La composition du conseil d’administration | Élément clé d’une saine gouvernance

Les investisseurs et les actionnaires reconnaissent le rôle prioritaire que les administrateurs de sociétés jouent dans la gouvernance et, conséquemment, ils veulent toujours plus d’informations sur le processus de nomination des administrateurs et sur la composition du conseil d’administration.

L’article qui suit, paru sur le Forum du Harvard Law School, a été publié par Paula Loop, directrice du centre de la gouvernance de PricewaterhouseCoopers. Il s’agit essentiellement d’un compte rendu sur l’évolution des facteurs clés de la composition des conseils d’administration. La présentation s’appuie sur une infographie remarquable.

Ainsi, on apprend que 41 % des campagnes menées par les activistes étaient reliées à la composition des CA, et que 20 % des CA ont modifié leur composition en réponse aux activités réelles ou potentielles des activistes.

L’article s’attarde sur la grille de composition des conseils relative aux compétences et habiletés requises. Également, on présente les arguments pour une plus grande diversité des CA et l’on s’interroge sur la situation actuelle.

Enfin, l’article revient sur les questions du nombre de mandats des administrateurs et de l’âge de la retraite de ceux-ci ainsi que sur les préoccupations des investisseurs eu égard au renouvellement et au rajeunissement des CA.

Le travail de renouvellement du conseil ne peut se faire sans la mise en place d’un processus d’évaluation complet du fonctionnement du CA et des administrateurs.

À mon avis, c’est certainement un article à lire pour bien comprendre toutes les problématiques reliées à la composition des conseils d’administration.

Bonne lecture !

Investors and Board Composition

In today’s business environment, companies face numerous challenges that can impact success—from emerging technologies to changing regulatory requirements and cybersecurity concerns. As a result, the expertise, experience, and diversity of perspective in the boardroom play a more critical role than ever in ensuring effective oversight. At the same time, many investors and other stakeholders are seeking influence on board composition. They want more information about a company’s director nominees. They also want to know that boards and their nominating and governance committees are appropriately considering director tenure, board diversity and the results of board self-evaluations when making director nominations. All of this is occurring within an environment of aggressive shareholder activism, in which board composition often becomes a central focus.

Shareholder activism and board composition

At the same time, a growing number of companies are adopting proxy access rules—allowing shareholders that meet certain ownership criteria to submit a limited number of director candidates for inclusion on the company’s annual proxy. It has become a top governance issue over the last two years, with many shareholders viewing it as a step forward for shareholder rights. And it’s another factor causing boards to focus more on their makeup.

So within this context, how should directors and investors be thinking about board composition, and what steps should be taken to ensure boards are adequately refreshing themselves?

Assessing what you have–and what you need

In a rapidly changing business climate, a high-performing board requires agile directors who can grasp concepts quickly. Directors need to be fiercely independent thinkers who consciously avoid groupthink and are able to challenge management—while still contributing to a productive and collegial boardroom environment. A strong board includes directors with different backgrounds, and individuals who understand how the company’s strategy is impacted by emerging economic and technological trends.

Sample board composition grid: What skills and attributes does your board need?

In assessing their composition, boards and their nominating and governance committees need to think critically about what skills and attributes the board currently has, and how they tie to oversight of the company. As companies’ strategies change and their business models evolve, it is imperative that board composition be evaluated regularly to ensure that the right mix of skills are present to meet the company’s current needs. Many boards conduct a gap analysis that compares current director attributes with those that it has identified as critical to effective oversight. They can then choose to fill any gaps by recruiting new directors with such attributes or by consulting external advisors. Some companies use a matrix in their proxy disclosures to graphically display to investors the particular attributes of each director nominee.

Board diversity is a hot-button issue

Diversity is a key element of any discussion of board composition. Diversity includes not only gender, race, and ethnicity, but also diversity of skills, backgrounds, personalities, opinions, and experiences. But the pace of adding more gender and ethnic diversity to public company boards has been only incremental over the past five years. For example, a December 2015 report from the US Government Accountability Office estimates that it could take four decades for the representation of women on US boards to be the same as men. [1] Some countries, including Norway, Belgium, and Italy, have implemented regulatory quotas to increase the percentage of women on boards.

Even if equal proportions of women and men joined boards each year beginning in 2015, GAO estimated that it could take more than four decades for women’s representation on boards to be on par with that of men’s.
—US Government Accountability Office, December 2015

According to PwC’s 2015 Annual Corporate Directors Survey, more than 80% of directors believe board diversity positively impacts board and company performance. But more than 70% of directors say there are impediments to increasing board diversity. [2] One of the main impediments is that many boards look to current or former CEOs as potential director candidates. However, only 4% of S&P 500 CEOs are female, [3] less than 2% of the Fortune 500 CEOs are Hispanic or Asian, and only 1% of the Fortune 500 CEOs are African-American. [4] So in order to get boards to be more diverse, the pool of potential director candidates needs to be expanded.

Is there diversity on US boards?

Source: Spencer Stuart US Board Index 2015, November 2015.

SEC rules require companies to disclose the backgrounds and qualifications of director nominees and whether diversity was a nomination consideration. In January 2016, SEC Chair Mary Jo White included diversity as a priority for the SEC’s 2016 agenda and suggested that the SEC’s disclosure rules pertaining to board diversity may be enhanced.

While those who aspire to become directors must play their part, the drive to make diversity a priority really has to come from board leadership: CEOs, lead directors, board chairs, and nominating and governance committee chairs. These leaders need to be proactive and commit to making diversity part of the company and board culture. In order to find more diverse candidates, boards will have to look in different places. There are often many untapped, highly qualified, and diverse candidates just a few steps below the C-suite, people who drive strategies, run large segments of the business, and function like CEOs.

How long is too long? Director tenure and mandatory retirement

The debate over board tenure centers on whether lengthy board service negatively impacts director independence, objectivity, and performance. Some investors believe that long-serving directors can become complacent over time—making it less likely that they will challenge management. However, others question the virtue of forced board turnover. They argue that with greater tenure comes good working relationships with stakeholders and a deep knowledge of the company. One approach to this issue is to strive for diversity of board tenure—consciously balancing the board’s composition to include new directors, those with medium tenures, and those with long-term service.

This debate has heated up in recent years, due in part to attention from the Council of Institutional Investors (the Council). In 2013, the Council introduced a revised policy statement on board tenure. While the policy “does not endorse a term limit,” [5] the Council noted that directors with extended tenures should no longer be considered independent. More recently, the large pension fund CalPERS has been vocal about tenure, stating that extended board service could impede objectivity. CalPERS updated its 2016 proxy voting guidelines by asking companies to explain why directors serving for over twelve years should still be considered independent.

We believe director independence can be compromised at 12 years of service—in these situations a company should carry out rigorous evaluations to either classify the director as non-independent or provide a detailed annual explanation of why the director can continue to be classified as independent.
— CalPERS Global Governance Principles, second reading, March 14, 2016

Factors in the director tenure and age debate

Source: Spencer Stuart US Board Index 2015, November 2015.

Many boards have a mandatory retirement age for their directors. However, the average mandatory retirement age has increased in recent years. Of the 73% of S&P 500 boards that have a mandatory retirement age in place, 97% set that age at 72 or older—up from 57% that did so ten years ago. Thirty-four percent set it at 75 or older. [6] Others believe that director term limits may be a better way to encourage board refreshment, but only 3% of S&P 500 boards have such policies. [7]

Investor concern

Some institutional investors have expressed concern about board composition and refreshment, and this increased scrutiny could have an impact on proxy voting decisions.

What are investors saying about board composition and refreshment?

Sources: BlackRock, Proxy voting guidelines for U.S. securities, February 2015; California Public Employees’ Retirement System, Statement of Investment Policy for Global Governance, March 16, 2015; State Street Global Advisors’ US Proxy Voting and Engagement Guidelines, March 2015.

Proxy advisors’ views on board composition—recent developments

Proxy advisory firm Institutional Shareholder Services’s (ISS) governance rating system QuickScore 3.0 views tenure of more than nine years as potentially compromising director independence. ISS’s 2016 voting policy updates include a clarification that a “small number” of long-tenured directors (those with more than nine years of board service) does not negatively impact the company’s QuickScore governance rating, though ISS does not provide specifics on the acceptable quantity.

Glass Lewis’ updated 2016 voting policies address nominating committee performance. Glass Lewis may now recommend against the nominating and governance committee chair “where the board’s failure to ensure the board has directors with relevant experience, either through periodic director assessment or board refreshment, has contributed to a company’s poor performance.” Glass Lewis believes that shareholders are best served when boards are diverse on the basis of age, race, gender and ethnicity, as well as on the basis of geographic knowledge, industry experience, board tenure, and culture.

How can directors proactively address board refreshment?

The first step in refreshing your board is deciding whether to add a new board member and determining which director attributes are most important. One way to do this is to conduct a self-assessment. Directors also have a number of mechanisms to address board refreshment. For one, boards can consider new ways of recruiting director candidates. They can take charge of their composition through active and strategic succession planning. And they can also use robust self-assessments to gauge individual director performance—and replace directors who are no longer contributing.

Act on the results of board assessments. Boards should use their annual self-assessment to help spark discussions about board refreshment. Having a robust board assessment process can offer insights into how the board is functioning and how individual directors are performing. The board can use this process to identify directors that may be underperforming or whose skills may no longer match what the company needs. It’s incumbent upon the board chair or lead director and the chair of the nominating and governance committee to address any difficult matters that may arise out of the assessment process, including having challenging conversations with underperforming directors. In addition, some investors are asking about the results of board assessments. CalPERS and CalSTRS have both called on boards to disclose more information about the impact of their self-assessments on board composition decisions. [8]

Take a strategic approach to director succession planning. Director succession planning is essential to promoting board refreshment. But, less than half of directors “very much” believe their board is spending enough time on director succession. [9] In board succession planning, it’s important to think about the current state of the board, the tenure of current members, and the company’s future needs. Boards should identify possible director candidates based upon anticipated turnover and director retirements.

Broaden the pool of candidates. Often, boards recruit directors by soliciting recommendations from other sitting directors, which can be a small pool. Forward-looking boards expand the universe of potential qualified candidates by looking outside of the C-suite, considering investor recommendations, and by looking for candidates outside the corporate world—from the retired military, academia, and large non-profits. This will provide a broader pool of individuals with more diverse backgrounds who can be great board contributors.

In sum, evaluating board composition and refreshing the board may be challenging at times, but it’s increasingly a topic of concern for many investors, and it’s critical to the board’s ability to stay current, effective, and focused on enhancing long-term shareholder value.

The complete publication, including footnotes and appendix, is available here.

Endnotes:

[1] United States Government Accountability Office, “Corporate Boards: Strategies to Address Representation of Women Include Federal Disclosure Requirements,” December 2015.
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[2] PwC, 2015 Annual Corporate Directors Survey, October 2015.
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[3] Catalyst, Women CEOs of the S&P 500, February 3, 2016.
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[4] “McDonald’s CEO to Retire; Black Fortune 500 CEOs Decline by 33% in Past Year,” DiversityInc, January 29, 2015; http://www.diversityinc.com/leadership/mcdonalds-ceo-retire-black-fortune-500-ceos-decline-33-past-year.
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[5] Amy Borrus, “More on CII’s New Policies on Universal Proxies and Board Tenure,” Council of Institutional Investors, October 1, 2013; http://www.cii.org/article_content.asp?article=208.
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[6] Spencer Stuart, 2015 US Board Index, November 2015.
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[7] Spencer Stuart, 2015 US Board Index, November 2015.
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[8] California State Teachers’ Retirement System Corporate Governance Principles, April 3, 2015, http://www.calstrs.com/sites/main/files/file-attachments/corporate_governance_principles_1.pdf; The California Public Employees’ Retirement System Global Governance Principles, Updated March 14, 2016, https://www.calpers.ca.gov/docs/board-agendas/201603/invest/item05a-02.pdf.
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[9] PwC, 2015 Annual Corporate Directors Survey, October 2015. www.pwc.com/us/GovernanceInsightsCenter.

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*Paula Loop is Leader of the Governance Insights Center at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Ms. Loop and Paul DeNicola. The complete publication, including footnotes and appendix, is available here.

L’importance de la confiance du président du conseil envers son CA | En reprise

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

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

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

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

CEOs, Stop Trying to Manage the Board

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

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

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

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

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

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

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

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

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

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

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

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

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

Recrudescence de l’activisme des actionnaires en Europe

Voici un article très bien documenté sur la recrudescence de l’activisme des actionnaires en Europe.

L’actif sous contrôle des activistes européens est passé de 21,7 B $, en 2012, à 27,5 B $, en 2015.

Bonne lecture !

Activist Investing in Europe: A Special Report

The inaugural edition of this report, published nearly two years ago, suggested that so long as opportunities presented themselves, activists would continue to seek governance, strategy and capital allocation reforms from European issuers. Indeed they have. After ebbing briefly in 2014, when only 51 companies were publicly targeted (after 61 in 2012 and 59 in 2013), activism has roared back, with 67 companies targeted in 2015 and 64 in the first half of 2016 alone. Assets under management for European activists have grown slowly in that period—from $21.7 billion in 2012 to $27.5 billion in 2015—suggesting the growth has been funded by new entrants and foreign players.

Even publicity-shy activists who have been working with companies behind closed doors for many years concede that the growth in activism in Europe is accelerating. Some see a cyclical boom, with activists hoping to catalyse M&A. Yet on topics such as remuneration, and with the launch of specialist European activist funds, the change appears built to last. Part of the evolution of activism in Europe has been the success of tactics seen as more common in the U.S., including proxy contests. Although longer-term participants and the bulk of campaigns suggest lowkey, collaborative approaches are still more common, activists are becoming less shy about testing where the boundaries lie.

The five countries covered in detail in this post represent approximately 80% of the companies targeted by activists since 2010, although in the past two-and-a-half years the level has been lower. Outside of their ranks, Scandinavia and the Netherlands are popular hunting grounds, while Southeastern Asset Management picked up a board seat at Spain’s Applus in July.

Future editions of this report will have to find a different flag for the front cover, following the U.K.’s decision to leave the European Union. The impact on activism in Europe could be still more profound. In the short period since the referendum, stock markets all over Europe dipped temporarily, creating buying opportunities at export-led companies. Elliott Management, a U.S. hedge fund with a well-established London office, has disclosed four positions since the vote (although it held some as toe-holds previously). Some of these companies were already subject to takeover offers, and Elliott has agitated for higher bids.

Another development, albeit not directly connected with traditional forms of activism, is the rise of activist short selling, where investors bet against a company and attempt to convince investors the stock price will drop. Such campaigns more than doubled from 2014 to 2015, and gained prominence after fuelling sell-offs at the likes of Quindell and Wirecard. Already in the first half of 2016, six companies had been targeted.

The U.S. has seen activism spread beyond a disciplined asset class in recent years. Whether European investors prove to be quite as demanding remains to be seen. But if markets continue to be volatile, opportunities for value investors, arbitrageurs and short sellers will be more plentiful. Recent events suggest there will be opportunists to match.

United Kingdom

Activism has roared back to prominence in the United Kingdom since 2014, with three high-profile proxy battles and the first FTSE 100 company accepting an activist into its boardroom.

ValueAct Capital Partners, a San Francisco-based hedge fund known for its engagements with Adobe and Microsoft, prefers to be seen as a cooperative investor. It generally avoids aggressive tactics such as proxy fights, lawsuits and public letter-writing, preferring testimonials from CEOs it has worked with in the past. Investing in Rolls-Royce Holdings, with its strategically important submarine business and stately shareholders, required a display of deference. As well as hiking its stake to above 10%, the fund worked with new CEO Warren East for over 200 days before its nominee was offered a board seat.

Others have taken less conciliatory paths. Sherborne Investors, defeated in a 2014 proxy contest at Electra Private Equity, raised its stake to 30% before finally winning two board seats the following year. Since then, almost all the other directors have been forced out, and the fund’s external manager served notice. Smoother contests saw victories for Elliott Management at Alliance Trust and the family office of Luis Amaral at Stock Spirits. Yet whereas the former has reformed slowly, attracting potential suitors in the process, the latter has descended into acrimony. The Stock Spirits board may have promised not to engage in acquisitions and to pay a special dividend, but risked conflict by designating the activist nominees non-independent.

Strong shareholder rights, including the ability to call a meeting with just 5% of shares, and a highly liquid and dispersed market, should mean the U.K. continues to be a focal point for activism in Europe. With stocks initially down sharply after the country voted to leave the European Union, a few bargain-hunters may even be preparing campaigns.

Proxy fights have become increasingly common at U.K. companies, with activists claiming a better record of success than in previous years after the Alliance Trust watershed. Toscafund, fighting the first in its 16-year history, will hope that track record continues. Elliott Management has also made merger arbitrage central to its strategy in recent years. Although operational activist Cevian Capital appears to be more focused on Continental Europe, turnarounds at exporters Rolls-Royce Holdings and Meggit are attracting activist attention.

Activism in the U.K. increased steadily after the financial crisis, culminating in the shareholder spring of 2012. Despite a dip thereafter, 2015 and 2016 have seen steadily more activity and this year is expected to be the busiest year yet.

* as of 30th June 2016. Projected full-year figure shown in dotted box.

Easy access to shareholder rights, including meeting requisitions and proposals ensure that smaller companies are always vulnerable to activism. With several well funded and established activists setting up in London, however, large cap companies are starting to draw more attention.

Shareholder Activism—recent developments in the U.K.

Continuing the trend of previous years, the U.K. continues to see the lion’s share of activism in Europe. Over the last 12 months, approximately 43% of all European campaigns were played out in the U.K., according to Activist Insight data. Whilst the traditional mix of activist strategies were deployed, attempts to obtain board representation received most attention and generated most success.

In April 2015, Elliott Management’s criticism of Alliance Trust’s poor performance and high costs resulted in two new non-executive directors (“NED”) being appointed to the latter’s board. At Stock Spirits, Western Gate Private Investment’s (“WGPI”) complaints of “spiraling costs” and a board prone to “group-think” also resulted in the appointment of two NEDs following a shareholder vote. At Rolls- Royce Holdings, too, ValueAct Capital’s complaints regarding a fifth profit warning in two years resulted in a NED appointment for ValueAct’s chief operating officer in return for the promise that ValueAct would not lobby for a break-up of the company, nor increase its stake above 12.5%.

In each of these cases, the activists’ public rationale for supporting NED appointments has been to better long-term results through improved corporate governance and executive scrutiny. Also notable is that in two of the cases mentioned above, new appointments were subject to negotiation and compromise, with the activists accepting limitations on the extent of their directors’ participation in board meetings and board committees.

Board appointments have not gone without criticism, however, particularly regarding the perceived lack of independence of the new directors. Certainly, fears over conflicts of interest can have practical implications. In the case of Rolls-Royce,

ValueAct’s seat on the board was subject to limited rights: it has no ability to propose changes in strategy or management, call a shareholder meeting nor push for mergers or acquisitions. At Stock Spirits, the new NEDs have been prevented from sitting on certain committees and the chairman has publicly stated that they may be asked to leave meetings where commercially sensitive information, such as pricing, is discussed.

The U.K.’s legal, regulatory and political landscape remains supportive of shareholder engagement, and activists will leverage this to reinforce their (shorterterm) theses. Witness the increasing activity of Investor Forum (the “Forum”), whose 40 members own approximately 42% of the FTSE All Share Index. The Forum seeks to promote long-term investment and collective engagement with U.K. companies by its members. In August, after over a year of private engagement with Sports Direct alongside major institutions holding approximately 12% of Sports Direct, the Forum issued a press release calling for a comprehensive and independent review of corporate governance at the company.

Whilst the mechanics for investor engagement have remained largely constant over the last few years in the U.K., the grounds for activist shareholders to demand change remains dynamic. In addition to the traditional activist calling cards of under-par growth, over-inflated executive salaries and deficiencies in corporate governance, Britain’s recent referendum vote to leave the European Union may lead to some boards being challenged on their strategies to cope with Brexit. For so long as activists can continue to find intrinsic, unlocked value in U.K. companies, the facilitative environment and dynamic business conditions will continue to catalyse activism in the U.K.

France

Controlling shareholders, double voting rights and government stakes in key industries make activism a challenging proposition in France, though there is no sign of activists abandoning their ambitions altogether. Last year, Airbus quietly sold its stake in Dassault Aviation in order to buyback shares, a year after The Children’s Investment Fund suggested the move.

Admittedly, not all activists have had such success. Elliott Management is currently in a legal battle with XPO Logistics Europe (formerly Norbert Dentressangle). Although it failed to remove CEO Troy Cooper at this year’s annual meeting, it owns enough to prevent the U.S. parent from delisting the company. In 2015, U.S.-based P. Schoenfeld Asset Management (“PSAM”) acquired a small stake in Vivendi and suggested selling Universal Music Group in order to pay larger dividends. Vivendi Chairman Vincent Bolloré increased his stake and pushed through double voting rights for long-term investors, enhancing his control.

Nonetheless, activism has begun to thrive in France. Electrical parts company Rexel waved goodbye to its CEO just months after Cevian Capital disclosed a stake earlier this year, Carrefour faced another request for board seats, and a merger between Maurel & Prom and MPI saw opposition from U.K. and South African funds. Meanwhile, the Paris-based hedge fund CI-AM has been making a name for itself, attempting to use the courts to stop the takeover of Club Med by China Fosun International and to reshape a licensing agreement between Euro Disney and The Walt Disney Company, to ensure investors in the Paris theme park were adequately compensated.

Activist short selling is also making its presence felt. In December, Muddy Waters Research released a 22-page report on grocery chain Groupe Casino, which it said was “dangerously leveraged, and… managed for the very short term.” Shares were down 11.6% a week after the report was published.

Elliott has already been holding out at Norbert Dentressangle for more than a year, preventing the company from delisting following a takeover bid by XPO Logistics. An attempt to take the chairman role from CEO Troy Cooper at this year’s annual meeting failed, but the company has yet to be delisted–unlike MPI, which has now been merged with Maurel & Prom. Vincent Bolloré shows no signs being slowed down by U.S. activists such as P. Schoenfeld Asset Management, which won dividends but no seat on the board from a 2015 raid. In December, Muddy Waters Research released a much discussed short report on grocer Groupe Casino.

2015 saw a sudden renewal of activist interest in France, coming close to the peak of 2012. So far, 2016 is off to a reasonable start, although it seems the country will continue to be targeted intermittently.

* as of 30th June 2016. Projected full-year figure shown in dotted box.

Activist targets tend to be larger, on average, in France than in other countries, perhaps because they are more likely to be susceptible to international pressure. However, a rising number of campaigns at small cap companies may presage a busier market in future.

France is in the process of strengthening its Say on Pay

The emergence of shareholder activism in France over the last decade has been supported by the development of corporate governance rules and best practices. A number of campaigns following the global financial crisis focused on corporate governance, including the separation of chairmen and CEO roles, management performance and compensation.

Say on Pay was introduced in France in 2013 in the form of a soft law set forth in the corporate governance code applicable to French listed companies (the “AFEP-MEDEF Code”). France opted for an annual non-binding shareholder vote on all forms of compensation paid or granted to the company’s officers, including the chairman (vote consultatif des actionnaires). If compensation is rejected, a board is required to post a release on the company’s website following its next board meeting detailing how it intends to deal with such vote.

As the vote is non-binding, the general view until now is that boards may maintain compensation granted to the company’s officers, even when it is rejected by shareholders, or receives very limited support. In 2016, Renault and Alstom’s CEO compensation gave rise to a negative Say on Pay vote by shareholders. In the case of Renault, the board met immediately after the meeting and decided to confirm the 2015 compensation of the company’s CEO, generating criticism from the French state, which holds a significant stake in Renault, and politicians, as well as questions on the efficacy of French Say on Pay.

Following the Renault controversy, a public consultation was launched in order to, amongst other things, strengthen the Code’s Say on Pay provisions. The proposed new wording (likely to be in force from September 2016), is somewhat more restrictive than that currently in force, as it contemplates an express obligation for the board to amend the relevant officers’ compensation for the previous year or the company’s management compensation policy for the future. The French government also proposed in early June in a bill currently under discussion at the French Parliament (the “Loi Sapin II”) to introduce a binding Say on Pay in the French Commercial Code. This bill was highly debated and, at the date hereof, the French Assemblée Nationale and Sénat have taken different positions on this topic.

In the context of this reform, it is essential that French legislators bear in mind that the board has always been and shall remain the competent corporate body to fix the compensation granted to the company’s officers. In particular, the board is the sole corporate body which can set the applicable performance criteria for the annual and long-term variable remuneration of the company’s officers and assess whether or not these criteria have been met. In our view, the best way to achieve a well-balanced system would be to implement a Say on Pay inspired by the U.K. model, with (i) a binding shareholder vote every three or four years on the company’s compensation policy, and (ii) a nonbinding shareholder vote every year on the compensation granted to the company’s officers for the previous fiscal year, without any effect provided that such compensation complies with the management compensation policy approved by the shareholders.

Germany

Shareholders have always occupied a more complicated role in Germany, where a two-tier board structure gives labour unions and other interest groups a role, while limiting direct contact with executives.

In recent years, however, activists have descended on Germany. Knight Vinke, a Monaco-based hedge fund that specialises in large cap companies, has written a white paper on how E.On should be reshaped, while Cevian Capital has stakes in Bilfinger and ThyssenKrupp, where it is practising its traditional long-term, operational style of activism. Sports retailer Adidas has been forced to deny suggestions that Southeastern Asset Management was behind a decision to sell its golf division.

Events at Volkswagen since the emissions scandal highlight both the opportunities and the challenges for activism in Germany. London-based hedge fund The Children’s Investment Fund (“TCI”), wrote a scathing public letter in May, attacking executive compensation and deals with local state officials and unions that had damaged productivity levels.

Other investors sought to use Volkswagen’s annual meeting to send a message by attempting to deny management board members discharge from liability for their decisions and to halt dividend payments. Despite a number of investors speaking at the meeting and criticism from proxy voting advisers, the management resolutions were carried comfortably, reflecting the concentrated ownership of the Porsche and Piëch families.

A proxy contest at drugmaker Stada Arzneimittel may yet present activists with a path to influencing German companies, however. Investors defied management to elect a director selected by Active Ownership Capital (“AOC”), voted down Chairman Martin Abend and rejected the company’s remuneration plan. Other investors have openly called for the company to be sold, although AOC denied it would push for this.

The proxy contest at Stada Arzneimittel is a rare beast in a country that generally encourages activists to work more with management than directors to get things done. Even The Children’s Investment Fund Management, which has a fearsome reputation, is relying on its bully pulpit as a shareholder in Volkswagen to get things done, rather than initiating a formal contest. Activists have appointed supervisory board members in the past, however. Cevian Capital, a big player in the region, is currently involved at several construction sector companies.

A wave of merger arbitrage by activists such as Kerrisdale Capital and Elliott Management as well the traditional activism of Cevian Capital made 2013 a banner year for activism in Germany. Cevian are showing the country more attention than ever, with 2016 on course to finish strongly.

* as of 30th June 2016. Projected full-year figures shown in dotted box.

Growing interest in activism in Germany has seen a wider range of market caps affected by activism since our last report. Both mid cap and large cap targets have increased in prominence, thanks to well-resourced activists showing interest in recent years.

New players rising

Shareholder activism in Germany continues to receive attention from the public, particularly with new domestic and short selling activists that understand how to utilise statutory legal instruments to implement their strategies entering the stage.

Elliott Management, a typical activist investor in special situations, continued to fiercely enforce its claim for an increase of the consideration for its 14.4% stake in Kabel Deutschland as part of the tender offer by Vodafone Group. In 2013, Elliott requested a special audit to review the offer of €84.53 per share. Since Vodafone vetoed a further special audit at the 2015 annual meeting, Elliott filed a court action requesting a further special audit alleging that €188 would have been fair; it seized upon its right pursuant to Sec. 145 German Stock Corporation Act (“AktG”). The court ruled in favour of Elliott, while the verdict of the further audit is outstanding.

Turning to “strategic” activists, with Active Ownership Capital (“AOC”) a new German player has entered the stage. In April 2016, AOC purchased a 5.1% position in Stada Arzneimittel and requested the replacement of initially five, later three, of the nine members of Stada’s supervisory board. Originally, Stada accepted these nominations but then changed its mind, eventually adjourning its annual meeting by nearly three months. Meanwhile AOC established a shareholders’ forum (Sec. 127a AktG) asking major shareholders to nominate candidates for election, eventually picking four to take into the proxy contest. Additionally, AOC called for the election of a new auditor; then it proposed the replacement of management board members even though the management board is appointed by the supervisory board whose members are independent from shareholders. AOC has been supported by Guy Wyser-Pratte and German Shareholder Value Management, drawing scrutiny by the German supervisory authority BaFin. It remains unclear whether AOC is seeking a longterm partnership or publicity to raise Stada’s market value, possibly with the goal of a sale; respective rumours of a partial or complete sale have evolved.

Besides the shareholders’ forum and direct communication with management, AOC essentially may use the following legal instruments: request that discharge of management not be granted on an individual basis (Sec. 120 para. 1 sent. 2 AktG), individual election of supervisory board members (Sec. 5.4.3 German Corporate Governance Code) and voting on its own director nominees prior to candidates proposed by management, thus enhancing their chances for election (Sec. 137 AktG).

The influence of activists is further proven by Cevian Capital’s investment in Bilfinger. For years Cevian has closely followed Bilfinger’s management and presumably “installed” Eckhard Cordes as chairman of the supervisory board, prompting various changes to the management board.

Aside from some other campaigns, a new kind of activists has emerged—those selling shares short and spreading news adversely affecting the share price. The lawfulness of this may be doubted. Examples include Muddy Waters (at Ströer) and Zatarra (Wirecard).

This illustrates the continuing increase in shareholder activism in Germany and that German law provides requisite instruments for it.

Italy

Shareholder representation on company boards is the rule and not the exception in Italy, with large investors dividing board seats amongst themselves and majority shareholders choosing managers. As of 2014, 83% of listed companies had a controlling shareholder, or a coalition of shareholders in control. However, the long-term trend is that the weight of the owners is slowly decreasing, and the presence of foreign institutional investors rising.

Moreover, the country’s prolonged economic crisis and new laws have weakened families and institutions that have controlled Italy’s largest companies for decades. Changes include the conversion of the largest co-operative banks into limited companies, a ban on director overboarding within competing entities in the financial sector, and limits on the grip of foundations on the country’s banks.

Railway signalling group Ansaldo STS has recently faced one of the most outspoken activist campaigns ever seen in the country, with Elliott Management and Amber Capital fighting for an increase in the price of a tender offer by Japan’s Hitachi—which recently acquired the Italian company’s controlling stake. Elliott also exploited Italy’s proxy access rules to elect three directors to the board of Ansaldo STS.

London-based Amber, which has an office in Milan, is also fighting a battle at dairy multinational Parmalat, where it has a board seat and accuses the controlling shareholder of improper related-party transactions.

In the 2016 proxy season, the Investment Managers’ Committee, an association assisting investment firms in nominating independent directors, submitted slates at 34 companies—up from 14 in 2013–and elected close to 60 board members, largely thanks to laws granting seats to minority shareholders.

Elliott Management has launched one of the most outspoken activist campaigns ever seen in Italy, electing three directors at Ansaldo STS and filing a lawsuit to gain complete control of the board. Amber Capital is engaging with several companies, and a battle with Parmalat’s largest shareholder that started in 2012 is still ongoing. In 2015, Vincent Bolloré’s Vivendi won three seats on the board of Telecom Italia.

Activism in Italy has been rising steadily since the eurozone crisis, and 2016 is the busiest year on record as regulatory reform increases the scope for investors to apply pressure.

* as of 30th June 2016. Projected full-year figures shown in dotted box.

Activism in Italy is dominated by companies with a market capitalisation of less than 1.8 billion euros, although high-profile examples of large companies being targeted can be found.

Switzerland

Activism in Switzerland continues to play a role in several aspects of corporate life. Despite campaigns at the likes of Transocean, Xstrata and UBS, the country has previously been thought of as unfavourable to activism because, as in Germany, many companies have dual board structures. However, that failed to stop investors recently demanding changes to boards at Holcim, fashion retailer Charles Vögele and listed hedge fund Altin.

M&A activity including some of the largest Swiss companies, such as Syngenta and LafargeHolcim, has forced management teams to engage more meaningfully with shareholders, although investors have been less successful in wringing out meaningful concessions than in 2012, when a shareholder vote on golden parachutes for Xstrata executives forced the resignation of Chairman John Bond.

At Sika, a specialty chemicals company, Bill Gates’ family office Cascade Investment has opposed a takeover offer from Cie de Saint-Gobain, lobbying the takeover panel to force the bidder to tender for minority shareholders’ stakes. At the time of writing, Swiss courts were being asked to decide whether Sika could limit the majority voting rights of its founding family, which sold its 16% stake to the bidder.

A campaign at Altin highlights the lengths activists have to go to in Switzerland. In February, Alpine Select requisitioned a shareholder meeting to vote on the appointment of three new directors and a special dividend. When Alpine won just one seat on the board, its nominee resigned, and it went on to build a majority stake before negotiating an agreement whereby the company nominated three new directors, paid a hefty dividend and agreed to delist from the London Stock Exchange. Altin CEO Tony Morrongiello also announced his resignation in favour of Alpine’s Claudia Habermacher at the June annual meeting.

The restricted power of dual-class Swiss boards often limits investors to complaining about decisions from outside the boardroom—as with the appointment of Adecco’s new CEO—or legal action—as Bill Gates’ family office Cascade Investment is pursuing at Sika. Mergers have also catalysed activism, with Syngenta and Holcim targeted. As ever, Cevian Capital is present through its stake in ABB, while Swiss activist Telios may be one to watch in the future.

After an exceptionally busy 2015, this year has a lot to live up to. However, activists have started strongly, targeting more companies than in any year before 2015.

* as of 30th June 2016. Projected full-year figures shown in dotted box.

The make up of activist targets has changed only slightly in recent years. Many Swiss targets of activists being international by nature and often involved in crossborder mergers, the predominance of large cap targets is perhaps not surprising.

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

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

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

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

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

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

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

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

par

Nicolle Forget*

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

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

nicolle-forget

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

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

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

Malaise !

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Encore une fois, pour quoi ? Pour qui ?

Pourquoi pas aux activistes de toutes origines ?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Malaise !

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

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

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

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

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

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

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

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

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

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

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

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

La fonction d’audit interne | de plus en plus incontournable pour assurer une saine gouvernance et l’intégrité du management

Voici le résumé d’un article du Wall Street Journal (Internal Audit Chiefs Gain in Clout, Compensation), publié par Joann S. Lublin, et paru dans le journal The Australian.

Cet article porte sur l’importance accrue accordée au rôle de l’auditeur interne dans la vérification des mécanismes de contrôle interne, de la gestion des risques, notamment des risques de cyberattaques, ainsi que des processus de gouvernance et de conformité.

L’influence du département de l’audit interne prend une place quasi incontournable dans la vaste majorité des grandes sociétés comme en témoignent les statistiques à ce sujet.

Ainsi, 83 % des directions d’audit interne se rapportent au CA ou au comité d’audit du CA ; c’est un accroissement de 76 % en trois ans !

On peut certainement constater que les activités d’audit interne représentent les « yeux et les oreilles du comité d’audit ».

Également, les directeurs des services d’audit interne ont vu leur rémunération augmenter d’environ 30 % au cours des dix dernières années.

Les conseils d’administration accordent maintenant une grande importance à la sélection et à la rémunération des « Chief Audit Executive » (CAE).

Bonne lecture !

Chief audit executives gaining clout and higher pay

Top watchdogs inside many companies bark louder these days.

They are known as chief audit executives, or CAEs, and they assess the effectiveness of corporate controls, risk management and governance processes. As boards worry more about cyber attacks, regulatory compliance and personal liability, these executives are gaining clout and commanding higher pay.

CAEs are becoming more visible in part because directors are playing bigger roles in selecting, evaluating and rewarding internal audit chiefs. In North America, 83 per cent of those executives now report to their employer’s full board or audit committee, according to a report by the Institute of Internal Auditors. That’s up from 76 per cent in 2013.

Another sign of their rising influence: this year, for the first time, the proportion of audit leaders who report to their chief executive matched those overseen by the chief financial officer, the report found.

Solid support from audit committees and top company leaders often give CAEs more freedom to raise red flags, experts said. It can also bring them sizeable pay cheques.

“Boards will pay a lot more for CAEs with superior risk-management and business acumen in their company’s industry,’’ said Richard Chambers, IIA president.

Recruiters agree. “Chief audit executives hired by large companies now command total pay packages approaching $US1 million — about 30 per cent more than a decade ago,’’ said Scott Simmons, a managing director at Crist Kolder Associates, which recruited nearly 15 current CAEs.

Sarbanes-Oxley, the sweeping corporate-reform law enacted in 2002, raised boards’ expectations for heads of internal audit, according to Charles Noski, chairman of the audit committee at Microsoft, Priceline Group and Avon Products.

“Internal audit really is the eyes and ears of the audit committee,’’ he said, adding that CAEs today “are stronger executives’’.

Mr Noski makes sure that’s true of candidates who interview for the job. He said he seeks “a strong backbone”, plus effective boardroom presence and communications skills.

Conseil d’administration | Perte de contrôle ?

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

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

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

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

Bonne lecture ! Vos commentaires sont les bienvenus.

Conseil d’administration | Perte de contrôle ?

par

Joanne Desjardins

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

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

Mettons les pendules à l’heure… juste.

Allez-vous vraiment perdre le contrôle ?

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

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

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

Est-ce que le CA peut gérer mon entreprise ?

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

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

Quels sont les 4 principaux avantages d’un CA ?

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

(1) briser l’isolement du président

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

(2) source d’expertises complémentaires

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

(3) crédibilité accrue et réputation renforcée

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

(4) force du réseau

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

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

Étude sur les éléments à prendre en ligne de compte par les comités de rémunération eu égard à la compensation globale des PDG de sociétés publiques aux É.U.

Ce matin, je partage avec vous les conclusions d’une enquête effectuée par Ira Kay et Blaine Martin, pour le compte de la SEC, et parue dans la revue Pay Governance.

Quelle part de l’accroissement de l’inégalité des revenus aux États-Unis a été occasionnée par les rémunérations « excessives » des CEO ? Cette inégalité est-elle attribuable à une défaillance de la gouvernance des sociétés ?

Le mandat répond à certaines questions de la SEC, notamment :

Question 1 : Is the recent increase in US income inequality caused primarily by the increase in the number of public company executives in the top .1% of earners?

Question 2 : Alternatively, is the recent increase in US income inequality caused primarily by the increase in the aggregate pay levels of public company executives in the top 1% and .1% of earners?

Question 3 : Is CEO pay aligned with the performance of their employer?

Question 4 : Have corporate governance failures caused excessive executive compensation levels at public companies, thus exacerbating the inequality issue?

Question 5 : Are shareholders dissatisfied with the US executive pay model?

Cet article apporte des réponses qui surprendront probablement les spécialistes de la gouvernance. Les auteurs tirent des conclusions très utiles pour les comités de rémunérations à l’occasion de l’évaluation de la paie de leurs CEO. « The conclusion of our research is that relatively high executive compensation at public companies, allegedly enabled by compliant boards, is not the primary explanation for rising income inequality in the US ».

Voici quelques considérations à l’intention des comités de rémunération :

Ensure that competitive executive compensation opportunity levels are monitored annually against the median of an appropriately-sized peer group. This will provide a robust context for the CEO pay ratio.

Ensure that executive compensation program design provides appropriate pay-for-performance linkage, including setting challenging performance goals and providing the majority of compensation in long-term equity.

Apply best-practice compensation policies including robust stock ownership guidelines, clawback provisions, and prohibitions on hedging and pledging company shares to further link executive income and wealth to the performance of the company.

Maintain strong corporate governance practices including nominating directors using an independent Nominating Committee, using independent compensation consultants and legal counsel, and holding executive sessions at each Compensation Committee meeting.

Ensure that all employees are competitively and appropriately paid relative to the profitability, fairness and economics of the company.

Consider whether the Compensation Committee should review supplemental analyses related to the CEO pay ratio and broad-based pay practices (e.g., comparison of executive versus broad-based pay increases, review of number of employees covered under benefit programs, and review of pay ratio and median employee data to peers).

Consider how the Company will address and explain the disclosure of the ratio of CEO to median employee pay in the 2018 proxy. Since supporters of the CEO pay ratio believe that this disclosure will reduce “excessive” CEO pay caused by weak governance, companies may need to be explicit in responding to this theory. The data and analysis presented here could help in this regard.

The SEC’s Madated CEO Pay Ratio in the Context of Income Inequality : Perspectives for Compensation Committees

Key Takeaways

While the income inequality controversy started as a sociological and public Policy debate, Compensation Committees should have a strong understanding of the Relationship between public company executive compensation and income inequality.

The impending disclosure of the ratio of CEO to median employee pay in 2018 proxy statements, as required Under Dodd–‐Frank, will dramatically bring such discussions into the Compensation Committee in the near future. Supporters of the CEO pay ratio believe that this disclosure will reduce “excessive” CEO pay and lower the pay multiple.

Many “overpaid” executives subject to weak boards and poor corporate governance for being the primary cause of US income inequality. This is not accurate. While corporate executives are paid well, public company executives represent a smaller portion of the highest .1% in more recent times than they did in the mid–‐1990s.

Additionally, for the top .1%, growth in public company executive compensation actually lags the growth in private company executive pay and finance Professional pay over the same 13–‐year time period.

Pay Governance’s analyses of realizable pay for performance indicate that pay–‐for–‐performance is operating among US companies.

Improvements in corporate governance practices combined with similar executive pay levels and designs for private company executives suggest that high levels of public company CEO pay are not the result of corporate governance failure.

Further, widespread investor support for say–‐on–‐pay votes in the past six years indicate broad investor support of the current executive compensation regime.

We make strong arguments that the CEO pay ratio for a particular company will be indicative of market–‐driven industry, size and performance factors, rather than a failure of corporate governance.

As Compensation Committees consider the context of inequality issues and executive compensation decisions, Committees should focus on robust corporate governance practices, independent advice, and the company’s strategy for addressing the disclosure of the ratio of CEO to median employee pay in 2018.

The complete publication, including footnotes, is available here.

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

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

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

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

Voici les points saillants des principes retenus :

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

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

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

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

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

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

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

Bonne lecture !

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

L’évolution de la divulgation des comités d’audit aux actionnaires

Voici un article d’Ann Yerger, directrice du Center for Board Matters, de la firme Ernst & Young, qui porte sur l’évolution significative des politiques de divulgation des comités d’audit aux actionnaires des entreprises cotées en bourse aux États-Unis en 2106. L’article est paru sur le site du Harvard Law School Forum on Corporate Governance le 9 octobre.

L’étendue des divulgations aux actionnaires est vraiment très importante dans certains cas. Par exemple, en 2012, seulement 42 % des entreprises dévoilaient explicitement que le comité d’audit était responsable de l’engagement, de la rémunération et de la surveillance des auditeurs externes, alors qu’en 2016, 82 % divulguent, souvent en détail, les informations de cette nature.

Plusieurs autres résultats font état de changements remarquables dans la reddition de compte des comités d’audit aux actionnaires des entreprises.

Ceux-ci sont maintenant plus en mesure d’évaluer la portée des décisions des comités d’audit eu égard à la qualité du travail des auditeurs externes, aux raisons invoquées pour changer d’auditeur externe, à la fixation du mandat de l’auditeur externe, à la composition du comité d’audit, à l’augmentation des honoraires des firmes comptables dans les quatre catégories suivantes : audit, relié aux travaux d’audit, fiscalité et autres services connexes, etc.

Bonne lecture !

Audit Committee Reporting to Shareholders in 2016

Audit committees have a key role in overseeing the integrity of financial reporting. Nevertheless, relatively little information is required to be disclosed by US public companies about the audit committee’s important work. Since our first publication in this series in 2012, we have described efforts by investors, regulators and other stakeholders to seek increased audit-related disclosures, as well as the resulting voluntary disclosures to respond to this interest.

Over 2015–2016, US regulators have placed a spotlight on audit-related disclosures and financial reporting more generally. The US Securities and Exchange Commission (SEC) and the US Public Company Accounting Oversight Board (PCAOB) have both taken action to consider the possibility of requiring new disclosures relating to the audit.

SEC representatives also have used speeches to urge companies and audit committees to increase disclosures in this area voluntarily. While additional disclosure requirements for audit committees are not expected in the near term, regulators continue to monitor developments in this area. This post seeks to shed light on the evolving audit-related disclosure landscape.

Context

Public company audit committees are responsible for overseeing financial reporting, including the external audit. Under US securities laws, audit committees are “directly responsible for the appointment, compensation, retention and oversight” of the external auditor, and must include a report in annual proxy statements about their work. This audit committee report, however, currently must affirm only that the committee carried out certain specific responsibilities related to communications with the external auditor, and this requirement has not changed since 1999.

In recent years, a variety of groups have brought attention to the relative lack of information available about the audit committee and the audit, including their view that this area of disclosure may not have kept up with the needs of investors and other proxy statement users. These groups include pension funds, asset managers, investors, corporate governance groups, and domestic and foreign regulators. As efforts to seek additional information have continued, there has been a steady increase in voluntary audit-related disclosures.

Over the last year, the SEC has taken a series of actions to consider whether and how to improve transparency around audit committees, audits and financial reporting more generally. The combined effect of these activities has been to increase engagement by issuers, audit firms, investors and other stakeholders in discussions about the current state of financial reporting related disclosure as well as how it should change.

Findings

Our analysis of the 2016 proxy statements of Fortune 100 companies indicates that voluntaryaudit-related disclosures continue to trend upward in a number of areas. The CBM data for this review is based on the 78 companies on the 2016 Fortune 100 list that filed proxy statements each year from 2012 to 2016 for annual meetings through August 15, 2016. Below are highlights from our research:

The percentage of companies that disclosed factors considered by the audit committee when assessing the qualifications and work quality of the external auditor increased to 50%, up from 42% in 2015. In 2012, only 17% of audit committees disclosed this information.

Another significant increase was in disclosures stating that the audit committee believed that the choice of external auditor was in the best interests of the company and/or the shareholders. In 2016, 73% of companies disclosed such information; in 2015, this percentage was 63%. In 2012, only 3% of companies made this disclosure.

The audit committees of 82% of the companies explicitly stated that they are responsible for the appointment, compensation and oversight of the external auditor; in 2012, only 42% of audit committees provided such disclosures.

31% of companies provided information about the reasons for changes in fees paid to the external auditor compared to 21% the previous year. Reasons provided in these disclosures include one-time events, such as a merger or acquisition. Under current SEC rules, companies are required to disclose fees paid to the external auditor, divided into the following categories: audit, audit-related, tax and all other fees. They are not, however, required to discuss the reasons why these fees have increased or decreased. From 2012 to 2016, the percentage of companies disclosing information to explain changes in audit fees rose from 9% to 31%. Additional CBM research examined the disclosures of the subset of studied companies (43) that had changes in audit fees of +/- 5% or more compared to the previous year. Out of these 43 companies, roughly 20% provided explanatory disclosures regarding the change in audit fees.

29 of the 43 companies had fee increases of 5% or more, out of which 8 companies disclosed the reasons for the increases. 14 of the 43 companies had fee decreases of 5% or more, out of which only one company provided an explanatory disclosure.

53% of companies disclosed that the audit committee considered the impact of changing auditors when assessing whether to retain the current auditor. This was a 6 percentage point increase over 2015. In 2012, this disclosure was made by 3% of the Fortune 100 companies. Over the past five years, the number of companies disclosing that the audit committee was involved in the selection of the lead audit partner has grown dramatically, up to 73% in 2016. In 2015, 67% of companies disclosed this information, while in 2012, only 1% of companies did so.

51% of companies disclosed that they have three or more financial experts on their audit committees, up from 47% in 2015 and 36% in 2012.

Summary: Trends in Audit Committee Disclosure

(Cliquez pour agrandir)

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

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

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

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

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

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

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Un cas culture organisationnelle déficiente !

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

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

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

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

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

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

Chris’s Answer …..

Julie’s Answer ….

Leanne’s Answer ….

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

Quelle est la rémunération globale des administrateurs canadiens ?

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

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

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

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

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

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

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

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

Bonne lecture !

How much is a director worth ?

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

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

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

PRIVATELY UNDERPAID?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PUBLICLY EXPOSED

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

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

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

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

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

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

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

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

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

EQUITY COMPENSATION

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

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

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

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

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

RICHER REWARDS

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

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

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

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

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

Livres phares sur la gouvernance d’entreprise

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

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

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

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

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

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

Je vous recommande donc vivement de vous procurer ces volumes.

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

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

Bonne lecture !

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

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

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

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

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

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

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

Bonne lecture. Vos commentaires sont les bienvenus.

A Theory of Efficient Short-Termism

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

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

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

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

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

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

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

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

The paper is available for download here.

References

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

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

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

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

Assurer une efficacité supérieure du conseil d’administration

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

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

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

L’auteure insiste sur les points suivants :

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

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

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Achieving higher board effectiveness

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

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

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

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

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

Board meeting follow-ups with the chair and CEO

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

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

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

On-boarding and integration

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

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

Educational sessions

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

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

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

Strategic planning sessions

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

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

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

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

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

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

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

CEO, board and management leadership effectiveness assessment

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

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

CEO leadership effectiveness assessment

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

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

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

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

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

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

Board and management leadership effectiveness assessments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bonne lecture ! Vos commentaires sont toujours les bienvenus.

Cas de relève familiale

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

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

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

How can Hannah find fulfilment in her new role?

Paul’s Answer …..

Julie’s Answer ….

Jakob’s Answer ….

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

L’efficacité du rôle du président du conseil

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

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

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

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

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

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

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

Vos commentaires sont appréciés. Bonne lecture.

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

par Danielle Malboeuf*

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

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

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

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

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

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

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

Un CA performant est guidé par un président compétent.

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

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

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

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

Articles sur la gouvernance des CEGEP

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

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

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

La composition du conseil d’administration | Élément clé d’une saine gouvernance

Le travail de renouvellement du conseil ne peut se faire sans la mise en place d’un processus d’évaluation complet du fonctionnement du CA et des administrateurs.

À mon avis, c’est certainement un article à lire pour bien comprendre toutes les problématiques reliées à la composition des conseils d’administration.

Bonne lecture !

Investors and Board Composition

In today’s business environment, companies face numerous challenges that can impact success—from emerging technologies to changing regulatory requirements and cybersecurity concerns. As a result, the expertise, experience, and diversity of perspective in the boardroom play a more critical role than ever in ensuring effective oversight. At the same time, many investors and other stakeholders are seeking influence on board composition. They want more information about a company’s director nominees. They also want to know that boards and their nominating and governance committees are appropriately considering director tenure, board diversity and the results of board self-evaluations when making director nominations. All of this is occurring within an environment of aggressive shareholder activism, in which board composition often becomes a central focus.

Shareholder activism and board composition

At the same time, a growing number of companies are adopting proxy access rules—allowing shareholders that meet certain ownership criteria to submit a limited number of director candidates for inclusion on the company’s annual proxy. It has become a top governance issue over the last two years, with many shareholders viewing it as a step forward for shareholder rights. And it’s another factor causing boards to focus more on their makeup.

So within this context, how should directors and investors be thinking about board composition, and what steps should be taken to ensure boards are adequately refreshing themselves?

Assessing what you have–and what you need

In a rapidly changing business climate, a high-performing board requires agile directors who can grasp concepts quickly. Directors need to be fiercely independent thinkers who consciously avoid groupthink and are able to challenge management—while still contributing to a productive and collegial boardroom environment. A strong board includes directors with different backgrounds, and individuals who understand how the company’s strategy is impacted by emerging economic and technological trends.

Sample board composition grid: What skills and attributes does your board need?

In assessing their composition, boards and their nominating and governance committees need to think critically about what skills and attributes the board currently has, and how they tie to oversight of the company. As companies’ strategies change and their business models evolve, it is imperative that board composition be evaluated regularly to ensure that the right mix of skills are present to meet the company’s current needs. Many boards conduct a gap analysis that compares current director attributes with those that it has identified as critical to effective oversight. They can then choose to fill any gaps by recruiting new directors with such attributes or by consulting external advisors. Some companies use a matrix in their proxy disclosures to graphically display to investors the particular attributes of each director nominee.

Board diversity is a hot-button issue

Diversity is a key element of any discussion of board composition. Diversity includes not only gender, race, and ethnicity, but also diversity of skills, backgrounds, personalities, opinions, and experiences. But the pace of adding more gender and ethnic diversity to public company boards has been only incremental over the past five years. For example, a December 2015 report from the US Government Accountability Office estimates that it could take four decades for the representation of women on US boards to be the same as men. [1] Some countries, including Norway, Belgium, and Italy, have implemented regulatory quotas to increase the percentage of women on boards.

Even if equal proportions of women and men joined boards each year beginning in 2015, GAO estimated that it could take more than four decades for women’s representation on boards to be on par with that of men’s.
—US Government Accountability Office, December 2015

According to PwC’s 2015 Annual Corporate Directors Survey, more than 80% of directors believe board diversity positively impacts board and company performance. But more than 70% of directors say there are impediments to increasing board diversity. [2] One of the main impediments is that many boards look to current or former CEOs as potential director candidates. However, only 4% of S&P 500 CEOs are female, [3] less than 2% of the Fortune 500 CEOs are Hispanic or Asian, and only 1% of the Fortune 500 CEOs are African-American. [4] So in order to get boards to be more diverse, the pool of potential director candidates needs to be expanded.

Is there diversity on US boards?

Source: Spencer Stuart US Board Index 2015, November 2015.

SEC rules require companies to disclose the backgrounds and qualifications of director nominees and whether diversity was a nomination consideration. In January 2016, SEC Chair Mary Jo White included diversity as a priority for the SEC’s 2016 agenda and suggested that the SEC’s disclosure rules pertaining to board diversity may be enhanced.

While those who aspire to become directors must play their part, the drive to make diversity a priority really has to come from board leadership: CEOs, lead directors, board chairs, and nominating and governance committee chairs. These leaders need to be proactive and commit to making diversity part of the company and board culture. In order to find more diverse candidates, boards will have to look in different places. There are often many untapped, highly qualified, and diverse candidates just a few steps below the C-suite, people who drive strategies, run large segments of the business, and function like CEOs.

How long is too long? Director tenure and mandatory retirement

The debate over board tenure centers on whether lengthy board service negatively impacts director independence, objectivity, and performance. Some investors believe that long-serving directors can become complacent over time—making it less likely that they will challenge management. However, others question the virtue of forced board turnover. They argue that with greater tenure comes good working relationships with stakeholders and a deep knowledge of the company. One approach to this issue is to strive for diversity of board tenure—consciously balancing the board’s composition to include new directors, those with medium tenures, and those with long-term service.

This debate has heated up in recent years, due in part to attention from the Council of Institutional Investors (the Council). In 2013, the Council introduced a revised policy statement on board tenure. While the policy “does not endorse a term limit,” [5] the Council noted that directors with extended tenures should no longer be considered independent. More recently, the large pension fund CalPERS has been vocal about tenure, stating that extended board service could impede objectivity. CalPERS updated its 2016 proxy voting guidelines by asking companies to explain why directors serving for over twelve years should still be considered independent.

We believe director independence can be compromised at 12 years of service—in these situations a company should carry out rigorous evaluations to either classify the director as non-independent or provide a detailed annual explanation of why the director can continue to be classified as independent.
— CalPERS Global Governance Principles, second reading, March 14, 2016

Factors in the director tenure and age debate

Source: Spencer Stuart US Board Index 2015, November 2015.

Many boards have a mandatory retirement age for their directors. However, the average mandatory retirement age has increased in recent years. Of the 73% of S&P 500 boards that have a mandatory retirement age in place, 97% set that age at 72 or older—up from 57% that did so ten years ago. Thirty-four percent set it at 75 or older. [6] Others believe that director term limits may be a better way to encourage board refreshment, but only 3% of S&P 500 boards have such policies. [7]

Investor concern

Some institutional investors have expressed concern about board composition and refreshment, and this increased scrutiny could have an impact on proxy voting decisions.

What are investors saying about board composition and refreshment?

Sources: BlackRock, Proxy voting guidelines for U.S. securities, February 2015; California Public Employees’ Retirement System, Statement of Investment Policy for Global Governance, March 16, 2015; State Street Global Advisors’ US Proxy Voting and Engagement Guidelines, March 2015.

Proxy advisors’ views on board composition—recent developments

Proxy advisory firm Institutional Shareholder Services’s (ISS) governance rating system QuickScore 3.0 views tenure of more than nine years as potentially compromising director independence. ISS’s 2016 voting policy updates include a clarification that a “small number” of long-tenured directors (those with more than nine years of board service) does not negatively impact the company’s QuickScore governance rating, though ISS does not provide specifics on the acceptable quantity.

Glass Lewis’ updated 2016 voting policies address nominating committee performance. Glass Lewis may now recommend against the nominating and governance committee chair “where the board’s failure to ensure the board has directors with relevant experience, either through periodic director assessment or board refreshment, has contributed to a company’s poor performance.” Glass Lewis believes that shareholders are best served when boards are diverse on the basis of age, race, gender and ethnicity, as well as on the basis of geographic knowledge, industry experience, board tenure, and culture.

How can directors proactively address board refreshment?

The first step in refreshing your board is deciding whether to add a new board member and determining which director attributes are most important. One way to do this is to conduct a self-assessment. Directors also have a number of mechanisms to address board refreshment. For one, boards can consider new ways of recruiting director candidates. They can take charge of their composition through active and strategic succession planning. And they can also use robust self-assessments to gauge individual director performance—and replace directors who are no longer contributing.

Act on the results of board assessments. Boards should use their annual self-assessment to help spark discussions about board refreshment. Having a robust board assessment process can offer insights into how the board is functioning and how individual directors are performing. The board can use this process to identify directors that may be underperforming or whose skills may no longer match what the company needs. It’s incumbent upon the board chair or lead director and the chair of the nominating and governance committee to address any difficult matters that may arise out of the assessment process, including having challenging conversations with underperforming directors. In addition, some investors are asking about the results of board assessments. CalPERS and CalSTRS have both called on boards to disclose more information about the impact of their self-assessments on board composition decisions. [8]

Take a strategic approach to director succession planning. Director succession planning is essential to promoting board refreshment. But, less than half of directors “very much” believe their board is spending enough time on director succession. [9] In board succession planning, it’s important to think about the current state of the board, the tenure of current members, and the company’s future needs. Boards should identify possible director candidates based upon anticipated turnover and director retirements.

Broaden the pool of candidates. Often, boards recruit directors by soliciting recommendations from other sitting directors, which can be a small pool. Forward-looking boards expand the universe of potential qualified candidates by looking outside of the C-suite, considering investor recommendations, and by looking for candidates outside the corporate world—from the retired military, academia, and large non-profits. This will provide a broader pool of individuals with more diverse backgrounds who can be great board contributors.

In sum, evaluating board composition and refreshing the board may be challenging at times, but it’s increasingly a topic of concern for many investors, and it’s critical to the board’s ability to stay current, effective, and focused on enhancing long-term shareholder value.

The complete publication, including footnotes and appendix, is available here.

Endnotes:

[1] United States Government Accountability Office, “Corporate Boards: Strategies to Address Representation of Women Include Federal Disclosure Requirements,” December 2015.
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[2] PwC, 2015 Annual Corporate Directors Survey, October 2015.
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[3] Catalyst, Women CEOs of the S&P 500, February 3, 2016.
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[4] “McDonald’s CEO to Retire; Black Fortune 500 CEOs Decline by 33% in Past Year,” DiversityInc, January 29, 2015; http://www.diversityinc.com/leadership/mcdonalds-ceo-retire-black-fortune-500-ceos-decline-33-past-year.
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[5] Amy Borrus, “More on CII’s New Policies on Universal Proxies and Board Tenure,” Council of Institutional Investors, October 1, 2013; http://www.cii.org/article_content.asp?article=208.
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[6] Spencer Stuart, 2015 US Board Index, November 2015.
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[7] Spencer Stuart, 2015 US Board Index, November 2015.
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[8] California State Teachers’ Retirement System Corporate Governance Principles, April 3, 2015, http://www.calstrs.com/sites/main/files/file-attachments/corporate_governance_principles_1.pdf; The California Public Employees’ Retirement System Global Governance Principles, Updated March 14, 2016, https://www.calpers.ca.gov/docs/board-agendas/201603/invest/item05a-02.pdf.
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[9] PwC, 2015 Annual Corporate Directors Survey, October 2015. www.pwc.com/us/GovernanceInsightsCenter.

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

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

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

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

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

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

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

Bonne lecture !

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

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

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

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

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

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

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

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

Review and refresh board composition and ensure appropriate succession

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

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

Prepare for and monitor developments in proxy access

Strategic Planning Considerations

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

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

finding ways to drive top-line growth

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

the effect of low oil and gas prices

figuring out whether and when to deploy growing cash stockpiles

assessing the opportunities and risks of climate change and resource scarcity

addressing corporate social responsibility.

Shareholder Activism

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

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

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

Cybersecurity

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

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

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

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

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

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

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

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

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

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

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

Risk Management

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

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

Social Media

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

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

M&A Developments

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

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

Board Composition and Succession Planning

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

Audit Committees

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

Executive Compensation

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

Proxy Access

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

The complete publication is available here.

Endnotes:

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

CEOs, Stop Trying to Manage the Board

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

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

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

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

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

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

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

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

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

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

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

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

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

Formation en éthique 2.0 pour les conseils d’administration

Je me suis engagé dans la diffusion de pratiques exemplaires en matière de gouvernance depuis plus d’une décennie : d’abord, en collaborant à la conception et la gestion d’un des premiers programmes de formation en gouvernance, dans le cadre du Collège des administrateurs de sociétés (CAS) ; ensuite, en créant un blogue dont l’objectif est d’être la référence en matière de documentation en gouvernance dans le monde francophone.

En gouvernance, on parle d’éthique associée aux entreprises depuis fort longtemps, mais j’ai compris qu’il ne suffisait pas de donner bonne conscience aux membres de l’organisation en prêchant les valeurs de l’éthique ! Non, il est essentiel de communiquer le sens profond que prend cette discipline, de s’assurer que les intéressés comprennent les implications sous-jacentes, et adoptent des comportements cohérents.

On doit enseigner les notions d’éthique en exposant concrètement, par des études de cas, les dilemmes qui se présentent aux participants.

L’un des experts mondiaux les plus crédibles pour traiter de ces questions est le spécialiste René Villemure qui œuvre dans ce domaine depuis plus de 18 ans.

René est un communicateur hors pair et un conférencier très recherché pour aborder toutes les questions touchant les notions d’éthique. Il a donné des centaines de conférences sur le sujet, il a participé activement à plusieurs programmes de formation en gouvernance, notamment au CAS, et il a abondamment contribué à enrichir le débat public sur les problèmes d’ordre éthique.

René Villemure a récemment mis en œuvre un programme de formation à l’intention des membres de conseils d’administration : L’Éthique pour le conseil. « C’est “l’éthique 2.0”, qui dès aujourd’hui et pour les années à venir, vise à préparer votre réponse aux préoccupations et défis en éthique ».

Voici les objectifs poursuivis par le nouveau programme :

Augmenter la sensibilité et la compréhension de l’éthique par les membres du conseil d’administration ;

S’assurer que votre conseil d’administration soit durable en matière d’éthique ;

Répondre aux nouvelles exigences en matière d’intégrité ;

S’assurer que la culture éthique de votre entreprise est bien ancrée au sein de l’entreprise et auprès de l’ensemble de vos employés ;

Prendre une position éthique distinctive dans votre marché ;

Établir votre positionnement en matière d’éthique avec l’ensemble des parties prenantes en lien avec votre entreprise ;

Mieux adapter la gouvernance éthique de votre entreprise aux différentes cultures, valeurs et règles sur le plan éthique dans les pays avec lesquels votre entreprise transige ou dans les pays où elle est établie ;

Minimiser les impacts des changements démographiques prévisibles en facilitant le recrutement des meilleurs talents ;

Laisser une empreinte éthique durable, digne de confiance, reconnue et unique qui survivra au remplacement des administrateurs.

Pour René Villemure, il est capital de s’adresser directement au conseil d’administration et de mettre en place des interventions ciblées. Vous trouverez, ci-dessous, une présentation des grandes lignes du programme.

Bonne lecture !

L’éthique pour le conseil

Plus que jamais votre organisation doit être proactive afin d’assurer la réalisation de son potentiel éthique

Augmenter la compréhension et la sensibilité du conseil en matière d’éthique

Répondez aux nouvelles exigences en matière d’intégrité

Réduisez l’écart entre les valeurs affichées et celles qui sont pratiquées

Rendez votre culture éthique durable

Attirez les meilleurs talents avec une culture éthique forte

Le programme « L’Éthique pour le conseil »

Un programme qualitatif qui mesure la sensibilité éthique des membres de conseils d’administration, ses forces et ses défis éthiques

Une méthode interactive, vote et discussions

Nos Géoramas permettront d’identifier en un coup d’oeil votre positionnement éthique

Les Axes de mesure

L’Éthique

Mission, Vision et Valeurs

Le rôle du conseil d’administration

Les critères de mesure

La Pratique

La Compréhension

L’Affiche

Le rapport

Analyse de pertinence éthique

Analyse de la Pratique, de la Compréhension et de l’Affiche

Géoramas éthiques pour chacun des axes et enjeux

Positionnement éthique global

Plan d’action

Un programme flexible et adapté à vos enjeux éthiques

Que ce soit pour initier une démarche éthique, pour valider les initiatives éthiques mises de l’avant, ou encore pour positionner l’éthique de manière durable au sein de votre organisation, le programme L’Éthique pour le conseil s’adapte au contexte et à la structure de votre organisation.

Les étapes du programme:

Analyse du contexte éthique actuel de l’organisation avec un sous-comité du conseil

Rencontre interactive avec le Conseil d’administration

Présentation du rapport, mesures et plan d’action d’Ethikos

Shareholder activism and board composition

Assessing what you have–and what you need

Sample board composition grid: What skills and attributes does your board need?

Board diversity is a hot-button issue

Is there diversity on US boards?

How long is too long? Director tenure and mandatory retirement

Factors in the director tenure and age debate

Investor concern

What are investors saying about board composition and refreshment?

Proxy advisors’ views on board composition—recent developments

How can directors proactively address board refreshment?

Endnotes:

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United Kingdom

Shareholder Activism—recent developments in the U.K.

France

France is in the process of strengthening its Say on Pay

Germany

New players rising

Italy

Switzerland

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Context

Findings

Summary: Trends in Audit Committee Disclosure

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References

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Shareholder activism and board composition

Assessing what you have–and what you need

Sample board composition grid: What skills and attributes does your board need?

Board diversity is a hot-button issue

Is there diversity on US boards?

How long is too long? Director tenure and mandatory retirement

Factors in the director tenure and age debate

Investor concern

What are investors saying about board composition and refreshment?

Proxy advisors’ views on board composition—recent developments

How can directors proactively address board refreshment?

Endnotes:

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Strategic Planning Considerations

Shareholder Activism

Cybersecurity

Risk Management

Social Media

M&A Developments

Board Composition and Succession Planning

Audit Committees

Executive Compensation

Proxy Access

Endnotes:

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Plus que jamais votre organisation doit être proactive afin d’assurer la réalisation de son potentiel éthique

Le programme « L’Éthique pour le conseil »

Les Axes de mesure

Les critères de mesure

Le rapport

Un programme flexible et adapté à vos enjeux éthiques

Les étapes du programme:

Analyse du contexte éthique actuel de l’organisation avec un sous-comité du conseil

Rencontre interactive avec le Conseil d’administration

Présentation du rapport, mesures et plan d’action d’Ethikos

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