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ANSWERS (A) YES AND (B) YES. The Ontario Court of Appeal has held that "the principles that govern a regulated utility that operates as a monopoly differ from those that apply to private sector companies, which operate in a competitive market. The directors and officers of unregulated companies have a fiduciary obligation to act in the best interests of the company, while a regulated utility must operate in a man- ner that balances the interests of the utility's shareholders against those of its ratepayers. In the circumstances, the independent directors on the utility board should assess whether paying the dividend would have adversely affected the ratepayers. YES. In circumstances where the decision of the utility will impose a financial burden on residents of a municipal- ity, an independent committee of the board of directors should approve all rate increases. YES. Provincial and federal environmental protection laws impose a duty of officers and directors to take all reason- able care to prevent the company from breaching those laws. Breaches of that duty can result in the prosecution of officers and directors and, on conviction, the imposition of fines and possibly jail terms. Because of that duty, officers and directors should ensure that, among other things, there is a policy in place requiring that spills be brought to their attention forthwith. Officers and directors must also ensure that the laws governing spills are adhered to, including ensuring that spills are cleaned up and any damage remediated. (A) NO. The new chair of the Compensation Committee should have consulted with the former chair. The compensation expert should have been retained directly by the Compensation Committee rather than by John Sparks. The expert should have been fully briefed by the Compensation Committee with respect to the issues. The expert report should have been considered by the Compensation Committee and the Committee should have met with the expert. A recommendation of the Compensation Committee should have been made to the board at the board YOUR RANKING? One or less correct: might be time to brush up Two correct: not bad, but some further work needed Three correct: very well done, but not perfect Four correct: impressive meeting. The expert should have attended the board meeting to answer questions from the board. The board and the Com- pensation Committee should have taken more time to ensure an informed decision was made. (B) YES. In light of the flawed decision-making process on this issue, despite the "business judgment" rule, the court would likely set aside the compensation package possibly with particular refer- ence to s.120(7)(c) of the Canada Business Corporations Act on the basis that the contract was not reasonable or fair to the corporation when it was approved. A daily blog of FEEDS LEGAL 14 • OCTOBER 2011 LegalFeeds_IH_Oct_11.indd 1 Canadian Legal News Powered by & INHOUSE 11-09-01 11:31 AM 1 2 3 4 canadianlaw Canadian Law yermag.com/legalfeeds yer Law Times