In March of this year, the Canadian Coalition for Good Governance (CCGG) published new guidelines for Building High Performance Boards (Guidelines). The original guidelines were introduced in 2005. Significant new commentary has been added in respect of risk management, and the Guidelines demonstrate an increasing emphasis on shareholder engagement by boards of directors as reflected in its model shareholder engagement and say-on-pay policy.
The Guidelines focus on developing high performance boards that are (1) accountable and independent; (2) have experienced, knowledgeable and effective directors and committees; (3) have clear roles and responsibilities; and (4) engage with shareholders. The CCGG encourages corporate boards and executives to continually assess whether their governance practices are enhancing shareholder value.
The Guidelines were developed after consultation with Canadian directors and issuers, governance experts, lawyers and compensation consultants. The expectation is that Canadian reporting issuers will adopt these Guidelines over and above the minimum standards required by the Canadian Securities Administrators and corporate law. As global governance practices evolve, they will periodically revise the guidelines to ensure they stay modern and relevant.
There are thirteen Guidelines, each of which is based on the four principles above. They are as follows:
A high performance board is accountable and independent.
Guideline 1 — Facilitate Shareholder Democracy.
Guideline 2 — Ensure at least two-thirds of directors are independent of management.
Guideline 3 — Separate the roles of chair and CEO.
A high performance board has experienced, knowledgeable and effective directors and committees, and the highest level of integrity.
Guideline 4 — Ensure that directors are competent and knowledgeable.
Guideline 5 — Ensure that the goal of every director is to make integrity the hallmark of the company.
Guideline 6 — Establish mandates for board committees and ensure committee independence.
Guideline 7 — Establish reasonable compensation and share ownership guidelines for directors.
Guideline 8 — Evaluate board, committee and individual director performance.
A high performance board has clear roles and responsibilities.
Guideline 9 — Oversee strategic planning, risk management and the hiring and evaluation of management.
Guideline 10 — Assess the CEO and plan for succession.
Guideline 11 — Develop and oversee executive compensation plans.
A high performance board engages with shareholders.
Guideline 12 — Report governance policies and initiatives to shareholders.
Guideline 13 — Engage with shareholders within and outside the Annual General Meeting.
For a more detailed discussion of the new CCGG guidelines, and in particular, expected best practices for each guidelines, click here.