Board composition: A strong and continuing focus
Board composition is at the heart of board effectiveness. No aspect of board governance has changed as significantly as how boards plan their composition, including how they recruit, attract and orient new directors.
Board composition will continue to be both a board and shareholder priority in 2019 and beyond, because:
- Competition for directors
- The complexity and urgency of disruptive issues
- Shareholders demands for more comprehensive disclosure
Diverse experiences and perspectives on a board are critical to its strength and ability to contribute to performance.
- We expect to see more Canadian companies prioritizing First Nations backgrounds on their boards, along with other ethnic groups, to be more representative of the Canadian population.
- Geographical diversity is becoming more relevant, including representation from different provinces and other countries, rural, urban and suburban areas.
- It may be time to consider nominating younger directors who may not have corporate board experience as yet, but they have been immersed in the digital and social issues that few of the older directors have experienced.
- Nominating committees need to expand their thinking and take a different approach at how they look at leadership experiences.
- Gender diversity has been a key element of board composition for the past decade.
- Our analysis shows the statistics are encouraging, but the pace of change needs to improve.
- Sexual harassment not only morally unacceptable but has a serious impact on the economy.
- Chances of an organization of any significant size having a #MeToo issue is very real.
- Boards with gender and generational diversity more likely to include individuals with experiences of sexual harassment and toxic workplace cultures. If the board has no or few women, they may have difficulty convincing employees and stakeholders that it truly understands the challenges faced by women in the workplace.
- TSX listed organizations required to disclose if they have specific diversity policies regarding women on their boards and senior executive positions.
- Shareholders indicate there needs to be greater progress in board diversity, including more definitive policies and a demonstration of their effectiveness in meeting targets.
- Development of diversity policies have been driven by regulatory requirements regarding gender diversity, however, boards must also consider other diverse perspectives, i.e., age, geographic, etc. that include a broad range of experiences.
Issues boards are facing in 2019 and beyond
Are risk management and strategy enough? Making succession and talent management true board priorities.
Industry knowledge on Canadian boards: Well off the target.
Counting the hours: How time consuming is it to be a Canadian director?
The impact of social media on boards and directors today.
Improving the board composition and director selection process.
Retirement age and term policies – a new focus.
Short-term focus versus long-term value creation
Despite much attention being given to the importance of long-term value creation for shareholders in business books, magazines and even annual reports, public company operations have been heavily influenced for many years by the demands of investors looking for short-term projections and results. This is beginning to change.
A shift in shareholder engagement
Prior to 2000, most corporate boards left shareholder interaction in the hands of the CEO and management team. Directors felt that it was not their responsibility to engage with shareholders outside of the annual meeting. There were exceptions, but many directors were uncomfortable with more interaction because they knew the CEO preferred to lead and control this activity.
Times have changed. Articulate, engaged board members can often make the difference to a corporation's relationship with a major shareholder.
The board and culture
Boards are once again paying attention to the culture of the organizations they lead. Current and potential employees care about work culture, sometimes more than they care about pay and benefits and a company that ignores their culture issues will have a difficult time attracting talent.
In order to make well-informed decisions about strategy, risk and operations, boards have oversight of corporate culture, must manage their own internal board culture and they must have an understanding wider societal cultural shifts and direction. It is not an easy task!
The false news phenomenon: How is it affecting boards?
Confidence in information is essential for good decision-making and risk management, however, for the first time ever there are complex questions concerning the validity and accuracy of the information they must absorb from both external and internal sources.
Advancements in technology make it possible to create and distribute false and misleading information that is almost impossible to differentiate from valid information. These false news tactics feed on our cognitive biases and tendencies. Directors now need the training, information and resources they need to help them assess how they receive and use information and how to appropriately interact with potentially false news in their own digital interactions.
Structure, processes and director compensation
Section two of the report shows a series of five-year data comparison tables by the following topic areas:
- Board structure and composition
- Board Effectiveness
- Compensation & Share Ownership
- Lead Director
- Committee Chair
- Committee Member
- Stock Based Compensation
- Director Share Ownership
Section three shows key governance and compensation data for each company in the Report in table format. Companies are listed alphabetically.
Comparisons contain data collected from annual reports, management proxy circulars and annual information forms regarding fiscal year-ends in late 2017 and early 2018.