Directors Source News - February 2010

• Long-term Performance Briefing:
  Questions for Directors to Ask
• 2009 Best Practices in Disclosure
  of Director Related Information

• New Web-Based Search Tool
  from CSA

• Post Your Directorship
  Opportunity Here

• Rotman School of Management, University of Toronto: Small and Medium-sized Enterprise (SME) Board Effectiveness Program
• The Governance Essentials Program for Directors of Not-For-Profit Organizations (NFP Program), Institute of Corporate Directors
• Being Good at Doing Good: Safeguarding Yourself and Your Charity in a Complex World
• Meetings and Governance Best Practices

• Owning Up: The 14 Questions Every Board Member Needs to Ask
• From Conflict to Trust: How Mutual Funds Manage Conflicts of Interest

• Board Chair Succession Planning: 2009 Special Report
• A Challenge to Board Leadership: Get Culture Right
• What Directors Think

Safeguarding the long-term interests of the corporation is a fundamental duty of the board of directors. The board must oversee management’s plans for surviving market volatility in the short term, but may provide even greater value by focusing on the enhancement of the company’s performance in the longer term.

Long-term Performance Briefing: Questions for Directors to Ask is written to help Canadian directors focus on enhancing longer-term corporate interests despite the immediate pressures of the economic downturn. The briefing highlights a number of key areas for boards to address in order to enhance the corporation’s long- term performance and offers questions that are intended to be a catalyst for useful dialogue among directors, with management or with outside advisors.

The areas include business strategy, risk, finance, workforce, stakeholder relations, leadership, executive compensation, internal controls and board structure.

In the area of business strategy, a dynamic oversight process involving frequent updating is recommended. Directors should be asking questions such as:

• What management assumptions about the future state of the economy, capital markets and risk environment underpin the business strategy? What time horizon does the strategy address? Consider for example: Has management evaluated the implications of various economic scenarios over differing timeframes? Is the strategic plan based on a specific scenario? If so, how was it selected?
• Under the economic scenario used by management to formulate strategy, what are the long-term implications for the company in terms of: operations, capital projects, competitive environment, mergers and acquisitions, new opportunities, risk management strategies, access to capital, and availability of other resources?
• What is management’s best assessment of the business strategies likely to be adopted by competitors? Have these been taken into account in developing our own long-term strategic plan?

The Canadian Coalition for Good Governance (CCGG) recently published its 2009 edition of Best Practices in Disclosure of Director Related Information, a guide intended to improve disclosure about directors.

The document recommends disclosure practices that exceed the minimum requirements set out in the regulations. It emphasizes that to be effective, disclosure should be easy to find and understand, accurate and complete, and presented in a context that gives the information meaning. Section E provides a concise five-page summary in checklist format of the key recommendations and it also highlights the innovations from 2008. These innovations include:

• identifying the skills the board should possess and indicating the ideal number of directors who possess each skill;
• detailing the skills and experience each director contributes to the board;
• providing a timeline for directors to meet ownership requirements should the director fall under the minimum;
• outlining responsibilities for each board assessment tool;
• summarizing overall attendance rates at the board and committee levels;
• providing a chart summarizing board tenure.  

Rotman School of Management, University of Toronto: Small and Medium-sized Enterprise (SME) Board Effectiveness Program

Date: April 16-18, 2010
Location: Toronto

SMEs are key drivers of economic growth in our economy. Boards of early stage growth companies can contribute enormously to the growth and success of these businesses, but only if both directors and senior management of the firms understand and implement effective governance practices. This three-day program provides a framework for directors, entrepreneurs and advisory board members to explore governance issues unique to SMEs and allows participants to come up with their own plan of action to ensure the survival, growth and success of their businesses. Participants develop a "toolkit" for success, applicable to SMEs at various stages of growth and development.

The SME program offered by the Rotman School of Management is an ICD endorsed Director Education Program.

The Governance Essentials Program for Directors of Not-For-Profit Organizations (NFP Program), Institute of Corporate Directors

This program will provide learning on key accountabilities and responsibilities of not-for-profit leaders. Team-based, facilitated learning will be used to ensure participants learn not only from faculty but also from their peers. The program is for directors and executive directors of small and large not-for-profits and is available in various Canadian cities.

Being Good at Doing Good: Safeguarding Yourself and Your Charity in a Complex World

Conference Date: February 22-23, 2010
Location: Toronto

In today’s rapidly-changing world managing charities effectively is becoming increasingly complex. From transparency to taxation, abuse to accountability, leaders in the charitable sector today need to be more engaged, more involved, and more careful than ever before.

This conference, supported by the Canada Revenue Agency, will help you maximize your organization’s effectiveness and prevent your resources from being misused.

Leaders in the field, law-makers, experts, and representatives of charities in a series of sessions will talk about the key issues all charitable organizations are facing today.

Dates: February 16, 2010: Ottawa; March 29, 2010: Calgary; March 30, 2010: Vancouver.

This workshop will explore: the role of the Corporate Secretary before, during and after the meeting; the purpose of minutes — what to include/exclude and tips for effective minutes; board delegation, shareholder meetings, managing disclosure, corporate governance issues, subsidiary governance, supporting corporate departments and operations, policy maintenance, insiders, administration, and more.

Owning Up: The 14 Questions Every Board Member Needs to Ask

Published: March 2009
Author: Ram Charan

For both new and experienced directors, this book focuses on 14 practical questions that boards need to address and are particularly crucial now as boards deal with the aftermath of the global financial crisis.

Click here for more information

From Conflict to Trust: How Mutual Funds Manage Conflicts of Interest

Published: July 2009
Author: André Fok Kam, CA, MBA

A mutual fund is managed by a fund manager which enjoys broad powers and considerable discretion. There is a risk that the manager will use its discretion to further its own interests rather than those of investors.

The book analyses the potential conflicts of interest and explains how they may be managed, with particular emphasis on the critical role of the fund’s Independent Review Committee. The theme of the book is that, provided appropriate controls are in place, conflicting interests need not be incompatible with mutual trust between investor and fund manager. The book will be of interest to CAs who serve on Independent Review Committees of mutual funds or are otherwise involved in the mutual fund industry.

Click here for more information

The objective of this survey was to better understand how Canadian boards plan for the succession of the board chair. Korn/Ferry International and Patrick O’Callaghan and Associates surveyed 185 directors across Canada during the spring and summer of 2009 soliciting their comments and views regarding board chair succession planning.

Highlights of Survey:

• Ninety-seven percent of the directors surveyed believe that board leadership is either important or very important to the effectiveness of the board.
• Directors indicated that the four most important responsibilities of the board chair are ensuring the board has a strategic focus, helping set the tone and culture of the organization, managing relationships and ensuring that the Board is operating effectively.
• Directors indicated that the key skills and experience required by a modern chair include previous significant leadership experience, outstanding communication skills, an understanding of the relevant business and industry, and the time to devote to undertaking the broad range of board chair responsibilities in today’s environment.
• Just over half of all the directors interviewed indicated that there was no board chair succession planning process in place within their organization.
• When directors were asked if board chair succession planning received the appropriate amount of attention within their organization forty-nine percent of directors said that either it did not or they were not sure.
• Directors identified a number of important principles that should be taken into consideration when planning a board chair succession process.

The annual Spencer Stuart Board Index was released in October 2009.

Highlights from the study of the S&P 500 companies reveal that classified board elections have been almost completely eliminated; many more companies are setting a ceiling on how many boards their directors can serve; companies are receiving more direct communication on issues from shareholders; the number of boards with only one insider rose 6 percent in a single year; and ninety-four percent of boards do some type of performance evaluation on either director performance or the board’s performance (quality on these evaluations varies, but 94 percent is a very big number).

The annual survey by Corporate Board Member and PricewaterhouseCoopers indicates that the ravaged economy, a hands-on administration, and activist shareholders are producing big changes in how board members do their job. Some frustrations remain constant — i.e., the need to get a handle on CEO pay and the wish for a greater role in setting strategy. But directors are more open to shareholder involvement than might be expected. For instance, 92% of the 1,021 surveyed say they’re prepared to answer questions about their company’s strategy at annual meetings.

More directors than ever are rethinking their job — how they can effectively govern a company or, in a growing number of cases, whether they should even try. Underlying all this is an increasing sense of risk, something that threatens both the survey respondents and the companies they serve. The sampling of survey results below begins with how risk is affecting directors’ lives and how they assess their ability to recognize and manage it.

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