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	<title>IGOPPChairman of the Board &#8211; IGOPP</title>
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		<title>Board members are independent but are they legitimate and credible?</title>
		<link>https://igopp.org/en/from-independent-to-legitimate-and-credible-the-challenge-facing-boards-of-directors/</link>
		<comments>https://igopp.org/en/from-independent-to-legitimate-and-credible-the-challenge-facing-boards-of-directors/#respond</comments>
		<pubDate>Thu, 07 Jun 2018 16:00:42 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[Policy Papers]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Independence of Board members]]></category>
		<category><![CDATA[Value-creating governance]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=9825/</guid>
		<description><![CDATA[That boards should be made up of a majority of independent members, that goal has been achieved in almost every type of organization. While this achievement did undoubtedly raise the quality of governance, it turned out that «independent boards» were not the cure-all medicine that some anticipated. Already in 2008 in a policy paper on [&#8230;]]]></description>
		<content><![CDATA[That boards should be made up of a majority of independent members, that goal has been achieved in almost every type of organization. While this achievement did undoubtedly raise the quality of governance, it turned out that «independent boards» were not the cure-all medicine that some anticipated.

Already in 2008 in a policy paper on that topic, IGOPP predicted that the concept of directors’ independence would not yield the expected results and would prove disappointing in many respects. That policy paper suggested that the concepts of legitimacy and credibility were far superior to the concept of independence in driving the performance of organizations. For IGOPP, independence – a director’s lack of any personal interests contrary to those of the company – was but a necessary condition for legitimacy.

Events since, in particular the financial crisis of 2008, have backed up the position taken by IGOPP at the time and have generated new legitimacy issues such as the diversity of boards, the representation on boards of stakeholders other than shareholders, the right, contingent upon a minimum holding period, to nominate candidates for the board, age and tenure limits for board membership.

As for board’s credibility, the 2008 policy paper proposed that it hinged on “its experience and expertise relevant to the specific issues and challenges of the organization”, on its in-depth knowledge “of the company’s business model and its drivers of economic and social value” (Allaire, 2008). For IGOPP, credibility also entails integrity and mutual trust between management and board members. Therefore, this credibility was so important that it would be acceptable, and even necessary, to trade-off some independence if this was the price to pay for raising the board’s credibility.

IGOPP’s position in 2018 offers some clarification and tackles some of the new issues which have arisen since 2008.

Thus this policy paper proposes a fundamental change in governance with respect to board evaluation, member selection and profile of expertise sought for the board.
]]></content>
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		</item>
		<item>
		<title>Board members are independent but are they legitimate and credible?</title>
		<link>https://igopp.org/en/board-members-are-independent-but-are-they-legitimate-and-credible/</link>
		<comments>https://igopp.org/en/board-members-are-independent-but-are-they-legitimate-and-credible/#respond</comments>
		<pubDate>Thu, 07 Jun 2018 16:00:19 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[Press Releases]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Independence of Board members]]></category>
		<category><![CDATA[Value-creating governance]]></category>

		<guid isPermaLink="false">https://igopp.org/les-administrateurs-sont-independants-mais-sont-ils-legitimes-et-credibles/</guid>
		<description><![CDATA[Montreal, June 7, 2017 – Today, the Institute for Governance (IGOPP) is publishing a policy paper entitled: From independent to legitimate and credible – The challenge facing boards of directors. Back in 2008, IGOPP had noted that, despite its presumably crucial role and its omnipresence, the concept of «independent» board members lent itself to several [&#8230;]]]></description>
		<content><![CDATA[Montreal, June 7, 2017 – Today, the Institute for Governance (IGOPP) is publishing a policy paper entitled: From independent to legitimate and credible – The challenge facing boards of directors.

Back in 2008, IGOPP had noted that, despite its presumably crucial role and its omnipresence, the concept of «independent» board members lent itself to several interpretations. It was taken for granted that a board made up of a majority of truly independent directors would deliver better governance and a more diligent focus on improving the performance of the organisation for all its stakeholders.

The financial crisis of 2008 and other widely reported mishaps have dented the confidence in «independence» as an assurance of effective monitoring and investor protection. Ever since that time, IGOPP has been advocating for a broader assessment of boards, namely their legitimacy and credibility. Let «independence» be a necessary but insufficient condition of legitimacy. However, the issue of board legitimacy raises a host of relevant questions: who does, or should, nominate members for the board? Who elects, or should elect board members? Why only shareholders may elect board members of publicly traded corporations? Does diversity, or lack of such, become an issue of legitimacy for boards?

Since 2008, IGOPP has also been proposing that a board's credibility is a condition sine qua non of its effectiveness and ability to add value. Clearly, all, or nearly all, boards meet the regulatory requirement of a majority of independent members, but are boards generally credible?

IGOPP proposes that board members be evaluated for their specific knowledge of, and experience with, the type of business or organization they are asked to govern. Do members understand in depth its business model, its drivers of value creation, the risks, issues and challenges in this particular industry, its comparative performance, etc.?

A board of directors is only credible to the extent that a significant number of its members are able to interact knowledgeably with management on components of performance and the multiple factors that have a dynamic influence on that performance. This type of exchange calls for a board’s deep and systemic understanding of the company's business model.

Credibility also implies that board members are perceived as principled and trustworthy. 

The chair of the board and its governance committee should devise a selection grid which corresponds to the current requirements for board membership. Thus, more than half of the members must be independent and a degree of diversity is becoming an essential requirement of the board make-up. Ideally, the board should look for new members who are independent, add to the board's diversity, and are credible within the meaning given to this term in this policy paper.

This policy paper strongly suggests that boards should begin by identifying industries with characteristics that closely track those of the industry in which the target company operates: such as capital intensity, time horizon of investments, industrial vs. consumer markets, international scope of competition, key success factors, strategies and drivers of value.

The reason for this is obvious. As recruiting board members from the same industry will often result in candidates who are not independent for some reason or another, the search should be broadened to industries which are similar in important features.

Executives with experience in such industries will more quickly master the essential aspects of a company operating in a “similar” industry. This recommendation will help reconcile the regulatory need for "independence" and the important quest for "credibility".

The policy paper published today provides guidelines for the selection and evaluation of board members to enhance their legitimacy and credibility.

IGOPP reminds all boards of directors that:

"It is through its legitimacy that a board gets the right and authority to impose its will on management but it is only through its credibility that a board will create value for all stakeholders of the organization" (Allaire, 2008).

&#160;

General Information and Media Inquiries:

Majida Lamnini
Director, Strategic Initiatives, IGOPP
514.439.9301
mlamnini@igopp.org [1]

Ginette Hains
Project Director, IGOPP
514.439.9301
ghains@igopp.org [2]

[1] https://igopp.orgmailto:mlamnini@igopp.org
[2] https://igopp.orgmailto:ghains@igopp.org]]></content>
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		<item>
		<title>The CEO pay crusade</title>
		<link>https://igopp.org/en/the-ceo-pay-crusade/</link>
		<comments>https://igopp.org/en/the-ceo-pay-crusade/#respond</comments>
		<pubDate>Thu, 29 Jun 2017 19:40:57 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Chief Executive Officer]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Institutional investors]]></category>
		<category><![CDATA[Say on Pay]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=8342/</guid>
		<description><![CDATA[For a few months there, 2016’s political earthquakes seemed to signal a power shift away from the 1%. What started with the Brexit vote escalated when Donald Trump won the White House. Now, as we barrel toward an apocalypse incited by ill-advised presidential tweets, all that anti-elite anger has somehow been forgotten—and with it, any [&#8230;]]]></description>
		<content><![CDATA[For a few months there, 2016’s political earthquakes seemed to signal a power shift away from the 1%. What started with the Brexit vote escalated when Donald Trump won the White House. Now, as we barrel toward an apocalypse incited by ill-advised presidential tweets, all that anti-elite anger has somehow been forgotten—and with it, any hope of a crackdown on runaway CEO pay.
Need proof this is an outrage that must be reined in? In an era of ruthless corporate cost-cutting and job losses, CEO pay on both sides of the Canada-U.S. border is astronomical. According to the Canadian Centre for Policy Alternatives, the top 100 highest-paid CEOs in Canada made, on average, $9.5 million a year in 2015. That’s 193 times the average industrial worker’s wage and a 30% increase from 2008, the start of the global financial crisis.
Take H&#38;R REIT: CEO Tom Hofstedter won the corporate governance lottery last year when his board blessed him and fellow executives with a batch of exceptionally lucrative stock options (on top of the $78-million worth of stock he already owned). Normally, options are granted at idealistic future prices, as a reward to executives for boosting the company’s equity value. But H&#38;R’s board issued Hofstedter’s practically at-the-money, which meant he could use them to buy shares almost right after he got them. And the timing happened to fall in late February, 2016—the same month H&#38;R’s stock fell to its lowest level in over five years.
[ ... ]
Until institutional shareholders get comfortable with calling out boards and CEOs (and let’s hope they do, soon), a few structural fixes could do wonders. For starters, make say-on-pay votes binding. As of early this year, according to the Montreal-based Institute for Governance of Private and Public Organizations, 80% of large Canadian companies have embraced say-on-pay. But such votes are meaningless if boards aren’t required to act on the results—and they often don’t. (A notable exception: Barrick Gold reformed its compensation after failing say-on-pay votes twice in three years.)
Read more [1]

[1] https://www.theglobeandmail.com/report-on-business/rob-magazine/its-time-to-overhaul-the-way-we-compensateceos/article35475579/]]></content>
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		</item>
		<item>
		<title>Are our State-owned enterprises well governed?</title>
		<link>https://igopp.org/en/are-our-state-owned-enterprises-well-governed/</link>
		<comments>https://igopp.org/en/are-our-state-owned-enterprises-well-governed/#respond</comments>
		<pubDate>Thu, 08 Jun 2017 17:00:09 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[News and Media]]></category>
		<category><![CDATA[Press Releases]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Gouvernance créatrice de valeurs]]></category>
		<category><![CDATA[Indépendance des administrateurs]]></category>
		<category><![CDATA[Independence of Board members]]></category>
		<category><![CDATA[Public governance]]></category>
		<category><![CDATA[Value-creating governance]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=8166/</guid>
		<description><![CDATA[Montreal, June 8, 2017 – The Institute for Governance (IGOPP) is unveiling today the results of a study about the quality of governance at 46 Quebec State-owned enterprises, which collectively have revenues of $63 billion, employ some 65,000 people, receive more than $4 billion in subsidies and generate more than $4 billion in dividends for the [&#8230;]]]></description>
		<content><![CDATA[Montreal, June 8, 2017 – The Institute for Governance (IGOPP) is unveiling today the results of a study about the quality of governance at 46 Quebec State-owned enterprises, which collectively have revenues of $63 billion, employ some 65,000 people, receive more than $4 billion in subsidies and generate more than $4 billion in dividends for the government.

Given their economic and fiscal role, it is important to assess the overall governance of these organizations, the make-up of their boards, their transparency, their adherence to best practices.

The governance score given to each State-owned enterprise is based on 47 variables selected to assess four different aspects of governance: (1) Board composition and structure (26% of total score); (2) Dynamic of board meetings (14%); (3) Qualifications of board members and their appointment/selection process (31%); and (4) Transparency, disclosure and accountability (29%).

These are summary findings:

 	Quebec State-owned enterprises achieved grades for governance ranging from 25% to 87%;
 	A significant difference is noted between those organizations which are subjected to the Quebec law on governance of State-owned enterprises enacted in 2006 versus those which are not;
 	Only half of the 46 State-owned enterprises in this study achieved a passing grade (60% and up).

These results lead to specific recommendations addressed in part to the Quebec government and in part to the boards of directors of State-owned enterprises.

The Quebec government should review and amend the outdated statutes governing several corporations so that all are required to implement best governance practices.

All boards of directors should adopt high-level governance principles and processes, even if not called for by their legal statute, provided that they do not thereby infringe the statute's requirements.

All boards should review their governance score and take measures to swiftly improve their score.

It is noteworthy that, with few exceptions, State-owned enterprises do not divulge the profile of expertise and experience they have set for their board, do not, in many cases, provide complete biographies of their board members, and rarely make public the relationship between the profile of expertise set for the board and the individual biographies of board members. Such disclosure has now become inescapable for any corporation listed on an exchange.

Finally, the information on the compensation of executive officers is often incomplete and, too often, their websites are not user-friendly making it difficult to access information on their governance, their financial results, their strategic plan and whatever performance indicators they use to monitor management.

For any information or to request an interview: 

Majida Lamnini
 Director, Strategic Initiatives, IGOPP &#124; 514.439.9301 &#124; mlamnini@igopp.org [1] &#124;www.igopp.org

[1] https://igopp.orgmailto:mlamnini@igopp.org]]></content>
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		</item>
		<item>
		<title>IGOPP&#8217;s Executive Chair of the Board will be named a Knight of the Order of Montreal</title>
		<link>https://igopp.org/en/le-president-executif-du-conseil-de-ligopp-nomme-chevalier-de-lordre-de-montreal/</link>
		<comments>https://igopp.org/en/le-president-executif-du-conseil-de-ligopp-nomme-chevalier-de-lordre-de-montreal/#respond</comments>
		<pubDate>Fri, 05 May 2017 14:55:08 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Press Releases]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Homages]]></category>

		<guid isPermaLink="false">https://igopp.org/le-president-executif-du-conseil-de-ligopp-nomme-chevalier-de-lordre-de-montreal/</guid>
		<description><![CDATA[By virtue of his long-standing commitment and exceptional contribution to the evolution of the governance of our public and private organizations, on May 17, 2017, professor Yvan Allaire, executive chair of the board of the Institute on Governance (IGOPP), will be named a Knight of the Order of Montreal, the city&#8217;s highest distinction. On May [&#8230;]]]></description>
		<content><![CDATA[By virtue of his long-standing commitment and exceptional contribution to the evolution of the governance of our public and private organizations, on May 17, 2017, professor Yvan Allaire, executive chair of the board of the Institute on Governance (IGOPP), will be named a Knight of the Order of Montreal, the city's highest distinction.

On May 4, 2017, the executive committee of the City of Montreal, on the recommendation of the mayor of Montreal, Denis Coderre, announced the appointment of 17 well-known Montrealers, including professor Allaire, who will receive the medal of the Order of Montreal next May 17.

The Order of Montreal, an important legacy of the 375th anniversary of Montreal, is aimed at recognizing exceptional women and men who have made a remarkable contribution to the development and reputation of Montreal.




Yvan Allaire is one of the most influential business figures in Québec and Canada. A renowned international leader in the field of business strategy and governance, he has led a brilliant academic career and played an exceptional role in the business world.








Professor emeritus of strategy at the Université du Québec à Montréal (UQAM) since 2001, Allaire has been the Executive Chair of the Board of the Institute for governance (IGOPP) since 2005. His contribution as Chair of the task force on the governance of government corporations, in 2003, led to the enactment of Québec’s Act Respecting the Governance of State-Owned Enterprises in 2006. He has published over a hundred works and articles covering every aspect of corporate governance, the most recent of which were co-authored with Mihaela Firsirotu.

Allaire was the co-founder and, from 1975 to 1990, Chair of the Board of the SECOR Group, a major Canadian strategic consulting group which became KPMG-Secor in 2012. He was also Executive Vice-President of Bombardier from 1996 to 2001 and has served on many Boards of Directors, including those of the Council of Universities, the École de technologie supérieure, the Social Sciences and Humanities Research Council, Bombardier, CGI Group, the Caisse de dépôt et placement du Québec, the Aga Khan Foundation and the Montréal Council on Foreign Relations.

In 1976, his visionary approach was instrumental in establishing the joint doctoral program in administration in the four Montréal universities, and, in 1979, the executive MBA program that sealed the reputation of UQAM’s management science school, the École des sciences de la gestion (ESG).

From 2010 to 2014, Yvan Allaire was, first, a member and, then, the Chair of the World Economic Forum’s Global Agenda Council on the Role of Business, a task force made up of some of the most eminent thinkers and senior leaders of the business world, academia and the media.

Allaire has been a Fellow of the Royal Society of Canada since 1991, and in 2001, he received the Award of Distinction from Concordia University’s John Molson School of Business for his extraordinary contribution to the business world and the community. The Academy of Economic Sciences of Bucharest awarded him a doctorate honoris causa in 1995. In 2001, he was chosen as one of 12 “High Performers” by Commerce magazine and, in 2008, the Financial Post Magazine named him one of Canada six Business Gurus.

Yvan Allaire holds a B.Sc. Com. (summa cum laude) and an MBA from the Université de Sherbrooke and a PhD from the MIT Sloan School of Management.




]]></content>
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		</item>
		<item>
		<title>The generally accepted compensation principles (GACP) in good times and in bad times</title>
		<link>https://igopp.org/en/la-remuneration-des-dirigeants-quand-ca-va-bien-quand-ca-va-mal/</link>
		<comments>https://igopp.org/en/la-remuneration-des-dirigeants-quand-ca-va-bien-quand-ca-va-mal/#respond</comments>
		<pubDate>Thu, 27 Apr 2017 15:00:57 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Publications ]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Say on Pay]]></category>
		<category><![CDATA[Value-creating governance]]></category>

		<guid isPermaLink="false">https://igopp.org/la-remuneration-des-dirigeants-quand-ca-va-bien-quand-ca-va-mal/</guid>
		<description><![CDATA[The debacles of Enron, Worldcom and others in 2001-2002 were imputed in good part to the “flexibility” of accounting norms and the artistry in their interpretation. As a result, regulators, governmental and professional, greatly tightened the Generally Accepted Accounting Principles (GAAP) to which all publicly traded companies must rigorously adhere. Any breach of the GAAP [&#8230;]]]></description>
		<content><![CDATA[The debacles of Enron, Worldcom and others in 2001-2002 were imputed in good part to the “flexibility” of accounting norms and the artistry in their interpretation. As a result, regulators, governmental and professional, greatly tightened the Generally Accepted Accounting Principles (GAAP) to which all publicly traded companies must rigorously adhere.

Any breach of the GAAP carries severe penalties ranging from re-statement of financial accounts to jail terms.

Curiously, under the unrelenting pressure of regulators, institutional investors and, particularly, of proxy voting advisory firms (such as ISS and Glass, Lewis), the setting of executive compensation is now governed by generally accepted compensation principles (GACP).

As deviations from these principles do carry significant risks for board members, GACP are meticulously observed and almost universally adopted. Indeed, the strict application of GACP ensures that the say-on-pay vote will be overwhelmingly supportive and board member re-election a foregone conclusion, unless other issues crop up.

These GACP call for specific processes and rules to set executive compensation, among which the following are critical:

 	a significant proportion of the compensation of senior officers should be "risk-based", i.e., it should be linked directly to the share price; this means that a large part of the compensation package takes the form of stock options, shares or units the value of which is linked to the share price;
 	a large portion of this incentive compensation must be “earned” by achieving some targeted financial measures;
 	this package of salary, bonus, stock options and share-related incentives is granted in different quanta every year;
 	the aggregate CEO compensation must be set with reference to the CEO compensation of so-called "comparable" companies; this bench-marking group of companies is selected by the company under advisement of its compensation consultants; this process is intended to provide guidance as to the "market" value of the CEO who, if underpaid, could presumably move to another company.

These compensation practices are based on questionable assumptions and weak premises but they have become the norm. Having applied GACP strictly, faithfully, the corporation will not face much push-back or criticism for the compensation of its executives, at least not from the institutional shareholders, provided its share price has performed reasonably well, preferably better than a relevant index.

Obviously, if the firm's financial performance is mediocre, the shareholders will be able to show their displeasure by exercising their (advisory) say-on-pay voting rights, or by voting against the election of certain members of the board.

But if the company is in difficulty and must turn-around its operations, how should its management be compensated in such circumstances? Surely, the usual GACP, whatever their limits and flaws in good times, cease to apply in turnaround circumstances.

Compensation for executives in a turn-around 

A company facing a turnaround situation will usually recruit several outside executives with the talent set for the job. How do you persuade senior managers to leave a position with a stable firm and take on the risks of a turnaround job with its unrelenting work under stressful conditions?

Should the newly recruited executives be less well-paid than executives in normal course companies, especially when they are not responsible for the firm's current difficulties? Of course not, but the form of their compensation should be adjusted to these circumstances.

What compensation program should the board of directors adopt in such a situation?

 	As cash and cash flows are critical in a turnaround, the compensation of the senior executives should involve a minimum of cash disbursements; so, no annual bonuses and no salary increases;
 	On the other hand, when the new executives are hired, they should be granted stock options in sufficient quantity to attract and motivate these executives; while we are opposed, in principle, to the granting of stock options, this form of compensation is inevitable in a turnaround situation; these options should only be exercisable after three years of employment with the firm; if the new management team succeeds in the turnaround operation, it will be highly compensated for their work.
 	However, the practice of adding new stock options every year to the executives' compensation should be dropped (as it should for companies not in a turnaround situation).
 	The board or its spokesperson should clearly explain that such stock options do not make use of the company’s cash and that the monetary value attributed to this form of compensation is entirely hypothetical, based on a questionable mathematical formula. If the new executives are unsuccessful in turning the firm around, the value of these options could be zero!
 	In a turnaround context, the senior executives should not receive any units linked to the share price other than stock options.

&#160;

Thus, for a turnaround, a situation which may well have social and political repercussions, the board of directors must design unique, ad hoc, compensation programs that are sensitive to these realities and defend these programs forcefully.

A board spokesperson, its chair, or the lead director, if the chair is conflicted, must explain the board's decisions in the media. Contrary to the practice in the United Kingdom where the chair of the board becomes the corporation's main spokesperson for all matters relating to governance, boards of directors in North America keep a low profile and stay away from the media spotlight when governance issues come up for public scrutiny. That is a mistake.

&#160;

The author is solely responsible for the opinions expressed in this article.
]]></content>
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		</item>
		<item>
		<title>Enhancing the Dynamics of Boards of Directors</title>
		<link>https://igopp.org/en/enhancing-the-dynamics-of-boards-of-directors/</link>
		<comments>https://igopp.org/en/enhancing-the-dynamics-of-boards-of-directors/#respond</comments>
		<pubDate>Mon, 27 Jun 2016 19:45:19 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Reports & Studies]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Diversity]]></category>
		<category><![CDATA[Independence of Board members]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=6444</guid>
		<description><![CDATA[Board members with extensive experience readily observe, and often comment, that the quality of governance and a board’s effectiveness result as much from subtle, dynamic, intangible factors as from strict observance of the fiduciary and formal aspects of governance. These factors take shape in social interaction among members, in the style of the Chair’s leadership, [&#8230;]]]></description>
		<content><![CDATA[Board members with extensive experience readily observe, and often comment, that the quality of governance and a board’s effectiveness result as much from subtle, dynamic, intangible factors as from strict observance of the fiduciary and formal aspects of governance.

These factors take shape in social interaction among members, in the style of the Chair’s leadership, in what happens before and after formal meetings and during discussions at board and committee meetings. That observation is pertinent for every type of organization, be it a listed corporation, a public institution, a State-owned corporation, a cooperative or a non-profit organization.

Thus, initiatives, mechanisms and processes to improve the dynamic interaction and interplay among board members should enhance a board’s effectiveness. Yet, this particular aspect of governance has been the subject of very few empirical studies because, for reasons of confidentiality, boards cannot readily give researchers direct, live, access to board meetings and ancillary board activities.

One notable exception is Richard Leblanc’s doctoral thesis. Due to the network of contacts of his thesis director and co-author, James Gillies, he was able to observe a certain number of boards in action. In 2005 they published Inside the Boardroom, a book which offers an interesting typology of the dominant behaviours of members during board meetings. Focused on what could be observed at formal board meetings, the work by Leblanc and Gillies provides some insight about but one particular facet of board dynamics.

No other empirical study has been conducted on the issue since then.

Our Institute undertook to shed some light on these subtle, dynamic, intangible factors and, possibly, offer suggestions to directors and board chairs on ways to enhance the quality of governance.

Read more [1]

[1] https://igopp.org/wp-content/uploads/2016/09/IGOPP_Rapport_PerformanceDynamiqueConseilsAdmin_EN_v2_WEB.pdf]]></content>
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		<title>Who Should Pick Board Members?</title>
		<link>https://igopp.org/en/who-should-pick-board-members-2/</link>
		<comments>https://igopp.org/en/who-should-pick-board-members-2/#respond</comments>
		<pubDate>Mon, 30 Nov 2015 20:58:44 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Columbia Law School Blog]]></category>
		<category><![CDATA[Institutional investors]]></category>
		<category><![CDATA[Proxy Advisors]]></category>
		<category><![CDATA[Risk management]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=5852</guid>
		<description><![CDATA[There is a frenzied rush for shareholders to get a new ‘right”, the right to put up their own nominees for board membership. Boards of directors, so goes a dominant opinion, are not to be fully trusted to pick the right kind of people as directors or to shift the membership swiftly as circumstances change. [&#8230;]]]></description>
		<content><![CDATA[There is a frenzied rush for shareholders to get a new ‘right”, the right to put up their own nominees for board membership. Boards of directors, so goes a dominant opinion, are not to be fully trusted to pick the right kind of people as directors or to shift the membership swiftly as circumstances change.

In 2014/2015, proposals from institutional investors (or even from management) to give shareholders access to the board nomination process have proliferated. No less than 74 U.S. corporations[1] [1] have now inserted (or soon will) in their by-laws the “right” of shareholders to nominate members of the board, among which GE, Coca Cola, McDonald’s, Chevron, Citigroup, Verizon, and so on. And a tsunami of similar proposals is visible over the horizon.

Of course, this agitation started In August 2010 when the Securities and Exchange Commission (SEC) introduced Rule 14a-11 giving shareholders having owned at least 3% of a public corporation’s shares for at least 3 years, the right to propose nominees to the board (for up to a maximum of 25% of the members of the existing board).

This new regulation was immediately challenged in the courts and had to be withdrawn when it was struck down. However, an amendment to Rule 14a-8 (amendment made by the SEC to accommodate its proposed regulation on proxy access) remained in force; its purpose was to allow shareholders to submit proposals on proxy access rules, which, if adopted by a majority of shareholders, were to be made part of the corporation’s by-laws.

This access to voting proxies is fast becoming a part of the governance landscape in the United States; the only issues that are still debated are qualifying ones: the level of shareholding, the holding period, the maximum number of shareholders which may band together to achieve the admission criteria and various aspects of its implementation.

It is very unlikely that major corporations will try to oppose the movement as many institutional investors are fiercely supportive of this measure. However, the eventual impact of this initiative on corporate governance raises important issues that seem totally absent from the discussions around this new “right” of shareholders.

Proxy access may have adverse effect on internal board dynamics

Among the arguments supposedly supportive of shareholder access to the nominating process, one is particularly noxious: the notion that “fear” among board members of being singled out for replacement would lead them to raise their game.

The consequences for an individual director being voted out of a board would be very significant and painful, both in economic and reputational terms; this is true for both incumbent nominees and the new nominees proposed by the shareholders.

Faced with the risk and arbitrary nature of a contested election, the directors would try to promote their personal contributions with institutional investors (and proxy advisors), thus generating an unhealthy competition among colleagues. In any event, how would the thousands of shareholders, called upon to choose between several nominees, decide for which nominee to vote, which nominee to dismiss when the voting proxy contains more nominees than available seats?

Smaller institutional funds may well come to rely on proxy advisors (such as ISS or Glass Lewis), again increasing by tenfold the influence of these outfits on the governance of public corporations. These proxy advisors will propose, as per their usual practice, some obvious, measurable criteria to make this choice: age of the directors, number of years as a member of the board, which are, in fact, arbitrary criteria, uncorrelated with actual performance.

Once these criteria are well understood, it is likely that corporations will try to preventively replace directors to avoid conflicts with large shareholders and to make rooms for their nominees. Therefore, directors would be shown the way out because they no longer satisfy the arbitrary criteria selected by proxy voting advisors without taking into account their actual contribution.

Even more likely, boards of directors will initiate discussions and negotiations with institutional investors who have indicated their intention to propose their own nominees in an effort to reach common ground. These secret negotiations are likely to result in some of the nominees proposed by institutional investors becoming the nominees of management and some current directors presumably viewed, more or less deservedly, as being weaker (older, longer tenure) forcibly retired.

Anyone believing that this process is likely to produce stronger boards in the long run needs to consider anew the calculus of current and prospective board members, the actions, likely dysfunctional, of people facing the humiliation (and economic loss) of an electoral rejection.

Shareholder access to the director nomination process brings forth a host of other issues related to the logistics of its application and the potential adverse effects on board dynamics including:

 	the usurpation of a responsibility historically and legally devolved exclusively on the board;
 	the implicit, yet false, postulate whereby directors are only accountable to the shareholders and are only responsible for the interests of shareholders;
 	the reputational issues of the directors submitted to a contested election and the self‑protective behaviour this would bring about;
 	the actual risk of secret negotiations being held between management and investors who are intending to propose nominees;
 	the overwhelming influence accruing to proxy voting advisory firms, whose clients would expect their voting recommendations on the nominees;
 	the risk that the independence of directors nominated by shareholders would be compromised or so perceived;
 	the risk of creating factions and a poisonous atmosphere within the board, which would compromise the proper functioning of the board;
 	the risk of ending up with a board deficient in relevant experience or competence;
 	the risk that the process be hijacked by single-issue groups of shareholders.

These unfortunate outcomes of granting shareholders the right to propose their nominees for the board should merit careful consideration before jumping on the bandwagon.

[1] [2] Data from SharkRepellent.net, as of September 8th, 2015.

This post comes to us from Yvan Allaire, Ph.D. (MIT) and Executive Chair of the Institute for governance of private and public organizations (IGOPP), and François Dauphin, Chartered Professional Accountant (CPA, CMA), MBA and Director of Research of IGOPP. The post is based on the authors’ Institution Policy Paper, entitled “Who should pick board members? Proxy Access by Shareholders to the Director Nomination Process” and is available here [3].

[1] http://clsbluesky.law.columbia.edu/2015/11/30/who-should-pick-board-members/#_ftn1
[2] http://clsbluesky.law.columbia.edu/2015/11/30/who-should-pick-board-members/#_ftnref1
[3] https://igopp.org/en/who-should-pick-board-members/]]></content>
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		<title>Barrick Gold unveils new pay scheme, may add directors</title>
		<link>https://igopp.org/en/barrick-gold-unveils-new-pay-scheme-may-add-directors/</link>
		<comments>https://igopp.org/en/barrick-gold-unveils-new-pay-scheme-may-add-directors/#respond</comments>
		<pubDate>Mon, 31 Mar 2014 20:23:04 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Say on Pay]]></category>

		<guid isPermaLink="false">http://aimta712.org/?p=2831</guid>
		<description><![CDATA[[&#8230;] &#8220;Yvan Allaire, executive chairman of the board of the Institute for Governance of Private and Public Organizations, was positive about the plan overall &#8220;It&#8217;s a giant step in the right direction,&#8221; said Allaire, praising the move towards share awards over stock options. Options have fallen out of favor in recent years in part because [&#8230;]]]></description>
		<content><![CDATA[[...] "Yvan Allaire, executive chairman of the board of the Institute for Governance of Private and Public Organizations, was positive about the plan overall

"It's a giant step in the right direction," said Allaire, praising the move towards share awards over stock options.

Options have fallen out of favor in recent years in part because of concerns they encourage short-term thinking, and offer executives gains if their company's stock rises without downside risk if it falls.

But Allaire also said the plan could cause retention issues.

In an emailed statement, Harvey said the system is meant to create a management team "personally vested" in Barrick's success.

"In developing our new system, we looked at other companies who use a similar approach and they have found that it is actually a motivating factor in the retention of key executives," he said.

"WE HEARD THE SHAREHOLDERS"

Thornton's total compensation was $9.5 million in 2013, including a $5 million cash award that he has committed to use to buy and hold Barrick shares. Last year, he bought shares with his controversial $11.9 million signing bonus.

Barrick said all shares awarded under the long-term compensation plan will be bought on the open market to avoid dilution. It also laid out new minimum ownership requirements, which among other things will require the chief executive to own shares worth 10 times base salary by 2020.

Last year, proxy advisory firm Glass Lewis had recommended that its clients withhold votes from three Barrick directors at the annual meeting, criticizing Thornton's signing bonus and the severance paid to outgoing Chief Executive Aaron Regent, among other things.

"In terms of large, discretionary packages, I think we heard the shareholders on that," Harvey said. "I think we'll be very hesitant to do that kind of thing." (Editing by Jeffrey Hodgson, Andre Grenon, Peter Galloway and Lisa Shumaker)."

Read more [1]

[1] http://finance.yahoo.com/news/barrick-announces-pay-scheme-may-185629425.html]]></content>
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		<title>Davos Forum 2014</title>
		<link>https://igopp.org/en/the-davos-forum-2014/</link>
		<comments>https://igopp.org/en/the-davos-forum-2014/#respond</comments>
		<pubDate>Wed, 22 Jan 2014 14:14:56 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Press Releases]]></category>
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		<category><![CDATA[Value-creating governance]]></category>
		<category><![CDATA[World Economic Forum]]></category>

		<guid isPermaLink="false">http://aimta712.org/?p=1405</guid>
		<description><![CDATA[Dr. Yvan Allaire, Executive Chair of the Institute for Governance (IGOPP) and Chair of the Council on the role of business- World Economic Forum, has moderated a session entitled “CEO Dialogue on the Role of Business” organised by the World Economic Forum Annual Meeting 2014. This session was attended by more than 100 CEO. To [&#8230;]]]></description>
		<content><![CDATA[Dr. Yvan Allaire, Executive Chair of the Institute for Governance (IGOPP) and Chair of the Council on the role of business- World Economic Forum, has moderated a session entitled “CEO Dialogue on the Role of Business” organised by the World Economic Forum Annual Meeting 2014. This session was attended by more than 100 CEO.

To find out more about the topics covered, please review the context paper below prepared by Dr. Allaire.

The Global Council brings together some 17 influential leaders from the world of international business, elite universities and the media. Professor Allaire has been a member of this Global Council since 2010 and was a panelist at the Davos Forum in 2010 and 2011.

Dr. Allaire has made several game-changing proposals about the international financial system in recent books co-authored with Professor Mihaela Firsirotu:

 	A Capitalism of Owners [1]
 	Black Markets and Business Blues [2] (Silver Medal of the American Independent Publishers Association)
 	Plaidoyer pour un nouveau capitalisme [3]


[1] http://www.amazon.ca/Capitalism-Financial-Markets-Companies-Societies/dp/2924055008
[2] http://www.amazon.ca/Black-Markets-Business-Blues-Capitalism/dp/2922285456/ref=sr_1_2?s=books&#38;ie=UTF8&#38;qid=1391627582&#38;sr=1-2&#38;keywords=black+markets+and+business
[3] http://www.renaud-bray.com/Livres_Produit.aspx?id=1108193&#38;def=Plaidoyer+pour+un+nouveau+capitalisme%2CALLAIRE%2C+YVAN%2CFIRSIROTU%2C+MIHAELA%2C9782981041081]]></content>
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