Étiquette : Corporate governance

Proposition pour un changement significatif dans la gouvernance des sociétés | Richard Leblanc


Voici un article de Richard Leblanc, avocat, expert-conseil en gouvernance et professeur-chercheur, publié récemment dans le HuffPost Business Canada, qui alimentera les discussions portant sur les changements requis en gouvernance au Canada.

L’auteur présente un changement réglementaire qui permettrait à des actionnaires d’avoir accès à la circulaire d’information pour fins de votation aux assemblées annuelles. Présentement, les actionnaires n’ont pas la possibilité de faire inscrire des candidatures d’administrateurs dans la circulaire de la direction; cela est du ressort du conseil d’administration qui fait des propositions de candidatures basées sur les recommandations d’un comité de gouvernance formé de membres du C.A.

Cette façon de fonctionner, selon Richard Leblanc, a pour résultat de bloquer la nomination de nouveaux administrateurs issus de la base actionnariale, ouvrant ainsi la voie à de grandes batailles d’opinions lorsque les actionnaires-investisseurs activistes exigent des changements à la gouvernance des sociétés.

La proposition de Richard Leblanc permettrait l’inclusion de candidatures d’actionnaires dans le prospectus de sollicitation à certaines conditions :

(1)   L’actionnaire ou le groupe d’actionnaires doit posséder un minimum d’actions dans l’entreprise (disons environ 3 %);

(2)  Les actions doivent avoir été acquises depuis une certaine période de temps (disons trois ans);

(3)  Les actionnaires peuvent soumettre annuellement des candidatures d’administrateurs jusqu’à un maximum de 25 % des administrateurs proposés dans la circulaire (dans le cas d’une élection non contestée, c’est-à-dire dans le cas où un changement de contrôle n’est pas envisagé).

L’auteur est très conscient que le management des entreprises est susceptible de résister à un tel changement car il ne veut pas de surprises (le management veut conserver son pouvoir d’influence dans le processus …). De plus, le C.A. veut conserver ses prérogatives de choisir ses pairs !

Que pensez-vous de cette approche ? En quoi celle-ci peut-elle améliorer la gouvernance ? Les actionnaires minoritaires auront-ils un rôle significativement plus crucial à jouer ? Est-ce le bon moyen pour susciter une plus grande participation des actionnaires ?

L’argumentation pour les changements proposés est développée dans l’article de Richard Leblanc présenté ci-dessous.

Bonne lecture ! Je souhaite avoir votre opinion sur cette approche, à première vue, favorable aux actionnaires.

The Corporate Governance Game Changer That Needs to Come to Canada

I teach my students and counsel board clients that shareholders elect directors; directors appoint managers; directors are accountable to shareholders; and managers are accountable to directors. This is largely theoretical.

Here is the reality: Shareholders: (i) cannot select directors; (ii) cannot communicate with directors; and (iii) cannot remove directors, by law, without great cost and difficulty. Therefore, directors are largely homogenous groups who are selected by themselves, or, worse yet, management.

Addressing the foregoing is the one piece of reform that will change corporate governance and performance for the better. The rest is, as they say, window dressing.

I have encouraged institutional investors and regulators to consider advocating what is known as « proxy access. » This means that a shareholder, or a group of shareholders, who (i) own a modest, minimum threshold of shares (say 3 per cent, although the percentage could be higher or lower, or floating, depending on the size of the company); (ii) for a period of time (say three years, although the time period could be shorter); (iii) can select up to 25 per cent of proposed directors, of the total board size, in an uncontested election (meaning a change of control is not desired by the shareholders) in a given year.P1030704

When shareholders « select » their nominees for the board, these directors would be alongside, in the management proxy circular, in alphabetical order, with profile parity (short bios and areas of competency), the management slate of directors. Management would be obliged to include shareholder-nominated directors, at a cost to the company, not shareholders, if the above ownership and time requirements are met. There would be no costly proxy battles or dissident slates. There would be no undue influence by management to marginalize shareholder-nominated directors within or outside of the proxy. Rules of the road will be set.

Then, shareholders get to decide, as they should, on the best directors from among the management-proposed and the shareholder-proposed directors. Ideally, the selection should be as blind or neutral as possible. The focus should be solely on the qualifications, competencies and track record of the proposed directors for election at that company. May the best directors win, as should be the case in any election, versus a slate of management-nominated directors, which is the case now. Under this new regime, there will be winners and losers. The practical effect may be that legacy or unqualified directors may withdraw from this scrutiny, as Canadian Pacific directors did at the time of shareholder Pershing Square’s involvement. This is not an undesired outcome and creates a market for the most qualified directors to rise to the top.

When proxy access was proposed by the Securities and Exchange Commission (SEC) in the U.S., management and lawyers who work for management used shareholder money to fight proxy access proposed under Dodd Frank, and won in the U.S. Court of Appeals, on the basis of an inadequate cost benefit analysis. Canadian investors and regulators should learn from this experience. Proxy access now is left to companies on a one-off basis, rather than being system wide. Meaningful proxy access has only occurred at a small number of companies as a result. The SEC should revisit proxy access. Industry Canada is currently looking at implementing proxy access at the 5 per cent level for all federally incorporated companies.

Opponents to proxy access argue that shareholders selecting directors will propose special purpose directors or directors who lack the background or experience. The evidence is the opposite. Shareholders are better at proposing directors who have the shareholder track record and industry expertise that the current board lacks. Recall Canadian Pacific, where not a single director possessed rail experience prior to shareholder involvement. There are other examples at Hess, Office Depot, Darden, Bob Evans, Abercrombie and Occidental Petroleum (see Field Experience Helps Win Board Seats), where shareholder-advocated directors were either better than incumbent ones, or caused the renewal of management-advocated ones. A director qualification dispute is welcome and will focus the lens on competencies of directors, including industry expertise, which is a good thing. Ann C. Mule and Charles Elson report in « Directors and Boards » that « One study concludes that more powerful CEOs tend to avoid independent expert directors. »

Herein lies the real resistance to proxy access: Management does not want it, and, the record shows, will fight vigorously to resist it. Management-retained advocates hired to oppose proxy access should disclose whom their client is. Directors however, when deciding to support proxy access, or not, should not be beholden to management, nor their advisors, nor act out of self-interest in entrenching themselves, but should be guided only by the best interests of the company, including its shareholders.

There is evidence that the market values strong proxy access positively, leading to an increase in shareholder wealth. If a director possesses the independence of mind, and the competency and skills to serve on the board, they should welcome proxy access. It will mean that the under performing directors on the board will be ferreted out, and current directors can avoid this uncomfortable task. Shareholders and the new competitive market for corporate directors will do it for them.

Suggestions d’ordre pratique pour l’adoption de comportements appropriés de la part des administrateurs


Doug Raymond, associé de la firme Drinker Biddle & Reath LLP et chroniqueur pour la revue Directors & Boards, nous présente une bonne revue des comportements à adopter comme membre d’un conseil d’administration.

Même si l’article revient sur des suggestions que vous connaissez bien, j’ai pensé vous faire partager les avis d’ordre pratique de l’auteur.

Bonne lecture !

Practical Dos and Don’ts for Directors

 

It isn’t exactly a “Top 10 list,” but I thought a listing of practical advice might be welcome to readers. So, recognizing that no list is perfect or exhaustive:

  1. Understand the company and its business—Directors should take the time to learn about the company’s business and the company’s industry, including its significant competitors.
  2. Do your homework—Directors should read and understand the board packet before the meeting; call if you have questions about the materials. The meeting should be used to discuss and make decisions rather than to educate directors who did not do their homework.IMG_00002057
  3. Keep the core strategy in mind—Once a strategic plan is formulated, further decisions should be evaluated by referring back to that plan. If the plan is broken or needs to be updated, be willing to suggest changing it.
  4. Directors plan and guide; management does—Directors should not confuse formulating and overseeing strategy with implementing it, which is done by management. Don’t overly defer to management in strategic matters in the planning stages, but don’t micromanage the tactics.
  5. Be constructive—Each director should be engaged at each meeting and participate in discussions without monopolizing them. Each member of the board has been chosen for his or her skills and potential to add value; for this to happen each director must be treated with courtesy, and board discussions must be open, thorough and deliberative.
  6. During board meetings, leave your iPhone in your briefcase—The board’s time is limited; don’t try to multitask during board meetings. Instead, directors should remain focused on the matters under discussion in order to appropriately discharge their duties.
  7. Don’t disappear after meetings—The job of being a director doesn’t end with the meeting. Feel free to contact your fellow directors, and, within reason, management, to stay involved with the company between meetings.
  8. Be social—Don’t skip board and management dinners and other social functions; these events help to form board culture and help the board function more effectively, particularly during hard times.
  9. Avoid conflicts of interest—Company business should never be influenced, or appear to be influenced, by personal interests; directors should avoid any implication of creating a conflict of interest, taking a company opportunity, or improperly using company knowledge or assets.
  10. No surprises—Directors should be forthcoming; if any circumstance might appear to compromise a board member or create a conflict, directors should discuss the circumstances with the board; often a mechanism to resolve or cleanse the situation will be available. Directors should also share whatever they know about issues being considered by the board.
  11. Follow the ‘elevator rule’—Much of the information that directors receive is non-public and belongs to the company or its business partners. Directors must carefully protect this information, discussing it only with people who need to know it and avoiding inappropriate discussions, including on mobile phones, and in public places such as airplanes, restaurants and elevators.
  12. No short-term trading—Directors should be long-term investors, not short-term traders. While directors are often required to own stock in the companies they serve, these holdings should be passive, absent extraordinary circumstances.
  13. Gifts—Gifts are a normal part of human interaction; however, no gift of meaningful value should ever be accepted or provided by a director, and no gift of any nature should be accepted if it might obligate, or appear to obligate, the company or any director.
  14. You are not the press secretary—Outside the boardroom, do not speak on behalf of the company unless specifically authorized to do so; directors should avoid making statements that might be perceived as company statements, even if not so intended.

The points discussed above are practical points that can contribute to being a more effective director. Of course, good directors must also have a working knowledge of the relevant legal rules, including applicable laws and company policies; standards for fiduciary duties, including those of care and loyalty; and insider trading rules, but regular readers of Directors & Boards already know that.

Guide des meilleures pratiques pour les C.A. concernant (1) les fusions et acquisitions, (2) les crises d’entreprise et (3) les difficultés financières


Voici un excellent guide, produit par Deloitte, qui porte sur les bons gestes à poser par les conseils d’administration lorsqu’ils sont aux prises avec les problématiques liées aux fusions et acquisitions, aux crises à gérer et aux problèmes financiers.

Afin de vous donner une idée du contenu du document, voici un aperçu des thèmes abordés.

  1. Les paramètres de la gouvernance évoluent
  2. Fusions et acquisitions : une bonne gouvernance à toutes les étapes du processus
  3. Gestion de crise : le manque de préparation représente clairement un risque
  4. Difficultés financières : priorité aux risques
  5. Le conseil d’administration peut relever le défi
  6. Personnes-ressources

Bonne lecture !

Un guide des meilleures pratiques pour les conseils d’administration qui porte sur les fusions et acquisitions, les crises d’entreprise et les difficultés financières

Le conseil d’administration vient d’apprendre que l’entreprise pourrait être à court de liquidités d’ici un an. Que devez-vous faire? Après une acquisition d’entreprise, le conseil d’administration est poursuivi par les actionnaires, qui l’accusent de ne pas avoir supervisé adéquatement la décision concernant le prix d’achat. Comment prévenir une telle situation? Votre entreprise traverse une crise depuis que la direction a été accusée d’avoir fourni de faux renseignements à des auditeurs externes. Quand faut-il demander conseil à des experts indépendants?

On a fait grand cas des pressions subies par les conseils d’administration dans les mois éprouvants qui ont suivi la crise financière mondiale. De nombreux facteurs ont été mis en cause, notamment la déréglementation du secteur financier, les procédures d’audit inadéquates, la confiance excessive des investisseurs, les pratiques de prêt viciées et la cupidité des entreprises. Les conseils d’administration n’ont pas échappé à cet examen, et les observateurs se demandent si une surveillance plus efficace de la part des conseils d’administration des institutions financières n’aurait pas permis de repérer et de résoudre certains des problèmes qui ont presque anéanti l’économie mondiale. Les conseils d’administration comprenaient-ils assez de membres possédant des connaissances suffisantes et appropriées? Les administrateurs ont-ils posé les bonnes questions? Ont-ils pris les bonnes mesures? Avaient-ils l’information la plus récente sur les nouveaux enjeux? Étaient-ils prêts à contester la direction? Naturellement, avec le recul, la crise financière est maintenant vue comme une tempête causée par une multitude de facteurs dont aucun n’est entièrement à blâmer, et les instances de réglementation et les entreprises appliquent encore les mesures correctives qui s’imposent. Les questions que cette crise a soulevées continuent cependant de préoccuper les conseils d’administration en général. En effet, à mesure que la crise financière devient chose du passé, les conseils d’administration s’interrogent sur d’autres questions et sur un éventail de risques et de responsabilités possibles.

Les cinq dernières années ont été le théâtre de grands bouleversements dans l’arène mondiale de la réglementation. Dans bien des secteurs, la quantité et la complexité des règles ont augmenté, de même que la rigueur avec laquelle elles sont appliquées; les entreprises ont du mal à suivre la cadence, car elles composent encore avec les effets de l’après-crise et cherchent le plus possible à limiter les risques. De leur côté, les conseils d’administration tentent également de s’adapter, malgré la transformation des attentes des parties prenantes, des organismes de réglementation et du public.

Quelles ont été les conséquences de ces événements pour l’administrateur moyen? Des pressions venant de tous les fronts. Par exemple, le rôle de l’administrateur, surtout de celui qui cumule plusieurs postes, peut être si astreignant qu’il devient ingérable et présente de plus en plus de risques du point de vue de la responsabilité. La quantité de connaissances réglementaires et spécialisées nécessaires pour siéger efficacement à un conseil d’administration va en augmentant, et les administrateurs sont souvent dépassés par l’étendue croissante de leurs tâches.

Les conseils d’administration se trouvent donc actuellement dans une position très difficile. Étant donné leur vaste mandat, ils doivent se tenir à l’affût d’une variété de plus en plus importante de renseignements, adopter de nouvelles stratégies de réponse en vertu de leur mandat et déterminer dans quelles circonstances ils doivent consulter des experts indépendants.

Le présent document est conçu pour leur venir en aide. Il examine trois questions cruciales auxquelles les conseils d’administration accordent rarement leur attention, c’est-à-dire les fusions et acquisitions, la gestion de crise et les difficultés financières. Il présente les principaux risques que les conseils d’administration devraient prendre en considération dans chaque domaine, suggère des mesures d’atténuation de ces risques et décrit les avantages d’une meilleure surveillance de leur part ainsi que les dangers d’un laxisme prolongé.

 

Bulletin du Collège des administrateurs de sociétés (CAS) | Octobre 2014


Vous trouverez, ci-dessous, le Bulletin du Collège des administrateurs de sociétés (CAS) du mois d’octobre 2014.

Le programme de certification universitaire en gouvernance de sociétés est le seul programme universitaire offert au Québec. Il s’adresse aux administrateurs siégeant à un conseil d’administration et disposant d’une expérience pertinente.

Les administrateurs de sociétés certifiés (ASC) sont regroupés dans la Banque des ASC, un outil de recherche en ligne mis au point par le Collège, afin de faciliter le recrutement d’administrateurs sur les conseils d’administration.

Bulletin du Collège des administrateurs de sociétés (CAS) | Octobre 2014  

 

 CÉRÉMONIE OFFICIELLE DE REMISE DES DIPLÔMES

 

Le Collège des administrateurs de sociétés (CAS) a honoré les 78 nouveaux finissants du programme de certification universitaire en gouvernance de sociétés à l’occasion de la 9e cérémonie officielle de remise des diplômes. Présenté le jeudi 11 septembre 2014 à l’hôtel Château Laurier de Québec, l’événement a réuni les nouveaux administrateurs de sociétés certifiés (ASC), en plus d’une cinquantaine de partenaires et collaborateurs.

Au total, près de 150 invités s’étaient donné rendez-vous afin d’applaudir les diplômés de la promotion 2014 et célébrer la plus importante communauté d’administrateurs formés en gouvernance de sociétés au Québec qui se chiffre maintenant à 664 ASC (consultez le www.BanqueAdministrateurs.com pour leurs profils).

Pour tous les détails et des photos de l’événement [+]

DÉVOILEMENT DE LA 3E SÉRIE DE CAPSULES D’EXPERTS EN GOUVERNANCE

 

Le CAS est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance.

 

Une capsule sera dévoilée chaque semaine par bulletin électronique. À surveiller !

 

 

Cette semaine : La présidence du CA, par Michel Clair [+]

 DEUX NOUVEAUX COURS SPÉCIALISÉS EN GOUVERNANCE 

 

Il nous fait plaisir de vous informer que deux nouveaux cours spécialisés en gouvernance sont à l’horaire dès cet automne.

GOUVERNANCE DES OBNL : Cette formation s’adresse spécifiquement aux directeurs généraux, présidents et administrateurs des organismes à but non lucratif (OBNL) soucieux d’intégrer de nouvelles pratiques de gouvernance adaptées au contexte des OBNL afin d’assurer la pérennité et la performance de leur organisation.

Ce cours aura lieu à Québec, les 24 et 25 octobre prochains. Le coût d’inscription est normalement de 1 950 $ pour cette formation de deux jours. Toutefois, grâce à la participation financière de la SAQ et des partenaires du Collège, le tarif est réduit à 500 $ par participant. Détails et inscription [+]

GOUVERNANCE ET LEADERSHIP À LA PRÉSIDENCE : Cette formation est destinée aux administrateurs d’expérience exerçant la fonction de présidence du conseil d’administration, d’un des comités du conseil ou du comité consultatif d’une PME. Basé sur des études de cas, des simulations et des discussions en petits groupes, cette formation est principalement orientée sur la maîtrise des habilités relationnelles et de leadership qu’exige la fonction de présidence d’un conseil.

Ce cours se tiendra à Québec, les 13 et 14 novembre prochains et le coût d’inscription est de 1950 $ par participant. Détails et inscription [+]

Les formations spécialisées sont offertes en alternance à Québec et Montréal et sont limitées à des groupes de 20 participants. Il est aussi possible de s’inscrire à l’une ou l’autre de ces formations qui seront présentées à Montréal dès février 2015. Consulter le calendrier complet [+]

Les formations du collège et les événements en gouvernance auxquels le CAS est associé

 

Gouvernance des OBNL | 24 et 25 octobre 2014, à Québec | 13 et 14 mars 2015, à Montréal

Gouvernance des PME | 5 et 6 novembre 2014, à Québec | 24 et 25 février 2015, à Montréal

Gouvernance et leadership à la présidence | 13 et 14 novembre 2014, à Québec | 28 et 29 mai 2015, à Montréal

Certification – Module 1 : Les rôles et responsabilités des administrateurs | 12, 13 et 14 février 2015, à Québec, et 26, 27 et 28 mars 2015, à Montréal

Petit-déjeuner conférence de l’IAS section du Québec sur « Les défis technologiques : cybersécurités, nouvelles technologies et données massives » | 15 octobre 2014, à Montréal

Conférence Femmes Leaders par Les Affaires | 15 octobre 2014, à Québec

Journée annuelle des administrateurs de l’Institut français des administrateurs sur le thème «gouvernance et compétitivité» | 21 octobre 2014, à Paris

Programme de l’ecoDa « New Governance Challenges for Board Members in Europe » | 21 et 22 octobre 2014, à Bruxelles

7e édition du Colloque régional Entreprendre Façon Femme | 22 octobre 2014, à Québec

Petit-déjeuner conférence du Cercle des ASC sur « Votre CV d’administrateur : comment mettre en valeur votre expertise? » | 23 octobre 2014, à Québec | 30 octobre 2014, à Montréal

NOMINATIONS ASC

 

Catherine Claveau, ASC | Barreau du Québec et Conseil du Barreau du Québec

André Boisclair, ASC | Fondation du cancer du sein du Québec

Josée De La Durantaye, ASC | P. Baillargeon ltée.

Éric Fournier, ASC | Verseau International inc.

Alain Bolduc, ASC | Capsana

Michel Lamontagne, ASC | Coffrage Saulnier

Martin Cyrenne, ASC | Cercle des administrateurs de sociétés certifiés (ASC)

Annie Tremblay, ASC | Cercle des administrateurs de sociétés certifiés (ASC)

Paulette Legault, ASC | Cercle des administrateurs de sociétés certifiés (ASC), Ordre des opticiens d’ordonnances du Québec et Chambre de la sécurité financière du Québec

Clarence Turgeon, ASC | Conseil du Patronat du Québec

Lucie Lebeuf, ASC | Ville de Laval

Éric Lavoie, ASC | Institut universitaire de cardiologie et de pneumologie de Québec

François Désy, ASC | Garde Côtière Auxiliaire Canadienne (Québec), Désy Meunier Construction Rénovation inc et Caisse populaire Desjardins de Baie-Comeau

José Mathieu, ASC | VCI Composites et NSE-Automatech

Boîte à outils pour administrateurs

 

Nouvelle référence mensuelle en gouvernance : Dossier spécial « Former un CA : enjeux et obligations » du Journal Les Affaires

La capsule d’expert du mois – NOUVEAUTÉ : La présidence du CA, par Michel Clair

Top 5 des billets les plus consultés au mois de septembre du blogue Gouvernance | Jacques Grisé.

Portrait d’Adm.A. sur Mme Lisane Dostie, ASC et formatrice au CAS

Bonne lecture !

____________________________________________

Collège des administrateurs de sociétés (CAS)

Faculté des sciences de l’administration Pavillon Palasis-Prince

2325, rue de la Terrasse, Université Laval Québec (Québec) G1V 0A6

418 656-2630; 418 656-2624

info@cas.ulaval.ca

 

Deux grandes approches réglementaires à la diversité sur les C.A. : (1) les quotas ou les mesures ciblées et (2) l’obligation de divulgation


Aujourd’hui, j’aimerais partager avec vous une étude empirique vraiment très intéressante portant sur deux approches réglementaires à la diversité sur les conseils d’administration:

(1) les quotas ou les mesures ciblées et

(2) l’obligation de divulgation.

Aaron A. Dhir,  professeur associé de droit à la Osgoode Hall Law School de Toronto, présente plusieurs réflexions fort pertinentes sur l’expérience norvégienne d’imposition de quotas pour accroître le nombre de femmes sur les conseils d’administration.

Plusieurs règlementations se sont inspirées de cette approche pour prendre en compte cette variable fondamentale. La conclusion de l’auteur au sujet de cette première approche réglementaire est résumée de la façon suivante :

My study of the Norwegian quota model demonstrates the important role diversity can play in enhancing the quality of corporate governance, while also revealing the challenges diversity mandates pose.

En ce qui concerne l’approche basée sur l’obligation de divulgation des mesures de diversité adoptée par la Securities and Exchange Commission (SEC), il appert que la règle ne donne aucune définition de la diversité et que les entreprises peuvent l’interpréter comme bon leur semble.

L’étude montre cependant que les organisations ont tendance à définir la diversité de manière très large, notamment en faisant référence à l’expérience antérieure pertinente des administrateurs (qui n’a rien à voir avec les caractéristiques sociodémographiques telles que le genre).

L’auteur avance également que cette réglementation a donné lieu à beaucoup d’efforts de définition de la diversité :

My study shows that “diversity” carries multiple connotations for these firms. My most salient finding, however, is that when interpreting this concept in the absence of regulatory guidance, the dominant corporate discourse is experiential rather than identity-based. Firms most frequently define diversity with reference to a director’s prior experience or other non-identity-based factors rather than his or her socio-demographic characteristics. The data provide a unique window into the potential meanings of “diversity” in the corporate governance setting, as well as the limits of a strategy that permits corporations to give the term their own definition.

L’auteur nous incite à lire les chapitres 1, 4 et 6 qui ont été publiés sur le réseau SSRN (Social Science Research Network). Le chapitre 1 présente l’objet de l’étude, la méthodologie, les deux variables étudiées, les résultats sommaires et les perspectives futures eu égard au débat sur la diversité.

Bonne lecture !

Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity

The lack of gender parity in the governance of business corporations has ignited a heated global debate, leading policymakers to wrestle with difficult questions that lie at the intersection of market activity and social identity politics. In my new book, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity (Cambridge University Press, forthcoming in 2015), I draw on semi-structured interviews with corporate board directors in Norway and documentary content analysis of corporate securities filings in the United States to investigate empirically two distinct regulatory models designed to address diversity in the boardroom—quotas and disclosure.IMG_00001049

In Chapter 4, recently made available on SSRN, I explore the quota-based approach to achieving gender balance in corporate boardrooms. Quotas and related target-based measures for publicly traded firms are currently in place in a number of countries, including Iceland, Belgium, France, Italy, and Norway and are at different stages of consideration in other jurisdictions, including Canada, the European Union, and Germany.

I present findings from my qualitative, interview-based study of Norwegian corporate directors in order to provide empirical elucidation of how quota-based regimes operate in practice. The identity narratives of Norwegian board members offer particularly rich sources of insight, given that Norway was the first jurisdiction to pursue the quota path and thus has the most mature quota regime. While highly contentious when adopted, the Norwegian quota project unquestionably set the stage for subsequent legislative developments in other countries.

I delve into the lived experiences of Norwegian directors who gained appointments as a result of Norway’s quota law, as well as those who held appointments before the law was enacted. Several questions frame my investigation. How have these individuals subjectively experienced, and made sense of, this intrusive form of regulation? How does legally required gender diversity affect their economic and institutional lives? And how has it shaped boardroom cultural dynamics and decision making, as well as the overall governance fabric of the board?

The forced repopulation of boards along gender lines has disturbed the traditional order of corporate governance systems, dislocating established hierarchies of power in key market-based institutions. Norway represents the paradigmatic case of this disturbance and has set in motion a wave of corporate governance reform unlike any other. As such, it constitutes a fascinating and appropriate case study through which to consider the implications of quota regimes. My study of the Norwegian quota model demonstrates the important role diversity can play in enhancing the quality of corporate governance, while also revealing the challenges diversity mandates pose.

In Chapter 6, also recently made available on SSRN, I explore the disclosure-based approach to addressing diversity in corporate governance. In 2009, the United States Securities and Exchange Commission adopted a rule requiring publicly traded firms to report on whether they consider diversity in identifying director nominees and, if so, how. The rule also requires firms that have adopted a diversity policy to describe how they implement the policy and assess its effectiveness. The rule does not define “diversity,” however, leaving it to corporations to give this term meaning.

I present findings from my mixed-methods content analysis of corporate disclosures submitted during the first four years of the rule in order to provide empirical elucidation of how the rule operates in practice. The research sample consists of a hand-collected dataset of the 2010–2013 definitive proxy statements of S&P 100 firms. I am interested in learning how these firms, in responding to the rule, construct the concept of diversity through their public discourse. What does diversity, viewed through the prism of legal regulation, mean to market participants? How do they interpret and understand this socio-political idea in the absence of a regulatory definition? How is diversity constituted and discursively performed?

The SEC’s disclosure rule has caused US corporations to establish a vocabulary of diversity. My study shows that “diversity” carries multiple connotations for these firms. My most salient finding, however, is that when interpreting this concept in the absence of regulatory guidance, the dominant corporate discourse is experiential rather than identity-based. Firms most frequently define diversity with reference to a director’s prior experience or other nonidentity-based factors rather than his or her socio-demographic characteristics. The data provide a unique window into the potential meanings of “diversity” in the corporate governance setting, as well as the limits of a strategy that permits corporations to give the term their own definition.

Challenging Boardroom Homogeneity aims to deepen ongoing policy conversations and offer new insights into the role law can play in reshaping the gendered dynamics of corporate governance cultures. The full version of Chapter 1 is available for download here.

Notions de gouvernance 101 | Que font les administrateurs ?


Vous trouverez ci-dessous un article de Lucy P. Marcus*, experte en gouvernance, qui présente, de manière vulgarisée, en quoi consiste le travail des administrateurs de sociétés aujourd’hui.

On y trouvera une bonne définition des responsabilités des administrateurs ainsi qu’une métaphore intéressante qui montre comment le travail des administrateurs a considérablement changé au cours des vingt dernières années.

L’auteure distingue entre les activités qui sont de nature « grounding » (connaissances de bases de la performance et des obligations de conformité) et celles, toujours plus importantes, qui sont de l’ordre du « stargazing » (la vision à long terme et la stratégie).

Je vous invite à lire ce bref article qui tient lieu de notions de gouvernance 101 !

Bonne lecture !

Boardroom 101: What, exactly, do directors do?

 

The boardroom is changing at a fast pace. The agenda items we discuss, the expectations of board directors and the responsibility we hold are all areas that are going through a much needed, and, in my experience, a very welcome, transition.

When my son was around 5 years old, I was preparing for a board meeting and he asked what that was and what I was going to do there.

Lucy P. Marcus
Lucy P. Marcus*, experte en gouvernance

That’s a question many adults have, too. What, exactly, is a board and what does a board director do?

Searching for an explanation, I finally went with this: « You know about King Arthur and the Round Table? Well, like King Arthur and the Round Table, a group of wise people gather together every month or so. We sit around a table and talk about what the people we are helping have been doing and what they are planning to do next. We try to make sure they are acting honourably and following the law and doing what is best for everyone. »

He seemed fairly satisfied with that answer, but it got me thinking — was the metaphor apt? Is that really what directors are doing in practice?

It does seem sometimes like the board is an arcane and distant body. A caricature would be one where the doors open with a whoosh to reveal suited people sitting around a table in an oak panelled room, having confidential discussions in hushed tones, drawing on deep expertise and thinking big thoughts. And of course, those discussions would be spoken in a special « thee and thou » language.

There are parts of that caricature which do ring true. We board directors generally do sit around a table, and I’d like to think we generally have robust discussions. Strangely, we do often speak in formal ways, referring to “Mr Chairman” and the like. As for the “deep expertise” and “big thoughts” part, I’m not sure we are always well equipped with enough information to make decisions.

Changes afoot

The boardroom is changing at a fast pace. The agenda items we discuss, the expectations of board directors and the responsibility we hold are all areas that are going through a much needed, and, in my experience, a very welcome, transition.

Board agendas used to be rigid and mostly focused on traditional oversight topics such as compensation and compliance. That mandate has grown to include a great deal more.

To better understand the changes and how they affect our job as directors, it is useful to think of the tasks and the agenda items of the board as being broadly divided into a balance of what I call “grounding” and “stargazing”.

The “grounding” side consists of what you might think of as the tick-boxing items: questions around the structure and performance of the organisation in the “here and now”. Is it behaving legally and responsibly? Is it following the rules and regulations? Are its financial accounts in good order? Does it meet to the expectations not just of its shareholders but also of other stakeholders in the broader ecosystem in which it operates?

The “stargazing” side is about strategy. This is the essence of what and where the organisation wants to be in the future. It is about asking questions about how the sector is changing and how the organisation plans to grow. It is also about challenging it to make the necessary changes as the world around it changes too, and to be a driver of positive change. It is about building innovation and a sense of excitement about the future into the DNA.

The old agendas were heavily weighted towards the “grounding” side of the equation, but today, a good balance of “grounding” and “stargazing” is vital to preparing the organisation for the future. The board must look closely at the here and now, making sure everything is working correctly; otherwise we run the risk of missing signs of everything from neglect to malfeasance. We must also look into the next 10 to 15 years to make sure that the organisation has a robust future to look forward to.

Responsibilities increase

The world around us has changed at an exponential pace. Companies are seen as having a greater responsibility for the role they play in the health and well-being of society. They also bear some responsibility for the individuals that they touch, be it employees, partners, or people who live in the community. At the same time, social media and niche publications amplify the voices of shareholders, communities and consumers. Also, boards and companies no longer operate in a black box — with the advent of everything from Twitter to Google Earth, there is more transparency than ever before.

Partly as a consequence of these changes in the boardroom and beyond, the responsibilities and expectations of directors, particularly independent directors, have increased exponentially. It is not sufficient to skim the board papers, ask a couple of superficial questions, eat the lovely meal, and be on your merry way home.

Board directors are now, rightly, expected to read the papers, come prepared, and ask the tough questions. Though the boardroom has traditionally been a black box room, much has changed. Individual directors will increasingly find themselves being held to account for the choices that they have made in the boardroom in many areas, be it around executive compensation or “innovative” tax strategies.

It means that we as directors must be more diligent and make sure we are only voting ‘yes’ for things when we have a thorough understanding of what the implications of the ‘yes’ is — both now and in the longer term. We must take into account those whose lives are impacted directly, such as people who work for the company and those who live in the area where the company sits, as well as the people who use the company’s products and services. It also about those who are impacted indirectly, such as shareholders whose life savings may be at stake. Those are all positives, in my view.

In the end, if we are to live up to the ideal of King Arthur and the Round Table, chivalrous knights who are guided by the ideals of courtesy, courage, and honour, we must ask ourselves every time we gather, “Why are we here and who do we serve?” so that the decisions we take are made wisely and judiciously, not only to serve the needs of the few, but to ensure that we help the organisation to live up to its potential, and do so in an honourable way.

_________________________

*, CEO, Non-Exec Board Director, Prof IE Biz School, Project Syndicate & BBC columnist.

L’audit interne au cœur d’une grande bataille !


Je partage avec vous un récent article que Denis Lefort, expert conseil en gouvernance et audit interne, m’a fait parvenir, accompagné de ses commentaires.

Cet article de Mike Jacka* est paru dans Internal Auditor Magazine​​​​​​​. Toute personne préoccupée par l’importance de cette fonction devrait prendre connaissance de cette mise en garde.

« En lisant ce bref article, vous saisirez rapidement que son auteur est d’avis que l’audit interne et les autres fonctions d’assurance des organisations (gestion des risques, conformité, sécurité et autres) sont entrées dans une guerre de juridiction… Et que l’audit interne ne peut agir comme si elle était comme la Suisse, neutre et inattaquable…!!!

L’auteur est ainsi d’avis que l’audit interne doit préparer à la fois sa stratégie de défense et d’attaque pour contrer les coups durs présents et à venir… »

Bonne lecture !

Internal Audit Is in the Midst of a Great War

 

The Harvard Law School Forum on Corporate Governance and Financial Regulation recently posted an interesting piece titled « Compliance or Legal? The Board’s Duty to Assure Compliance. » I know it all sounds a little boring, but trust me on this one — there is interesting information here. Take some time to read through it before we dive in.

(One very quick, very important aside. I came across this article as a part of The IIA’s SmartBrief — a weekly « snapshot » of news and issues internal auditors might care about. To receive the newsletter you must « opt in. » I cannot urge you enough to opt in. No puffery here. Seldom does a week go by where I don’t find at least one nugget I can use. If you aren’t receiving it, you can opt in here.)

Ia Online Home

If you have been paying attention to the discussions that are going on regarding internal audit’s evolving role you were probably gobsmacked by the similarities between those discussions and what is being said in this article. Take the opening sentence: « A series of developments threaten to blur the important distinction between the corporation’s legal and compliance functions. » Make a few changes and you are talking about the dilemma internal audit is facing. « A series of developments threaten to blur the important distinction between the organization’s internal audit department and [insert your favorite assurance provider’s name here]. »

There it is in a nutshell, the crux of the battle currently being waged over the role of internal audit and others within the organization.

Wait, let’s back up a second. Did you miss that there is a war going on? Let’s take a quick look.

I have a good friend who is a CAE. In that role he is also in charge of risk management. We often talk about the potential conflict that exists with those dual roles. He is not alone. I have talked with other audit leaders who are being approached about audit taking on the role of risk. Not a bad fit. We are risk experts, we have the communication and relationship skills, and there should be a definite meshing of gears between audit and risk.

On the other hand, I have also heard from others who face the opposite issue; they are under pressure to have internal audit placed under the jurisdiction of the risk officer. « Wait a minute, » you say, « That is a very bad idea: a serious problem, a conflict of interests, a subversion of our objectivity, an invasion on our independence. » Our list of reasons why this shouldn’t happen is quite long.

When the shoe is on the other foot the bunions become just a tad more obvious.

And it is not just the risk function. While not as common, I am hearing similar discussions around such functions as compliance, corporate security, finance, quality assurance, and, yes, even legal. In some cases the discussion is around audit taking on part of the role; in others it is about audit becoming a part of the other function.

Why are we suddenly seeing this land grab?

Governance has become an important topic at the executive and board level. (Definitely a good thing.) Assurance providers (compliance, legal, risk, et al) realize the way to raise the esteem with which the board and executives hold them is to take on a greater piece of the governance pie. The pushing and shoving starts. Escalation ensues. And we find ourselves in the midst of a jurisdictional war.

And while internal audit would like to believe we are above the fray (we are independent, we are objective, we are internal audit, hear us roar), unless we recognize the existence of this war — unless we are willing to take up arms and join in the fray — we will find ourselves trivialized, the core values we provide handed off to the victors.

We think we are Switzerland. But there is no such thing as neutrality in this battle.

So, with that background, let’s return to the article previously referenced. The contents provide a good indication of the type of arguments internal audit will encounter. Two examples:

  1. The author states that a forced separation of compliance from under legal would jeopardize the ability of the organization to preserve attorney-client privilege. Cold chills went up my spine as I read this. I still vividly recall similar debates from 20 years ago when the legal department argued they should have more direct control over internal audit in order to preserve attorney-client privilege. We won. But it is obvious that the ugly head of that particular argument continues to rise again and again.
  2. The article quotes compliance thought leaders as saying that the role of « guardian of corporate reputation » is exclusively reserved for the corporate compliance officer; that the compliance officer is the organizational « subject matter expert » for ethics and culture. The author of the article states that this is « contrary to long standing public discourse that frames the lawyer’s role as a primary guardian of the organizational reputation. » My first, knee-jerk reaction is that internal audit should be the guardian of reputation and the subject matter expert. But once I put my knee back where it belongs, I realize it is probably more true that the attempt to define any one department as guardian or expert is a fool’s game. Everyone with any governance role should have the protection of reputation, ethics, and culture as their No. 1 responsibility.

There is much more in the article and many more thoughtful and reasoned arguments. And it would be quite easy to say « Let them duke it out. Their arguments are not important to us. » However, that is exactly why we should be paying attention. The article contains the points that will be used in the battle — points to be used against us and points we can use in our defense.

We are in a war. And audit cannot sit back and say, « We have independence; we are safe and above the fray. » No. They will have an eye on our « turf, » also. And who’s to say that some of their turf shouldn’t be ours. I’m not saying we break out the bayonets and start going after some of the unwounded, but I am saying we have to recognize the existence of a battle and be willing to take a stand — be willing to say what it is we do, why it is important, and why we should have those responsibilities.

What are your thoughts? What is internal audit’s role regarding the organization’s approach to risk, governance, compliance, legal, etc.? If we are more involved, is there a conflict? If the lines blur, does it have a negative impact on the company? Is there really a war brewing? And what might this have to do with the future (if there is going to be a future) of internal audit?​

_____________________________________

*Mike Jacka, CIA, CPA, CPCU, CLU, worked in internal audit for nearly 30 years at Farmers Insurance Group.

Comment les principaux intéressés peuvent-ils évaluer la qualité d’un conseil d’administration ?


Que peut faire un actionnaire ou un investisseur pour évaluer la compétence d’un conseil d’administration et se former une opinion sur l’efficacité de son rôle de fiduciaire ?

Voici un article, publié par la rédaction d’Investopedia, qui présente un checklist en cinq points, simple mais fort utile, pour mieux savoir quoi regarder dans la documentation publique.

Bien sûr, votre évaluation ne sera pas nécessairement concluante mais je suis assuré que si vous portez une attention spéciale aux 5 éléments présentés ci-dessous, vous aurez une bien meilleure appréciation des qualités du conseil et de ses administrateurs.

Quels autres facteurs considérez-vous dans l’évaluation des compétences d’un Board ? Bonne lecture !

Evaluating The Board Of Directors

You can learn a lot from looking at the disclosures made about a company’s board of directors in its annual report, but it takes time and knowledge to pick up clues on the level of quality of a company’s governance as reflected in its board’s composition and responsibilities. (For related reading, see An Investor’s Checklist To Financial Footnotes and Footnotes: Early Warning Signs For Investors.)

Tulips

In theory, the board is responsible to the shareholders and is supposed to govern a company’s management. But in many instances, the board has become a servant of the chief executive officer (CEO), who is typically also the chairman of the board. The role of the board of directors has increasingly come under scrutiny in light of corporate scandals such as those at Enron, WorldCom and HealthSouth, in which the board of directors failed to act in investors’ best interests. Although the Sarbanes-Oxley Act of 2002 made corporations more accountable, investors should still pay attention to what a corporation’s board of directors is up to. Here we’ll show you what the board of directors can tell you about how a company is being run.

The Checklist
According to an October 27, 2003, Wall Street Journal article, a checklist was developed by the Corporate Library to help investors evaluate the objectivity and effectiveness of a board. According to this checklist, investors should examine:

1. Size of the Board
There is no universal agreement on the optimum size of a board of directors. A large number of members represents a challenge in terms of using them effectively and/or having any kind of meaningful individual participation. According to the Corporate Library’s study, the average board size is 9.2 members, and most boards range from 3 to 31 members. Some analysts think the ideal size is seven.

In addition, there are two critical board committees that must be made up of independent members:

  1. The compensation committee
  2. The audit committee

The minimum number for each committee is three. This means that a minimum of six board members is needed so that no one is on more than one committee. Having members doing double duty may compromise the important wall between audit and compensation, which helps avoid any conflicts of interest. Members serving on a number of other boards may not devote adequate time to their responsibilities.

The seventh member is the chairperson of the board. It’s the responsibility of the chairperson to make sure the board is functioning properly and the CEO is fulfilling his or her duty and following the directives of the board. A conflict of interest is created if the CEO is also the chairperson of the board.

To staff any additional committees, such as nominating or governance, additional people may be necessary. However, having more than nine members may make the board too big to function effectively. (For background reading, see The Basics Of Corporate Structure.)

2. The Degree of Independence: Insiders and Outsiders
A key attribute of an effective board is that it is comprised of a majority of independent outsiders. While not necessarily true, a board with a majority of insiders is often viewed as being stacked with sycophants, especially in cases where the CEO is also the chairman of the board.

An outsider is someone who has never worked at the company, is not related to any of the key employees and has never worked for a major supplier, customer or service provider, such as lawyers, accountants, consultants, investment bankers, etc. While this definition of independent outsiders is clear, you’d be surprised at the number of times it is misapplied. Too often, the « outsider » label is given to the retired CEO or a relative when that person is actually an insider with conflicts of interest.The Wall Street Journal article found that independent outsiders made up 66% of all boards and 72% of Standard & Poor’s (S&P) boards. The larger the number of outside board members the better. This makes the board more independent and allows it to provide a higher level of corporate governance to shareholders, particularly if the position of chairman of the board is separated from the CEO and is held by an outsider.

3. Committees
There are four important board committees: executive, audit, compensation and nominating. There may be more committees depending on corporate philosophy, which is determined by an ethics committee and special circumstances relating to a particular company’s line of business. Let’s take a closer look at the four main committees:

  1. The Executive Committee
    The executive committee, is made up of a small number of board members that are readily accessible and easily convened, to decide on matters subject to board consideration but must be decided on expeditiously, such as a quarterly meeting. Executive committee proceedings are always reported to and reviewed by the full board. Just as with the full board, investors should prefer that independent directors make up the majority of an executive committee.
  2. The Audit Committee
    The audit committee works with the auditors to make sure that the books are correct and that there are no conflicts of interest between the auditors and the other consulting firms employed by the company. Ideally, the chair of the audit committee is a Certified Public Accountant (CPA). Often, a CPA is not on the audit committee, let alone on the board. The New York Stock Exchange (NYSE) requires that the audit committee include a financial expert, but this qualification is typically met by a retired banker, even though that person’s ability to catch fraud may be questionable. The audit committee should meet at least four times a year in order to review the most recent audit. An additional meeting should be held if there are other issues that need to be addressed
  3. The Compensation Committee.
    The compensation committee is responsible for setting the pay of top executives. It seems obvious that the CEO or other people with conflicts of interest should not be on this committee, but you’d be surprised at the number of companies that allow just that. It is important to check if the members of the compensation board are also on the compensation committees of other firms because of the potential conflict of interest. The compensation committee should meet at least twice a year. Having only one meeting may be a sign that the committee meets just to approve a pay package that was created by the CEO or a consultant without much debate. (To learn more, read Evaluating Executive Compensation.)
  4. The Nominating Committee
    This committee is responsible for nominating people to the board. The nomination process should aim to bring on people with independence and a skill set currently lacking on the board.M

4. Other Commitments and Time Constraints
The number of boards and committees a board member is on is a key consideration when judging the effectiveness of a member.

The following chart from the survey shows the time commitments of board members of the 1,700 largest U.S. public companies according the the study’s 2003 data. This indicates that the majority of board members sit on no more than three boards. What this data does not specify is the number of committees to which these people belong.

You’ll often find that independent board members serve on both the audit and compensation committees and are also on three or more other boards. You have to wonder how much time a board member can devote to a company’s business if the person is on multiple boards. This situation also raises questions about the supply of independent outside directors. Are these people pulling double duty because there’s a lack of qualified outsiders?

5. Related Transactions
Companies must disclose any transactions with executives and directors in a financial note entitled « Related Transactions. » This discloses actions or relationships that cause conflicts of interest, such as doing business with a director’s company or having relatives of the CEO receiving professional fees from the company.

The Bottom Line
The composition and performance of a board of directors says a lot about its responsibilities to a company’s shareholders. A board loses credibility if its objectivity and independence are compromised by material shortcomings in this checklist. Investors are poorly served by substandard governance practices.

Les risques de gouvernance associés à l’OPA d’Alibaba


, professeur de droit, d’économique et de finance, et directeur des programmes sur la gouvernance corporative à la Harvard law School vient de publier un article très important dans le New York Times.

L’auteur met les investisseurs en garde contre de réels risques de gouvernance liés à l’offre publique d’achat (OPA) de l’entreprise chinoise Alibaba.

Je crois qu’il est utile de mieux comprendre les enjeux de gouvernance avant d’investir dans cette immense OPA.

Bonne lecture !

 

Wall Street is eagerly watching what is expected to be one of the largest initial public offering in history: the offering of the Chinese Internet retailer Alibaba at the end of this week. Investors have been described by the media as “salivating” and “flooding underwriters with orders.” It is important for investors, however, to keep their eyes open to the serious governance risks accompanying an Alibaba investment.

Several factors combine to create such risks. For one, insiders have a permanent lock on control of the company but hold only a small minority of the equity capital. Then, there are many ways to divert value to affiliated entities, but there are weak mechanisms to prevent this. Consequently, public investors should worry that, over time, a significant amount of the value created by Alibaba would not be shared with them.

In Alibaba, control is going to be locked forever in the hands of a group of insiders known as the Alibaba Partnership. These are all managers in the Alibaba Group or related companies. The Partnership will have the exclusive right to nominate candidates for a majority of the board seats. Furthermore, if the Partnership fails to obtain shareholder approval for its candidates, it will be entitled “in its sole discretion and without the need for any additional shareholder approval” to appoint directors unilaterally, thus ensuring that its chosen directors always have a majority of board seats.

Alibaba is scheduled to become a publicly traded company later this week.

Many public companies around the world, especially in emerging economies, have a large shareholder with a lock on control. Such controlling shareholders, however, often own a substantial portion of the equity capital that provides them with beneficial incentives. In the case of Alibaba, investors need to worry about the relatively small stake held by the members of the controlling Alibaba Partnership.

After the I.P.O., Alibaba’s executive chairman, Jack Ma, is expected to hold 7.8 percent of the shares and all the directors and executive officers will hold together 13.1 percent. Over time, insiders may well cash out some of their current holding, but Alibaba’s governance structure would ensure that directors chosen by the Alibaba Partnership will forever control the board, regardless of the size of the stake held by the Partnership’s members.

With an absolute lock on control and a limited fraction of the equity capital, the Alibaba insiders will have substantial incentives to divert value from Alibaba to other entities in which they own a substantial percentage of the equity. This can be done by placing future profitable opportunities in such entities, or making deals with such entities on terms that favor them at the expense of Alibaba.

Alibaba’s prospectus discloses information about various past “related party transactions,” and these disclosures reflect the significance and risks to public investors of such transactions. For example, in 2010, Alibaba divested its control and ownership of Alipay, which does all of the financial processing for Alibaba, and Alipay is now fully controlled and substantially owned by Alibaba’s executive chairman.

Public investors should worry not only about whether the Alibaba’s divesting of Alipay benefited Mr. Ma at the expense of Alibaba, but also about the terms of the future transactions between Alibaba and Alipay. Because Alibaba relies on Alipay “to conduct substantially all of the payment processing” in its marketplace, these terms are important for Alibaba’s future success.

Mr. Ma owns a larger fraction of Alipay’s equity capital than of Alibaba’s, so he would economically benefit from terms that would disfavor Alibaba. Indeed, given the circumstances, the I.P.O. prospectus acknowledges that Mr. Ma may act to resolve Alibaba-Alipay conflicts not in Alibaba’s favor.

The prospectus seeks to allay investor concerns, however, by indicating that Mr. Ma intends to reduce his stake in in Alipay within three to five years, including by having shares in Alipay granted to Alibaba employees. But stating such an intention does not represent an irreversible legal commitment. Furthermore, transfers of Alipay ownership stakes from Mr. Ma to other members of the Alibaba Partnership would still leave the Partnership’s aggregate interest to be decidedly on the side of Alipay rather than Alibaba.

Given the significant related party transactions that have already taken place, and the prospect of such transactions in the future, Alibaba tried to placate investors by putting in a “new related party transaction policy.” But this new policy hardly provides investors with solid protection. Unlike charter and bylaw provisions, corporate policies are generally not binding. Furthermore, Alibaba’s policy explicitly allows the board, where the nominees of Alibaba partnership will always have a majority, to approve any exceptions to the policy that the board chooses.

Of course, the Alibaba partners might elect not to take advantage of the opportunities for diversion provided to them by Alibaba’s structure. And, even if the partners do use such opportunities, the future business success of Alibaba might be large enough to make up for the costs of diversions and leave public investors with good returns on their investment.

Before jumping in, however, investors rushing to participate in the Alibaba I.P.O. must recognize the substantial governance risks that they would be taking. Alibaba’s structure does not provide adequate protections to public investors.

__________________________________________

Article relié :

Alibaba Raises the Fund-Raising Target for Its I.P.O. to $21.8 Billion (Sept. 15, 2014)

Les modèles de gouvernance fondés sur la prise en compte des intérêts des « Stakeholders » sont-ils efficaces ?


Dans ce billet, nous attirons votre attention sur une étude remarquable, récemment publiée par Franklin Allen, professeur d’économie à l’Université de Pennsylvanie et à Imperial College, Londres; Elena Carletti, professeure de finance à l’université Bocconi ; et Robert Marquez, professeur de finance à l’Université de Californie (Davis), paru sur le blogue de Harvard Law School Forum on Corporate Governance.

L’étude montre que les entreprises peuvent adopter deux modèles relativement distincts de gouvernance.

Le premier modèle, celui qui règne dans les pays Anglo-Saxons, adopte la perspective de la théorie de l’agence selon laquelle il doit exister une nette séparation des pouvoirs entre les actionnaires-propriétaires et les dirigeants de l’organisation. Dans ces pays (U.S., Canada, UK, Australie), les lois précisent assez clairement que les actionnaires sont les propriétaires de l’entreprise et que les managers ont le devoir fiduciaire d’agir en fonction de leurs intérêts, tout comme les administrateurs qui sont les représentants élus des actionnaires.

La situation canadienne est un peu particulière parce que certains jugements stipulent que les administrateurs doivent aussi tenir compte des conséquences des décisions sur les diverses parties prenantes.

Il y a plusieurs pays qui adoptent un deuxième modèle de gouvernance, un modèle qui accorde une importance capitale aux parties prenantes (Stakeholders), plus particulièrement aux employés.

Par exemple, en Allemagne, le système de cogestion exige un nombre égal de sièges d’actionnaires et d’employés au conseil de supervision. Les intérêts des parties prenantes sont également pris en compte par une représentation significative d’employés en Autriche, en France, aux Pays-Bas, au Danemark, en Suède.

D’autres pays tels que la Chine et le Japon ont des modèles de gouvernance qui se fondent sur des normes se rapportant aux consensus sociaux.

Quel modèle de gouvernance peut le mieux optimiser la performance des entreprises, tout en répondant aux impératifs de rentabilité, de compétitivité et de pérennité de ces dernières ?

Vous ne serez peut-être pas étonnés d’apprendre que le modèle Anglo-Saxon, fondé sur la propriété des actionnaires, n’est pas nécessairement le plus efficace ! Mais pourquoi ?

Voilà ce que cette étude examine en profondeur. Voici quelques extraits de l’article, dont la conclusion suivante :

« If workers and shareholders are made better off by co-determination and consumers are made worse off, then it is still likely that co-determination will be implemented. The reason is that workers and shareholders are usually better organized and are in a position to lobby in favor of co-determination, whereas consumers are dispersed. Such a political economy approach can help shed light on the emergence of stakeholder governance. In turn, the present study illustrates one of the likely consequences of the adoption of a stakeholder approach to corporate governance ».

Stakeholder Governance, Competition and Firm Value

 

….. These differences in firms’ corporate orientation are confirmed by the results of a survey of senior managers at a sample of major corporations in Japan, Germany, France, the US, and the UK, who were asked whether “A company exists for the interest of all stakeholders” or whether “Shareholder interest should be given the first priority” (Yoshimori, 2005). The results of the survey strongly suggest that stakeholders are considered to be very important in Japan, Germany and France, while shareholders’ interests represent the primary concern in the US and the UK. The same survey reports that firm continuity and employment preservation are important concerns for managers of corporations located in Japan, Germany and France, but not for those located in the US and the UK. All these considerations suggest that in many countries the legal system or social conventions have as a common objective the inclusion of parties beyond shareholders into firms’ decision-making processes. In particular, workers are seen as important stakeholders in the firm, with continuity of employment being an important objective.IMG_20140516_140943

In our paper, Stakeholder Governance, Competition and Firm Value, forthcoming in the Review of Finance, we examine these issues, and provide an understanding of how imposing stakeholder governance affects firms’ behavior even when this involves a trade-off between the interests of shareholders and those of other stakeholders. Our main idea is that stakeholder firms internalize the effects of their behavior on stakeholders other than shareholders. In particular, they are concerned with the benefits that their stakeholders would lose should the firm not survive. As a consequence, stakeholder firms are more concerned with avoiding bankruptcy since this prevents their stakeholders from enjoying their benefits. The different concern for survival affects firms’ strategic behavior in the product market and, in particular, the way they behave in the presence of uncertainty.

Specifically, we develop a model where firms compete in the product market with other firms, and have to choose the prices at which to sell their goods. Firms are subject to uncertainty, and can go bankrupt if they fail to turn a profit either because the expected sales did not quite materialize, or because costs turned out to be higher than anticipated. The possibility, and fear, of bankruptcy thus induces firms to be more conservative in their pricing policies, preferring to maintain a larger cushion between their revenues and their costs, than in seeking out (possibly) larger sales but at thinner margins.

A concern for stakeholders makes a firm even more concerned about avoiding bankruptcy to the extent that it may lead to dislocation of its workers, and makes it even more conservative in its pricing policies. While the direct consequence of this is to move a firm away from the objective of maximizing profits and thus shareholder value, there is an indirect effect coming through the interaction between competing firms in the product market: when one firm becomes less aggressive, other firms have an incentive to follow suit. This reduction in aggression (i.e., competition) industry-wide benefits the stakeholder-oriented firm, so much so that shareholders may in fact be better off when their firm can commit to internalizing stakeholder concerns. In other words, stakeholders’, such as employees, and shareholders’ interests become aligned through the competitive interactions among firms, rather than being at odds as they would appear to be if one ignores firms’ product market interactions.

We use this basic idea to study a number of issues ranging from state-mandated inclusion of stakeholders in corporate governance (e.g., the case of Germany), to globalization that makes it commonplace for firms from shareholder-oriented societies to compete with those from countries with a stakeholder orientation. We also study the implications of financial constraints for the capital structure of stakeholder-oriented firms, and show that the same conservative stance in the product market translates into more conservative capital structure.

Our study raises a number of unanswered questions about the ultimate effect of stakeholders’ orientations on firm behavior and value, and suggests directions for future research. One of the interesting questions is why some countries adopt stakeholder governance while others do not, and why governments adopt such governance although it may benefit firms and employees at the expense of consumers. There is a growing literature on corporate governance and political economy that emphasizes that the political process plays a very important part in determining the corporate governance structure in a country (see, e.g., Pagano and Volpin, 2005; Perotti and von Thadden, 2006; and Perotti and Volpin, 2007). For example, if workers and shareholders are made better off by co-determination and consumers are made worse off, then it is still likely that co-determination will be implemented …..

Toute la lumière sur les attentes envers les C.A. | L’état de situation selon Lipton


Aujourd’hui, je veux vous faire partager le point de vue de Martin Lipton*, expert dans les questions de fusion et d’acquisition ainsi que dans les affaires se rapportant à la gouvernance des entreprises, sur les enjeux des C.A.. L’auteur met l’accent sur les pratiques exemplaires en gouvernance et sur les comportements attendus des conseils d’administration.

Ce texte, paru sur le blogue du Harvard Law School Forum on Corporate Governance,résume très bien les devoirs et les responsabilités des administrateurs de sociétés de nos jours et renforce la nécessité, pour les conseils d’administration, de gérer les situations d’offres hostiles.

Bonne lecture ! Êtes-vous d’accord avec les attentes énoncées ? Vos commentaires sont les bienvenus.

The Spotlight on Boards

 

The ever evolving challenges facing corporate boards prompts an updated snapshot of what is expected from the board of directors of a major public company—not just the legal rules, but also the aspirational “best practices” that have come to have almost as much influence on board and company behavior.

Boards are expected to:

Establish the appropriate “Tone at the Top” to actively cultivate a corporate culture that gives high priority to ethical standards, principles of fair dealing, professionalism, integrity, full compliance with legal requirements and ethically sound strategic goals.IMG_20140523_112914

Choose the CEO, monitor his or her performance and have a succession plan in case the CEO becomes unavailable or fails to meet performance expectations.

Maintain a close relationship with the CEO and work with management to encourage entrepreneurship, appropriate risk taking, and investment to promote the long-term success of the company (despite the constant pressures for short-term performance) and to navigate the dramatic changes in domestic and world-wide economic, social and political conditions. Approve the company’s annual operating plan and long-term strategy, monitor performance and provide advice to management as a strategic partner.

Develop an understanding of shareholder perspectives on the company and foster long-term relationships with shareholders, as well as deal with the requests of shareholders for meetings to discuss governance and the business portfolio and operating strategy. Evaluate the demands of corporate governance activists, make changes that the board believes will improve governance and resist changes that the board believes will not be constructive. Work with management and advisors to review the company’s business and strategy, with a view toward minimizing vulnerability to attacks by activist hedge funds.

Organize the business, and maintain the collegiality, of the board and its committees so that each of the increasingly time-consuming matters that the board and board committees are expected to oversee receives the appropriate attention of the directors.

Plan for and deal with crises, especially crises where the tenure of the CEO is in question, where there has been a major disaster or a risk management crisis, or where hard-earned reputation is threatened by a product failure or a socio-political issue. Many crises are handled less than optimally because management and the board have not been proactive in planning to deal with crises, and because the board cedes control to outside counsel and consultants.

Determine executive compensation to achieve the delicate balance of enabling the company to recruit, retain and incentivize the most talented executives, while also avoiding media and populist criticism of “excessive” compensation and taking into account the implications of the “say-on-pay” vote.

Face the challenge of recruiting and retaining highly qualified directors who are willing to shoulder the escalating work load and time commitment required for board service, while at the same time facing pressure from shareholders and governance advocates to embrace “board refreshment”, including issues of age, length of service, independence, gender and diversity. Provide compensation for directors that fairly reflects the significantly increased time and energy that they must now spend in serving as board and board committee members. Evaluate the board’s performance, and the performance of the board committees and each director.

Determine the company’s reasonable risk appetite (financial, safety, cyber, political, reputation, etc.), oversee the implementation by management of state-of-the-art standards for managing risk, monitor the management of those risks within the parameters of the company’s risk appetite and seek to ensure that necessary steps are taken to foster a culture of risk-aware and risk-adjusted decision-making throughout the organization.

Oversee the implementation by management of state-of-the-art standards for compliance with legal and regulatory requirements, monitor compliance and respond appropriately to “red flags.”

Take center stage whenever there is a proposed transaction that creates a real or perceived conflict between the interests of stockholders and those of management, including takeovers and attacks by activist hedge funds focused on the CEO.

Recognize that shareholder litigation against the company and its directors is part of modern corporate life and should not deter the board from approving a significant acquisition or other material transaction, or rejecting a merger proposal or a hostile takeover bid, all of which is within the business judgment of the board.

Set high standards of social responsibility for the company, including human rights, and monitor performance and compliance with those standards.

Oversee relations with government, community and other constituents.

Review corporate governance guidelines and committee charters and tailor them to promote effective board functioning.

To meet these expectations, it will be necessary for major public companies

(1) to have a sufficient number of directors to staff the requisite standing and special committees and to meet expectations for diversity;

(2) to have directors who have knowledge of, and experience with, the company’s businesses, even if this results in the board having more than one director who is not “independent”;

(3) to have directors who are able to devote sufficient time to preparing for and attending board and committee meetings;

(4) to provide the directors with regular tutorials by internal and external experts as part of expanded director education; and

(5) to maintain a truly collegial relationship among and between the company’s senior executives and the members of the board that enhances the board’s role both as strategic partner and as monitor.

________________________________________________

* Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy

Bulletin du Collège des administrateurs de sociétés (CAS) | Septembre 2014


Vous trouverez, ci-dessous, le Bulletin du Collège des administrateurs de sociétés (CAS) du mois de septembre 2014.

Seul programme de certification universitaire en gouvernance de sociétés offert au Québec, il s’adresse aux administrateurs siégeant à un conseil d’administration et disposant d’une expérience pertinente.

Les administrateurs de sociétés certifiés (ASC) sont regroupés dans la Banque des ASC, un outil de recherche en ligne mis au point par le Collège, afin de faciliter le recrutement d’administrateurs sur les conseils d’administration.

Bulletin du Collège des administrateurs de sociétés (CAS) | Septembre 2014

_______________________

 

RAPPORT D’ACTIVITÉ 2013-2014

 

Rapport d'activité 2013-2014 du CASC’est avec plaisir que le Collège des administrateurs de sociétés vous présente son Rapport d’activité 2013-2014.

Vous y trouverez un bilan positif de cette neuvième année, marquée par de nombreuses actions visant à diversifier notre offre de formation, à affirmer notre statut de leader de la formation des administrateurs et à promouvoir l’excellence en gouvernance au Québec.

Consultez le rapport pour tous les détails [+]

 

 

Banques des administrateurs de sociétés certifiés

 

Le Collège est fier de mettre en ligne une nouvelle présentation de la Banque des Administrateurs de sociétés certifiés (ASC). La Banque des ASC est maintenant intégrée au site Web du Collège et propose un nouvel outil de recherche bonifié, ainsi qu’un design plus ergonomique.

Plusieurs nouveautés ont été apportées à l’outil de recherche dans le but d’optimiser la recherche d’ASC selon les requêtes des recruteurs d’administrateurs.

Consultez cette nouvelle Banque des ASC [+]

 

DÉVOILEMENT DE LA 3E SÉRIE DE CAPSULES D’EXPERTS EN GOUVERNANCE

 

3e série de capsules d'experts : les médias sociaux, par Sylvain LafranceLe CAS est heureux de vous dévoiler sa 3e série de capsules d’experts, formée de huit entrevues vidéos. Pendant 3 minutes, un expert du Collège partage une réflexion et se prononce sur un sujet d’actualité lié à la gouvernance.

Une capsule sera dévoilée chaque semaine par bulletin électronique. À surveiller !

Cette semaine : Les médias sociaux, par Sylvain Lafrance [+]

 Les programmes de formation du CAS

 

Gouvernance des PME | 5 et 6 novembre 2014, à Québec

Certification – Module 1 : Les rôles et responsabilités des administrateurs |  12, 13 et 14 février 2015, à Québec, et 26, 27 et 28 mars 2015, à Montréal

 

Les événements en gouvernance auxquels le CAS est associé

 

Inscription au programme « Réseau jeunes administrateurs » pour la cohorte d’automne | 8 septembre 2014, à Montréal

Congrès national de l’IAS sur la gouvernance transformationnelle et Gala des Fellows | 18 septembre 2014, à Montréal

Assemblée générale annuelle du Cercle des ASC et conférence « Un CA peut-il être trop avant-gardiste » par Mme Anne Darche, ASC | 23 septembre 2014, à Québec

Conférence Prestige de l’Ordre des CPA du Québec, « Leadership éthique au 21e siècle » par Mme Cynthia Cooper | 1er octobre 2014, à Montréal

Conférence Femmes Leaders par Les Affaires | 15 octobre 2014, à Québec

Programme de l’ecoDa « New Governance Challenges for Board Members in Europe » | 21 et 22 octobre 2014, à Bruxelles

NOMINATIONS ASC

 

Serge Bouchard, ASC | Conseil régional de l’environnement du Centre-du-Québec

Marlène Deveaux, ASC | CLD Saguenay

Sylvie Tremblay, ASC | Chambre des notaires du Québec

Richard Audet, ASC | Inforoute Santé du Canada

Marc Duchesne, ASC | Nicorp inc.

Vincent Dagnault, ASC | Signes d’Espoir

Annick Mongeau, ASC | Groupe TVA inc.

Jean-François Thuot, ASC | Société canadienne des directeurs d’association, section du Québec

Sylvain Beaudry, ASC | Institut québécois de planification financière

Lyne Laverdure, ASC | PharmaBio Développement

Louise Dostie, ASC | Caisse de l’Administration et des Services publics

Pauline D’Amboise, ASC | Solidarité rurale du Québec

Jean-Paul Gagné, ASC | Metix inc.

Denis Arcand, ASC | Caisse Desjardins Brossard

Josée De La Durantaye, ASC | Ordre des comptables professionnels agréés du Québec

Michel Verreault, ASC | Chambre des notaires du Québec

Michel Sanschagrin, ASC | Fondation des Violons du Roy et Club musical de Québec

Carl Viel, ASC | Palais Montcalm

Luc Séguin, ASC | Hydrocarbures Anticosti

Anne Darche, ASC | Groupe Germain Hospitalité et Groupe St-Hubert

 

DISTINCTIONS ASC et formateurs

 

Marie Lavigne, ASC | Chevalière de l’Ordre national du Québec

Claude Béland, formateur au CAS | Grand officier de l’Ordre national du Québec

Maurice Gosselin, ASC | Prix du ministre accordé par le ministère de l’Enseignement supérieur, de la Recherche et de la Science

Boîte à outils pour administrateurs

 

Nouvelle référence mensuelle en gouvernance : Rémunération des administrateurs et gouvernance : enjeux et défis, par l’IGOPP.

La capsule d’expert du mois – NOUVEAUTÉ : Les médias sociaux, par Sylvain Lafrance.

Top 5 des billets les plus consultés cet été (juin, juillet et août) du blogue Gouvernance | Jacques Grisé.

 

Bonne lecture !

____________________________________________

Collège des administrateurs de sociétés (CAS)

Faculté des sciences de l’administration Pavillon Palasis-Prince

2325, rue de la Terrasse, Université Laval Québec (Québec) G1V 0A6

418 656-2630; 418 656-2624

info@cas.ulaval.ca

 

Contribution des administrateurs externes à la vision des entreprises


Michael Evans, l’auteur de ce court article publié dans Forbes, montre les nombreux avantages des entreprises (jeunes, petites, familiales, entrepreneuriales …) à recruter un ou quelques administrateurs externes au conseil d’administration.

Les administrateurs externes doivent être judicieusement choisis afin de compter sur leurs expériences du domaine d’affaires ainsi que sur leurs capacités à exposer plus de perspective et de vision.

L’auteur présente également les quatre rôles fondamentaux que les administrateurs externes peuvent contribuer à clarifier.

Voici un extrait de la première partie de l’article. Bonne lecture !

Outside Board Members Bring Needed Experience And Perspective To Your Company

 

Middle-market companies often operate as small fiefdoms under the control of the king, or to use a business term, the CEO. Very few mid-sized companies have a formal board of directors and for those that do have boards, CEOs tend to populate them with family, friends, and internal management. The theory is that board members do not know the business of the company, cost too much, and often do not provide value. In some cases, those conclusions are often true. But in many cases, the establishment of an effective board and the inclusion of outside board members have saved many a company from ruin.

It is estimated that less than 5 percent of middle-market companies have an established board or advisory board, the primary reason for such a low percentage is that small- and middle-market businesses believe they are smart enough not to need a board, think it is too expensive, or believe it would constrain their decision-making abilities.

female outside board member

With the demands on CEOs — including ongoing regulatory changes, pressure from family and other founders, the rise of new competitors and business models, and the need to transform businesses at an ever-quickening pace — it may be time for you to get some help and add an outside director to your board.

Outside directors bring outside experience and perspective to the board. They keep a watchful eye on the inside directors and on the way the organization is run, and provide guidance as to risk management and good corporate governance practices. Outside directors are often useful in handling disputes between inside directors, or between shareholders and the board.

Enquête 2014 sur le leadership du conseil d’administration | Korn Ferry


Ce billet publié par Robert E. Hallagan et Dennis Carey, vice-présidents de Korn Ferry, présente une partie d’une étude conduite par l’Institut Korn Ferry portant sur le leadership du C.A.

On constatera que la séparation des fonctions de président du conseil et de président et chef de la direction s’effectue lentement chez nos voisins du sud ! En effet, bien que tous les experts de la gouvernance reconnaissent le bien fondé d’avoir un président du conseil indépendant, on note un certain progrès à cet égard mais il y a encore loin de la coupe aux lèvres, surtout dans les grandes entreprises cotées aux ÉU.

Voici un aperçu de l’introduction de cette étude. Je vous invite à lire le document complet pour avoir une meilleure idée des résultats de l’enquête. Bonne lecture !

Survey of Board Leadership 2014

This is our second annual report on board leadership.

The numbers and trends are interesting but the subtleties and substance behind them are extremely valuable as the National Association of Corporate Directors (NACD) and Korn Ferry continue their study of high-performing boards. The thoughtful selection and performance of board leaders is one of two pillars of leadership that drive long-term shareholder value—the other being the CEO of the company.IMG_00000694

There is universal agreement that each board must have an independent leader but how each company has achieved this takes many shapes.

In this year’s report, we see continued evidence of a slow and deliberate trend toward separation of the roles, higher in mid-cap companies than the large-cap S&P 500. Key catalysts included activism, and a transition of CEO leadership that prompted the board to elect to separate the roles.

…

There is universal agreement that each board must have an independent leader but how each company has achieved this takes many shapes.

In our first report we stated our commitment to remaining an honest broker of facts in the performance debate. Many proponents of separation claim it will enhance long-term shareholder value, yet no study to date has rendered conclusive evidence in either direction. We have now isolated companies that have made the change, documented their performance before and after, and will soon be comfortable debating the results. While we clearly understand the danger in relying solely on numbers and acknowledge that there are many potential ways to slice the data, we believe our attempt to get at the “facts” will generate engaged, healthy debate among our members and clients. We look forward to a rich dialogue at NACD conferences to come.

Methodology and approach

This study examined changes to and trends in board leadership structure for 900 US companies, namely the constituents of Standard & Poor’s Large Cap 500 Index (S&P 500) and the Mid-Cap Index (the S&P 400) as of December 31, 2012. Companies are added to the S&P 500 if they have unadjusted market capitalization of $4.6 billion or more, and to the S&P 400 if they have unadjusted market capitalization of between $1.2 billion and $5.1 billion. The S&P 500 Index represents a barometer of the state of the largest publicly traded US corporations, and the majority of the research and analysis in this study focuses on this group. To expand the scope beyond large-cap companies, and thus broaden the findings of the research, the constituents of the S&P 400 were also examined in detail.

For each company, we looked at the type of board leadership structure in place at the time of its proxy filing for each year between 2008 and 2012. This report focuses primarily on the leadership structure in place as of year-end 2012, and examines each company’s overall leadership approach as it pertains to the roles of chairman, CEO, and lead director (if at all). Proxy filings, annual reports, and the corporate governance section of company websites comprise the source documents for these determinations. Please note that numbers shown in this report reflect actual statistics and not data projected from a random sampling of companies.

In addition, each company that had a change in its leadership structure since January 1, 2003 (by replacing either the CEO or chairman) was investigated to understand the reason for the change, and additional details—such as tenure, age, education, committee responsibilities—were sought for the incoming chairman. Company and outside press reports and news articles were used to determine the reason for an executive’s departure, and executive biographical and company data were culled from secondary sources, including Reuters, Businessweek, MarketWatch, and Morningstar.

The trend to separate roles continues to move steadily forward.

Though board composition is not likely to be an area marked by rapid, significant change, the slow and steady trend to separate chairman and CEO roles continued in 2012. By the end of 2012, 56% of S&P 500 chairmen also held the position of CEO. This marks a significant departure from 2009, when 63% of all chairmen also held the company’s highest executive office. The change comes almost equally from increases in non-executive chairmen and chairmen who have some past affiliation with the company; additional analysis in this report will examine what types of companies are likely to favor the different approaches.

fig1Click image to enlarge

While it is reasonable to expect this gradual trend to continue, particularly as activist shareholders keep pushing for separation, some large companies, including IBM, Disney, and Urban Outfitters, are moving in the opposite direction and are recombining roles. In the case of IBM and Disney, the recombinations are part of longterm succession, though IBM Chairman-CEO Ginny Rometty added the Chairman role just 10 months after becoming CEO—faster than many expected. In the case of Urban Outfitters, founder Richard Hayne reclaimed the CEO role after his successor had difficulty maintaining the main brand’s appeal to young people. Our continued perspective is that there is no one-size-fits-all approach to board leadership and that careful analysis and trusted advisors should be leveraged to find the appropriate structure for each organization.

In our opinion, chairmen must meet several criteria to qualify as truly “non-executive” or independent. They must not currently hold an executive role (CEO or other), must not be former executives, and must not be founders or family members of founders. From time to time, companies may characterize these types of chairmen as “non-executive” in the language of their proxy reports or even in the chairman’s title, but our analysis re-characterizes them per the criteria above. The idea of an independent chairman is that he or she can bring an impartial and objective perspective to the board, and our experience finds that founders, family members of founders, and former executives tend not to possess that objectivity. This particular debate on nomenclature is a classic case of saying it doesn’t make it so. Being independent in title is not necessarily a reflection of reality. An analysis of the types of chairmen found in the S&P 500 in 2012 is described in Figure 2.

The trend toward separation of the chairman and CEO has been more pronounced over time within the mid-cap companies in the S&P 400 than it has been in the S&P 500. Separation rates in both groups rose by two points in 2012, to 44% in the S&P 500 and 55% in the S&P 400.

….

Le point de vue sans équivoque de l’activiste Carl Icahn


Depuis quelques années, on parle souvent d’activistes, d’actionnaires activistes, d’investisseurs activistes ou de Hedge Funds pour qualifier la philosophie de ceux qui veulent assainir la gouvernance des entreprises et redonner une place prépondérante aux « actionnaires-propriétaires » !

Pour ceux qui sont intéressés à connaître le point de vue et les arguments d’un actionnaire activiste célèbre, je vous invite à lire l’article écrit par Carl Icahn le 22 août sur son site Shareholders’ Square Table (SST).

Vous aurez ainsi une très bonne idée de cette nouvelle approche à la gouvernance qui fait rage depuis quelque temps.

Je vous invite aussi à lire l’article de Icahn qui s’insurge contre la position de Warren Buffet de ne pas intervenir dans la décision de la rémunération globale « excessive » à Coke, suivi de la réponse de Buffet.

My article from Barron’s on Warren Buffett’s abstention from a vote on Coke’s executive-pay plan

À vous de vous former une opinion sur ce sujet ! Bonne lecture !

The Bottom Line | Carl Icahn

Among other things, I’m known to be a “reductionist.”  In my line of work you must be good at pinpointing what to focus on – that is, the major underlying truths and problems in a situation.  I then become obsessive about solving or fixing whatever they may be. This combination is what perhaps has lead to my success over the years and is why I’ve chosen to be so outspoken about shareholder activism, corporate governance issues, and the current economic state of America. IMG00570-20100828-2239

Currently, I believe that the facts “reduce” to one indisputable truth which is that we must change our system of selecting CEOs in order to stay competitive and get us out of an extremely dangerous financial situation.  With exceptions, I believe that too many companies in this country are terribly run and there’s no system in place to hold the CEOs and Boards of these inadequately managed companies accountable. There are numerous challenges we are facing today whether it be monetary policy, unemployment, income inequality, the list can go on and on… but the thing we have to remember is there is something we can do about it: Shareholders, the true owners of our companies, can demand that mediocre CEOs are held accountable and make it clear that they will be replaced if they are failing.

I am convinced by our record that this will make our corporations much more productive and profitable and will go a long way in helping to solve our unemployment problems and the other issues now ailing our economy.

…….

Pourquoi nommer un administrateur indépendant comme président du conseil


Plusieurs se questionnent sur les raisons qui expliquent l’importance de choisir un administrateur indépendant comme président du conseil, même dans les entreprises dont le fondateur possède le contrôle.

Le court article de  paru dans itbusiness le 25 août 2014 montre les avantages réels à se doter d’une gouvernance exemplaire.

Voici, selon l’auteur,  neuf points à considérer dans le choix de cette option. Bonne lecture !

1. Increased share price on acquisition
2. Investor due diligence is smoother
3. Greater interest in follow-on investment rounds
4. Increased transparency through supplying shareholder information
5. Increased accountability of management
6. Stronger risk and crisis management policies
7. Stronger customer acquisition process resulted from customers’ appreciation that the company is stronger than its individual executives.
8. Competitors take notice of the seriousness of your company’s approach
9. Creates environment for innovative change

The use of a non-executive chairperson for a private corporation, including early and growth stage companies, allows the company to start acting as if the company is structured for success and is serious about its responsibilities to shareholders, customers, and staff.

9 reasons to name a non-executive chairperson to your board

It is natural for entrepreneurs and founders to want to control the destiny of their company. Facebook and Mark Zuckerberg are often cited as examples of why a founder should stay in control.

In this example, Zuckerberg owned less than 30 per cent of Facebook; however, he maintained a controlling vote through multiple voting rights. These voting rights enabled him to singlehandedly buy Instagram for over $1 billion without board approval.IMG_00000884

Some entrepreneurial observers may say that this is a good thing. Others who have been schooled in corporate governance would suggest too much power rested in one shareholder’s hands, and one who holds less than 50 per cent of the equity of the company. This example of a lack of corporate governance points a founder in the direction of how a private company and its strategic direction should be directed and controlled, while maintaining the vision the founders had when they formed the company.

When a company accepts equity investment from outside shareholders, the shareholders have an expectation that their rights will be protected by the board of directors. For a growth stage company, these many responsibilities become burdensome. I agree with most founders that their primary responsibility is to drive product development and acquire profitable customers. A founder who is both comfortable with and understands the alignment of the vision and strategic direction should be comfortable handing off some of the leadership responsibilities that guide the company.

Best practices of corporate governance for a public company separate the role of CEO of the company and the chairperson of the board of directors, often referred to as the non-executive chairperson or lead director. Under this structure, the CEO manages the affairs of the company under the direction of the board, and the governance structure or board of directors and its members are managed by the non-executive chairperson. Many founders are concerned with a loss of control in this structure; however, they need not be. With a strong selection process that was developed from a skills matrix, and a desire to have open and regular communication between the two roles, the company should be positioned for success.

….

Les devoirs des administrateurs selon la description de la règlementation UK


Aujourd’hui, je prends l’initiative de vous présenter un résumé de la règlementation UK eu égard aux devoirs des administrateurs de sociétés, accompagnée d’une explication de David Doughty*, expert en gouvernance, sur les sept (7) principaux devoirs principaux de ceux-ci.

Il n’y a rien de bien nouveau quant aux responsabilités qui incombent aux administrateurs en Grande-Bretagne. En fait, le UK Company Act date de 2006 et on y trouve une description claire, et toujours d’actualité, des fonctions d’administrateurs qui s’appliquent autant aux indépendants qu’aux non-indépendants (plus particulièrement, les membres de la hautes direction qui siègent au conseil).

Ce texte est tiré d’un récent billet paru sur le blogue de David Doughty. Bonne lecture !

Les devoirs des administrateurs selon la description de la règlementation UK

 

« The 2006 Companies Act, which set out to streamline and simplify UK Company law, ended up being one of the largest pieces of legislation ever written!

However, it did, for the first time, specify exactly what a Company Director’s duties are (which apply equally to both Executive and Non-Executive Directors), as follows:

  1. To act within powers
  2. To promote the success of the company
  3. To exercise independent judgement
  4. To exercise reasonable care, skill and diligence
  5. To avoid conflicts of interest
  6. Not to accept benefits from third parties
  7. To declare interest in proposed transaction or arrangement with the company

To take them one by one – To act within powers – how does a director know what powers he or she is required to act within?

A good place to start is the Articles of Association (previously known as the Memorandum and Articles or ‘Mem and Arts’) – when was the last time you looked at these? When did your board last review them to make sure that they are still appropriate? These, together with any shareholder agreements, contracts, covenants and other items form the company’s constitutional documents which define your powers as a director.

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If you haven’t looked at these for a while, or worse still, have never looked at them, then ask your Company Secretary for copies as soon as possible.

Next – To promote the success of the company – prior to the 2006 Act it used to be the case that company directors were responsible to shareholders and providing they endeavoured to ensure a decent return on the shareholders investment then they were complying with their duties.

Following the ‘unacceptable face of capitalism’ scandals of Lonrho and Slater Walker in the 1970s and the corporate failures of the ’80s leading to the Cadbury Report and the UK Corporate Governance Code it became clear that company directors had much wider duties which are now enshrined in the 2006 Companies Act, especially in respect of promoting the success of the company.

To promote the success of the company – having regard (amongst other matters) to:

The likely consequences of any decision in the long term;

The interests of the company’s employees;

The need to foster the company’s business relationships with suppliers, customers and others;

The impact of the company’s operations on the community and the environment;

The desirability of the company maintaining a reputation for high standards of business conduct; and

The need to act fairly as between the members of the company

Clearly, the new act, which applies equally to Executive and Non-Executive company directors in the UK, establishes a legal duty for directors to avoid short-termism in their strategic decision making and take into account the legitimate interests of their staff, suppliers, customers, the community and the environment as well as their shareholders.

With regard to the need To exercise independent judgement – it is important that, regardless of job title or board role or independence, all directors come to the boardroom table as equals, with joint and several liability for the decisions that they make and that they are not unduly swayed or influenced in making those decisions.

All directors are expected To exercise reasonable care, skill and diligence – which means that they should devote sufficient time to their role (which limits the number of directorships any individual may hold) and come to every board meeting well prepared, having read all the board papers and where possible, having had off-line conversations with fellow directors about key strategic matters.

Turning up to board meetings late and trying to read the papers during the meeting for the first time is unlikely to lead to an effective contribution to decision making or a satisfactory discharge of your duties as a company director.

Holding more than one board position or running your own business whilst serving on the board of another company are likely to compromise your legal duty To avoid conflicts of interest – whilst it is not always possible to avoid conflicts of interest, you should be aware of the possibility and alert the board when conflicts are likely to occur.

A well run board will have a Register of Interests, which will be reviewed annually, containing a list of all directors’ outside interests. The standing agenda for each board meeting should include an item for Declarations of Interests, at which point directors should declare if they have an interest in an agenda item. Often, if this is the case, the director will formally leave the meeting whilst the matter is being discussed and will only re-join once a decision has been made.

All directors should be aware of the requirement Not to accept benefits from third parties – compliance with this aspect of the act can be demonstrated by maintaining a Gifts and Hospitality register and ensuring that there is a company-wide policy on entertainment paid for by third parties.

Finally, directors need to comply with the requirement To declare interest in proposed transaction or arrangement with the company – most commonly this covers property transactions or contracts with businesses that a director has an interest in. The sphere of interests that need to be declared also usually includes the director’s spouse, children and immediate family.

If you are a company director and you have been aware of your duties under the 2006 Companies Act and you have been complying with them then you can be satisfied that you are acting within the law – if not, then you should review how you and your board operates to make sure that you are discharging your director’s duties correctly ».

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*David Doughty, Corporate Governance Expert, Chartered Director, Chairman, Non-Executive Director, Entrepreneur. He works with company directors to help them and their boards to be more effective. He provides Investment Due-dilligence, Board Evaluation, Director Development and facilitated Board Strategic Away-days.

Laxisme et passivité au conseil d’administration | La situation en G-B


Vous trouverez, ci-dessous, l’extrait d’un article très pertinent publié par Dina Medland , laquelle couvre le domaine de la gouvernance dans Forbes, qui fait état d’une entrevue conduite avec le professeur de Gouvernance Andrew Kakabadse, de la Henley Business School de Grande-Bretagne.

L’article met le doigt sur le conservatisme (et le traditionalisme) crasse des administrateurs qui siègent sur les conseils d’administration en Grande-Bretagne. L’attitude de non-intervention de plusieurs administrateurs conduit à un sérieux manque d’innovation dans la gouvernance des entreprises anglaises (UK).

Trouve-t-on le même laxisme et la même résistance aux changements dans nos organisations nord-américaines ?

Personnellement, je ne crois pas que ce soit à la même échelle mais les conseils d’administration souffrent beaucoup du manque de questionnement de leurs membres. Il y a, ici aussi, trop de passivité eu égard aux questions d’orientation de l’entreprise ainsi qu’aux actions de la direction.

Je vous invite donc à lire ce court article et à partager votre point de vue sur le sujet. Bonne lecture !

There Is A Crying Need For Innovation In Boardrooms

Andrew Kakabadse has built a reputation for sharp, insightful commentary on the boardrooms of publicly listed companies. Professor of Governance and Leadership at Henley Business School since last summer, he has spoken out before now on the declining worth of non-executive directors.

In an interview with me in April 2013, he suggested many non-executive directors in the UK’s boardrooms were ‘of little or no value to the business.’ Particularly scathing about the UK, he said : “We have a culture where we don’t ask questions.”

Dina Medland
Dina Medland, Contributrice pour Forbes

We also have a boardroom culture in the UK where we believe that “if it has worked fine for hundreds of years, why change it?” It is part and parcel, it seems of a national love of ritual – at which we clearly excel. The world’s love for very British celebrations -often involving members of the Royal family, horses, logistical feats of military planning and discipline and split-second timing- bears testimony to that. But the flip side of that seems to be that innovation is both rare, and resisted.

It is worth noting, therefore, that ICSA, the professional body for company secretaries – who are required for listed companies in the UK – chose Professor Kakabadse to undertake a piece of research on The Company Secretary, with a view to finding a way to progress the value of the role. (Note: for transparency, the software arm of ICSA which provides technology solutions for the boardroom is the commercial sponsor of my blog Board Talk but has no editorial control on input).

“On average, UK boards consist of 9 to 11 members, if whom the majority are over the age of 50. Fewer than half of these board members had had a job description and the chairman is very likely to be white, male and over the age of 60. Barriers to diversity remain firmly set throughout most boardrooms in the country” says the report.

It says the management and governance realities of boards indicate “animosity, a lack of intimacy with strategy, and poor communication” when it comes to top team strategy. Board and executive relations are “non-cohesive” when it comes to “shaping/negotiation of strategy, open interaction and trust.” Board members are described as “out of touch” – with “reality, markets and employees, unclear member role and contribution, productivity of meetings, engagement with the executive.”

……

L’état des travaux de recherche relatifs à la contribution des investisseurs activistes


Ainsi que mon billet du 19 août en faisait état, le débat est de plus en plus vif en ce qui regarde la contribution des « Hedge Funds » à l’amélioration de la performance à long terme des entreprises ciblées.

Vous trouverez, ci-dessous, un court billet de Martin Lipton, partenaire fondateur de la firme Wachtell, Lipton, Rosen & Katz, paru sur le site du Harvard Law School Forum on Corporate Governance, qui décrit la problématique et les principaux enjeux liés au comportement des investisseurs « activistes ».

L’auteur accorde une grande place aux travaux d’Yvan Allaire et de François Dauphin de l’IGOPP (Institut sur la Gouvernance d’Organisations Privées et Publiques) qui pourfendent l’approche économétrique de la recherche phare de Bebchuk-Brav-Jiang.

Le résumé ci-dessous relate les principaux jalons relatifs à cette saga !

The post puts forward criticism of an empirical study by Lucian Bebchuk, Alon Brav, and Wei Jiang on the long-term effects of hedge fund activism; this study is available here, and its results are summarized in a Forum post and in a Wall Street Journal op-ed article. As did an earlier post by Mr. Lipton available here, this post relies on the work of Yvan Allaire and François Dauphin that is available here. A reply by Professors Bebchuk, Brav, and Jiang to this earlier memo and to the Allaire-Dauphin work is available here. Additional posts discussing the Bebchuk-Brav-Jiang study, including additional critiques by Wachtell Lipton and responses to them by Professors Bebchuk, Brav, and Jiang, are available on the Forum here.

 

The Long-Term Consequences of Hedge Fund Activism

The experience of the overwhelming majority of corporate managers, and their advisors, is that attacks by activist hedge funds are followed by declines in long-term future performance. Indeed, activist hedge fund attacks, and the efforts to avoid becoming the target of an attack, result in increased leverage, decreased investment in CAPEX and R&D and employee layoffs and poor employee morale.IMG_00002145

Several law school professors who have long embraced shareholder-centric corporate governance are promoting a statistical study that they claim establishes that activist hedge fund attacks on corporations do not damage the future operating performance of the targets, but that this statistical study irrefutably establishes that on average the long-term operating performance of the targets is actually improved.

In two recent papers, Professor Yvan Allaire, Executive Chair of the Institute for Governance of Private and Public Organizations, has demonstrated that the statistics these professors rely on to support their theories are not irrefutable and do not disprove the real world experience that activist hedge fund interventions are followed by declines in long-term operating performance. The papers by Professor Allaire speak for themselves:

“Activist” hedge funds: creators of lasting wealth? What do the empirical studies really say?

Hedge Fund Activism and their Long-Term Consequences; Unanswered Questions to Bebchuk, Brav and Jiang

Les « Hedge Funds » contribuent-ils à assurer la croissance à long terme des entreprises ciblées ?


Voici un article publié par IEDP (International Executive Development Programs) et paru sur le site http://www.iedp.com

Comme vous le constaterez, l’auteur fait l’éloge des effets positifs de l’activisme des actionnaires qui, contrairement à ce que plusieurs croient, ajoutent de la valeur aux organisations en opérant un assainissement de la gouvernance.

Je sais que les points de vue concernant cette forme d’activisme sont très partagés mais les auteurs clament que les prétentions des anti-activistes ne sont pas fondées scientifiquement.

En effet, les recherches montrent que les activités des « hedges funds » contribuent à améliorer la valeur ajoutée à long terme des entreprises ciblées.

La lecture de cet article vous donnera un bon résumé des positions en faveur de l’approche empirique. Votre idée est-elle faite à ce sujet ?

 

Do Hedge Funds Create Sustainable Company Growth ?

 

Hedge funds get a bad press but are they really a negative force? Looking at their public face, on the one hand we see so the called ‘vulture’ funds that this month forced Argentina into a $1.5bn default, on the other hand we recall that the UK’s largest private charitable donation, £466 million, was made by hedge fund wizard Chris Cooper-Hohn. Looking beyond the headlines the key question is, do hedge funds improve corporate performance and generate sustainable economic growth or not?

Researchers at Columbia Business School, Duke Fuqua School of Business and Harvard Law School looked at this most important question and discovered that despite much hype to the contrary  the long-term effect of hedge funds and ‘activists shareholders’ is largely positive. They tested the conventional wisdom that interventions by activist shareholders, and in particular activist hedge funds, have an adverse effect on the long-term interests of companies and their shareholders and found it was not supported by the data.

Their detractors have long argued that hedge funds force corporations to sacrifice long-term profits and competitiveness in order to reap quick short-term benefits. The immediate spike that comes after interventions from these activist shareholders, they argue, inevitably leads to long-term declines in operating performance and shareholder value.

Three researchers, Lucian Bebchuk of Harvard Law School, Alon Brav of Duke Fuqua School of Business, and Wei Jiang of Columbia Business School argue that opponents of shareholder activism have no empirical basis for their assertions. In contrast, their own empirical research reveals that both short-term and long-term improvements in performance follow in the wake of shareholder interventions. Neither the company nor its long-term shareholders are adversely affected by hedge fund activism.

Their paper published in July 2013 reports on about 2,000 interventions by activist hedge funds during the period 1994-2007, examining a long time window of five years following the interventions. It found no evidence that interventions are followed by declines in operating performance in the long term. In fact, contrary to popular belief, activist interventions are followed by improved operating performance during the five-year period following these interventions. Furthermore the researchers discovered that improvements in long-term performance, were also evident when the intervention were in the two most controversial areas – first, interventions that lower or constrain long-term investments by enhancing leverage, beefing up shareholder pay-outs, or reducing investments and, second, adversarial interventions employing hostile tactics.

There was also no evidence that initial positive share price spikes accompanying activist interventions failed to appreciate their long-term costs and therefore tend to be followed by negative abnormal returns in the long term; the data is consistent with the initial spike reflecting correctly the intervention’s long-term consequences.

‘Pumping-and-dumping’ (i.e. when the exit of an activist is followed by long-term negative returns) is much sited by critics. But no evidence was found of this. Another complaint, that activist interventions during the years preceding the financial crisis rendered companies more vulnerable, was also debunked, as targeted companies were no more adversely affected by the crisis than others.

In light of the recent events in Argentina it is salutary to recall this important research. The positive aspect of activist hedge fund activity that it reveals should be born in mind when considering the ongoing policy debates on corporate governance, corporate law, and capital markets regulation. Business leaders, policy makers and institutional investors should reject the anti-hedge fund claims often used by detractors as a basis for limiting the rights and involvement of shareholders, and should support expanding rather than limiting the rights and involvement of shareholders. Boards and their executives should carefully monitor these debates in order to prepare for corporate governance’s evolving policy environment.