Tag Archives: corporate responsability

The “Glass ceiling” is cracked but not yet broken!

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Maile Carnegie, Google Australia Director, Amy Hood, CFO at Microsoft, Marissa Mayer, President and CEO of Yahoo, Sheryl Sandberg, CEO of Facebook… Progress has been achieved in corporate governance diversity practices and we can notice cracks in the glass ceiling but still, in 2013, women only account for 10.5% of board seats in the world(1).

gender diversity

Gender equality is a worldwide issue and is now becoming a priority for companies and their Boards. Recent research has shown that companies with more women in charge survived the 2008 financial crisis better: concerning French companies with a highly feminized management, at least 38%, declined less than the CAC 40… Hermès was the only large company whose share price rose and it has the second largest feminized management (55%). On the contrary, companies with mainly male management recorded the highest declines…(2)

Having more women on Boards seems to in a way protect companies from the crisis mostly because women behave differently to men, according to gender studies, women tend to take fewer risks and focus on long term priorities. The presence of just one woman as director can reduce the risks of going bankrupt by 20%!

Greater female representation on Boards also leads to increase the company’s performance. Boards with high female representation experience a 53% higher return on equity, a 66% higher return on invested capital and a 42% higher return on sales(3).

The close relationship between corporate performance and female directors proves that having “women on the Board is no longer just the right thing but also the smart thing to do” as said by Chris Bart, McMaster University business professor.

Women take decisions differently than men by reviewing more factors and competing interests to make the decisions fairer whereas men base their decisions on rules and traditions. Women directors will also answer in a better way to the needs and expectations of their female customers. This is significant since women account for 85% of purchasing decisions. They also bring value to the boardroom by expanding the content of discussions, raising new perspectives, asking more questions and promoting collaboration.

Studies show that one woman alone can make important contributions and bring value to Boards, adding a second woman to a Board helps but it takes the presence of at least three women to change boardroom dynamics and enhances everyday governance(4).

(1) GMI Ratings’ Women on Boards Survey
(2) Michel Ferrary : financial times
(3) Joy et al., 2007
(4) Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance


A small quizz about governance and boardroom !

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Test your knowledge about governance and rules on boardroom !

Quick Quiz

1. Why should a board have independent directors?

A. They can take over for executives if necessary.
B. They are able to make decisions free of conflict of interest
C. They do not hold large share positions in the company

2. Who has primary responsibility for risk management in a company?

A. The CEO
B. Board of directors
C. Shareholders

3. Scorecards are useful ways to:

A. Determine whether companies are following good corporate governance practices
B. Figure out which companies’ shares are likely to go up
C. Find out which directors serve on multiple boards

4. What is the difference between an executive director and a non-executive director?

A. The executive director heads a board committee; the non-executive director does not
B. The executive director is also a member of management, while the non-executive director is not
C. There is no difference

5. Which characteristic would disqualify a director from being independent?

A. A member of the company’s management
B. An expert in the company’s industry
C. An executive at another company

6. One of the following committees is most common for a board of directors. The others are optional. Which one is most common?

A. Mergers and acquisitions
B. Audit committee
C. Ethics

7. Tag-along rights means:

A. Public citizens may attend a company’s annual meetings
B. Minority shareholders can join in if a majority shareholder sells a stake
C. A method of voting on director nominations

8. Succession planning is the responsibility of:

A. Shareholders
B. Current managers
C. The board of directors

9. “Say on Pay” means:

A. Board chairman decides CEO compensation
B. Compensation committee makes a decision
C. Shareholders have an advisory voice in compensation issues

10. What is tunneling?

A. Separating management roles by function
B. Directing profits to company activities rather than dividends
C. Transferring the company’s assets to deprive shareholders of value

Answers:
1. B, 4. B, 7. B, 10. C
2. B, 5. A, 8. C,
3. A, 6. B 9. C,

Source: Who’s running the company ?

Peter Hadekel: Montreal startup develops governance tool

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This article come from Thegazette, write by Peter Hadekel

MONTREAL — Better corporate governance has become a top objective of just about every publicly traded company. Boards of directors are more scrutinized than ever before by analysts, shareholders and regulators.

Amid an outbreak of corporate fraud over the last decade, legislative changes have placed a lot more responsibility and accountability on the shoulders of directors.

Now, a small Montreal startup has identified a way to help boards work more efficiently and with greater transparency

The business, known as Leading Boards, started four years ago under entrepreneur Jean-Marc Félio after he had served as director of a non-profit organization.

At the time, the organization needed to distribute a number of documents to directors and Félio realized that a digital system for sharing and archiving documents would make sense.

He spent a couple of years developing a software program with an information-technology specialist and then took eight months testing the product with a range of small, medium and large enterprises.

At the end of 2010, Leading Boards began to commercialize the system and has signed 60 clients so far — many of them either publicly traded firms or non-profit institutions.

The system is a secure “board portal” that reduces or eliminates printouts and multiple copies of documents. It can eliminate courier service costs and reduce meeting preparation time, Félio says.

“Just look at the amount of paper that is sent to the board of a large company — it’s the equivalent of about two telephone books every month.”

Directors often find they need to consult a corporate document of some kind only to find that it’s not at hand and they need to have it sent. They get another set of the same binders when they come to a board meeting.

That wastes even more money. Document costs can run to more than $15,000 a year for a single committee of seven directors.

Leading Boards puts together a complete archive of documents ranging from agendas and minutes of meetings to financial statements, directors’ committee reports and corporate policy statements.

The system has been developed with the practical needs of directors in mind. “You get powerful search engines, information sharing, quick, easy access,” Félio says. Agendas are interactive and directors can write personal or shared notes in a “Post-it” style.

Perhaps the biggest gain is increased transparency. The system can be set up to allow different levels of access, whether by shareholders, regulators or fellow directors.

It’s best suited for iPads and tablets, he says.

Félio worked in film and television and taught communications at the university level before taking the entrepreneurial plunge. He financed the startup out of his own pocket but recently got an additional investment from an angel investor to help him develop the market.

Leading Boards is not the only player in this game. Two other software providers — BoardBook and BoardVantage — service the market for Fortune 500 companies in the U.S.

But Félio hopes to capitalize on the market in Canada for smaller, listed companies that need to save time and money on governance and compliance.

Among clients that have recently signed up are two publicly traded mining companies in Quebec: Argex Titane Inc. and St-Georges Platinum & Base Metal Ltd. Both companies said they expect the software package will wind up improving board governance.

The trilingual nature of the software package, offering English, French and Spanish capabilities, will open up new avenues of growth in Europe and Latin America, as well the Middle East and North Africa, Félio believes. He is already in discussions with a firm about a joint venture to sell the product in France.

The company hosts the web-based system for clients who pay an annual service fee. It has about half a million dollars in annual revenue so far and six employees, expecting to double in size every year.

Among the non-profit or public organizations using the system is Montreal’s Palais des congrès, he said. Expressions of interest have come from a number of other provincial agencies.

9 keys issues for board of administrators in 2013

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Here you have a list of the key issues that are newly emerging or will be especially important in the coming year. Each year, the legal rules and aspirational best practices for corporate governance, as well as the demands of activist shareholders seeking to influence boards of directors, have increased. So too have the demands of the public with respect to health, safety, environmental and other socio-political issues.
Looking forward to 2013, it is clear that in addition to satisfying these expectations, the key issues that boards will need to address include:

1. Working 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.

2. Working with management and advisors to review the company’s business and strategy, with a view toward minimizing vulnerability to attacks by activist hedge funds.

3. Resisting the escalating demands of corporate governance activists, which this year will continue the efforts to increase shareholder power and dismantle takeover protections and include proposals to separate the positions of Chairman and CEO and to lower the percentage of outstanding shares necessary for shareholders to call a shareholder meeting.

4. Organizing the business, and maintaining 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.

5. Developing an understanding of shareholder perspectives on the company and fostering long-term relationships with shareholders, as well as coping with the escalating requests of union and public pension funds and other activist shareholders for meetings to discuss governance and business proposals.

6. Developing an understanding of how the company and the board will function in the event of a crisis. 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.

7. Retaining and recruiting directors who meet the requirements for experience, expertise, diversity, independence, leadership ability and character, and providing 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.

8. Working with management to cope with the proliferation of new regulations and changes in the general perception of business that have followed the financial crisis.

9. Dealing with populist demands, such as criticism of executive compensation and risk management, in a manner that will pre-empt increased regulation and avoid escalation of activist’s demands while at the same time furthering the best interests of the company.

This article is extract from:  Key Issues for Directors in 2013

Ten things for boards of directors to avoid

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Here we will see ten things that a boards of directors can avoid to improve their performance.

 

 1. Avoid presentation overload

Presentations should not dominate board meetings. If your board meetings consist of a scripted agenda packed with one presentation after another, there may not be sufficient time for substantive discussions. The majority of board meetings should be focused on candid dialogue about the critical strategic issues facing the company. Management should feel confident that the board will read these pre-meeting materials, and the board must commit an adequate amount of time in advance of the meeting to do so. Board portal can help administrators to be prepared before the meeting.

2. Avoid understating the importance of compliance

There is no room for a culture of complacency when it comes to compliance with laws and regulations.

3. Avoid postponing the CEO succession discussion

CEO succession planning is one of the primary roles of the board. During this time of rebuilding and prior to the implementation of new regulations, boards should assess where time is being spent and perhaps redirect focus on succession.

It is important to note that the succession planning process is continual and doesn’t end when a new CEO is selected.

4. Avoid the trap of homogeneity

The topic of board composition and having the “right” people on the board continues to receive much attention. The board needs to assess whether this new mix translates into a positive and productive board dynamic. Boards should take a closer look at the expertise, experience and other qualities of each member to ensure the board that can provide the right expertise. Diversity of thought provides the perspectives needed to effectively address critical topics, which can contribute to greater productivity and ultimately a stronger board.

5. Avoid excessive short-term focus

Recent history offers many examples of modern corporate entities managing to reach short-term results at the expense of long-term prosperity. The board can demonstrate its leadership by being the voice of reason and openly discussing the sustainability of strategic initiatives. This can result in a well-governed company with a greater chance of achieving long-term, sustainable success.

6. Avoid approvals if you don’t understand the issue

Complex issues can have significant implications for the survival of an organization. It is up to directors to make sure that they understand issues that can alter the future of an enterprise before a vote is taken. If you don’t adequately understand the issue, ask for more education from management or external experts. True consensus results from a thorough debate and airing of the issues before the board, resulting in a more informed vote by directors.

7. Avoid discounting the value of experience

As a director, it is important to recognize the value that your experience can bring to the issues at hand. It is bringing together the diverse skills and experiences of each director to lead the company through challenges. Directors can provide greater insight by being ‘situationally aware’ when evaluating events and courses of action to take.

8. Avoid stepping over the line into management’s role

A board that makes management decisions will find it difficult to hold the CEO accountable for the outcome. A director’s role is to oversee the efforts of management rather than stepping into management’s shoes. Directors must make a concentrated effort to ensure that they have clarity on management’s role, which is to operate the company.

9. Avoid ignoring shareholders

A company’s shareholders are among the most important and potentially vocal constituents of the enterprise. Concerns can sometimes be addressed by providing shareholders an audience with the board to air their concerns.

10. Avoid a bias to risk aversion

With the recent focus on excessive risk-taking and its impact on the credit crisis, there is concern that companies and boards may become risk-averse.

 

This article is extract from: Ten things for boards of directors to avoid by Deloitte

5 elements which can disturb the progression of boards

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The definition of board effectiveness has shifted dramatically over the past decade. In the aftermath of the global financial crisis and numerous corporate scandals, a director now confronts not only complex oversight accountability, but also personal risk and liability.

To be truly effective, a board needs directors who can work as a group to clearly define their role and mission, and in specialized individual roles, such as succession planning, acquisitions and capital allocation.

 

Here, we will see five elements that tend to hinder the progression of boards toward self-actualization and high performance.

If your board present some disrupters, see on the list if you recognize some symptom enumerate.

 

 

  • Lack of clarity on the roles of individual directors and the board as a whole. Role ambiguity slows decision-making and causes unnecessary director conflicts.

 

  • Poor process management hinders effective board preparation, meeting management, and communications. This results in indecisiveness and a lack of urgency on critical challenges facing the organization.

 

  • Lack of alignment and agreement on company strategy causes disinterest among board members, who then simply default to tackling regulatory and compliance issues. Poor strategic alignment also hampers a board’s ability to prioritize issues and set their near-term agendas. This often causes board disruption and sends damaging signals to financial markets.

 

  • Poor team dynamics fracture boards and lead to power struggles. Like any effective working group, a board should be comprised of professional peers who respect and work well with each other.

 

  • Board composition is a serious impediment, if not done right. Today’s challenges require new perspectives and skills. But boards often lack the ability to objectively evaluate their makeup to determine if they have the right people and skills at the table.

 

You must be careful with this element, because they can affect your board if you don’t take them in account and if you don’t take the good measure.

 

This article is extract from A More Effective Board of Directors

Four areas of inquiry in the compliance function.

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The compliance function is an independent function that identifies, evaluates and controls the risk of non-compliance of the establishment.

How to make the board compliant? What are the areas which can help you to fulfill this function   ? What is the impact for a board portal ?

Here, there are four areas of inquiry that a board should take up with the company’s chief compliance officer.

Structure questions

This area consists of questions which will help determine the fundamental sense of a company’s overall compliance program. The questions should begin with the basics of the program through how it operates in practice. Such inquiries should allow each board member to communicate the main elements of a compliance program.

Culture questions

This area should focus on the culture of the organization regarding compliance. Board members should have an understanding of what message is being communicated not only by senior management but also by middle management. Equally important, the board needs to understand what message is being heard at the lowest levels of the company.

Areas of risk

Board members ‘need to know what process is being used to identify emerging risks’. Such risk analysis would be broader than simply a legal or compliance risk assessment; it should be tied to other matters, such as ‘business continuity planning and crisis response plans’.

Forecast

A truly effective and informed board knows where the company stands at the present moment, but it also has a strategic plan for how the compliance and ethics program can continue to excel. This could be encapsulated in a one-three-five year compliance game plan. However, the compliance program should be nimble enough to effectively respond to new information or actions, such as mergers or acquisitions, divestitures or other external events. If the dynamic changes, ‘you want to get your board’s attention on the changes which may need to happen with the [compliance] program’. This is best accomplished by obtaining buy-in from a board that understands the role of forecasting the compliance program going forward.

 

This article is extract from : Board of directors and compliance: four areas of inquiry

How diversify your boardroom?

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`The number one issue in corporate governance is the diversification of boards.

The results confirm this as the Canadian Board Diversity Council found. Only 150 out of 1000 Canadian companies had any diversity on boards.

What is the business case for diversity on boards?

 

There is also evidence that women make better monitors of management and that performance of men increases when women join boards. The other business case for diversity is a simple talent issue.

 

So how do boards diversify themselves? What are leading practices the best boards are doing?

 

 

Step 1: Recruit directors solely on the basis of competency, not on whom you know.

A board is a team. Team members have different abilities. “Competency” can include experience, skills, knowledge and behaviours. A good board draws up a matrix of competencies it needs on one axis and individual directors along the other. It defines the competencies and the scale, and then individual directors assess themselves relative to each other.

 

Step 2: Recruit directors whom you do not know personally and who are first-time directors.

Once you have the desired director competencies, the next step is to recruit directors who fill this gap. Cast your net wide and go beyond personal and professional networks. Have a diligent way of short-listing resumes and ask candidates to address the specific competencies you need.

Don’t be afraid to short-list diverse candidates whom you likely will not know, including first-time directors who have stellar qualifications your board needs.

 

Step 3: Link director time on the board to performance.

Have on boarding, coaching and development for new directors. Then, assess each director on his or her contribution at regular intervals.

 

Step 4: Be prepared to be accountable.

Consistency and follow-through are the only means by which diversity can be achieved. We can expect that some current directors may object to these best practices. Change is difficult and upsetting the status quo is threatening.

 

Finally, you should disclose the basis upon which directors are recruited, developed and assessed so shareholders can vote meaningfully on each director at the time of renewal or removal. This sets the tone that the board holds itself responsible and accountable to shareholders in the same way it expects management to be accountable to itself. Your board and organization will be the better for it.`

 

This article is extract from: Four Steps to a More Diverse Corporate Board

What to do With Proxies That You Get in the Mail

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By Sheyna Steiner,

On the bankrate website, Sheyna Steiner deals about the next question :
Why your proxy vote matters in proxy season?

“ Proxy season may be winding down, but next year’s voting season will be here sooner than you realize. If you’re at all interested in influencing corporate governance, then learn the ins and outs of proxy voting before your company’s meeting or before next year’s ballots arrive in the spring.

For small-time owners of common stock in companies, it can be easy to discount the importance of participating in corporate governance. Why should management at Exxon Mobil Corp. care about the votes from a shareholder with a measly 100 shares, for instance? But adding your voice to those of other shareholders, big and small, can get attention and influence the decisions of the board of directors, the management and the social and environmental direction of the company.

What is a Proxy? Why Do You Vote It?

Before the annual shareholder meeting, packets of information containing the proxy statement are sent to all shareholders. The proxy statement contains information about the topics to be covered at the annual meeting, including nominations for the board of directors and the pay packages of the top five executives. There are also proposals from management as well as shareholder proposals.

Also included in the mailing is background information on the issues.

The shareholder then fills out the proxy ballot, also known as a voting instruction form, and sends it back.

Alternatively, shareholders can vote by phone or over the Internet.

The various issues up for a vote every year receive different treatment from management. For instance, while the votes for directors on the board are binding, the say on pay vote and those on shareholder resolutions are considered advisory.

For the advisory votes, “there’s nothing legally binding where the company has to make a change. But even if there are just 20% of shareholders who voted in favor of a certain initiative, that’s a lot. When a portion of your shareholders get together in support of an issue, that warrants discussion at least,” says Jessica Clarke, advocate relationship manager at Moxy Vote, a proxy voting research firm.”

The author continue the analyse with the shareholder initiatives and their power over decisions

Shareholder initiatives

“Anyone who owns $2,000 worth of a company’s stock for one year can submit shareholder resolutions to be voted on at the shareholder meeting. Shareholder initiatives span many different environmental, social or governance issues.

Like most investment mailings, proxy voting materials tend to be complex and a little esoteric. In most cases, the nominations for the board of directors are not particularly well-known people, and the other issues up for a vote can also require some research…”

Read the full article on the bankrate website

In CAMERA Board Session… Why?

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One of the most delicate topics in governance is the ability to discuss freely any contentious agenda items. As the Board and committees are intended to oversee the management and the executive team in place, it may be difficult in their presence to address openly certain subjects during a meeting. This may be even more difficult when discussing and evaluating their performance.

The governance practice “in-camera session” is designed to help board to manage these delicate situations.  Note that in-camera session if started should be held at every meeting, otherwise it will stress too much the CEO and the management since they will suspect that a request for a private session is to talk about them.

A definition of what constitutes an in-camera session is  when directors meet on their own, without management or any other non-Board member present.

The legal term is “recused,” which means to disqualify someone from participation in a decision on grounds that they cannot, because of a particular interest or position, objectively discuss the matter.

Currently accepted principles of good governance provide that all boards and committees should regularly hold scheduled in camera sessions for board members only.

We find several references to this practice to hold a session of 15 minutes or less at the end of CA with only directors. It’s providing them with the opportunity to talk about more sensitive elements or simply get together as a team. In Camera session provide:

• an opportunity for the board to discuss particularly sensitive matters within the jurisdiction of the board (such as litigation, work relations, management/CEO’s performance )

• an opportunity for the board to discuss sensitive internal board governance matters, attendance, evaluation, leadership

• an opportunity for the board to review the performance and compensation of the president, discuss the attitude of one director, etc.

In conclusion, in–camera sessions are a very valuable tool allowing full and open debate on different topics strictly between board members and without any possible interference.