David Pasieka – Liberty Utilities December 2011"

Governance Failures…… Ø Worldcom

Ø Enron

Ø Martha Stewart

Ø Bear Sterns

Ø Lehman Bros

Ø Nortel

Ø Hollinger

Ø RIM

Ø eHealth

Ø Olympus

Why - Why – Why?

§  Management Reporting Spin

§  Part-Time role / Full Time Need

§  Forceful CEO’s

§  Board Skill and Experience

§  Unwavering Trust of Management

§  Unwillingness to Rock the Boat

The Corporation

Board of Directors Shareholders

Management Advisory Board

Key Linkages

Shareholder

Board of Directors

Management

Auditor

Committees

Advisory Board Team

Boards over Time

Stage Financing

Influence

Governance Board of Directors

Advisory Boards

Time

Complexity

Director’s Duty

Ø Fiduciary Duty- “To act in the best interests of the corporation. It is this notion that all stakeholders need to be considered.”

Ø Duty of Care – “To exercise the care, diligence and skill that a reasonably prudent man would exercise under comparable circumstances.”

Stakeholder View

Shareholders / Public / NGO’s / Competitors / Global Markets

Employees Legislators

Scientists / Banks / Media / Customers / Investors

Directors Functions

Ø Hire / Fire CEO Ø Reviews & Approves the

Strategic Direction of the Corporation

Ø Monitor the Performance of Management

Directors Tools

Ø Information: Ø  Right amount to absorb key issues and

make informed decisions.

Ø Process Ø  Independence & Diligence. Ask lots of

Questions.

Ø Business Judgment –  Background, Insight, Experience

Bright Red Line Ø Very Passive: Rubber Stamp

Ø  Management sets and drives agenda Ø  Packages are late or Walked in Ø  CEO strong willed Ø  Infrequent meetings Ø  Board Never votes no

Ø Moderate Ø Very Active: Micro Management

Ø  Board meets monthly, lots of Committees Ø  Board is stronger then the CEO Ø  Board Committee work extensive Ø  Board Large / Executive Committee Active Brown Governance 2005

TSX Governance Guidelines

National Instrument 58-101 Ø Board of Directors Ø Orientation and Continuing

Education Ø Ethical Business Conduct Ø Nomination of Directors Ø Compensation Ø Other Committees beyond Audit,

Comp & Nominating Ø Assessments

Building Your Board(s)

Ø Define Strategic Gap Ø Business Experience Ø Management Experience Ø Directors Experience Ø Personal Attributes Ø Ready / Willing / Able

Board Chemistry

Ø Strong Board Chair

Ø Constant Tending of Culture and Composition

Ø Senior Management Equipping Directors

Ø Bias to Forward Looking Insight vs Rear View Judgements

What’s the Motivation?

Ø Favour to CEO Ø Status / Prestige Ø Interesting & Engaging Ø Opportunity to Network Ø Give Something Back Ø Fun Ø Remuneration

What’s the Risk

Ø Insolvency Liabilities: Ø Payments to Employees Ø Payments to Creditors Ø Payments to Government

Ø Personal Conduct Ø Insider Trading

Ø Joint & Several Liability

Defending the Risk

Ø Fiduciary Duty Ø Duty of Care Ø Due Diligence Ø  Corporate Indemnity Ø Director & Officer

Insurance

Key Advisory Roles

Ø “The Customer” Ø “The Geek” Ø “Dad” Ø “Tight Ass” Ø “Jerry Maguire”

“Art of the Start” – Guy Kawasaki

Managing Your Board Ø Orientation Ø Effective Charters Ø Meeting Management Ø Board Materials Ø Agenda / Minutes Ø In Camera Ø Ongoing Assignments Ø Celebrations

Evaluating Participation

Ø On the Masthead

Ø Silent and Deep

Ø Personality Challenged

Ø Ethical Poison

Is It Time to Act?

Ø Do they come prepared for the meetings?

Ø Can you get your Advisors when you need them?

Ø Is to much time being spent on trivial issues?

Ø Are all members contributing to critical discussions?

Ø Are you getting great return?

Assessment Approaches

Ø Attendance at Meetings Ø For the “Good of the Board” Ø One on One Coaching Sessions Ø Survey - Board / Peer Performance Ø 360 degree Feedback Ø High Tech Interactive Ø Third Party Observers

“Cheap & Cheerful”

“Expensive & Comprehensive”

For the “Good of the Board” Round the Table (Verbal)

Ø What Worked / What Didn’t Ø Areas to Improve Ø Emotional Decompress

Survey 1 to 5 (Written): Ø Pre-materials Concise and Helpful? Ø Everyone prepared? Ø Issues covered Trivial or Important? Ø Discussion Focused Operational or Strategic? Ø Stayed on Track? Ø Who were the Heroes? / Who were the Foes?

In Summary

Ø The Corporation Ø Directors Duty Ø Building Boards Ø Managing Boards Ø Evaluating Boards

References Ø Corporate Governance – Carol Hansell 2003

Ø  Integrity in the Spotlight – Maureen Sabia & James Goodfellow 2005

Ø National Instrument 58-101- Disclosure of Corporate Governance Practices

Ø CICA 20 Questions Series

Ø www.Wallstreetfollies.com

Ø  “Money for Nothing: How the Failure of Corporate Boards Is Ruining American Business and Costing Us Trillions.” – Gillespie 2008

Ø Globe and Mail Board Games – 2011

Ø www.Guidedfutures.com - 2011

Ø Corporate Governance in Canada – Osler 2009

David Pasieka! dpasieka@marsdd.com!