Les jeunes de la génération Y ont-ils leurs places sur des conseils d’administration | Pour ou contre ?

Vous trouverez, ci-dessous, les coordonnées d’un article d’Alan Mak et Andrew Hill sur le Blogue du FT du 2 juillet 2014. Les auteurs se questionnent sur la place des jeunes (millennials) dans les conseils d’administration du futur.

Vous y découvrirez plusieurs raisons qui militent en faveur de la nomination de jeunes au C.A. (Mak) ainsi que la prise de position d’un auteur qui ne croit pas à la contribution des jeunes sur des C.A., principalement à cause de leur manque d’expérience (Hill). Comme vous vous en doutez, je partage entièrement le point de vue de Mak qui propose l’engagement des jeunes sur les conseils.

La lecture des arguments pour et des arguments contre est intéressante. Qu’en pensez-vous ?

Bonne lecture !

In or out: do millennials belong in company boardrooms?

Yes

Alan Mak

Lord Davies in his report “Women on Boards” rightly said the best boards contain “a mix of voices [that] must include women”. It should also include millennials.

Today’s rapidly changing marketplace is more complex than ever and businesses that want to stay competitive, especially in customer-facing sectors, need Generation Y to help them deal with the big trends, from the rise of digitally empowered consumers to the febrile post-financial crisis business environment.

The business case for younger directors is strong. Generation Y, also known as millennials, are aged 18-35 and, at 2bn people, are the world’s biggest demographic group. By 2018 they will have the biggest spending power of any age group, Deloitte says. And three in four millennials say they influence the purchasing decisions of other generations. So, every business needs to understand Generation Y’s behaviour and aspirations, and younger, suitably qualified directors can be their champion in the boardroom.

Meanwhile, better decisions are made when companies draw on the widest possible range of talent regardless of age, and when directors bring to bear the broadest range of experiences, perspectives and lifestyles. In this context, “diversity” must include generational diversity, not just gender diversity. Adding a Generation Y perspective can be a powerful antidote to age-related groupthink. For example, millennials are more likely to take a longer-term approach to risk taking because they have to live with the financial and reputational consequences of failure when older colleagues may not.

The financial crisis caused an irreversible cultural and structural shift. Corporations from banks to supermarkets are redefining their values and business models to become more accountable and sustainable. As David Jones explains in his book Who Cares Wins, for business, “the new price of doing well is doing good”.

Generation Y instinctively understands this new paradigm, and they are best placed to act as boardroom cultural translators.

Such rapid cultural change is itself largely driven by fast technological and demographic change. Social media have given today’s consumers more information about how companies do business than ever before. Whereas the industrial revolution empowered the corporation, the digital revolution empowered the consumer. As Jones observes, “ … there’s not been another time in history when the youngest people understood the most about what is going on”. Companies that fail to understand this new “good business zeitgeist” find their brands and share price diminished.

Generation Y directors add value by helping their companies to navigate this volatile, Twitter-driven landscape. That is why Starbucks appointed social media expert Clara Shih, then 29, to its main board.

Meanwhile, globalisation has created increasingly complex decision-making environments that require new skills and fresh insights – for example, into emerging markets and new technologies – that were simply not around, or as needed in the past. Every company must now balance Gen X’s experience with Gen Y’s inherently global outlook, digital aptitude and commitment to life-long learning. Putting younger leaders into the boardroom helps that development while sending a wider message that an organisation rewards talent and ambition.

Pessimists may say younger figures lack the industry knowledge or operational experience to step into the boardroom. These qualities can all be developed and naysayers should listen to Peter Cave-Gibbs, former London head of recruiter Heidrick & Struggles: “Board chairmen want outstanding leaders who can help their business succeed in today’s global marketplace. Gen Y talent is highly educated, multilingual, and comfortable with change and technology. They are changing the way business is done: age is just a number in business now.”

. . .

No

Andrew Hill

Boards are changing. The devastating economic and financial crisis has exposed the risk of groupthink in the boardroom and the weaknesses in established corporate governance, as pursued by establishment people, who, let’s face it, are still predominantly “white, male and stale”. Business logic and a simple sense of equity dictate that the gender and ethnic balance in the boardroom should alter. Research increasingly suggests that diverse teams come up with better ideas.

So, if more women and people from ethnic minorities are becoming non-executive directors, for these and other excellent reasons, shouldn’t large companies invite more young people to step up to the board?

No, they shouldn’t, and here’s why.

First, the immediate priority for large companies ought to be to assemble a balanced board with an accumulation of experience that will help supervise the executive team. By definition, younger candidates have less experience.

What ambitious and talented young people know could still be useful to the board and to the company. Millennials may help a consumer products company tailor its offering to younger customers.

While the boardroom dinosaurs are struggling with their iPads, they could help a natural resources company to understand coming risks to its reputation (posed, for example, by social media protests). But these contributions can be sought in better and more efficient ways than by inviting a representative into the boardroom. Smart companies are already tapping social media – the natural heir to focus groups – for a quantitative assessment of youth trends. Phil Clarke, Tesco’s chief executive, has a 20-something staffer in his office, precisely to keep him updated on such trends.

I am as suspicious as anyone of the power of vested interests. When a headhunter recently told me that a boardroom should “not be trying to reflect the demographic” and warned that 20-something non-executives with little corporate experience might “throw in grenades that are inappropriate”, I was almost ready to help them pull the pin.

Boards do need shaking up and young people with proven records of relevant achievement could have what it takes to hold their own in a boardroom packed with company veterans. But these candidates will be few and far between. Youth per se is no qualification.

Second, a bigger priority for boards is to reflect the gender and ethnic mix around them without compromising on experience. I would choose, say, a female executive informed by diverse experiences ahead of a promising younger businessperson with only youth on his or her side.

Finally, if companies want to draw on the energy and inspiration brought by younger people – and they should – they should employ them and promote them to executive roles. It may not have dawned on aspiring Gen Y non-executives, but the board is not the engine of creativity, innovation and strategy at big companies: it is a regulator of the engine, and an important sounding board for ideas brought by the executive team.

Most entrepreneurial young people I know would simply be frustrated by boardroom politics and bluster. Those young managers who feel they should start their non-executive portfolio in their 20s have got their careers back to front: they should be directing their best efforts to founding start-ups, or at least changing the way companies work, not the way they are supervised. If it is revolution they seek, they stand a better chance of pursuing it from the bottom up than from the top down.

L’État de l’audit interne à l’échelle internationale | Rapport 2014 de Thompson Reuters Accelus

Denis Lefort, CPA, expert-conseil en Gouvernance, audit et contrôle, vient de me faire parvenir l’édition 2014 de l’étude Thompson Reuters Accelus sur l’audit interne.

Ce sondage identifie des observations intéressantes pour la profession d’auditeur interne :

(1) Seulement un peu plus de 27% des services d’audit interne vérifient les processus de gouvernance de leur organisation;

(2) Il y a encore des écarts importants de perception entre les services d’audit interne et les comités d’audit quant aux priorités que devraient être celles des services d’audit interne;

(3) Les auditeurs internes investissent 45% de leur temps pour l’audit de la sécurité des TI;

(4) Près de 50% des services d’audit interne interagissent maintenant avec les autres fonctions d’assurance de leur organisation (Conformité, Gestion des risques, etc…).

Ce document sera donc très utile à tout administrateur soucieux de parfaire ses connaissances de l’état de la situation en 2014 dans le monde.

Bonne lecture. Vos commentaires sont les bienvenus. Voici le sommaire de l’étude.

ÉTAT DE L’AUDIT INTERNE – RAPPORT 2014 DE THOMSON REUTERS ACCELUS

Thomson Reuters Accelus’ annual State of Internal Audit Survey provides an insight into the experiences and expectations of internal audit professionals around the world. More than 900 internal audit practitioners across 50 countries participated in the 2014 survey sharing their views across a range of subjects, issues and concerns. The experiences shared in this report are intended to help internal audit functions and senior management benchmark the myriad of challenges faced and enable them to leverage the approach taken by their peers.

The survey has demonstrated that the world and work of internal audit continues to be as complex, and challenging as ever. Both the volume and diversity of issues that internal auditors need to understand and assess continues to increase globally and across all industries.

In fact, at a high level the results of the Thomson Reuters Accelus State of Internal Audit Survey have remained relatively unchanged for the last few years.

This year the results confirmed that the vast majority (81 percent) of internal auditors’ focus remains on providing assurance on the efficacy of internal control process. While assurance work is the traditional mainstay of internal audit there are a wide range of other areas and issues for internal auditors to consider, including:

(1) Nearly a quarter (24 percent) of internal auditors expect their personal liability to increase in 2014. The adequacy of internal auditors’ skills, focus and approach is firmly on the radar of regulators worldwide. It is no surprise, therefore, that internal auditors expect their own personal liability to increase in the near future.

(2) Nearly half (49 percent) of all internal auditors have had no involvement in assessing their firm’s culture. There are distinct regional variations with respondents from South America reporting that three-quarters (77 percent) of internal auditors have not assessed the culture of their firm.

(3) Just over a quarter (27 percent) of internal auditors have had no involvement in assessing their firm’s corporate governance; regionally this figure looks most concerning for North America, with 32 percent of internal auditors having no involvement.

4) Internal auditors spend 45 percent of their time on IT security and risk. Nearly half (48 percent) of respondents said that it should be a top priority for their organization and 35 percent said it would be a top challenge for boards of directors in 2014.

(5) Nearly half of the respondents (48 percent) expect to be spending more time reporting to senior management and tracking remedial actions. This is in addition to almost a quarter (24 percent) of internal auditors anticipating a need to focus on the implementation of industry-specific legislation.

(6) Nearly half of internal auditors interact with risk management (44 percent) and compliance (47 percent) on at least a monthly basis. While these figures are a slight improvement on last year it remains an area where improvements could be made.

(7) It is interesting that areas not considered a priority for internal audit included customer outcomes (6 percent), whistle-blowing (5 percent) and capital and liquidity (4 percent).

(8) Internal auditors’ perception of priorities for the board are not aligned with their own. The key challenges for internal auditors are greater complexity of issues and focus on risk and control, as well as changing business models. In contrast, boards’ priorities are corporate strategy, strategic risk management and legal and regulatory risk.

The growing focus which policymakers and regulators have been placing on culture, corporate governance and risk management has emphasized still further the need for a strong, well-resourced independent audit function operating, and in particular reporting, in close coordination with other risk and compliance functions, all with visible support from the top of the organization. Yet the results show a relatively unchanged picture in these areas from previous years. As the risks increase so does the need for internal audit to react to those changes.

Le bon « comply or explain » selon la Commission européenne

Ce billet est une synthèse d’un article, plus long et davantage juridique, que le professeur Ivan Tchotourian publiera sur le blogue du BDE (Bulletin de Droit Économique de la Faculté de Droit de l’Université Laval).

Lorsque le blogue du BDE publiera l’article, le lecteur sera renvoyé à l’article de notre blogue. Bonne lecture !

Le bon « comply or explain » selon la Commission européenne

par Ivan Tchotourian

Le 9 avril 2014, la Commission européenne (1) a présenté dans la lignée du Plan d’action qu’elle a diffusé en décembre 2012 une proposition de Recommandation sur la qualité de l’information sur la gouvernance d’entreprise [1]. Certes non obligatoire, le signal envoyé par l’Union européenne n’en est pas moins significatif sur ce que devrait dorénavant être une bonne politique de « comply or explain » (2) de la part des entreprises. Que propose finalement la Commission européenne pour améliorer la situation ? Pas de recette miracle, mais des préconisations de bon sens qui sont les suivantes :

(1) Étendre la portée de la déclaration : les sociétés devraient rendre compte de la manière dont elles se sont conformées aux codes applicables en ce qui concerne les aspects susceptibles d’être les plus importants pour les actionnaires (paragraphe 5);

(2) Améliorer l’accessibilité de l’information : les sociétés sont encouragées à mettre en ligne les informations contenues dans leurs déclarations (paragraphe 6);

(3) Faire preuve d’une grande pédagogie dans la fourniture des informations…

(a) … De conformité : « Les informations peuvent être présentées sous la forme d’une déclaration générale ou bien disposition par disposition, du moment qu’elles sont informatives et utiles aux actionnaires, aux investisseurs et aux autres parties prenantes. Les sociétés devraient éviter de faire des déclarations trop générales, qui pourraient ne pas couvrir certains aspects importants pour les actionnaires, ainsi que des déclarations dans lesquelles elles se contentent de cocher des cases et qui n’ont qu’une faible valeur informative. De même, elles devraient également éviter de fournir des informations trop longues, qui pourraient ne pas permettre une bonne lecture » (considérant 16).

(b) … D’explication en cas de dérogation : la Commission européenne explicite la philosophie de la Section III de la Recommandation qui est le cœur de son initiative dans les considérants 17 et 18 que nous reprenons ici. « Il est très important que des informations appropriées sur les dérogations aux codes applicables et les raisons de ces dérogations soient communiquées, afin que les parties prenantes puissent prendre des décisions en connaissance de cause au sujet des sociétés. […] Les sociétés devraient clairement indiquer à quelles recommandations du code elles ont dérogé et, à chaque fois, fournir une explication concernant la manière dont la société y a dérogé, les raisons de cette dérogation, comment la décision de déroger à une recommandation a été prise, les limites dans le temps de la dérogation et les mesures qui ont été adoptées pour garantir que l’action de la société reste conforme aux objectifs de la recommandation et au code. Lorsqu’elles fournissent ces informations, les sociétés devraient éviter d’utiliser des formules toutes faites et mettre l’accent sur le contexte spécifique à la société qui explique la dérogation à une recommandation. Les explications devraient être structurées et présentées de telle manière qu’elles puissent être facilement comprises et utilisées. Il sera ainsi plus facile aux actionnaires d’engager un dialogue constructif avec la société ».

(4) Mettre en place un suivi efficace pour inciter les sociétés à se conformer à un code de gouvernement d’entreprise ou à expliquer le non-respect de ce code ((paragraphe 11).

__________________________________________

[1] Commission européenne, « Recommandation sur la qualité de l’information sur la gouvernance d’entreprise (« appliquer ou expliquer ») », 2014/208/UE, 9 avril 2014 : JOUE L. 109/43 12 avril 2014.

[2] Le « comply or explain » se trouve davantage explicité dans ses aspects juridiques sur le blogue « Gouvernance et services financiers » du Bulletin de droit économique : http://www.droit-economique.org/?page_id=2304.

Bras de fer entre Osisko et Goldcorp | Réflexions sur le rôle des administrateurs

Dans le cadre du cours à la maîtrise de Gouvernance de l’entreprise (DRT-6056) dispensé à la Faculté de droit de l’Université Laval, le professeur Ivan Tchotourian a bénéficié du Programme d’appui au développement pédagogique 2013-2014 et il a mis en place des méthodes innovantes d’apprentissage. Dans le cadre de ce programme, il a été proposé aux étudiants non seulement de mener des travaux de recherche sur des sujets qui font l’actualité en gouvernance de l’entreprise, mais encore d’utiliser un format original permettant la diffusion des résultats. Le présent billet expose le résultat des recherches menées par M. Philippe Côté et M^mesPatricia Gingras et Émilie Le-Huy.

Ce travail revient sur l’offre publique hostile qui a été lancée en janvier 2014 par l’entreprise Goldcorp sur la société québécoise aurifère Osisko et ouvre le débat entourant le contenu des devoirs fiduciaires des administrateurs.

Je vous en souhaite bonne lecture et suis certain que vous prendrez autant de plaisir à le lire que j’ai pu en prendre à le corriger. Merci encore à Jacques de permettre la diffusion de ce travail et d’offrir ainsi la chance à des étudiants de contribuer aux riches discussions dont la gouvernance d’entreprise est l’objet.

Ivan Tchotourian

Bras de fer entre Osisko et Goldcorp : réflexions sur le rôle des administrateurs

En janvier 2014, la minière vancouvéroise Goldcorp a lancé une offre publique d’achat dans le but de prendre le contrôle de la minière Osisko, une compagnie québécoise aurifère exploitée à Malartic, en Abitibi, et employant près de huit cent personnes. Osisko n’exploite pas seulement la plus grosse mine du Québec, mais aussi la plus grosse mine d’or du Canada.

D’« Osisko pour tous » à « tous pour Osisko »

Considérant que l’offre de Goldcorp ne s’insérait pas dans l’intérêt de la société et de ses parties prenantes, le conseil d’administration d’Osisko a fait connaître son désaccord à cette offre publique d’achat, devenue dès lors « hostile » (ci-après « OPA hostile »), et a multiplié depuis les mesures défensives dans l’espoir de contrer celle-ci et de protéger sa société. Elle a ainsi saisi la Cour supérieure[1] et sollicité de nouveaux investisseurs. Tel que l’illustre l’importante couverture médiatique entourant la guerre ouverte ayant cours entre Osisko et Goldcorp, cette dernière ne laisse personne indifférent. Il faut reconnaître qu’une prise de contrôle de la société Osisko par Goldcorp pourrait vraisemblablement mener à la perte d’un siège social important pour le Québec qui verrait un grand moteur économique lui échapper, ce qui n’est pas sans inquiéter les parties prenantes d’Osisko. La bataille d’Osisko a récemment connu un nouveau souffle avec l’arrivée d’un chevalier blanc, mettant à profit certaines des parties prenantes de sa société[2] et augmentant ainsi considérablement ses chances de bloquer l’OPA hostile de Goldcorp[3]. Soulignons toutefois que la partie est loin d’être gagnée puisque Goldcorp a récemment bonifié son offre afin de concurrencer celle du chevalier blanc d’Osisko, la minière torontoise Yamana[4].

Du « déjà-vu » sous le thème des OPA hostiles

Alors que l’aventure d’Osisko se poursuit, celle-ci ramène au premier plan les préoccupations énoncées par la communauté des affaires au cours des dernières années, alors que Rona et Fibrek faisaient face à la menace d’une OPA hostile. Elle rappelle également, par voie de conséquences, les recommandations que l’Autorité des marchés financiers (ci-après l’« AMF ») ainsi que le groupe de travail mandaté par le gouvernement (ci-après le « Groupe de travail ») ont respectivement formulées récemment en vue d’améliorer la protection des sociétés eu égard aux OPA hostiles[5]. Elle met à nouveau en lumière les incohérences du droit des sociétés et du droit boursier devant guider les décisions des administrateurs dans l’exercice de leur devoir fiduciaire. La bataille entre Osisko et Goldcorp relance un débat qui ne s’est finalement jamais conclu : quelle discrétion devrait être accordée aux administrateurs d’une société dans l’exercice des moyens défensifs visant à contrer une OPA hostile ?

Une question d’intérêt

Rappelons que les administrateurs d’une société doivent en tout temps agir dans l’intérêt de la société en vertu des lois québécoise et canadienne[6]. Ces lois ne définissant pas clairement le critère de « l’intérêt de la société », celui-ci demeure sujet à interprétation. Il appert d’ailleurs des récents développements en gouvernance qu’il y a effectivement matière à interprétation : l’intérêt de la société oscille toujours entre sa conception traditionnelle, fondée sur la primauté des actionnaires, soutenue par une réglementation boursière formaliste, commandant de favoriser les actionnaires envers et contre tout, et son courant plus libéral, largement influencé par nos voisins américains, puis supportée par d’importantes décisions de la Cour suprême du Canada, telles que les causes Peoples[7] et BCE[8]. Il en ressort ainsi que la grande déférence qu’accordent les tribunaux judiciaires aux décisions des administrateurs[9] se voit limitée, par ailleurs, par la réglementation des autorités canadiennes en valeurs mobilière qui leur commande de garantir le libre choix des actionnaires de la société, à qui l’OPA hostile est adressée[10]. Bien que cette réglementation se justifie aisément en raison du contrôle qu’elle permet d’exercer sur l’opportunisme des administrateurs de la société, il n’en demeure pas moins qu’elle réduit considérablement la discrétion des administrateurs dans l’évaluation du meilleur intérêt de la société, lequel prendra naturellement des allures traditionnelles.

L’espoir du renouveau

Par leur nature fortement inspirée du droit émanant du Delaware[11], les recommandations de l’AMF et du Groupe de travail semblent s’insérer dans une volonté de plus en plus populaire d’élargir la discrétion des administrateurs, afin qu’ils puissent considérer plus librement l’intérêt des parties prenantes dans l’exercice de leur pouvoir décisionnel face à une OPA hostile, ce qui pourrait contribuer d’autant à la clarification de leur devoir fiduciaire dans un tel contexte. Cependant, ces mesures n’auront rien d’une panacée tant que les autres provinces canadiennes n’adopteront pas des mesures semblables à celles proposées par l’AMF et n’emboîteront pas le pas au Québec, ce qui est loin d’être chose faite[12].

Le dernier acte

Pour l’heure, il semble bien que le salut d’Osisko repose entièrement sur l’ardeur de ses administrateurs à préserver l’intérêt à long terme de la société, qui s’inscrit du même coup dans l’intérêt de ses parties prenantes. Dans un monde où le meilleur intérêt de la société ne fait pas consensus, laissant planer le spectre d’une lourde responsabilité à l’encontre de toute décision des administrateurs s’éloignant de la traditionnelle conception de la primauté des actionnaires, il y a lieu de se demander jusqu’où les administrateurs pourront porter leur étendard avant de se voir attribuer l’étiquette des opportunistes.

Philippe Côté

Patricia Gingras

Émilie Le-Huy

Anciens étudiants du cours DRT-6056 Gouvernance de l’entreprise

_____________________________________________________

[1] Osisko, qui reprochait à Goldcorp d’avoir agi de mauvaise foi dans le cadre de la présentation de son OPA, a finalement retiré sa poursuite. Voir Agence France-Presse, « Osisko retire sa poursuite contre Goldcorp », affaires.lapresse.ca, 3 mars 2014.

[2] Lesaffaires.com, « Osisko trouve son sauveur: Yamana Gold », lesaffaires.com, 2 avril 2014 ; Sylvain Larocque, « La Caisse appuie le chevalier blanc d’Osisko », affaires.lapresse.ca, 2 avril 2014.

[3] En effet, avec l’aide de la Caisse de dépôt et de placement du Québec ainsi que l’Office d’investissement du Régime de pensions du Canada (OIRPC), l’entreprise torontoise Yamana Gold propose d’acheter la moitié de la société aurifère québécoise pour un montant 1,37 milliard, une offre qui vient concurrencer celle de Goldcorp. Voir J.-P. Décarie, « Osisko, un très bon coup de la Caisse », affaires.lapresse.ca, 5 avril 2014.

[4] Lesaffaires.com, « Goldcorp bonifie son offre pour Osisko », lesaffaires.com, 10 avril 2014.

[5] L’AMF propose dans son rapport des modifications radicales de la règlementation concernant le rôle des régulateurs de valeurs mobilières. Selon certains experts, ses propositions se rapprochent de la législation du Delaware, où plus de 60 % des grandes entreprises ont leur siège juridique.Voir le rapport de l’AMF : AUTORITÉ DES MARCHÉS FINANCIERS, Un regard différent sur l’intervention des autorités en valeurs mobilières dans les mesures de défense, Document de consultation, Montréal, 2013. Voir également à ce sujet Y. allaire, « Le Québec : sièges sociaux et prises de contrôle », lesaffaires.com, 24 février 2014. Quant aux recommandations du Groupe de travail, voir Groupe de travail sur la protection des entreprises au Québec, Le maintien et le développement des sièges sociaux au Québec, Québec, Gouvernement du Québec, 2014.

[6] Loi sur les sociétés par actions, L.R.Q. c. S-31.1, art. 119 ; Loi canadienne sur les sociétés par actions, L.R.C. 1985, c. C-44, art. 122.

[7] Magasins à rayons Peoples inc. c. Wise, [2004] 3 R.C.S. 461.

[8] BCE Inc. c. Détenteurs de débentures de 1976, [2008] 3 R.C.S. 560.

[9] Sur la règle de l’appréciation commerciale, voir R. Crête et S. Rousseau, Droit des sociétés par actions, 3^e éd., Montréal, Éditions Thémis, 2011, aux par. 1036-1058.

[10] Règlement 62-104 sur les offres publiques d’achat et de rachat, L.R.Q. c. V-1.1, r. 35 ; Avis 62-202 relatif aux mesures de défense contre une offre publique d’achat, Bulletin hebdomadaire, vol. XXXIV, n^o 28, 18 juillet 2003.

[11] Sur le droit du Delaware, voir S. Rousseau et P. Desalliers, Les devoirs des administrateurs lors d’une prise de contrôle : étude comparative du droit du Delaware et du droit canadien, Montréal, Édtions Themis, 2007.

[12] Pensons notamment aux défis que représente l’harmonisation d’un tel régime avec l’ensemble des législations fédérales et provinciales (autres que québécoises) auxquelles seront confrontées tôt ou tard les entreprises québécoises désirant s’inscrire à la Bourse de Toronto. Voir M. Vallières, « Québec devrait s’aligner avec les provinces et Ottawa », lesaffaires.com, 22 février 2014.

La saga d’American Apparel | Une affreuse gouvernance

Voici un article publié par Gael O’Brien dans Business Ethics sur la saga de la gouvernance à American Apparel. Le fondateur Charney est en guerre contre son conseil d’administration pour une foule de raisons, valables à mon point de vue.

La situation est d’autant plus saugrenue que le président Charney est responsable de la nomination des membres du C.A. !

Je vous invite à une lecture pimentée d’une situation surréelle dont vous trouverez un extrait ci-dessous.

American Apparel: Sex, Power and Terrible Corporate Governance

The American Apparel story gets crazier by the moment.

Actions taken by the company’s board two weeks ago to attempt to remove founder Dov Charney as chairman and CEO have prompted him to launch a counteroffensive to regain control of American Apparel. Working with hedge fund investors, Charney has borrowed money to increase his shares in the company to 43 percent and is threatening a proxy fight. But the hedge fund investors working with Charney are now negotiating with the very board that fired him – and there’s a possibility that a new management team could be appointed that does not include Charney.

Whether Charney is successful or not, the result of his past leadership is an American Apparel characterized by two faces in opposition to each other. When that happens, the worst face eventually outweighs the best. The retail company’s attempts at socially responsible practices — clothes touted as ethically made in the United States – have ended up being plowed under by the repugnant behavior of its leader, who sexualized the workplace as a stalking ground for employee relationships called consensual, disregarding disparity of age and power.

American Apparel’s drama illustrates two key problems: In companies where there is a dominant founder running the company according to the beat of his (or her) own drum, how hands-on can a hand-picked board be when it is necessary to reign in the founder? And, when ethical issues surface in a company with a sexually provocative brand image, how does a hand-picked board ensure a clear stand is taken?

Charney’s hand-picked board supported him for years through several very public sexual harassment lawsuits — not appearing to reign in his philosophy that a sexually-charged workplace fosters creativity; it authorized a quiet, internal investigation this year which uncovered examples where they said Charney misused company funds and didn’t prevent the posting of naked photos of a former employee who had sued him for sexual harassment a few years before.

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Gael O’Brien, a Business Ethics Magazine columnist, is a consultant, executive coach, and presenter focused on building leadership, trust, and reputation. She publishes the The Week in Ethics and is The Ethics Coach columnist for Entrepreneur Magazine.

Attention aux huis clos !

Nous avons déjà abordé l’importance d’inscrire un item « huis clos » à l’ordre du jour des réunions du conseil d’administration. Celui-ci doit normalement être à la fin de la réunion et comporter une limite de temps afin d’éviter que la réunion ne s’éternise … et que les membres de la direction (qui souvent attendent la fin de la rencontre) soient mieux informés.

Ensuite, le président du conseil d’administration (PCA) devrait rencontrer le président et chef de la direction (PCD) en privé, et dans les meilleurs délais, afin de rendre compte des résultats et de la portée du huis clos. Cette responsabilité du PCD est déterminante car les dirigeants ont de grandes attentes et un souci eu égard aux discussions du huis clos.

Plusieurs dirigeants et membres de conseil m’ont fait part de leurs préoccupations concernant la tenue des huis clos. Il y a des malaises dissimulés en ce qui a trait à cette activité; il faut donc s’assurer de bien gérer la situation car les huis clos peuvent souvent avoir des conséquences inattendues, voire contre-productives !

Ainsi, le huis clos :

(1) ne doit pas être une activité imprévue et occasionnelle inscrite à l’ordre du jour,

(2) doit comporter une limite de temps,

(3) doit être piloté par le PCA,

(4) doit comporter un suivi systématique et,

(5) doit se dérouler dans un lieu qui permet de préserver la confidentialité absolue des discussions.

J’insiste sur cette dernière condition parce que l’on a trop souvent tendance à la négliger ou à l’oublier, carrément. Dans de nombreux cas, la rencontre du conseil a lieu dans un local inapproprié, et les dirigeants peuvent entendre les conversations, surtout lorsqu’elles sont très animées …

Au début de la séance, les membres sont souvent insoucieux; avec le temps certains peuvent s’exprimer très (trop) directement, impulsivement et de manière inconvenante. Si, par mégarde, les membres de la direction entendent les propos énoncés, l’exercice peut prendre l’allure d’une véritable calamité et avoir des conséquences non-anticipées sur le plan des relations interpersonnelles entre les membres de la direction et avec les membres du conseil. 26856_10028886_1367856120_conseil-administration

L’ajout d’un huis clos à l’ordre du jour témoigne d’une volonté de saine gouvernance mais, on le comprend, il y a un certain nombre de règles à respecter si on ne veut pas provoquer la discorde. Les OBNL, qui ont généralement peu de moyens, sont particulièrement vulnérables aux manquements à la confidentialité ! Je crois que dans les OBNL, les dommages collatéraux peuvent avoir des incidences graves sur les relations entre employés, et même sur la pérennité de l’organisation.

J’ai à l’esprit plusieurs cas de mauvaise gestion des facteurs susmentionnés et je crois qu’il vaut mieux ne pas prendre le bien fondé du huis clos pour acquis.

Ayant déjà traité des bienfaits des huis clos lors d’un billet antérieur, je profite de l’occasion pour vous souligner, à nouveau, un article intéressant de Matthew Scott sur le site de Corporate Secretary qui aborde un sujet qui préoccupe beaucoup de hauts dirigeants : le huis clos lors des sessions du conseil d’administration ou de certains comités.

L’auteur explique très bien la nature et la nécessité de cette activité à inscrire à l’ordre du jour du conseil. Voici les commentaires que j’exprimais à cette occasion.

« Compte tenu de la « réticence » de plusieurs hauts dirigeants à la tenue de cette activité, il est généralement reconnu que cet item devrait toujours être présent à l’ordre du jour afin d’éliminer certaines susceptibilités.

Le huis clos est un temps privilégié que les administrateurs indépendants se donnent pour se questionner sur l’efficacité du conseil et la possibilité d’améliorer la dynamique interne; mais c’est surtout une occasion pour les membres de discuter librement, sans la présence des gestionnaires, de sujets délicats tels que la planification de la relève, la performance des dirigeants, la rémunération globale de la direction, les poursuites légales, les situations de conflits d’intérêts, les arrangements confidentiels, etc. On ne rédige généralement pas de procès-verbal à la suite de cette activité, sauf lorsque les membres croient qu’une résolution doit absolument apparaître au P.V.

La mise en place d’une période de huis clos est une pratique relativement récente, depuis que les conseils d’administration ont réaffirmé leur souveraineté sur la gouvernance des entreprises. Cette activité est maintenant considérée comme une pratique exemplaire de gouvernance et presque toutes les sociétés l’ont adoptée.

Notons que le rôle du président du conseil, en tant que premier responsable de l’établissement de l’agenda, est primordial à cet égard. C’est lui qui doit informer le PCD de la position des membres indépendants à la suite du huis clos, un exercice qui demande du tact !

Je vous invite à lire l’article ci-dessous. Vos commentaires sont les bienvenus ».

Are you using in-camera meetings ?

Nouveau code de conduite européen pour les firmes spécialisées en recherche de cadres

Voici un bref condensé préparé par Roger Baker, de IoD (UK) et diffusé par Béatrice RICHEZ-BAUM, secrétaire générale de European Confederation of Directors’ Associations (ecoDa), relatif aux nouvelles directives contenues dans un code de conduite à l’intention des firmes conseils en recrutement de cadres et d’administrateurs de sociétés.

Ce nouveau code, dit volontaire, met l’accent sur la reconnaissance des efforts des sociétés du FSTE 350 eu égard à la planification de la relève des administrateurs, notamment des candidates féminines. Cette approche « soft » rejoint tout à fait le courant de pensée britannique en matière de changement dans le domaine de la gouvernance corporative (Comply or Explain).

The new Code of Conduct for Executive Search firms

The new Enhanced Voluntary Code of Conduct for Executive Search Firms gives recognition to those firms who have been most successful in the recruitment of women to FSTE 350 boards. It builds on the terms of the standard voluntary code and will also recognize the outstanding efforts of search firms working to build the pipeline of FTSE board directors of the future.

The Enhanced Voluntary Code was drawn up by the search firms themselves working with the Davies Steering Group. It contains 10 new provisions, from launching initiatives to support aspiring women to sharing of best practice and running awareness programmes within their own firms.

Under the new provisions, it is specified that:

Search firms should support chairmen and their nomination committees in developing medium-term succession plans that identify the balance of experience and skills that they will need to recruit for over the next two to three years to maximize board effectiveness. This time frame will allow a broader view to be established by looking at the whole board, not individual hires; this should facilitate increased flexibility in candidate specifications.

When taking a specific brief, search firms should look at overall board composition and, in the context of the board’s agreed aspirational goals on gender balance and diversity more broadly, explore with the chairman if recruiting women directors is a priority on this occasion.

During the selection process, search firms should provide appropriate support, in particular to first-time candidates, to prepare them for interviews and guide them through the process.

Search firms should provide advice to clients on best practice in induction and ‘onboarding’ processes to help new board directors settle quickly into their roles.

Voici un lien qui vous donnera plus de détails sur ce nouveau code ainsi qu’une vidéo de Viviane Reeding sur l’importance à accorder à l’accroissement du nombre de candidatures féminines aux conseils d’administration des sociétés européennes :

http://www.aesc.org/eweb/Dynamicpage.aspx?webcode=PressRelease&wps_key=012f6000-a53e-49f3-b2de-0a1e8eda7106

Articles reliés :

Coûts élevés associés à la combinaison des rôles du président du conseil et du président de la société

Andrea Ovans, senior editor du Harvard Business Review, a récemment publié un article d’actualité en gouvernance dans HBR Blog Network. L’auteure fait le point sur les études concernant la séparation des pouvoirs entre le PCD et les PCA.

Sa conclusion est qu’il n’y a pas de différences significatives dans le rendement des firmes, sauf lorsque l’on analyse la situation à long terme. Dans ce cas, la séparation des rôles est favorable (40 % vs 31 %) sur une période de 5 ans. L’auteure conclue que la réalisation de rendements supérieurs à long terme, lorsque les fonctions sont séparées, vient de la situation vécue par des entreprises aux prises avec les carences de leurs PCD (CEO).

Sinon, selon Mme Ovans, les résultats seront les mêmes peu importe le système de gouvernance que les actionnaires adopteront ! C’est évidemment une conclusion qui va à l’encontre des principes de bonne gouvernance. Qu’en pensez-vous ?

Il y a cependant un coût élevé à combiner les deux rôles. Le tableau présenté dans le texte ci-dessous est éloquent !

Bonne lecture !

The Cost of Combining the CEO and Chairman Roles

Will Netflix’s shareholders be sorry that they voted to let Reed Hastings carry on as both CEO and chairman? A look through the research on combining and separating out the two roles suggests that, much like most splits in life, the answer is… complicated.

Netflix’s shareholders notwithstanding, most people assume the right answer is to keep the two roles separate, in the interests of diversity of thinking and proper CEO oversight. And that’s how pretty much every research report starts — before going on to explain why it probably isn’t so.

Back in 2006, for instance, in an article in our magazine entitled “Before You Split that CEO/Chair…,” Robert Pozen, chairman (but not CEO) of a Boston-based investment management firm, cited three studies from three different countries (the U.S., the U.K., and Switzerland) which each found no statistically significant difference in terms of stock price or accounting income between companies that split the roles and those that combined them. These findings echoed dozens of previous ones going as far back as 1996.

Harvard Law School Langdell Library in Cambridge, Mass. (Photo credit: Wikipedia)

Yet over the same period, a steady stream of business thinkers and practitioners offered up reasons (if not data) for why splitting the two roles could cause trouble. In 2003, for instance, in “In Defense of the CEO Chair,”Harvard Law’s William Allen and William Berkeley (who was chairman and CEO of the eponymous insurance holding company) argued that doing so would create two armed camps that would interfere with productivity. Two years later, Jay W. Lorsch and Andy Zelleke similarly argued in the Sloan Management Review that splitting the two roles blurs lines of responsibility, distracts both parties, and creates power struggles.

Maybe that’s why the 2012 research from Matthew Semadeni and Ryan Krause at the University of Indiana’s Kelley School was so widely reported as suggesting that the roles should not be split unless the company is doing badly. But a closer look shows the findings have more in common with the “it doesn’t make any difference” camp than the headlines would suggest.

The study looked at three scenarios, all of which involved what happens when a combined CEO/chair is split. In the first, a sitting CEO/chair gives up the CEO role but remains chairman, essentially making the incoming CEO an apprentice. In the second, the incumbent CEO/chair leaves (voluntarily or not), and the positions are filled with two separate people. In the third, a CEO/chair remains CEO but gives up the chair to another (what the researchers referred to as a demotion). In that last circumstance, if the company was in difficulties, the data indicated that splitting the two roles, so that someone could ride herd over a less-than-ideal CEO, made a positive difference. But in the first two cases, once again, the data found no difference in company fortunes. From this, Krause drew a general if-ain’t-broke-don’t-fix-it conclusion, not because splitting the roles would cause harm but because when a company is doing well, it doesn’t appear to matter which model you follow.

That same year, though, a more obscure study from GovernanceMetrics International, highlighted by the Harvard Law School Forum, approached the question from a different angle, tracking not just the effects but the costs of splitting the two roles.

The 2012 study looked at 180 North American corporations with a market capitalization of $20 billion or more. Given the complexities of running such large businesses, it was thought, differences in cost and performance of different leadership structures would be especially marked.

And differences there were. Surprisingly, combining the two roles cost more than splitting them – much more. Median total compensation (base salary, bonus, incentives, perks, stock, stock options, and retirement benefits) of executives holding both positions was $16 million. That was nearly 60% more than the median combined compensation ($10.6 million) awarded to the two individuals in companies in which the positions were split. Considering that median income for the chair-only position was just under $500,000, it’s hard not to avoid drawing the conclusion that the order-of-magnitude $5.4 million extra the CEO receives for taking on the additional chairmanship duties is rather a lot. This impression is further strengthened by the fact that the median income for non-independent chairs was $630,930 — more than 50% higher than the $417,910 for independent chairs (making a company run by a separate CEO and independent chair a real bargain).

One might argue that differences in compensation reflect differences in corporate performance, and if that’s the case, it would be a strong argument for combining the two roles. That was so in this study – but only in the short term. Median one-year shareholder returns for companies in which the roles are combined were an impressive 11.65%, compared with a distinctly anemic 2.27% for those in which the roles were separate. Over time, however, performance for the first group lagged and the other improved such that shareholders shelling out for a combined CEO/chair received five-year returns of 31.3% while their counterparts, paying considerably less to both their CEO and chair, were enjoying an even more impressive 39.96% return.

Put all of these finding together, and perhaps the only conclusion one can draw is that the higher long-term returns for companies in which the roles are separate come from struggling companies that take steps to address the inadequacies of their CEOs (or that lower returns in companies where the roles are combined come from allowing a poor CEO too much latitude for too long).

Otherwise, most of the research suggests that Netflix’s fortunes, like most companies, will be what they will be – regardless of whichever governance system the shareholders vote in.

Une subvention de recherche de l’AMF à Ivan Tchotourian

L’Autorité des marchés financiers (AMF) a octroyé au professeur Ivan Tchotourian, de la Faculté de droit de l’Université Laval, par le biais du Fonds pour l’éducation et la saine gouvernance (FESG), une subvention de 60 000 dollars pour une durée de deux ans, pour financer son projet de recherche intitulé « Le droit de vote des actionnaires en question ».

Le FESG soutient des projets axés sur la protection et l’éducation des investisseurs, la promotion de la gouvernance et l’amélioration des connaissances, dans tous les domaines liés à la mission de l’Autorité. Il favorise, entre autres, le développement et la transmission des connaissances en matière d’éducation financière et de gouvernance.

Ivan Tchotourian enseigne en droit des sociétés et gouvernance des entreprises. Il codirige par ailleurs le Centre d’études en droit économique et anime le blogue Contact : Droit, entreprise et citoyen.

Le point de vue de Mary Jo White, PDG de la SEC, sur les responsabilités des administrateurs de sociétés

Aujourd’hui, je vous présente les grandes lignes de l’allocution que Mary Jo White, présidente de la US Securities and Exchange Commission (SEC), a exposé devant les membres du Stanford Directors’ College, le 23 juin 2014.

Après avoir brièvement décrit la structure et les fonctions de la SEC, Mme White a choisi d’aborder trois thèmes très importants pour les administrateurs de sociétés :

(1) Le rôle crucial que les administrateurs de sociétés jouent en tant que gardiens des intérêts des actionnaires;

(2) La divulgation des malversations et la coopération avec les investigations de la SEC;

(3) La description du programme de dénonciation (whistleblower) de la SEC, son fonctionnement et ses relations avec le programme de conformité et de contrôle interne de la firme.

Dans ce billet, je présente le point de vue de la SEC eu égard aux rôles fondamentaux que les administrateurs jouent dans la gouvernance des entreprises. Je crois, que comme moi, vous serez intéressé de savoir ce que pense la présidente du plus puissant organisme de surveillance et de régulation des marchés des capitaux au monde. Bonne lecture !

A Few Things Directors Should Know About the SEC

Directors Are Essential Gatekeepers

Those of you who are directors play a critically important role in overseeing what your company is doing, and by preventing, detecting, and stopping violations of the federal securities laws at your companies, and responding to any problems that do occur. In other words, you are the essential gatekeepers upon whom your investors and, frankly, the SEC rely. We see you as our partners in the effort to ensure that investors in our capital markets can invest with confidence and, hopefully, success.

At the SEC, we typically use the term “gatekeeper” to refer to auditors, lawyers, and others who have professional obligations to spot and prevent potential misconduct. And while there are certainly other gatekeepers who may be closer to some of the action or more familiar with the details of a transaction or a disclosure document, a company’s directors serve as its most important gatekeepers. For by law, it is ultimately the fiduciary responsibility of the board of directors to oversee the business and affairs of a company.

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

In discharging this important responsibility, it is essential for directors to establish expectations for senior management and the company as a whole, and exercise appropriate oversight to ensure that those expectations are met. It is up to directors, along with senior management under the purview of the board, to set the all-important “tone at the top” for the entire company.

Ensuring the right “tone at the top” for a company is a critical responsibility for each director and the board collectively. Setting the standard in the boardroom that good corporate governance and rigorous compliance are essential goes a long way in engendering a strong corporate culture throughout an organization.

How directors can most effectively instill a strong corporate culture and how challenging it is to do so will vary from company to company. CEOs come with a range of experiences and perspectives. Many, including some here in Silicon Valley, are, at heart, innovators whose day job has come to include being the business leader of a public company. As board members, one of the most important duties you have is to select the right CEO for your company and to ensure that he or she “gets it,” in terms of understanding the importance of tone at the top and a strong corporate culture. Deficient corporate cultures are often the cause of the most egregious securities law violations, and directors, both directly and through the oversight of senior management, play a key role in shaping the prevailing attitude and behaviors within a company.

As a former director and member of an audit committee of a public company, I know the heavy responsibilities you bear and the time-consuming work that is required of you. The best advice I can give for being an effective director is to learn and be engaged. As directors, you must understand your company’s business model and the associated risks, its financial condition, its industry and its competitors. You must pay attention to what senior managers say, but also listen for the things they are not saying. You have to know what is going on in your company’s industry, but also the broader market. You need to know what your company’s competitors are doing and what your shareholders are thinking.

At the risk of hearing a collective groan in response, I would also urge you to consider another outside view that would also be useful to you as a director—the view of your regulators. Listen to what they say publicly is important to them, what is problematic to them. Talk to them. Perhaps visit them. I know of an audit committee chair who visits all of his company’s major regulators once a year, including the international regulators. You may get an earful from time-to-time, but it will be invaluable input for you as a director.

To state the obvious, you must ask the difficult questions, particularly if you see something suspicious or problematic, or, simply, when you do not understand. You should never hesitate to ask more questions, and, always, insist on answers when questions arise. It also goes without saying that you should never ignore red flags. It is your job to be knowledgeable about issues, to be vigilant in protecting against wrongdoing, and to tackle difficult issues head on.

Chair Mary Jo White (Photo credit: Securities and Exchange Commission)

Of course, it is always important for you to know what your shareholders—the owners of your company—are thinking. As most boards today recognize, an open and constructive dialogue with shareholders is not only the right thing to do, but also very helpful in providing perspective on the challenges a company is facing. Many institutional shareholders have unique insights on industry dynamics, competitive challenges and how macroeconomic events are shaping the environment for your company. But it is important not to forget about your other shareholders. There is real value in listening to their views and their voice, as well.

Look thoughtfully at the proposals shareholders are submitting to your company. Ask your management team about them and about the proposals that other companies are receiving that could be relevant to your company. Look at the voting results at shareholder meetings—the percentage of votes for a shareholder– supported resolution or against a management–supported resolution are important, irrespective of whether the resolution is approved, or not.

Ethics and honesty can become core corporate values when directors and senior executives embrace them. This includes establishing strong corporate compliance programs focused on regular training of employees, effective and accessible codes of conduct, and procedures that ensure complaints are thoroughly and fairly investigated. And, it must be obvious to all in your organization that the board and senior management highly value and respect the company’s legal and compliance functions. Creating a robust compliance culture also means rewarding employees who do the right thing and ensuring that no one at the company is considered above the law. Ignoring the misconduct of a high performer or a key executive will not cut it. Compliance simply must be an enterprise-wide effort.

Obama: ‘You don’t want to mess with Mary Jo.’ Here’s why.

Les PCD (PDG) d’OBNL ne sont pas « tout puissant » !

Voici un autre article intéressant d’Eugene Fram sur son blogue Nonprofit Management. Le PCD (CEO) d’un OBNL doit avoir beaucoup de pouvoir mais ne doit pas se comporter en « matamore » mais plutôt en partenaire du conseil d’administration.

Le C.A. constitue, bien sûr, l’autorité suprême de l’OBNL, mais on constate souvent que l’on doive laisser beaucoup d’initiatives au PCD compte tenu de la situation particulière de plusieurs organisations à but non lucratif.

Voici un court extrait de l’article que je vous invite à lire afin de mieux saisir les nuances en gouvernance de ce type d’organisation.

Nonprofit CEO: Board Peer – Not A Powerhouse

Some nonprofit CEOs make a fetish out of describing their boards and/or board chairs as their “bosses.” Others, for example, can see the description, as a parent-child relationship by funders. The parent, the board, may be strong, but can the child, the CEO, implement a grant or donation? Some CEOs openly like to perpetuate this type of relationship because when bad decisions come to roost, they can use the old refrain: the board made me do it.

The Networked Nonprofit (Photo credit: HowardLake)

My preference is that the board-CEO relationship be a partnershipamong peers focusing on achieving desired outcomes and impacts for the nonprofit. (I, with others, would make and have made CEOs, who deserve the position, voting members of their boards!)

La présidence du conseil d’administration (PCA) | Une fonction essentielle au succès des organisations

J’ai répertorié un article d’Andrew Saunders paru dans Management Today en juin 2014 qui décrit toute l’importance du rôle de leader du président du conseil d’administration (PCA).

Selon l’auteur, les fonctions du PCA sont de plus en plus reconnues, au point où il est souvent plus facile de trouver un PDG qu’un grand leader du conseil. L’article présente la fonction de PCA comme consubstantiel au succès de l’entreprise et montre les caractéristiques-clés de ces grands leaders.

J’ai souvent fait référence à l’importance accrue des présidents de conseil dans mes billets précédents. Cet article va plus loin, et plus en détail, sur ce qui fait le succès d’un bon patron du conseil.

Voici un extrait de cet excellent article que je vous invite à lire.

« The chief executive may get the glory and the salary, but leading the board is an increasingly important role, requiring subtlety, maturity and an iron grip on the agenda »

The importance of being a chairman

By contrast, the chairman’s role is less obvious and much less well understood. The task of running the board rather than running the company can appear limited and process-heavy, a lot of dull admin to be tackled while the CEO has all the fun.

But there is much more to it than that: a good chairman is at least as important for the long-term prosperity of a business as a good CEO, and often harder to find. How different might the outcome at Manchester United have been if veteran manager Sir Alex Ferguson had not been allowed to pick his own successor?

A strong chairman should influence the decision-making process, if not always its outcome, greatly for the better. And yet, by comparison with the wide-ranging executive authority enjoyed by the CEO, the chairman’s powers are distinctly limited.

‘As chairman you only really have absolute control of two things,’ says Roger Parry, the chairman of MSQ Partners and a former chairman of Johnston Press and Future Publishing, among others. ‘Firstly, you have (or should have) a lot of influence over hire and fire – you pretty much get to decide who is on the board.

‘And the second crucial thing is that, in the board meeting, you can control what is discussed and for how long. Not only the agenda itself, but the amount of time to be spent on each item. A good deal of the agenda is fixed – you have to discuss health and safety, performance against budget, remuneration and so on – but the weight of emphasis can be shifted by the chairman.’

GOOD CHAIRMEN

Do

Pick NEDs who are sufficiently diverse and strong-minded to challenge the executive directors.

Maintain a five-year perspective. The executive directors are focused on this year, the senior managers on this month. Your job is to take a longer view.

Support chief execs as best you can, know their personal circumstances, priorities and how long they want to stay.

Put your network and wider business experience at the disposal of the board.

Don’t

Dole out non-exec jobs to your old mates.

Get too chummy with CEOs: if you go on family holidays together, it will be much harder to sack them if and when the time comes.

Pull rank on a director in front of their boardroom colleagues.

Ever let the words: ‘This is how we did it when I was the chief executive …’ pass your lips in a board meeting.

Gouvernance des OBNL | Questions que les administrateurs devraient se poser

Ce document phare, publié en juin 2014 par CPA Canada*, sous la plume de Don Taylor, est un outil précieux, voire indispensable, pour tout administrateur d’OBNL. Les administrateurs de sociétés sont exposés à un cadre conceptuel vraiment révélateur eu égard à la mise en œuvre de l’organisation ou au raffinement de la gouvernance d’un organisme à but non lucratif.

On y trouvera également un recueil des principales questions que les administrateurs d’OBNL doivent se poser en siégeant sur ces conseils.

Si vous êtes impliqué (engagé) dans la gouvernance d’un OBNL, je suis persuadé que cette publication est pour vous. Bonne lecture !|

Gouvernance des organismes sans but lucratif | Questions que les administrateurs devraient se poser

Le Conseil sur la surveillance des risques et la gouvernance des Comptables professionnels agréés du Canada (CPA Canada) a préparé le présent guide afin d’aider les administrateurs d’organismes sans but lucratif (OSBL) à s’assurer qu’un bon cadre de gouvernance est en place, de manière à favoriser la productivité, la reddition de comptes et le succès de ces organismes dans la réalisation de leur mission.

English: CPA Global Logo (Photo credit: Wikipedia)

Voici les principales étapes qui seront abordées pour guider les administrateurs d’OSBL dans l’élaboration ou la mise au point d’un tel cadre :

• compréhension des exigences et du contexte législatifs;

• conception du cadre de gouvernance;

• mise en œuvre du cadre de gouvernance;

• établissement d’une saine dynamique au sein du conseil;

• suivi, apprentissage et amélioration sur une base continue.

Le guide propose également des questions que les administrateurs peuvent poser pour savoir si le cadre de gouvernance et les processus connexes de l’OSBL sont efficaces et adaptés aux besoins particuliers de celui-ci. Nous encourageons aussi les administrateurs à formuler d’autres questions selon la situation particulière de l’OSBL en question.

____________________________________

* ©2014 CPA Canada. Le lien vers Gouvernance des organismes sans but lucratif | Questions que les administrateurs devraient se poser est utilisé avec la permission des Comptables professionnels agréés du Canada. Sa reproduction ou sa distribution, de quelque façon que ce soit, constitue une violation du droit d’auteur des Comptables professionnels agréés du Canada et est strictement interdite.

Let’s talk : Governance | EY Center for Board Matters

Voici un document intéressant d’Ernst & Young (EY) qui identifie les priorités majeures en gouvernance pour les investisseurs en 2014.

Voici un extrait du document. Bonne lecture.

Let’s talk : Governance | EY Center for Board Matters

« An emerging dynamic of the 2014 proxy season is the move toward a greater focus on board effectiveness. Investors—through direct engagement, letters to boards and shareholder proposals—are increasingly communicating their expectations around governance and for companies to more clearly explain their governance decisions and approach on key issues. These developments are raising the importance for companies to have proxy disclosures that tell a clear governance story and to have company-investor dialogues that are ongoing and constructive. Examining this evolving landscape, EY’s Center for Board Matters released a new report – 2014 Proxy season preview: Boards face shifting investor priorities and expectations – to provide boards and those who support them with timely, data-rich analysis of the areas of investor focus going into the proxy season.

“There’s a new paradigm in company-investor engagement in that it’s no longer reserved for times of crisis, and in some cases directors are increasingly playing a role. Companies are recognizing that a, constructive approach to engagement, particularly with long-term investors, can build trust and investor support,” said Allie Rutherford, Director of Corporate Governance in the EY Center for Board Matters.

Key governance priorities for investors this year include:

Board composition and renewal: Investors are highlighting board composition and renewal as a priority in 2014, saying they want to know that the right people – those with qualification aligned with the company’s strategic goals, stakeholders and risk oversight needs – are in the boardroom. Investors are increasingly raising these topics in discussions with companies.
English: Ernst & Young board close to Time Square in New York (Photo credit: Wikipedia)
Board structure and accountability: Investors list board structure and accountability as a priority and these investors are continuing to push for the annual election of all directors under a majority vote standard. Some investors are also looking to see that a board has a strong independent chair or lead director with clearly defined, robust responsibilities.
Sustainability: Investors also include environmental and social topics as a key priority. Combined, these topics continue to represent the largest number of shareholder proposals submitted. Investors are focused on environmental sustainability and human rights and labor conditions, including across a company’s global supply chain. Shareholder requests for enhanced disclosure, monitoring and management of these sustainability related risks are growing.
Executive compensation: More than 2400 companies with annual say-on-pay (SOP) votes will continue to gauge investor support for their compensation policies and practices, and 2014 will mark the second SOP vote for companies that elected triennial frequencies. Some shareholders also are submitting proposals targeting specific pay practices, such as to limit the accelerated vesting of equity awards and to adopt or enhance executive clawback policies, including asking for disclosure of when decisions to claw back pay have been made.
Political and lobbying spending and oversight: A number of investors continue to prioritize requests for enhanced transparency and oversight around a company’s political and lobbying expenditures in the absence of SEC rulemaking on this topic. This year, shareholder proposal seeking board oversight and disclosure of political and lobbying expenditures are the most common in terms of numbers, with more than 120 submitted to companies across a wide range of size and industry ».

Quel est le profil d’administrateurs recherchés par les OBNL ?

Philippe MASSÉ, agent de développement de l’organisation Leadership Montréal | Conférence régionale des élus de Montréal, m’a récemment fait parvenir les résultats d’une étude réalisée sur les profils d’administrateurs recherchés par les OBNL de la région de Montréal.

Vous trouverez, ci-dessous, l’introduction au document en guise de mise en contexte.

Bonne lecture. Vos commentaires sont les bienvenus.

PROFILS D’ADMINISTRATEURS RECHERCHÉS PAR LES OBNL

Du 21 janvier au 7 février 2014, la Conférence régionale des élus (CRÉ) de Montréal et certains de ses partenaires ont invité des représentants d’organisations à but non lucratif (OBNL) à compléter un questionnaire relatif aux profils d’administrateurs recherchés par leur conseil d’administration. Cette démarche a été réalisée dans le cadre de l’initiative Leadership Montréal. Centraide du Grand Montréal, le Conseil des arts de Montréal et le Comité d’économie sociale de l’île de Montréal (CÉSÎM) ont participé à l’exercice et ont invité leurs membres et partenaires à répondre au questionnaire.

Montreal shining (Photo credit: Clément Belleudy)

Au total, 336 personnes ont répondu au questionnaire. De ce nombre, 264 l’ont complété, soit 78,6 % des répondants. Les données présentées dans ce document ne tiennent compte que des réponses fournies par ces 264 répondants. La démarche effectuée n’est pas scientifique et les réponses obtenues ne constituent pas un échantillon représentatif des OBNL de la région montréalaise. L’utilisation et l’interprétation des résultats doivent donc se faire avec la plus grande réserve. Les pourcentages indiqués reflètent le point de vue des répondants et ne représentent nullement l’ensemble des OBNL.

Vous trouverez ici une synthèse des réponses recueillies ainsi que quelques pistes de réflexion sur les enjeux de la relève au sein des conseils d’administration (C. A.) de la région de Montréal. Ce document compte 5 sections :

(1) Profils des organisations répondantes

(2) Profils des administrateurs recherchés

(3) Relève au conseil d’administration

(4) Attentes face aux administrateurs

(5) Accueil des nouveaux membres et reconnaissance de la contribution des administrateurs.

La gouvernance, les cyber risques et la reponsabilité du C.A.

Voici la présentation de M. Luis A. Aguilar, commissaire à la Securities and Exchange Commission (SEC). Le billet paru dans Harvard Law School Forum on Corporate Governance sonne l’alarme en ce qui regarde les menaces posées par les cyber attaques et les rôles et responsabilités des conseils d’administration à cet égard.

C’est un article qui met en perspective les besoins d’un changement significatif dans le focus de la gouvernance des entreprises.

Ci-dessous, un extrait de l’introduction à cet article, Bonne lecture !

I am pleased to be here and to have the opportunity to speak about cyber-risks and the boardroom, a topic that is both timely and extremely important. Over just a relatively short period of time, cybersecurity has become a top concern of American companies, financial institutions, law enforcement, and many regulators. I suspect that not too long ago, we would have been hard-pressed to find many individuals who had even heard of cybersecurity, let alone known what it meant. Yet, in the past few years, there can be no doubt that the focus on this issue has dramatically increased.

Boards of Directors, Corporate Governance and Cyber-Risks | Sharpening the Focus

Cybersecurity has become an important topic in both the private and public sectors, and for good reason. Law enforcement and financial regulators have stated publicly that cyber-attacks are becoming both more frequent and more sophisticated. Indeed, according to one survey, U.S. companies experienced a 42% increase between 2011 and 2012 in the number of successful cyber-attacks they experienced per week. As I am sure you have heard, recently there have also been a series of well-publicized cyber-attacks that have generated considerable media attention and raised public awareness of this issue. A few of the more well-known examples include:

The October 2013 cyber-attack on the software company Adobe Systems, Inc., in which data from more than 38 million customer accounts was obtained improperly;

The December 2013 cyber-attack on Target Corporation, in which the payment card data of approximately 40 million Target customers and the personal data of up to 70 million Target customers was accessed without authorization;

The January 2014 cyber-attack on Snapchat, a mobile messaging service, in which a reported 4.6 million user names and phone numbers were exposed;

The sustained and repeated cyber-attacks against several large U.S. banks, in which their public websites have been knocked offline for hours at a time; and

The numerous cyber-attacks on the infrastructure underlying the capital markets, including quite a few on securities exchanges.

Official portrait of Securities and Exchange Commission (SEC) Commissioner Luis A. Aguilar. (Photo credit: Wikipedia)

In addition to becoming more frequent, there are reports indicating that cyber-attacks have become increasingly costly to companies that are attacked. According to one 2013 survey, the average annualized cost of cyber-crime to a sample of U.S. companies was $11.6 million per year, representing a 78% increase since 2009. In addition, the aftermath of the 2013 Target data breach demonstrates that the impact of cyber-attacks may extend far beyond the direct costs associated with the immediate response to an attack. Beyond the unacceptable damage to consumers, these secondary effects include reputational harm that significantly affects a company’s bottom line. In sum, the capital markets and their critical participants, including public companies, are under a continuous and serious threat of cyber-attack, and this threat cannot be ignored.

As an SEC Commissioner, the threats are a particular concern because of the widespread and severe impact that cyber-attacks could have on the integrity of the capital markets infrastructure and on public companies and investors. The concern is not new. For example, in 2011, staff in the SEC’s Division of Corporation Finance issued guidance to public companies regarding their disclosure obligations with respect to cybersecurity risks and cyber-incidents. More recently, because of the escalation of cyber-attacks, I helped organize the Commission’s March 26, 2014 roundtable to discuss the cyber-risks facing public companies and critical market participants like exchanges, broker-dealers, and transfer agents.

Today, I would like to focus my remarks on what boards of directors can, and should, do to ensure that their organizations are appropriately considering and addressing cyber-risks. Effective board oversight of management’s efforts to address these issues is critical to preventing and effectively responding to successful cyber-attacks and, ultimately, to protecting companies and their consumers, as well as protecting investors and the integrity of the capital markets.

Comment aborder l’enjeu le plus délicat des C.A. | La relève des PCD (CEO)

Comment, en tant que fiduciaires et stratèges, les membres des conseils d’administration doivent-il aborder l’enjeu le plus critique de la gouvernance : La relève du président et chef de la direction PCD (CEO). C’est un sujet difficile et délicat, un sujet qui requiert toute l’attention des administrateurs, notamment de son comité des ressources humaines.

L’article dont il est question dans ce billet est basé sur les résultats du Global Strategic Leadership Forum qui s’est tenu à Atlanta en 2013 et qui a paru dans le Harvard Law School Forum on Corporate Governance.

Vous trouverez un extrait ci-dessous. Bonne lecture !

Board Challenges: The Question of CEO Succession

The World Affairs Council of Atlanta’s 2013 Global Strategic Leadership Forum focused on a critical issue facing boards of directors: CEO succession. As arguably its most crucial responsibility, the board’s process for hiring and developing CEOs must be an extraordinarily thorough one that addresses the complexities of the modern global company. While there is no exact template that fits all circumstances, the board must ensure that its processes and oversight accurately reflects the organization’s future needs, identifies the skills and experience required in today’s complex global economy, and builds and closely monitors a truly robust succession plan.

The critical questions include the following: How can the board best identify what the company most needs and match a candidate to meet those needs? Who among the CEO candidates is most capable of driving the company to greater growth and performance? What are the necessary attributes, contextual experience, and values that will drive effective, positive change in the company and in the industry? Of course, a company’s specific position in its industry and its own history are important distinctions that will impact the answers to these questions. All of these topics must be viewed in the context of the escalating risk factors and competitive forces facing all companies not only in the United States, but in other countries around the world, especially in emerging market countries.

215 px (Photo credit: Wikipedia)

The responsibility of the board with respect to CEO succession is a part of the board’s increasing engagement in corporate strategic decision-making and broad operational focus. Because CEO selection and monitoring is carried out in the context of the company’s risk position in all its markets, the board and the CEO should be in full agreement as to the risk appetite of the company, where the company is heading, and how it plans to get there—understood in terms of the short, medium, and long-term strategic horizon.

The Process of CEO Succession is Ongoing

While the search and selection of a new corporate leader is a major event in a company’s life, in fact the CEO succession process is not a time-limited event. Rather, it must be an ongoing process of development and discernment that is constant and systematic, driven by the company’s strategy and core values, and involving the intentional engagement of all of the board members. As boards are becoming increasingly engaged in forming the strategic trajectory of the company, they also are coupling this focus on a longer-range view of CEO succession. Connecting these two principal board duties influences the defining of CEO attributes that will support the implementation of the long-range strategy. The CEO succession process must be seen as an integral part of the broader leadership and talent identification, development, and monitoring system within the organization. Although the board’s legal responsibility resides in selecting and overseeing the work of the CEO, it has an implied responsibility to ensure that a management development system provides a clear way to identify and nurture potential corporate leaders, including a pool of potential CEO candidates. While an outside search for a CEO is also a proven pathway for CEO selection in certain circumstances, the majority of new CEOs emerge from inside the company and, hence, should come out of an established leadership development program….

The Inside/Outside Choice

The company’s current strategic position almost surely will influence the board’s decision on whether to seek a candidate for CEO from inside or outside the company. There are some circumstances in which the board may perceive a real need to find a CEO who can address internal matters of culture and motivation and that may require a different skill set from the previous or current CEO.

While there is a substantial literature on the board’s decision to focus either inside or outside the company for a CEO, there is a broad consensus that the inside candidate is preferred if the company is performing well. The outside candidate may be better if the company is not meeting its strategic objectives or if the company’s competitive position in the industry is not meeting the board’s expectations. While an inside candidate may know the corporate culture quite well, in certain circumstances, including a need for major strategic change, the CEO may need to be an inspirational change manager, a “refresher” for the corporate culture, and a motivator….

Attributes and Values of the Exemplary CEO

As the board evaluates potential CEO candidates, it should systemically and constantly refine the list of specific attributes that the future CEO should possess. Clearly, most boards want a CEO candidate who is a strong leader, who is capable of a high level of critical and holistic thinking, has unquestioned integrity, courage to act, and who perceives the necessity for innovation in products, services, and stakeholder engagement. Four principal attributes at the top of any board’s list should be: operational ability, strategic outlook, congruence with the corporate culture, and a high level of social and emotional intelligence. In all interactions, the CEO must be able to listen and learn, be open to a variety of opinions in his or her approach to decision-making, and operate well under stress. Candidates’ attributes and the board’s evaluation criteria must include the ability to handle key relationships with three “masters” in mind: customers, shareholders, and employees. The board must evaluate the potential CEO’s track record in dealing with these three key, yet very different, constituencies. While these constituencies are not involved directly in the selection process, the CEO candidate’s knowledge of them and how to strengthen ties to them should be a primary consideration in the final decision.

More than ever, the essential attributes list will include an excellent understanding of finance, including a keen ability to articulate where the company’s value is being produced, its capital structure, cost dynamics, asset utilization, and any potential resource gaps. A thorough comprehension of global financial markets is increasingly vital. Moreover, a strong financial fluency will allow the CEO to speak effectively not only with the CFO, but also with analysts and institutional investors.

Beyond industry knowledge and operational acumen necessary to lead an enterprise in a globalized market, today’s CEO must be able to have a full grasp of a wide range of issues including the drivers of the global economy, the complexity of the regulatory environment wherever the company is operating, enterprise risk management including political risk and cultural differences, corporate growth strategies, and current or potential acquisition or merger targets. A major category of concern to any CEO is compliance with the U.S. Foreign Corrupt Practices Act, which absorbs a lot of international companies’ corporate resources and must be managed carefully—especially in an era where the rise of whistleblowers, including the malicious ones, is a reality.

All CEOs must have a capacity to look forward, to envision what the future in the industry will look like, and anticipate, to the extent possible, the political and economic developments that may impact the company’s operations and performance. Global fluency and cross-cultural competence are essential ingredients for today’s CEO and some companies look very favorably on candidates who speak languages in addition to English.

Where CEO succession most often goes wrong is when there is not a good cultural fit, when the board uses the wrong metrics for evaluation, when the board does not know the candidate well enough, or when it fails to discerns how the candidate will react in specific and stressful situations. The candidates’ ethics and values must be clearly understood not only on their own, but also in the framework of the corporate culture.

Another critical dynamic in the selection of the CEO is to ensure that the candidate understands the impact of digitalization and the emergence of “big data” on his or her industry and company. Increasingly, the CEO must have a fulsome understanding of technology, especially those technological developments that are or will be impacting the industry….

Bien comprendre les droits et responsabilités des actionnaires de sociétés !

Ci-dessous, l’extrait d’un article très simple sur les devoirs attendus de la part des actionnaires. Si vous avez décidé d’investir dans une entreprise, vous possédez une part de la propriété de celle-ci !

Il est donc important de lire la documentation fournie par le conseil d’administration et par la direction de l’entreprise afin de vous former une opinion sur sa gouvernance, et vous devriez vous faire un devoir d’exercer vos droits de votes.

L’article récemment publié par The Canadian Press saura-t-il éveiller chez vous le sens de la responsabilité de l’actionnaire ? En ce qui me concerne, j’ai décidé, il y a quelques années, de me faire un devoir de lire les documents préparatoires à l’AGA et de voter, par la poste, sur les items de l’ordre du jour qui sollicitent l’assentiment des actionnaires.

Understand your rights as a shareholder: experts – Business – The Telegram

Documents sent to shareholders ahead of the meeting can include the management proxy circular, annual information form and the company’s annual report. The information form and annual report give the financial statements and an update by management on the business and the direction for the company — both key documents for shareholders.

Walmart Shareholders’ Meeting 2011 (Photo credit: Walmart Corporate)

The proxy circular includes information related to the annual meeting, including the nominees for the board of directors and the appointment of the auditors. It can also include shareholder proposals or major changes at the company that require shareholder approval.

Eleanor Farrell, director of the Office of the Investor at the Ontario Securities Commission, says shareholders have the right to vote on matters that affect the company, including the election of the board of directors. “That is a very important governance piece for the company,” Farrell says.

“The board is the one that approves the strategic plan. It sets the direction of the company. They appoint the CEO, they evaluate the CEO and they also approve the compensation plan.” Farrell says if shareholders don’t approve of a nominated director they can withhold their vote and, at most large companies, if a majority of the votes cast withhold a vote for a particular director, that director would be forced to step aside.

“Shareholders in the last few years have certainly become and gotten a lot more powerful and a lot more powers, I would say,” Farrell said. “Corporate governance has been a very big concern for institutional investors, certainly, and companies are much more concerned about corporate governance.”

The information circulars also include detailed descriptions about how much the company’s directors receive in compensation and what the senior executives are paid in salary, shares or options, as well as the size of their bonuses and the value of any other perks. The circular will also include how the board arrived at that compensation as well as comparisons with previous years. Certain provisions, such as how much a chief executive will receive if the company is taken over or if they are let go, are also often included.

Recommandations utiles pour la création d’un conseil aviseur (Advisory Board) efficace !

Voici un excellent article paru sur le blogue de Josse Tores, un auteur reconnu pour ses qualités d’influenceur, de conférencier et d’éditeur. M. Tores explique bien l’importance pour tout entrepreneur de se doter d’un conseil aviseur.

L’article fait état de huit facteurs qui contribuent à l’efficacité d’un conseil aviseur. Vous trouverez ci-dessous un sommaire des 8 caractéristiques.

Je vous conseille de prendre le temps de lire ce court article.

Bonne lecture. Vos commentaires sont appréciés.

8 Tips to Creating an Effective Advisory Board

Advisory boards are used by the best entrepreneurs as a way to fill knowledge gaps with subject matter experts. Advisory board members are not directors in the traditional sense. Advisory board members do not serve a governance function and do not represent shareholders or other stakeholders. An advisory board’s role is simply to provide advice to the entrepreneur relative to achieving business goals.

Business in London (Photo credit: Stuck in Customs)

At its most basic level an advisory board acts as a sounding board for the business owner. At its best, an advisory board provides expertise, guidance, and business development opportunities. In all cases, the advisory board provides the entrepreneur a group of experts with whom to talk about opportunities, challenges, and next steps.

The following are 8 tips to creating an effective advisory board:

1. Have a Purpose: “Management by objective works – if you know the objectives. Ninety percent of the time you don’t.” – Peter Drucker

2. Recruit Doubters: “The path of sound credence is through the thick forest of skepticism.” – George Jean Nathan

3. Leverage the Network: “The purpose of human life is to serve, and to show compassion and the will to help others.” – Albert Schweitzer

4. Write It Down: “A verbal contract isn’t worth the paper it’s written on.” – Samuel Goldwyn

5. Time is Money: “Price is what you pay. Value is what you get.” – Warren Buffett

6. Keep It Intimate: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” – Margaret Mead

7. Maximize Value: “Success depends upon previous preparation, and without such preparation there is sure to be failure.” – Confucius

8. Ongoing Communication: “Number one, cash is king…number two, communicate…number three, buy or bury the competition.” – Jack Welch

Entrepreneurs should consider forming an advisory group as early in the life of the business as possible. Advisory boards should be dynamic, changing composition as challenges change. Advisors should know their role may be temporary. They should be recognized and praised by the entrepreneur to ensure they remain engaged and involved. Above all else, advisors should recognize that they are there to provide advice to the entrepreneur and not to govern the business. Utilizing these eight tips enables an entrepreneur to achieve greater success in a shorter amount of time.

Modèle de supervision du management | Lignes de défense des parties prenantes

Vous trouverez ci-dessous un document de réflexion publié par Sean Lyon* et paru dans la série Executive Action du Conference Board. Ce document partagé et commenté par Denis Lefort, CPA, CA, CIA, CRMA, fait référence à cinq (5) lignes de défense interne, soit les opérations, les fonctions de surveillance tactiques comme la gestion des risques et la conformité, les fonctions d’assurance indépendante que sont le comité d’audit, l’audit interne et les autres sous-comités du conseil, et, enfin, la direction et le conseil d’administration.

Quatre lignes de défense externe sont aussi proposées, soit: les auditeurs externes, les actionnaires, les agences de notations et les organismes de réglementation.

Le modèle des 5 lignes de défense est aussi comparé au modèle traditionnel des trois lignes de défense.

Finalement, l’auteur insiste sur l’importance pour l’ensemble des lignes de défense d’agir de façon concertée, voire intégrée, pour assurer le succès global des interventions des uns et des autres pour le bénéfice de l’organisation.

Voici un extrait du document. Bonne lecture !

Corporate Oversight and Stakeholder Lines of Defense

Corporate stakeholder responsibility should take intoaccount various stakeholder groups, including shareholders, employees, customers, suppliers, special interest groups,

communities, regulators, politicians, and, ultimately, society. Consequently, a comprehensive corporate oversight framework should be multi-faceted to safeguard the diverse interests and varied expectations of all stakeholders. Increasingly, stakeholders are demanding oversight that safeguards a multitude of their interests, be they financial, economic, social, or environmental. Such an inclusive approach should include an appreciation of the symbiotic relationship that exists between business, society, and nature.

Michael Oxley , U.S. Senator from Maryland. (Photo credit: Wikipedia)

Organizations should understand the complexity of this interconnectedness to fulfill their social responsibilities. A holistic focus that includes the various lines of defense approach helps provide different stakeholders with the comfort that their interests are safeguarded, if implemented appropriately. A lines-of-defense framework provides stakeholders with a comprehensive system of “checks and balances.”

The existence of such an integrated framework means that stakeholders can reasonably rely on it to ensure that the organization is fulfilling its fiduciary duties, legal obligations, and moral responsibilities, while creating durable value and sustainable economic performance in the process. For this approach to operate effectively, however, each line of defense must play its part both individually and collectively—fulfilling its oversight duties within a holistic framework.

Accordingly, each line of defense collaborates with and challenges the other (complimentary yet antagonistic) lines of defense, as it acts in its own enlightened self-interest. Enhanced cooperation and communication between these lines of defense should be facilitated by better interaction between stakeholders through regular dialogue which is based on mutual understanding of the organization’s objectives. This, however, must be achieved without allowing respective responsibilities or accountabilities to become blurred in the process.

To strengthen corporate defense capabilities, organizations should consider fortifying the second line of defense, which provides the critical link between operational line management and executive management. For many organizations, this is still perhaps the weakest link in the chain. Unfortunately, in many organizations, the defense activities at this layer are operating in a silo; they are not in alignment with other lines, but rather, operate in isolation, with little or no interaction, sharing of information, or collaboration. The activities of an effective second line of defense must be managed in a coordinated and integrated manner.

Each of the other lines of defense requires differing degrees of fortification, but this perhaps has as much to do with best practices rather than any radical makeover. The goal is to reach a more effective balance between the spirit of guidelines based on principle and the interpretation of guidelines that are legal or more prescriptive.

____________________________________

* Sean Lyons is the principal of Risk Intelligence Security Control (R.I.S.C.) International (Ireland) and a recognized corporate defense strategist. He is published internationally and has lectured and spoken at seminars and conferences in both Europe and North America. His contributions have been acknowledged in the Walker Review ofCorporate Governance in UK Banks and Other Financial Institutions, the Financial Reporting Council (FRC)’s Review of the Effectiveness of theCombined Code and the International Corporate Governance Network (ICGN)’s ICGN Corporate Risk Oversight Guidelines. In 2010 Sean was shortlisted as a finalist in the GRC MVP 2009 Awards organized by US based GRC Group (SOX Institute) co-chaired by Senator Paul Sarbanes and Congressman Michael Oxley.

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« The chief executive may get the glory and the salary, but leading the board is an increasingly important role, requiring subtlety, maturity and an iron grip on the agenda »

GOOD CHAIRMEN

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