Activism

Shareholder activism and “suggestivism” continue to gain traction. With the success that activists have experienced throughout 2015, coupled with significant new money being allocated to activist funds, there is no question that activism will remain strong in 2016.

In the first half of 2015, more than 200 U.S. companies were publicly subjected to activist demands, and approximately two-thirds of these demands were successful, at least in part. [1] A much greater number of companies are actually targeted by activism, as activists report that less than a third of their campaigns actually become public knowledge. [2] Demands have continued, and will continue, to vary: from requests for board representation, the removal of officers and directors, launching a hostile bid, advocating specific business strategies and/or opining on the merit of M&A transactions. But one thing is clear: the demands are being heard. According to a recent survey of more than 350 mutual fund managers, half had been contacted by an activist in the past year, and 45 percent of those contacted decided to support the activist. [3]

With the threat of activism in the air, boards need to cultivate shareholder relations and assess company vulnerabilities. Directors—who are charged with overseeing the long-term goals of their companies—must also understand how activists may look at the company’s strategy and short-term results. They must understand what tactics and tools activists have available to them. They need to know and understand what defenses the company has in place and whether to adopt other protective measures for the benefit of the overall organization and stakeholders.

Cybersecurity

Nearly 90 percent of CEOs worry that cyber threats could adversely impact growth prospects. [4] Yet in a recent survey, nearly 80 percent of the more than 1,000 information technology leaders surveyed had not briefed their board of directors on cybersecurity in the last 12 months. [5] The cybersecurity landscape has become more developed and as such, companies and their directors will likely face stricter scrutiny of their protection against cyber risk. Cyber risk—and the ultimate fall out of a data breach—should be of paramount concern to directors.

One of the biggest concerns facing boards is how to provide effective oversight of cybersecurity. The following are questions that boards should be asking:

Governance. Has the board established a cybersecurity review > committee and determined clear lines of reporting and > responsibility for cyber issues? Does the board have directors with the necessary expertise to understand cybersecurity and related issues?

Critical asset review. Has the company identified what its highest cyber risks assets are (e.g., intellectual property, personal information and trade secrets)? Are sufficient resources allocated to protect these assets?

Threat assessment. What is the daily/weekly/monthly threat report for the company? What are the current gaps and how are they being resolved?

Incident response preparedness. Does the company have an incident response plan and has it been tested in the past six months? Has the company established contracts via outside counsel with forensic investigators in the event of a breach to facilitate quick response and privilege protection?

Employee training. What training is provided to employees to help them identify common risk areas for cyber threat?

Third-party management. What are the company’s practices with respect to third parties? What are the procedures for issuing credentials? Are access rights limited and backdoors to key data entry points restricted? Has the company conducted cyber due diligence for any acquired companies? Do the third-party contracts contain proper data breach notification, audit rights, indemnification and other provisions?

Insurance. Does the company have specific cyber insurance and does it have sufficient limits and coverage?

Risk disclosure. Has the company updated its cyber risk disclosures in SEC filings or other investor disclosures to reflect key incidents and specific risks?

The SEC and other government agencies have made clear that it is their expectation that boards actively manage cyber risk at an enterprise level. Given the complexity of the cybersecurity inquiry, boards should seriously consider conducting an annual third-party risk assessment to review current practices and risks.

Risk Management

Risk management goes hand in hand with strategic planning—it is impossible to make informed decisions about a company’s strategic direction without a comprehensive understanding of the risks involved. An increasingly interconnected world continues to spawn newer and more complex risks that challenge even the best-managed companies. How boards respond to these risks is critical, particularly with the increased scrutiny being placed on boards by regulators, shareholders and the media. In a recent survey, directors and general counsel identified IT/cybersecurity as their number one worry, and they also expressed increasing concern about corporate reputation and crisis preparedness. [6]

Given the wide spectrum of risks that most companies face, it is critical that boards evaluate the manner in which they oversee risk management. Most companies delegate primary oversight responsibility for risk management to the audit committee. Of course, audit committees are already burdened with a host of other responsibilities that have increased substantially over the years. According to Spencer Stuart’s 2015 Board Index, 12 percent of boards now have a stand-alone risk committee, up from 9 percent last year. Even if primary oversight for monitoring risk management is delegated to one or more committees, the entire board needs to remain engaged in the risk management process and be informed of material risks that can affect the company’s strategic plans. Also, if primary oversight responsibility for particular risks is assigned to different committees, collaboration among the committees is essential to ensure a complete and consistent approach to risk management oversight.

Social Media

Companies that ignore the significant influence that social media has on existing and potential customers, employees and investors, do so at their own peril. Ubiquitous connectivity has profound implications for businesses. In addition to understanding and encouraging changes in customer relationships via social media, directors need to understand and weigh the risks created by social media. According to a recent survey, 91 percent of directors and 79 percent of general counsel surveyed acknowledged that they do not have a thorough understanding of the social media risks that their companies face. [7]

As part of its oversight duties, the board of directors must ensure that management is thoughtfully addressing the strategic opportunities and challenges posed by the explosive growth of social media by probing management’s knowledge, plans and budget decisions regarding these developments. Given new technology and new social media forums that continue to arise, this is a topic that must be revisited regularly.

M&A Developments

M&A activity has been robust in 2015 and is on track for another record year. According to Thomson Reuters, global M&A activity exceeded $3.2 trillion with almost 32,000 deals during the first three quarters of 2015, representing a 32 percent increase in deal value and a 2 percent increase in deal volume compared to the same period last year. The record deal value mainly results from the increase in mega-deals over $10 billion, which represented 36 percent of the announced deal value. While there are some signs of a slowdown in certain regions based on deal volume in recent quarters, global M&A is expected to carry on its strong pace in the beginning of 2016.

Directors must prepare for possible M&A activity in the future by keeping abreast of developments in Delaware case law and other trends in M&A. The Delaware courts churned out several noteworthy decisions in 2015 regarding M&A transactions that should be of interest to directors, including decisions on the court’s standard of review of board actions, exculpation provisions, appraisal cases and disclosure-only settlements.

Board Composition and Succession Planning

Boards have to look at their composition and make an honest assessment of whether they collectively have the necessary experience and expertise to oversee the new opportunities and challenges facing their companies. Finding the right mix of people to serve on a company’s board of directors, however, is not necessarily an easy task, and not everyone will agree with what is “right.” According to Spencer Stuart’s 2015 Board Index, board composition and refreshment and director tenure were among the top issues that shareholders raised with boards. Because any perceived weakness in a director’s qualification could open the door for activist shareholders, boards should endeavor to have an optimal mix of experience, skills and diversity. In light of the importance placed on board composition, it is critical that boards have a long-term board succession plan in place. Boards that are proactive with their succession planning are able to find better candidates and respond faster and more effectively when an activist approaches or an unforeseen vacancy occurs.

Audit Committees

Averaging 8.8 meetings a year, audit continues to be the most time-consuming committee. [8] Audit committees are burdened not only with overseeing a company’s risks, but also a host of other responsibilities that have increased substantially over the years. Prioritizing an audit committee’s already heavy workload and keeping directors apprised of relevant developments, including enhanced audit committee disclosures, accounting changes and enhanced SEC scrutiny will be important as companies prepare for 2016.

Executive Compensation

Perennially in the spotlight, executive compensation will continue to be a hot topic for directors in 2016. But this year, due to the SEC’s active rulemaking in 2015, directors will have more to fret about than just say-on-pay. Roughly five years after the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, the SEC finally adopted the much anticipated CEO pay ratio disclosure rules, which have already begun stirring the debate on income inequality and exorbitant CEO pay. The SEC also made headway on other Dodd-Frank regulations, including proposed rules on pay-for-performance, clawbacks and hedging disclosures. Directors need to start planning how they will comply with these rules as they craft executive compensation for 2016.

Proxy Access

2015 was a turning point for shareholder proposals seeking to implement proxy access, which gives certain shareholders the ability to nominate directors and include those nominees in a company’s proxy materials. During the 2015 proxy season, the number of shareholder proposals relating to proxy access, as well as the overall shareholder support for such proposals, increased significantly. Indeed, approximately 110 companies received proposals requesting the board to amend the company’s bylaws to allow for proxy access, and of those proposals that went to a vote, the average support was close to 54 percent of votes cast in favor, with 52 proposals receiving majority support. [9] New York City Comptroller Scott Springer and his 2015 Boardroom Accountability Project were a driving force, submitting 75 proxy access proposals at companies targeted for perceived excessive executive compensation, climate change issues and lack of board diversity. Shareholder campaigns for proxy access are expected to continue in 2016. Accordingly, it is paramount that boards prepare for and monitor developments in proxy access, including, understanding the provisions that are emerging as typical, as well as the role of institutional investors and proxy advisory firms.

The complete publication is available here.

Endnotes:

[1] Activist Insight, “2015: The First Half in Numbers,” Activism Monthly (July 2015).
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[2] Activist Insight, “Activist Investing—An Annual Review of Trends in Shareholder Activism,” p. 8. (2015).
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[3] David Benoit and Kirsten Grind, “Activist Investors’ Secret Ally: Big Mutual Funds,” The Wall Street Journal (August 9, 2015).
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[4] PwC’s 18th Annual Global CEO Survey 2015.
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[5] Ponemon Institute’s 2015 Global Megatrends in Cybersecurity (February 2015).
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[6] Kimberley S. Crowe, “Law in the Boardroom 2015,” Corporate Board Member Magazine (2^nd Quarter 2015). See also, Protiviti, “Executive Perspectives on Top Risks for 2015.”
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[7] Kimberley S. Crowe, supra.
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[8] 2015 Spencer Stuart Board Index, at p. 26.
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[9] Georgeson, 2015 Annual Corporate Governance Review, at p. 5.
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L’importance de la confiance du président du conseil envers son CA | En reprise

Voici le point de vue de Liam McGee paru récemment dans la section Leadership de la revue du Harvard Business School (HBR). L’auteur relate son expérience alors qu’il était le président et chef de la direction (PCD) de la Hartford Financial Services Group.

Selon lui, tous les présidents de conseils d’administration tentent de « gérer leur CA » en utilisant diverses approches basées sur le contrôle et le pouvoir de l’information. Cependant, depuis une dizaine d’années, les conseils d’administration ont progressivement repris leurs droits ! Ils cherchent à maintenir une plus grande distance entre leurs rôles de fiduciaires et ceux qui incombent à la direction de l’organisation.

Pour l’auteur, il n’y a qu’une façon de réconcilier les deux parties : le partenariat. Celui-ci est fondé sur la confiance, et la confiance ne s’acquiert pas du jour au lendemain ! Il faut élaborer une stratégie et mettre en œuvre des mécanismes qui renforceront graduellement la confiance entre le CA et la haute direction. Selon lui, il vital que le PCD ait confiance en son CA.

Toute la carrière de l’auteur a été consacrée à l’établissement de liens de confiance essentiels aux bonnes pratiques de gouvernance. C’est de son expérience dont il est question dans ce bref extrait. Bonne lecture !

CEOs, Stop Trying to Manage the Board

It’s understandable that most CEOs try to manage their boards. With directors often attempting to take a more active role in decisions these days, CEOs naturally feel a bit threatened. They’re trying to lead a group of people who typically lack the time or expertise to fully understand what’s going on — but who have real power.

At most companies, despite all the best intentions, managing the board usually means keeping directors at arm’s length. Most CEOs I’ve known are inclined to give out just enough information to satisfy their fiduciary obligations, often in highly structured meetings that leave little to chance. They hold off on revealing the deeper challenges or complexities that might provoke tough questions.

But as I learned over the course of my career, there’s a better approach with boards. A CEO can work in partnership with directors without sacrificing his or her authority — and thereby accomplish far more than is possible with an arm’s-length relationship. It’s all a matter of developing trust. In my five years as CEO of The Hartford, a Fortune 100 insurer, winning trust was crucial to turning around the company in the aftermath of the global financial crisis.

Building trust can be a delicate thing, but it isn’t magic. You don’t need special charisma. All you really need is courage and self-confidence.

The first step is to show that you trust your directors. In practical terms, that means not trying to stage-manage board interactions. When I took over at The Hartford, the management team took up most of our board meetings going through long slide decks. I got rid of that barrier. We distilled the most important information into pre-reads for the directors to study in advance. The meetings themselves, aside from the CFO’s report on financials, focused on discussions of the main issues. Real transparency, I learned, isn’t so much in the numbers, but in open conversation.

That wasn’t easy at first for my executives, who were used to wielding their slide decks to control their presentations. I had to coach them not to worry and to remember that directors were genuinely interested in their businesses and in getting to know them as managers. So they should just be open to the discussions that came up.

These unscripted meetings not only freed directors to ask more questions, but also gave them more of a window into the company. They got to see the other executives in action, including my potential successors.

It’s important to remember that boards see only a small part of you, and even less of the company. They visit for a day or two and get a snapshot. How you work with them is often as important as the substance of what you say. If you give the board unfettered access to executives, you’ll build trust with the directors as well as with your management team. Openness and transparency in board meetings over time can go a long way toward making everyone comfortable with everyone else.

Still, those steps weren’t enough for me to build a strong basis of trust. It’s one thing to allow open discussion on the usual company topics. But what about the issues that involved me personally? How could I get the directors to trust me on my own performance? Obviously a CEO will want to maintain some discretion here. But openness on even these issues can pay off enormously.

A year into my tenure, a senior executive quit abruptly and, on the way out, criticized my management style to the board. I was concerned enough to get a coach, who conducted a full 360-degree feedback process for me. But instead of just telling the directors about the coaching, I decided to give them an overview of my coach’s findings. Her report was generally positive, but it had some tough parts in it, and I decided to discuss these openly. It may have been risky, but it helped to break the ice. The board members felt relaxed enough to give me some feedback of their own. My lead director even became something of a second coach. All of this was invaluable, and it wouldn’t have happened if I hadn’t made myself vulnerable in the first place.

That trust made a big difference in 2012, when an activist investor challenged us to restructure the company. We were still in the process of developing our new strategy, and the stock price was disappointingly low. The controversy could have led to my departure and, more important, a costly delay in the company’s revival. Instead the board stayed unified and we stuck to our plan, which turned out to be a better approach than the strategy the activist was pushing.

All along the way, as we developed trust, I grew to welcome the board members’ tough questions. I could see they were focused on helping me protect and improve the company. A CEO’s job is hard enough. One of your biggest responsibilities is to avoid making dumb decisions. Wouldn’t you want all the directors to feel comfortable challenging you and each other?

*Liam McGee was chairman and CEO of the Hartford Financial Services Group (“The Hartford”) from 2009 to June of 2014. He died in February 2015.

La SEC propose le bulletin de vote « universel »

Ce billet présente la proposition de la Securities and Exchange Commission (SEC) eu égard à l’utilisation d’un bulletin de vote dit universel dans le cas d’élections contestées lors de l’assemblée annuelle.

En fait, la SEC veut revoir le mode d’élection des administrateurs en obligeant les parties à solliciter les votes pour leurs candidats (la « slate »), mais à la condition d’inclure les noms de tous les autres candidats-administrateurs sur leur bulletin de vote.

Les actionnaires auront ainsi la possibilité de choisir parmi tous les candidats, plutôt que de choisir une « slate » ou une autre.

Cet article a été publié dans Harvard Law School Forum par Ron Cami, Joseph A. Hall, Phillip R. Mills, Ning Chiu, et Rebecca E. Crosby de la firme Davis Polk & Wardwell LLP ; il présente tous les arguments pour une telle proposition tout en montrant les différences avec l’accès au bulletin de vote (« proxy access ») par les groupes d’actionnaires possédant plus de 3 % du capital sur la période des trois dernières années.

Bonne lecture !

SEC Proposes Universal Proxy Ballots

On October 26, the Securities and Exchange Commission proposed long-expected changes to the proxy rules in order to mandate the use of universal proxy cards in contested elections at annual meetings. The proposal is designed to address the current inability of shareholders to vote for the combination of board nominees of their choice in an election involving a proxy contest. Under the proposal, each party in a contested election—management and one or more dissident shareholders—would continue to distribute its own proxy materials and use its own proxy card to solicit votes for its preferred slate of nominees. However, each party’s proxy card would be required to include the nominees of all parties, and thus enable the proxy voter to select its preferred combination of candidates.

The proposal would—

mandate the use of universal proxy cards for most contested director elections,

establish notice and filing requirements for both companies and dissidents,

require dissidents to undertake a minimum solicitation effort, and

prescribe form and presentation criteria for the proxy card.

What seems clear to us is that the universal proxy would ultimately move the balance of corporate power further from the board and closer to the shareholders. As the SEC observed in the proposing release, “[i]f the proposed amendments result in additional dissident representation, it is difficult to predict whether such additional dissident representation would enhance or detract from board effectiveness and shareholder value.” The SEC is seeking comment from all affected constituencies, including companies, on this critical question. The deadline for comments on the proposal is expected to fall in late December 2016, 60 days after publication of the proposal in the Federal Register. Given the timing of the proposal and comment period, there is little chance that a universal proxy card would be required for the 2017 proxy season.

Why Is the SEC Acting?

Currently, a shareholder voting by proxy in a contested election is effectively required to choose between the slate of nominees put forward by management and the slate put forward by the dissident. By contrast, a shareholder who attends a meeting in person can pick and choose between directors nominated by management and directors nominated by dissidents. In the SEC’s view this creates a kink in the proxy plumbing, the overarching goal of which is to make proxy voting as close as possible to voting at a shareholder meeting, due to the interplay between two rules—

– “Bona fide nominee” rule—Under the SEC’s rules, one party’s director nominee may not be included on the opposing party’s proxy card unless the nominee gives his or her consent to the opposing party. Since this rarely happens, the bona fide nominee rule usually results in two separate proxy cards, forcing a shareholder voting by proxy to choose one slate or the other.

– “Last in time” rule—Delaware and other state corporate laws generally provide that the latest proxy revokes any earlier proxy executed by a shareholder. The last-in-time rule therefore effectively stymies a shareholder’s attempt to submit multiple proxy cards to vote for a combination of nominees from different slates, even if the aggregate number of nominees selected is the same as the number of seats up for election. In 1992, the SEC introduced a modification to the bona-fide-nominee rule to permit a dissident to propose a “short slate” of nominees—that is, a slate where the dissident nominees would constitute a minority of the board—and then to “round out” the dissident proxy card by identifying management nominees that the dissident would not vote for, resulting in a proxy voter’s remaining votes being cast for the unnamed management nominees. While the short-slate rule allows proxy voters to vote for a combination of dissident and management nominees, albeit in a roundabout way, the shareholder is still unable to mix and match as it sees fit, since the combination of dissident and management nominees is dictated by the dissident.

Key Features of the Proposal

Mandatory use. The proposal would require universal proxy cards for most contested director elections at annual meetings. Each soliciting party would continue to distribute its own proxy materials and its own version of the universal proxy card. The proposal would not require the cards to be identical; rather, each party would be permitted to design its own card so long as the content, format and presentation comply with the proposal’s criteria.

Mandatory use only applies to solicitations that involve a contested election where a dissident is proposing a competing slate of director candidates. However, with the amendment to the bona-fide-nominee rule, a dissident could name all of management’s nominees on a proxy card in order to solicit against their election, or to seek their removal, even without a universal proxy card. A dissident could also solicit for a proposal other than an election of directors but name all of management’s nominees in order to have a proxy card that could be used for all matters to be voted on at the meeting.

Mandatory use also would not apply to “exempt solicitations” under the proxy rules or to registered investment companies or business development companies.

Revision of the bona-fide-nominee rule. The proposal would define a “bona fide nominee” as a person who has consented to being named in any proxy statement relating to the company’s next meeting of shareholders for the election of directors. The proposal would retain the requirement that a nominee intend to serve, if elected. If a nominee intends to serve only if his or her nominating party’s slate is elected, the proxy statement would need to disclose that fact.

Elimination of the short-slate rule. The proposal would eliminate the short-slate rule because universal proxy cards obviate the need for dissidents to round out partial slates with management nominees. Dissidents would however retain the ability to recommend their preferred management nominees in their proxy materials.

Notice and filing. The proposal would require a dissident shareholder to provide the company with notice of its intent to solicit proxies and the names of its nominees at least 60 days before the anniversary of the previous year’s annual meeting, or about two to four weeks prior to the time the company would typically mail its proxy statement. The company would then be required to provide the dissident with the names of management’s nominees at least 50 days before that anniversary. The dissident would need to file its proxy statement by the later of 25 days before the meeting date or five days after management files its proxy statement.

Minimum solicitation effort. Dissidents would be obligated to solicit holders of shares representing at least a majority of the company’s voting power, which would mean a dissident must expend its own resources in order to trigger use of the mandatory universal proxy card. However, because dissidents would not be required to solicit all shareholders, many shareholders (such as retail investors) may not receive proxy statements containing information about the dissident nominees—thereby decreasing the financial burden on the dissident. The SEC is seeking comment on whether dissidents should be required to solicit all shareholders.

Presentation and formatting. The proposal prescribes formatting and presentation criteria intended to ensure that information is presented clearly and fairly.

A universal proxy card would be required to—

clearly distinguish between management nominees, dissident nominees, and any proxy access nominees,

within each group of nominees, list the nominees in alphabetical order,

use the same font type, style and size to present all nominees,

disclose the maximum number of nominees for which authority to vote can be granted, and

disclose the treatment of a proxy executed in a manner that grants authority to vote for more, or fewer, nominees than the number of directors being elected, or does not grant authority to vote for any nominees. A universal proxy card would be permitted to offer the ability to vote for all management nominees as a group or all dissident nominees as a group, but only if both parties have proposed a full slate of nominees and there are no proxy access candidates.

Voting Standards Disclosure and Voting Options

The SEC has proposed additional rules governing all meetings, not just contested situations, for the election of directors. Due to concerns that some company proxy statements have ambiguous or inaccurate disclosures about voting standards in director elections, the proposal would mandate changes to proxy cards and the disclosure of those voting standards in the proxy statement.

If a company uses a majority vote standard for the election of directors and a vote cast against a nominee would have legal effect under state law, the proxy card would be required to include the options to vote “against” the nominee and to “abstain” from voting. The company would not be permitted to offer an option to “withhold” against a director.

A company that applies plurality voting standards for director elections, including a plurality voting standard with a director resignation policy (often known as “plurality plus”), would need to disclose in its proxy statement the treatment and effect of a “withhold” vote in the election—namely, that “withholds” have no legal effect.

How Is This Different From Proxy Access?

Over the past two years, many companies have adopted “proxy access” bylaws that permit shareholders, typically those who have held at least 3% of the company’s shares for at least three years, to nominate candidates for inclusion in the proxy materials distributed by the company.

The SEC acknowledged that some are concerned that a universal proxy card could be viewed as a substitute for proxy access. However, the SEC indicated that significant differences exist. Unlike proxy access, using a universal proxy card would not require a company to include in its proxy materials the names of the nominating shareholder’s nominees, disclosure about the nominating shareholder and its nominees and a supporting statement from the nominating shareholder. Shareholders making nominations under proxy access can rely on the company’s proxy materials and are not required to prepare and file their own proxy materials, disseminate those materials and use them to solicit shareholders.

With universal proxy cards, by contrast, dissidents would need to spend the time and effort and incur the costs to develop their own proxy statements and solicit shareholders. A company need only include dissident nominees on the universal proxy card it uses, and can choose to provide no other information in the company’s proxy materials about the dissident’s nominees.

What’s Next?

The SEC nodded to concerns that have been raised over allowing universal proxy cards, including the potential for investor confusion and the implication that the soliciting party endorses the other party’s nominees. Though it believes its proposal addresses these issues, the SEC acknowledged that other unknowns remain, including whether universal proxy cards would have an impact on the number of dissident nominees elected, whether they would increase the frequency of contested elections, and what the impact of these developments would be on board effectiveness and, ultimately, shareholder value. The SEC is seeking comment on all of these questions, and the responses it receives could shape any final rules in ways that differ materially from the proposal.

We expect the proposal to generate a lively debate among companies, institutional investors and shareholder advocates. The timing of the proposal, coming in the final days of the Obama Administration, suggests that any definitive action on universal proxy cards may be left to an SEC composed largely of newly appointed members, who may have priorities and concerns that differ from the current commissioners.

Whether or not the SEC adopts its proposal, it would make sense for companies to review their disclosure about voting standards and voting options on their proxy cards for the upcoming proxy season. The SEC staff has expressed concerns that some proxy statements contain ambiguities or inaccuracies under existing law and the Division of Corporation Finance may issue comments in advance of the final rules when it thinks companies may be making inaccurate disclosures.

Malaise au conseil | Les effets pervers de l’obligation de divulgation des rémunérations de la haute direction (en rappel)

Aujourd’hui, je cède la parole à Mme Nicolle Forget*, certainement l’une des administratrices de sociétés les plus chevronnées au Québec (sinon au Canada), qui nous présente sa vision de la gouvernance « réglementée » ainsi que celle du rôle des administrateurs dans ce processus.

L’allocution qui suit a été prononcée dans le cadre du Colloque sur la gouvernance organisée par la Chaire de recherche en gouvernance de sociétés le 6 juin 2014. Je pensais tout d’abord faire un résumé de son texte, mais, après une lecture attentive, j’en ai conclu que celui-ci exposait une problématique de fond et constituait une prise de position fondamentale en gouvernance. Il me semblait essentiel de vous faire partager son article au complet.

Nous avons souvent abordé les conséquences non anticipées de la réglementation, principalement celles découlant des exigences de divulgation en matière de rémunération. Cependant, dans son allocution, l’auteure apporte un éclairage nouveau, inédit et audacieux sur l’exercice de la gouvernance dans les sociétés publiques.

Elle présente une solide argumentation et expose clairement certains malaises vécus par les administrateurs eu égard à la lourdeur des mécanismes réglementaires de gouvernance. Les questionnements présentés en conclusion de l’article sont, en grande partie, fondés sur sa longue expérience comme membre de nombreux conseils d’administration.

Comment réagissez-vous aux constats que fait Mme Forget ? Les autorités réglementaires vont-elles trop loin dans la prescription des obligations de divulgation ? Pouvons-nous éviter les effets pervers de certaines dispositions sans pour autant nuire au processus de divulgation d’informations importantes pour les actionnaires et les parties prenantes.

Vos commentaires sont les bienvenus. Je vous souhaite une bonne lecture.

MALAISE AU CONSEIL | Les effets pervers de l’obligation de divulgation en matière de rémunération

par

Nicolle Forget*

Merci aux organisateurs de ce colloque de me donner l’occasion de partager avec vous quelques constatations et interrogations qui m’habitent depuis quatre ou cinq ans concernant diverses obligations imposées aux entreprises à capital ouvert (inscrites en Bourse). Je souligne d’entrée de jeu que la présentation qui suit n’engage que moi.

Depuis l’avènement de quelques grands scandales financiers, ici et ailleurs, on en a mis beaucoup sur le dos des administrateurs de sociétés. On voudrait qu’un administrateur soit un expert en semblable matière. Il ne l’est pas. Il arrive avec son bagage, c’est pourquoi on l’a choisi. On lui prépare un programme de formation pour lui permettre de comprendre l’entreprise au conseil de laquelle il a accepté de siéger, mais il n’en saura jamais autant que la somme des savoirs de l’entreprise. C’est utopique de s’attendre au contraire. Même un administrateur qui ne ferait que cela, siéger au conseil de cette entreprise, ne le pourrait pas.

nicolle-forget

Des questions reviennent constamment dans l’actualité : où étaient les administrateurs ? N’ont-ils rien vu venir ou rien vu tout court? Ont-ils rempli leur devoir fiduciaire? Tout juste si on ne conclut pas qu’ils sont tous des incompétents. Les administrateurs étaient là. Ils savaient ce que l’on a bien voulu leur faire savoir. (ex. Saccage de la Baie-James. Les administrateurs de la SEBJ, convoqués en Commission parlementaire à Québec, au printemps 1983, ont appris, par un avocat venu y témoigner, l’existence d’un avis juridique qu’il avait préparé à la demande de la direction. La SEBJ poursuivait alors les responsables du saccage et un très long procès était sur le point de commencer. Avoir eu connaissance de son contenu, au moment où il a été livré au PDG, aurait eu un impact sur nos décisions. J’étais alors membre du conseil d’administration).

Posons tout de suite que la meilleure gouvernance qui soit n’empêchera jamais des dirigeants qui veulent cacher au conseil certains actes d’y parvenir — surtout si ces actes sont frauduleux. Même avec de belles politiques et de beaux codes d’éthique, plusieurs directions d’entreprise trouvent encore qu’un conseil d’administration n’est rien d’autre qu’un mal nécessaire. Les administrateurs sont parfois perçus comme s’ingérant dans les affaires de la direction ou dans les décisions qu’elle prend. Aussi, ces dirigeants ont-ils tendance à placer les conseils devant des faits accomplis ou des dossiers tellement bien ficelés qu’il est difficile d’y trouver une fissure par laquelle entrevoir une faille dans l’argumentation au soutien de la décision à prendre. Pourtant, et nous le verrons plus loin, en vertu de la loi, le conseil « exerce tous les pouvoirs nécessaires pour gérer les activités et les affaires internes de la société ou en surveiller l’exécution ».

Les conseils d’administration, comme les entreprises et leurs dirigeants, sont soumis à quantité de législations, réglementations, annexes à celles-ci, avis, lignes directrices et autres exigences émanant d’autorités multiples — et davantage les entreprises œuvrent dans un secteur d’activités qui dépasse les frontières d’une province ou d’un pays. Et, selon ce que l’on entend, il faudrait que l’administrateur ait toujours tout vu, tout su…

Malaise !

En 2007, Yvan Allaire écrivait que « … la gouvernance par les conseils d’administration est devenue pointilleuse et moins complaisante, mais également plus tatillonne, coûteuse et litigieuse ; les dirigeants se plaignent de la bureaucratisation de leur entreprise, du temps consacré pour satisfaire aux nouvelles exigences » 1. Denis Desautels, lui, signalait que « Certains prétendent que le souci de la conformité aux lois et aux règlements l’emporte sur les discussions stratégiques et sur la création de valeur. Et d’autres, que l’adoption ou l’endossement des nouvelles normes n’est pas toujours sincère et, qu’au fond, la culture de l’entreprise n’a pas réellement changé » 2.

Pour mémoire, voyons quelques obligations (de base) d’un administrateur de sociétés.

Au Québec, la Loi sur les sociétés par actions (L.r.Q., c. S-31.1) prévoit que les affaires de la société sont administrées par un conseil d’administration qui « exerce tous les pouvoirs nécessaires pour gérer les activités et les affaires internes de la société ou en surveiller l’exécution » (art. 112) et que, « Sauf dans la mesure prévue par la loi, l’exercice de ces pouvoirs ne nécessite pas l’approbation des actionnaires et ceux-ci peuvent être délégués à un administrateur, à un dirigeant ou à un ou plusieurs comités du conseil. »

De façon générale, les administrateurs de sociétés sont soumis aux obligations auxquelles est assujetti tout administrateur d’une personne morale en vertu du Code civil. « En conséquence, les administrateurs sont notamment tenus envers la société, dans l’exercice de leurs fonctions, d’agir avec prudence et diligence de même qu’avec honnêteté et loyauté dans son intérêt » (art. 119). L’intérêt de la société, pas l’intérêt de l’actionnaire. La loi fédérale présente des concepts semblables. (La Cour Suprême du Canada a d’ailleurs rappelé dans l’affaire BCE qu’il n’existe pas au Canada de principe selon lequel les intérêts d’une partie — les actionnaires, par exemple — doivent avoir priorité sur ceux des autres parties.)

Si la société fait appel publiquement à l’épargne, elle devient un émetteur assujetti. Alors s’ajoutent les règles de la Bourse concernant les exigences d’inscription initiale ainsi que celles concernant le maintien de l’inscription. S’ajoutent aussi les obligations édictées dans la Loi sur les valeurs mobilières (L.R.Q., c. V-1.1), de même que les règlements qui en découlent, et dont l’Autorité des marchés financiers (AMF) est chargée de l’application. L’émetteur assujetti est tenu aux obligations d’information continue. Si vous êtes un administrateur ou un haut dirigeant d’un tel émetteur ou même d’une filiale d’un tel émetteur, vous êtes un initié avec des obligations particulières.

L’article 73 de cette Loi stipule que tel émetteur « … fournit, conformément aux conditions et modalités déterminées par règlement, l’information périodique au sujet de son activité et de ses affaires internes, dont ses pratiques en matière de gouvernance, l’information occasionnelle au sujet d’un changement important et toute autre information prévue par règlement. ». « L’émetteur assujetti doit organiser ses affaires conformément aux règles établies par règlement en matière de gouvernance ». (art.73.1)

La mission de l’Autorité, (entendre ici AMF) telle qu’énoncée à l’article 276.1 de la Loi sur les valeurs mobilières se décline comme suit :

Favoriser le bon fonctionnement du marché des valeurs mobilières ;
Assurer la protection des épargnants contre les pratiques déloyales, abusives et frauduleuses ;
Régir l’information des porteurs de valeurs mobilières et du public sur les personnes qui font publiquement appel à l’épargne et sur les valeurs émises par celles-ci ;
Encadrer l’activité des professionnels des valeurs mobilières et des organismes chargés d’assurer le fonctionnement d’un marché des valeurs mobilières.

Dans sa loi constituante, l’Autorité a une mission plus élaborée qui reprend sensiblement les mêmes thèmes, mais en appuyant davantage sur la protection des consommateurs de produits et utilisateurs de services financiers. (art.4, L.R.Q., c. A-33.2)

Aux termes de la législation en vigueur, « L’Autorité exerce la discrétion qui lui est conférée en fonction de l’intérêt public » (art.316, L.R.Q., c. V-1.1) et un règlement pris en vertu de la présente loi confère un pouvoir discrétionnaire à l’Autorité » (art.334). En outre, toujours selon cette Loi, « Les instructions générales sont réputées constituer des règlements dans la mesure où elles portent sur un sujet pour lequel la loi nouvelle prévoit une habilitation réglementaire et qu’elles sont compatibles avec cette loi et les règlements pris pour son application. »

Je vous fais grâce du Règlement sur les valeurs mobilières (Décret 660-83 ; 115 G.O.2, 1511) ; quant à l’Annexe (51-102A5), portant sur la Circulaire de sollicitation de procuration par la direction, et celle (51-102A6) portant spécifiquement sur la Déclaration de la rémunération de la haute direction, j’y reviendrai plus loin.

Ceci pour une société qui ne fait affaire qu’au Québec, et à l’exclusion de toutes les autres législations et les nombreux règlements portant sur un secteur d’activité en particulier. Pensons juste aux activités qui peuvent affecter l’environnement, même de loin. Alors, si une société fait affaire ailleurs au Canada et aux É.-U. ou sur plusieurs continents — ajoutez des obligations, des modes différents de divulgation de l’information — et cela peut vous donner une petite idée de « l’industrie » qu’est devenue la gouvernance d’entreprise avec l’obligation de livrer l’information en continu et sous une forme de plus en plus détaillée. Et les administrateurs devraient tout savoir, avoir tout vu…

Les très nombreuses informations que nous publions rencontrent-elles l’objectif à l’origine de ces exigences ? Carol Liao soutient que « les autorités réglementaires sont par définition orientées vers l’actionnaire ce qui aurait mené à une augmentation des droits de ces derniers, bien au-delà de ce que les lois canadiennes (sur les sociétés) envisageaient. » On a vu plus haut que la Loi sur les sociétés par actions édicte que « les administrateurs sont notamment tenus envers la société dans l’exercice de leurs fonctions, d’agir avec prudence et diligence de même qu’avec honnêteté et loyauté dans son intérêt ». Se pourrait-il que « ce qui est dans l’intérêt supérieur des actionnaires ne coïncide pas avec une meilleure gouvernance ? (doesn’t align with better governance – that’s where the practice falls down »3.)

J’aime à croire que l’origine de l’obligation qui est faite aux entreprises de dire qui elles sont, ce qu’elles font, comment elles le font, et avec qui elles le font, est la protection du petit investisseur — vous et moi qui plaçons nos économies en prévision de nos vieux jours — comme disaient les anciens.

À moins d’y être obligé par son travail, qui comprend le contenu des circulaires de sollicitation de procuration par la direction, émises à l’intention des actionnaires ? Les Notices annuelles ? D’abord, qui les lit? Chaque fois que l’occasion m’en est donnée, je pose la question – et partout le même commentaire : si je n’avais pas les lire je ne les lirais pas. La quantité de papier rebute en partant ; la complexité des informations à publier en la forme prescrite est difficile à comprendre pour un non-expert, alors imaginez pour un petit investisseur. Si même il s’aventure à lire le document.

Donc, si tant est que les circulaires et les notices ne soient pratiquement lues que par ceux qui n’ont pas le choix de le faire, il serait peut-être temps de se demander à quoi, ou plutôt, à qui elles servent ? Et à quels coûts pour l’entreprise. A-t-on une idée de combien d’experts s’affairent avec le personnel de l’entreprise à préparer ces documents sans compter les réunions des comités d’Audit, de Ressources humaines, de Gouvernance et du conseil qui se pencheront sur diverses versions des mêmes documents ?

Encore une fois, pour quoi ? Pour qui ?

Pourquoi pas aux activistes de toutes origines ?

La dernière crise financière (2008/2009) semble avoir été l’accélérateur de l’activisme de groupes, autour des actionnaires, de même que l’arrivée d’experts de toutes sortes en gouvernance d’entreprise. Une industrie venait de naître! Le Rapport sur la gouvernance 2013, de Davies Ward Phillips & Vineberg, s.e. n.c. r. l., soutient qu’il s’agit d’une tendance alimentée surtout « par le nombre accru d’occasions d’activisme découlant de certaines tendances actuelles de la législation et des pratiques à vouloir que plus de questions soient soumises à l’approbation des actionnaires » 4.

Mais, l’a-t-on oublié ? Les administrateurs ont un devoir de fiduciaire envers la société, pas juste envers les actionnaires. Ils doivent assurer la pérennité de l’entreprise et pas juste afficher un rendement à court terme qui entraîne des effets pervers sur la gestion des ressources humaines et ne tient pas suffisamment compte d’une saine gestion des risques. Question : est-ce que la mesure de l’efficacité consiste en une reddition de compte trimestrielle ? Est-ce que cette reddition de compte, toute formatée, n’est pas en train de remplacer la responsabilité et l’engagement personnel des hauts dirigeants ? La pression mise sur les conseils d’administration, par certains activistes (d’ailleurs pas toujours actionnaires de l’entreprise !), et de leurs conseillers divers, pour discuter avec le président du conseil et le président du comité de ressources humaines est perçue comme une tentative de la part de ces activistes d’imposer leur programme — au détriment des autres actionnaires et de l’intérêt même de l’émetteur. Et comme certains fournisseurs de ces activistes (agences de conseils en vote) produisent des analyses pour leur clientèle en vue d’une recommandation de vote lors d’une assemblée annuelle — cette démarche peut être interprétée comme une pression à la limite de l’intimidation.

Venons-en aux obligations de divulgation portant sur la rémunération des membres de la haute direction visés.

Les prêteurs, les actionnaires, ont le droit de connaître — à terme — les obligations de l’entreprise, y compris celles envers ses hauts dirigeants. Remarquez, ils ont aussi le droit de savoir s’il y a exagération ou abus. Mais, ont-ils besoin, entre autres, de connaître dans le détail les objectifs personnels fixés à Monsieur X ou à Madame Y?; pour quel % cela compte-t-il dans la rémunération incitative à court terme?; à quel % tels objectifs ont-ils été rencontrés?; pourquoi l’ont-ils été à ce %?. Peut-on sérieusement croire qu’une entreprise va publier que telle ou telle personne n’est pas à la hauteur, 12 à 15 mois après les faits?. Ou bien cette personne a rencontré les objectifs fixés de façon satisfaisante ou bien elle n’est plus là. Denis Desautels avance, dans le texte cité plus haut, qu’il « n’est pas sage d’appuyer les régimes de rémunération sur des formules trop quantitatives ou mathématiques et d’allouer une trop grande portion de la rémunération globale à la partie variable ou à risque de la rémunération ». Pourtant, les pressions ne cessent d’augmenter pour que cela soit le cas (Pay for Performance) et que ce soit basé sur des mesures objectives et connues comme le cours de l’action ou le résultat par action… le tout par rapport au groupe de référence. Performance devient le nouveau leitmotiv. S’est-on jamais demandé ce que cette divulgation pouvait avoir comme effet d’« emballement » sur la rémunération des hauts dirigeants? Et les politiques de rémunération doivent continuellement s’ajuster.

Le Règlement 51-102, à son Annexe A6 (Déclaration de la rémunération de la haute direction) prescrit non seulement le contenu, mais aussi la forme que doit prendre cette déclaration :

L’ensemble de la rémunération payée, payable, attribuée, octroyée, donnée ou fournie de quelque autre façon, directement ou indirectement, par la société ou une de ses filiales à chaque membre de la haute direction visé et chaque administrateur, à quelque titre que ce soit, notamment l’ensemble de la rémunération en vertu d’un plan ou non, les paiements directs ou indirects, la rétribution, les attributions d’ordre financier ou monétaire, les récompenses, les avantages, les cadeaux ou avantages indirects qui lui sont payés, payables, attribués, octroyés, donnés ou fournis de quelque autre façon pour les services rendus et à rendre, directement ou indirectement, à la société ou à une de ses filiales. (art. 1.3 par, 1 a).

L’émetteur assujetti doit, en outre, produire une analyse de la rémunération, laquelle doit :

1) Décrire et expliquer tous les éléments significatifs composant la rémunération attribuée, payée, payable aux membres de la haute direction visés, ou gagnée par ceux-ci, au cours du dernier exercice, notamment les suivants :

a) les objectifs de tout programme de rémunération ou de toute stratégie en la matière ;
b) ce que le programme de rémunération vise à récompenser ;
c) chaque élément de la rémunération ;
d) les motifs de paiement de chaque élément ;
e) la façon dont le montant de chaque élément est fixé, en indiquant la formule, le cas échéant ;
f) la façon dont chaque élément de la rémunération et les décisions de la société sur chacun cadrent avec les objectifs généraux en matière de rémunération et leur incidence sur les décisions concernant les autres éléments.

2) Le cas échéant, expliquer les actions posées, les politiques établies ou les décisions prises après la clôture du dernier exercice qui pourraient influencer la compréhension qu’aurait une personne raisonnable de la rémunération versée à un membre de la haute direction visé au cours du dernier exercice.

3) Le cas échéant, indiquer clairement la référence d’étalonnage établie et expliquer les éléments qui la composent, notamment les sociétés incluses dans le groupe de référence et les critères de sélection.

4) Le cas échéant, indiquer les objectifs de performance ou les conditions similaires qui sont fondés sur des mesures objectives et connues, comme le cours de l’action de la société ou le résultat par action. Il est possible de décrire les objectifs de performance ou les conditions similaires qui sont subjectifs sans indiquer de mesure précise.

Si les objectifs de performance ou les conditions similaires publiés ne sont pas des mesures financières conformes aux PCGR, en expliquer la méthode de calcul à partir des états financiers de la société.

Et le tout dans un langage clair, concis et « présenté de façon à permettre à une personne raisonnable, faisant des efforts raisonnables de comprendre (…)

a) la façon dont sont prises les décisions concernant la rémunération des membres de la haute direction visés et des administrateurs ;
b) le lien précis entre la rémunération des membres de la haute direction visés et des administrateurs et la gestion et la gouvernance de la société (par. 10). »

L’Instruction générale relative au règlement 51-102 sur les obligations d’information continue définit, en son article 1.5, ce qu’il faut entendre par langage simple. C’est en quatorze points ; je vous en fais grâce. Je rappelle ici qu’une instruction générale est réputée constituer un règlement.

Trop, c’est comme pas assez. C’est aussi ce que pourrait se dire la personne raisonnable après avoir fait des efforts raisonnables pour comprendre tout cela. Cette personne pour laquelle l’entreprise publie toutes les informations réclamées par le législateur/autorité réglementaire poussé par l’industrie de la gouvernance qui, elle, bénéficie de la complexification des règles.

L’émetteur est placé devant ces obligations auxquelles il veut bien se conformer, mais pas au point de livrer des éléments importants de ses stratégies de développement au premier lecteur venu. Ce qui pourrait même être contre l’intérêt des actionnaires, et finalement ne bénéficier qu’à la concurrence. Ce qui fait que l’on en est rendu à se demander comment éviter de divulguer « les secrets de familles », si je puis dire, sans indisposer les autorités réglementaires — surtout si on doit aller au marché dans les mois qui suivent.

Malaise !

Si mon souvenir est bon, les pressions sont venues de groupes divers (investisseurs institutionnels, gestionnaires de fonds et autres) qui jugeaient les rémunérations des hauts dirigeants extravagantes et non méritées. Pour eux, les administrateurs étaient responsables de cet état de fait. Alors, on a légiféré, réglementé, permis le Say on Pay et diverses propositions d’actionnaires. La rémunération a-t-elle baissé ? Non. Les parachutes ont-ils disparu? Non. Chacun se compare à l’autre et ne voit pas pourquoi il ne serait pas rémunéré comme son vis-à-vis de l’entreprise Z. Et les PDG de se négocier un contrat blindé — pourquoi pas? Ils sont assis sur un siège éjectable.

Ne pourrait-on pas se demander maintenant si partie ou toutes ces exigences ne produisent pas davantage d’effets pervers que de bénéfices ? (Dans le plan d’affaires 2013-2016 des ACVM. Les deux dernières priorités sont : réglementation des marchés ; et efficacité des mesures d’application de la loi).

Ne pourrait-on pas aussi se demander si exiger une durée minimale de détention de l’actionnariat pour obtenir le droit de vote à une assemblée générale ne serait pas souhaitable ?

Si publier les résultats deux fois l’an, au lieu de quatre, ne donnerait pas un peu d’oxygène aux entreprises — un début de délivrance de la tyrannie du rendement à court terme ? Et, quant à y être, pourquoi continuer de publier l’information telle qu’exigée, si elle n’est pas lue ?

Et puis, à quoi servent les administrateurs si les actionnaires peuvent s’immiscer dans la gestion d’une entreprise et imposer leurs volontés en tout temps ?

Et à quel actionnaire permettre quoi ? Un Hedge Fund qui achète et vend des millions d’actions par minute ? Un fond mutuel qui garde des actions quelques années ? Un retraité qui conserve ses actions depuis 20 ans ?

D’ici à ce que l’on ait réfléchi à tout cela, ne peut-on pas marquer le pas ?

1. Allaire, Yvan, Pourquoi cette vague de privatisation d’entreprises cotées en Bourse, La Presse, mars 2007.
2. Desautels, Denis, OC, FCA, Les défis les plus difficiles des administrateurs de sociétés, Collège des administrateurs de sociétés, Conférence annuelle, 11 mars 2009.
3. Carol Liao, A Canadian Model of Corporate Governance, Where do shareholders really stand? Director Journal, January/February 2014, p. 37
4. p. 55.

*Nicolle Forget siège au conseil d’administration du Groupe Jean Coutu (PJC) Inc., de Valener Inc. et de ses filiales et du Collège des administrateurs de sociétés. Elle a, entre autres, fait partie d’un comité d’éthique de la recherche et des nouvelles technologies et de comités d’éthique clinique, de même que du Groupe de travail sur l’éthique, la probité et l’intégrité des administrateurs publics et a présidé le Groupe de travail sur les difficultés d’accès au financement pour les femmes entrepreneuses.

Madame Forget a été chargée de cours à l’École des Hautes Études commerciales et elle est l’auteure de cas en gestion de même que de quelques ouvrages biographiques. Madame Forget a d’abord fait du journalisme à Joliette avant de se consacrer à la gestion d’organismes de recherche et de formation durant les années 1970. Elle a aussi été membre (juge administratif) de tribunaux administratif et quasi judiciaire durant les années 1980 et 1990.

Madame Forget est diplômée de l’UQÀM (brevet d’enseignement spécialisé en administration), des HEC (baccalauréat en sciences commerciales) et de l’Université de Montréal (licence en droit et DESS en bioéthique). Elle fût membre du Barreau du Québec jusqu’en 2011.

Madame Forget a siégé à de nombreux conseils d’administration dont : Fédération des femmes du Québec, Conseil économique du Canada, SEBJ, Hydro-Québec, Hydro-Québec International, Gaz Métro Inc., Agence québécoise de valorisation industrielle de la recherche, Fonds de solidarité des travailleurs du Québec, Université de Montréal, École polytechnique, Innotermodal. Elle a, de plus, présidé les conseils de Accesum Inc., Nouveler Inc., Accès 51, Ballet Eddy Toussaint, Festival d’été de Lanaudière et Association des consommateurs du Québec.

Conseil d’administration | Perte de contrôle ?

Cette semaine, je donne la parole à Joanne Desjardins* qui agit à titre d’auteure invitée sur mon blogue en gouvernance.

L’auteure a une solide expérience de consultation dans plusieurs grandes sociétés. Joanne est associée de Keyboard, une firme spécialisée en gouvernance et en stratégie.

Elle est aussi régulièrement invitée comme conférencière pour échanger sur la stratégie et la gouvernance.

Dans ce billet, l’auteure présente les raisons sous-jacentes à la mise en place d’un conseil d’administration (et même d’un comité consultatif) et elle décrit les quatre principaux avantages de la constitution d’un CA.

Bonne lecture ! Vos commentaires sont les bienvenus.

Conseil d’administration | Perte de contrôle ?

par

Joanne Desjardins

Jonglez-vous avec l’idée de constituer un conseil d’administration (CA) ? Avez-vous le pied sur le frein ? Pourquoi ?

Avez-vous peur de perdre le contrôle ? Est-ce qu’un CA prendra véritablement le contrôle de votre entreprise ?

Mettons les pendules à l’heure… juste.

Allez-vous vraiment perdre le contrôle ?

Comme dirigeant de l’entreprise, vous croyez avoir le contrôle. En affaires, la notion de contrôle est ambiguë, hachurée de zones grises. Qui a véritablement le contrôle de votre entreprise ? Vos actionnaires, votre banquier, vos clients, vos fournisseurs ont tous — collectivement — un certain contrôle sur votre entreprise.

Une étude de chercheurs de l’Université Harvard (The Founder’s Dilemma) démontre que des fondateurs motivés par le contrôle vont généralement prendre des décisions qui leur permettent de diriger l’entreprise, au détriment de l’accroissement de sa valeur. Selon Pearl Zhu (Digitizing Boardroom : The Multifaceted Aspects of Digital Ready Boards), le rôle du CA est de faire descendre l’équipe de direction de l’arbre pour lui faire voir la forêt.

Avec un CA, vous aurez inévitablement des comptes à rendre. Même si vous rendez des comptes, vous demeurez le capitaine du navire. Néanmoins, vous devez être prêt à faire preuve d’ouverture, de transparence et à entretenir une relation avec votre CA.

Est-ce que le CA peut gérer mon entreprise ?

Vous êtes responsable des opérations quotidiennes de votre entreprise. Vous possédez tous les pouvoirs et la capacité d’action requise pour assurer le bon fonctionnement de votre entreprise. Certains administrateurs connaissent bien les rudiments de la gestion puisqu’ils gèrent ou ont déjà géré des entreprises et des équipes.

La tentation est souvent grande pour ceux-ci de plonger dans la baignoire de la gestion avec vous. Mais, vous avez le bouchon de la baignoire. À titre d’administrateur, leur rôle se limite à accompagner, guider et orienter votre équipe de direction et non à gérer votre entreprise. Comme le dit le dicton : ¨nose in, fingers out!¨. Avec un CA, vous aurez le bénéfice de consulter des administrateurs cumulant ensemble plus de 100 ans d’expérience » (Solutions Keyboard).

Quels sont les 4 principaux avantages d’un CA ?

Un CA comporte plusieurs avantages pour votre entreprise, dont les suivants :

(1) briser l’isolement du président

Quand vient le moment de prendre des décisions importantes sur le destin de votre entreprise, les regards sont rivés sur vous. En période d’accalmie, cette responsabilité est plus facile à assumer. Cependant, quand le presto de la marmite saute, l’appui d’un CA aide à briser l’isolement et à vous éclairer dans les grandes décisions à la suite d’une réflexion partagée avec d’autres administrateurs expérimentés.

(2) source d’expertises complémentaires

Vous aurez le bénéfice de consulter des administrateurs cumulant collectivement plus de 100 ans d’expérience ! Utilisez le CA comme un tremplin pour vous propulser vers le sommet, comme un accélérateur de croissance.

(3) crédibilité accrue et réputation renforcée

Le CA accroît la crédibilité et renforce la réputation de votre entreprise. Vous cherchez du financement ou un nouveau partenaire ? L’appui d’un CA solide rassure les investisseurs potentiels, car il conduit à plus de rigueur dans la gestion de la performance et le suivi des résultats.

(4) force du réseau

Vous pourrez bénéficier du réseau des administrateurs pour renforcer vos projets d’affaires : nouveau marché, lancement d’un nouveau produit, recherche d’un fournisseur, etc. Pour des astuces sur le recrutement efficace d’administrateurs, nous vous invitons à consulter l’article suivant : Comité consultatif : sept erreurs de recrutement à éviter.

*Joanne Desjardins, LL.B., MBA, ASC, CRHA, est associée chez Keyboard, www.solutionskeyboard.com une firme spécialisée en gouvernance et en stratégie. Elle est aussi régulièrement invitée comme conférencière pour échanger sur la stratégie et la gouvernance. Elle rédige actuellement un livre sur la stratégie et la gouvernance.

Amendements à la loi canadienne sur les sociétés par actions : De quoi s’agit-il ?

Le 28 septembre 2016, le gouvernement fédéral a proposé un certain nombre de modifications à la Loi canadienne sur les sociétés par actions (projet de loi C-25) afin de clarifier les obligations de divulgation des émetteurs canadiens. Les amendements à la loi ont deux objectifs :

(1) s’assurer que certaines règles adoptées par le Toronto Stock Exchange (TSX) soient clarifiées et incorporées dans la loi canadienne sur les sociétés par actions ;

(2) faire en sorte que la loi amendée reflète davantage les bonnes pratiques de gouvernance généralement reconnue.

Dans leur compte rendu sur les implications de ce projet de loi, paru sur le site du Harvard Law School Forum on Corporate Governance, Louis-Martin O’Neill et Jennifer Longhurst, associés de la firme Davies Ward Phillips & Vineberg LLP, discutent de trois changements susceptibles d’affecter la gouvernance et les modes de divulgation des sociétés.

Voici les changements proposés :

True majority voting: requiring shareholders to cast their votes “for” or “against” each individual director’s election (rather than slate voting), and prohibiting a director who has not been elected by a majority of the votes cast from serving as a direcror, except in “prescribed circumstances”;
Annual director elections: requiring corporations to hold annual elections for all directors of a company’s board, effectively prohibiting staggered boards; and
Diversity disclosures: requiring corporations to place before shareholders, at each AGM, information respecting diversity among the directors and among the members of senior management.

Je vous encourage à prendre connaissance de ce bref article.

L’article suivant est également : Proposed Changes to the Canada Business Corporations Act – How Could this Affect You?

Bonne lecture !

Proposed Canada Business Corporations Act Amendments: A New Era?

amendement-a-la-loi-canadienne-sur-les-societes-par-actions — Amendement à la loi canadienne sur les sociétés par actions | Proposed Changes to the Canada Business Corporations Act – How Could this Affect You?

True majority voting requirement

In 2014, the Toronto Stock Exchange (TSX) implemented rules requiring majority voting for most TSX-listed issuers. This entailed adopting a majority voting policy requiring any undersupported director (i.e., a nominee who does not receive a majority of “for” votes) in an uncontested director election to tender his or her resignation to the board; the board is then required to consider and, save for “exceptional circumstances,” accept that resignation and publicly announce its decision. Since then, there has been some lingering controversy surrounding the TSX’s majority voting standard as a result of many boards rejecting the resignations of undersupported directors in reliance on those so-called exceptional circumstances, despite the expressed will of the shareholders.

For example, our Davies Governance Insights 2015 report revealed that in 2015 only one of 10 directors who failed to achieve majority support from shareholders had their resignation accepted by the board. The report explained how some of the boards relied on the “exceptional circumstances” carve-out to allow undersupported directors to remain on the board. Our most recent Davies Governance Insights 2016 report, however, suggests that this trend may be changing: in 2016, in those cases where directors of issuers on the TSX/S&P Composite and SmallCap indices received less than majority approval, the boards accepted their resignations.

The Proposed Amendments would put an end to this debate. They provide that (1) the shareholders of a distributing corporation will be able to vote only “for” or “against” each individual director (as opposed to withholding their votes); and (2) each director is elected only if the number of “for” votes represents a majority of the total shareholder votes cast. Slate voting would no longer be permitted, except for certain “prescribed corporations” (to be outlined in revised regulations, not yet published, to the CBCA). Moreover, the Proposed Amendments also provide that a director who is not elected by a majority cannot be appointed by the remaining directors to fill a vacancy on the board, except in “prescribed circumstances.”

In doing so, the Proposed Amendments would reverse the current practice that has developed under the TSX rules: rather than having an undersupported nominee elected as a matter of law and leaving to the board the decision on whether to accept their resignation, the Proposed Amendments would mean that a nominee who fails to get a majority of “for” votes is not elected as a matter of law, and may be appointed by the directors only in “prescribed circumstances.” Whether the Proposed Amendments will result in meaningful change to the current practice for TSX-listed companies will, however, depend on what those “prescribed circumstances” are, to be set out in the not yet released regulations to the CBCA.

Annual elections now required

The TSX rules currently require its listed companies to hold annual director elections, effectively prohibiting staggered boards, a fairly uncommon practice in Canada. The Proposed Amendments will bring the CBCA up to speed with this current corporate governance best practice. We note that an exception included in the Proposed Amendments allows for elections to be held in accordance with existing CBCA requirements, which allow for three-year terms and staggered boards, in the case of “any prescribed class of distributing corporations” or “any prescribed circumstances respecting distributing corporations.” There is currently no such exception in the TSX rules, save for foreign issuers. The impact of this change will, therefore, depend upon the prescribed categories of corporations and circumstances that will be proposed in the CBCA regulations, if this change is implemented.

Disclosure relating to diversity

TSX-listed and other non-venture issuers are currently required, under National Instrument 58-101—Disclosure of Corporate Governance Practices (NI 58-101), to disclose certain information relating to the diversity of their board and executive officers, including whether they have adopted a written policy regarding female representation on the board, whether they consider the level of female representation when making board or executive officer nominations or appointments, and whether they have adopted a target regarding the representation of women on the board or in senior management; if not, the issuer must disclose why not. The Proposed Amendments to the CBCA would require “prescribed corporations” to provide the “prescribed information” respecting diversity among their directors and members of senior management.

Once again, the “prescribed corporations” and “prescribed information” that will need to be disclosed have not yet been determined. Accordingly, until proposed regulations clarifying these concepts have been released, it remains unclear whether the Proposed Amendments will alter the existing “comply or explain” model under NI 58-101 or impose stricter requirements on subject companies. We do not, however, expect the Proposed Amendments to impose targets or quotas on issuers; instead, they are likely to promote a similar approach to that currently in place under securities laws.

Conclusions

The majority voting requirement set forth in the Proposed Amendments is likely to bring an end to the debate over those circumstances in which an undersupported director may remain on the board. The questions, however, that are still unanswered will be whether boards will be inclined to use the Proposed Amendments to fill a vacancy by appointing an undersupported director whose failed election created the vacancy in the first place; and, in such a situation, how stringent the “prescribed circumstances” will be that would allow the directors to appoint an undersupported director. We also note there are some inconsistencies between the TSX rules and the Proposed Amendments that could subject some TSX-listed CBCA companies to potentially different (and potentially conflicting) sets of rules. We expect the regulators are attuned to and will be focused on minimizing that risk. In any case, if the Proposed Amendments are adopted, we expect TSX-listed issuers that are governed by the CBCA may need to revisit and revise their majority voting policies to ensure compliance with the Proposed Amendments.

While some view the Proposed Amendments as a welcome modernization of the federal corporate statute and a reflection of the need to enhance companies’ corporate governance practices, in many ways the Proposed Amendments are entrenching practices or policies that are already addressed under the TSX rules and securities laws. By delving into these areas, there remains a risk that the Proposed Amendments could lead to compliance and interpretational issues, as well as confusion over the appropriate mandates for each of the regulators, a concern expressed by some commentators in response to Industry Canada’s initial December 2013 consultation paper on the potential CBCA amendments. In addition, several undetermined exceptions and terms that will be laid out in revised CBCA regulations have yet to be published—only once they are will the full impact of the Proposed Amendments be known.

Prélude à un code de gouvernance aux É.U. !

Voici un bref article de Gary Larkin, associé à The Conference Board Governance Center, qui porte sur la perspective de concevoir un code de gouvernance qui s’adresse à l’ensemble des entreprises publiques (cotées) américaines.

Le projet de code est l’initiative de quelques leaders d’entreprises cotées, de gestionnaires d’actif, d’un gestionnaire de fonds de pension et d’un actionnaire activiste.

Cet énoncé des grands principes de gouvernance se veut un exercice devant jeter les bases d’un code de gouvernance comme on en retrouve dans plusieurs pays, notamment au Royaume-Uni.

Voici les points saillants des principes retenus :

Every board should meet regularly without the CEO present, and every board should have active and direct engagement with executives below the CEO level.

Directors should be elected by a majority of either “for” or “against/withhold” votes (with abstentions and non-votes not be counted)

Board refreshment should always be considered in order that the board’s skillset and perspectives remain current.

Every board should have members with complementary and diverse skills, backgrounds and experiences.

If the board decides on a combined CEO/Chair role, it is essential that the board have a strong independent director.

Institutional investors that make decisions on proxy issues important to long-term value creation should have access to the company, its management, and, in some circumstances, the board.

Companies should only provide earnings guidance to the extent they believe it is beneficial to shareholders.

Bonne lecture !

It’s Commonsense to Have a U.S. Corporate Governance Code

Over the summer, one of the most interesting pieces of corporate governance literature was the Commonsense Corporate Governance Principles.

The publication was the result of meetings between a group of leading executives of public companies, asset managers, a public pension fund, and a shareholder activist. The principles themselves may not have broken new ground—they addressed such basic issues as director independence, board refreshment and diversity, the need for earnings guidance, and shareholder engagement. But the fact that such a publication was released at a time when some in Congress to roll back Dodd-Frank corporate-governance-related regulations is impressive.

It’s impressive because of who was in the meetings. It’s impressive because the meetings took place without any government or third-party instigation. It’s impressive because it might be the beginning of a new strategy for overseeing corporate governance in the United States. It shows that sometimes industry can lead by example without rules and regulations to tell them how to govern their own companies and boards.

Maybe these principles could be the start of the first true US corporate governance code, something that our brethren in the UK have had for years. Even smaller markets such as South Africa and Singapore have codes that are used to guide corporate governance.

Granted, those at the meetings, some of who included J. P. Morgan Chase CEO Jamie Dimon, Berkshire Hathaway chief Warren Buffett, General Motors head Mary Barra, BlackRock Chair and CEO Larry Fink, and Canada Pension Plan Investment Board President and CEO Mark Machin might not have envisioned themselves as U.S. corporate governance pioneers. But it’s a first step toward a true principles-based approach to good corporate governance in a country that is used to following rules and hiring attorneys to find the loopholes.

If you look at the main points made in the Commonsense Principles, you can see the foundation for such a code:

Every board should meet regularly without the CEO present, and every board should have active and direct engagement with executives below the CEO level.

Directors should be elected by a majority of either “for” or “against/withhold” votes (with abstentions and non-votes not be counted)

Board refreshment should always be considered in order that the board’s skillset and perspectives remain current.

Every board should have members with complementary and diverse skills, backgrounds and experiences.

If the board decides on a combined CEO/Chair role, it is essential that the board have a strong independent director.

Institutional investors that make decisions on proxy issues important to long-term value creation should have access to the company, its management, and, in some circumstances, the board.

Companies should only provide earnings guidance to the extent they believe it is beneficial to shareholders.

Microsoft, a Governance Center member, is satisfied with the Commonsense Principles because it aligns with what it has in place, according to a blog from Microsoft Corporate Secretary John Seethoff. “For example, we’ve made a concerted effort to assure board refreshment occurs with a focus on diversity in skillsets, backgrounds, and experiences,” he wrote. “The Principles agree with this emphasis, asserting, ‘Diversity along multiple dimensions is critical to a high-functioning board. Director candidates should be drawn from a rigorously diverse pool.’ Board tenure receives similarly thoughtful consideration, with the Principles underscoring the need to temper ‘fresh thinking and new perspectives’ with ‘age and experience.’”

Seethoff concluded: “At Microsoft, we’ve long believed that good corporate governance encourages accountability and transparency, as well as promotes sound decision-making to support our business over time. The ultimate goal is to create a system that provides appropriate structure for the company at present, allows flexibility to change in the future, and has a long-term perspective that matches our business objectives and strategy. As part of this open, constructive mindset, we applaud the leaders for outlining these Principles and look forward to continued dialogue on this important effort.”

If you ask me, the Commonsense Principles can definitely be the US Corporate Governance Code Version 1.0. They could be treated like climate change agreements (i.e. the 2015 Paris Climate Change Agreement) where countries come together and sign on. The original group of executives could hold a follow-up meeting or convention that would allow US companies to promise to follow the principles, similar to The Giving Pledge started by Buffet and Microsoft founder Bill Gates.

Le point sur la gouvernance au Canada en 2016 | Rapport de Davies Ward Phillips Vineberg

Le rapport annuel de Davies est toujours très attendu car il brosse un tableau très complet de l’évolution de la gouvernance au Canada durant la dernière année.

Le document qui vient de sortir est en anglais mais la version française devrait suivre dans peu de temps.

Je vous invite donc à en prendre connaissance en lisant le court résumé ci-dessous et, si vous voulez en savoir plus sur les thèmes abordés, vous pouvez télécharger le document de 100 pages sur le site de l’entreprise.

Cliquez sur le lien ci-dessous. Bonne lecture !

Rapport de Davies sur la gouvernance 2016

Davies Governance Insights 2016, provides analysis of the top governance trends and issues important to Canadian boards, senior management and governance observers.

The 2016 edition provides readers with our take on important topics ranging from shareholder engagement and activism to leadership diversity and the rise in issues facing boards and general counsel. We also provide practical guidance for boards and senior management of public companies and their investors on these and many other corporate governance topics that we expect will remain under focus in the 2017 proxy season.

Les devoirs des administrateurs eu égard à un climat de travail malsain | Un cas pratique

Voici un cas de gouvernance publié sur le site de Julie Garland McLellan* qui illustre les contradictions entre les valeurs énoncées par une école privée et celles qui semblent animer les administrateurs et les parents.

Le cas montre comment un administrateur, nouvellement élu sur un CA d’une école privée, peut se retrouver dans une situation embarrassante impliquant des comportements de harcèlement et de menaces qui affectent la santé mentale et le bien-être des employés.

Cette situation semble se présenter de plus en plus fréquemment dans les institutions d’enseignement qui visent des rendements très (trop !) élevés.

Comment Ignacio peut-il s’y prendre pour bien faire comprendre aux administrateurs de son CA leurs devoirs et leurs obligations légales d’assurer un climat de travail sain, absent d’agression de la part de certains parents ?

Le cas présente, de façon claire, une situation de culture organisationnelle déficiente ; puis, trois experts en gouvernance se prononcent sur le dilemme qui se présente aux administrateurs qui vivent des expériences similaires.

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Un cas culture organisationnelle déficiente !

Ignacio is an old boy of a private school with a proud sporting tradition. He was invited onto the board last year when a long-serving director retired. The school is well run with a professional principal who has the respect of the staff as well as many of the boys.

The school has worked hard to develop academic excellence and its place in rankings has improved with a greater percentage of boys qualifying for university.

At the last board meeting the CEO was absent. The chairman explained that he had taken stress leave because he couldn’t cope with bullying from some of the parents. Some directors sniggered and the rest looked embarrassed. There were a few comments about ‘needing to grow a backbone’, ‘being a pansy’, and ‘not having the guts to stand up to parents or lead the teams to victory on the field’.

Ignacio was aghast – he asked about the anti-harassment and workplace health and safety policies and was given leave by the chair « to look into ‘covering our backs’ if necessary ».

Ignacio met with the HR manager and discovered the policies were out of date and appeared to have been cut and pasted from the original Department of Education advice without customisation. From his experience running a business Ignacio is aware of the importance of mental health issues in the modern workplace and also of the legal duty of directors to provide a workplace free from bullying and harassment. School staff are all aware of a discrepancy between the stated School values and those of the board and some parents. The HR manager tells him that recent bullying by parents has become more akin to verbal and even physical assault. Staff believe the board will not support them against fee paying parents even though the school is, in theory, a not-for-profit institution.

How can Ignacio help lead his board to an understanding of their duty to provide a safe workplace?

Chris’s Answer …..

Julie’s Answer ….

Leanne’s Answer ….

*Julie Garland McLellan is a practising non-executive director and board consultant based in Sydney, Australia.

Quelle est la rémunération globale des administrateurs canadiens ?

C’est une question que beaucoup de personnes me posent, et qui n’est pas évidente à répondre !

Le montant de la rémunération dépend aussi beaucoup des plans de distribution d’actions, des privilèges, des bonis, etc.

Je vous encourage à lire cet article. Vous en saurez plus long sur les raisons qui font que les informations sont difficiles à obtenir dans le secteur privé.

Bonne lecture !

How much is a director worth ?

Determining director compensation at private companies is more of an art than a science, with a wide range of practices and no one-size-fits-all formula.

Unlike publicly traded companies, where detailed information about director remuneration is as close as the nearest proxy circular, compensation at private boards is like “a black box,” according to Steve Chan, principal at Hugessen Consulting, who says retainers, meeting fees and share-based awards “are all over the map.”

Not much is known about private director compensation “for good reason,” observes David Anderson, president of Anderson Governance Group. “There is not a lot of data out there.”

PRIVATELY UNDERPAID?

Private company directorships can be prized assignments because they don’t involve the heavy compliance and regulatory burdens that occupy increasing amounts of time at public company boards.

But what private boards should be paid is difficult to determine, when there is little research to guide individual directors or companies. Some of the available data suggest private directors are being underpaid, at least relative to their public counterparts. But this information does not include the fact that the work may be different and much of the compensation at public boards may not ultimately pay off because it is linked to share price performance.

It is difficult to benchmark best practices with so little hard data, making it unsurprising that how best to set private company directors’ compensation is the most frequently asked question made by members to the ICD.

One of the few ongoing attempts to analyze compensation indicates remuneration is far higher at public boards, about four times higher in fact, although the amounts are skewed by the heavy use of stock-linked awards at publicly traded companies.

The private company survey, by Lodestone Global, was based on a questionnaire posed to members of the Young Presidents’ Organization, an international group of corporate présidents and CEOs, including many from Canada.

The Lodestone survey looked at medium-sized family or closely held firms, companies that are more established than early-stage startups, but smaller than large global corporations.

“The survey is not casually designed. The data is pretty rigorous and it’s global,” says Bernard Tenenbaum, managing partner at Princeton, N.J.-based Lodestone.

Tenenbaum says he started investigating private company board compensation because of the paucity of data on the subject. No one seemed to know what was going on. “People kept asking me, ‘Well how much should we pay directors?’ I’d say: ‘I don’t know. How much do you pay them now?’ And I started surveying.”

The firm’s most recent survey, based on 2014 data, had responses from more than 250 private companies, including 19 from Canada. The median revenue at the Canadian companies was $100-million, with the median number of employees at 325.

According to Tenenbaum, the median Canadian retainer was $25,000, with a $1,500 meeting fee and four meetings annually. The median number of directors was six, with three independent and one woman. The total of fees and retainers came to $31,000 (all dollar figures U.S.)

Interestingly, the overall U.S. compensation figure matched the Canadian one, but with a different composition. The median U.S. retainer was lower at $21,000, but the meeting fee was higher at $2,500. Including a few other miscellaneous items, like teleconference fees, U.S. compensation was $33,000, compared to $32,250 in Canada, a closeness that Tenenbaum termed “a kissing distance.”

The Lodestone figures give an indication of director compensation, although it is worth cautioning that the sample size is small, the figures are based on the median or middle-ranked firm, and there was a wide variety in size among the companies, given that they included a few smaller tech and industrial firms.

To benchmark private company director compensation, it is worthwhile to look at what comparable publicly traded companies are paying. One useful comparator is the smaller companies embedded in the BDO 600 survey of director compensation at medium-sized public companies. It has access to highly accurate data based on shareholder proxy circulars.

BDO’s 2014 survey found that among firms with revenue between $25-million and $325-million, cash compensation through retainer and committee fees averaged $54,000, while directors typically received another $65,000 in stock awards and options for a total of $119,000.

There is a small amount of information available in Canada on private board compensation, but the amount of data isn’t large enough to make generalized statements on remuneration and involves larger companies.

For example, in its director compensation, Canadian Tire Corp. breaks out amounts paid to the company’s non-publicly traded banking subsidiary, Canadian Tire Bank. In 2014, three directors on both boards were paid about $55,000 each for retainers and meeting fees for serving at the bank. Similarly, Loblaw Companies Ltd. paid $58,000 to a director who also served on President’s Choice Bank, a privately-held subsidiary.

The amounts are relatively low for blue-chip Canadian companies, but both banks are far smaller than their parent companies, with Canadian Tire Bank at $5.6-billion in assets and PC Bank at $3.3-billion.

Hugessen’s Chan says that in his experience, the larger, family-run private companies that have global operations compensate directors at roughly the same amounts as similarly sized public firms.

“Among the larger public companies versus the private companies, they’re comparable,” Chan says.

PUBLICLY EXPOSED

Tenenbaum says that based on his research and the figures from BDO, directors are being paid about $20,000 annually for taking on the added hassle of serving on a public company. He discounted the value of the stock-based compensation because it is conditional on share-price performance.

“There is a premium that you pay a director for taking the risk” of public company exposure, Tenenbaum says.

Directors also need to take into account some of the non-monetary factors of the board experience. Given that so much time on a public board is spent on compliance with regulatory requirements, being freed of this responsibility has value.

“When you’re on a private board, you don’t need to worry about all of the compliance that you have to worry about on a public company board,” says Larry Macdonald, who has served on both types of boards in the oil and gas sector. “You can spend more time on the issues which are probably more important to the company on a private board than you can on public board.”

Macdonald currently chairs publicly-traded Vermilion Energy Inc., but has also served on several private and volunteer boards.

One consequence of the difference in focus is that private boards can often have fewer members because directors can be more focused on company business needs, rather than on compliance requirements. Decision making can also be quicker and easier.

Macdonald says a public board may need eight to 10 people to handle the volume of work, compared to only five or six on a similar private company. As an example of the efficiency of a private board, a company that has a particularly good year and wants to pay employees a bonus can easily decide to do so.

At a public company, however, making this payment wouldn’t be as straightforward. Directors would have to compile a detailed explanation of why they wanted to pay the bonus and include it in shareholder circulars.

While some companies are downgrading the importance of meeting fees, Macdonald thinks they are necessary, with a range of $1,000 to $1,500 being sufficient. “There should be a permeeting fee. You want your directors to show up in person, if at all possible, and if you’re not going to give them a permeeting fee they’re going to be phoning it in or not showing up, so you’ve got to keep everybody interested,” he says.

EQUITY COMPENSATION

He would set the retainer with an eye to any equity compensation. “If there is a pretty good option plan, I would think that $10,000 a year would be adequate, but if the option plan is weaker, you have to up the annual fee,” Macdonald says.

The amount of equity reserved for directors in private companies is a disputed topic. Tenenbaum says equity compensation at private companies, in his experience, is rare. But Chan says a figure often used is to allocate 10 percent of the equity for directors and executives.

If the director is “pounding the pavement with the CEO, a big chunk ofthe [equity] pool might go to directors,” Chan says.

The amount of equity reserved for executives and the board could be as high as 20 percent to 30 percent in the early life of a technology company, but lower than 10 percent in a capital intensive business. “It all depends on size. You’re not going to give 10 percent away of a $1-billion company,” he says.

Macdonald considers the 10 percent of stock reserved for management and directors a good ball park figure. The bulk of the stock typically goes to management, with one or two percent earmarked for directors, he says.

RICHER REWARDS

Public boards are typically egalitarian, with all directors receiving the same base compensation. Private boards, however, can and do pay differing amounts, depending on the specialized skills companies are trying to assemble among their directors. Macdonald says a private oil company looking to pick up older fields, which may have environmental issues, might award extra compensation to attract a director with recognized skills in health, safety and environment.

To be sure, compensation is only one factor in attracting directors to a board. Tenenbaum says academic research has found that the reasons directors cite to join boards are led by the quality of top management, the opportunity to learn and to be challenged. Personal prestige, compensation and stock ownership are far down the list.

These factors may explain why many people want to serve on private boards. “The qualitative experience of private company directors is quite different from public company directors,” says Anderson.

“They avoid a lot of the perceived risk of public company boards and they get the benefit of doing what, as business people, they really like doing, which is thinking about the business and applying their knowledge and experience to business problems.”

Livres phares sur la gouvernance d’entreprise

Voici un article de James McRitchie, publié dans Corporate governance, qui commente succinctement le dernier volume de Richard Leblanc.

Comme je l’ai déjà mentionné dans un autre billet, le livre de Richard Leblanc est certainement l’un des plus importants ouvrages (sinon le plus important) portant sur la gouvernance du conseil d’administration.

Une révision du volume de Richard Leblanc | Handbook of Board Governance

Mentionnons également que le volume publié par David F. Larcker et Brian Tayan, professeurs au Graduate School de l’Université Stanford, en est à sa deuxième édition et il donne l’heure juste sur l’efficacité des principes de gouvernance. Voici une brève présentation du volume de Larcker.

Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (2nd edition )

Je vous recommande donc vivement de vous procurer ces volumes.

Enfin, je profite de l’occasion pour vous indiquer que je viens de recevoir la dernière version des Principes de gouvernance d’entreprise du G20 et de l’OCDE en français et j’ai suggéré au Collège des administrateurs de sociétés (CAS) d’inclure cette publication dans la section Nouveauté du site du CAS.

Bonne lecture !

Les CEO adoptent une vision à long terme, mais ils doivent souvent rechercher des objectifs à court terme pour y arriver !

Aujourd’hui, le courtermisme a mauvaise presse, mais il faut bien se rendre à l’évidence que c’est très souvent l’approche poursuivie…

L’étude montre qu’il existe deux situations susceptibles d’exister dans toute entreprise :

il y a des circonstances qui amènent les propriétaires à choisir des projets à court terme, même si ceux-ci auraient plus de valeur s’ils étaient effectués avec une vision à long terme. L’auteur insiste pour avancer qu’il y a certaines situations qui retiennent l’attention des propriétaires pour des projets à long terme.
ce sont les gestionnaires détestent les projets à court terme, même si les propriétaires les favorisent. Pour les gestionnaires, ils ne voient pas d’avantages à faire carrière dans un contexte de court terme.

L’auteur donne des exemples de situations qui favorisent l’une ou l’autre approche. Ou les deux !

Bonne lecture. Vos commentaires sont les bienvenus.

A Theory of Efficient Short-Termism

In the area of corporate investment policy and governance, one of the most widely-studied topics is corporate “short-termism” or “investment myopia”, which is the practice of preferring lower-valued short-term projects over higher-valued long-term projects. It is widely asserted that short-termism is responsible for numerous ills, including excessive risk-taking and underinvestment in R&D, and that it may even represent a danger to capital quiism itself. Yet, short-termism continues to be widely practiced, exhibits little correlation with firm performance, and does not appear to be used only by incompetent or unsophisticated managers (e.g. Graham and Harvey (2001)). In A Theory of Efficient Short-termism, I challenge the notion that short-termism is inherently a misguided practice that is pursued only by self-serving managers or is the outcome of a desire to cater to short-horizon investors, and theoretically ask whether there are circumstances in which it is economically efficient.

I highlight two main findings related to this question. First, there are circumstances in which the owners of the firm prefer short-term projects, even though long-term projects may have higher values. There are other circumstances in which the firm’s owners prefer long-term projects. Moreover, this is independent of any stock market inefficiencies or pressures. Second, it is the managers with career concerns who dislike short-term projects, even when the firm’s owners prefer them.

These results are derived in the context of a model of internal governance and project choice, with a CEO who must approve projects that are proposed by a manager. The projects are of variable quality—they can be good (positive NPV) projects or bad (negative NPV) projects. The manager knows project quality, but the CEO does not. Regardless of quality, the project can be (observably) chosen to be short-term or long-term, and a long-term project has higher intrinsic value. The probability of success for any good project depends on managerial ability, which is ex ante unknown to everybody.

In this setting, the manager has an incentive to propose only long-term projects, because shorter projects carry with them a risk of revealing negative information about the manager’s ability in the interim. Put differently, by investing in a short-term project that reveals early information about managerial ability, the manager gives the firm (top management) the option of whether to give him a second-period project with managerial private benefits linked to it, whereas with the long-term project the manager keeps this option for himself. The option has value to the firm and to the manager. Thus, the manager prefers to retain the option rather than surrendering it to the firm.

The CEO recognizes the manager’s incentive, and may thus impose a requirement that any project that is funded in the first period must be a short-term project. This makes investing in a bad project in the first period more costly for the manager because adverse information is more likely to be revealed early about the project and hence about managerial ability. The manager’s response may be to not request first-period funding if he has only a bad project. Such short-termism generates another benefit to the firm in that it speeds up learning about the manager’s a priori unknown ability, permitting the firm to condition its second-period investment on this learning.

There are a number of implications of the analysis. First, not all firms will practice short-termism. For example, firms for which the value of long-term projects is much higher than that of short-term projects—such as some R&D-intensive firms—will prefer long-term projects, so not all firms will display short-termism. Second, since short-termism is intended to prevent lower-level managers from investing in bad projects, its use should be greater for managers who typically propose “routine” projects and less for top managers (like the CEO) who would typically be involved in more strategic projects. Related to this, since it is more difficult to ascertain an individual employee’s impact on a project’s payoffs at lower levels of the hierarchy, this suggests that the firm is more likely to impose a short-termism constraint on lower-level managers. Third, the analysis may be particularly germane for managers who care about how their ability is perceived prior to the realization of project payoffs. As an example of this, it is not uncommon for a manager to enter a job with the intention or expectation of finding a new job within a few years. The analysis then suggests that the manager would rather not jeopardize future employment opportunities by allowing (potentially risky) project outcomes to be revealed in the short-term, instead preferring that those outcomes be revealed at a time when the manager need not be concerned about the result (i.e. in a different job).

Overall, the most robust result from this analysis is that informational frictions may bias the investment horizons of firms, and that the bias towards short-termism may, in fact, be value-maximizing in the presence of such frictions. This means that castigating short-termism as well as the rush to regulate CEO compensation to reduce its emphasis on the short term may be worth re-examining. Indeed, not engaging in short-termism may signal an inability or unwillingness on the CEO’s part to resolve intrafirm agency problems and thus adversely affect the firm’s stock price. This is not to suggest that short-termism is necessarily always a value-maximizing practice, since some of it may be undertaken only to boost the firm’s stock price. The point of this paper is simply that some short-termism reduces agency costs and benefits the shareholders.

For example, the project horizon for a beer brewery is typically 15-20 years. Similarly, R&D investments by drug companies have payoff horizons typically exceeding 10 years.

The paper is available for download here.

References

Graham, John R., and Campbell R. Harvey, 2001, “The Theory and Practice of Corporate Finance: Evidence from the Field”. Journal of Financial Economics, 60 (2-3), 187-243.

This is in line with Roe (2015), who states: “Critics need to acknowledge that short-term thinking often makes sense for U.S. businesses, the economy and long-term employment … it makes no sense for brick-and-mortar retailers, say, to invest in long-term in new stores if their sector is likely to have no future because it will soon become a channel for Internet selling.”

One can think about the long-term and short-term projects concretely through examples. Within each firm, there are typically both short-term and long-term projects. For example, for an appliance manufacturer, investing in modifying some feature of an existing appliance, say the size of the freezer section in a refrigerator, would be a short-term project. By contrast, building a plant to make an entirely new product—say a high-technology blender that does not exist in the company’s existing product portfolio—would be a long-term project. The long-term project will have a longer gestation period, with not only a longer time to recover the initial investment through project cash flows, but also a longer time to resolve the uncertainty about whether the project has positive NPV in an ex post sense. There may also be industry differences that determine project duration. For example, long-distance telecom companies (e.g. AT&T) will typically have long-duration projects, whereas consumer electronics firms will have short-duration projects.

*Richard T. Thakor, Assistant Professor of Finance at the University of Minnesota Carlson School of Management.

Assurer une efficacité supérieure du conseil d’administration

Aujourd’hui, je cède la parole à Johanne Bouchard* qui agit, de nouveau, à titre d’auteure invitée sur mon blogue en gouvernance.

L’auteure insiste sur les points suivants :

Le suivi des réunions du CA par le président du conseil
L’intégration des nouveaux membres du conseil
La formation en gouvernance et l’apprentissage des rouages de l’entreprise
Les sessions de planification stratégique
L’évaluation du leadership du CEO, du conseil et du management