Étiquette : Comportements

Quelles tendances en gouvernance, identifiées en 2014, se sont avérées au 20 octobre 2018


Dans un premier temps, j’ai tenté de répondre à cette question en renvoyant le lecteur à deux publications que j’ai faites sur le sujet. C’est du genre check-list !

Puis, dans un deuxième temps, je vous invite à consulter les documents suivants qui me semblent très pertinents pour répondre à la question. Il s’agit en quelque sorte d’une revue de la littérature sur le sujet.

  1. La gouvernance relative aux sociétés en 2017 | Un « Survey » des entreprises du SV 150 et de la S&P 100
  2. Principales tendances en gouvernance à l’échelle internationale en 2017
  3. Séparation des fonctions de PDG et de président du conseil d’administration | Signe de saine gouvernance !
  4. Six mesures pour améliorer la gouvernance des organismes publics au Québec | Yvan Allaire
  5. Cadre de référence pour évaluer la gouvernance des sociétés | Questionnaire de 100 items
  6. La gouvernance française suit-elle la tendance mondiale ?
  7. Enquête mondiale sur les conseils d’administration et la gouvernance

 

J’espère que ces commentaires vous seront utiles, même si mon intervention est colorée par la situation canadienne et américaine !

Bonne lecture !

 

Résultats de recherche d'images pour « tendances en gouvernance »

 

Gouvernance : 12 tendances à surveiller

 

J’ai réalisé une entrevue avec le Journal des Affaires le 17 mars 2014. Une rédactrice au sein de l’Hebdo des AG, un média numérique qui se consacre au traitement des sujets touchant à la gouvernance des entreprises françaises, m’a contacté afin de connaître mon opinion sur quelles « prédictions » se sont effectivement avérées, et lesquelles restent encore à améliorer.

J’ai préparé quelques réflexions en référence aux douze tendances que j’avais identifiées le 17 mars 2014. J’ai donc revisité les tendances afin de vérifier comment la situation avait évolué en quatre ans. J’ai indiqué en rouge mon point de vue eu égard à ces tendances.

 « Si la gouvernance des entreprises a fait beaucoup de chemin depuis quelques années, son évolution se poursuit. Afin d’imaginer la direction qu’elle prendra au cours des prochaines années, nous avons consulté l’expert en gouvernance Jacques Grisé, ex- directeur des programmes du Collège des administrateurs de sociétés, de l’Université Laval. Toujours affilié au Collège, M. Grisé publie depuis plusieurs années le blogue www.jacquesgrisegouvernance.com, un site incontournable pour rester à l’affût des bonnes pratiques et tendances en gouvernance. Voici les 12 tendances dont il faut suivre l’évolution, selon Jacques Grisé »

 

  1. Les conseils d’administration réaffirmeront leur autorité. « Auparavant, la gouvernance était une affaire qui concernait davantage le management », explique M. Grisé. La professionnalisation de la fonction d’administrateur amène une modification et un élargissement du rôle et des responsabilités des conseils. Les CA sont de plus en plus sollicités et questionnés au sujet de leurs décisions et de l’entreprise. Cette affirmation est de plus en plus vraie. La formation certifiée en gouvernance est de plus en plus prisée. Les CA, et notamment les présidents de CA, sont de plus en plus sollicités pour expliquer leurs décisions, leurs erreurs et les problèmes de gestion de crise.
  2. La formation des administrateurs prendra de l’importance. À l’avenir, on exigera toujours plus des administrateurs. C’est pourquoi la formation est essentielle et devient même une exigence pour certains organismes. De plus, la formation continue se généralise ; elle devient plus formelle. Il va de soi que la formation en gouvernance prendra plus d’importance, mais les compétences et les expériences reliées au secteur d’activité de l’entreprise seront toujours très recherchées.
  3. L’affirmation du droit des actionnaires et celle du rôle du conseil s’imposeront. Le débat autour du droit des actionnaires par rapport à celui des conseils d’administration devra mener à une compréhension de ces droits conflictuels. Aujourd’hui, les conseils doivent tenir compte des parties prenantes en tout temps. Il existe toujours une situation potentiellement conflictuelle entre les intérêts des actionnaires et la responsabilité des administrateurs envers toutes les parties prenantes.
  4. La montée des investisseurs activistes se poursuivra. L’arrivée de l’activisme apporte une nouvelle dimension au travail des administrateurs. Les investisseurs activistes s’adressent directement aux actionnaires, ce qui mine l’autorité des conseils d’administration. Est-ce bon ou mauvais ? La vision à court terme des activistes peut être néfaste, mais toutes leurs actions ne sont pas négatives, notamment parce qu’ils s’intéressent souvent à des entreprises qui ont besoin d’un redressement sous une forme ou une autre. Pour bien des gens, les fonds activistes sont une façon d’améliorer la gouvernance. Le débat demeure ouvert. Le débat est toujours ouvert, mais force est de constater que l’actionnariat activiste est en pleine croissance partout dans le monde. Les effets souvent décriés des activistes sont de plus en plus acceptés comme bénéfiques dans plusieurs situations de gestion déficiente.
  5. La recherche de compétences clés deviendra la norme. De plus en plus, les organisations chercheront à augmenter la qualité de leur conseil en recrutant des administrateurs aux expertises précises, qui sont des atouts dans certains domaines ou secteurs névralgiques. Cette tendance est très nette. Les CA cherchent à recruter des membres aux expertises complémentaires.
  6. Les règles de bonne gouvernance vont s’étendre à plus d’entreprises. Les grands principes de la gouvernance sont les mêmes, peu importe le type d’organisation, de la PME à la société ouverte (ou cotée), en passant par les sociétés d’État, les organismes à but non lucratif et les entreprises familiales. Ici également, l’application des grands principes de gouvernance se généralise et s’applique à tous les types d’organisation, en les adaptant au contexte.
  7. Le rôle du président du conseil sera davantage valorisé. La tendance veut que deux personnes distinctes occupent les postes de président du conseil et de PDG, au lieu qu’une seule personne cumule les deux, comme c’est encore trop souvent le cas. Un bon conseil a besoin d’un solide leader, indépendant du PDG. Le rôle du Chairman est de plus en plus mis en évidence, car c’est lui qui représente le conseil auprès des différents publics. Il est de plus en plus indépendant de la direction. Les É.U. sont plus lents à adopter la séparation des fonctions entre Chairman et CEO.
  8. La diversité deviendra incontournable. Même s’il y a un plus grand nombre de femmes au sein des conseils, le déficit est encore énorme. Pourtant, certaines études montrent que les entreprises qui font une place aux femmes au sein de leur conseil sont plus rentables. Et la diversité doit s’étendre à d’autres origines culturelles, à des gens de tous âges et d’horizons divers. La diversité dans la composition des conseils d’administration est de plus en plus la norme. On a fait des progrès remarquables à ce chapitre, mais la tendance à la diminution de la taille des CA ralentit quelque peu l’accession des femmes aux postes d’administratrices.
  9. Le rôle stratégique du conseil dans l’entreprise s’imposera. Le temps où les CA ne faisaient qu’approuver les orientations stratégiques définies par la direction est révolu. Désormais, l’élaboration du plan stratégique de l’entreprise doit se faire en collaboration avec le conseil, en profitant de son expertise. Certes, l’un des rôles les plus importants des administrateurs est de voir à l’orientation de l’entreprise, en apportant une valeur ajoutée aux stratégies élaborées par la direction. Les CA sont toujours sollicités, sous une forme ou une autre, dans la conception de la stratégie.
  10. La réglementation continuera de se raffermir. Le resserrement des règles qui encadrent la gouvernance ne fait que commencer. Selon Jacques Grisé, il faut s’attendre à ce que les autorités réglementaires exercent une surveillance accrue partout dans le monde, y compris au Québec, avec l’Autorité des marchés financiers. En conséquence, les conseils doivent se plier aux règles, notamment en ce qui concerne la rémunération et la divulgation. Les responsabilités des comités au sein du conseil prendront de l’importance. Les conseils doivent mettre en place des politiques claires en ce qui concerne la gouvernance. Les conseils d’administration accordent une attention accrue à la gouvernance par l’intermédiaire de leur comité de gouvernance, mais aussi par leurs comités de RH et d’Audit. Les autorités réglementaires mondiales sont de plus en plus vigilantes eu égard à l’application des principes de saine gouvernance. La SEC, qui donnait souvent le ton dans ce domaine, est en mode révision de la réglementation parce que le gouvernement de Trump la juge trop contraignante pour les entreprises. À suivre !
  11. La composition des conseils d’administration s’adaptera aux nouvelles exigences et se transformera. Les CA seront plus petits, ce qui réduira le rôle prépondérant du comité exécutif, en donnant plus de pouvoir à tous les administrateurs. Ceux-ci seront mieux choisis et formés, plus indépendants, mieux rémunérés et plus redevables de leur gestion aux diverses parties prenantes. Les administrateurs auront davantage de responsabilités et seront plus engagés dans les comités aux fonctions plus stratégiques. Leur responsabilité légale s’élargira en même temps que leurs tâches gagnent en importance. Il faudra donc des membres plus engagés, un conseil plus diversifié, dirigé par un leader plus fort. C’est la voie que les CA ont empruntée. La taille des CA est de plus en plus réduite ; les conseils exécutifs sont en voie de disparition pour faire plus de place aux trois comités statutaires : Gouvernance, Ressources Humaines et Audit. Les administrateurs sont de plus en plus engagés et ils doivent investir plus de temps dans leurs fonctions.
  12. L’évaluation de la performance des conseils d’administration deviendra la norme. La tendance est déjà bien ancrée aux États-Unis, où les entreprises engagent souvent des firmes externes pour mener cette évaluation. Certaines choisissent l’auto-évaluation. Dans tous les cas, le processus est ouvert et si les résultats restent confidentiels, ils contribuent à l’amélioration de l’efficacité des conseils d’administration. Effectivement, l’évaluation de la performance des conseils d’administration est devenue une pratique quasi universelle dans les entreprises cotées. Celles-ci doivent d’ailleurs divulguer le processus dans le rapport aux actionnaires. On assiste à un énorme changement depuis les dix dernières années.

 

À ces 12 tendances, il faudrait en ajouter deux autres qui se sont révélées cruciales pour les conseils d’administration depuis quelques années :

(1) la mise en œuvre d’une politique de gestion des risques, l’identification des risques, l’évaluation des facteurs de risque eu égard à leur probabilité d’occurrence et d’impact sur l’organisation, le suivi effectué par le comité d’audit et par l’auditeur interne.

(2) le renforcement des ressources du conseil par l’ajout de compétences liées à la cybersécurité. La sécurité des données est l’un des plus grands risques des entreprises.

 

Aspects fondamentaux à considérer par les administrateurs dans la gouvernance des organisations

 

 

Récemment, je suis intervenu auprès du conseil d’administration d’une OBNL et j’ai animé une discussion tournant autour des thèmes suivants en affirmant certains principes de gouvernance que je pense être incontournables.

Vous serez certainement intéressé par les propositions suivantes :

(1) Le conseil d’administration est souverain — il est l’ultime organe décisionnel.

(2) Le rôle des administrateurs est d’assurer la saine gestion de l’organisation en fonction d’objectifs établis. L’administrateur a un rôle de fiduciaire, non seulement envers les membres qui les ont élus, mais aussi envers les parties prenantes de toute l’organisation. Son rôle comporte des devoirs et des responsabilités envers celle-ci.

(3) Les administrateurs ont un devoir de surveillance et de diligence ; ils doivent cependant s’assurer de ne pas s’immiscer dans la gestion de l’organisation (« nose in, fingers out »).

(4) Les administrateurs élus par l’assemblée générale ne sont pas porteurs des intérêts propres à leur groupe ; ce sont les intérêts supérieurs de l’organisation qui priment.

(5) Le président du conseil est le chef d’orchestre du groupe d’administrateurs ; il doit être en étroite relation avec le premier dirigeant et bien comprendre les coulisses du pouvoir.

(6) Les membres du conseil doivent entretenir des relations de collaboration et de respect entre eux ; ils doivent viser les consensus et exprimer leur solidarité, notamment par la confidentialité des échanges.

(7) Les administrateurs doivent être bien préparés pour les réunions du conseil et ils doivent poser les bonnes questions afin de bien comprendre les enjeux et de décider en toute indépendance d’esprit. Pour ce faire, ils peuvent tirer profit de l’avis d’experts indépendants.

(8) La composition du conseil devrait refléter la diversité de l’organisation. On doit privilégier l’expertise, la connaissance de l’industrie et la complémentarité.

(9) Le conseil d’administration doit accorder toute son attention aux orientations stratégiques de l’organisation et passer le plus clair de son temps dans un rôle de conseil stratégique.

(10) Chaque réunion devrait se conclure par un huis clos, systématiquement inscrit à l’ordre du jour de toutes les rencontres.

(11) Le président du CA doit procéder à l’évaluation du fonctionnement et de la dynamique du conseil.

(12) Les administrateurs doivent prévoir des activités de formation en gouvernance et en éthique.

 

Voici enfin une documentation utile pour bien appréhender les grandes tendances qui se dégagent dans le monde de la gouvernance aux É.U., au Canada et en France.

 

  1. La gouvernance relative aux sociétés en 2017 | Un « Survey » des entreprises du SV 150 et de la S&P 100
  2. Principales tendances en gouvernance à l’échelle internationale en 2017
  3. Séparation des fonctions de PDG et de président du conseil d’administration | Signe de saine gouvernance !
  4. Six mesures pour améliorer la gouvernance des organismes publics au Québec | Yvan Allaire
  5. Cadre de référence pour évaluer la gouvernance des sociétés | Questionnaire de 100 items
  6. La gouvernance française suit-elle la tendance mondiale ?
  7. Enquête mondiale sur les conseils d’administration et la gouvernance

 

Quels sont les efforts à faire pour obtenir un poste d’administrateur de société de nos jours ? | Un rappel utile


Plusieurs personnes très qualifiées me demandent comment procéder pour décrocher un poste d’administrateur de sociétés… rapidement.

Dans une période où les conseils d’administration ont des tailles de plus en plus restreintes ainsi que des exigences de plus en plus élevées, comment faire pour obtenir un poste, surtout si l’on a peu ou pas d’expérience comme CEO d’une entreprise ?

Je leur réponds qu’ils doivent :

(1) viser un secteur d’activité dans lequel ils ont une solide expertise

(2) bien comprendre ce qui les démarque (en revisitant leur CV)

(3) se demander comment leurs avantages comparatifs peuvent ajouter de la valeur à l’organisation

(4) explorer comment ils peuvent faire appel à leurs réseaux de contacts

(5) s’assurer de bien comprendre l’industrie et le modèle d’affaires de l’entreprise

(6) bien faire connaître leurs champs d’intérêt et leurs compétences en gouvernance, notamment en communiquant avec le président du comité de gouvernance de l’entreprise convoitée, et

(7) surtout… d’être patients !

Si vous n’avez pas suivi une formation en gouvernance, je vous encourage fortement à consulter les programmes du Collège des administrateurs de sociétés (CAS).

L’article qui suit présente une démarche de recherche d’un mandat d’administrateur en six étapes. L’article a été rédigé par Alexandra Reed Lajoux, directrice de la veille en gouvernance à la National Association of Corporate Directors (NACD).

Vous trouverez, ci-dessous, une brève introduction de l’article paru sur le blogue de Executive Career Insider, ainsi qu’une énumération des 6 éléments à considérer.

Je vous conseille de lire ce court article en vous rappelant qu’il est surtout destiné à un auditoire américain. Vous serez étonné de constater les similitudes avec la situation canadienne.

 

6 Steps to Becoming a Corporate Director This Year

 

Of all the career paths winding through the business world, few can match the prestige and fascination of corporate board service. The honor of being selected to guide the future of an enterprise, combined with the intellectual challenge of helping that enterprise succeed despite the odds, make directorship a strong magnet for ambition and a worthy goal for accomplishment.

Furthermore, the pay can be decent, judging from the NACD and Pearl Meyer & Partners director compensation studies. While directors do risk getting underpaid for the accordion-like hours they can be called upon to devote (typical pay is a flat retainer plus stock, but hours are as needed with no upper limit), it’s typically equivalent to CEO pay, if considered hour for hour. For example, a director can expect to work a good 250 hours for the CEO’s 2,500 and to receive nearly 10 percent of the CEO’s pay. In a public company that can provide marketable equity (typically half of pay), the sums can be significant—low six figures for the largest global companies.

Granted, directorship cannot be a first career. As explained in my previous post, boards offer only part time engagements and they typically seek candidates with track records. Yet directorship can be a fulfilling mid-career sideline, and a culminating vocation later in life—for those who retire from day to day work, but still have much to offer.

So, at any age or stage, how can you get on a board? Here are 6 steps, representing common wisdom and some of my own insights based on what I have heard from directors who have searched for – or who are seeking – that first board seat.

 

1. Recast your resume – and retune your mindset – for board service. Before you begin your journey, remember that the most important readers of your resume will be board members in search of a colleague. As such, although they will be duly impressed by your skills and accomplishments as an executive, as they read your resume or talk to you in an interview they will be looking and listening for clues that you will be an effective director. Clearly, any board positions you have had – including nonprofit board service, work on special committees or task forces and the like should be prominent on your resume and in your mind.

2. Integrate the right keywords. Language can be tuned accordingly to “directorspeak.” Any language that suggests you singlehandedly brought about results should be avoided. Instead, use language about “working with peers,” “dialogue,” and “stewardship” or “fiduciary group decisions, » « building consensus, » and so forth. While terms such as “risk oversight,” “assurance,” “systems of reporting and compliance,” and the like should not be overdone (boards are not politbureaus) they can add an aura of governance to an otherwise ordinary resume. This is not to suggest that you have two resumes – one for executive work and one for boards. Your use of boardspeak can enhance an existing executive resume. So consider updating the resume you have on Bluesteps and uploading that same resume to NACD’s Directors Registry.

3. Suit up and show up—or as my colleague Rochelle Campbell, NACD senior member engagement manager, often says, “network, network, network.” In a letter to military leaders seeking to make a transition From Battlefield to Boardroom (BtoB)through a training program NACD offers for military flag officers, Rochelle elaborates: “Make sure you attend your local chapter events—and while you are there don’t just shake hands, get to know people, talk to the speakers, and create opportunities for people to learn about you and your capabilities, not just your biography.” Rochelle, who has helped military leaders convey the value of their military leadership experience to boards, adds: “Ensure when you are networking, that you are doing so with a purpose. Include in your conversations that you are ready, qualified, and looking for a board seat.” Rochelle also points out the value of joining one’s local Chamber of Commerce and other business groups in relevant industries.

4. Cast a wide net. It is unrealistic for most candidates to aim for their first service to be on a major public company board. Your first board seat will likely be an unpaid position on a nonprofit board, or an equity-only spot on a start-up private board, or a small-cap company in the U.S. or perhaps oversees. Consider joining a director association outside the U.S. Through the Global Network of Director Institutes‘ website you can familiarize yourself with the world’s leading director associations. Some of them (for example, the Institute of Directors in New Zealand) send out regular announcements of open board seats, soliciting applications. BlueSteps members also have access to board opportunities, including one currently listed for in England seeking a non-executive director.

5. Join NACD. As long as you serve as a director on a board (including even a local nonprofit) you can join NACD as an individual where you will be assigned your own personal concierge and receive an arrange of benefits far too numerous to list here. (Please visit NACDonline.org to see them.)  If you seek additional board seats beyond the one you have, you will be particularly interested in our Directors Registry, where NACD members can upload their resumes and fill out a profile so seeking boards can find them. Another aspect will be your ability to attend local NACD chapter events, many of which are closed to nonmembers. You can also join NACD as a Boardroom Executive Affiliate no matter what your current professional status.

6. Pace yourself. If you are seeking a public company board seat, bear in mind that a typical search time will be more than two years, according to a relevant survey from executive search firm Heidrick & Struggles and the affinity group WomenCorporateDirectors. That’s how long on average that both female and male directors responding to the survey said it took for them to get on a board once they started an active campaign. (An earlier H&S/WCD survey had indicated that it took more time for women than for men, but that discrepancy seems to have evened out now – good news considering studies by Credit Suisse and others showing a connection between gender diversity and corporate performance.)  Remember that the two years is how long it took successful candidates to land a seat (people looking back from a boardroom seat on how long it took to get them there). If you average in the years spent by those who never get a board seat and gave up, the time would be longer. This can happen.

An Uphill Battle

Jim Kristie, longtime editor of Directors & Boards, once shared a poignant letter from one of his readers, whose all too valid complaint he called “protypical”:
When I turned 50, I felt like I had enough experience to add value to a public board of directors. I had served on private boards. I joined the National Association of Corporate Directors, and began soliciting smaller public companies to serve on their boards. I even solicited pink sheet companies. I solicited private equity firms to serve on the boards of portfolio companies. I signed up with headhunters, and Nasdaq Board Recruiting. In the last several years, I have sent my CV to hundreds of people, and made hundreds of telephone calls. I have been in the running, but so far no board positions.

Jim responded that the individual had done “all the right things” (thanks for the endorsement!) and steered him to additional relevant resources.

Similarly, a highly respected military flag officer, an Army general who spent two solid years looking for a board seat with help from NACD, called his search an “uphill battle.”  While four-star generals tend to attract invitations for board service, flag officers and others do not always get the attention they merit from recruiters and nominating committees. In correspondence to our CEO, he praised the BtoB program, but had some words of realism:
My experience over the past two years has convinced me that until sitting board room members see the value and diversity of thought that a B2B member brings, we will never see an appreciable rise in board room membership beyond the defense industry and even then, they only really value flag membership for the access they bring. The ‘requirements’  listed for new board members coming from industry will rarely match with a B2B resume and until such time that boards understand the value that comes with having a B2B member as part of their leadership team, they probably never will.

We’ve heard similar words from other kinds of leaders—from human resources directors to chief internal auditors, to university presidents. With so few board seats opening up every year, and with a strong leaning toward for-profit CEOs, it’s a real challenge to get through the boardroom door.

One of NACD’s long-term goals is to educate existing boards on the importance of welcoming these important forms of leadership, dispelling the notion that only a for-profit CEO can serve. For example, I happen to believe that a tested military leader can offer boards as much as or more than a civilian leader in the current high-risk environment. But no matter what your theatre of action, you must prepare for a long campaign. It’s worth the battle!

Manuel de saine gouvernance au Canada


Voici un excellent rapport produit par L’Alliance canadienne pour la mixité et la bonne gouvernance que je vous invite vivement à consulter.

L’Alliance « est un regroupement inédit d’organisations sans but lucratif de premier plan, axé sur la recherche, la promotion et l’information dans les domaines de la gouvernance et de la mixité ».

Les membres de l’Alliance sont les suivants :

Les initiatives de l’Alliance consistent en la publication de deux documents qui constituent en quelque sorte des jalons et des consensus sur les principes de saine gouvernance au Canada.
La première partie du rapport porte sur la mixité dans les conseils d’administration.
Tout porte à croire que les organisations dotées de conseils d’administration et d’équipe de haute direction où les deux sexes sont représentés de façon équilibrée sont plus susceptibles que les autres d’obtenir de solides résultats financiers à long terme et de bénéficier d’une culture organisationnelle plus positive et inspirante. Elles donnent l’exemple et signalent clairement que la diversité de pensée et d’expérience leur tient à cœur.
Cette première partie brosse un portrait de la situation de la mixité au Canada. On y traite des points suivants :
– Le contexte et les obstacles courants
– L’analyse de rentabilité
– Les conditions essentielles de la mixité dans les conseils d’administration
Dans la deuxième partie, les auteurs ont constitué une trousse pour les conseils d’administration.
On y aborde les sujets suivants, en présentant de nombreux outils pratiques utiles à tous les CA :
1. Processus d’évaluation officiel des conseils d’administration
2. Limites liées aux mandats et à l’âge
3. Matrice de compétences des conseils d’administration
4. Politique sur la diversité des genres
5. Recrutement des membres du conseil
Résultats de recherche d'images pour « Alliance canadienne pour la mixité et la bonne gouvernance »
L’Alliance canadienne pour la mixité et la bonne gouvernance

 

Les auteurs espèrent que ce « manuel stimulera la réflexion et apportera des outils pratiques pour la prise de mesures qui se traduiront par un meilleur équilibre hommes-femmes dans les conseils d’administration ».

Bonne lecture !

L’état de la situation en matière d’activisme des actionnaires


Il est important pour les administrateurs de sociétés d’être bien informés de l’état de la situation eu égard au phénomène de l’activisme.

Qu’y a-t-il de nouveau à l’aube de 2019 ?

Martin Lipton* associé fondateur de la firme Wachtell, Lipton, Rosen & Katz, spécialisée dans les questions de fusions et acquisitions ainsi que dans les activités relatives à la gouvernance des entreprises cotées, nous offre une mise à jour des principales tendances dans le monde de l’activisme et des investissements à long terme.

L’article, publié par HLS Forum on Corporate Governance, peut être traduit en français instantanément en utilisant l’outil de traduction du navigateur Chrome. Même si le résultat est imparfait, cela permet de mieux comprendre certaines parties de l’article.

Voici donc les principaux facteurs à prendre en compte en 2019.

Bonne lecture !

 

Activism: The State of Play

 

 

Résultats de recherche d'images pour « activist martin lipton »
Conférencier d’honneur lors de la célébration du 10e anniversaire de l’IGOPP

 

  1. The threat of activism remains high, and has become increasingly global.
  2. Activist assets under management remain at elevated levels, encouraging continued attacks on many large successful companies in the U.S. and abroad.
  3. In the current robust M&A environment, deal-related activism is prevalent, with activists instigating deal activity, challenging announced transactions (e.g., the “bumpitrage” strategy of pressing for a price increase) and/or pressuring the target into a merger or a private equity deal with the activist itself.
  4. “Short” activists, who seek to profit from a decline in the target’s market value, are increasingly aggressive in both the equity and corporate debt markets.
  5. Activists continue to garner extensive coverage in both the business and broader press, including a lengthy profile of Paul Singer and Elliott Management in an August New Yorker article, “Paul Singer, Doomsday Investor”. “Singer has excelled in this field in part because of a canny ability to discern his opponents’ weaknesses and a seeming imperviousness to public disapproval.”
  6. Momentum for enhanced ESG disclosures is growing. The Coalition for Inclusive Capitalism continues to study ways to measure long-term sustainable value creation that will demonstrate the value companies create beyond financial results. Embankment Project for Inclusive Capitalism. And earlier this month, two prominent business law professors, supported by investors and other entities with over $5 trillion in assets under management, filed a petition for rulemaking calling for the SEC to “develop a comprehensive framework requiring issuers to disclose identified environmental, social, and governance (ESG) aspects of each public-reporting company’s operations.”
  7. In turn, activists have sought to enhance their profile among governance professionals, passive institutional investors and ESG-oriented investors, e.g., JANA Partners’ “impact investing” fund which has partnered with CalSTRS to request that Apple address overuse of its devices among youth, and Elliott Management’s “Head of Investment Stewardship” position, highlighted in an October 8, 2018 Wall Street Journal article.
  8. An important new study by Ed deHaan, David Larcker and Charles McClure, Long-Term Economic Consequences of Hedge Fund Activist Interventions, has found that on a value weighted basis, long-term returns are “insignificantly different from zero.”
  9. Gender diversity has become an increasingly prominent focus in the corporate governance conversation, with California recently becoming the first state to enact legislation instituting gender quotas for boards of directors of public companies headquartered in the state. In the current climate, it is prudent for public companies to work toward developing policies to promote equality in the workplace and ensure appropriate disclosure and shareholder engagement in that regard.

As we recently noted, with the (1) embrace of corporate purpose, ESG, and long-term investment strategy by BlackRock, State Street and Vanguard, (2) adoption and promotion by the World Economic Forum of The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, (3) enactment of a benefit corporation law by Delaware and some 30 states, (4) introduction of legislation by Senator Warren to achieve stakeholder corporate governance by way of mandatory federal incorporation, and (5) the activities of Focusing Capital on the Long Term, Coalition for Inclusive Capitalism and Investors Stewardship Group, it is clear that we are reaching a new inflection point in corporate governance.

However, it is unlikely that today’s elevated level of activism will be curbed by legislation, regulation or market forces in the near term. Companies will have to follow closely activist developments and the opinions of their major investors. Companies should perfect and maintain their engagement activities. Companies should regularly review and adjust their plans designed to avoid an activist attack and to successfully deal with an activist attack if one should occur.

________________________________________________________

Martin Lipton* is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum authored by Mr. Lipton and Zachary S. Podolsky . Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here); Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).

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


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

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

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

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

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

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

Qu’en pensez-vous ?

Bonne lecture !

 

On Elon Musk, Donald Trump, and Corporate Governance

 

 

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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


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

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

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

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

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

Selon l’auteur Kevin Reed,

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

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

Bonne lecture !

 

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

 

 

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

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

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

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

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

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

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

Crashing companies onto rocks

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

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

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

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

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

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

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

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

Les fonds activistes accusés d’hypocrisie !


Il y a une pléthore d’arguments qui circulent dans la littérature sur la gouvernance et qui concernent les pour et contre des fonds activistes eu égard aux avantages pour les actionnaires.
Voici un article publié par Kai Haakon E. Liekefett*, président de Shareholder Activism Defense Team, paru dans récemment dans ethicalboardroom.
L’auteur tente de montrer l’hypocrisie des fonds activistes de type « edge fund » eu égard aux points suivants :

1. Undermining the shareholder franchise

2. Weakening board independence and diversity

– Overboarding

– Director tenure

– Mandatory retirement age

3. Inconsistency on takeover defences

 

 

The hypocrisy of hedge fund activists

 

 

 

In virtually every activism campaign, hedge fund activists don the mantle of the shareholders’ champion and accuse the target company’s board and management of subpar corporate governance.

This claim to having ‘best practices of corporate governance’ at heart is hollow – even hypocritical – as evidenced by at least three examples: hedge fund activists actually undermine the shareholder franchise, they weaken the independence and diversity of the board, and they waffle on their anti-takeover protection stance.

 

1. Undermining the shareholder franchise

 

Shareholders have a significant interest in maintaining their franchise: the right to elect directors, approve significant transactions such as a merger or the sale of all or a substantial part of the assets, or amend the charter of a corporation. Hedge fund activists promote themselves as ferocious proponents of this franchise and of ‘shareholder democracy’. In their campaigns, they demand shareholder votes on any matter that allegedly touches on shareholder rights, including areas where corporate law and the bylaws bestow authority on the board.

Yet, in most activism situations, activists seek to influence board decisions and obtain board seats through private settlement negotiations. The price of peace for the corporation is often accepting the addition of one or more activist representatives to the board to avoid the cost and disruption of a proxy contest. Notably, hedge fund activists will accuse directors of  ‘entrenchment’ if a board does not settle and instead opts to let the shareholders decide at the ballot box. This practice of entering into private settlements to appoint directors without a shareholder vote is, of course, directly contrary to the shareholder franchise. For this reason, major institutional investors have called publicly on companies to engage with a broader base of shareholders prior to settling with an activist.

In the same vein, activists habitually accuse directors of ‘disenfranchising shareholders’ when they refresh the board in the face of an activist campaign, arguing that a board must not appoint new directors without shareholder approval. Remarkably, all these concerns for the shareholder franchise quickly disappear once a company engages in settlement discussions with an activist. In private negotiations, activists commonly insist on an immediate appointment to the board. A board’s request to delay the appointment and allow shareholders to vote on an activist’s director designees at the annual meeting is usually met with fierce resistance.

“THERE ARE NUMEROUS EXAMPLES OF CORPORATE GOVERNANCE ‘BEST PRACTICES’ THAT ACTIVISTS TEND TO IGNORE IN CONNECTION WITH THEIR CAMPAIGNS”

Note also that in these private settlement negotiations, activists almost always seek recovery of their campaign expenses and companies typically agree to some level of payment. These demands for expense reimbursement are almost never submitted to shareholders for approval. While the proxy rules expressly require dissidents to disclose ‘whether the question of such reimbursement will be submitted to a vote of security holders’, an activist hedge fund’s interest in the shareholder franchise evaporates once the fund’s own wallet is concerned. All too often, it appears that the activists’ concern for the shareholder franchise is merely for public consumption.

 

2. Weakening board independence and diversity

 

The main target of most activist campaigns is the composition of a company’s board of directors. The business model of hedge fund activism is to identify undervalued public companies whose intrinsic value is substantially higher than the share price on the stock exchange. And if the stock market undervalues a company, then it is only fair to look to those in charge of the company: the board of directors. Consequently, activists often argue that a board needs a refresh, typically calling for ‘shareholder representatives’ and ‘industry experts’ to be appointed as directors.

Of course, activists are not interested in just any type of ‘shareholder representative’ in the boardroom. The preferred director candidate is a principal or employee of the activist hedge fund itself. The reason is that activists intend to use the influence in the boardroom to push aggressively for their own agenda. And, in most cases, that agenda is to push the company to take some strategic action that will return financial value to the hedge fund in the near-term – such as a quick sale at a premium – irrespective of the company’s long-term potential.

Often, an activist will also identify the need for more ‘industry experts’ to join the board and propose experts affiliated with the activist to be added. Activists may give lip service to the need for independent director candidates but when they have to choose between placing an independent candidate or themselves on the board, their preferred candidate is an activist principal or employee. Frequently, even if they passionately argued for ‘much-needed industry expertise’ beforehand, activists are quick to drop their independent board nominee in favour of a 30-something activist employee who lacks any significant relevant experience. This is particularly true for smaller activist hedge funds but is also evident at larger companies. Last year, ISS and the Investor Responsibility Research Center Institute (IRRC) published a study of the impact of activism on board refreshment at S&P 1500 companies targeted by activists.  The study found that activist nominees and directors appointed to boards by activists via settlements were nearly three times more likely to be ‘financial services professionals’ compared to directors appointed unilaterally by boards.

Moreover, while proxy advisory firms and key institutional investors increasingly demand more gender and ethnic diversity in boardrooms, most activist slates exclusively feature white, male director candidates. According to last year’s ISS/IRRC study, women comprised only 8.4 per cent of dissident nominees on proxy contest ballots and directors appointed via settlements with activists, and only 4.2 per cent of those candidates and directors were ethnically or racially diverse.

There are numerous other examples of corporate governance ‘best practices’ that activists tend to ignore in connection with their campaigns:

(a) Overboarding ISS, Glass Lewis and most institutional investors agree that a director should not sit on too many boards (in particular if the director is also an executive in his ‘daytime’ job). For activists, this seems to be a non-issue when it comes to themselves or their fund-nominated candidates. In addition, the practice of funds nominating the same people for various campaigns raises independence concerns. As noted in the aforementioned ISS/IRRC study: “Many of these ‘busy’ directors appear to be ‘go-to’ nominees for individual activists. The serial nomination of favourite candidates raises questions about the ‘independence’ of these individuals from their activist sponsors”.

(b) Director tenure Directors who sit on the same board for 10 years and more typically end up in the crosshairs of activist hedge funds, which argue that such directors are entrenched and cannot provide objective oversight. However, it is not uncommon for activist directors to remain on the board for many years if they cannot push the company into a sale.

(c) Mandatory retirement age Young activists frequently decry the high average age of boards and may target older directors as part of a campaign. By contrast, one rarely hears a call for age limits on the board from the more seasoned activists of the 1980s, who are pushing 70 years and beyond. In some campaigns, activists nominated director candidates who were 75 years old, 80 years old or even older.

 

3. Inconsistency on takeover defences

 

Activists love to attack companies for their takeover defences and perceived lack of ‘shareholder rights’. They crucify boards who dare to adopt a poison pill in response to a hostile bid or activist stake accumulation. They condemn bylaw amendments for ‘changing the rules of the game after the game has started’. And they deride classified boards as an outrageous entrenchment device whose sole purpose is to shield incumbent directors from the ballot box.

UNLOCKING VALUE Activist hedge funds want to deliver outsize returns within two years

Against this backdrop, it is fascinating and educational to observe what sometimes happens once activists join a board. Activists claim to hate poison pills unless, of course, they were able to acquire a large stake of 15 to 25 per cent before the pill was adopted. In these cases, an activist is sometimes perfectly fine with capping other shareholders at 10 per cent or less because it ensures that the activist remains the largest shareholder with the most influence.

It is also not usual for an activist-controlled board to maintain the very same bylaws the activist previously voraciously attacked in the campaign. Sometimes, activists will limit shareholder rights even further. The rights to act by written consent and call special meetings tend to be among the victims. If shareholders can act by written consent or call special meetings to remove the board, insurgents do not have to wait for an annual shareholder meeting to wage a proxy fight. However, once activists are in charge of a boardroom, these shareholder rights primarily constitute a threat to their own control.

The last example is the classified board (aka ‘staggered board’). In a company with a classified board, only a fraction (usually, one third) of the board members are up for re-election every year. Activists are fierce opponents of classified boards. Classification makes it harder for them to win a proxy fight. For example, it is more difficult to win an election contest for three board seats on a nine-member board if only three board seats are up for election and not all nine directorships. Activists also like the intimidation factor of threatening a proxy fight for control of a board. It makes it easier to settle for two or three seats if the activist starts by demanding seven or more seats. Everything changes, of course, once an activist is on the board. Then, many activists are perfectly comfortable with with it being a classified board. In settlement negotiations, activists often fight hard to be in the director classes that are not up for re-election in the near term. Occasionally, they even suggest a ‘reshuffling’ of the director classes to achieve this. Activists also often refuse to leave a classified board after a standstill expires, arguing that they need to be allowed to serve out their three-year term – even if they previously campaigned for annual director elections.

“ACTIVISTS HAVE BEEN ABLE TO CLOAK THEMSELVES IN THE MANTLE OF SHAREHOLDER CHAMPION WHILE PRIVATELY PUSHING TO INCREASE THEIR OWN INFLUENCE”

In other words, when it comes to takeover defences, activists’ perspectives depend on whether they have control of the boardroom or not. When activists are successful in ‘conquering the castle’, there is sometimes little reluctance on their part to pull up the drawbridge.

The true reason why activists love corporate governance

 

These examples make clear that most activists really do not care about corporate governance all that much. So why are activists so focussed on corporate governance in their campaigns? For the same reason why politicians kiss babies during political campaigns: it plays well with the voters. Most institutional investors and the proxy advisory firms ISS and Glass Lewis care deeply about governance issues. That is because they believe, with some justification, that good corporate governance will create shareholder value in the long-term. The long term, of course, is rarely the game of activist hedge funds. Most of these funds have capital with relatively short lock-ups, which means that their own investors will be breathing down their neck if they do not deliver outsize returns within a year or two.

Many activists will admit after a few drinks that their professed passion for governance is only a means to an end. Activists preach so-called ‘best practices of corporate governance’ in every proxy fight because it is an effective way to smear an incumbent board and rile up the voters who do care about governance issues.

Conclusion

 

Hedge fund activists have been able to cloak themselves in the mantle of a shareholder champion while privately pushing to increase their own influence. Institutional investors and proxy advisory firms should not look to activist hedge funds as promoters of good corporate practices. Activists are no Robin Hoods. They care about good corporate governance just as much as they care about taking from the rich and giving to the poor.

 

_____________________________________________________

Kai Haakon Liekefett* is a partner of Sidley Austin LLP in New York and the chair of the firm’s Shareholder Activism Defense Team. He has over 18 years of experience in corporate law in New York, London, Germany, Hong Kong and Tokyo. He dedicates 100% of his time to defending companies against shareholder activism campaigns and proxy contests. Kai holds a Ph.D. from Freiburg University; an Executive MBA from Muenster Business School; and an LL.M., James Kent Scholar, from Columbia Law School. He is admitted to practice in New York and Germany. The opinions expressed in this article are those of the author and not necessarily those of Sidley Austin LLP or its clients.

Principes simples et universels de saine gouvernance | Rappel d’un billet antérieur


Quels sont les principes fondamentaux de la bonne gouvernance ? Voilà un sujet bien d’actualité, une question fréquemment posée, qui appelle, trop souvent, des réponses complexes et peu utiles pour ceux qui siègent à des conseils d’administration.

L’article de Jo Iwasaki, paru sur le site du NewStateman, a l’avantage de résumer très succinctement les cinq (5) grands principes qui doivent animer et inspirer les administrateurs de sociétés.

Les principes évoqués dans l’article sont simples et directs ; ils peuvent même paraître simplistes, mais, à mon avis, ils devraient servir de puissants guides de référence à tous les administrateurs de sociétés.

Les cinq principes retenus dans l’article sont les suivants :

 

(1) Un solide engagement du conseil (leadership) ;

(2) Une grande capacité d’action liée au mix de compétences, expertises et savoir-être ;

(3) Une reddition de compte efficace envers les parties prenantes ;

(4) Un objectif de création de valeur et une distribution équitable entre les principaux artisans de la réussite ;

(5) De solides valeurs d’intégrité et de transparence susceptibles de faire l’objet d’un examen minutieux de la part des parties prenantes.

 

« What board members need to remind themselves is that they are collectively responsible for the long-term success of their company. This may sound obvious but it is not always recognised ».

 

What are the fundamental principles of corporate governance ?

 

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Our suggestion is to get back to the fundamental principles of good governance which board members should bear in mind in carrying out their responsibilities. If there are just a few, simple and short principles, board members can easily refer to them when making decisions without losing focus. Such a process should be open and dynamic.

In ICAEW’s  recent paper (The Institute of Chartered Accountants in England and Wales) What are the overarching principles of corporate governance?, we proposed five such principles of corporate governance.

Leadership

An effective board should head each company. The Board should steer the company to meet its business purpose in both the short and long term.

Capability

The Board should have an appropriate mix of skills, experience and independence to enable its members to discharge their duties and responsibilities effectively.

Accountability

The Board should communicate to the company’s shareholders and other stakeholders, at regular intervals, a fair, balanced and understandable assessment of how the company is achieving its business purpose and meeting its other responsibilities.

Sustainability

The Board should guide the business to create value and allocate it fairly and sustainably to reinvestment and distributions to stakeholders, including shareholders, directors, employees and customers.

Integrity

The Board should lead the company to conduct its business in a fair and transparent manner that can withstand scrutiny by stakeholders.

We kept them short, with purpose, but we also kept them aspirational. None of them should be a surprise – they might be just like you have on your board. Well, why not share and exchange our ideas – the more we debate, the better we remember the principles which guide our own behaviour.

 

De son côté, l’Ordre des administrateurs agréés du Québec (OAAQ) a retenu six (6) valeurs fondamentales qui devraient guider les membres dans l’accomplissement de leurs tâches de professionnels.

Il est utile de les rappeler dans ce billet :

 

Transparence 

 

La transparence laisse paraître la réalité tout entière, sans qu’elle soit altérée ou biaisée. Il n’existe d’autre principe plus vertueux que la transparence de l’acte administratif par l’administrateur qui exerce un pouvoir au nom de son détenteur ; celui qui est investi d’un pouvoir doit rendre compte de ses actes à son auteur.

Essentiellement, l’administrateur doit rendre compte de sa gestion au mandant ou autre personne ou groupe désigné, par exemple, à un conseil d’administration, à un comité de surveillance ou à un vérificateur. L’administrateur doit également agir de façon transparente envers les tiers ou les préposés pouvant être affectés par ses actes dans la mesure où le mandant le permet et qu’il n’en subit aucun préjudice.

 

Continuité

 

La continuité est ce qui permet à l’administration de poursuivre ses activités sans interruption. Elle implique l’obligation du mandataire de passer les pouvoirs aux personnes et aux intervenants désignés pour qu’ils puissent remplir leurs obligations adéquatement.

La continuité englobe aussi une perspective temporelle. L’administrateur doit choisir des avenues et des solutions qui favorisent la survie ou la croissance à long terme de la société qu’il gère. En lien avec la saine gestion, l’atteinte des objectifs à court terme ne doit pas menacer la viabilité d’une organisation à plus long terme.

 

Efficience

 

L’efficience allie efficacité, c’est-à-dire, l’atteinte de résultats et l’optimisation des ressources dans la pose d’actes administratifs. L’administrateur efficient vise le rendement optimal de la société à sa charge et maximise l’utilisation des ressources à sa disposition, dans le respect de l’environnement et de la qualité de vie.

Conscient de l’accès limité aux ressources, l’administrateur met tout en œuvre pour les utiliser avec diligence, parcimonie et doigté dans le but d’atteindre les résultats anticipés. L’absence d’une utilisation judicieuse des ressources constitue une négligence, une faute qui porte préjudice aux commettants.

 

Équilibre

 

L’équilibre découle de la juste proportion entre force et idées opposées, d’où résulte l’harmonie contributrice de la saine gestion des sociétés. L’équilibre se traduit chez l’administrateur par l’utilisation dynamique de moyens, de contraintes et de limites imposées par l’environnement en constante évolution.

Pour atteindre l’équilibre, l’administrateur dirigeant doit mettre en place des mécanismes permettant de répartir et balancer l’exercice du pouvoir. Cette pratique ne vise pas la dilution du pouvoir, mais bien une répartition adéquate entre des fonctions nécessitant des compétences et des habiletés différentes.

 

Équité

 

L’équité réfère à ce qui est foncièrement juste. Plusieurs applications en lien avec l’équité sont enchâssées dans la Charte canadienne des droits et libertés de la Loi canadienne sur les droits de la personne et dans la Charte québécoise des droits et libertés de la personne. L’administrateur doit faire en sorte de gérer en respect des lois afin de prévenir l’exercice abusif ou arbitraire du pouvoir.

 

Abnégation

 

L’abnégation fait référence à une personne qui renonce à tout avantage ou intérêt personnel autres que ceux qui lui sont accordés par contrat ou établis dans le cadre de ses fonctions d’administrateur.

Pourquoi les employés ont-ils tendance à bafouer les règles d’éthique ?


Dans le contexte du nouveau code de gouvernance du Royaume-Uni, les administrateurs doivent exercer une vigilance accrue de la culture des organisations.

Cet article de GUENDALINA DONDE*, publié dans Board Agenda, nous rappelle certains enseignements concernant la nature des comportements éthiques dans les organisations.

Perhaps the first important lesson from behavioural ethics is to forget the idea that human beings are perfectly rational. In reality, people do not always make consistent decisions, based on strict logic or narrow self-interest. Human behaviour is complex and emotions and intuition have a significant role to play in individual decision-making.

Voici donc plusieurs facteurs qui peuvent avoir une incidence significative sur les comportements éthiques et sur la culture organisationnelle.

J’ai pensé que tous les administrateurs devraient se familiariser avec ces notions.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

Business ethics: Why do good people do bad things?

 

 

 

The UK’s revised governance code will require boards to keep a watchful eye on their corporate cultures. To this end, understanding behavioural ethics can help instil the right values in employees.

There is no escaping the current increasing pressure for boards to have this question on their agenda, as the draft new UK Corporate Governance Code contains a provision requiring directors to monitor and assess their corporate culture to satisfy themselves that behaviour throughout the business is in line with the company’s values.

Perhaps the first important lesson from behavioural ethics is to forget the idea that human beings are perfectly rational.

What can be done to ensure that employee behaviour is in line with ethical values? Ethics programmes, which include the development of a code of ethics, training and communication campaigns can go some way, but even the best-intentioned ethics programmes will fail if they don’t take into account behavioural ethics—the biases that can blind us to unethical behaviour, whether ours or that of others.

 

People are likely to put aside their personal moral standards at work if they think this is what is expected of their role

 

“I was only following orders” is a classic indicator of this kind of ethical blindness. Expectations of a role can translate into pressure to compromise one’s ethical standards.

Many organisations make explicit in their code of ethics that all employees, and managers in particular, have the responsibility to be a role model for ethics in the organisation. It is important that this message is also reinforced through the communications strategy and through training for managers.

 

Ethics needs to become part of the reward, recognition and promotion system

 

Availability bias means that people tend to overestimate the likelihood of something happening because a similar event has either happened recently or because they feel emotional about a previous similar event. If employees remember that someone was promoted or rewarded for commercial results, which were achieved by unethical means, they will think that this is the norm—even if it was just a one-off event.

On the other hand, recognising and rewarding those who live up to the organisation’s ethical values, or communicating positive stories internally, can be a quick and effective way to send employees the message that ethics is important in the organisation.

 

Time pressure can negatively impact organisational culture and the ability to consider ethical implications of decisions

 

A group of seminary students were asked to prepare a talk on the Good Samaritan at two adjacent buildings. In between talks, the researchers told participants that they should hurry, varying the amount of urgency between students. An actor was situated in an alleyway between the two buildings, posing as a sick man.

The results showed that time pressure had a significant impact on the students’ willingness to stop and help the sick man: in low-hurry situations, 63% helped; medium hurry, 45%; and high hurry only 10%. This was even when, ironically, they were on their way to prepare a talk on the Good Samaritan.

 

Internal communications and the language used within an organisation can have a significant impact on ethical culture

 

The framing effect is a cognitive bias where individuals respond differently to the same problem depending on how it is presented. Communications manipulate perception and how a situation is interpreted or framed, making it easier for employees to rationalise their behaviour. The use of aggressive language—such as “at war with competitors”—promotes rigid framing which can, in turn, drive ethical blindness.

On the other hand, using positive language can be a driver of change—changing a whistleblowing line to a “Speak Up” line can have a significant effect on call volume.

 

In some circumstances, “nudging” ethics can be more effective than enforcing compliance

 

Nudge Theory (developed by the 2017 Nobel laureate Richard Thaler) suggests that positive reinforcement and indirect suggestions can be more effective in encouraging desired behaviour than direct instructions, legislation and enforcement.

This concept has seen many applications, especially in marketing, and it can also be used to promote an ethical culture. An approach that focuses on ethics—by communicating ethical values, explaining how and why an organisation does its business, encouraging individual judgement based on ethical values—is at least as important as having clear rules of conduct which employees must follow, and the related sanctions.

 

Individual responsibility for values and associated behaviours needs to be encouraged

 

Following the atrocities of World War II, one of the most researched behaviour patterns has been the willingness of people to put aside their own moral standards and give up responsibility for their actions if they are following the instructions of a person in a position of authority.

To prevent this kind of blind obedience, it is important that companies encourage employees to apply critical thinking and learn how to take initiative, rather than just follow orders.corporate culture, Board Agenda Culture Survey

Perhaps the most well known of these studies was by Stanley Milgram, whose electric-shock experiment showed that people are likely to follow orders given by authority figures (e.g. managers, teachers, police officers) even if it means inflicting harm on another human being.

To prevent this kind of blind obedience, it is important that companies encourage employees to apply critical thinking and learn how to take initiative, rather than just follow orders. Promoting an open culture where employees feel empowered to challenge decisions, even when they have been instructed by a superior, is paramount.

 

People determine the appropriate behaviour by looking at what others are doing

 

The phrase “everybody’s doing it” is a red flag which signifies that there may be an ethical problem. Social pressure from a majority group can cause a person to conform to a certain behaviour, and there is plenty of research to back this up, most recently from behavioural economists like Francesca Gino and Dan Ariely.

To avoid this ethical risk, training staff on ethical matters is important to create a shared systems of beliefs and to keep these issues prominent in people’s minds when they face a difficult decision.

Leadership engagement and the right “tone at the top” are also crucial. We naturally follow our leaders, and employees will be more likely to behave unethically if they perceive that their senior leaders and managers fail to “walk the talk”.

 

Doing the right thing needs to become our instinctive reaction

 

Daniel Kahneman, professor of psychology at Princeton University, proposes that most human decision-making is done intuitively and subconsciously (“System 1”) before the cognitive part of the brain engages (“System 2”).

In many circumstances, even when people feel they are making a rational decision, their cognitive System 2 is simply rationalising a decision that their intuitive System 1 has already made. Sometimes this results in a seemingly irrational decision that might increase ethical risk.

Embedding ethical values into everything the organisation does can help them become an automatic part of an employee’s System 1. Corporate culture—“the way things are done around here”—is a powerful influence upon our corporate subconscious.

Sometimes a company’s culture can actually be working against its ethical values. Looking at which behaviours are rewarded, considering how messages are framed, and setting an example at the top are all examples of how ethics can achieve saliency in an organisation.

So perhaps the question should be: Why do good people do good things? And how can we support and empower them to consider the ethical implications of their decisions?

________________________________________________________________________

Guendalina Dondè* is a senior researcher at the Institute of Business Ethics.

Le futur code de gouvernance du Royaume-Uni


Je vous invite à prendre connaissance du futur code de gouvernance du Royaume-Uni (R.-U.).

À cet effet, voici un billet de Martin Lipton*, paru sur le site de Harvard Law School Forum on Corporate Governance, qui présente un aperçu des points saillants.

Bonne lecture !

 

The Financial Reporting Council today [July 16, 2018] issued a revised corporate governance code and announced that a revised investor stewardship code will be issued before year-end. The code and related materials are available at www.frc.org.uk.

The revised code contains two provisions that will be of great interest. They will undoubtedly be relied upon in efforts to update the various U.S. corporate governance codes. They will also be used to further the efforts to expand the sustainability and stakeholder concerns of U.S. boards.

First, the introduction to the code makes note that shareholder primacy needs to be moderated and that the concept of the “purpose” of the corporation, as long put forth in the U.K. by Colin Mayer and recently popularized in the U.S. by Larry Fink in his 2018 letter to CEO’s, is the guiding principle for the revised code:

Companies do not exist in isolation. Successful and sustainable businesses underpin our economy and society by providing employment and creating prosperity. To succeed in the long-term, directors and the companies they lead need to build and maintain successful relationships with a wide range of stakeholders. These relationships will be successful and enduring if they are based on respect, trust and mutual benefit. Accordingly, a company’s culture should promote integrity and openness, value diversity and be responsive to the views of shareholders and wider stakeholders.

Second, the code provides that the board is responsible for policies and practices which reinforce a healthy culture and that the board should engage:

with the workforce through one, or a combination, of a director appointed from the workforce, a formal workforce advisory panel and a designated non-executive director, or other arrangements which meet the circumstances of the company and the workforce.

It will be interesting to see how this provision will be implemented and whether it gains any traction in the U.S.

 

 

The UK Corporate Governance Code

 

Résultats de recherche d'images pour « UK Corporate Governance Code 2018 »

Martin Lipton* is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton.

Les sept attentes que les comités d’audit ont envers les chefs des finances


Une bonne relation entre le Président du comité d’Audit et le Vice-président Finance (CFO) est absolument essentielle pour une gestion financière éclairée, fidèle et intègre.

Les auteurs sont liés au Centre for Board Effectiveness de Deloitte. Dans cette publication, parue dans le Wall Street Journal, ils énoncent les sept attentes que les comités d’audit ont envers les chefs des finances.

Cet article sera certainement très utile aux membres de conseils, notamment aux membres des comtés d’audit ainsi qu’à la direction financière de l’entreprise.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

The CFO and the Audit Committee: Building an Effective Relationship

 

 

Résultats de recherche d'images pour « Common Expectations Audit Committee Have of CFOs »

 

 

The evolution of the CFO’s role is effecting a shift in the audit committee’s expectations for the working relationship between the two. By considering their response to seven commonly held expectations audit committees have of CFOs, CFOs can begin to lay the groundwork for a more effective working relationship with their organization’s audit committee.

Typically, CFOs play four key roles within their organizations, but the amount of time CFOs allocate to each role is changing rapidly. “For CFOs high integrity of work, accuracy, and timely financial reporting are table stakes, but increasingly they are being expected to be Strategists and Catalysts in their organization,” says Ajit Kambil, global research director for Deloitte’s CFO Program. “In fact, our research indicates that CFOs are spending about 60% to 70% of their time in those roles, and that shift is both reflecting and driving higher expectations from the CEO as well as the board.”

As in any relationship, a degree of trust between CFOs and audit committee chairs serves as a foundation to an effective communication on critical issues. “In high-functioning relationships between CFOs and audit committee chairs, trust and dialogue are critical. Challenges can occur if a CFO comes to an audit committee meeting unprepared or presents a surprising conclusion to the audit committee without having sought the audit committee chair’s opinion, leaving the audit committee chair without the ability to influence that conclusion,” says Henry Phillips, vice chairman and national managing partner, Center for Board Effectiveness, Deloitte & Touche LLP.

 

Common Expectations Audit Committee Have of CFOs

 

Following are seven key expectations audit committees have of CFOs for both new and established CFOs to bear in mind.

 

(1) No Surprises: 

Audit committees do not welcome any surprises. Or, if surprises occur, the audit committee will want to be apprised of the issue very quickly. Surprises may be inevitable, but the audit committee expects CFOs to take precautions against known issues and to manage the avoidable ones and to inform them very early on when something unexpected occurs. In order to do this well, it is important for the CFO and the audit committee chair — perhaps some of the other board members — to set a regular cadence of meetings, so that they have a relationship and a context within which to work together when challenging issues arise. Don’t leave these meetings to chance. “If the audit committee chair or committee members are hearing about something of significance for the first time in a meeting, that’s problematic. Rather, the CFO should be apprising the audit committee chair as much in advance of a committee meeting as possible and talk through the issues so the audit committee chair is not surprised in the meeting,” says Phillips.

 

(2) Strong partnering with the CEO and other leaders: 

Audit committees want to see the CFO as an effective partner with the CEO, as well as with their peer executives. “The audit committee is carefully observing the CFO and how he or she interacts across the C-suite. At the same time, the audit committee also wants the CFO to be objective and to provide to the board independent perspectives on financial and business issues and not be a ‘yes’ person,” says Deb DeHaas, vice chair and national managing partner, Center for Board Effectiveness at Deloitte. A key for the CFO is to proactively manage CEO and peer relations — especially if there are challenging issues that may be brought up to the board. In that case, the CFO should be prepared to take a clear position on what the board needs to hear from management.

(3) Confidence in finance organization talent: 

 

Audit committees want visibility into the finance organization to ensure that it has the appropriate skills and experience. They also are looking to ensure that the finance organization will be stable over time, that there will be solid succession plans in place and that talent is being developed to create the strongest possible finance organization. CFOs might consider approaching these goals in several ways. One way is to provide key finance team members an opportunity to brief the audit committee on a special topic, for example, a significant accounting policy, a special analysis or another topic that’s on the board agenda. “While I encourage CFOs to give their team members an opportunity to present to the committee, it’s critical to make sure they’re well prepared and ready to address questions,” Phillips notes.

‘An outside-in view from audit committee members can bring significant value to the CFO — and to the organization.’

 

(4) Command of key accounting, finance and business issues: 

 

Audit committees want CFOs to have a strong command of the key accounting issues that might be facing the organization, and given that many CFOs are not CPAs, such command is even more critical for the CFO to demonstrate. Toward that end, steps the CFO can take might include scheduling deep dives with management, the independent auditor, the chief accounting officer and others to receive briefings in order to better understand the organization’s critical issues from an accounting perspective, as well as to get trained up on those issues. In addition, CFOs should demonstrate a deep understanding of the business issues that the organization is confronting. There again, CFOs can leverage both internal and external resources to help them master these issues. Industry briefings are also important, particularly for CFOs who are new to an industry.

 

(5) Insightful forecasting and earnings guidance: 

 

Forecasts and earnings guidance will likely not always be precise. However, audit committees expect CFOs to not only deliver reliable forecasts, but also to articulate the underlying drivers of the company’s future performance, as well as how those drivers might impact outcomes. When CFOs lack a thorough understanding of critical assumptions and drivers, they can begin to lose support of key audit committee members. For that reason, it is important that CFOs have an experienced FP&A group to support them. In addition,audit committees and boards want to deeply understand the guidance that is being put forward, the ranges, and confidence levels. As audit committee members read earnings releases and other information in the public domain, they tend to focus on whether the information merely meets the letter of the law in terms of disclosures, or does it tell investors what they need to know to make informed decisions. This is where an outside-in view from audit committee members can bring significant value to the CFO — and to the organization. Moreover, audit committees are increasingly interested in the broader macroeconomic issues that can impact the organization, such as interest rates, oil prices, and geographic instability.

 

(6) Effective risk management: 

 

CFOs are increasingly held accountable for risk management, even when there is a chief risk officer. Further, audit committees want CFOs to provide leadership not only on traditional financial accounting and compliance risk matters, but also on some of the enterprise operational macro-risk issues — and to show how that might impact the financial statement. It is important for CFOs to set the tone at the top for compliance and ethics, oversee the control environment and ensure that from a compensation perspective, the appropriate incentives and structures are in place to mitigate risk. A key to the CFO’s effectiveness at this level is to find time to have strategic risk conversations at the highest level of management, as well as with the board.

 

(7) Clear and concise stakeholder communications: 

 

Audit committees want CFOs to be very effective on how they communicate with key stakeholders, which extend beyond the board and the audit committees. They want CFOs to be able to articulate the story behind the numbers and provide insights and future trends around the business, and to effectively communicate to the Street. CFOs can expect board members to listen to earnings calls and to observe how they interact with the CEOs, demonstrate mastery of the company’s financial and business issues, and communicate those to the Street. Moreover, a CFO who is very capable from an accounting and finance perspective should exercise the communication skills that are necessary to be effective with different stakeholders.

 

“Communication is the cornerstone for a strong CFO-audit committee chair relationship,” notes DeHaas. “Although the CFO might be doing other things very well, if there is not effective communication and a trusting relationship with the audit committee, the CFO will likely not be as effective.”

Les administrateurs de la nouvelle génération


Vous trouverez, ci-dessous, le résultat d’une enquête réalisée par SpencerStuart portant sur le renouvellement des conseils d’administration et les attentes des administrateurs de ladite nouvelle génération.

Le texte a été publié en anglais. Vous pouvez le lire dans cette langue en cliquant sur le titre ci-dessous. Je vous invite à le faire puisque le texte original contient des tableaux et des statistiques que l’on ne retrouve pas dans ma version.

Afin de faciliter la compréhension, j’ai révisé la traduction électronique produite. Je crois que cette traduction est très acceptable.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

 

How Next‑Generation Board Directors Are Having an Impact

 

 

Guide du Secrétariat à la jeunesse
GUIDE POUR FAVORISER LE RECRUTEMENT ET L’INTÉGRATION DES ADMINISTRATEURS DE LA RELÈVE AU SEIN DES CONSEILS D’ADMINISTRATION D’OBNL

 Consultez le guide du SAJ

 

Les conseils font l’objet des pressions croissantes pour démontrer leur pertinence à un moment où de multiples forces perturbatrices menacent les modèles d’affaires établis et créent de nouvelles possibilités d’innovation et de croissance. De plus en plus, les investisseurs s’attendent à ce que les conseils aient des processus significatifs en place pour renouveler leur adhésion et maximiser leur efficacité.

En conséquence, un nombre croissant « d’administrateurs de prochaine génération » sont nommés aux conseils d’administration à travers le monde. Beaucoup apportent des connaissances dans des domaines tels que la cybersécurité, l’IA (intelligence artificielle), l’apprentissage automatique et les technologies de l’industrie 4.0 ; d’autres ont une expérience directe de la transformation numérique, de la conception organisationnelle, de la connaissance du client ou de la communication sociale. Inévitablement, les experts de ces disciplines ont tendance à provenir d’une génération différente de celle de la majorité des membres du conseil d’administration.

Les jeunes administrateurs ont un impact sur le contenu et la dynamique du débat en salle de réunion. Ils incitent d’autres administrateurs à s’engager sur des sujets qui ne leur sont pas familiers et à apporter une approche et une perspective différentes au rôle. Tout comme les entreprises élargissent leur réflexion sur la valeur de la diversité et reconnaissent les avantages de la main-d’œuvre intergénérationnelle, les conseils bénéficient de recrutements d’administrateurs qui apportent non seulement une expertise foncièrement nécessaire, mais aussi une vision contemporaine de la façon dont les décisions affectent les parties prenantes — des employés et des fournisseurs aux clients et à la communauté. Ces administrateurs font face à un ensemble différent de défis en milieu de travail dans leurs rôles exécutifs ; en tant qu’administrateurs, ils peuvent rarement exprimer leurs préoccupations et leurs points de vue, autour de la table du conseil d’administration.

Les conseils qui choisissent sagement leurs jeunes administrateurs peuvent bénéficier grandement de leur présence. Cependant, il ne suffit pas d’amener de nouveaux administrateurs compétents dans la salle du conseil ; il est vital que les conseils les préparent au succès en combinant une intégration complète, une intégration réfléchie et une attitude ouverte, réceptive et respectueuse envers leurs contributions.

Nous avons interrogé un groupe de présidents de conseil d’administration et d’administrateurs de la prochaine génération sur plusieurs continents à propos de leur expérience de cette dernière phase de l’évolution des conseils d’administration.

 

Qu’y a-t-il pour la prochaine génération?

 

Avant de rejoindre le conseil d’administration d’une entreprise publique, il est important d’être clair sur la motivation. Pourquoi maintenant ; et pourquoi cette entreprise ? Être un administrateur non exécutif est un engagement important, et vous devez vous assurer que vous et le conseil d’administration considérez que c’est un investissement qui en vaut la peine. Nous constatons que la plupart des administrateurs next-gén sont motivés par trois choses : (1) le développement personnel. (2) la possibilité d’enrichir leur rôle exécutif avec de nouvelles idées et de nouvelles expériences acquises en tant qu’administrateur et (3) le désir de faire une contribution.

Un cadre qui commençait à se familiariser avec son propre conseil estimait qu’il était temps de se joindre à un conseil externe : « Je voulais élargir mon point de vue, acquérir des expériences différentes et voir une entreprise sous un autre angle. Je sentais que cela finirait par faire de moi un leader meilleur et plus efficace ». Une autre gestionnaire d’entreprise a souligné l’occasion unique d’apprendre d’autres personnes plus expérimentées qu’elle-même : « Je pourrais voir que je serais parmi les gens inspirants et que je serais exposé à un secteur différent, mais aussi, à une culture différente et à de nouvelles façons de faire des affaires. “Un troisième a décrit la décision de rejoindre un conseil comme” l’une des choses les plus utiles que j’ai fait dans ma vie ».

Les nouveaux administrateurs citent un certain nombre d’expériences et de compétences qu’ils espèrent acquérir en siégeant à un conseil, allant d’un style de leadership différent et travaillant avec une culture organisationnelle différente à l’apprentissage d’un nouveau secteur ou marché géographique.

Bien sûr, rejoindre un conseil d’administration doit être un exercice mutuellement bénéfique. « C’est utile pour moi parce que j’apprends sur la gouvernance, et sur le fonctionnement interne du conseil ». Je peux appliquer ce que j’apprends dans mon autre travail. Le conseil, quant à lui, obtient quelqu’un avec un ensemble différent de spécialités et une perspective légèrement plus fraîche ; ils ont quelqu’un qui veut être plus ouvert et plus direct, un peu plus non-conformiste par rapport aux autres membres du conseil.

Les présidents de conseil d’administration sont de plus en plus ouverts au recrutement de talents de prochaine génération, citant plusieurs raisons allant du besoin de compétences et de compétences spécifiques à des voix plus diverses à la table. Un président recherchait spécifiquement quelqu’un pour déplacer le centre du débat : « Un nouvel administrateur plus jeune peut voir un dilemme d’un point de vue différent, nous faisant réfléchir à deux fois. Je cherche une personne intègre qui est prête à parler ouvertement et à défier la gestion. Ce que je ne peux pas nécessairement attendre de ces personnes, bien sûr, c’est l’expérience d’avoir vu beaucoup de situations similaires sur 30-40 ans dans les affaires. C’est un compromis, et c’est l’une des raisons pour lesquelles la diversité des âges au sein du conseil est si importante. L’expertise des spécialistes doit être équilibrée avec l’expérience, et avec l’expérience vient un bon jugement ».

 

Préparation au rôle

 

Si vous êtes un dirigeant actif qui rejoint le conseil d’administration d’une entreprise publique, beaucoup de temps est en jeu (ainsi que votre réputation), vous devez donc être sûr que vous prenez la bonne décision. Un processus de vérification préalable approfondi offre non seulement cette sécurité, mais contribue également à accélérer votre préparation au rôle. « Au cours de mes entrevues, j’ai lu énormément de choses sur l’entreprise », a déclaré un administrateur récemment nommé. « J’ai regardé les appels des analystes, j’ai lu les documents de la SEC et j’ai posé beaucoup de questions, en particulier sur la dynamique du conseil. Ils m’ont fait rencontrer tous les membres du conseil d’administration et j’ai pu voir comment ils se parlaient entre eux ».

Il est important d’avoir une compréhension claire de ce que le conseil recherche et de la façon dont vos antécédents et votre expérience ajouteront de la valeur dans le contexte de l’entreprise. Par exemple, bien que les membres du conseil les plus séniors puissent avoir un aperçu raisonnable de la perturbation de l’entreprise, ils n’auront pas d’expérience pratique d’une initiative de transformation numérique. Vous êtes peut-être parfaitement placé pour fournir ces connaissances de première main, mais il se peut que le président du conseil d’administration veuille bien faire face à certaines difficultés, ait appris à relever le défi technologique d’un point de vue commercial et sache quel type de questions poser. Seule une due diligence approfondie révélera si vos attentes sont alignées avec celles du conseil et vous permettront de procéder en toute confiance.

 

Embarquement (Onboarding)

 

L’une des choses les plus courantes que nous entendons des administrateurs de prochaine génération est qu’ils auraient aimé un processus d’intégration plus approfondi avant leur première réunion — c’est quelque chose que les conseils d’administration doivent clairement aborder. Il revient souvent aux nouveaux administrateurs de prendre l’initiative et de concevoir un programme qui les aidera à s’intégrer dans l’entreprise. « Une grande partie de l’immersion dont j’ai eu besoin est venue des étapes que j’ai suivies moi-même », a déclaré un administrateur qui estimait que rencontrer quelques dirigeants et présidents de comité du conseil ainsi qu’une lecture du matériel fourni par le secrétaire de la société constituait une préparation insuffisante.

Un bon programme d’initiation comprendra des présentations de la direction sur le modèle d’affaires, la rentabilité et la performance ; visites de site ; et des réunions avec des conseillers externes tels que des comptables, des banquiers et des courtiers. Assister avec le responsable des relations avec les investisseurs pour revoir les perspectives des investisseurs et des analystes peut aussi être utile.

Les administrateurs de la prochaine génération ont demandé à rencontrer les chefs d’entreprise pour un examen plus détaillé d’une filiale ou d’une activité particulière où leur propre expérience est particulièrement pertinente. Dans une entreprise de vente au détail, par exemple, il serait logique de rencontrer le responsable du merchandising d’un magasin phare pour se familiariser avec le positionnement des produits et l’expérience client.

Le temps passé avec le PDG pour en apprendre davantage sur l’entreprise est essentiel. La plupart des chefs d’entreprise seront ravis de faire en sorte que le nouvel administrateur puisse voir directement les principaux projets et rencontrer les personnes qui les dirigent, ainsi que passer du temps avec d’autres membres de l’équipe de la haute direction. « Ils étaient complètement ouverts à la possibilité de rencontrer d’autres personnes, mais cela ne faisait pas partie du programme d’initiation formel. J’ai trouvé ces conversations les plus éclairantes parce que je me suis simplement rapproché de l’entreprise et du travail. »

Un président d’une société de produits de consommation a ajouté une touche intéressante à l’intégration d’un nouvel administrateur nommé pour son expérience de leadership en matière de commerce électronique. Il a invité la nouvelle recrue à faire une présentation à toute l’équipe de direction au sujet de son propre cheminement. « Le genre de perturbation et la vitesse à laquelle fonctionne sa société en ligne étaient stupéfiants, et cet exercice s’est avéré une source d’apprentissage pour le conseil d’administration et l’équipe de direction », a déclaré le président. « Cela a également renforcé sa crédibilité auprès du reste du conseil ».

 

Faire la transition à un rôle d’administrateur non exécutif

 

La plupart des administrateurs de la prochaine génération comprennent qu’ils devront aborder les responsabilités de leur conseil d’une manière différente d’un rôle exécutif, mais la plupart sous-estiment les difficultés à faire cette transition dans la pratique.

Il est important d’être en mesure de faire la distinction entre les questions sur lesquelles seul le conseil peut se prononcer (par exemple, la relève du chef de la direction) et les sujets que le conseil doit laisser à la direction (questions opérationnelles). La stratégie est un domaine où, dans la plupart des marchés, le conseil d’administration et la direction ont tendance à collaborer étroitement, mais il y a beaucoup d’autres moyens où les administrateurs de la prochaine génération peuvent apporter leur expertise particulière.

Cependant, il faut du temps pour apprendre comment ajouter de la valeur aux discussions du conseil sans pour autant saper l’autorité de la direction. L’écoute et l’apprentissage sont un aspect crucial pour gagner le respect et la crédibilité auprès du reste du conseil. « Il faut être très conscient du moment où il faut intervenir, quand il est nécessaire d’insister sur un sujet difficile, et quand il faut prendre du recul », explique un administrateur. « La compétence consiste à poser la bonne question de la bonne façon — à ne pas affaiblir ou à décourager la direction, mais à les encourager à voir les choses un peu différemment ».

En tant qu’administrateur non exécutif, vous devez vous engager à un niveau supérieur et de manière plus détachée que dans votre rôle exécutif. Avec des réunions mensuelles ou bimestrielles, il peut être difficile de déterminer si vous ajoutez de la valeur, ou même à quoi ressemble la valeur, surtout lorsque votre travail régulier implique de prendre la responsabilité d’une exécution de haute qualité. En tant qu’administrateur non exécutif, vous pouvez voir des choses qui doivent être prises en compte et vouloir vous impliquer plus activement, mais vous devez faire confiance en la capacité de l’équipe de direction à le faire. « J’avais l’impression que le conseil d’administration pourrait être un peu plus engagé. Nous avons des zones très précises dans lesquelles nous sommes censés contribuer à orienter les décisions et les actions, et il y en a d’autres où nous sommes plus consultatifs ; c’est une question de trouver le bon équilibre ».

Cependant, le travail des administrateurs de prochaine génération ne commence pas et ne se termine pas avec les réunions du conseil d’administration. Beaucoup interagiront avec la direction en dehors des réunions. Un directeur britannique nommé pour son expertise numérique prend le temps de se mettre à jour avec l’équipe numérique de l’entreprise lorsqu’elle est à New York « pour savoir à quoi ils travaillent, comprendre ce qui les motive et quelles sont leurs préoccupations ». Un nouvel administrateur indépendant a été invité par le PDG (CEO) à passer une journée avec l’équipe de management du développement de l’entreprise, après quoi il a passé en revue l’expérience client. « J’ai reçu des commentaires très clairs, mais je me suis contenté de l’envoyer au chef de la direction, pas à l’équipe que j’ai rencontrée ou à un autre membre du conseil ». Offrir de l’aide à l’équipe de direction de façon informelle.

Votre rôle n’est pas nécessairement de comprendre les problèmes, mais de proposer des idées et de poser des questions à l’équipe de direction.

 

Obtenir de la rétroaction

 

Les administrateurs de prochaine génération qui sont habitués à recevoir des commentaires dans leur capacité de direction peuvent avoir du mal à s’adapter à un rôle où il est moins facilement disponible. « La rétroaction est la chose la plus difficile à laquelle je me suis attaqué », explique un administrateur. « Avec votre propre entreprise, c’est un succès ou pas. Si vous êtes un employé, on vous dit si vous faites du bon travail. Ce n’est pas le cas sur un conseil ».

Les nouveaux administrateurs doivent identifier une personne avec laquelle ils se sentent à l’aise et qui peut leur offrir un aperçu de certaines des règles non écrites du conseil. Certains préfèrent une relation de mentorat plus formelle avec un membre du conseil d’administration, mais cette idée ne plaît pas à tout le monde. Des vérifications régulières auprès du président du conseil (et du chef de la direction) les aideront à évaluer leur rendement et à apprendre comment ils peuvent offrir une contribution plus utile.

Au-delà de la rétroaction individuelle informelle, le conseil peut avoir un processus pour fournir une rétroaction à chaque administrateur dans le cadre de l’auto-évaluation annuelle du conseil. Sur les conseils où cette pratique est en place, les administrateurs de la prochaine génération ont tendance à être très à l’aise avec elle et à accueillir les commentaires. S’il n’y a pas de processus de rétroaction individuelle des administrateurs en place, l’administrateur de la prochaine génération peut servir de catalyseur pour établir cette saine pratique en s’enquérant directement à ce sujet.

 

Le rôle du président du conseil

 

Les présidents de conseil ont une influence significative sur le succès des administrateurs de prochaine génération dans le rôle. Il peut être difficile d’arriver à un conseil qui compte beaucoup d’administrateurs plus âgés et plus expérimentés, en particulier s’il existe une dynamique « collégiale » établie de longue date. Le président a la double tâche de guider le nouvel administrateur, tout en s’assurant que les autres membres du conseil restent ouverts aux nouvelles idées et perspectives que celui-ci apporte au conseil. Cela peut impliquer de travailler dur pour encourager les relations à se développer à un niveau personnel, ce qui permettra ensuite d’émettre des points de vue divergents, et même dissidents sur le plan professionnel.

Un président peut faire un certain nombre de choses pour soutenir l’administrateur de la prochaine génération, par exemple : s’intéresser de près au processus d’intégration ; fournir un encadrement sur la meilleure façon de représenter les intérêts des investisseurs ; offrir des commentaires constructifs après les réunions ; et encourager le nouvel administrateur à se tenir à l’écart plutôt que de jouer la carte de la sécurité et à simplement s’aligner sur la culture existante du conseil d’administration. Comme l’a dit un président : « Certains conseils se méfient d’un nouvel administrateur qui pense différemment et qui menace, bien que respectueusement, de faire bouger les choses. Mais parfois, vous avez besoin que le nouvel administrateur perturbe le conseil avec des idées nouvelles, acceptant que cela puisse entraîner un changement culturel. C’est mon travail de laisser cela se produire ». Cela dit, si un nouvel administrateur est en désaccord avec certains éléments contenus dans la documentation du conseil d’administration ou s’il ne comprend pas, il serait sage d’en discuter avec le président du conseil en premier lieu.

Pour le nouvel administrateur, l’adaptation à la structure et à la formalité des réunions du conseil d’administration signifie adopter une approche mesurée et s’inspirer de la décision du président, en particulier à contre-courant. « Bien que je n’aie assisté qu’à trois réunions, je teste les barrières qui font que je peux être ouvert et direct, tout en en apprenant davantage sur l’entreprise », rapporte un administrateur. Un autre a défendu une position non partagée par la majorité du conseil d’administration, convaincu que le président est heureux de donner une tribune à ses opinions. Vous devez être respectueux et faire valoir votre point de vue et vos arguments, mais si ceux-ci ne prévalent pas, c’est bien aussi. Bien sûr, si cela devient une question de principe, vous êtes toujours libre de démissionner, n’est-ce pas ?

 

Vers un nouveau genre de conseil

 

Au fur et à mesure que les entreprises relèvent de nouveaux défis et qu’une jeune génération de cadres issus de milieux très différents accède à des postes d’administrateurs indépendants, les conseils d’administration devront trouver le bon équilibre entre expérience et pertinence. Ils devront également devenir plus dynamiques en matière de composition, de diversité, de discussion et d’occupation. Les administrateurs de longue date qui s’intéressent à la gouvernance et à la gestion des risques côtoieront des représentants de la prochaine génération nommés pour leur excellente connaissance du domaine ou leur expérience en temps réel des environnements transformationnels, mais le mandat de ces administrateurs sera probablement plus court que la moyenne actuelle.

Les conseils doivent être réalistes quant à la durée du mandat d’un candidat de la prochaine génération. Ils doivent également réfléchir soigneusement à la question de savoir si cet administrateur se sentirait moins isolé et plus efficace s’il était accompagné par un autre administrateur d’un âge et d’un passé similaires. « En tant que femme, j’ai été une minorité tout au long de ma carrière, donc c’est étrange d’être une minorité à cause de mon expertise numérique », a déclaré une administratrice. Tout comme la présence d’autres femmes au sein du conseil d’administration réduit le fardeau d’une femme administratrice, il y a lieu de nommer deux ou plusieurs administrateurs de la nouvelle génération.

Les conseils d’administration résolus à rester au fait des problèmes critiques affectant leurs entreprises devraient considérer les avantages potentiels de nommer au moins un administrateur de la prochaine génération, non seulement pour leur expertise, mais aussi pour leur capacité à apporter une pensée alternative et des perspectives multipartites dans la salle du conseil. Soutenus par un président du conseil attentif et par des administrateurs ouverts d’esprit, les administrateurs de la prochaine génération peuvent avoir un impact positif et durable sur l’efficacité du conseil en cette période de changement sans précédent.

Adapter le modèle de gouvernance à la réalité des OBNL de petite taille | en rappel


Il est vrai que la réalité des organisations à but non lucratif (OBNL) est souvent assez éloignée des grands principes de gouvernance généralement reconnus.

Les différences principales portent essentiellement sur l’application rigoureuse de certains principes de gouvernance lorsque l’entreprise est à ses débuts ou en transition.

La distinction nette entre les activités des administrateurs et l’embryon de direction peut alors prendre une forme différente. Il est évident que pour les entreprises en démarrage, le rôle des administrateurs peut comprendre des tâches qui relèveraient normalement de la direction générale de l’entreprise.

Cependant, les administrateurs doivent toujours saisir qu’ils ont d’abord et avant tout un rôle de fiduciaire, ce qui rend leurs prestations d’autant plus délicates ! La gestion de conflits d’intérêts potentiels est à prévoir dans ces cas. Le président du conseil doit être très vigilant à cet égard.

Les administrateurs doivent accepter l’idée que l’organisation ne puisse survivre sans leur apport concret, en attendant la constitution d’une véritable structure de management avec l’embauche d’un directeur général ou d’une directrice générale.

Voici le témoignage de Sandra Dunham* qui a une longue expérience dans la direction des OBNL et qui a été invitée à contribuer au blogue de Imagine Canada.

Bonne lecture ! Ce billet est-il pertinent ? Avez-vous des interrogations ? Vos commentaires sont les bienvenus.

 

Modèles de gouvernance du CA : oser la différence !

 

 

Résultats de recherche d'images pour « obnl imagine canada »

 

Résultats de recherche d'images pour « OBNL »

 

 

Lorsque j’ai débuté dans mon tout premier poste de directrice générale à la fin des années 1990, tout le monde parlait du modèle de gouvernance de Carver. À l’époque, j’ignorais tout de l’existence même d’un « modèle de gouvernance ». Les adeptes de cette théorie l’étudiaient soigneusement, élaboraient des politiques et renseignaient leurs collègues-administrateurs à son sujet. Le modèle Carver était alors considéré comme le nec plus ultra des modèles de gouvernance.

Dans l’organisation à laquelle je me joignais alors, le directeur général sortant avait participé à une formation à ce sujet et avait suggéré aux administrateurs des façons de faire pour devenir un conseil d’administration (CA) conforme au modèle Carver. À mon arrivée, les membres avaient créé une multitude de règlements superflus à propos du fonctionnement du CA, soit en raison des informations relayées par l’ancien directeur général, soit en raison de l’interprétation qu’eux-mêmes en avaient faite ou en raison de l’expertise des nouveaux administrateurs.

Encore aujourd’hui, j’entends certains administrateurs décrire leur CA comme un « CA selon Carver », mais il est devenu beaucoup plus courant de parler d’un modèle de gouvernance par politiques. Malgré la multiplication des formations en gouvernance, les administrateurs ignorent souvent à quel type de CA s’identifier, et s’ils le savent, ils ne réussissent pas toujours à agir en fonction des caractéristiques du modèle choisi.

J’estime qu’il est grand temps pour les CA d’arrêter de vouloir travailler relativement à certaines catégories qui ne correspondent pas à leur réalité et de s’excuser de leur mode de fonctionnement. Ils devraient plutôt se concentrer sur les priorités qui s’imposent compte tenu de leur étape de développement et définir clairement leur rôle dans l’organisation.

 

Politiques, opérations et entre-deux

 

Presque tous les CA remplissent d’abord une fonction opérationnelle. Puisque très peu d’organismes comptent des employés dès le jour un de leur existence, les administrateurs doivent assurer le fonctionnement de l’organisation jusqu’à ce qu’un employé rémunéré ou un nombre suffisant de bénévoles se joignent à l’équipe et libèrent les administrateurs de cette tâche. Or, de nombreux CA continuent à assumer certaines tâches opérationnelles même après l’arrivée de personnel et laissent à ces derniers le soin de mettre en œuvre les programmes offerts par l’organisme.

Puis, généralement, au fur et à mesure qu’une organisation grandit et embauche une personne responsable de la gestion quotidienne des activités, les administrateurs prennent leurs distances avec ces aspects de l’organisation (comptabilité, ressources humaines, relations avec les donateurs, etc.) et commencent à se concentrer sur la définition d’orientations stratégiques, l’élaboration de politiques de gouvernance et l’embauche et l’encadrement de la personne la plus haut placée dans l’organisation, soit le directeur général ou la directrice générale. Idéalement, le CA se serait alors déjà doté de politiques qui clarifient les relations entre lui-même et cette personne à la tête de l’organisation.

Cependant, la transition entre ces deux catégories n’est pas un processus linéaire, parfait ou permanent, et il existe autant de bonnes que de mauvaises raisons incitant un CA à tergiverser entre le modèle opérationnel et le modèle par politiques. Voici quelques situations exemplaires :

Pendant les phases de transition, de croissance significative, de changement de mandat ou de menace importante pour l’organisation, un CA qui fonctionne selon le modèle de gouvernance par politiques peut être appelé à participer aux activités opérationnelles de l’organisation.

Certains administrateurs ne reconnaissent pas la valeur de la gouvernance par politiques et ne peuvent s’empêcher de s’ingérer dans les détails des activités opérationnelles.

Si un ou plusieurs administrateurs sont en conflit personnel avec la personne directrice générale, ils pourraient essayer de s’immiscer dans les activités opérationnelles dans une tentative de recueillir des arguments pour une destitution de cette personne.

Lorsque la personne à la tête de la direction générale ne fournit pas assez d’information aux administrateurs pour leur permettre de remplir leurs obligations fiduciaires, ces derniers peuvent décider de participer davantage aux activités opérationnelles pour s’assurer que l’organisation a les reins solides.

Si le CA a réalisé son mandat stratégique et n’est pas en mesure d’amorcer une réflexion visionnaire pour créer une nouvelle stratégie à long terme, ses membres pourraient, par défaut, se tourner vers l’aspect opérationnel du travail afin de s’assurer de leur propre pertinence.

 

Comment trouver le meilleur modèle pour son CA ?

 

Dans un monde idéal, les administrateurs et la personne à la tête de la direction générale recevraient une formation exhaustive en matière de gouvernance, adopteraient et respecteraient des politiques de gouvernance adéquates et réaliseraient une autoévaluation sur une base régulière afin de s’assurer que l’organisation continue de fonctionner conformément au modèle de gouvernance retenu. En réalité, la plupart des administrateurs, voire des directeurs généraux, apprennent la gouvernance « sur le tas ». Ils se fient souvent aux informations relayées par des administrateurs ayant siégé à d’autres CA, sans l’assurance que cette information est juste.

Les organisations dont les ressources leur permettent de se prévaloir d’une formation en gouvernance adaptée à leur contexte et leurs besoins devraient en profiter. Cette formation devrait d’abord reconnaître que le modèle de gouvernance par politiques n’est pas approprié pour tous les organismes sans but lucratif et qu’il existe des modèles hybrides, alliant gouvernance opérationnelle et gouvernance par politiques, qui se prêtent davantage à certaines organisations, surtout les petites.

Pour déterminer son rôle le plus approprié dans le contexte de l’organisation, un CA peut également réviser différentes normes de certification en matière de gouvernance, une méthode très efficace et qui demande peu de ressources. Ainsi, le programme de normes d’Imagine Canada est articulé autour des règles de gouvernance les plus importantes, en plus de présenter des normes différentes et adaptées pour les petites organisations.

 

Mon CA joue un grand rôle opérationnel, et alors ?

 

Je propose que les CA de petites organisations cessent de s’excuser pour la participation de leurs administrateurs aux activités opérationnelles, car il serait totalement illogique pour une organisation avec un budget de moins de 100 000 $ de suivre le même modèle de gouvernance qu’un hôpital ou une université. Or, souvent, on évalue ces petites organisations en fonction des mêmes critères applicables aux grandes.

Les administrateurs devraient utiliser les normes définies par un programme de certification pertinent pour la taille de leur organisation comme point de référence et de comparaison. S’ils peinent à respecter ces normes, ils peuvent demander de l’aide pour ajuster leur modèle de gouvernance. Si, par contre, ils respectent toutes les normes et si leur organisation fonctionne de manière efficace et réalise ses priorités stratégiques, ils ont toutes les raisons de se montrer fiers de leur travail, de reconnaître leur propre compétence à gérer une organisation en fonction de sa taille et de mettre en lumière tout le travail que les petites organisations réussissent à faire avec peu de moyens.

À propos de l’auteure

Sandra Dunham a à son actif plus de 30 ans d’expérience dans le secteur de la bienfaisance et sans but lucratif ainsi qu’une maîtrise en administration publique de l’Université Dalhousie obtenue alors qu’elle poursuivait une carrière déjà bien entamée. Sandra est la propriétaire unique de Streamline New Perspective Solutions, une boîte de consultation spécialisée en gestion et collecte de fonds dans le secteur caritatif. Nos auteurs invités s’expriment à titre personnel. Leurs opinions ne reflètent pas nécessairement celles d’Imagine Canada.

La gouvernance des grandes institutions bancaires européennes au cours des dix années qui ont suivi la crise financière des 2008


Voici un article publié par Lisa Andersson*, directrice de la recherche à Aktis et Stilpon Nestor, paru sur le site du Forum de Harvard Law School, qui brosse un portrait de l’évolution de la gouvernance des grandes institutions bancaires européennes au cours des dix années qui ont suivi la crise financière des 2008.

Je vous invite à prendre connaissance de ce document illustré d’infographies très éclairantes. J’ai reproduit, ci-dessous, l’introduction à l’article.

Si vous avez un intérêt pour la gouvernance dans le milieu bancaire, cet article est pour vous.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

Governance of the 25 Largest European Banks a Decade After the Crisis

 

 

Résultats de recherche d'images pour « gouvernance bancaire européenne »

 

 

This summer marked the 10-year anniversary of the start of the global financial crisis. Over the 18 months following August 2007, several bank collapses in the United States, Germany and Britain, culminating with the demise of Lehman Brothers in September 2008 shook the financial system to its core. The interconnectivity of the world’s financial system meant that the repercussions would be felt globally, and on a monumental scale. The US Department of the Treasury has estimated that total household wealth would lose some $19.2 trillion following a publicly-funded government bailout program. Over the last decade governments, regulators, banks and their investors have revamped the financial system and its supervision in order to recover the public subsidy and prevent a similar crash from happening again.

In Europe, politicians and regulators at both the national and European level abandoned the path of deregulation and dramatically increased regulatory requirements and the scope of prudential supervision with an unparalleled focus on governance. The Capital Requirements Directive IV (CRD IV) and the ensuing European Banking Authority (EBA) and European Central Bank (ECB) guidance implied stricter suitability reviews for board members and senior management, along with individual responsibility and in some cases criminal liability of non-executive directors (“NEDs”), as well as strict limits on variable remuneration. Higher regulatory requirements were compounded by the creation of a single supervisor for all systemic Eurozone banks. In many countries, especially the smaller ones, familiarity with supervisors usually allow a larger margin of forbearance and greater tolerance in assuming local sovereign risk. This has since disappeared. New rules and stricter oversight practices in the financial industry have translated into higher governance requirements and expectations for European banks’ boards of directors and senior management. So how do the boards and management committees of the top European banks measure up to their former selves? Data from the 25 largest listed banks [1] in Europe shows that boards today are smaller, work harder, and have a higher level of expertise than a decade ago.

While board sizes are getting smaller, the number of committees supporting the board has consistently grown over the years. This is in part driven by the mandatory separation of the audit and risk committee into two separate committees, but also by a general trend towards establishing more and more committees focusing on regulatory and compliance issues, as well as bank culture, conduct and reputation.

On average, 86% of board membership has been refreshed post-crisis. New board members brought with them greater independence, banking experience and general financial expertise among NEDs, as well as an improved gender balance on the board. In fact, women now comprise on average 34% of top European banks’ board membership, a development largely driven by national initiatives. Another significant change since 2007 is the fact that all the bank boards in the group now conduct regular assessments of the effectiveness of the board, a Capital Requirements Directive IV (CRD IV) requirement. The disclosure of this process has also improved significantly, with 48% of banks now disclosing specific challenges identified and actions taken to address these.

The role of a bank NED has evolved post-crisis. With increased scrutiny, boards of financial institutions are now required to adopt a more hands-on approach, requiring a greater time-commitment by their non-executive directors. On average, the workload per director has increased by over 30% compared to pre-crisis levels.

In contrast to the board, the size of management committees has grown in recent years. The top management committee now tend to include more heads of functions, reflected by the increased presence of the Chief Risk Officer, Head of Compliance and Head of Legal. Despite the positive development of a better gender balance on the board of directors, the number of women on the highest management committee has not increased significantly over the last ten years. This may suggest that the “top-down” approach of board quotas adopted in many European countries might be less than effective in promoting gender equality.

*Lisa Andersson is Head of Research of Aktis and Stilpon Nestor is Managing Director and Senior Advisor at Nestor Advisors. This post is based on their recent Nestor Advisors/Aktis publication.

 

L’indépendance des administrateurs, c’est bien ; mais, des administrateurs qui sont impérativement crédibles et légitimes, c’est mieux !


C’est avec enthousiasme que je vous recommande la lecture de cette dixième prise de position d’Yvan Allaire* au nom de l’IGOPP.

L’indépendance des administrateurs est une condition importante, mais d’autres considérations doivent nécessairement être prises en compte, notamment la légitimité et la crédibilité du conseil d’administration.

Comme l’auteur le mentionne, il faut parfois faire des arbitrages afin de se doter d’un conseil d’administration efficace.

J’ai reproduit, ci-dessous, le sommaire exécutif du document. Pour plus de détails sur ce document de 40 pages, je vous invite à lire le texte au complet.

Bonne lecture ! Vos commentaires sont les bienvenus. Ils orienteront les nouvelles exigences en matière de gouvernance.

 

D’indépendant à légitime et crédible : le défi des conseils d’administration

 

 

L’indépendance de la plupart des membres de conseils d’administration est maintenant un fait accompli. Bien qu’ayant contribué à un certain assainissement de la gouvernance des sociétés, force est de constater que cette sacro-sainte indépendance, dont certains ont fait la pierre angulaire, voire, la pierre philosophale de la «bonne» gouvernance, n’a pas donné tous les résultats escomptés.

Déjà en 2008, au moment de publier une première prise de position sur le thème de l’indépendance, l’IGOPP argumentait que ce qui faisait défaut à trop de conseils, ce n’était pas leur indépendance mais la légitimité et la crédibilité de leurs membres. Le fait qu’un administrateur n’ait pas d’intérêts personnels contraires aux intérêts de la société, son indépendance, devait être vu comme une condition nécessaire mais non suffisante au statut d’administrateur légitime.

Les évènements depuis lors, en particulier la crise financière de 2008, ont donné raison à cette prise de position et ont suscité de nouveaux enjeux de légitimité, comme la diversité des conseils, la représentation au conseil de parties prenantes autres que les actionnaires, le droit, contingent à la durée de détention des actions, de mettre en nomination des candidats pour le conseil, les limites d’âge et de durée des mandats comme administrateur.

Quant à la crédibilité d’un conseil, l’IGOPP proposait en 2008 que celle-ci devait s’appuyer sur «une expérience et une expertise pertinentes aux enjeux et aux défis avec lesquels l’organisation doit composer» ainsi que sur une connaissance fine «du modèle d’affaires de l’entreprise, de ses moteurs de création de valeurs économique et sociale» (Allaire, 2008). Pour l’IGOPP, la crédibilité du conseil suppose également l’intégrité et la confiance réciproque entre les membres du conseil et la direction. Donc, celle-ci devenait si importante qu’il serait acceptable, voire nécessaire, de suspendre l’exigence d’indépendance pour certains membres si c’était le prix à payer pour relever la crédibilité du conseil.

Depuis 2008

Profondément perturbés par la crise financière, les sociétés, les agences de règlementation et tous les observateurs de la gouvernance durent admettre que l’indépendance des membres du conseil et leur expérience de gestion dans des secteurs d’activités sans similarité avec l’entreprise à gouverner étaient nettement insuffisants. Ceux-ci devaient également posséder des compétences et une expérience à la mesure des enjeux et défis précis de la société qu’ils sont appelés à gouverner.Résultats de recherche d'images pour « indépendance des administrateurs »

Graduellement, pour la sélection des membres de conseil, on s’est préoccupé de leur expérience et connaissance spécifiques au type d’organisation qu’ils sont appelés à gouverner ainsi que de leur intégrité et leur fiabilité. Ainsi, l’évolution du monde de la gouvernance depuis 2008 a conforté la position de l’IGOPP et lui a donné un caractère prescient.

Toutefois, certains ont constaté que cette crédibilité pouvait être parfois difficile à concilier avec l’indépendance. En effet, si la crédibilité d’un candidat provient d’une longue expérience à œuvrer dans l’industrie à laquelle appartient la société-cible, il est bien possible que pour cette raison cette personne ne satisfasse pas à tous les desiderata d’une indépendance immaculée.

La prise de position de 2018 de l’IGOPP offre des précisions et des solutions aux nouveaux enjeux apparus depuis 2008.

Ainsi, l’IGOPP propose un net changement dans les démarches d’évaluation des conseils, dans les critères de sélection des nouveaux membres ainsi que pour l’établissement du profil de compétences recherchées.

La démarche d’évaluation du conseil

L’évaluation du conseil constitue le premier pilier d’une nécessaire réforme de la gouvernance. Cette évaluation doit répondre aux questions suivantes : le conseil est-il légitime par la façon dont les membres ont été mis en nomination? Par qui furent-ils élus ou nommés?

L‘IGOPP estime qu’une recherche de légitimité relevée et élargie pour un conseil deviendra un enjeu à plus ou moins brève échéance. Même dans le contexte juridique actuel, il est possible de s’interroger sur la qualité des démarches de mise en nomination et d’élection ainsi que du sens à donner aux variations dans le support électif reçu par les différents membres d’un conseil.

Puis, le conseil est-il crédible? L’IGOPP propose une évaluation des connaissances et de l’expérience spécifiques au type d’industries dans lequel œuvre la société que le conseil est appelé à gouverner. Il est important que la plupart des membres du conseil (tous?) possèdent des connaissances économique et financière pertinentes à ce secteur d’activités.

Un conseil d’administration n’est crédible que dans la mesure où une grande partie de ses membres peuvent soutenir un échange avec la direction sur ces aspects de performance et sur les multiples facteurs qui exercent une influence dynamique sur cette performance. Ce type de questionnement suppose, de la part du conseil, une fine et systémique compréhension du modèle d’affaires de la société.

Les critères de sélection de nouveaux membres:

Le président du conseil et le comité de gouvernance doivent s’équiper d’une grille de sélection à la mesure des enjeux actuels. Ainsi, plus de la moitié des membres doivent être indépendants et le conseil doit se préoccuper de la diversité de sa composition. Idéalement, le conseil devrait rechercher des nouveaux membres qui sont indépendants, ajoutent à la diversité du conseil et sont crédibles selon le sens donné à ce terme dans ce texte.

Toutefois, il pourra arriver qu’un conseil doive faire des arbitrages, des compromis entre ces trois qualités souhaitables pour un nouveau membre du conseil.

Si une personne par ailleurs dotée de qualités attrayantes pour le conseil ne possédait pas une expérience qui en fasse un membre crédible dès son arrivée, il faut s’assurer préalablement que celle-ci dispose du temps nécessaire, possède la formation et la rigueur intellectuelle essentielles pour acquérir en un temps raisonnable, un bon niveau de crédibilité; il est essentiel qu’un programme fait sur mesure soit mis en place pour relever rapidement la crédibilité de ce nouveau membre du conseil

Le profil d’expertise recherché:

Cette prise de position propose que le profil établi pour la recherche de nouveaux candidats pour le conseil débute par l’identification de secteurs d’activités proches de celui dans lequel œuvre la société en termes de cycle d’investissement, d’horizon temporel de gestion, de technologie, de marchés desservis (industriels, consommateurs, international), de facteurs de succès et de stratégie (leadership de coûts, différenciation/segmentation, envergure de produits).

Des dirigeants ayant une expérience de tels secteurs apprivoiseront plus rapidement les aspects essentiels d’une société œuvrant dans un secteur s’en rapprochant. Cette façon de procéder permet de concilier «indépendance» et «crédibilité».

Puis, si l’éventail des expertises au conseil indique une carence, disons, en termes de «finance», la recherche ne doit pas se limiter à identifier une personne qui fut une chef de la direction financière, mais bien une personne dont l’expérience en finance fut acquise dans le type de secteurs d’activités identifiés plus tôt. La gestion financière, des ressources humaines, des risques ou de la technologie d’information sont sans commune mesure selon que l’entreprise en est une de commerce au détail ou une minière ou une banque ou une entreprise du secteur aéronautique.

Conclusion

Notre prise de position de 2008 conserve toute sa pertinence. En fait les évènements survenus depuis 2008 appuient et confortent nos propositions d’alors. Si, à l’époque, nous étions une voix dans le désert, notre propos est maintenant sur la place publique, appuyé par des études empiriques et repris par tous ceux qui ont un peu réfléchi aux dilemmes de la gouvernance contemporaine.

Cette révision de notre prise de position de 2008 y ajoute des clarifications, aborde des enjeux devenus inévitables et veut rappeler à tous les conseils d’administration que:

«Si c’est par sa légitimité qu’un conseil acquiert le droit et l’autorité d’imposer ses volontés à la direction, c’est par sa crédibilité qu’un conseil devient créateur de valeur pour toutes les parties prenantes d’une organisation.» (Allaire, 2008).

*Ce document a été préparé et rédigé par Yvan Allaire, Ph. D. (MIT), MSRC, président exécutif, IGOPP

La gestion des notes de réunion par les administrateurs | Bonnes pratiques pour éviter les quiproquos


Aujourd’hui, je partage avec vous une lecture très inintéressante, intrigante même, sur les bonnes façons de prendre des notes et de les sécuriser lors des réunions du conseil d’administration.

Les organisations ont tout avantage à avoir une politique relative à la gestion des notes prises par les administrateurs avant, durant et après les réunions du CA.

L’auteur, David A. Katz*, fait très bien ressortir les problématiques entourant la prise de notes :

  1. Les notes sur les documents du CA
  2. Les notes électroniques
  3. Les courriels

Comme vous le constaterez, l’article présente une perspective très rigoureuse de la gestion des notes (1) pour éviter les conséquences des fuites et (2) pour se protéger en cas d’éventuelles enquêtes judiciaires.

Directors must prepare carefully for and be actively engaged during board meetings. When they leave the boardroom, it is incumbent upon directors to handle their notes and board materials in a manner that is consistent with board policy and applicable law. Directors should review the board’s record retention policy and fully commit to following it. For electronic materials, such as board portals, the retention policy should automatically function to delete notes or other annotations of the materials. The consistent application of a thoughtful and well-tailored policy is in the best interests of the company, the board, and the directors themselves.

Bonne lecture ! Et vous, quels moyens utilisez-vous pour protéger vos informations ? Vos commentaires sont les bienvenus.

 

Directors’ Notes: A Trap for the Unwary?

 

 

Résultats de recherche d'images pour « notes des réunions de CA »

 

“To take notes or not to take notes—that is the question” often asked in corporate board rooms today. As a matter of good governance, it is important that the minutes serve as the single, clear, official record of each in-person or telephonic board and committee meeting. Board materials that are circulated and discussed at the meeting should be part of the official record and either attached to the minutes or maintained in the corporate secretary’s files, as appropriate. In connection with significant transactions, board minutes will be reviewed by third parties for diligence purposes and to confirm that all appropriate (and required) actions have been taken. Moreover, these minutes will be scrutinized closely in the event that a decision taken at the board meeting is subsequently challenged in litigation or otherwise. Directors should use caution in creating or retaining any notes, texts or emails that could be considered an unofficial record of a board meeting. Directors’ notes and emails are discoverable in litigation and can confuse or even undermine the official account of the meeting in question. Various forms of notes—paper, electronic, and email—raise slightly different issues, all of which directors need to understand in advance of their creation.

 

Notes on Paper

 

Note-taking can be a useful and, for some directors, a necessary element of preparation as they review board materials in order to participate in a meeting, particularly one involving complex topics. Important documents that will be discussed during a meeting should generally be provided to directors sufficiently ahead of the meeting so that directors can review them in advance and be ready to ask questions and discuss key points at the meeting. During a meeting, some directors may jot down questions or comments as reminders to make certain that their concerns are addressed before the meeting concludes.

While note-taking can be helpful to some directors, the question becomes what to do with these notes once the meeting has concluded, or once the minutes have been finalized. Many corporate secretaries, as well as outside counsel, discourage any note-taking by directors to minimize the possibility that these notes could create issues at some future time. Directors are often counseled that the length of their deposition in any shareholder litigation will have a direct correlation to the amount of notes they have taken and retained. It is a common practice among many boards to collect all directors’ meeting notes (and copies of unneeded meeting materials) at the conclusion of a meeting so that they can be destroyed. Some boards have a policy of note destruction after the minutes have been finalized so that directors who wish to refer to their notes as they review the draft minutes can do so. This practice should be discouraged, as in the event that litigation arises after the meeting and before the notes are destroyed, the notes may need to be preserved and produced. In order to minimize the need to retain notes, in most circumstances, draft minutes should be prepared promptly after the meeting.

Some directors may feel that their notes could protect them in litigation, by demonstrating that they have been diligent and fully engaged during board meetings. However, properly-drafted minutes can serve the same purpose without the risks inherent in retaining meeting notes. In many cases, notes are informal comments or questions in document margins whose import may be easily misinterpreted by others or even misremembered by the author, since litigation may occur months after the event. Moreover, notes taken during a meeting are by nature often incomplete and cryptic. If a director annotates material with a question, but does not then write down the answer, it can appear that an issue was not fully discussed or resolved. Inconsistencies between notes and board-approved minutes can undermine the official record of the meeting and could even cause directors to become adversely positioned against each other in litigation. If a director jots down unrelated notes, such as doodles or a shopping list, these can be used to show that the director lacked diligence and attention to the matter at hand. Similarly, if a director sends numerous emails during a meeting unrelated to the matter at hand (which may be discoverable in litigation), the director may be accused of not being appropriately engaged in the matters addressed at the meeting.

Electronic Notes

 

There is a growing trend toward electronic delivery of board materials using portals and iPads. This environmentally friendly approach enables immediate, cost-free delivery of board materials anywhere in the world. Nonetheless, electronic documents create issues of their own, and board portals may not be the panacea that directors and corporate secretaries imagine. Because there is no natural limit to the quantum of materials that can be uploaded to the board portal, some boards will find themselves inundated with documents. Too much in the way of board materials can be as dangerous as too little. Management teams should monitor the quantum of materials to be reviewed prior to each board meeting to make sure that action items have sufficient documentation and that directors are not overwhelmed with information.

The use of electronic board portals can create other headaches for directors and corporate secretaries. Documents that are downloaded to directors’ personal computers raise security issues as well as difficulties in ensuring that the documents and related notes are deleted in accordance with company policy. Documents that are not downloadable but are read-only may be difficult or impossible to annotate, making them less useful to directors as they try to prepare for an upcoming meeting. Corporate secretaries should have specific discussions with board members to make sure that the directors are comfortable with the materials provided, that they take appropriate actions to safeguard materials, and that they refrain from creating additional documents discoverable in pending or subsequent litigation. If directors are permitted to annotate their electronic board materials, these annotations should be automatically deleted at the conclusion of the board meeting.

Chief Justice Leo Strine of the Delaware Supreme Court has raised additional concerns about online documents and electronic board portals. He observes that it is difficult to focus on materials that, unlike paper documents, are necessarily viewed on a device that contains many other distractions; and at the same time, the online data room can be monitored for access and active use. (Monitoring should be strongly discouraged, and usage should not be tracked, but this information can be automatically generated by the portal without directors’ knowledge unless this functionality is fully disabled.) Chief Justice Strine cites an example of a director, on a long flight to a board meeting, opening his computer to review board documents and ending up spending much of his time watching movies, sending emails, and attending to his primary work, rather than focusing on the board materials. If access to an online board portal can be monitored, the log later may reveal that the director spent very little time—potentially even negligently little time—reviewing the materials available. The use of electronic documents and notes should be carefully managed to avoid becoming a trap for the unwary.

Emails

 

Email is also used to deliver board materials, and directors often communicate with each other and with the company via email, but directors should exercise caution in using email, texts, or similar means (including mobile applications such as Messenger or WhatsApp) for substantive board business. In addition to the security issues inherent in sending emails or messages with confidential information and attachments outside the company, there are also potentially significant discovery issues. After the 2016 Yahoo! case in the Delaware Chancery Court, it is clear not only that electronically stored information is explicitly required to be produced in discovery under Delaware law, but also that if a director uses her own work or personal email account for board materials, those email accounts may be subjected to a highly intrusive search in litigation discovery. Directors should be aware that using these accounts for board business means potentially opening them up to intense and unfriendly scrutiny in litigation.

It can be particularly difficult to implement document destruction policies with respect to email. Often backups are made automatically on one or more servers, of which the director may not even be aware, and these backup copies are subject to discovery as well. Moreover, if a director conducts board business using her external business email, those emails may be subject to routine or litigation-driven searches and reviews relating to that other workplace. Although unrelated to the company on which she serves as a director, these searches could compromise the confidentiality of the company information contained therein and call into question any attorney-client privilege that would have applied.

The asymmetric use of email can also yield a distorted version of events. When emailed concerns are addressed in a subsequent phone call, there remains a record of only the concern and not its resolution, which, years later, may be forgotten or misremembered. It is a wiser practice to raise concerns in person or on the phone rather than with an email or text inquiry. The purpose of this practice is not to subvert discovery but to avoid creating an incomplete and misleading record that may be difficult to defend after the fact.

 

Consistency and Control

 

Each board should have a policy regarding directors’ notes, draft minutes, and other board documents that best serves that board’s specific needs. Policies can and will differ across companies. The key element is to implement a policy consistently, across all directors of a particular company and across time. The company should be able to rely on directors’ following the policy systematically and without exception. It will be problematic if, for example, discovery reveals that a director retained notes from every meeting except the one at which a material transaction was approved. Of course, if litigation or an investigation or audit is pending or reasonably foreseeable, directors must preserve all relevant materials, including emails, texts and notes.

Directors should make sure that they will continue to have access to minutes and board materials from the term of their directorship if necessitated by a subsequent litigation or investigation, even one commencing after their directorship has ended. Directors should not maintain their own files of notes and materials for this purpose. The creation of a personal set of documents would increase the risks of inconsistencies and other issues arising that would be to the detriment of both the director and the company.

Directors’ notes, if not properly handled, can result in unintentional waivers of privilege and violations of confidentiality obligations. In order to preserve attorney-client privilege where applicable, official minutes indicate that a lawyer was present and simply note the general topic discussed. Directors’ notes may not be annotated in the same manner and may contain more detail than is advisable; if these notes are treated carelessly, privilege may not survive. Similarly, if directors’ meeting notes are not destroyed, confidential information reflected in such notes may not be secure.

Directors must prepare carefully for and be actively engaged during board meetings. When they leave the boardroom, it is incumbent upon directors to handle their notes and board materials in a manner that is consistent with board policy and applicable law. Directors should review the board’s record retention policy and fully commit to following it. For electronic materials, such as board portals, the retention policy should automatically function to delete notes or other annotations of the materials. The consistent application of a thoughtful and well-tailored policy is in the best interests of the company, the board, and the directors themselves.

________________________________________________________________

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

Quel client les firmes d’audit servent-elles ?


Voici un article-choc publié par Chris Hughes dans la revue Bloomberg qui porte sur l’indépendance (ou le manque d’indépendance) des quatre grandes firmes d’audit dans le monde.

Il y a une sérieuse polémique eu égard à l’indépendance réelle des grandes firmes d’audit.

Cet article donne les grandes lignes de la problématique et il esquisse des avenues de solution.

Qu’en pensez-vous ?

 

 

Just Whom Does an Auditor Really Serve?

 

Shareholders need to be the client, not company executives.

L’une des quatre grandes firmes

 

British lawmakers are pushing for a full-blown antitrust probe into the country’s four big accountancy firms following the demise of U.K. construction group Carillion Plc.

The current domination of KPMG, PricewaterhouseCoopers, EY and Deloitte isn’t working for shareholders. But creating more competition among the bean counters won’t be enough on its own. The fundamental problem is who the client is. The thrust of reform should be on making auditors see that their client is the investor and not the company executive. Randgold Resources is the only FTSE 100 company not to be audited by one of the Big Four !

Carillion’s accounts weren’t completely useless. Recent annual reports contained red flags of the company’s deteriorating financial health that were apparent to the smart money. Some long funds cut their holdings and hedge funds took large short positions, as my colleague Chris Bryant points out.

If the evidence was there to those who looked hard, it’s odd that the company was given a clean bill of health from accountancy firm KPMG months before it went bust. The impression is that auditors are on the side of the company rather than the shareholder. (KPMG says it believes it conducted its audit appropriately.)

Would more competition have made a difference? Companies may have only one accountant available if the few competing firms are already working for a rival. A lack of choice in any market usually leads to lower quality.

One response would be to force the Big Four to shed clients to mid-tier firms, creating a Big Five or Big Six. The risk is this greater competition just leads to a race to the bottom on fees with no improvement in quality. Other remedies are needed first.

The combination of audit and more lucrative consultancy work has long been chided – with good reason. Consultancy creates a client-pleasing culture. That’s at odds with the auditor’s role in challenging the assumptions behind company statements.

Opponents of a separation say combining the two services helps attract talent. This is a weak argument. Further lowering the current cap on consultancy fees, or completely separating audit and consultancy, is hard to argue with.

The accountancy firm should clearly serve the non-executive directors on the company’s audit committee which, in turn, is charged with looking out for shareholders. The risk is that the auditor’s main point of contact is the executive in the form of the chief financial officer.

Shareholders already have a vote on the appointment of the auditor. But annual reports could provide more useful disclosure on the frequency and depth of the last year’s contact between the firm and the audit committee, and between the latter and shareholders.

Now consider the nature of the job itself. Companies present the accounts, auditors check them. Out pops a financial statement that gives the false impression of extreme precision. Numbers that are the based on assumptions might be better presented as a range, accompanied by a critique of the judgments applied by the company.

Creating more big audit firms may create upward pressure on quality. But so long as they aren’t incentivized to have shareholders front of mind, it won’t be a long wait for the next Carillion.

__________________________________________________________

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

L’évaluation du conseil d’administration et des administrateurs | Une activité essentielle


Il y a quelques années, j’ai publié, en collaboration avec Geoffrey KIEL et James BECK (1), un guide pratique des questions clés que les conseils d’administration devraient prendre en considération lorsqu’ils planifient une évaluation du conseil d’administration.

Cet article est toujours d’actualité ; il met l’accent sur l’utilité d’avoir des évaluations bien menées ainsi que sur les sept étapes à suivre pour obtenir des évaluations efficaces. Vous pouvez consulter cet article sur mon blogue : « SEPT ÉTAPES À SUIVRE POUR DES ÉVALUATIONS EFFICACES D’UN CONSEIL D’ADMINISTRATION ET DES ADMINISTRATEURS ».

Récemment, les auteurs Geoffrey KIEL* et James BECK, ont publié un livre sur l’importance de l’évaluation du conseil d’administration dans une perspective de valeur ajoutée : « Reviewing Your Board—A Guide to Board and Director Evaluation ».

Après avoir brossé un tableau de la progression très marquée de l’activité d’évaluation, les auteurs reviennent sur l’approche conceptuelle idéale à adopter.

Je vous invite à prendre connaissance de cette documentation afin de valider la portée de cette activité qui relève du comité de gouvernance.

Bonne lecture !

 

Board Performance Evaluations that Add Value

 

 

Résultats de recherche d'images pour « évaluation du fonctionnement du conseil d'administration »

 

Annual board evaluations are now commonplace for both for-profit and non-profit organizations, with specific board evaluation recommendations forming a key component in nearly every major corporate governance standard, review or report internationally.

Recent data on US boards from the global consulting firm Spencer Stuart shows that 98% of S&P 500 boards conduct a board evaluation of some type, although only about a third review the board as a whole, individual directors and committees as part of the process. [1] In the UK, the majority of boards on the FTSE 150 conduct board reviews, with 60.7% conducting their evaluations internally, while 38% of boards used an external facilitator. [2] Encouragingly, PwC reports that in 2017 68% of public company directors in the US say that the board has taken action based on the results of their last board review, which was an increase on the 49% from PwC’s survey in 2016. [3]

In a cross sector review of board effectiveness by the UK arm of Grant Thornton, more than 60% off those surveyed agreed or strongly agreed that there were “adequate processes in place to evaluate the performance of the whole board.” [4] But are “adequate processes” good enough? For example, adequate processes might mean a perfunctory activity is conducted annually to meet listing requirements or pay lip service to best practice governance. And what about the 40% of boards in the UK survey that do not have adequate processes?

Our experience, having been involved in many board evaluations in large and small, for-profit and non-profit organisations, is that the effectiveness of board reviews ranges from counterproductive exercises, which exacerbate already fractious and poorly performing boards, to truly transformational change leading to superior governance and organisational outcomes. Further, our experience suggests that understanding the relative advantages and disadvantages of the different types of board reviews, and properly planning and implementing the board’s evaluation significantly increases the likelihood of positive outcomes.

 

A seven step framework for board evaluations

 

We wrote our recently released book, Reviewing Your Board—A Guide to Board and Director Evaluation, to address this need for more information about board and director evaluations to give boards and their directors the opportunity to think about board evaluations and how they can be carried out to add—rather than subtract—value to the organization.

Our approach to effective board and director evaluations uses a seven-step framework (see Figure 1) that asks the vital questions all boards should consider when planning an evaluation. [5] While these questions must be asked for all board evaluations, the combined answers can be quite different. Thus, although the seven questions may be common to each, the subsequent review processes can range markedly in their scope, complexity and cost. Further, while our framework is described sequentially, in practice, most boards will not follow such a linear process.

 

Figure 1

Framework for a board evaluation

 

Source: Kiel, et al., 2018, p. 4

 

1. What are our objectives?

 

The first (and, in our opinion, most important) aspect of any evaluation is establishing why the board is doing it. The primary motivation can be characterized as “conformance” or “value adding”:

– conformance focuses on meeting the expectations of external scrutiny through compliance with various laws and following appropriate governance standards—whether mandated or self-imposed; and

– value adding focuses on improving both organizational and board performance. For example, taking proactive steps to ensure the board is effective in bringing new talent into the boardroom to maintain a proper mix of skills.

In practice, most board reviews will be aimed at meeting both conformance and value-adding objectives.

Without a solid rationale shared by the directors, any evaluation is likely to meet resistance and/or fail. There are many aspects of its performance the board may wish to evaluate. Apart from a desire to contribute to firm performance, many boards feel that regular evaluation contributes significantly to group processes within the board. A regular board review can indicate potential problems or differences of opinion that can be addressed before they become a source of conflict.

Generally, the answer to the first question in the seven-step framework will fall into one of the following two categories:

– organizational leadership, e.g., “We want to clearly demonstrate our commitment to performance management”; or

– problem resolution, e.g., “We do not seem to have the appropriate skills, competencies or motivation on the board”.

Clearly identified objectives enable the board to set specific goals for the evaluation and make decisions about the scope of the review; e.g., the approach the board will take, how many people will be involved, how much time and money will be allocated.

 

2. Who will be evaluated?

 

Comprehensive governance evaluations can entail reviewing the performance of a wide range of individuals and groups. Boards need to consider three groups:

– the board as whole (including committees);

– individual directors (including the role of the chair); and

– key governance personnel (generally the CEO and corporate/company secretary).

Considerations such as cost or time constraints, however, may prevent reviewing all three groups.

Alternatively, a board may have a very specific objective for the review process that does not require the review of all individuals and groups identified. In both cases, an effective evaluation requires the board to select the most appropriate individuals or groups to review, based on its objectives.

 

3. What will be evaluated?

 

The third stage in establishing a framework for a board evaluation involves deciding the criteria for the evaluation process. This is necessary whether the board is seeking general or specific performance improvements, and will suit boards seeking to improve areas as diverse as board processes, director skills, competencies and motivation, or even boardroom relationships.

To cover the range of objectives the board may have, including meeting any compliance requirements, board evaluations generally use some form of leading practice framework, such as the National Association of Corporate Directors’ Key Agreed Principles [6]or the Business Roundtable Principles of Corporate Governance. [7] Of course, a comprehensive list of areas for investigation will need to be balanced with the scope of the evaluation and the resources available for the process. At this stage, a realistic assessment of the resources available, a component of which is the time availability of directors and other key governance personnel, can be made.

 

4. Who will be asked?

 

The vast majority of board and director evaluations concentrate exclusively on the board as the sole sources of information for the evaluation process. However, this discounts other potentially rich sources of feedback. Participants in the evaluation can be drawn from within or from outside the organization. Internally, directors, the CEO, senior executives and, in some cases, other management personnel and employees may be able to provide useful feedback on elements of the governance system. Externally, depending on the ownership structure, shareholders may provide valuable data for the review. Similarly, in some situations, key stakeholders such as government departments or agencies, major clients and suppliers may have close links with the board and be in a position to provide useful information on its performance.

 

5. What techniques will be used?

 

Depending on the degree of formality, the objectives of the evaluation, and the resources available, boards may choose between a range of qualitative and quantitative techniques. Quantitative data are in the form of numbers. They can be used to answer questions of “how much” or “how many”. Questionnaire-based surveys are by far the most common form of quantitative technique used in board evaluations and can be an important information-gathering tool.

Questions of “what”, “how”, and “why” require qualitative research methods. The three main methods used for collecting qualitative data are:

  1. Interviews, either one-on-one or in small groups, provide an excellent way of assessing directors’ perceptions, meaning and constructions of reality by asking for information in a way that allows them to express themselves in their own terms;
  2. Board meeting observation is especially useful when the evaluation objectives relate to issues of boardroom dynamics or relationships between individuals; and
  3. Document analysis of board packs, governance policies and similar can also be a rich source of information to identify areas of improvement in board processes.

When the board evaluation’s objectives are to identify governance issues, qualitative research is particularly useful. Qualitative data does, however, have several drawbacks. The major one being that interpreting the results requires judgment and experience on the part of the person undertaking the review and analysis.

There is no best methodology. Research techniques need to be adapted to the evaluation objectives and board context. However, there are advantages to be gained from combining a questionnaire with interviews. The questionnaire (most often delivered online) allows directors to benchmark the board along a series of dimensions (e.g. very poor to very good; 1 to 5; etc.), which allows directors to see where they have differing viewpoints from other directors. This can then be followed-up by interviews to allow directors to provide further context to the topics covered in the questionnaire and to raise areas of concern not covered in the survey.

 

6. Who will do the evaluation?

 

Who conducts the evaluation process will depend on whether the review is to be conducted internally or externally and what methodology is chosen. Internal reviews are conducted within the organization, either by one or more directors or governance personnel such as the corporate secretary. External reviews are conducted by external parties, most often either specialist consulting firms in corporate governance, large generalist consulting firms or law firms.

Internal reviews are more likely to provide board members with confidence surrounding the confidentiality of the process and are likely to cost less. All of these are important considerations when making the decision.

There are, however, several limitations to an internally conducted review. The internal reviewer may lack the skills required (e.g., interview technique, survey design), they are likely to have a bias (often unconscious) that carries over into the assessment and it is a less transparent process where the review process is carried out by one of the board’s own. Perhaps most significantly, the review is likely to achieve little if the reviewer (e.g., the chair) is the source of the problems or it may not be appropriate given the objectives of the review.

An external facilitator can offer a number of advantages including that:

– a good external facilitator is more likely to have undertaken a significant number of reviews and will often provide important insights into techniques, comparison points and new ideas;

– an external party often aids transparency and objectivity;

– a good external party can play a mediating role for boards facing sensitive issues through being the messenger for difficult matters involving group dynamics and egos.

Ultimately, factors such as the complexity of the governance problems faced, the experience of the board and cost considerations will determine whether the board decides to conduct the evaluation internally or seek external advice. However, it is now becoming more and more common for boards to alternate between an internal review one year and an external review the next.

 

7. What will we do with the results?

 

The evaluation’s objectives should be the determining factor when deciding to whom the results will be released. Most often, the board’s central objective will be to agree a series of actions that it can take to improve governance. Since the effectiveness of the governance system relies on people within the organization, communicating the results to all directors and key governance personnel is critical for boards seeking performance improvement. Where the objective of the board evaluation is to assess the quality of board—management relationships, a summary of the evaluation may also be shared with the senior management team.

If the board wishes to build its reputation for transparency and/or to develop relationships with external stakeholders, a positive, focused board evaluation is an excellent way of demonstrating that it is serious about governance and is committed to improving its performance. Obviously, when considering what information to communicate externally, a balance needs to be struck between transparency on the one hand and the need for shareholders and other external stakeholders to retain faith in the board’s ability and effectiveness on the other hand. Such communication outline how the evaluation was conducted (e.g. internal or external review), the focus of the review (e.g. role fulfilment) and, perhaps, some of the major outcomes (e.g. identified need to further focus on strategy or requirements for new skills on the board).

In communicating board review outcomes, it should be remembered that the confidentiality of the process contributes significantly to full and frank insights being provided by participants and provides the board with defensible results. As such, director confidentiality must be protected.

 

Implementing the outcomes

 

Once the annual performance evaluation is over, the board’s attention will move on to other issues and any stimulus for change that may have come when the results were first delivered can dissolve. Worse still, directors along with any executives who participated in the process will feel the evaluation has been a waste of their valuable time if recommendations for improvement were accepted, but not acted on. Therefore, it is critical that any agreed actions that come out of an evaluation are implemented and monitored. Many boards include a review of action steps as an agenda item to be tracked at each meeting. Milestones can be established for the achievement of the action plans and progress reviewed until all agreed changes have been implemented.

 

Other approaches to board evaluation

 

There are a number of different approaches to evaluating board performance that may better suit a board’s objectives and differ from the “traditional” board, individual director (self and peer), chair or committee evaluations. For example, board skills assessment and board maturity assessment all serve a different purpose and can bring about significant improvements to the board’s performance if appropriately implemented.

If the board’s primary objective in undertaking a review of its performance is to focus on the current and required skills of the board, a dedicated skills analysis rather than a board evaluation would be the best way to identify the skills that currently exist on the board and consequently, highlight any skills gaps.

More recently, a new type of board review is being used, board maturity assessment. Maturity assessments involve benchmarking the board against what is regarded as good practice. Maturity models have become popular in several management disciplines. They involve establishing different levels of practice from “basic” to “advanced” over the key functions of an activity, based on contemporary views of best practice. In corporate governance, the key functions include the role of the board in relation to the CEO, risk practices, compliance, the conduct of board meetings, effective use of board committees, and so on. The governance activity of the organization in all these governance dimensions is then assessed by an external evaluator experienced in corporate governance against the maturity model to provide a current maturity rating. Directors’ views can be part of the process, with directors indicating what level of maturity is desirable for the organization given its circumstances. Looking at the gaps between the current level of governance practice and the appropriate level as agreed by directors shows where better practice may be implemented. This approach also has the benefit of indirectly educating directors as to what is good governance practice.

 

Conclusion

 

Performance evaluation is an increasingly important feature of boardrooms across the globe. These reviews have benefits for individual directors, boards and the organizations for which they work. Boards also need to recognize that the evaluation process is an effective team-building, ethics-shaping activity. Our observation is that boards often neglect the process of engagement when undertaking evaluations; unfortunately, boards that fail to engage their members are missing a major opportunity for developing a shared set of board norms and inculcating a positive board and organizational culture. In short, the process is as important as the content.

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Endnotes

1Spencer Stuart, 2017 Spencer Stuart US Board Index, www.spencerstuart.com/research-and-insight/ssbi-2017, accessed 7 March 2018.(go back)

2Spencer Stuart, 2017 Spencer Stuart UK Board Index, www.spencerstuart.com/research-and-insight/uk-board-index-2017, accessed 7 March 2018.(go back)

3 PwC, 2017 Annual Corporate Directors Survey, https://www.pwc.com/us/en/governance-insights-center/annual-corporate-directors-survey/assets/pwc-2017-annual-corporate–directors–survey.pdf, accessed 7 March 2018.(go back)

4Grant Thornton UK, 2017, The Board: creating and protecting value, https://www.grantthornton.co.uk/globalassets/1.-member-firms/united-kingdom/pdf/publication/board-effectiveness-report-2017.pdf, accessed 8 March 2018, p 10(go back)

5G Kiel, G Nicholson, J Tunny, and J Beck, 2018, Reviewing Your Board: A Guide to Board and Director Evaluation, Australian Institute of Company Directors, Sydney.(go back)

6National Association of Corporate Directors (NACD), 2011, Key Agreed Principles, https://www.nacdonline.org/files/PDF/KEY%20AGREED%20PRINCIPLES%202011.pdf, accessed 1 May 2018.(go back)

7Business Roundtable, 2016, Business Roundtable Principles of Corporate Governance, https://businessroundtable.org/sites/default/files/Principles-of-Corporate-Governance-2016.pdf, accessed 1 May 2018.(go back)

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*Professor Geoffrey Kiel is a Specialist Advisor and James Beck is Managing Director at Effective Governance Pty Ltd. This post is based on an Effective Governance publication by Prof. Kiel and Mr. Beck.

(1) Geoffrey KIEL, James BECK et Jacques GRISÉ (1) Geoffrey Kiel, Ph.D., premier vice-chancelier délégué et doyen de l’École d’administration, University of Notre Dame, Australie, et président de la société Effective Governance Pty Ltd, James Beck, directeur général, Effective Governance Pty Ltd, Jacques Grisé, Ph.D., F.Adm.A., collaborateur spécial du Collège des administrateurs de sociétés (CAS), Faculté des sciences de l’administration, Université Laval, Québec.

Le cycle de vie des sociétés régies par des classes d’actions diverses


Les études montrent que ces types d’arrangements ne sont pas immanquablement dommageables pour les actionnaires, comme nous laissent croire plusieurs groupes d’intérêt tels que le Conseil des investisseurs institutionnels et la firme de conseil Institutional Shareholder Services (« ISS »). Plusieurs militent en faveur d’une durée limitée pour de telles émissions d’actions.

Les récentes émissions d’actions à classes multiples des entreprises de haute technologie ne nous permettent pas, à ce stade-ci, de statuer sur les avantages à long terme pour les actionnaires.

Les auteurs, Martijn Cremers et coll., concluent qu’il est trop tôt pour se prononcer définitivement sur la question, et pour réglementer cette structure de capital. Voir à cet égard l’article suivant : Are Dual-Class Companies Harmful to Stockholders? A Preliminary Review of the Evidence.

Bonne lecture !

 

The Life-Cycle of Dual Class Firms

 

 

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In our paper, The Life-Cycle of Dual Class Firms, we consider the market valuation of dual class firms over their life cycle. Dual class financing is on the rise in recent years, particularly among high-tech firms, following Google’s seminal 2004 dual-class IPO structure. This financing choice leaves control of the firms in the hands of entrepreneurs, giving outside investors with inferior-vote shares no direct mechanism to influence the board or management. Rather, public investors buying inferior vote shares at the IPO are betting that granting the entrepreneurs such control allows them to better implement their unique vision.

However, as dual class firms mature and their vision is largely accomplished, entrepreneurs’ leadership may no longer be needed, and entrepreneurs may start self-serving behavior. Public investors’ resentment may then develop, accusing dual class firms’ controlling shareholders for wanting their money without any accountability. Such public pressure arguably recently led MSCI to issue a proposal to reduce the weight of inferior-vote shares in MSCI indices by multiplying the regular weight by the shares fractional voting power. Notably, the same MSCI also issued a report a few months ago stating that “[o]ur research shows that unequal voting stocks in aggregate outperformed the market over the period from November 2007 to August 2017, and that excluding them from market indexes would have reduced the indexes’ total returns by approximately 30 basis points per year over our sample period.” Obviously, confusion reigns over the merits of dual class financing.

Bebchuk and Kastiel (2017) (The Untenable Case for Perpetual Dual-Class Stock, Virginia Law Review) argue that any initial benefits of dual class structures decay with firm age, while the potential agency costs associated with dual class structures increase with time. Thus, Professors Bebchuk and Kastiel advocate sunset clauses to dual class financing. The sunset clauses would require the “non-interested” public shareholders of the firm to vote on whether or not to extend the dual class structure, some pre-determined number of years after the IPO. If the extension proposal is declined, firms would unify the low- and high-vote shares, i.e., convert all shares into a single class of shares with “one share one vote”.

In our paper, we empirically investigate the desirability of sunset provisions by examining the life-cycle of dual class firms. Using an extensive sample of all single-and dual-class firm IPOs in the U.S. during 1980-2015, and relying on comparing dual class firms to similar single class firms, we document several novel phenomena in the life cycle of dual class firms.

First, the difference in firm valuation between dual and single class firms strongly varies over the corporate life cycle. At the IPO, dual class firms tend to have higher valuations, as at the IPO year-end the market valuation of dual class firms is, on average, 11% higher than that of matched single class firms. This initial valuation premium of dual class firms dissipates in the years after the IPO, and on average it becomes insignificantly negative about six to nine years after the IPO. We also find that the difference between the voting and equity stakes of the controlling shareholders of dual class firms (the “wedge”) tends to increase as the firm ages. According to one of our estimates, the mean wedge increases from 16% one year after the IPO to 22% five years after the IPO, and to 26% nine years after the IPO. The widening of the wedge is typically associated with more severe valuation reducing agency problems—see Masulis et al. (2009) (Agency Costs and Dual-Class Companies, Journal of Finance). Bebchuk and Kastiel (2018) (The Perils of Small-Minority Controllers, forthcoming Georgetown Law Review) analyze the perils of the widening wedges and advocate informing the public and capping it.

Second, we document interesting differences between dual class firms with a valuation premium (relative to their matched single class firms) at the IPO and dual class firms with a valuation discount at the IPO. Dual class firms with a valuation premium at the end of their IPO year gradually tend to lose this premium, until their valuations become very similar to those of their single class counterparts about six to nine years after the IPO. In contrast, we find no evidence for a life cycle in the relative valuation of initially discounted dual class firms, as their valuation discount persists from the time of their IPO to when they are mature dual class firms as well. The behavior of the subsample of dual class firms with a valuation premium at the IPO suggests that for some firms the dual class structure does not harm valuations, at least in the first decade after the IPO. On the other hand, the behavior of the subsample of dual class firms with an initial valuation discount, which we find is highly persistent, suggests that a mandatory sunset provision may be useful for these firms.

Third, a natural solution to possible dual class inefficiency is a voluntary firm-initiated dual class share unification, in which all share classes are transformed into “one share one vote”. We find that only about 20% of dual class firms unify their shares within 9 years after the IPO. Furthermore, voluntary unifications become rare after six years following the IPO. Most of the mature dual class firms elect to retain a dual class structure, perhaps because unification is against the interests of their controlling shareholders. This implies that some inefficient dual class structures may persist.

Our findings suggest that some sort of a sunset provision might be useful, especially for firms that trade at a valuation discount. Further, regarding the set-in time of any sunset provision, our study suggests to wait at least six years after the IPO. Regulators should also be worried about some potential negative consequences of any sunset regulation. First, some founders may be more reluctant to issue publicly traded shares if their reign over the firm is likely to be more limited in time. Public may lose the opportunity to invest in some breakthrough firms. Second, controlling shareholders may intensify their private benefits extraction in the period before their extra power expires. Third, it is possible that shareholders may elect to abolish dual class structures even when they are (still) beneficial.

Finally, our paper also documents several other interesting life cycle phenomena of dual class firms such as their higher survival rates, similar stock returns and lower likelihoods of being taken over, compared to matched single class firms. We conclude that unequal vote structures are viable financing tools.

The complete paper is available for download here.

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*Martijn Cremers* is Bernard J. Hank Professor of Finance at University of Notre Dame Mendoza College of Business, and an ECGI research member; Beni Lauterbach is a Professor of Finance and the Raymond Ackerman Family Chair in Corporate Governance at Bar Ilan University Graduate School of Business Administration, and an ECGI research member; Anete Pajuste is an Associate Professor of Finance and Head of Accounting and Finance Department at the Stockholm School of Economics, and an ECGI research member. This post is based on their recent paper.

Related research from the Program on Corporate Governance includes The Untenable Case for Perpetual Dual-Class Stock (discussed on the Forum here) and The Perils of Small-Minority Controllers (discussed on the Forum here), both by Lucian Bebchuk and Kobi Kastiel.

Les six principes qui gouvernent la conduite des investisseurs — ISG


Aujourd’hui, je vous présente le point de vue de l’association Investor Stewardship Group (the “ISG”) Governance Principles, eu égard aux principes de gouvernance que celle-ci entend promouvoir.

Je reproduis ici les principaux éléments de l’article publié par Anne Meyer* et paru sur le forum du Harvard Law School, notamment les six principes qui gouvernent leur conduite.

1 — Les CA sont redevables envers les actionnaires ;

2 — Les actionnaires doivent avoir des droits de vote qui sont proportionnels à leurs intérêts économiques ;

3 — Les CA doivent être à l’écoute des actionnaires et être proactifs dans la compréhension de leurs perspectives ;

4 — Les CA doivent avoir une solide structure de leadership indépendante ;

5 — Les CA doivent adopter des structures de gouvernance qui mènent à des pratiques efficaces ;

6 — Les CA doivent adopter des structures de rémunération des dirigeants qui sont alignées sur la stratégie à long terme de l’entreprise.

Bonne lecture ! Vos commentaires sont les bienvenus.

 

The Investor Stewardship Group’s Governance Principles

 

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In this post, we provide an overview of the Investor Stewardship Group (the “ISG”) Governance Principles and steps for public companies to consider when evaluating how the principles may be incorporated into their own disclosure and engagement priorities. The ISG’s website, including a link to the ISG Governance Principles, is available here. In January 2017, the Investor Stewardship Group (the “ISG”), a collective of large U.S.-based and international institutional investors and asset managers, announced the launch of its Framework for U.S. Stewardship and Governance (the “Framework”). The measure is an unprecedented attempt to establish a set of elementary corporate governance principles for U.S. listed companies (the “ISG Governance Principles”) as well as parallel stewardship principles for U.S. institutional investors. The Framework’s effective date was January 1, 2018, in order to provide U.S. listed companies with time to adjust to the corporate governance principles prior to the 2018 proxy season.

As the 2018 proxy season gets into full swing, there is evidence that ISG members will be utilizing the Framework as a tool for evaluating the governance regimes at their portfolio companies, informing their engagement priorities, and potentially factoring compliance with the ISG Governance Principles into selected voting policies and decisions. In December, the ISG issued a press release “encouraging companies to articulate how their governance structures and practices align with the ISG’s Corporate Governance Principles and where and why they differ in approach”, leaving it to companies to determine how and where to disclose such alignment. And at least one large investor, State Street Global Advisors, has specifically highlighted that it will screen portfolio companies for compliance with the principles.

As a result, companies and their boards should continue to benchmark and understand how their specific governance practices relate to ISG Governance Principles and remain cognizant of this new regime as they prepare for engagement with investors and draft public disclosures.

 

Background

 

The ISG’s global reach and financial influence is significant; currently consisting of 50 investors representing over $22 trillion invested in the U.S. equity markets. The ISG’s signatories includes some of the largest and most influential institutional investors, including BlackRock, CalSTRS, State Street Global Advisors, TIAA Investments, T. Rowe Price, ValueAct Capital and Vanguard, among others. The Framework’s stewardship principles emphasize that these institutional investors have a vested interest and responsibility for the long-term economic success of their portfolio companies.

The ISG’s roll-out of the Framework characterized it as a “sustained initiative” and emphasized an evolutionary view of the ability of U.S. companies and investors to work together under the Framework.

Corporate governance practices at U.S. listed companies have historically been informed by multiple regulatory and rules-based regimes. Rules and regulations of the Securities and Exchange Commission, stock exchange listing requirements, state corporate codes, case law and federal legislation adopted in the wake of past financial market crises, have been the primary dictating standards. More recently, shareholders and other stakeholders have played a larger role in influencing corporate governance norms at U.S. listed companies through engagement and various forms of shareholder activism. In contrast, the ISG Governance Principles are based substantially on U.K., Continental European and other non-U.S. frameworks that establish principles-based corporate governance standards and tend to rely on “comply-or-explain” accountability. [1] Advocates for this type of principles-based approach stress the flexibility that it gives for companies to adopt a tailored response to important tenets such as boardroom transparency, as opposed to responding more narrowly to prescriptive rules. As institutional investors continue to focus more attention on environmental and social matters, including related governance concerns, the Framework’s principles-based approach will be a tool, for both institutions and companies, to promote mutually agreeable objectives, particularly given the lack of rulemaking or legislation mandating more specific disclosure on trending topics such as board diversity and environmental concerns.

 

The ISG Governance Principles

 

The six ISG Governance Principles are broad principles that will not look new to those who have been following key issues in corporate governance over the past several years. Indeed, they were designed to reflect the common corporate governance principles that are already embedded in member institutions’ proxy voting and engagement guidelines. The principles emphasize the importance of boardroom effectiveness and oversight, alignment of executive compensation with long-term financial results, and board accountability demonstrated in part through the adoption of governance best practices, including a one-share one-vote capital structure and independent board leadership.

Principle 1: Boards are accountable to shareholders

This principle encompasses the annual election of directors, majority voting, proxy access and more robust disclosure surrounding board practices and corporate governance. Companies are also asked to explain how any anti-takeover measures are in the best long-term interest of the company.

Interestingly, BlackRock’s CEO Larry Fink recently published a letter to the CEOs at the world’s largest public companies in which he argued explicitly that boards are accountable to other stakeholders, such as employees and customers, in addition to shareholders.

Principle 2: Shareholders should be entitled to voting rights in proportion to their economic interest

This principle sets a base line of one-share one-vote and encourages companies with existing multi-class share structures to review and consider phasing out control shares.

In 2017, this issue became national news when Snap Inc. filed for an IPO of non-voting shares. Many large investors were vehemently opposed and at the urging of the Council for Institutional Investors and other investor advocates, the stock index provider FTSE Russell refused to include these shares in its indices.

Principle 3: Boards should be responsive to shareholders and be proactive in order to understand their perspectives

Under this principle, companies are expected to implement shareholder proposals that receive “significant” support or explain why they have not done so. Independent directors are encouraged to participate in engagement on matters that are meaningful to investors, and directors may be held accountable with “against” votes in instances where investors do not feel that their concerns have been adequately addressed.

Principle 4: Boards should have a strong, independent leadership structure

There are two common independent leadership structures at U.S. companies—an independent chairperson and an independent lead director (where the role of Chairman and CEO are combined)—and the principles acknowledge that signatory investors have differing opinions on whether they provide adequate independent oversight.

The overarching position under the principles is that the role of the independent board leader should be “clearly defined and sufficiently robust to ensure effective and constructive leadership.”

Principle 5: Boards should adopt structures and practices that enhance their effectiveness

This principle encompasses an array of board structure and effectiveness issues, including: strong board composition and board diversity; board and committee responsibilities; director attentiveness, preparedness and time commitments; and board refreshment.

Board diversity, in particular gender diversity, has emerged as a high priority for most of the largest institutional investors. There has also been a focus on screening for long-tenured directors and directors that are over-boarded or have poor attendance records as a proxy for identifying directors that may not be adequately engaged or independent.

Principle 6: Boards should develop management incentive structures that are aligned with the long-term strategy of the company

This principle emphasizes that the board, in particular the compensation committee, is responsible for ensuring that drivers and performance goals that underpin the company’s long-term strategy are adequately reflected in a company’s management incentive structure.

Steps to Consider

As noted, the ISG Governance Principles are intended to provide a framework of broad, high-level principles. The individual investors that comprise the ISG have their own voting guidelines and engagement priorities that are tailored to their own investment philosophy and strategy. Even on current hot button issues, such as board diversity, investors have differing views and companies should consider the practices they adopt depending upon their specific facts and circumstances. There are, however, general steps that we recommend companies take to address the growing influence of the Framework.

These include:

Understand how the company’s corporate governance structure and practices relate to the six ISG Governance Principles.

Review the company’s public disclosure regarding corporate governance structure and practices; consider enhancements to be responsive to the ISG’s request that companies disclose how their governance aligns or differs from the ISG Governance Principles.

As with other corporate governance benchmarking exercises, companies should be particularly cognizant of how and why their practices may differ from the ISG Governance Principles and whether these differences are adequately explained in public disclosures. As investors screen their portfolio companies’ governance practices, they will often consider valid explanations, but in the absence of effective disclosure the company may be unnecessarily penalized.

Management and the board should be informed and prepared to respond to questions about the company’s alignment with the ISG Governance Principles during shareholder engagements. Companies can also consider proactively addressing the issue in written materials or prepared remarks during investor presentations.

In preparing for shareholder engagements with ISG signatories, understand how and if they are explicitly incorporating the ISG Governance Principles into engagement and voting priorities and continue to screen their individual voting and engagement policies.

Companies should determine whether, and how, they wish to address and incorporate the ISG Governance Principles based upon their own specific governance profile, disclosure regime and approach to shareholder engagement.

Endnotes

1 See in particular the UK Investor Stewardship Code, on which the US ISG Principles are largely based. The UK Code “sets out a number of areas of good practice to which … institutional investors should aspire.” Available here.

*Anne Meyer is Senior Managing Director, Don Cassidy is Executive Vice President, and Rajeev Kumar is Senior Managing Director at Georgeson LLC. This post is based their recent Georgeson publication. Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst.