Canadian Lawyer InHouse

INHOUSE www.canadianlawyermag.com/inhouse Director/Group Publisher: Karen Lorimer karen.lorimer@thomsonreuters.com Editor in Chief: Gail J. Cohen gail.cohen@thomsonreuters.com Editor: Jennifer Brown jen.brown@thomsonreuters.com Staff Writer: Charlotte Santry charlotte.santry@thomsonreuters.com Copy Editor: Mallory Hendry Art Director: Steve Maver Account Co-ordinator: Catherine Giles Advertising Sales Representatives Legal Suppliers: Kimberlee Pascoe Tel: (416) 649-8875 E-mail: kimberlee.pascoe@thomsonreuters.com Law Firms: Joseph Galea Tel: (416) 649-9919 E-mail: joseph.galea@thomsonreuters.com Grace So Tel: (416) 609-5838 E-mail: grace.so@thomsonreuters.com Steffanie Munroe Tel: (416) 298-5077 E-mail: steffanie.munroe@thomsonreuters.com Canadian Lawyer InHouse is published 6 times a year by Thomson Reuters Canada Ltd., One Corporate Plaza 2075 Kennedy Rd., Toronto ON. M1T 3V4 (416) 298-5141. Fax : 416-649-7870 Web: www.canadianlawyermag.com/inhouse LinkedIn: www.goo.gl/9tytr Twitter: @clinhouse Editorial advisory board: Sanjeev Dhawan, Hydro One Networks Inc.; Kari Horn, Alberta Securities Commission; Jonathan Lau, TVO; Janis Vanderburgh, York Region Rapid Transit Corp. All rights reserved. Contents may not be reprinted without written permission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Canadian Lawyer InHouse disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reliance upon information in this publication. Publications Mail Agreement #40766500 ISSN 1921-9563 Copyright © 2013 H.S.T. Registration #R121349799 To subscribe or change addresses Call (416) 649-9926 Fax (416) 649-7870 or e-mail Ellen Alstein at ellen.alstein@thomsonreuters.com RETURN UNDELIVERABLE CANADIAN ADDRESS TO: CIRCULATION DEPARTMENT One Corporate Plaza 2075 Kennedy Rd., Toronto ON. M1T 3V4 E D I T O R ' s b o x By Jennifer Brown Effective boards make for good business T he makeup of a board of directors and how they function as a group is under greater scrutiny these days as more attention is paid to issues of diversity and just how public companies and stakeholders are served by their boards. For the most part, criticism of the number of women populating Canadian boards of directors has been getting the most attention. But as the light is shined on just how dysfunctional they can be, the more interesting discussion is becoming what makes for a highly effective board? That's why it was interesting to see the results of the Excellence in Governance Awards put on by the Canadian Society of Corporate Secretaries and held in Halifax this past summer. A glimpse at its winners (see page 9) will give you an indication of what boards of the future may look like as best practices are shared and their effectiveness becomes more evident to the public. In the category of "best sustainability, ethics, and environmental governance," Telus Communications Co. took the top prize. Nominees in the category had to outline their climate change and environmental health and safety policies, explain their anti-corruption framework, social outreach, and political engagement. Judges considered the extent to which the company integrated corporate social responsibility issues into everyday business practices and the role the company plays in the communities it operates in. In the category of "boardroom diversity," entrants were judged on their diversity policy, measurable diversity objectives, a director competency and skills matrix, director qualifications, and other practices, such as tenure limits, restrictions on the number of boards on which incumbent directors serve, and recruiting of first-time directors. Shoppers Drug Mart was the winner of that award, recognized for its efforts to have not only women on the board but also chairing committees. They also didn't have "over-tenured" directors. One of the judges of the awards, Richard Leblanc, an associate professor of law, governance, and ethics at York University, raised the point these companies are undertaking these endeavours (diversity, environmental sustainability) in the absence of any specific board diversity or climate legislation in Canada. Without any government push, he says there is no firm obligation requiring boards to focus on these efforts. For the most part, I think corporations understand the social and business reasons to pursue diverse boards and have environmentally sustainable operations. But most probably don't measure their efforts. Leblanc emphasized the importance of using metrics, noting there must be assurances a company is not "gaming the metrics." Last summer, Harvard Business School lecturer and former general counsel for Fidelity Mutual Funds Robert Pozen told the Canadian Coalition for Good Governance that it is high-functioning boards, not legislation, that leads to better governance. Pozen argued regulatory legislation in the United States failed to protect against the actions that led to the financial crisis. In 2002 after the WorldCom and Enron Corp. scandals, the U.S. Congress passed the Sarbanes-Oxley Act requiring a majority of independent directors, independent audit committees to oversee financial statements, and assessment of internal controls. But the list of companies that were SOX-compliant included Lehman Brothers Holdings Inc., Citigroup Inc., and Bank of America Corp. In 2007, of the 16 directors on Citigroup's board only one had ever worked for a financial services company. That speaks volumes to the requirement for director competency, a skills matrix, and specified director qualifications. IH Send your news and story ideas to jen.brown@thomsonreuters.com Indexed in the Canadian Periodical Index w w w. c a n a d i a n law y er m a g . c o m / i n h o u s E october 2013 • 3

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