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En quoi une formation en gouvernance des TI est-elle essentielle ?


Plusieurs personnes me demandent s’il existe une formation en gouvernance des TI à l’intention de membres de conseils d’administration et des hauts dirigeants.

Le Collège des administrateurs de sociétés (CAS) offre une formation ciblée d’une journée en gouvernance des TI, même si vous n’êtes pas un spécialiste en la matière.

Bon nombre d’administrateurs se sentent démunis et mal à l’aise lorsque vient le temps de discuter des dossiers de TI au conseil d’administration et de prendre des décisions importantes et stratégiques pour l’entreprise.
Cette formation d’une journée en gouvernance des TI vous donnera des assises solides pour comprendre et bien jouer votre rôle, et ce même si vous n’êtes pas un spécialiste en la matière.

Paule-Anne Morin, ASC, consultante, administratrice de sociétés et formatrice a conçu une formation spécialisée de haut niveau pour combler ce grand besoin.

 

 

Thèmes abordés lors de la journée

 

Gouvernance des TI : pourquoi faut-il s’y intéresser ?

Tremplin stratégique dans la performance des organisations : des outils concrets

Enjeux numériques et gestion de risques

Outils de mesure et de performance TI

CA et gouvernance des TI : rôle, structure et conditions de succès

Profil des participants

 

– Membres de conseils d’administration

– Hauts dirigeants

– Gestionnaires

– Investisseurs

 

Prochaines sessions de formation

 

23 octobre 2018 — Québec

De 8 h à 18 h
Édifice Price
65, rue Sainte-Anne
11e étage Québec (Québec)  G1R 3X5

 

28 mars 2019 — Montréal

De 8 h à 18 h
Centre de conférence Le 1000
Niveau Mezzanine
1000, rue De La Gauchetière Ouest
Montréal (Québec)  H3B 4W5

 

Inscrivez-vous ici

 

 


Information

Consultez la page Gouvernance des TI sur le site du CAS pour obtenir tous les détails.

Reconnaissance professionnelle

Cette formation, d’une durée de 7,5 heures, est reconnue aux fins des règlements ou des politiques de formation continue obligatoire du Collège et des ordres et organismes professionnels suivants : Barreau du Québec, Ordre des ADMA du Québec, Ordre des CPA du Québec, Ordre des CRHA et Association des MBA du Québec.

Top 10 de Harvard Law School Forum on Corporate Governance au 27 septembre 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 27 septembre 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

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Les enjeux de la diffusion des informations stratégiques sur les réseaux sociaux


Ce matin un article de Alissa Amico*, paru sur le forum de Harvard Law School, a attiré mon attention parce que c’est sur un sujet qui fait couler beaucoup d’encre dans le domaine la gouvernance des entreprises publiques (cotées en bourse).

En effet, quels sont les moyens appropriés de diffusion et de divulgation des informations à l’ère des médias sociaux ? L’auteure fait le tour de la question en rappelant qu’il existe encore beaucoup d’ambiguïté dans l’acceptation des nouveaux outils de communication.

On le sait, la SEC a réagi promptement aux annonces de Elon Musk, PDG et Chairman de Telsa, faites par le biais de Twitter qui ont été jugées trompeuses et qui ne respectaient pas le principe d’une diffusion de l’information à la portée de tous les actionnaires.

L’auteure rappelle que l’Autorité des Marchés Financiers français a pris une position ferme à ce propos en exigeant que les entreprises divulguent leurs réseaux sociaux privilégiés de communication sur leur site Internet.

La conclusion de l’article est révélatrice de grands changements à l’égard de la diffusion d’information stratégique.

The ultimate twist of irony is of course that the SEC, investigating Tesla and its CEO, is part of the same government whose President’s tweeting activity has been far from uncontroversial. Both Mr. Musk’s and Mr. Trump’s use of Twitter highlight that—whether we like it or not—social media may soon be the most consulted sort of media. Its impact, in both corporate or political circles, needs hence to be considered by policymakers seriously. It is clear that every boat—whether corporate or political—needs a captain responsible for setting the course and communicating it to the lighthouse to avoid collisions and confusion at sea. Yet, captains are not pirates, and in the era of social media, regulators need to devise new rules of the game to avoid investor collusion and collision.

Qu’en pensez-vous ?

Bonne lecture !

 

On Elon Musk, Donald Trump, and Corporate Governance

 

 

Résultats de recherche d'images pour « Elon Musk SEC »

SEC sues Tesla CEO Elon Musk for ‘misleading’ tweet »- ABC News

 

There was something Trumpian in Elon Musk’s tweet about taking Tesla private. “Am considering taking Tesla private at $420. Funding secured”, he boldly and succinctly announced on August 7, claiming that the necessary capital has been confirmed from the Public Investment Fund (PIF), the Saudi sovereign fund that is seeking to become the region’s largest according to the ambitions of its government, including through the much-debated public offering of Saudi Aramco.

Like in a Mexican soap opera, news about the PIF raising fresh capital through the transfer of its 70% stake in SABIC, the Saudi $100 billion petrochemicals giant and the largest listed company in the Kingdom to Saudi Aramco, as well its talks with Tesla’s rival Lucid followed shortly, immediately highlighting the perils of instant communication. As it turns out, tweeting 280-character messages is straightforward, explaining them takes a little more character and significantly more characters.

The Securities and Exchange Commission (SEC) has reacted promptly, issuing a subpoena to Tesla to probe into the accuracy of its communication to investors. Elon Musk is unfortunately not the first CEO to pay for taking to Twitter. Nestle’s attempt at humor on Twitter, which likened a massacre of Mexican students to its candy bar, resulted in calls for boycott, ultimately forcing the company to erase the message and apologize. Even the CEO of Twitter itself, Jack Dorsey, has had to apologize for one of his personal tweets, which unlike Tesla and Nestle cases, had nothing to do with his company.

Indeed, the emergence of new communication channels has occurred at a faster pace than regulation on how these should be employed by companies has emerged, whilst over-excited executives have taken to social media in attempt to build hype around their companies. In the world where the number of Instagram, Twitter and Facebook followers counts more than the number of public investors, social media has the potential of becoming the main channel for communication in the corporate world.

Although this phenomenon has gone largely unnoticed, its implications need to be considered in a wider context that is beyond this immediate Bermuda Triangle involving Mr. Musk, the PIF and Tesla. In fact, this episode raises two important and distinct questions: first, who should be able to speak on behalf of public shareholding companies in order to ensure the accuracy of communication, and second, how should this communication be made such that it reaches its ultimate target, the investor community.

In developed markets such as the United States, where Tesla is incorporated, disclosure by public companies is subject to a myriad of regulations including Rule 10b-5—first issued 70 years ago—which prohibits the release or omission of material information, resulting in fraud or deceit. It is also subject to a more recent Fair Disclosure Regulation which essentially forbids companies from releasing non-public material information to third parties, effectively stamping out the practice of selective disclosure by companies to specific investors.

These regulations provide the colorful context behind the SEC’s investigation into Mr. Musk’s unfortunate tweet, allowing the regulator to question whether he had misled investors: that is, whether funding for taking Tesla private has indeed been “secured”. Another issue—and one not raised in the media—is whether Twitter can effectively be considered as an appropriate means of communication to the investor community. In the United States, where 70% of public share ownership today is in the hands of institutional investors, this is a moot point.

Indeed, the SEC has officially allowed listed companies to use social media in 2013, prompted by an investigation into a Facebook post by the Netflix CEO Reed Hastings about the company passing a billion hours watched for the first time. The SEC did not penalize him and decided that henceforth social media could be used for communicating corporate announcements as long as investors are warned that this would be the case.

In the context of emerging markets however, this position would be potentially quite dangerous. In Saudi Arabia for example, home to the PIF—Tesla’s alleged buyer—trading in the stock market is 90% retail, whereas its underlying ownership is largely institutional. Communicating company news via social media presupposes that all investors have equal access to it, which may not necessarily be the case in retail marketplaces. Regulators in emerging markets, where guidelines on the use of social media for corporate announcements are generally lacking, would do well to address this before executives take to Twitter and Facebook.

They would need to keep in mind however, that habits of emerging market investors may not have shifted fast enough to be comfortable in the world of Twitter. In Egypt for example, the officially recognised channel for publishing financial results remains the country’s newspapers. Expecting investors to run from conventional—not to say outdated—means of communication, to judiciously tracking social media announcements appears overly ambitious.

Using social media as a means of communicating material corporate news raises another non-semantic point which is equally important to address in both emerging and developed markets. It is not only tweets of CEOs like Elon Musk that have the potential to affect share prices and investor perceptions. If CFOs, CROs, CIOs, COOs and other C-suite members take to Twitter, Facebook, Instagram or other platforms to offer their interpretation of company developments, the potential impact on investors could be quite disheartening.

Just like the CEO’s or the CFO’s ability to write a cheque is circumscribed by internal controls and board oversight of material transactions related to mergers and acquisitions for instance, their ability to speak on behalf of their companies should be addressed by policies including specific approval processes. This would effectively limit the possibility of senior executives or board members using their iPhone as a Megaphone, instead requiring rigorous processes to be introduced such that social media announcements are coherent with other disclosure channels and indeed with corporate strategy.

From a governance perspective, further thought should be given to centralizing the communication function within companies in the hands of the Head of Investor Relations or equivalent. Indeed, given the value of information in our era of fast-paced communication powered by social media and fast-paced stock exchanges powered by algorithmic and high-frequency trading, the role of a Chief Communication Officer may be justified in large publicly listed companies, just as the role of a Chief Risk Officer reporting to the board has been introduced in many large organisations following the financial crisis.

While forcing companies in a straightjacket of yet more corporate governance rules on how they should handle their corporate communications may be unwise, some thought about legal distinctions and limits between what is considered personal and corporate announcements appears warranted. Investors may need to be told that unless corporate announcements come from official company channels—which personal Twitter accounts are not—their interpretation of tweets by excited executives are to be made at their own peril, not subject to usual investor protections.

Likewise, publicly-traded companies need to inform the investor community of what constitutes their official communication channels and ensure that financial and non-financial information announced through these is pre-approved, synchronized and not in conflict with existing regulations. Some regulators such as the French securities regulator, Authorité des Marches Financiers, has done so almost 5 years ago, recommending that companies specify their social media accounts on their website as well as establish a charter addressing how executives and staff are to use their personal social media accounts.

The ultimate twist of irony is of course that the SEC, investigating Tesla and its CEO, is part of the same government whose President’s tweeting activity has been far from uncontroversial. Both Mr. Musk’s and Mr. Trump’s use of Twitter highlight that—whether we like it or not—social media may soon be the most consulted sort of media. Its impact, in both corporate or political circles, needs hence to be considered by policymakers seriously. It is clear that every boat—whether corporate or political—needs a captain responsible for setting the course and communicating it to the lighthouse to avoid collisions and confusion at sea. Yet, captains are not pirates, and in the era of social media, regulators need to devise new rules of the game to avoid investor collusion and collision.

 


*Alissa Amico is the Managing Director of GOVERN. This post is based on a GOVERN memorandum by Ms. Amico.

Le conseil d’administration est garant de la bonne conduite éthique de l’organisation !


La considération de l’éthique et des valeurs d’intégrité sont des sujets de grande actualité dans toutes les sphères de la vie organisationnelle*. À ce propos, le Réseau d’éthique organisationnelle du Québec (RÉOQ) tient son colloque annuel les 25 et 26 octobre 2018 à l’hôtel Marriott Courtyard Montréal Centre-Ville et il propose plusieurs conférences qui traitent de l’éthique au quotidien. Je vous invite à consulter le programme du colloque et y participer.

 

 

Ne vous méprenez pas, la saine gouvernance des entreprises repose sur l’attention assidue accordée aux questions éthiques par le président du conseil, par le comité de gouvernance et d’éthique, ainsi que par tous les membres du conseil d’administration. Ceux-ci ont un devoir inéluctable de respect de la charte éthique approuvée par le CA.

Les défaillances en ce qui a trait à l’intégrité des personnes et les manquements de nature éthique sont souvent le résultat d’un conseil d’administration qui n’exerce pas un fort leadership éthique et qui n’affiche pas de valeurs transparentes à ce propos. Ainsi, il faut affirmer haut et fort que les comportements des employés sont largement tributaires de la culture de l’entreprise, des pratiques en cours, des contrôles internes… Et que les administrateurs sont les fiduciaires de ces valeurs qui font la réputation de l’entreprise !

Cette affirmation implique que tous les membres d’un conseil d’administration doivent faire preuve de comportements éthiques exemplaires : « Tone at the Top ». Les administrateurs doivent se donner les moyens d’évaluer cette valeur au sein de leur conseil, et au sein de l’organisation.

C’est la responsabilité du conseil de veiller à ce que de solides valeurs d’intégrité soient transmises à l’échelle de toute l’organisation, que la direction et les employés connaissent bien les codes de conduites et que l’on s’assure d’un suivi adéquat à cet égard.

Mais là où les CA achoppent trop souvent dans l’établissement d’une solide conduite éthique, c’est (1) dans la formulation de politiques probantes (2) dans la mise en place de l’instrumentalisation requise (3) dans le recrutement de personnes qui adhèrent aux objectifs énoncés et (4) dans l’évaluation et le suivi du climat organisationnel.

Les administrateurs doivent poser les bonnes questions sur la situation existante et prendre le recul nécessaire pour envisager les divers points de vue des parties prenantes dans le but d’assurer la transmission efficace du code de conduite de l’entreprise.

Les préconceptions et les préjugés sont coriaces, mais ils doivent être confrontés lors des échanges de vues au CA ou lors des huis clos. Les administrateurs doivent aborder les situations avec un esprit ouvert et indépendant.

Vous aurez compris que le président du conseil a un rôle clé à cet égard. C’est lui qui doit incarner le leadership en matière d’éthique et de culture organisationnelle. L’une de ses tâches est de s’assurer qu’il consacre le temps approprié aux questionnements éthiques. Pour ce faire, le président du CA doit poser des gestes concrets (1) en plaçant les considérations éthiques à l’ordre du jour (2) en s’assurant de la formation des administrateurs (3) en renforçant le rôle du comité de gouvernance et (4) en mettant le comportement éthique au cœur de ses préoccupations.

Le choix du premier dirigeant (PDG) est l’une des plus grandes responsabilités des conseils d’administration. Lors du processus de sélection, on doit s’assurer que le PDG incarne les valeurs éthiques qui correspondent aux attentes élevées des administrateurs ainsi qu’aux pratiques en vigueur. L’évaluation annuelle des dirigeants doit tenir compte de leur engagement éthique, et le résultat doit se refléter dans la rémunération variable des dirigeants.

Quels items peut-on utiliser pour évaluer la composante éthique de la gouvernance du conseil d’administration ? Voici un instrument qui peut aider à y voir plus clair. Ce cadre de référence novateur a été conçu par le Bureau de vérification interne de l’Université de Montréal.

 

1.       Les politiques de votre organisation visant à favoriser l’éthique sont-elles bien connues et appliquées par ses employés, partenaires et bénévoles ?
2.       Le Conseil de votre organisation aborde-t-il régulièrement la question de l’éthique, notamment en recevant des rapports sur les plaintes, les dénonciations ?
3.       Le Conseil et l’équipe de direction de votre organisation participent-ils régulièrement à des activités de formation visant à parfaire leurs connaissances et leurs compétences en matière d’éthique ?
4.       S’assure-t-on que la direction générale est exemplaire et a développé une culture fondée sur des valeurs qui se déclinent dans l’ensemble de l’organisation ?
5.       S’assure-t-on que la direction prend au sérieux les manquements à l’éthique et les gère promptement et de façon cohérente ?
6.       S’assure-t-on que la direction a élaboré un code de conduite efficace auquel elle adhère, et veille à ce que tous les membres du personnel en comprennent la teneur, la pertinence et l’importance ?
7.       S’assure-t-on de l’existence de canaux de communication efficaces (ligne d’alerte téléphonique dédiée, assistance téléphonique, etc.) pour permettre aux membres du personnel et partenaires de signaler les problèmes ?
8.       Le Conseil reconnaît-il l’impact sur la réputation de l’organisation du comportement de ses principaux fournisseurs et autres partenaires ?
9.       Est-ce que le président du Conseil donne le ton au même titre que le DG au niveau des opérations sur la culture organisationnelle au nom de ses croyances, son attitude et ses valeurs ?

10.    Est-ce que l’organisation a la capacité d’intégrer des changements à même ses processus, outils ou comportements dans un délai raisonnable ?


*Autres lectures pertinentes :

  1. Formation en éthique 2.0 pour les conseils d’administration
  2. Rapport spécial sur l’importance de l’éthique dans l’amélioration de la gouvernance | Knowledge@Wharton
  3. Rôle du conseil d’administration en matière d’éthique*
  4. Comment le CA peut-il exercer une veille de l’éthique ?
  5. Le CA est garant de l’intégrité de l’entreprise
  6. Cadre de référence pour évaluer la gouvernance des sociétés | Questionnaire de 100 items

Top 10 de Harvard Law School Forum on Corporate Governance au 20 septembre 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 20 septembre 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

Résultats de recherche d'images pour « top 10 »

 

Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

 

  1. Would a Shift to Semiannual Reporting Really Affect Short-Termism?
  2. Statement on Shareholder Voting
  3. Corporate Law Should Embrace Putting Workers On Boards: The Evidence Is Behind Them
  4. Corporate Governance Oversight and Proxy Advisory Firms
  5. Study of the German Corporate Governance Code Compliance
  6. The Universal Proxy Gains Traction: Lessons from the 2018 Proxy Season
  7. Growth in CEO Pay Since 1990
  8. Glass Lewis Response To SEC Statement Regarding Staff Proxy Advisory Letters
  9. The Law and Economics of Environmental, Social, and Governance Investing by a Fiduciary
  10. Unfair Exchange: The State of America’s Stock Markets

Le comportement d’Elon Musk est-il un signe de faible gouvernance chez Tesla ?


Depuis quelques années, on ne cesse de relater les faits d’armes de Elon Musk lequel gère ses entreprises de manières plutôt controversées, ou à tout le moins contraires aux principes de saine gouvernance.Dans cet article de Kevin Reed, publié sur le site de Board Agenda le 17 septembre 2018, on porte un jugement assez sévère sur le comportement autoritaire de Musk qui continue de bafouer les règles les plus élémentaires de gouvernance.

Les investisseurs qui croient dans le génie de cet entrepreneur sont en droit de s’attendre à ce que le fondateur mette en place des systèmes de gouvernance qui respectent les parties prenantes, dont les investisseurs.

Ces comportements de dominance sont tributaires du conseil d’administration où le fondateur joue le rôle de « Chairman, Product architect and CEO », comme s’il était le propriétaire de tout le capital de l’entreprise.

On peut comprendre la confiance que les investisseurs mettent en Musk, mais jusqu’à quel point doivent-ils ignorer certaines règles fondamentales de gouvernance d’entreprise ?

On connaît plusieurs entreprises qui sont dominées complètement par leur fondateur-entrepreneur. Ces comportements « dysfonctionnels » ne sont pas toujours signe de mauvaise performance à court terme. Mais, à long terme, sans de solides principes de gouvernance, ces entreprises rencontrent généralement des problèmes de croissance.

Selon l’auteur Kevin Reed,

Elon Musk, Tesla’s “chairman, product architect and CEO”, has recently the displayed classic traits of a dominant, idiosyncratic and controversial boss which, according to one commentator, is a sure sign of weak governance.

Voici un aperçu de l’argumentaire présenté dans l’article.

Bonne lecture !

 

Tale of Tesla’s Elon Musk is a ‘sadly familiar story’ of weak governance

 

 

Résultats de recherche d'images pour « elon musk »

There has been a long history of dominant, sometimes idiosyncratic and often irascible CEOs.

They will court controversy—which can be directly related to the business’s strategy and operations, or linked to “non-corporate” behaviour or actions.

Names such as Mike Ashley, Lord Sugar and even “shareholder-return-friendly” Sir Martin Sorrell have shown how outspoken and autocratic leaders will find their approach strongly questioned or criticised.

Names such as Mike Ashley, Lord Sugar and even “shareholder-return-friendly” Sir Martin Sorrell have shown how outspoken and autocratic leaders will find their approach strongly questioned or criticised—usually during tough times, despite previous spells of success.

However, recent proclamations on social and traditional media by Tesla’s Elon Musk could well be viewed as beyond the pale.

Whether offering a mini-submarine to rescue children stuck in a Thai cave, to making lewd accusations about another rescuer, through to proclaiming on Twitter that he is considering taking Tesla private, it puts into question whether such behaviour damages shareholder value.

“The tale of Elon Musk is a sadly familiar story of a founder who through vision, drive, ambition and talent grows a company to fantastic levels, but who then seems unable to accept challenge and healthy criticism and feels unable to operate in an appropriate governance environment,” explains Iain Wright, director of corporate and regional engagement at the Institute of Chartered Accountants in England and Wales (ICAEW).

Crashing companies onto rocks

Wright believes that we have seen “time and time again” dominant founders and chiefs “crash those companies onto the rocks” through “weak corporate governance”.

An important part of reining in such dominance is through the board and, namely, the chairman. They need to be able to support someone  with the vision and entrepreneurial spirit of someone like Musk, but also challenge them on behalf of the company and its stakeholders to “curb some of his erratic behaviour”.

“The board is subservient to the founder and chief executive rather than the other way round.”

He adds: “Good corporate governance would put in place a board who would challenge this, led by a chair who has the authority, experience and gravitas to stand up to Musk and tell him to have a holiday and get some sleep.”

And so, what of Tesla’s chairman? Well, that’s Elon Musk, whose full title is “chairman, product architect and CEO”. Attempts to separate the roles and appoint a chairman have been rebuffed by the board in the past, stating that it has a lead independent director in place.

This director is Antonio Gracias, a private equity investor who has reportedly shared many years associated with Musk.

“The board is subservient to the founder and chief executive rather than the other way round,” suggests Wright. “Musk is both chairman and CEO of Tesla, a situation relatively common in the States but quite properly frowned upon as inappropriate corporate governance in the UK.”

Separating the role is for the “long-term benefit of the company”, adds Wright. “This proposal should come back on the table soon.”

Top 10 de Harvard Law School Forum on Corporate Governance au 13 septembre 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 13 septembre 2018. Comme à l’habitude, j’ai relevé les dix principaux billets. Bonne lecture !
top 20, 10, 5

1.  Potential Reform to the Federal Reserve Board’s “Control Rules”

2.  Reporting Obligations of Variable Interest Entities

3.  The Rise of Fiduciary Law

4.  Will Warren’s Accountable Capitalism Act Help? The Answer is No.

5.  Volcker Rule 2.0: A Significant but Unfinished Proposal

6.  Non-Shareholder Voice in Bank Governance: Board Composition, Performance and Liability

7.  State Law Implementation of The New Paradigm

8.  A Proposed Alternative to Corporate Governance and the Theory of Shareholder Primacy

9.  Citizens United as Bad Corporate Law

10.  The Legality of Mandatory Arbitration Bylaws

Robert Dutton donne son point de vue sur la vente de RONA !


Problèmes de gouvernance ?

Je suis certain que plusieurs seront intéressés à connaître la version de Robert Dutton, ex-PDG de RONA, parue dans un livre racontant les dessous de l’affaire. Je vous souhaite une bonne lecture de l’article publié par Michel Girard dans le Journal de Montréal aujourd’hui.
Mettez-vous à la place de Robert Dutton. Se faire mettre à la porte de «son» entreprise après 35 années de loyaux services, dont 20 à titre de président et chef de la direction, c’est à la fois blessant et révoltant.
La blessure est d’autant plus grande lorsque vous découvrez que votre départ avait en fait pour finalité de permettre aux gros actionnaires, dont la Caisse de dépôt et placement, de faire la piastre en vendant l’entreprise à une multinationale américaine.
Farouche défenseur d’un Québec inc. qui protège ses sièges sociaux, l’ancien grand patron de RONA, Robert Dutton, ne voulait rien savoir des offres d’acquisition de Lowe’s.

Inconcevable

Pour lui, il était inconcevable de voir RONA devenir une filiale d’une multinationale étrangère.
Pour les gros fonds institutionnels qui détiennent des blocs d’actions de votre entreprise, il était évident qu’un PDG comme Dutton représentait un obstacle majeur.
C’est le genre de gars capable de déplacer des montagnes pour protéger l’entreprise contre les prédateurs étrangers.

Les dessous de la vente de RONA : l’ex-PDG ne voulait rien savoir des offres de Lowe’s

Top 10 de Harvard Law School Forum on Corporate Governance au 6 septembre 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 6 septembre 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

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Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

L’âge des nouveaux administrateurs est une variable de diversité trop souvent négligée dans la composition des CA !


Lorsque l’on parle de diversité au sein des conseils d’administration, on se réfère, la plupart du temps, à la composition du CA sur la base des genres et des origines ethniques.

L’âge des nouveaux administrateurs est une variable de diversité trop souvent négligée de la composition des CA. Dans cette enquête complète de PwC, les auteurs mettent l’accent sur les caractéristiques des administrateurs qui ont moins de 50 ans et qui servent sur les CA du S&P 500.

Cette étude de PwC est basée sur des données statistiques objectives provenant de diverses sources de divulgation des grandes entreprises américaines.

En consultant la table des matières du rapport, on constate que l’étude vise à répondre aux questions suivantes :

 

(1) Quelle est la population des jeunes administrateurs sur les CA du S&P 500 ?

Ils sont peu nombreux, et ils ne sont pas trop jeunes !

Ils ont été nommés récemment

Les femmes font une entrée remarquable, mais pas dans tous les groupes…

 

(2) Qu’y a-t-il de particulier à propos des « jeunes administrateurs » ?

96 % occupent des emplois comme hauts dirigeants, 31 % des jeunes administrateurs indépendants sont CEO provenant d’autres entreprises,

Plus de la moitié proviennent des secteurs financiers et des technologies de l’information

Ils sont capables de concilier les exigences de leurs emplois avec celles de leurs rôles d’administrateurs

Ils sont recherchés pour leurs connaissances en finance/investissement ou pour leurs expertises en technologie

90 % des jeunes administrateurs siègent à un comité du CA et 50 % siègent à deux comités

La plupart évitent de siéger à d’autres conseils d’administration

 

(3) Quelles entreprises sont les plus susceptibles de nommer de jeunes administrateurs ?

Les jeunes CEO représentent une plus grande probabilité d’agir comme administrateurs indépendants

Plus de 50 % des jeunes administrateurs indépendants proviennent des secteurs des technologies de l’information, et des produits aux consommateurs

Les secteurs les moins pourvus de jeunes administrateurs sont les suivants : télécommunications, utilités, finances et immobiliers

Les plus jeunes administrateurs expérimentent des relations mutuellement bénéfiques.

 

La conclusion de l’étude c’est qu’il est fondamental de repenser la composition des CA en fonction de l’âge. Les conseils prodigués relatifs à l’âge sont les suivants :

 

Have you analyzed the age diversity on your board, or the average age of your directors?

Does your board have an updated succession plan? Does age diversity play into considerations for new board members?

Are there key areas where your board lacks current expertise—such as technology or consumer habits? Could a new—and possibly younger—board member bring this knowledge?

Does your board have post-Boomers represented?

Does your board have a range of diversity of thought—not just one or two people in the room who you look to continually for the “diversity angle”?

Could younger directors bring some needed change to the boardroom?

 

Notons que cette étude a été faite auprès des grandes entreprises américaines. Dans l’ensemble de la population des entreprises québécoises, la situation est assez différente, car il y a beaucoup plus de jeunes sur les conseils d’administration.

Mais, à mon avis, il y a encore de nombreux efforts à faire afin de rajeunir et renouveler nos CA.

Bonne lecture !

 

 

Board composition: Consider the value of younger directors on your board

 

 

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Résumé des principaux résultats

 

There are 315 Younger Directors in the S&P 500. Together, they hold 348 board seats of companies in the index. Of these 348 Younger Director seats, 260 are filled by independent Younger Directors.

Fewer than half of S&P 500 companies have a Younger Director. Only 43% of the S&P 500 (217 companies) have at least one Younger Director on the board. At 50 of those companies, one of the Younger Directors is the company’s CEO.

S&P 500 companies with younger CEOs are much more likely to have independent Younger Directors on the board. Sixty percent (60%) of the 527 companies with a CEO aged 50 or under have at least one independent Younger
Director on the board—as compared to just 42% of companies that have a CEO over the age of 50.

Almost one-third of Younger Directors are women. Women comprise a much larger percentage (31%) of Younger Directors than in the S&P 500 overall (22%). This is in spite of the fact that over 90% of Younger Directors nominated under
shareholder agreements—such as those with an activist, private equity investor or family shareholder—are men.

Information technology and consumer products companies are more likely to have Younger Directors. The three companies in the telecommunications sector have no Younger Directors.

Close to half of the independent Younger Directors have finance/investing backgrounds. Just under one-third are cited for their technology expertise, executive experience or industry knowledge.

Younger Directors fit in board service while pursuing their careers. According to their companies’ SEC filings, 96% of Younger Directors cite active jobs or positions in addition to their board service.

Younger Directors serve on fewer boards. The average independent S&P 500 director sits on 2.1 public company boards. In contrast, independent Younger Directors sit on an average of 1.7 boards. More than half serve on only one public board.

More than half of the independent Younger Directors have held their board seat for two years or less. Only 18% have been on the board for more than five yearsé

Top 10 de Harvard Law School Forum on Corporate Governance au 30 août 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 30 août 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

Résultats de recherche d'images pour « top 10 »

 

Résultats de recherche d'images pour « Top 10 en gouvernance Harvard Law School »

 

 

  1. High-Quality Sales Processes and Appraisal Proceedings
  2. Awakening Governance: ACGA China Corporate Governance Report 2018
  3. The CFIUS Reform Bill
  4. Does Transparency Increase Takeover Vulnerability?
  5. Performance Awards and Say on Pay
  6. Fintech as a Systemic Phenomenon
  7. Securing Financial Stability: Systematic Regulation of Systemic Risk
  8. Gender Quotas in California Boardrooms
  9. The Race to the Bottom in Global Securities Regulation
  10. Supreme Court Nominee and the Derivative Suit

Le point sur la future loi californienne eu égard aux quotas de femmes sur les CA


Voici un article de Tomas Pereira, analyste de recherche à Equilar Inc, publié sur le site du Harvard Law School Forum qui fait le point sur la future loi californienne eu égard aux quotas de femmes sur les CA.

L’étude présente des statistiques intéressantes sur la situation des femmes sur les CA en Californie et fait état de projections concernant l’effet des mesures. Rappelons que l’état de la Californie est le premier état qui s’aventure dans l’établissement de quotas pour favoriser la diversité sur les conseils d’administration.

La législation propose qu’une entreprise ait au moins une femme sur le CA au 31 décembre 2019,

That minimum will be raised to at least two female board members for companies with five directors or at least three female board members for companies with six or more directors by December 31, 2021.

Ainsi en 2021, les conseils d’administration devront compter au moins trois femmes sur les CA, si le nombre d’administrateurs est de six ou plus.

Bonne lecture !

 

Gender Quotas in California Boardrooms

 

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By August 31, 2018, California could become the first state in the nation to mandate publicly held companies that base their operations in the state to have women on their boards. The legislation—SB 826—will require public companies headquartered in California to have a minimum of one female on its board of directors by December 31, 2019. That minimum will be raised to at least two female board members for companies with five directors or at least three female board members for companies with six or more directors by December 31, 2021.

If SB 826 is passed in the Assembly and signed by Governor Jerry Brown, corporations not compliant with the new rules will be subjected to financial consequences. Strike one will be accompanied with a fine equal to the average annual cash compensation of directors. Any subsequent violation would amount to a fine equal to three times the average annual cash compensation for directors. Hence, the consequences are very real for companies that choose not to comply with the new rules.

A new study by Equilar looks at where public companies headquartered in California currently lie in relation to the proposed legislation. The study includes public companies in California that have annual revenues of $5 million or more—amounting to a total of 211 companies with an aggregate of 349 female and 1,466 male board members.

 

Looking broadly, California is slightly below other states and the national average in terms of average women on a board. California, on average, has 1.65 female members per board, whereas other states and the United States as a whole average 1.76 and 1.75 female members, respectively. This type of statistic is a likely factor in spurring state legislators in Sacramento to make significant changes to the status quo and place California in a leading role for board diversity in the United States.

 

By 2019, most companies in California would be safe from any financial penalties for having an insufficient number of female board members. As it stands now, 82% of public companies in California who have annual revenues of over $5 million will meet the initial criteria, whereas 18% will not. Consequently, 37 public companies would be faced with a fine equal to the average annual director compensation for failing to comply.

In the following table, Equilar examined the 82% success rate a bit further and broke it down by sector in order to examine which industries are driving the rates of success and failure. By 2019, the basic materials and utilities sectors in California would both have a 100% success rate. Thus, every company within these two sectors has at least one female director present on their board. The next sector with the highest rate of success is services, with 92% having at least one female member. Both the healthcare and technology sectors are tied for lowest compliance at 83% pass.

 

When looking at the companies that would meet the secondary December 31, 2021 criteria, the picture is much bleaker at present for public companies in California. According to the proposed legislation, the required minimum would increase to two female board members for companies with five total directors or to three female board members for companies with at least six total directors.

 

Taking that future criteria and applying it to today, 79% of public companies would fail, while only 21% would pass. The following table sees basic materials—one of the sectors with 100% company success rate with the previous 2019 criteria—fall down to a 50-50 ratio of pass to fail. The sector with the highest success rate is utilities, while the industrial goods sector has the lowest success rate at 75% and 14%, respectively.

 

While the path for the proposed legislation is still a bit rocky, the broader trend towards diversifying boardrooms across the country is growing. Companies should anticipate new legislation—not just SB 826—sprouting throughout more state legislatures and get ahead of this rolling tide. States like Maine, Illinois and Ohio have already begun promoting resolutions to encourage companies to diversify their boards. In addition, BlackRock and other institutional investors have publicly stated that they will expect at least two female members per board. The push towards gender diversification is well warranted. Studies by management consulting firms, such as Boston Consulting Group and McKinsey & Co., have shown that diverse boards perform better financially. Signs do point to a gradual progression towards gender parity in the boardroom, as noted by the Q1 2018 Equilar Gender Diversity Index. However, without proactive encouragement or legislation, it would take decades before a true gender balance is realized.

L’émergence de la Chine dans le monde de la gouvernance moderne


Aujourd’hui, je vous propose la lecture d’un article sur l’évolution de la gouvernance chinoise.

Les auteurs, Jamie Allen*et Li Rui, de la Asian Corporate Governance Association (ACGA), ont produit un excellent rapport sur les changements que vivent les entreprises chinoises eu égard à la gouvernance.

L’étude se base sur une enquête auprès d’entreprises chinoises et auprès d’investisseurs étrangers. Également, les auteurs présentent une mine d’information sur la situation de la gouvernance.J’ai reproduit, ci-après, un résumé de l’enquête.

Bonne lecture !

 

With its securities market continuing to internationalise and grow in complexity, China appears at a turning point in its application of CG and ESG principles.

The time is right to strengthen communication and understanding between domestic and foreign market participants.

 

 

Awakening Governance: ACGA China Corporate Governance Report 2018

 

 

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Introduction: Bridging the gap

 

The story of modern corporate governance in China is closely connected to the rapid evolution of its capital markets following the opening to the outside world in 1978. The 1980s brought the first issuance of shares by state-owned enterprises (SOEs) and a lively over-the-counter market. National stock markets were relaunched in Shanghai and Shenzhen in 1990 to 1991, while new guidance on the corporatisation and listing of SOEs was issued in 1992. The first overseas listing of a state enterprise came in October 1992 in New York, followed by the first SOE listing in Hong Kong in 1993. Corporate governance reform gained momentum in the late 1990s, but it was less a byproduct of the Asian Financial Crisis than a need to strengthen the governance of SOEs listing abroad. The early 2000s then brought a series of major reforms on independent directors, quarterly reporting and board governance aimed squarely at domestically listed firms.

A great deal has changed in China since then, with periods of intense policy focus on corporate governance followed by consolidation. In recent years, China’s equity market has undergone a renewed burst of internationalisation through Shanghai and Shenzhen Stock Connect, relaxed rules for Qualified Foreign Institutional Investors, and the landmark inclusion of 234 leading A shares in the MSCI Emerging Markets Index in June 2018. While capital controls and other restrictions on foreign investment remain, there seems little reason to doubt that foreign portfolio investment will play an increasing role in China’s public and private securities markets in the foreseeable future.

Running parallel to market internationalisation, and facilitated by it, is a broadening of the scope of corporate governance to include a focus on environmental and social factors (“ESG”), and a deepening concern about climate change and environmental sustainability. Pension funds and investment managers in China are now encouraged by the government to look closely at ESG risks and opportunities in their investment process. And green finance has become big business in China, with green bond issuance growing steadily. Indeed, these themes are also part of the newly revised Code of Corporate Governance for Listed Companies (2018) from the China Securities Regulatory Commission (CSRC); this is the first revision of the Code since 2002.

 

Turning point

 

China thus appears at a new turning point in its market development and application of corporate governance principles. While it is difficult to predict how this process will unfurl, we believe three broad developments would be beneficial:

-That unlisted and listed companies in China see corporate governance and ESG not merely as a compliance requirement, but as tools for enhancing organisational effectiveness and corporate performance over the longer term. This applies as much to entrepreneurial privately owned enterprises (POEs) as established SOEs. The view that good governance is not relevant or possible in young, innovative firms is misguided.

-That domestic institutional investors in China see corporate governance and ESG not only as tools for mitigating investment risk, but as a platform for enhancing the value of existing investments through active dialogue with investee companies. The process of engagement can also help investors differentiate between companies that take governance seriously and those which do not.

-That foreign institutional investors view corporate governance in China as something more nuanced than a division between “shareholder unfriendly” SOEs and “exciting but risky” POEs. We recommend foreign asset owners and managers spend more time on the ground in China and invest in studying China’s corporate governance system, if they are not already doing so.

Of course, there are many exceptions to these broad characterisations. It is possible to find companies which view governance as a learning journey—and they are not necessarily listed. Certain mainland asset managers have begun investigating how to integrate governance and ESG factors into their investment process. And there are a growing number of foreign investors, both boutique and mainstream, that have developed a deep understanding of the diversity among SOEs and POEs and which have achieved excellent investment returns from SOEs as well.

Not surprisingly, however, our research has found that significant gaps in communication and understanding do exist between foreign institutional investors and China listed companies. According to an original survey undertaken by ACGA for this report, a majority of foreign investor respondents (59%) admitted that they did not understand corporate governance in China. Only 10% answered in the affirmative, while another 31% felt they “somewhat” understood the system. Conversely, it appears that most China listed companies do not appreciate the challenges that foreign institutional investors face in navigating “corporate governance with Chinese characteristics”.

This report is written for both a domestic and international audience. Our aim is to describe in as fair and factual a manner as possible the system of corporate governance in China, highlighting what is unique, what looks the same but is different, and areas of genuine similarity with other major securities markets. The main part of the report focuses on “Chinese characteristics” and looks at the role of Party organisations/committees, the board of directors, supervisory boards, independent directors, SOEs vs POEs, and audit committees/auditing. Each chapter explains the current legal and regulatory basis for the governance institution described, the particular challenges that companies and investors face, and concludes with suggestions for next steps. Our intention has been to craft recommendations that are practical and anchored firmly in the current CG system in China—in other words, that are implementable by companies and institutional investors. We hope the suggestions, and indeed this report, will be viewed as a constructive contribution to the development of China’s capital market.

The remainder of this Introduction provides an overview of key macro results from our two surveys. We start with the good news—that a large proportion of foreign institutional investors and local companies are optimistic about China—then highlight the challenges both sides face in addressing governance issues. The following chapters draw upon additional material from the two surveys.

ACGA survey—The big picture

Are you optimistic?

 

The good news from our survey is that a sizeable proportion of both foreign investors (38% of respondents) and China listed companies (52%) are optimistic about the investment potential of the A share market over the next five to 10 years, as Figure 1.1 below shows. Only 21% of foreign investors are negative, while the remainder are neutral. Not surprisingly, only 15% of China respondents were negative, while almost one-third were neutral.

 

Do you agree with MSCI?

 

The picture diverges on the issue of whether MSCI was right to include A shares in its Emerging Markets Index in 2018: only 27% of foreign respondents agreed compared to 65% of Chinese respondents, as Figure 1.2, below, shows. Almost half the foreign respondents did not agree compared to a mere 12% for Chinese respondents. A similar proportion was neutral in both surveys.

 

Challenges—Foreign institutional investors

The investment process

 

Foreign investors face a range of challenges investing in China, the first of which is understanding the companies in which they invest. As Figure 1.3 below indicates, foreign investors do not rely solely on information provided by companies when making investment decisions, but utilise a range of additional sources. It appears that listed companies are not aware of this issue.

 

Company engagement

 

Globally, institutional investors seek to enter into dialogue with their investee companies. It is no different in China, as shown in Figure 1.4.

 

 

But the process is not easy.

 

 

And successful outcomes are fairly thin on the ground to date.

 

Common threads

 

Respondents gave a range of answers as to why the process of engagement was difficult and successful outcomes limited, but some common threads were discernible:

Language and communication: In addition to straightforward linguistic difficulties (ie, companies not speaking English, investors not speaking Chinese), the communication problem is sometimes cultural. As one person said, “Even though I am from China, it is hard to interpret hidden messages.”

Access: Getting access to companies can be difficult. Getting to meet the right senior-level person, such as a director or executive, can be even more challenging.

Investor relations (IR): While some IR teams are professional, many are not. As one respondent commented: “IR (managers) are not very well trained and some of them lack basic understanding or knowledge of corporate governance or even financial information.”

CG as compliance: A common complaint is that companies view CG as merely a compliance exercise. Some refuse to give “detailed answers beyond the party line”.

Non-alignment: There is a recurring feeling that the interests of controlling shareholders in SOEs are not aligned with minority shareholders. One investor commented on the “lack of responsiveness” to outside shareholder suggestions, adding that SOEs “wait for government to give the direction, not investors”.

Lack of understanding: There can be a significant gap in the awareness of CG and ESG principles.

 

Empathy for companies

 

Conversely, a few respondents expressed empathy for the position of companies. As one wrote: “There also appears to be an under appreciation by international investors of the differences in culture, political context, and the path and stage of economic development between China and the rest of the world. Any attempt at influencing changes without a reasonable understanding of these differences is likely to be ineffective and (may) at times lead to unintended consequences.”

Another explained some of the regulatory challenges facing listed companies: “With a few exceptions, both SOEs and POEs have to deal with stringent and ever-changing industry regulations and government policies.”

A third said that some engagement had been positive: “Generally, where I have had access to the right people, engagement has been constructive. I suspect this is a result of the companies already appreciating the value of good governance in attracting non-domestic investors.”

And perhaps the most positive comment of all: “A number of the Chinese companies we speak to, especially the industry leaders, already address ESG risks in their businesses. Most of them publish ESG reports annually, which help to set the benchmark for their industry and also to garner positive feedback from society and hence, end-customers. Some of such companies end up enjoying a pricing premium on their products once this positive brand equity has been established. This creates a virtuous cycle, where ESG becomes part of their corporate culture. They understand that for the long-term sustainability of their business, and for the benefits of all their stakeholders, such investment can only enhance their competitiveness.”

 

Brave new world of stewardship

 

Yet most investors still find engaging with companies a challenge. A further reason may be that China is one of only three major markets in Asia-Pacific that has not yet issued an “investor stewardship code”. Such codes push institutional investors to take CG and ESG more seriously, incorporate these concepts into their investment process, and help to encourage greater dialogue between listed companies and their shareholders (see Table 1.1, below). In recent years, the bar has been quickly raised on this issue in Asia and expectations have risen commensurately.

Without an explicit policy driving investor stewardship, it is unlikely that the average listed company will give proper weight to a dialogue with shareholders. As one foreign investor said: “Generally speaking, it is relatively easier to engage with bigger listed companies. SOEs and larger companies tend to be more responsive. SOEs have more incentive to do so following government guidelines and trends.”

A key question to ask is who within a company should be responsible for engaging with shareholders? The short answer is the board, as a group representing and accountable to shareholders. Indeed, on a positive note, our survey found that most Chinese listed companies do admit that the responsibility for talking to shareholders should not be placed solely on the investor relations (IR) team (see Figure 1.7 below). But given that delegating this task to IR remains a common practice, it would appear that there is an inconsistency between words and actions here.

 

 

 

Challenges—China listed companies

 

Some additional factors clearly play on the willingness of companies to take CG and ESG seriously, as Figures 1.8 and 1.9 below show.

Does the market reward good CG?

 

Only 27% of the respondents to our China listed company survey believe there is a close correlation between good corporate governance and company performance. Another 46% think they are “somewhat related”, while a quarter see no relationship. These results broadly align with the view common in most markets, including China, that only a minority of companies (usually the large caps) feel incentivised to improve their governance practices and that they will be rewarded by investors if they do so.

 

Even more concerning is the largely negative view on whether better governance helps a company to list.

 

 

As an aside, this might also help to explain why listed POEs in China are generally not seen as being a better investment proposition or as having better governance than SOEs—an issue we explore in Chapter 3.5.

Only 23% of foreign respondents said they preferred investing in POEs over SOEs, while two-thirds said they did not. Meanwhile, only 10% of China listed companies thought POEs were better governed than SOEs. Around one-third thought they were about the same, while 54% thought POEs were worse.

Even so, in a fast-growing market such as China, there is a risk in taking a static or one-dimensional view.

‘Companies will have to become more ESG aware’

 

We conclude this section with a wide-ranging comment from a China-based institutional investor on the need to see governance and ESG as a process:

Chinese companies are generally financial weaker than their more established peers in developed markets. This is a symptom of markets being at different stages of development. For Chinese companies, survival is the top priority. Once they have gained enough market share and accumulated a certain level of capital reserves, they will start to consider ESG issues. This will help them cement their market position and grow more healthily in the long term.

At the moment, we recognise that the cost of not practicing ESG is not high in China. But things are changing, especially on the environmental front. We can see that the government is very serious about closing down small players who are not compliant with emission standards. The quality of air, earth and water concerns the livelihood of every citizen, and we believe that there will be heightened enforcement of pollution laws.

Corporate governance is also improving as public shareholders get more actively involved in major corporate actions. Having said that, shareholder structures remain highly concentrated, especially for SOEs in China, and external forces may not be strong enough to ensure a proper division of power.

We see increasing numbers of entrepreneurs and companies more willing to give back to society and the challenge here is simply that philanthropy is quite new in China.

As society becomes more civilised and consumers become more aware of issues such as child labour and environmental pollution, Chinese companies will have to become more ESG aware and responsible.

 

Interview: ‘Character and quality of management is critical’

 

David Smith CFA, Head of Corporate Governance, Aberdeen Standard Investments Asia, Singapore

 

What is your view on investing in A shares?

 

We have an A share fund, so naturally, we have spent substantial time and effort getting comfortable with both the market and the companies. There are well-documented risks surrounding investing in China, but the market has obvious attractions China is leading the world in some of the sectors, like e-commerce, for example. As investors, we always have to balance return with macroeconomic risk, political risk, regulatory risk, and so on, and this is certainly the case for China.

 

What is your view on stock suspensions in China?

 

The situation is getting better but companies too often still choose to suspend given a pending “restructuring”, which protects potential investors at the expense of existing investors, something that can be incredibly frustrating given how long we can be locked up for. There is a general misunderstanding in China as to what suspension means: companies should only suspend when there is information asymmetry, not when there is uncertainty. We are paid to analyse and deal with uncertainty, and the market will find a price for it. If companies have to suspend whenever there is uncertainty, we won’t have a stock market in place.

In general, there are too many suspensions in China. If a company has a restructuring plan or a regulatory investigation is going on, it should just disclose this through an announcement; as long as everyone in the market knows the same information, the stock should keep trading.

The issue of price-sensitive information has already been taken care of by regulations around continuous disclosure, so a suspension is often not protecting anyone, it just removes liquidity for existing investors. This issue is exacerbated by the bizarre and unusual situation of dual-listed A/H share companies suspending on one exchange and not the other.

In developed markets, in contrast, suspensions of issuers lasting more than a month for whatever reason are very rare. Part of the issue is also that promoter shares might sometimes have been pledged, so promoters want to avoid a share price fall triggering a margin call.

 

What are the top CG issues you have observed in Chinese companies?

 

Entrepreneur risk (people risk) is the most obvious one, including related-party transaction risks, along with operational and execution risks. For Aberdeen, we never invest if we feel uncomfortable with the founder or management. Both the character and quality of the people inside the company is something we value a lot in our investment decision-making process.

Regulatory risk is another issue. Changes in regulations can affect not just SOEs but also POEs to different extents. For example, the recent regulatory change on the reinforcement of Party committees inside Chinese companies is not what foreign investors expected to see as the direction of corporate governance development in China.

Another issue is that given more and more onus put on independent directors, maybe we need to think about another way to elect them. The current situation involves voting for independent directors on their independence, rather than competence. However, “independence” can be easily gamed in Asia. Many independent directors are structurally independent but rely on the company for their living (pension), so investors are increasingly asking if/how they add value to board discussions.

 

What is your view on voting trends among China listed firms? Does voting lead to engagement

 

Not much has changed. Any voting against has tended to focus on resolutions like related-party transactions, or other corporate actions, rather than issues across the board.

Engagement is getting a little bit better in China. We have seen more and more companies listening to us, and dialogue is getting much better. Companies increasingly understand that we are not in China for the short-term and that our interests are aligned. That certainly helps.

 

Methodology

A tale of two surveys

 

The two surveys in this report, the “ACGA Foreign Institutional Investor Perceptions Survey 2017” and the “ACGA China Listed Company Perceptions Survey 2017”, were developed internally in the first half of 2017 and carried out over 21 July to 1 September of that year. They were distributed through ACGA’s global network of members and contacts, and by a number of supporting organisations both inside and outside China (see the Acknowledgements page for details).

Purpose

We decided to conduct a survey at the preliminary stage of this project for two main reasons. The first was to add a broader range of perspectives to the report and to complement the extensive research carried out by ACGA and our contributing authors.

The second was to develop new data on corporate governance in China. When we began researching this report, we found that much of the information on board structures and governance practices in China was out of date, incomplete or non-existent. We developed the survey to partially fill this gap. To complement this information, we turned to data providers such as Wind and Valueonline to provide raw data on which we could do original analysis—and we carried out our own reviews of specific governance practices among large listed companies.

Foreign Institutional Investor Perceptions Survey

The Foreign Institutional Investor Perceptions Survey contained 22 questions and focused on areas that we believe are relevant to China’s investment potential and governance. They can be divided into the following categories:

Macro questions, such as capital market development, MSCI inclusion, SOEs vs POEs, and mainland-listed vs overseas-listed firms.

Shareholder rights, including investor protection in China vs overseas.

Company governance, including corporate reporting, role of chairman, independent directors, supervisory boards.

Role of government, including appointment of chairmen, intervention in SOEs and POEs, the role of the Party organisation/committee.

Investor engagement with companies.

Several of the questions provided options for respondents to give detailed answers and, where relevant, these comments are incorporated into our text.

The survey was developed by ACGA in Q2 2017 and first tested with a select group of ACGA global investor members in June of that year. It was refined based on feedback received before being sent out electronically in July. The recipients were primarily drawn from among ACGA’s list of institutional investor members based in Asia and around the world. This was complemented by recipients from our supporting organisation membership networks.

In total, we received 155 complete and comparable responses. Partial responses were not counted. Based on information gathered about respondents’ titles, they fell into three broad groups: CEOs, directors, managing directors or partners; portfolio managers and analysts; and managers or specialists in CG, ESG or stewardship. A large proportion held senior roles in their organisations.

The total assets under management (AUM) of all respondents amounted to around US$40 trillion, with the range from US$20m to US$6 trillion. In other words, a mix of both boutique investment managers and large mainstream institutions.

China Listed Company Perceptions Survey

The China Listed Company Perceptions Survey contained 12 questions and likewise focused on areas that we believe are relevant to such companies, their directors and managers. While there were fewer questions in this survey, they covered similar categories as in our foreign survey, namely macro issues, company governance, role of government, and investor engagement.

We designed some questions to be identical to the Foreign Institutional Investor Survey, in order to allow direct comparisons between corporate and investor perspectives on the same issue.

We also asked some unique questions of companies, such as whether or not they see a close correlation between corporate governance and performance, and whether better governance helps a firm list its shares.

The survey recipients were drawn from among ACGA’s corporate membership base, as well as clients and contacts of supporting organisations.

In total, we received 182 complete responses from which we extracted the survey results. Most respondents held senior positions in their companies such as directors, executives, board secretaries and senior managers. Most of the companies represented have been listed in China for more than five years and have a market cap of more than Rmb5 billion (US$800m approx). Further demographic data on the two groups of respondents follows:

 

Foreign respondents

The foreign institutional investors who responded are mostly from the US, UK, Asia and the European Union, as shown in Figure 1.10 below. The response is consistent with the distribution of ACGA members by region. Investors from Australia, New Zealand, the Middle East and Canada also responded to the survey.

 

 

In terms of their global AUM, the vast majority of respondents have less than 1% invested in China A shares, while a significant minority have between 1% and 10%. Very few have more than 10% of their funds invested in China domestic listings, although interestingly a few have more than 50%. The latter would be smaller investment managers with a dedicated China focus, as shown in Figure 1.11.

The picture changes markedly when overseas-listed Chinese firms are taken into account: the majority of foreign respondents allocate between 1% to 10% of their global AUM to such companies and a sizeable proportion, about one-fifth, invest more than 10%.

 

 

How do foreign investors invest in China? As Figure 1.12 below shows, around a quarter go only through the Qualified Foreign Institutional Investor (QFII) scheme, 15% only through Stock Connect, and almost half through both channels. Interestingly, a significant minority invest directly through wholly owned foreign enterprises (WFOEs) or other foreign direct investment (FDI) channels.

 

China respondents

Most respondents to our China Listed Company Perceptions Survey work for a company that has been listed for more than five years. Around 40% of the companies have been listed for more than 10 years, which is a relatively long period given that the Chinese stock market is still less than 30 years old (see Figure 1.13).

The market cap of 54% of respondents’ companies was more than Rmb5 billion, as highlighted in Figure 1.14, and 19% have a market cap of more than Rmb10 billion. Generally, the larger firms are likely to be SOEs.

 

In terms of ownership, the distribution of respondents falls evenly between SOEs and POEs, with 13% being of a “mixed-ownership” type (see Figure 1.15, above). This gives us confidence that the survey results incorporate a range of views from different participants in the Chinese market.

As for where respondents’ companies are listed, Figures 1.16 and 1.17, below, highlight that almost 60% are listed in a single jurisdiction. Mainland China comes first, not surprisingly, followed by a reasonable number in Hong Kong. Only a few respondents work for Chinese companies listed in Singapore, the US and the UK. Regarding the remaining companies listed in more than one jurisdiction, again the most popular venue is a dual-listing in China and Hong Kong, followed by a listing in China and the US. Some companies have a listing in China, Hong Kong and the US.

 

 

 

The complete report, in both English and Chinese, is available here.

___________________________________________________________

*Jamie Allen is Secretary General and Li Rui (Nana Li) is Senior Research Analyst at the Asian Corporate Governance Association (ACGA). This post is based on the introduction to their ACGA report.

Top 10 de Harvard Law School Forum on Corporate Governance au 23 août 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 23 août 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

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  1. Corporate Governance; Stakeholder Primacy; Federal Incorporation
  2. Microcap Board Governance
  3. Taking Stock: Share Buybacks and Shareholder Value
  4. Shareholder Vote on Golden Parachutes: Determinants and Consequences
  5. Corporate Governance—The New Paradigm: A Better Way Than Federalization
  6. Board Diversity Developments
  7. Corporate Governance in Emerging Markets
  8. Dual-Class Index Exclusion
  9. Board Diversity, Firm Risk, and Corporate Policies
  10. Shareholder Activism: Evolving Tactics

L’objectif visé par les fonds d’investissement activistes afin de profiter au maximum de leurs interventions : la vente de l’entreprise au plus offrant !


Vous trouverez, ci-dessous, un article de Roger L. Martinex-doyen de la Rotman School of Management de l’Université de Toronto, paru dans Harvard Business Review le 20 août 2018, qui remet en question la valeur des interventions des fonds activistes au cours des dernières années.

L’auteur pourfend les prétendus bénéfices des campagnes orchestrées par les fonds activistes en s’appuyant notamment sur une étude d’Allaire qui procure des données statistiques probantes sur les rendements des fonds activistes.

Ainsi, l’étude publiée par Allaire montre que les fonds d’investissement activistes réalisent des rendements moyens de 12,4 %, comparés à 13,5 % pour le S&P 500. Le rendement était de 13,9 % pour des firmes de tailles similaires dans les mêmes secteurs industriels.

Je vous invite à prendre connaissance d’une présentation PPT du professeur Allaire qui présente des résultats empiriques très convaincants : Hedge Fund Activism : Some empirical evidence.

Le résultat qui importe, et qui est très payant, pour les investisseurs activistes est la réalisation de la vente de l’entreprise ciblée afin de toucher la prime de contrôle qui est de l’ordre de 30 %.

The reason investors keep giving their money to these hedge funds is simple. There is gold for activist hedge funds if they can accomplish one thing. If they can get their target sold, the compound annual TSR jumps from a lackluster 12,4 % to a stupendous 94,3 %.  That is why they so frequently agitate for the sale of their victim.

Bonne lecture. Vos commentaires sont les bienvenus.

 

Activist Hedge Funds Aren’t Good for Companies or Investors, So Why Do They Exist?

 

 

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Activist hedge funds have become capital market and financial media darlings. The Economist famously called them“capitalism’s unlikely heroes” in a cover story, and the FT published an article saying we “should welcome” them.

But they are utterly reviled by CEOs. And at best, their performance is ambiguous.

The most comprehensive study of activist hedge fund performance that I have read is by Yvan Allaire at the Institute for Governance of Private and Public Organizations in Montreal, which studies hedge fund campaigns against U.S. companies for an eight-year period (2005–2013).

Total shareholder return is what the activist hedge funds claim to enhance. But for the universe of U.S. activist hedge fund investments Allaire studied, the mean compound annual TSR for the activists was 12.4% while for the S&P500 it was 13.5% and for a random sample of firms of similar size in like industries, it was 13.9%. That is to say, if you decided to invest money in a random sample of activist hedge funds, you would have earned 12.4% before paying the hedge fund 2% per year plus 20% of that 12.4% upside. If instead you would have invested in a Vanguard S&P500 index fund, you would have kept all but a tiny fraction of 13.5%.

Since the returns that they produce underwhelm, why do activist hedge funds exist? Why do investors keep giving them money? It is an important question because the Allaire data shows the truly sad and unfortunate outcomes for the companies after the hedge funds ride off into the sunset, after a median holding period of only 423 unpleasant days. Over this span, employee headcount gets reduced by an average of 12%, while R&D gets cut by more than half, and returns don’t change.

The reason investors keep giving their money to these hedge funds is simple. There is gold for activist hedge funds if they can accomplish one thing. If they can get their target sold, the compound annual TSR jumps from a lackluster 12.4% to a stupendous 94.3%.  That is why they so frequently agitate for the sale of their victim.

But why is this such a lucrative avenue? It is because of the control premium. When a S&P500-sized company gets sold, the average premium over the prevailing stock price that is paid for the right to take over that company is in excess of 30%. This is ironic, of course, because studies show the majority of acquisitions don’t earn the cost of capital for the buyer. It is a case of the triumph of hope over reality – which is not unusual. It is not dissimilar to what happens in the National Football League where the trade price for a future draft pick is typically higher than the trade price for an accomplished successful player. That is because the acquiring team dreams that the player it will pick in the draft will be more awesome than that player is likely to turn out to be. But hope springs eternal!

The activist hedge funds have their eyes focused laser-like on the control premium — which for the S&P 500, which has a market capitalization of $23 trillion, is conservatively a $7 trillion pie assuming a 30% control premium. To get a piece of that scrumptious pie, all they need to do is pressure their victim to put itself up for sale and they will have “created shareholder value.” Of course, on average, they will have destroyed shareholder value for the acquiring firm, but they couldn’t care less. They are long gone by that time; off to the next victim.

And they have lots of friends to help them access the control premium pie. Investment bankers want to help them do the deal whether it is a good deal or not and that $7 trillion pie for hedge funds translates into a multibillion dollar annual slice for investment bankers. And for the M&A lawyers that need to opine on the deal. And the accounting firms that need to audit the deal. And for the proxy voting firms that collect the votes for and against the deal. And the consultants who get hired to do post-merger integration. And the financial press that gets to write stories about an exciting deal.

It is an entire ecosystem that sees the $7 trillion pie and wants a piece of it. It doesn’t matter a whit whether a hedge-fund inspired change of control is a good thing for customers, employees or the combined shareholders involved (selling plus acquiring). It is too lucrative a pie to pass up.

What will stop this lunacy? When shareholders come to their senses and realize that when an activist hedge fund has pressured a company intensively enough to put it up for sale, they are simply feeding the hedge fund beast and the vast majority of the time it will be at their own expense. When activist hedge funds’ access to the $7 trillion pie is shut off, they will have to rely on their ability to actually make their victims perform better. And their track record on that front is mediocre at best.

______________________________________________________________

Roger L. Martin is the director of the Martin Prosperity Institute and a former . He is a coauthor of Creating Great Choices: A Leader’s Guide to Integrative Thinking.

Top 10 de Harvard Law School Forum on Corporate Governance au 16 août 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 16 août 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

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  1. SEC Concept Release on Compensatory Offerings
  2. Shedding the Status of Bank Holding Company
  3. Proposed Amendments to SEC’s Whistleblower Program
  4. Women in the C-Suite: The Next Frontier in Gender Diversity
  5. Director Skill Sets
  6. FCPA Successor Liability
  7. Urban Vibrancy and Firm Value Creation
  8. Self-Dealing Without a Controller
  9. The Misplaced Focus of the ISS Policy on NOL Poison Pills
  10. New Amendments to Delaware General Corporation Law

La place des femmes sur les CA et dans la haute direction des entreprises


Voici un rapport qui fait le point sur la place des femmes dans les CA et dans des postes de haute direction des entreprises publiques (cotées) américaines et internationales.

Cet article, publié par Subodh Mishra* directeur de Institutional Shareholder Services (ISS), est paru sur le forum du Harvad Law School on Corporate Governance, le 13 août 2018.

On note des progrès dans tous les domaines, mais l’évolution est encore trop lente. Eu égard à la présence des femmes sur les CA des grandes entreprises cotées, c’est la France qui remporte la palme avec 43 % de femmes sur les CA.

Les entreprises se dotent de plus en plus de politique de divulgation de la diversité sur les postes de haute direction. Le Danemark (96 %), l’Australie (91 %) et le R.U. (84 %) sont en tête de liste en ce qui concerne la présence de politique à cet égard. Les É.U. (32 %) et la Russie (22 %) ferment la marche. Le Canada est en milieu de peloton avec 63 %.

L’infographie présentée ici montre clairement les tendances dans ce domaine.

L’auteur identifie les cinq pratiques émergentes les plus significatives pour mettre en œuvre une politique de diversité exemplaire.

(1) Address subtle or unconscious bias.

Cultivating a strong culture free of subtle or unconscious bias is a fundamental step towards an inclusive work environment. A meta-analysis by the Harvard Business Review finds that subtle discrimination has as negative effects, if not more negative, than overt discrimination, as it can drain emotional and cognitive resources, it can accumulate quickly, and is difficult to address through legal recourse. The researchers suggest that structured processes and procedures around hiring, assignments, and business decisions limit the opportunity for unconscious bias to creep in. In addition, they suggest training programs and practicing techniques, such as mindfulness, to reduce bias.

(2) Establish clear diversity targets and measure progress towards goals.

Most companies with gender diversity strategies set clear, measurable targets. BP has set a goal of women representing at least 25 percent of its group leaders by 2020, while Symantecaims at having 30 percent of leadership roles occupied by women by the same year. This approach allows firms to focus on concrete performance results, while also creating a framework of accountability in the company’s gender diversity and inclusion program.

(3) Focus on key roles and redefine the path to leadership.

True meritocracy should determine the criteria for leadership roles. However, companies should recognize that there may be multiple paths to the CEO position, and should focus on their efforts on roles that lead to those paths. Women CEOs Speak, A Korn Ferry Institute study supported by the Rockefeller Foundation, identifies four different career approaches for women to prepare for the CEO role. However, the study identifies early assumption of profit-and-loss responsibilities in all four paths as a crucial experience leading to top positions.

(4) Establish mentorship and sponsorship programs.

Training and development programs within the organization can help facilitate mentorships and sponsorships, which are crucial in career development. GM’s Diversity and Inclusion Report explains how its Executive Leadership Program aims at creating a support network of female leaders, as well as training and development sessions hosted by female executives. Mentors can support employees earlier in their career with coaching and advice, while sponsors take a more active role later in one’s career to promote the individual. Gender should obviously not constitute a barrier for such mentorships and sponsorships, and organizations should take active steps to encourage such relationships across genders and remove any hesitations or biases.

(5) Provide flexibility and support towards work-life balance.

Top executive assignments often involve significant time commitments and travel that can impact an executive’s family life. In a New York Times news analysis, former McDonald’s executive Janice Fields, identified her choice not to work overseas as a handicap to becoming the CEO. Making accommodations in relation family, including both children and spouses, can remove some significant hurdles for women.

 

 

Women in the C-Suite: The Next Frontier in Gender Diversity

 

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Despite recent advances in female board participation globally, gender diversity among top executives remains disappointingly low across all markets, with some improvement discerned in the past few years. Moreover, there does not appear a correlation between board gender diversity and gender diversity in the C-Suite at the market level. Some of the markets that have implemented gender quotas on boards and have achieved the highest rates of female board participation, such as France, Sweden, and Germany, appear to have embarrassingly low rates of female top executives. In fact, many of the markets with progressive board diversity policies have lower gender diversity levels in executive positions compared to several emerging markets like South Africa, Singapore, and Thailand. Thus, achieving higher rates of gender diversity in the C-Suite will require deeper cultural shifts within organizations in order to overcome potential biases and hurdles to gender equality.

The number of female top executives remains low

 

In the past decade, gender quotas, policy initiatives, and—more recently—investor pressure have led to boards improving female board participation in Europe and North America significantly. The percentage of female directors in the Russell 3000 increased from 10 percent in 2008 to 18 percent in 2018, with most of the increase taking place since 2013. Similarly, the percentage of female directors in ISS’s core universe of widely-held European firms more than tripled from 8 percent in 2008 to 27 percent in 2018. While the recent push by policymakers, investors, and advocacy groups for greater gender diversity has primarily focused on board positions, the discussion is beginning to evolve to encompass diversity in all leadership roles, including top management. In the United States, we have observed small but significant changes in the gender composition of the C-Suite over the past five years. Since 2012, the Russell 3000 has seen a 70-percent increase in the number of female CEOs. Despite the relative increase, the number of top female executives remains disappointingly low, with only 5 percent of Russell 3000 companies having a female CEO in 2018.

 

Companies need to develop the pipeline of female executive leaders

 

The scarcity of female CEOs does not appear surprising, especially after taking a closer look at the rest of the members of the C-Suite, who often comprise the primary candidates in line for succession for the top job. These roles include the Chief Operating Officer, the Chief Financial Officer, and the Head of Sales, among others. Only 9 percent of top executive positions in the Russell 3000 are filled by women, which means that companies have a long way to go towards building gender equity within the top ranks where the next generation of CEOs are cultivated. Certain sectors lag considerably more than others, with Real Estate, Telecommunications and Energy exhibiting the lowest rates of female named executive officers.

 

Within the C-Suite, gender differentiation persists in terms of executive roles

 

The picture seems even bleaker for the future of gender parity at the CEO level when examining the types of roles that female top executives currently occupy within their organizations. Female executives appear scarcer at roles with profit-and-loss responsibilities that often serve as stepping stones to the CEO role, such as COO, Head of Sales, or CEOs of business units and subsidiary groups. Meanwhile, women are more highly concentrated in positions that rarely see a promotion to the top job, such as Human Resources Officer, General Counsel, and Chief Administrative Officer.

 

 

Not surprisingly, and in conjunction with the disparity in functions described above, women who belong to the group of the five highest paid executive officers in their organization, are far more likely to rank fourth or fifth in pay rank compared to their male counterparts. Approximately 46 percent of women in the top five positions rank either fourth or fifth in pay, compared to 33 percent of male top five executives in these pay rankings.

 

Breaking down barriers to gender diversity in the C-Suite

 

Companies can take a number steps to foster gender diversity in their executive leadership, and to remove biases or potential obstacles to an inclusive management environment. Many companies have identified gender diversity in leadership positions as a key priority, and have established gender diversity strategies to achieve specific goals. While workforce diversity policies appear to become the standard across most markets, gender diversity policies at the senior management level are common only in some markets. According to ISS Environmental & Social QualityScore data, the majority of companies in developed European markets and Canada disclose gender diversity policies for senior managers. The practice has not been widely established United States, where 32 percent of the S&P 500 and only 4 percent of the remaining Russell 3000 disclose such policies.

 

 

Several companies and advocacy groups identify gender diversity and inclusion as a major driver for talent acquisition and performance. The recognition of the absence of women in top executive roles has sparked several initiatives that seek to promote inclusivity in the workplace. The Rockefeller Foundation’s 100×25 advocacy initiative aims at bringing more women to the C-Suite, with the explicit goal of having 100 Fortune 500 female CEOs by 2025. Meanwhile, Paradigm for Parity was formed by a coalition of business leaders (CEOs, founders, and board members), and set the goal of achieving full gender parity by 2030. The group has created a 5-point action plan to help companies accelerate their progress.

Based on the work of these initiatives and actual programs disclosed by companies, we identify five of the emerging best practices that companies adopt to address gender diversity in leadership roles.

Address subtle or unconscious bias. Cultivating a strong culture free of subtle or unconscious bias is a fundamental step towards an inclusive work environment. A meta-analysis by the Harvard Business Review finds that subtle discrimination has as negative effects, if not more negative, than overt discrimination, as it can drain emotional and cognitive resources, it can accumulate quickly, and is difficult to address through legal recourse. The researchers suggest that structured processes and procedures around hiring, assignments, and business decisions limit the opportunity for unconscious bias to creep in. In addition, they suggest training programs and practicing techniques, such as mindfulness, to reduce bias.

Establish clear diversity targets and measure progress towards goals. Most companies with gender diversity strategies set clear, measurable targets. BP has set a goal of women representing at least 25 percent of its group leaders by 2020, while Symantecaims at having 30 percent of leadership roles occupied by women by the same year. This approach allows firms to focus on concrete performance results, while also creating a framework of accountability in the company’s gender diversity and inclusion program.

Focus on key roles and redefine the path to leadership. True meritocracy should determine the criteria for leadership roles. However, companies should recognize that there may be multiple paths to the CEO position, and should focus on their efforts on roles that lead to those paths. Women CEOs Speak, A Korn Ferry Institute study supported by the Rockefeller Foundation, identifies four different career approaches for women to prepare for the CEO role. However, the study identifies early assumption of profit-and-loss responsibilities in all four paths as a crucial experience leading to top positions.

Establish mentorship and sponsorship programs. Training and development programs within the organization can help facilitate mentorships and sponsorships, which are crucial in career development. GM’s Diversity and Inclusion Report explains how its Executive Leadership Program aims at creating a support network of female leaders, as well as training and development sessions hosted by female executives. Mentors can support employees earlier in their career with coaching and advice, while sponsors take a more active role later in one’s career to promote the individual. Gender should obviously not constitute a barrier for such mentorships and sponsorships, and organizations should take active steps to encourage such relationships across genders and remove any hesitations or biases.

Provide flexibility and support towards work-life balance. Top executive assignments often involve significant time commitments and travel that can impact an executive’s family life. In a New York Times news analysis, former McDonald’s executive Janice Fields, identified her choice not to work overseas as a handicap to becoming the CEO. Making accommodations in relation family, including both children and spouses, can remove some significant hurdles for women.

_________________________________________________________________

*Subodh Mishra is Executive Director at Institutional Shareholder Services, Inc. This post is based on an ISS Analytics publication by Kosmas Papadopoulos, Managing Editor at ISS Analytics.

Top 10 de Harvard Law School Forum on Corporate Governance au 9 août 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 9 août 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

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Top 10 de Harvard Law School Forum on Corporate Governance au 2 août 2018


Voici le compte rendu hebdomadaire du forum de la Harvard Law School sur la gouvernance corporative au 2 août 2018.

Comme à l’habitude, j’ai relevé les dix principaux billets.

Bonne lecture !

 

 

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La nouvelle loi californienne | Instauration de quotas pour accélérer la diversité sur les CA


Aujourd’hui, je souhaite vous familiariser avec la réalité de la nouvelle loi californienne eu égard à la mise en place de quotas pour accélérer la diversité sur les conseils d’administration.

Cet article paru sur le site de Harvard Law School Forum on Corporate Governance, par David A. Katz et Laura A. McIntosh, associés à la firme Wachtell, Lipton, Rosen & Katz, explique le contexte menant à la nouvelle législation californienne.

La Californie se distingue par l’originalité et par le caractère affirmatif de sa loi sur la composition des conseils d’administration. Bien entendu, cette loi a ses détracteurs, notamment les chambres de commerce qui redoutent les impacts négatifs de la loi pour les plus petites entreprises qui ont des CA composés essentiellement d’hommes !

Mais, il faut noter que l’état de la Californie est le seul état américain à avoir légiféré sur la diversité des membres de conseils d’administration en proposant des mesures qui s’apparentent aux quotas imposés par plusieurs pays européens.

Voici un extrait de l’article qui résume assez bien le contenu de cette loi.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

The bill that passed the California State Senate at the end of May 2018 would, if enacted, require any public company with shares listed on a major U.S. stock exchange that has its principal executive offices in California to have at least one woman on its board by December 31, 2019. By year-end 2021, such companies with five directors would be required to have two women on the board, and companies with six or more directors would be required to have three women on the board.

 

 

 

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California has made headlines this summer with legislative action toward instituting gender quotas for boards of directors of public companies headquartered in the state. The legislation has passed the state senate; to be enacted, it must be passed by the California state assembly and signed by the governor. In 2013, California became the first state to pass a precatory resolution promoting gender diversity on public company boards, and five other states have since followed suit. The current legislative effort has come under criticism for a variety of reasons, and, while it is not certain to become law, it could be a harbinger of a broader push for public company board gender quotas in the United States. It is worth considering whether quotas in this area would be beneficial or harmful to the larger goals of gender parity and board diversity.

 

The California Bill

 

The bill that passed the California State Senate at the end of May 2018 would, if enacted, require any public company with shares listed on a major U.S. stock exchange that has its principal executive offices in California to have at least one woman on its board by December 31, 2019. By year-end 2021, such companies with five directors would be required to have two women on the board, and companies with six or more directors would be required to have three women on the board.

Section 1 of the California bill (SB 826) presents an argument in favor of establishing gender quotas: More women directors would be beneficial to California’s economy in various ways, yet progress toward gender parity is too slow. The bill cites studies indicating that companies perform better with women on their boards and observes that other countries have used quotas to achieve 30 percent to 40 percent representation. The bill notes that, of California public companies in the Russell 3000 as of June 2017, 26 percent had no women on their boards, while women composed 15.5 percent of directors on boards that have at least one woman. The bill cites further studies showing that, at current rates, it could take approximately four decades to achieve gender parity on boards. And finally, Section 1 of the bill concludes by citing studies suggesting that having at least three women directors increases board effectiveness.

The Opposing View

 

The California bill has been controversial. The California Chamber of Commerce filed an opposition letter on behalf of numerous organizations arguing that the bill would violate state and federal constitutions and conflict with existing California civil rights law, on the basis that it requires a person to be promoted—and another person disqualified—simply on the basis of gender. California legislators dispute that the bill requires men to be displaced by women, noting that boards can simply increase their size. This may be easier said than done, however: Because the required quota increases with board size, a company with a four-man board that did not wish to force out a current director would need to add three women to accommodate the requirements of the law by 2021. Suddenly expanding from four to seven would entail a very significant change to board dynamics. For a previously well-functioning board, the negative effects of a change that dramatic could outweigh the benefits of gender diversity.

Further, the bill’s opponents argue that prioritizing only one element of diversity would be suboptimal, especially at time when many California companies are engaged in addressing and increasing diversity by focusing on all classifications of diversity. Advocates for greater representation of ethnic minority groups on boards have expressed concerns that prioritizing gender will be detrimental to progress toward greater ethnic diversity. For purposes of increasing overall diversity, quotas are not a solution that can be applied broadly; if quotas such as those in the California bill were established not only for gender but for ethnic and other categories of diversity, the project of board composition would soon become a near-impossible logic and recruitment puzzle, as nominating committees struggled to meet mandated quotas, expertise needs, and director independence requirements, all within the board size parameters set forth in the company’s organizing documents. Board functioning and effectiveness would be severely compromised by the legislative micromanaging of board composition.

Thanks to the establishment of quotas in various European countries over the past 15 years, there is evidence as to the effect of gender quotas for boards. A 2018 Economist study found that, despite high expectations, the effects of quotas were, in some ways, disappointing. According to the Economist, greater numbers of women on boards did not necessarily produce better performance or decision-making, nor was there a trickle-down effect of boosting women’s progress to senior management jobs.

On the other hand, fears about unqualified women being put on boards, or a few qualified women being overboarded, also did not materialize. While there is a great deal of evidence showing that having women directors does produce more effective boards—and there are even indications in Europe that diverse boards are less likely to be targeted by shareholder activists—the Economist study shows that diversity achieved through government-imposed quotas may not be as beneficial as diversity achieved through private-ordering efforts.

The Big Picture

 

Progress toward gender diversity in the board room is accelerating. In the first fiscal quarter of 2018, nearly one-third of new directorships in the Russell 3000 went to women, and for the first time, fewer than 20 percent of companies in that index had all-male boards. Institutional investors, corporate governance activists, and many large companies have been at the forefront of this progress. State Street and BlackRock have been leaders on this issue in the United States. Similarly, in the UK—a country that has made significant efforts to improve gender diversity on boards while also resisting the imposition of quotas—the large investment funds Legal & General Investment Management and Standard Life Aberdeen Plc have said that they will vote against boards that are composed of less than 25 percent or 20 percent women, respectively. British institutional investor Hermes has said that it expects boards to include at minimum 30 percent women, and it led a failed opposition to the reelection of the chairman of mining group Rio Tinto Plc due to lack of diversity on the board. Given the effectiveness of recent efforts by the private sector, and in light of the intense resistance to quotas in the business community, government intervention to establish quotas may be unnecessary as well as undesirable.

Recent research shows that simply adding women to boards does not necessarily improve board performance. As common sense would suggest, it turns out that to be a positive factor, the gender composition of the board must be considered along with the skills and knowledge of the board as a whole in the context of the organization and its stakeholders. A 2017 academic study indicated that the “right” level of gender diversity may be proportionate to the number of female stakeholders—employees, clients, and suppliers, for example—and may vary across countries and cultures. In certain circumstances, the appropriate gender diversity ratio might well be over 50 percent women. The authors of the study caution against selecting directors based on quotas if, in so doing, gender diversity is prioritized over the expertise needs of the board.

Overall board diversity, including gender and ethnic minorities, has never been higher. According to a comprehensive 2018 study by James Drury Partners, overall board diversity is now at 34 percent for America’s 651 largest corporations, as measured by revenue and market capitalization. The level of board diversity is increasing, as 49 percent of the 449 newly elected directors at these companies represent diverse groups. Of particular note, the study revealed that the diversity distribution of the 6,225 directors currently serving on the boards of these companies corresponds very closely to the diversity of the population in the executive ranks of 222 companies studied by McKinsey & Co. and LeanIn.org. While there clearly is more room for progress toward greater diversity at both the executive and board levels, this data point shows that boardrooms are indeed mirroring the increasingly diverse leadership of U.S. business.

The benefit of mandatory quotas, as the business community has seen through European examples, is that they compel companies and shareholders to focus on board composition and to establish more formal recruitment processes in order to find the necessary directors. Such developments are certainly beneficial. That said, boards can and should focus on composition and recruitment in the absence of quotas, and indeed they are doing so to a greater extent than ever before. Proponents of gender diversity can be heartened by recent developments in the United States, as organic and market-driven efforts have produced results that increase the business community’s enthusiasm for diverse boards. A real danger of legislation like the California bill is that context-free quotas may have the effect of destabilizing boards and undermining the business case for increased gender diversity. Were that to occur, then not only boards themselves, but stakeholders, the business community, and the larger societal goals of gender parity and board diversity would suffer as well.

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*David A. Katz is partner and Laura A. McIntosh is consulting attorney at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Katz and Ms. McIntosh that originally appeared in the New York Law Journal.

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