As Canada adopts more and more Sarbanes-Oxley-style regulations, corporate counsel have found a growing aspect of their job to be corporate governance.
That trend will only continue as the U.S. Securities and Exchange Commission ramps up even further, drafting stringent new rules on the disclosure of the dating of stock options and other pay and perks to corporate executives. The changes mean that U.S. companies will have to report each year on the annual pay for chief executives, chief financial officers, and the next three top-earning executives. How long that trend will take to be put in place in Canada is anyone’s guess, say lawyers.
Some forward-thinking Canadian companies, of course, comply with the tougher U.S. regulations even before they are required to be Canadian law.“Everybody these days has corporate governance at the top of their list,” says Jim Turner of Torys. “And it’s primarily in-house counsel — general counsel — who spearheads the development under the supervision of the board. The reason they like to call us in the private firms is simply because they want to know what everybody else is doing.“I think most in-house general counsel are reasonably comfortable that they know what is happening with corporate governance in the sense that they feel comfortable in implementing changes based on regulations you see in the United States and Canada, but they are really interested in is ‘what don’t I know? What are other companies doing? What are the private firms advising?’”
Asked to name some leaders in corporate governance, many lawyers said they felt all their clients were doing a fine job in that department. A few companies, however, have shown more leadership than others.
Says Blake Cassels & Graydon LLP’s Sheila Murray: “I think that Telus does an amazing job at governance. They set out to be ‘best in class’ — those are their words — at the very outset of Sarbanes-Oxley. Telus is cross-listed — it has a dual listing in both Canada and the U.S. — so it knew that when Sarbanes-Oxley came in, it would have to adhere to that, but they got right out there ahead of that and I think have worked very, very hard to make sure that they had all the right policies in place, the right principles in place.”
“If you go to [Telus’] web site [http://about.telus.com/index.html], you’ll see there’s lots on governance. I think they’ve done a wonderful job and that actually started at the top. The CFO, Bob McFarlane, led the charge, but he is extremely ably assisted by Audrey Ho, his general counsel, and their deputy general counsel. That is a client that I am very proud to serve and the kind of client I look to. I know the kind of questions they ask me and they are always cutting-edge. They want to be the best they can. They are way out there.”
Other Canadian leaders in corporate governance include:
Roger Barton, vice president, general counsel, and secretary, Ontario Teachers’ Pension Plan Board: As the Ontario Teachers’ Pension Plan Board’s first in-house lawyer, appointed prior to its 1990 reorganization, Barton has played a significant role in the ongoing development of the pension plan’s corporate governance policies and practices.
Also vice president and secretary of Teachers, Barton was active in its joint founding of the Canadian Coalition for Good Governance as well as in ensuring the pension plan’s voluntary compliance with internal governance practices established by the Canadian Association of Pension Supervisory Authorities.
As part of the senior management team led by chief executive Claude Lemoureux, Barton also sits on Teachers’ internal governance committee. Barton and his staff are responsible for providing legal advice on the administration of the plan and on management of the pension fund.
Daniel Desjardins, senior vice president and general counsel, Bombardier Inc.: As senior vice-president and general counsel of Bombardier Inc., Desjardins has played a central role in recent years in developing and implementing “best in class” corporate governance policies and practices.
Under his tenure, the company, which has 60,000 employees in 21 countries, has introduced a global whistle-blower program that is backed by a leading corporate ethics policy published in 12 languages and enforced by a full-time global compliance officer.
Introducing corporate governance policies in a company like Bombardier, in which the founding family continues to play an active role, can be much more challenging than in a widely held public company, for which such principles are often better suited. Desjardins has cemented his role as Bombardier’s ambassador for corporate governance through his pivotal involvement in the development of a new code of ethics and an ethics advisory committee of which he is a member, the implementation of an internal certification process, the creation of a corporate disclosure policy, and the creation of a web site dedicated to compliance matters.
Although Bombardier is not listed in the United States and therefore not required to comply with the edicts of the Sarbanes-Oxley legislation, Bombardier voluntarily began implementing the SOX provisions in November 2003, well before any equivalent Canadian legislation had taken effect. As a member of Bombardier’s management committee, bid approval committee and disclosure committee, Desjardins continues to be well positioned as a decision-maker focused on making corporate governance work.
Richard Lococo, in-house counsel, Manulife Financial: The leadership efforts of Lococo, who manages the legal department at Manulife Financial’s head office and is a member of the executive group responsible for the company’s worldwide legal and compliance operations, have helped to set the standard for effective governance practices among Canadian public companies, particularly within the financial sector.
Under Lococo’s guidance, Manulife was an early leader in moving beyond compliance to the development of best practices standards of performance. Many issuers have experienced challenges in implementing CEO/CFO certification and are now experiencing similar challenges in preparing to file management reports on internal controls.
Lococo worked closely with other members of management and with his board in developing Manulife’s approach to both of these challenges. He also chairs Manulife’s legal practice groups in corporate finance/securities and mergers and acquisitions, and is a member of the company’s corporate governance task force and capital committee. Lococo has also mentored and contributed significantly to the development of a number of outstanding lawyers, both at Manulife and during his years in private practice.
Christopher Montague, executive vice president and general counsel, TD Bank Financial Group: Since becoming general counsel in 2000, Chris Montague has been the central advisor throughout TD Bank Financial Group’s dramatic evolution as a national leader in corporate governance.
Providing leadership to its chairman, board, and management team, Montague has helped TDBFG come to terms with a rapidly changing regulatory landscape for banks, integrating a set of governance innovations that engage employees and consistently put the long-term interest of shareholders first.
With his expertise and guidance, he has participated in many governance enhancements, such as separating the role of chairman and CEO; eliminating option grants and per-meeting fees for directors in favour of deferred share units and a flat-fee structure; increasing director share ownership requirements; having only one TD bank executive on the board; separating the risk and audit committees; being among the first to expense options and reduce their usage; and enhancing director orientation and peer evaluation.
In 2005, TDBFG became the first major Canadian bank to implement specified term limits for current and new board members, a policy that supports the bank’s goal to bring diversity of age, gender, region, and experience to its boardroom. Another new governance guideline requires any executive officer of the bank to resign as a director of the board within six months of retirement, unless the board feels there are exceptional circumstances. Currently Montague is leading the advancement of a bank-wide reputational risk policy.