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	<title>IGOPPStakeholders &#8211; IGOPP</title>
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		<title>Private market investors neglect risk in rush for returns</title>
		<link>https://igopp.org/en/private-market-investors-neglect-risk-in-rush-for-returns/</link>
		<comments>https://igopp.org/en/private-market-investors-neglect-risk-in-rush-for-returns/#respond</comments>
		<pubDate>Wed, 04 Dec 2024 15:16:42 +0000</pubDate>
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		<description><![CDATA[The recent scandal involving Adani Group and Canadian pension fund CPDQ exposes flagging standards as investors rush for private markets across emerging markets in Asia. [&#8230;] François Dauphin, who leads the Montreal-based Institute for governance of private and public organisations, identifies a concerning trend. He notes the investors&#8217; due dilligence is suffering under pressure to [&#8230;]]]></description>
		<content><![CDATA[The recent scandal involving Adani Group and Canadian pension fund CPDQ exposes flagging standards as investors rush for private markets across emerging markets in Asia.

[...]

François Dauphin, who leads the Montreal-based Institute for governance of private and public organisations, identifies a concerning trend.

He notes the investors' due dilligence is suffering under pressure to deploy capital quickly and achieve returns, often in unfamiliar investment vehicules.

''In recent years, there has been an abundance of capital from private funds or institutional funds looking for private investments opportunities to improve their total returns,'' Dauphin told AsianInvestor.

''The appeal of private placements lies in the potential of high returns, but the level of risk associated with such projects is also necessarily higher. This is all more true when distance does not allow for direct monitoring.''

Numerous institutional have rushed past standard risk assessment procedures in eagerness to secure leading investment positions, he added.

''This compromised approach to due dilligence has inevitably, led to adverse outcomes, as evidenced by the current situation in India.''

Read more [1]

[1] https://igopp.org/wp-content/uploads/2024/12/ASIANI1.pdf]]></content>
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		<title>Former CEO gives Gildan Activewear board a dressing-down</title>
		<link>https://igopp.org/en/former-ceo-gives-gildan-activewear-board-a-dressing-down/</link>
		<comments>https://igopp.org/en/former-ceo-gives-gildan-activewear-board-a-dressing-down/#respond</comments>
		<pubDate>Wed, 17 Jan 2024 22:44:01 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/?p=16362/</guid>
		<description><![CDATA[Former Gildan Activewear Inc. chief executive Glenn Chamandy fired back at the company’s latest accusations concerning his leadership, saying the board is seeking to unfairly harm his reputation and cast aspersions on his performance. The company on Tuesday took aim at Mr. Chamandy’s leadership, alleging he had become disengaged from his job, and that he had an [&#8230;]]]></description>
		<content><![CDATA[Former Gildan Activewear Inc. chief executive Glenn Chamandy fired back at the company’s latest accusations concerning his leadership, saying the board is seeking to unfairly harm his reputation and cast aspersions on his performance.
The company on Tuesday took aim at Mr. Chamandy’s leadership, alleging he had become disengaged from his job [1], and that he had an undisclosed relationship with an unnamed investor that’s now demanding he be rehired.
“It is with regret that I observe the board’s current focus on a strategy seemingly aimed at undermining my reputation and my record through insinuation and distortion of the truth,” Mr. Chamandy said in a statement Wednesday morning.
The board’s latest release “barely warrants a response,” Mr. Chamandy said. “It continues to reflect an approach that is misguided, misleading, and value-destructive, prioritizing the obsession of board members with their own reputations above all else.”
[...]
Over the past 10 days, they’ve sharpened their justifications by attacking his day-to-day leadership, saying he’d become distracted by personal pursuits such as the development of a golf course in Barbados. According to Gildan directors, Mr. Chamandy was rarely in the office, held few management meetings and sent on average “no more than a handful” of work e-mails a day.
The board is also probing Mr. Chamandy’s activities around the time he was dismissed, poring through his files and electronic information because of what they’ve called his “questionable behaviour.” Directors say what they’ve uncovered so far underscores the broken trust between the board and the former CEO toward the end of his employment and the need for new leadership.
[...]
It’s very rare for the board of directors of a Canadian public company to be so aggressive when faced with activist shareholder campaigns, said François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations. This suggests they’re digging to defend their position.
“The very people who launched the attack are now under fire,” Mr. Dauphin said of the dissident shareholders. “The latest revelations show that a link clearly existed between Mr. Chamandy and activist shareholders well before his termination. This raises questions about the sharing of privileged information, but also in terms of conflicts of interest.”
In his statement Wednesday, Mr. Chamandy declined to address specifics about his ties to investors. He said only: “Over the years, Gildan’s executive team and I dedicated ourselves to fostering relationships with our stakeholders, grounded in confidence and trust. These efforts were instrumental in establishing a company that is not only respected, but also deeply trusted by its shareholders, customers and employees.”
Directors have said they’re unanimous that Mr. Chamandy’s continued employment would have jeopardized the company’s future. Shareholders including U.S. hedge fund Browning West LP and Montreal investment management firm Jarislowsky Fraser say Mr. Chamandy has delivered in spades for investors over the years and want him back.
Read more [2]

[1] https://www.theglobeandmail.com/business/article-gildan-cites-lack-of-interest-and-transparency-in-dismissal-of-ceo/
[2] https://igopp.org/wp-content/uploads/2024/01/Former-CEO-gives-Gildan-Activewear-board-a-dressing-down-The-Globe-and-Mail_January-2024.pdf]]></content>
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		<title>Family Controlled Companies: Drivers of Canadian Economy</title>
		<link>https://igopp.org/en/family-controlled-companies-key-drivers-of-canadian-economic-sustainability-panel-2/</link>
		<comments>https://igopp.org/en/family-controlled-companies-key-drivers-of-canadian-economic-sustainability-panel-2/#respond</comments>
		<pubDate>Wed, 18 Oct 2023 02:51:19 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/family-controlled-companies-key-drivers-of-canadian-economic-sustainability-panel-2/</guid>
		<description><![CDATA[To listen to the full panel with Louis Audet (board member of IGOPP), about the most recent report of IGOPP on family businesses, please click here or on the image below (the panel&#8217;s duration is 43 minutes):]]></description>
		<content><![CDATA[To listen to the full panel with Louis Audet (board member of IGOPP), about the most recent report of IGOPP [1] on family businesses, please click here  [2]or on the image below (the panel's duration is 43 minutes):

[1] https://igopp.org/en/the-performance-of-canadian-controlled-companies-listed-on-the-sptsx/
[2] https://www.youtube.com/watch?v=EneTrzShDZM]]></content>
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		<title>Family Controlled Companies: Key Drivers of Canadian Economic Sustainability &#8211; Panel</title>
		<link>https://igopp.org/en/family-controlled-companies-key-drivers-of-canadian-economic-sustainability-panel/</link>
		<comments>https://igopp.org/en/family-controlled-companies-key-drivers-of-canadian-economic-sustainability-panel/#respond</comments>
		<pubDate>Wed, 18 Oct 2023 02:34:41 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/family-controlled-companies-key-drivers-of-canadian-economic-sustainability-panel/</guid>
		<description><![CDATA[To listen to the full panel with Louis Audet (board member of IGOPP), about the most recent report of IGOPP on family businesses, please click here or on the image below (the panel&#8217;s duration is 43 minutes):]]></description>
		<content><![CDATA[To listen to the full panel with Louis Audet (board member of IGOPP), about the most recent report of IGOPP [1] on family businesses, please click here  [2]or on the image below (the panel's duration is 43 minutes):

 [3]

[1] https://igopp.org/en/the-performance-of-canadian-controlled-companies-listed-on-the-sptsx/
[2] https://www.youtube.com/watch?v=EneTrzShDZM
[3] https://www.youtube.com/watch?v=EneTrzShDZM]]></content>
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		<title>South African prison scandal raises concerns over Caisse’s G4S connections</title>
		<link>https://igopp.org/en/south-african-prison-scandal-raises-concerns-over-caisses-g4s-connections/</link>
		<comments>https://igopp.org/en/south-african-prison-scandal-raises-concerns-over-caisses-g4s-connections/#respond</comments>
		<pubDate>Mon, 01 May 2023 19:26:06 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/south-african-prison-scandal-raises-concerns-over-caisses-g4s-connections/</guid>
		<description><![CDATA[[&#8230;] Even before this latest scandal, questions were being raised about why a Canadian corporate pillar like the Caisse would jump into the security industry and, later, associate itself with a company like G4S, which has a checkered recent history. Critics say the pension giant, which administers the retirement funds for thousands of public-sector employees, has no business [&#8230;]]]></description>
		<content><![CDATA[[...]
Even before this latest scandal, questions were being raised [1] about why a Canadian corporate pillar like the Caisse would jump into the security industry and, later, associate itself with a company like G4S [2], which has a checkered recent history. Critics say the pension giant, which administers the retirement funds for thousands of public-sector employees, has no business being in the security sector and that the risks outweigh the returns. Others say it should use its muscle to push Allied harder on cleaning up G4S – and be fully transparent about its concerns.
“Doing something means either leaving or trying to be an agent of change,” said Yan Cimon, a specialist in corporate strategy and governance at Quebec City’s Laval University. “It’s clear that the status quo is not enough. You cannot sit back and wish for that G4S experience in South Africa to go away.”
Pension fund investments around the world are coming under increased scrutiny as environmental, social and governance (ESG) standards gain importance. Observers are asking whether it’s appropriate to direct retirees’ money into shares in gun manufacturers, oil and gas producers, and other companies often seen as offside on human progress efforts.
The Caisse has a policy on responsible investment in which it cautions it might invest in sectors that “may appear problematic from the standpoint of social responsibility.” It says it approaches those investments in part by taking a “collaborative approach” with the companies it holds in its actively managed portfolios, which includes communicating directly with a company’s executives or directors to discuss concerns.
The Globe and Mail sent the Caisse a series of questions about the South African controversy, and Allied’s ownership of G4S. The fund manager did not directly answer those questions but spokesman Conrad Harrington said it was following the situation in the country closely and takes any human-rights allegations “very seriously.”
Caisse “is one of the world’s most respected investors when it comes to ESG criteria – which we apply rigorously and consistently,” Mr. Harrington said in an e-mailed response. “There is no exception with this investment and we have an active ongoing dialogue with the company across a number of strategic matters. When Allied acquired G4S, they communicated plans to evaluate options for certain non-core businesses and these conversations are ongoing.”
The Caisse bought into Allied Universal in 2019 in a deal that valued the security company at US$7-billion, citing the industry’s organic growth and consolidation potential. It held a 27.7-per-cent stake in the company as part of $402-billion in assets under management at the end of 2022, according to its latest annual report; and it has two directors on Allied’s 11-member board. The largest shareholder in Allied is a group of funds controlled by New York-based private equity firm Warburg Pincus LLC.
Some say the Caisse should consider selling its investment in Allied. They argue staying in reflects poorly on the pension fund’s own reputation, particularly if the U.S. company remains in the business of private prisons through its G4S ownership.
[...]
Caisse has a responsibility to ensure that its investment complies with laws and international standards on corruption, Mr. Baker said. “Given controversies like the one G4S is currently facing in South Africa, and the poor investment performance for the private prison industry, it is unclear why CDPQ, Allied Universal and G4S are still in the private prison business,” he said.
Others have a different view. Pulling out of Allied altogether is the “easy” route, said Patric Besner, vice-president of Montreal’s Institute for Governance of Private and Public Organizations, a think tank. Staying in and pushing to influence the company to have better metrics and better governance is a harder path but the one that might yield better outcomes in the long term, he said.
“The problem is that if they pull out, there will be no force to encourage these corporations to act better and improve their ESG and improve their environmental rules and regulations,” Mr. Besner said.
[...]
Pension funds in Norway and New York have divested themselves from G4S in recent years. Norges Bank Investment Management, which manages Norway’s government pension funds, sold its shares in G4S after its ethics council decided there was an “unacceptable risk” that the company is responsible for “serious or systematic human-rights violations.”
Read more [3]

[1] https://www.lapresse.ca/affaires/2020-06-22/la-caisse-et-les-dangers-de-la-securite-privee
[2] https://www.theglobeandmail.com/business/article-gardaworld-ceo-blasts-the-caisse-for-backing-allied-universal-in-bid/
[3] https://igopp.org/wp-content/uploads/2023/05/South-African-prison-scandal-raises-concerns-over-Caisse’s-G4S-connections-The-Globe-and-Mail_May-2023.pdf]]></content>
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		<title>Companies should disclose board members’ spoken languages to investors, Quebec group Médac says</title>
		<link>https://igopp.org/en/companies-should-disclose-board-members-spoken-languages-to-investors-quebec-group-medac-says/</link>
		<comments>https://igopp.org/en/companies-should-disclose-board-members-spoken-languages-to-investors-quebec-group-medac-says/#respond</comments>
		<pubDate>Thu, 29 Dec 2022 18:51:57 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/companies-should-disclose-board-members-spoken-languages-to-investors-quebec-group-medac-says/</guid>
		<description><![CDATA[A leading investors’ rights group in Quebec is pressing publicly traded Canadian companies to reveal what languages their board members speak, saying the disclosure is needed to ensure rising expectations for corporate diversity are being met. The call comes from Montreal-based Mouvement d’éducation et de défense des actionnaires, known as Médac. The group says the [&#8230;]]]></description>
		<content><![CDATA[A leading investors’ rights group in Quebec is pressing publicly traded Canadian companies to reveal what languages their board members speak, saying the disclosure is needed to ensure rising expectations for corporate diversity are being met.
The call comes from Montreal-based Mouvement d’éducation et de défense des actionnaires, known as Médac. The group says the information should be made public in the circulars sent to investors ahead of companies’ annual meetings.
Médac is making a shareholder proposal to that effect this year for each of the 21 companies in which it is invested, including Canada’s big six banks and pillars of the Quebec corporate community such as Alimentation Couche-Tard Inc and Dollarama Inc. and it has submitted the suggestion to the federal Finance Department as part of recent consultations on improving diversity in federally regulated financial institutions.




“We think this is a blind spot for companies in terms of diversity,” said Willie Gagnon, Médac’s managing director. “We want the disclosure of languages spoken, starting with the official languages of course. But we also want the other languages when it’s pertinent.”




The request plays into an ever-sharpening focus in Canada on corporate governance standards, including expectations that boards have more members from traditionally underrepresented groups than they did in the past. It also reflects the thorny issue of language in Quebec [1], a province shaken by several linguistic controversies that have spilled into the business world in recent months.
Arguably the biggest of these was Air Canada chief executive Michael Rousseau’s verbal faux pas [2] in November, 2021. Following a speech he made in English to the Chamber of Commerce of Metropolitan Montreal, Mr. Rousseau said he had managed to live in Montreal for 14 years without speaking French, and suggested he was too busy to learn the language.
His comments shocked politicians in Quebec City and Ottawa alike, and triggered more than 2,500 complaints to the office of Canada’s Commissioner of Official Languages. In the ensuing storm, SNC-Lavalin chief executive Ian Edwards called off a largely English-language speech he was set to give just days later. Attention also turned to other Quebec-based companies with perceived linguistic shortcomings, including Canadian National Railway Co., whose board lacked any French speakers for a time.
[...]
The Canadian government has since 2020 required companies incorporated at the federal (but not provincial) level to report to shareholders and Corporations Canada yearly on the representation of women, visible minorities, Indigenous peoples and people with disabilities on their boards and in senior management. The requirement does not include any disclosure related to language.
That is an omission that needs to be corrected, according to Médac. The group argues diversity can’t be reduced to matters strictly related to biology, or other things that don’t bear on competence.
François Dauphin, president of the Institute of Governance for Public and Private Organizations, said it makes sense for companies to disclose the language skills of their executives and directors because it would show they understand the different contexts and geographies in which their businesses operate. But he said it should be a voluntary disclosure, rather than one forced by regulation.
“It has to be relevant to the strategy of the organization itself,” Mr. Dauphin said. If, for example, a third of a company’s shareholders are native French speakers, it would be nice to have someone who speaks French on the board, he said.
“Just as much as diversity in general, where we want to have minorities on the board, we need to have that representativeness in a way to retain employees or to confer some kind of legitimacy with stakeholders in general,” Mr. Dauphin said.




In 2021, Médac made a separate shareholder proposal on language that it presented to its portfolio companies, in which it asked that the official status of French be expressly written into their corporate statutes. The idea was rejected by all of them.




Read more [3]

[1] https://www.theglobeandmail.com/canada/quebec/
[2] https://www.theglobeandmail.com/business/article-air-canada-ceo-sets-off-firestorm-in-quebec-over-language-comments/
[3] https://igopp.org/wp-content/uploads/2023/01/Companies-should-disclose-board-members’-spoken-languages-to-investors-Quebec-group-Médac-says-The-Globe-and-Mail_December-2022.pdf]]></content>
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		<title>Language office eyes probe after Air Canada English-only speech</title>
		<link>https://igopp.org/en/language-office-eyes-probe-after-air-canada-english-only-speech/</link>
		<comments>https://igopp.org/en/language-office-eyes-probe-after-air-canada-english-only-speech/#respond</comments>
		<pubDate>Fri, 05 Nov 2021 15:10:18 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/?p=13908/</guid>
		<description><![CDATA[Michael Rousseau’s first speech to business leaders in Montreal was supposed to be his coming out party, a chance for Air Canada new chief executive to build credibility and tell the story of an airline – a pillar of the Quebec economy – in recovery mode. Instead, the CEO’s English-only talk, during which he revealed that [&#8230;]]]></description>
		<content><![CDATA[Michael Rousseau’s first speech to business leaders in Montreal was supposed to be his coming out party, a chance for Air Canada new chief executive to build credibility and tell the story of an airline – a pillar of the Quebec economy – in recovery mode. Instead, the CEO’s English-only talk, during which he revealed that he’s not comfortable speaking in French even after living in the city for more than a decade, has become a public relations nightmare for his employer.
Canada’s Commissioner of Official Languages, Raymond Théberge, said in an interview on Friday that his office has received about 1,000 complaints about the speech and is now weighing whether to launch an investigation. He said his office warned the company days in advance to rethink the CEO’s plan to communicate in English.
“The depth of the reaction shows to what point he’s touched a very sensitive nerve with the francophone public,” Mr. Théberge said. “It’s very much a leadership issue.”
Mr. Rousseau’s admission has also become a political problem for Air Canada, which is federally regulated. Prime Minister Justin Trudeau and Quebec politicians from across the political spectrum have criticized the airline publicly.
In his speech Wednesday to the Chamber of Commerce of Metropolitan Montreal, Mr. Rousseau made a few words of introduction in French before switching to English. While answering questions from reporters after the event, he was asked in French: “How does one live in Montreal for more than 14 years speaking very approximative French?” His answer, in English: “Could you redo that in English?
[...]
As a federally regulated corporation, Air Canada is subject to Canada’s Official Languages Act, which means it has to communicate and deliver services to the public in both English and French. There is no obligation in the act for Air Canada’s CEO to be able to speak French.
The question now is whether Mr. Rousseau’s speech constitutes a communication with the public. If the Commissioner of Official Languages finds Air Canada at fault, his enforcement options are limited: he only has the power to make recommendations for change to the airline.
The federal government had previously been working on an update to the Official Languages Act that would include strengthening the commissioner’s enforcement powers. Following this incident, Quebec has called on Ottawa to make sure any overhaul includes a closer watch on Air Canada.
Air Canada’s board of directors as a whole is responsible for appointing the CEO, according to the board’s charter. A description of the CEO position on the company’s website, dating from November, 2006, makes no mention of knowing French as a condition of employment.
John Gradek, a former Air Canada manager who teaches aviation leadership at McGill University, said the airline’s board members now have to answer for Mr. Rousseau’s comments and whether they understood the implications of hiring a non-French-speaking CEO. He said Ottawa can “exert some muscle” as a shareholder if the government feels this is an unsalvageable situation.
François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations, said Mr. Rousseau had been “very clumsy” in his role as the public-facing guardian of Air Canada’s culture, which includes bilingualism. But he said the board also failed to coach the CEO in the importance of bilingualism to the wider community.
Read more [1]

[1] https://igopp.org/wp-content/uploads/2021/11/Language-office-eyes-probe-after-Air-Canada-English-only-speech-The-Globe-and-Mail_November-2021.pdf]]></content>
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		<item>
		<title>Corporate Purpose, ESG, stakeholders: what’s the deal?</title>
		<link>https://igopp.org/en/corporate-purpose-esg-stakeholders-whats-the-deal/</link>
		<comments>https://igopp.org/en/corporate-purpose-esg-stakeholders-whats-the-deal/#respond</comments>
		<pubDate>Tue, 17 Nov 2020 15:15:16 +0000</pubDate>
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		<category><![CDATA[American governance]]></category>
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		<guid isPermaLink="false">https://igopp.org/raison-detre-esg-parties-prenantes-a-quoi-cela-rime-t-il/</guid>
		<description><![CDATA[Since the publication in 1932 of Berle and Means’ The Modern Corporation and Private Property, “capitalist” societies have been engaged in a forlorn quest for an appropriate definition of the role, justification and “raison d’être” of large corporations. Except for the legal fiction of shareholders as owners, corporations of the 1950’s, 60’s and 70’s, were [&#8230;]]]></description>
		<content><![CDATA[Since the publication in 1932 of Berle and Means’ The Modern Corporation and Private Property, “capitalist” societies have been engaged in a forlorn quest for an appropriate definition of the role, justification and “raison d’être” of large corporations.

Except for the legal fiction of shareholders as owners, corporations of the 1950’s, 60’s and 70’s, were not really “owned” by anyone but controlled by management. In this context, the manager had to be a man (or a woman) of many constituencies, a nimble balancer of conflicting interests, an impartial purveyor of amenities to one and all, a human synthesizer of the rights and interests of all parties which might directly or indirectly be affected by the actions of the corporation. Whether managers actually internalized these norms of conduct is a moot point. That concept of the corporation gave rise to formidable, dominant companies, such as IBM, Johnson and Johnson, GM, GE.

However for the last 40 years or so, with the rise of “financial capitalism” and the clever linking of executive compensation to share price, “creating shareholder value” became the driver of management, the rallying cry of the executive corps. That worked well for the managerial class. No matter that all large corporations proudly brandish statements about their Vision, Mission, Values and Ethics, recriminations and discontent simmered and eventually crystallized around a bundle of expectations now assembled under the ESG banner. [Environment, Social and Governance]

Institutional funds, pension funds, asset managers of various stripes and index funds particularly have joined, indeed led the bandwagon, relentlessly pushing corporations to include ESG issues in their management. Most corporations have given in to the pressure with various degrees of enthusiasm.

The proxy advisory firms (ISS in particular), their noses firmly in the wind, have sniffed the trend and now intend to include ESG factors in their assessment of corporate governance.

That’s the context which led some 181 CEOs of large (mainly American) corporations, under the aegis of the Business Roundtable, to sign a solemn undertaking, a year ago or so. They committed to adopt and impose on themselves a “Purpose” of care for, and nurturing of, their stakeholders. Henceforth, corporate decisions will factor in the interests of various parties, including the civic society and Mother Earth.

Professor Colin Mayer, one of the promoters of the ‘corporate purpose”, puts it this way: “the purpose of business is to solve the problems of people and planet profitably, and not profit from causing problems”. Hum, all leaders of large corporations will subscribe to this broad and vague agenda.

Business circumstances, at least for the oligopolistic leviathans, are changing; the greatest threat to these corporations’ survival often comes from the social and political environment, not mainly or solely from the economic and competitive environment. Large companies with slack resources can cope with the piling up of new demands and expectations in matters of environment, social responsibility, diversity and so on. But three points need to be emphasized here:

1. In this quest for a stakeholder oriented corporation and the multiplication of new ESG mandates, what’s the role of the entrepreneurial spirit, the drive to create and build a business in a world of sharp competition and evolving technologies? The vibrancy of an economy rests on entrepreneurial activity. Let’s be careful, lest we collectively stifle the entrepreneurial drive.

2. As the demands and legal requirements imposed on business corporations largely single out stock-market listed corporations, the current drought of new businesses listing on a stock exchange may worsen as entrepreneurs weigh the costs and benefits of “going public” and private sources of funding mushroom.

3. In Canada, two rulings by the Supreme Court clarified the meaning of acting in “the interest of the corporation” as stipulated in the Canadian Business Corporation Act. Boards of directors in their decisions must give equal consideration to stakeholders and shareholders; boards should not favor any particular group in its decision-making. Basically, we have in Canada a stakeholder model of governance. The U.S. jurisprudence is not that clear on this issue; several legal scholars still argue that maximizing shareholder wealth should be the prime objective of boards of directors. For instance, Professor Bainbridge writes “The law of corporate purpose remains that directors have an obligation to put shareholder interests ahead of those of other stakeholders and maximize profits for those shareholders”.

That is the context for the BRT’s “Purpose” initiative: an unclear American legal framework combined with investor and societal/political pressures on management to adopt a sort of stakeholder model.

But In Canada, this whole agitation about “Corporate Purpose” is moot as stakeholder governance is the law! Canadian boards of directors should be governed accordingly although there is yet little empirical evidence as to how that legal fact has impacted governance in Canada.

When all is said and done, managing for the long term, factoring in the multiple interests of the broader society, desirable goals indeed, will only happen when the games of some financial types are checked and executive compensation is re-arranged to support these objectives. Otherwise, all this agitation is perfunctory, pro-forma, “sound and fury signifying nothing”.

&#160;

Opinions expressed in this article are strictly those of the authors.
]]></content>
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		<title>The &#8221;Purpose&#8221; of a Corporation</title>
		<link>https://igopp.org/en/la-nouvelle-raison-detre-des-entreprises-rediffusion-de-la-conference/</link>
		<comments>https://igopp.org/en/la-nouvelle-raison-detre-des-entreprises-rediffusion-de-la-conference/#respond</comments>
		<pubDate>Wed, 30 Sep 2020 18:48:14 +0000</pubDate>
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		<description><![CDATA[You have missed our virtual event on &#8221; The Purpose of a Corporation and the Stakeholder Model &#8221; with the renowned lawyer from New York,  Martin Lipton, founding partner of the prominent law firm Wachtell, Lipton, Rosen &#38; Katz  ? With the attendance of more than 300 participants, this conference, organised in partnership with ICD, tackled multiple governance [&#8230;]]]></description>
		<content><![CDATA[You have missed our virtual event on '' The Purpose of a Corporation and the Stakeholder Model '' with the renowned lawyer from New York,  Martin Lipton, founding partner of the prominent law firm Wachtell, Lipton, Rosen &#38; Katz  ?

With the attendance of more than 300 participants, this conference, organised in partnership with ICD, tackled multiple governance challenges including  the transition towards the ''Stakeholder Model'' and concerns about ESG factors.

This conference is now available as a rebroadcast by clicking on the image below.
]]></content>
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		<title>The Age of ESG: new issues for corporate governance ?</title>
		<link>https://igopp.org/en/actionnaires-et-parties-prenantes-quelle-gouvernance-a-venir/</link>
		<comments>https://igopp.org/en/actionnaires-et-parties-prenantes-quelle-gouvernance-a-venir/#respond</comments>
		<pubDate>Sun, 09 Aug 2020 18:01:18 +0000</pubDate>
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		<description><![CDATA[For 40 years or so, corporations listed on stock markets were expected to pursue diligently, if not exclusively, value creation for their shareholders. A number of factors had pushed corporations away from an earlier “stakeholder model,” prime among them the revolution in executive compensation. Then, in the new century, a perennial criticism of business corporations [&#8230;]]]></description>
		<content><![CDATA[For 40 years or so, corporations listed on stock markets were expected to pursue diligently, if not exclusively, value creation for their shareholders. A number of factors had pushed corporations away from an earlier “stakeholder model,” prime among them the revolution in executive compensation.

Then, in the new century, a perennial criticism of business corporations and “capitalism” suddenly took on new urgency, with the capitalist system being held responsible for the wealth and income inequality it produces and the environmental havoc it has wreaked. This time around, though, the complaints did not issue from some leftist organization but from the very heart of the system, from large institutional shareholders who have recently converted to the church of ecological sanctity and social responsibility. In this new view, corporations should henceforth be accountable for their financial performance, yes, but also for achieving set targets in matters of environment (E), society (S) and governance (G). The ESG triplet, tacitly fostering a “stakeholder” doctrine on corporations, has created new challenges for corporate governance.

A year ago, this revised doctrine received a surprising endorsement when 181 CEOs of large American companies signed on [1] to a new “purpose” for the corporation: a fundamental commitment to all of our stakeholders (customers, employees, suppliers, communities and shareholders). “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” 

So, institutional funds and others now require specific ESG action plans, target metrics and linkage of executive compensation to these metrics.

But there are unresolved issues with this “stakeholder” model of the corporation:

When the interests of various stakeholders are divergent, how should the interests of the corporation be understood? How should the board proceed in determining a fair trade-off between the interests of various stakeholders and which of them are entitled to such consideration? 

A second concern: How are business corporations to cope with ESG demands when facing tough competitors, domestic and international, who are not subjected to these same pressures? A recent study shows that activist hedge funds treat ESG targets as a signal of management’s less than absolute devotion to shareholder interest. Firms spending more than average on corporate social responsibility activities have double the probability of being targeted by “activist” hedge funds.

At a more fundamental, philosophical, level: Should ESG targets go beyond what government regulations call for? In a democratic society, is it not, rather, the role of governments, elected to protect the common good and represent the general will of the people, to regulate business corporations so as to achieve society’s social and environmental goals? But, perhaps the recent ESG focus and re-discovered “corporate purpose” are but maneuvers to fend off popular pressures on governments to impose stringent regulations.

In any case, the achievement of ESG targets will require changes in management incentives. Executive compensation in its current format is in large part linked to financial performance, with major components highly sensitive to stock price. Linking compensation to some ESG targets will call for re-tooling the way executives are compensated, a difficult task. In 2019, 67.2% of S&#38;P/TSX 60 firms incorporated at least one ESG metric in their incentive plans, but only 39.7% related to environmental factors. Some 90% of the firms include ESG metrics in their annual executive incentive programs but rarely in their long-term incentive programs. Willis Towers Watson also noted in a recent study that only four per cent of S&#38;P 500 firms used ESG metrics as part of their long-term incentive awards.

Finally, if a company is to be stakeholder-driven, why only shareholders get to elect board members? That nagging question may come to haunt some of the promoters of the “stakeholder model” as it opens the door to board membership by other stakeholders, such as employees. It may not be what the institutional funds had in mind when pushing their ESG agenda.

A sharp debate is now raging (in academia at least) about the pros and cons of the stakeholder model. Be that as it may, in the business world, the relentless pressure from investors has converted most corporate management and boards of directors to the ESG religion despite many unresolved issues.

&#160;

Opinions expressed herein are strictly those of the authors.

[1] https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans]]></content>
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