Director Journal (July/August 2023)

Director Journal

A P U B LI CATI O N O F TH E I N STITUTE O F C O R PO R ATE D I R ECTO R S

INTELLIGENCE QUOTIENT As AI changes everything, can boards keep up?

JULY/AUGUST 2023

BREAKTHROUGH BOARDROOMS 2023 ICD NATIONAL DIRECTOR CONFERENCE & FELLOWSHIP AWARDS GALA

Thank you to the participants and speakers from the director community who joined us this year for the ICD National Director Conference & Fellowship Awards Gala.

THANK YOU TO OUR SPONSORS LEAD

PREMIUM

CONFERENCE PATRON

GALA PATRON

SOUTHLEA

FRIENDS OF ICD

SAVE THE DATE I Toronto, June 4 - 6 2024 ICD NATIONAL DIRECTOR CONFERENCE & FELLOWSHIP AWARDS GALA

CONTENTS

Director Journal Editorial EDITOR Simon Avery ART DIRECTOR Lionel Bebbington CONTRIBUTORS Jenny Alfandary, Richard Blackwell, Jeff Buckstein, Anna Ladd-Kruger, Gordon Pitts, Serge Rivest, Barbara Smith, Sebastien Thibault, Prasanthi Vasanthakumar, Shirley Won

Managerial Lead Prasanthi Vasanthakumar

Departments Editor’s note

Get ready for a packed agenda

CEO insights

Rahul Bhardwaj on the exhilarating pace of change

Dispatches

Tough at the top, Musk on morality, Tim Cook’s inbox, young night owls, corporate AI interests, and chemistry in the boardroom

Issues

How many directorships are too many?

11 12

Institute of Corporate Directors

Directors’ dilemma

Rahul Bhardwaj - President and CEO Richard Piticco - Chief administrative officer Jan Daly Mollenhauer - Vice-president, sales, marketing and membership Gigi Dawe - Vice-president, policy and research Kathryn Wakefield - Vice-president, chapter relations

How do you balance the need to raise capital with the high cost?

Directors on the move

44

Parting shot

Finally Content

A different type of cold war

50

Eric Schneider - President Abi Slone - Creative director Dana Francoz - Advertising sales dana.francoz@finallycontent.com 416-726-2853

Building trust and confidence in Canadian organizations is imperative. At the Institute of Corporate Directors (ICD), we believe that this starts with the right leadership and good governance. Directors must lead by being informed, prepared, ethical, connected, courageous and engaged with the world. In the pages that follow, you will find thoughtful and provocative articles that explore these essential leadership qualities.

COVER ILLUSTRTION: SEBASTIEN THIBAULT

04 05 06

Bâtir la confiance envers les organisations canadiennes est primordial. À l’Institut des administrateurs de sociétés (IAS), nous croyons que cela commence par un bon leadership et une bonne gouvernance. Les administrateurs doivent gouverner en étant informés, préparés, intègres, connectés, courageux et ouverts sur le monde.

Dans les pages qui suivent, vous trouverez des articles réfléchis et provocateurs qui explorent ces qualités de leadership essentielles.

2701 – 250 Yonge Street, Toronto, Ontario M5B 2L7 T: 416-593-7741 F: 416-593-0636 E: info@icd.ca ISSN 2371-5634 (Print) www.icd.ca ISSN 2371-5650 (Online) The ICD welcomes a diversity of opinion for inclusion in Director Journal. The contents of this publication do not necessarily reflect the opinions of the ICD, its partners, its sponsors, or its advertisers. Readers are encouraged to consider seeking professional advice and other views.

To request reprints of articles, please contact info@icd.ca

Recent board appointments across the country

Features ICD Fellow insights

16

Connecting with nature

24

Cover story

32 38

Seasoned director Benita Warmbold knows the value of staying calm under pressure

As the effects of climate change grow clearer, some boards are adding biodiversity to their agenda

Directors need to get up to speed on AI or risk irrelevance

Controlling the board

Activist shareholders are looking for targets.

Directors need a plan

Recommended reading

In Everybody’s Business: How to Ensure Canadian Prosperity Through the Twenty-First Century, the authors offer their prescription for economic change

46 ICD.CA | 3

EDITOR’S NOTE

Busy days of summer From AI to biodiversity to shareholder activism, directors must be on their toes THIS ISSUE LOOKS at some of the big items CE NUMÉRO SE PENCHE sur certains des that are landing on many boards’ agendas, grands enjeux à l’agenda de nombreux confrom figuring out how new artificial intelliseils, de la façon dont les nouveaux modèles gence models will affect a business to keepd’intelligence artificielle affecteront les ening restless activist shareholders at bay. treprises à la nécessité de contenir les assauts There’s plenty of commentary these days d’actionnaires activistes toujours impatients. about how the rapid development of generative On entend bien des commentaires sur la AI will change the way we work and live. In manière dont le développement rapide de our cover story, “Who’s Afraid of Artificial Inl’IA générative changera nos modes de tratelligence?,” Richard Blackwell highlights the vail et de vie. « Qui a peur de l’intelligence importance of boards going beyond the hype artificielle? », demande Richard Blackwell, and fear of AI to learn what the applications qui souligne l’importance pour les conand implications of the new technology will seils d’aller au-delà des engouements et be for their organization, its people and their des peurs reliés à l’IA et d’en connaître les industry. Directors must be up to speed if they applications et les implications pour leurs are to provide oversight and guidance, as well organisations, leurs gens et leurs industries.

Simon Avery as offer credible reassurances to their workers, Les administrateurs doivent tenir le rythme Editor especially knowledge workers, that AI will be s’ils veulent être en mesure d’offrir la susavery@icd.ca used to enhance a business, not kill careers. pervision et l’orientation nécessaires et rasIn “Getting Back to Nature” (page 24), the surer de façon crédible leurs employés – en ICD’s Prasanthi Vasanthakumar looks at how particulier les travailleurs du savoir – sur la capacité de l’IA d’améliorer leur organisathe complicated subject of biodiversity is tion et non de tuer des carrières. making its way onto board agendas, much as Dans l’article « Getting back to nature » (page 24), Prasanthi environmental, social and governance (ESG) issues have during the Vasanthakumar de l’IAS examine la façon dont le sujet complexe past few years. Improving our relationship with the natural world de la biodiversité fait son chemin à l’agenda des conseils, tout comcan seem daunting, but has enormous potential, she writes, and me les enjeux d’environnement, de société et de gouvernance (ESG) investors and consumers are already paying close attention. l’ont fait au cours des dernières années.

As new issues show up for discussion in the boardroom, the fundaÀ mesure que des questions nouvelles alimentent les discussions mental one of shareholder relations never goes away – it only changes au conseil, l’enjeu fondamental des relations avec les actionnaires in intensity. The past year has produced an increase in investor activne disparaît pas; il change seulement d’intensité. L’activisme des ism that some consultants predict will accelerate. A recent change to actionnaires a crû au cours de la dernière année et certains convoting rules gives unhappy investors a new way to express their dissultants pensent que ce mouvement va s’accélérer. Un changement pleasure short of an all-out proxy war, writes Jeff Buckstein (page 40), récent dans les règles de votation a donné aux investisseurs insatmaking it crucial that directors be aware of the red flags that can make isfaits une nouvelle façon d’exprimer leur mécontentement, sans the company susceptible to shareholder activism. aller jusqu’à une guerre de procurations, écrit Jeff Buckstein (page Across all sectors of the economy, directors’ workloads are increas40), ce qui rend plus importante que jamais la nécessité que les ading, as is the complexity of the issues they must address. In this enviministrateurs soient conscients des signaux d’alarme susceptibles ronment, it’s worth assessing the amount of time necessary to fulfill d’exposer une entreprise à l’activisme des actionnaires. one’s duties on each board. In our Issues column (page 11), Hugessen Dans notre chronique Issues (page 11), Peter Stephenson et CiaConsulting’s Peter Stephenson and Ciara Wakita weigh in on how many ra Wakita de Hugessen Consulting sont d’avis que la charge est trop directorships are too many for an individual. Whatever the number, it’s lourde.

Quel que soit le chiffre, il est clair que le calcul change. DJ clear that the calculus is changing for the entire director community. DJ

4 | DIRECTOR JOURNAL

CEO INSIGHTS

The edge of tomorrow

ILLUSTRATIONS BY AARON MCCONOMY

As boards navigate a scary but exciting future, we’re here to help WHILE IT’S OFTEN been said that change MÊME SI ON DIT souvent que le changehas never happened faster than right now, ment ne s’est jamais produit aussi rapideit’s also true that change will never occur as ment, il est aussi vrai que le changement ne slowly again as it does today. Once boards se produira plus jamais aussi lentement que embrace this reality, we begin to view maintenant. Une fois que les conseils auevents differently. Consider, for instance, ront embrassé cette réalité, on commencera the notion of a long-term strategy. à voir les choses autrement. Prenons, par Many directors today feel that they don’t exemple, la notion de stratégie à long terme. have the luxury of looking long term. If a Beaucoup d’administrateurs ont aujoboard is approving the deployment of a urd’hui le sentiment qu’ils n’ont pas le luxe significant amount of capital, or perhaps de voir à long terme. Si un conseil approuve the adoption of a new AI model that funle déploiement d’une somme importante de damentally affects operations, it needs to capital ou l’adoption d’un nouveau modèle get the short-term strategy right first or it d’IA qui affectera fondamentalement les won’t make it to the long term. opérations, il lui faut d’abord établir une Rahul Bhardwaj Emerging generative AI technology and stratégie de court terme adéquate, sinon il LL.B, ICD.D accelerating climate change are existential n’arrivera pas au long terme.

President and CEO, developments, and they land on a board La technologie d’IA générative et l’accéléraThe Institute of Corporate Directors agenda that is already filled with complex tion des changements climatiques sont des issues, from managing stakeholder activists développements existentiels qui aboutissent to adopting appropriate diversity, equity à la table de conseils déjà engagés dans une and inclusion plans. Navigating a future you foule d’enjeux complexes. Face à un avenir can’t see, with risks you barely know, makes qu’on ne peut deviner, ponctué de risques serving on a board more challenging today than at any previous time. dont on connaît à peine la nature, la tâche des conseils est plus difficile New uncertainties can make it more difficult for directors to deterque jamais auparavant. De nouvelles incertitudes font qu’il est encore mine how to serve the best interests of their organization, especially plus ardu pour les administrateurs de déterminer comment agir dans when it comes to balancing short-term and long-term strategies. les meilleurs intérêts de leur organisation, en particulier lorsqu’il s’agit In this environment, it’s important to keep in mind that new d’établir un équilibre entre les stratégies à court et long terme. opportunities will be as large as the risks and threats that keep us Dans un tel environnement, il est important de garder à l’esprit awake at night. We are at the edge of a period that will offer extraorque les nouvelles opportunités seront aussi considérables que les risdinary growth, invention and opportunity. For those in leadership ques et les menaces qui nous tiennent éveillés la nuit. C’est à la fois positions, it’s a moment that’s both frightening and exhilarating. terrifiant et exaltant.

At the ICD, we truly believe that directors are the best positioned and À l’IAS, nous croyons fermement que les administrateurs sont prepared to help Canadians turn today’s challenges into tomorrow’s oples mieux préparés pour aider les Canadiens à transformer les défis portunities. But to do so, it’s essential that our members keep pace with d’aujourd’hui en opportunités de demain. Mais pour ce faire, il est developments and stay connected in the community. As our national essentiel que nos membres tiennent le rythme du développement conference in Montreal this spring demonstrated, the ICD serves as a et demeurent proches de leur communauté. Comme l’a démontré national forum to convene informed, diverse voices so that Canadian notre congrès national tenu à Montréal ce printemps, l’IAS est un fodirectors can learn from each other in a focused and productive way. rum qui permet aux administrateurs canadiens d’apprendre les uns Our online and in-person education courses, as well as our local chapdes autres. Nos formations en ligne et en personne, tout comme les ter events, have been designed to help you deal with change today and événements de nos sections régionales, ont été conçues pour vous see beyond the horizon. I invite you to check them out. DJ aider à faire face au changement et à voir au-delà de l’horizon. DJ

ICD.CA | 5

COMPILED BY Prasanthi Vasanthakumar

Dispatches A digest for diligent directors

WORST JOB EVER? THESE DAYS, IT’S HARD TO BE TOP DOG. CEOs are paid handsomely and love to be in charge, but face challenges that didn’t test their predecessors, Ravi Mattu writes in The New York Times.

For example, how do leaders engage with governments amid rabid populism and geopolitical tensions? Should companies cave to political pressure and break up with China after reaping the benefits of working with the world’s second-largest economy for decades?

How can CEOs take a position on social issues like abortion and transgender rights without alienating half the country? Can you “Plead the Fifth” when your customers and employees want you to speak up?

What’s the best way to introduce AI to your workforce? Does

6 | DIRECTOR JOURNAL

slow and steady win the race or leave you behind?

And what does the continuing battle to get workers back in the office say about modern-day management? Is the boss even in charge any more?

For Nicholas Bloom, the power and the glory aren’t worth it.

“It’s frankly a horrible job – I wouldn’t want it,” the Stanford University professor and leadership expert once said.

To add insult to injury, CEO compensation at S&P 500 companies dropped in 2022 for the first time in a decade, according to The Wall Street Journal. But at US$14.5-million, the median pay package is still impressive. Would you take the job?

NEWS

PHOTOGRAPHY BY RICHVINTAGE/ISTOCK (LEFT), PEKIC/STOCK (TOP), DAVID GYUNGISTOCK (RIGHT)

WHEN 9 TO 5 STARTS AT 6 P.M. Unlike Apple’s Tim Cook and others of his vintage, young professionals are not keen to spring out of bed at first light. Global research by Adobe shows that many millennials and Gen Zs prefer to start their workday at 6 p.m. and work well into the night. In a business world geared toward early birds, night owls have had less success, observes Orianna Rosa Royle in Fortune. But that could change if flexibility around time and space becomes non-negotiable.

THE REAL RISK OF AI

25%

Gen Z’s share of the workforce by 2025

26%

Gen Z workers who claim to be most productive from 6 p.m. to 3 a.m., compared with just 6 per cent of baby boomers

70%

Young professionals who would switch jobs for more control of their work schedule

Source: Adobe, Fortune

Geoffrey Hinton, the “Godfather of AI,” quit Google this spring to warn the world that artificial intelligence could soon outsmart humans. But Meredith Whittaker says Hinton’s warnings miss the point. According to the president of Signal Technology Foundation, a private messaging app, the real risk of artificial intelligence comes from the corporations behind the technology.

There’s no evidence that large machine-learning models have “the spark of consciousness,” she tells Fast Company. These technologies rely on vast amounts of surveillance data and computational infrastructure. Unplugging the servers will render AI useless – and thwart any plans to wipe out humanity.

What’s concerning is the human reaction to AI. When faced with a technology that seems eager to listen and respond to us, we fall into a kind of trance, Whittaker says. Not only does this distract us from real problems like climate change, but it also takes our eyes off the handful of organizations that control these systems.

“If we follow these corporations’ interests, we have a pretty good sense of who will use it, how it will be used, and where we can resist to prevent the actual harms that are occurring today and likely to occur,” Whittaker says.

ICD.CA | 7

GOVERNANCE 2.0 IS YOUR BOARD READY FOR THE FUTURE? According to directors from Fortune’s Modern Board 25 list, the right board chemistry is critical for success.

A free exchange of ideas, healthy disagreement and camaraderie inside and outside formal meetings can be essential elements.

Launched last year, the Modern Board 25 ranking aims to feature the most innovative boards among S&P 500 companies. This year, cybersecurity firm F5 toppled Microsoft to take the top spot.

READY TO SERVE According to François Locoh-Donou, CEO of F5, high-performing, future-ready boards share three non-negotiable traits. They are:

Always evolving

Technologically aware

MUSK ON MORALITY Elon Musk can’t stop making headlines. In a recent interview, the Tesla chief executive officer said it was “morally wrong” for the “laptop classes” to work from home when those who toil in factories and restaurants can’t do the same. Musk’s commitment to employee equality must have taken the day off when he was found to have wrongly fired a factory worker for trying to unionize, but that’s beside the point. Because, like Musk, many other executives aren’t thrilled about remote work and view it as an economic threat.

A devotion to sweatpants aside, the real reason people are shunning the office is the commute, Farhad Manjoo writes in The New York Times. The pandemic rendered this daily ritual in all its exhausting, expensive and environmentally toxic glory obsolete. Why would anyone want it back? Workers aren’t taking a moral stance; they’re just being rational, Manjoo says.

However, remote work might be ruining cities. Without commuters streaming through downtown cores, everything from the local coffee shop to public transport could be in jeopardy. If Musk had his way, there would be no commute because employees would live and sleep at the office. Problem solved. But where’s the morality in that?

8 | DIRECTOR JOURNAL

ICONS BY NOUN PROJECT. ILLUSTRATION BY ARTISTICCO/ISTOCK. PHOTOGRAPH BY ANDRII YALANSKYI/ISTOCK

Diverse

MESSAGE ME ANY TIME Tim Cook is inspired by his inbox.

The Apple CEO, whose email address is publicly available, starts reading messages at the crack of dawn each day. Customers share how they feel about Apple products; some even tell him stories about their lives. When emails spark an idea, Cook forwards them to his employees.

“We can all perform at 90 per cent, but you want people to get to 100,” he tells GQ magazine. “And to get to 100, you have to be inspired by something.”

According to Gabriela Riccardi in Quartz, Cook’s attention to email reflects the human tendency to pay more attention to strangers than those close to us. Research shows we listen more closely to people we don’t know well, and come up with more and better ideas when we consult these lesserknown folk. In contrast, we often tune out our loved ones because we think we already know what they’re going to say – a tendency known as closenesscommunication bias.

This inclination doesn’t bode well for friends and family, but it can get those creative juices flowing. For those who dread opening their inboxes, it may be time for a new outlook.

NEWS

ICD.CA | 9

ICD-ROTMAN GOVERNANCE ESSENTIALS PROGRAM.

BOARD DIRECTORSHIP STARTS WITH A STRONG FOUNDATION. Enhance your governance knowledge with a foundational program to learn key accountabilities and responsibilities to serve boards more effectively.

The ICD-Rotman Governance Essentials Program (GEP) is an intensive two-day course focused on the key accountabilities, responsibilities, and critical skills of board directors. Developed in partnership with the University of Toronto’s Rotman School of Management, the GEP provides newly appointed board directors and senior executives with the fundamentals of board governance through team-based learning, enabling them to participate in board discussions and boost director effectiveness.

For board members of a registered charity, whose mission is to enhance outcomes for the community organization they serve, a limited number of scholarships are available through the ICD-RBC Foundation. For more information visit ICD.CA/RBCAPPLICATION.

APPLY ONLINE ICD.CA/GEP Call 416.593.3349 or email education@icd.ca for a personal consultation.

Think beyond the boardroom.

UPCOMING GEP DATES ONLINE APPLY BY:

September 18, 2023 August 21, 2023

ONLINE APPLY BY:

October 14, 2023 September 14, 2023

The ICD-Rotman Governance Essentials Program was previously known as the ICD-Rotman NFP Governance Essentials Program. Contents of this course remains unchanged.

Scholarship supported by:

® [The RBC Foundation] is a registered trademark of Royal Bank of Canada.

Used under license.

ISSUES

BY Peter Stephenson and Ciara Wakita

Are you ‘overboarded’?

ILLUSTRATION BY ERHUI1979/iSTOCK

Despite plenty of guidance about how many boards are too many, the answer comes down to personal performance

THE EXPECTATION FOR BOARD MEMBERS to create sustainable value continues to grow. Stakeholders increasingly expect directors to stay current on industry trends and disruptive forces, remain inquisitive about strategic opportunities and risks, be prepared and contribute to meetings, and effectively monitor an organization’s strategic and operational progress and risks. All of this has led to greater scrutiny of directors’ bandwidth to fulfill their responsibilities, and ample recommendations on how much board work is too much.

Canadian Securities Administrators – a group that aims to harmonize securities regulations in the provinces and territories – has released relatively broad guidance, advising nominating committees to “… consider whether or not each new nominee can devote sufficient time and resources to his or her duties as a board member.” The Canadian Coalition for Good Governance (CCGG), and the proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis & Co., have each developed their own policies to assess director “overboarding.” Among their conclusions: Directors not employed full-time may serve on up to five public company boards, and active CEOs may serve on up to two or three boards.

At Hugessen Consulting Inc., our 2023 proxy review found that 52 per cent of S&P/TSX 60 companies have a policy stating that directors may serve on either three or four other boards. While the CCGG, ISS and Glass Lewis are silent on the issue of audit committee members being stretched too thin, 36 per cent of TSX 60 companies have implemented a policy stating, most frequently, that directors can serve on only two other audit committees (perhaps reflecting similar requirements set by the New York Stock Exchange for dual-listed companies). CCGG and Glass Lewis also consider time commitments related to directors’ roles at not-for-profits, private companies and government agencies in determining whether they are taking on too much board work. Ultimately, none of these recommendations is binding on a public company. It is up to each board’s nominating committee to determine whether a director should remain on the board if they assume another directorship.

The most important issue is individual director performance: Is a director adding value through their inquisitiveness about the organization, diligent preparation, engagement in meetings, and participation in decision-making? Is their personal contribution earning them their seat at the table?

While overboarding policies are good barometers, they are blunt tools for truly determining a director’s performance. A well-man-

aged individual director feedback process can more effectively gauge a director’s contribution and trigger appropriate action.

Ninety-five per cent of TSX 60 companies report having some form of individual director feedback process, though it is difficult to determine the quality, impact and outcomes of the process.

At the end of the day, if a director’s performance is suffering for any reason, including being spread too thinly by their other board responsibilities, the board chair and governance and nominating committee need to act. DJ

Proxy advisory firms suggest directors limit themselves to a maximum of five boards. The key factor, however, is whether each member’s personal contribution is enough to earn them a seat at the table.

PETER STEPHENSON and CIARA WAKITA lead Hugessen Consulting’s board effectiveness practice and help boards improve their odds of making good choices. Both are faculty members of the ICD-Rotman Directors Education Program.

ICD.CA | 11

The dilemma Q.

With high interest rates, businesses can expect to pay more to raise capital today – assuming they can even find willing lenders. If you’re a board director of a small to medium-sized enterprise, how do you balance the need to raise capital with the high cost?

PURSUE STRATEGIC OPTIONS Mergers and acquisitions provide strategic opportunities to leverage synergies, especially during challenging market conditions. By integrating with other businesses, SMEs can improve their operational efficiencies, gain access to new markets, and increase their financial resources. This strategy could mitigate the need for expensive borrowing.

CONSIDER ALTERNATIVE FUNDING Companies should explore other financing options that may be more cost-effective than traditional lending. These could include venture capital, angel investment, crowdfunding, government-supported grants or loans, or strategic partnerships. Such options not only reduce the reliance on high-cost debt but can also provide strategic

IN THE FACE OF HIGH INTEREST RATES, the strategic priorities of a small to medium-sized enterprise (SME) must undergo careful scrutiny. These businesses, known for their agility, need to pivot according to ever-evolving market conditions. Capital allocation and cost implications form a crucial part of this strategic re-evaluation.

The first step involves a thorough re-examination of the company’s strategic road map. The inherent cost of capital becomes a critical consideration in evaluating the economic feasibility of various undertakings. It is crucial for SMEs to verify whether their business plans match up with the anticipated yields, particularly within the context of elevated borrowing costs. This analysis not only helps steer the company’s trajectory but also facilitates decision-making related to the timing and magnitude of capital generation. With this foundation laid, SMEs can explore a range of strategies to raise capital while considering the following options: CONSERVE CASH In an environment of high-interest rates, cash conservation becomes critical. SMEs may need to consider downsizing or adopting lean operational practices to save cash. This approach will help the company remain a viable entity and prepare for market uncertainties. It is essential, however, that these measures do not compromise the company’s core strengths or long-term sustainability.

12 | DIRECTOR JOURNAL

advantages such as market insight, industry connections and operational expertise.

ANNA LADD-KRUGER, ICD.D, serves on the boards of Sherritt International Inc., SilverCrest Metals Inc. (audit chair), and Integra Resources Corp. (audit chair). Previously, she was chair of Nova Minerals Ltd., and has also served as the chief financial officer and corporate development executive of several public mining companies.

DEVANT DES TAUX D’INTÉRÊTS ÉLEVÉS, les priorités stratégiques d’une PME doivent faire l’objet d’un examen approfondi.

Ces entreprises doivent agir en fonction des conditions d’un marché en constante évolution. L’allocation de capitaux et les implications liées à leur coût forment un élément crucial d’une réévaluation stratégique.

La première étape implique un réexamen rigoureux du plan stratégique de l’entreprise. Le coût du capital devient une considération essentielle d’évaluation de la faisabilité économique. Il est crucial de vérifier si les projets d’affaires correspondent aux rendements anticipés, surtout dans un contexte de coûts d’emprunt élevés. Non seulement cette analyse contribue-t-elle à orienter la trajectoire de l’entreprise, mais elle facilite aussi la prise de décision. Une fois cette base établie, les PME peuvent envisager les options suivantes.

PHOTOGRAPH BY WIPADA WIPAWIN/ISTOCK

Anna Ladd-Kruger

DIRECTORS’ DILEMMA

CONSERVER LES LIQUIDITÉS

ENVISAGER DU FINANCEMENT ALTERNATIF

Dans un environnement de forts taux d’intérêts, la conservation des liquidités

Certaines entreprises devraient explorer d’autres options de finance-

est essentielle. Les PME pourraient devoir envisager une rationalisation ou

ment moins coûteuses, comme le capital de risque, les anges investis-

l’adoption de pratiques opérationnelles allégées pour économiser. Une telle

seurs, les subventions ou prêts gouvernementaux ou les partenariats

approche aidera l’entreprise à demeurer viable et la préparera aux incerti-

stratégiques. Non seulement ces options réduisent-elles la dépen-

tudes du marché. Il est crucial, toutefois, que ces mesures ne compromettent

dance envers l’endettement, mais elles offrent aussi des avantages

pas les principales forces ou la durabilité à long terme de l’entreprise.

stratégiques comme une meilleure connaissance du marché, des liens au sein de l’industrie et une expertise opérationnelle.

MAINTENIR LES OPTIONS STRATÉGIQUES Les fusions et acquisitions offrent des opportunités stratégiques permettant de tirer profit de synergies lorsque les conditions du marché sont difficiles. En intégrant d’autres entreprises, les PME peuvent améliorer leur performance stratégique, accéder à de nouveaux marchés et accroître leurs ressources financières. Cette stratégie pourrait atténuer la nécessité d’emprunts coûteux.

ANNA LADD-KRUGER, IAS.A, siège aux conseils de Sherritt International, SilverCrest Metals Inc. (présidente du comité d’audit) et Integra Resources Corp. (présidente du comité d’audit).

Elle a aussi été présidente du conseil de Nova Minerals et chef de la direction financière et chargé du développement d’entreprise de plusieurs sociétés minières cotées en bourse.

ICD.CA | 13

By adopting the strategic mindset, you can effectively balance the need to raise capital with the high costs involved. The key is to optimize the financial position, explore alternative funding sources, and build strong relationships with lenders and investors who share your long-term vision.

JENNY ALFANDARY, ICD.D, is a board director at Touchstone Exploration Inc. and serves on the board of governors of the Mackenzie Institute.

Jenny Alfandary A BOARD’S TASK OF OVERSEEING the allocation of capital is more challenging today as the cost of capital has risen with high interest rates. Balancing the need for fresh capital with elevated costs requires a strategic approach that focuses on growth, partnerships and capital strength. Here are five important steps for board directors to consider:

LA TÂCHE DE SURVEILLANCE par un conseil de l’allocation de capital est plus difficile aujourd’hui, avec des taux d’intérêts élevés.

Pour atteindre l’équilibre entre le besoin de nouveaux capitaux et le loyer élevé de l’argent, il faut une approche centrée sur la croissance, les partenariats et la force du capital. Voici cinq étapes importantes pour y parvenir.

BÂTIR DES PARTENARIATS STRATÉGIQUES Explorez des partenariats à long terme avec des investisseurs

DEVELOP STRATEGIC PARTNERSHIPS

stratégiques qui apportent plus que du capital. Recherchez des inves-

Explore long-term partnerships with strategic investors who bring more

tisseurs pouvant offrir une expertise, des réseaux et un accès à de

than just capital to the table. Seek investors who can provide industry

nouveaux marchés, donc une valeur ajoutée et de nouvelles synergies.

expertise, networks and access to new markets. These partnerships can unlock growth opportunities and help mitigate the high costs of capital

CRÉER DE LA CONFIANCE

through added value and synergies.

Développez de solides relations avec des prêteurs et investisseurs qui comprennent votre industrie. Engagez un dialogue continu, participez

BUILD RELATIONSHIPS

aux événements de l’industrie et développez activement vos réseaux.

Develop strong ties with lenders and investors who understand your

Vous améliorerez votre position de négociation et augmenterez la proba-

industry. Engage in ongoing dialogue, attend industry events and ac-

bilité d’obtenir du financement à des taux raisonnables.

tively network to build rapport. By establishing trust and credibility, you enhance your negotiating position, increasing the likelihood of securing

ÉVALUER LES BESOINS EN CAPITAL

capital at more favourable rates.

Menez une analyse rigoureuse de vos besoins en capital. Identifiez les projets, initiatives ou zones spécifiques qui requièrent du finance-

EVALUATE CAPITAL REQUIREMENTS

ment. Accordez la priorité à ceux qui correspondent à vos objectifs

Conduct a thorough analysis of your capital requirements. Identify the

stratégiques et ont le potentiel de générer des rendements importants.

specific projects, initiatives or areas of your business that require funding.

Prioritize those that align with your strategic objectives and have the poten-

ATTÉNUER LES RISQUES

tial to generate significant returns. The evaluation helps to determine the

Élaborez une stratégie complète de gestion du risque afin d’identifier et

necessary amount of capital to raise that reduces the risk of overborrowing.

d’atténuer les risques potentiels. Les prêteurs et investisseurs sont plus susceptibles d’accorder des conditions favorables s’ils perçoivent votre

MITIGATE RISKS

entreprise comme étant résiliente et bien préparée à relever des défis.

Develop a comprehensive risk-management strategy to identify and

Mettez de l’avant votre capacité d’adaptation à des conditions de marché

mitigate potential risks. Lenders and investors are more likely to provide

changeantes, d’instaurer des plans d’urgence et de faire preuve d’une

favourable terms if they perceive your business as resilient and well-pre-

claire compréhension de vos stratégies d’atténuation du risque.

pared to navigate challenges. Showcase your ability to adapt to changing market conditions, implement contingency plans and demonstrate a

SURVEILLER ET S’AJUSTER

clear understanding of your risk-mitigation strategies.

Suivez régulièrement vos stratégies de financement et évaluez leur efficacité. Tenez-vous au fait des tendances du marché, de la fluctuation des

MONITOR AND ADJUST

taux d’intérêts et des changements aux conditions d’emprunt. Ajustez votre

Regularly monitor your capital-raising strategies and assess their

approche de financement afin d’en optimiser les coûts et assurez-vous que

effectiveness. Keep abreast of market trends, interest rate fluctuations

vos stratégies de financement correspondent à vos objectifs d’affaires. DJ

and changes in lending conditions. Stay agile and adjust the financing approach accordingly to optimize costs and ensure your capital-raising strategies remain aligned with your business goals.

14 | DIRECTOR JOURNAL

JENNY ALFANDARY, IAS.A, est administratrice de Touchstone Exploration Inc. et siège au conseil des gouverneurs de l’Institut Mackenzie.

CLIMATE GOVERNANCE COURSE – FIRST TO RECEIVE CGI GLOBAL RECOGNITION Chapter Zero Canada’s* course, Board Oversight of Climate Change (BOCC), is the first to successfully pass a robust review process based on new global curriculum standards set out by the Climate Governance Initiative (CGI). This recognition confirms the ICD’s commitment to best-in-class director education, preparing boards to navigate the complex and ever-changing climate governance landscape.

Apply for the next Board Oversight of Climate Change offering, starting November 1, 2023, and equip yourself with forward-thinking strategies to enhance your oversight of climate-related risks and opportunities. *Chapter Zero Canada, the Canadian chapter of the World Economic Forum’s Climate Governance Initiative (CGI), is the primary resource for information and education on climate governance and oversight at the Institute of Corporate Directors (ICD).

APPLY ONLINE ICD.CA/BOCC

Canada

PHOTOGRAPHS BY Steve Carty

COOL GOVERNANCE ICD Fellow BENITA WARMBOLD has faced her share of corporate crises.

The chair of the Canadian Public Accountability Board, which oversees firms that audit Canadian public companies, tells business author Gordon Pitts that the ability to remain calm and focused under pressure is one of the most valuable traits a director can offer today La Fellow de l’IAS BENITA WARMBOLD a vécu son lot de crises en entreprise.

La présidente du conseil du Conseil canadien sur la reddition de comptes, qui assume un rôle de surveillance des cabinets d’audit des entreprises canadiennes cotées en bourse, a confié au journaliste d’affaires Gordon Pitts que la capacité de rester calme et concentré sous pression demeure l’un des plus précieux attributs que puisse posséder un administrateur aujourd’hui THERE IS A QUESTION that Benita Warmbold likes to ask wouldbe directors: How have they responded in stressful situations?

It seems like a simple question, but Warmbold, a corporate director and retired senior executive, feels it can unearth telling responses as she probes candidates and their references.

She finds board members can often deal readily with routine matters. “But when the pressure comes, you need people who are going to lean in appropriately – to be there and not to pull back or panic unnecessarily.”

From decades observing boards from outside and inside, she looks for a sense of calm when the going gets tough. “When people were running around like their hair was on fire, the outcome was never so good; when people were calm and worked things though, you got good results.”

Stress management is an important test for any board in any era, but its relevance rises with the degree and frequency of today’s high-pressure situations. A number of industries seem to be living in

16 | DIRECTOR JOURNAL

IL Y A UNE QUESTION que Benita Warmbold aime bien poser aux aspirants administrateurs : comment répondent-ils aux situations de stress? Ça paraît une question simple, mais Mme Warmbold, administratrice de sociétés et dirigeante d’entreprise à la retraite, croit qu’elle peut révéler des réponses éloquentes sur les candidats qu’elle examine.

Elle estime que les membres du conseil peuvent facilement s’en tirer dans les questions de routine. « Mais quand la pression monte, on a besoin de gens qui se comportent adéquatement – qui ne cèdent pas inutilement à la panique. » Après des décennies à observer les conseils d’administration de l’extérieur et de l’intérieur, elle recherche la capacité de rester calme lorsque les choses se corsent. « Quand les gens courent dans tous les sens comme s’ils avaient le feu aux trousses, le dénouement n’est jamais trop bon; quand ils sont calmes et étu-

'Boards and management need to be agile and adaptable. They have to be looking around the corners to see what is coming,' says corporate director and ICD Fellow Benita Warmbold.

ICD.CA | 17

an age of constant crisis, for which the Covid-19 pandemic was not an extreme outlier but a dress rehearsal for an onslaught of unexpected shocks. Crisis is always a fact of life, but boards and managers are more acutely aware of the global interconnectedness of mayhem.

Warmbold, whose directorships include a major bank and the chair’s role at a public auditing oversight body, says that in composing a board for these times – any times – you need to look beyond the classic skills matrix used to evaluate candidates.

“You need to focus on the key attributes of the individual – integrity, [being] ethical, a team player, independent, constructive, all that as well.

But you really want to know, too, how they will be under pressure.”

The pandemic posed the ultimate test of crisis governance. Boards had to step up to support their management teams in myriad challenges – the juggling of remote and in-person work, constrained revenues, difficult financings, supply squeezes and health-and-wellness issues.

Throughout the crisis, Warmbold sought to communicate constantly with senior management in organizations she served, bringing not just her experience and judgment to the task, but also caring support for the well-being of the team on the firing line.

Her measured, thoughtful presence – and ability to focus on essential tasks, while cutting through the chaff – are cited among the attributes that led to her 2023 induction as a Fellow of the Institute of Corporate Directors.

Prepare for anything In a crisis, “people get very distracted by things that are not impactful,” she cautions. “You have to help people work through that, and create the time and place for the right conversations to take place.”

The banking industry is a case study in cascading events. As a director of Bank of Nova Scotia, she has seen the bank weather the myriad uncertainties of a pandemic, followed rapid-fire by a war in Europe, an inflationary and interest-rate spiral, and a U.S. banking crisis, while bracing for the looming and unpredictable fallout from climate change.

For Scotiabank chair Aaron Regent, executives and directors require an adaptability that echoes boxer Mike Tyson’s classic line: “Everyone has a plan until they get punched in the mouth.”

Big companies like banks are complicated entities to start with, Regent says. There are always going to be issues that come out of the blue.

Companies plan and forecast but they know they can’t get 100 per cent of it right. “You know something will come at you unexpectedly.

“You have to build that resilience for dealing with changing circumstances and have that muscle as part of your DNA,” Regent says.

People like Warmbold are valuable board additions because, Regent says, she’s had experience in difficult situations, and knows “it is important to remain calm, not overreact, get the facts, keep an open mind and work together as a group.”

But how does a board embed that preparedness gene – when, as Warmbold says, a crisis is rarely repeated in the same way? Indeed, the next challenge is likely something entirely new, which means “boards and management need to be agile and adaptable.

They have to be looking around the corners to see what is coming,” at the same time as being realistic in what can be done.

18 | DIRECTOR JOURNAL

dient des solutions, les résultats sont beaucoup plus heureux. » La gestion du stress représente un test important pour n’importe quel conseil dans n’importe quel domaine, mais sa pertinence s’élève avec le degré et la fréquence des situations de forte pression qu’on connaît aujourd’hui. Plusieurs industries semblent vivre en situation de crise constante. À cet égard, la pandémie de Covid-19 n’a pas été un cas particulier, mais une répétition générale en vue d’assauts inattendus. Les crises font partie de la vie, mais les conseils et les directions d’entreprise sont plus conscients qu’auparavant du caractère mondial des situations chaotiques.

Mme Warmbold, qui siège notamment au conseil d’une grande banque et préside celui d’un organisme de surveillance des audits d’entreprises publiques, affirme que pour former un conseil à notre époque – à n’importe quelle époque – il faut voir au-delà de la grille classique de compétences. « On doit bien sûr se concentrer sur les principaux attributs de la personne : intégrité, éthique, capacité de travailler en équipe, attitude constructive. Mais on souhaite aussi savoir comment elle se comportera sous pression. » La pandémie fut le test ultime d’une crise de gouvernance. Les conseils ont dû aider leurs équipes de direction à relever de multiples défis : gestion du travail en présentiel et à distance, pertes de revenus, difficultés de financement, problèmes logistiques et enjeux de santé et de bien-être.

Tout au long de la crise, Benita Warmbold a cherché à communiquer constamment avec les équipes de direction des organisations qu’elle desservait, apportant non seulement son expérience et son jugement, mais s’assurant aussi du bien-être des gens sur la ligne de feu.

Sa présence mesurée et attentive – et sa capacité de se concentrer sur l’essentiel – fait partie des attributs qui expliquent sa nomination à titre de Fellow 2023 de l’Institut des administrateurs de sociétés.

Se préparer à tout En situation de crise, « les gens deviennent très distraits par des choses sans importance, prévient-elle. Il faut les aider à surmonter cela et créer un espace où tenir des conversations pertinentes. » Le secteur bancaire est une étude de cas dans une série d’événements en cascades. Comme administratrice de la Banque Scotia, elle a vu celle-ci traverser une foule d’incertitudes liées à la pandémie, rapidement suivie d’une guerre en Europe, d’une spirale inflationniste et d’une hausse des taux d’intérêts, en plus d’une crise bancaire aux États-Unis, tout en essayant de se préparer aux retombées imminentes et imprévisibles des changements climatiques.

Pour le président du conseil de la Banque Scotia Aaron Regent, les cadres et administrateurs doivent faire preuve d’une adaptabilité qui fait écho à la citation classique du boxeur Mike Tyson : « Tout le monde a un plan jusqu’à ce qu’il se prenne une droite dans la gueule. » Au départ, tout comme les banques, les grandes entreprises sont des entités compliquées, rappelle M. Regent. Il y aura toujours des problèmes imprévus. Les entreprises planifient et prévoient, mais

What you really want to know about any director, says Benita Warmbold, is 'how they will be under pressure.'

In these periods, “you need a strong and open relationship and a lot of trust between management and the board. You need the right CEO and you need the CEO and management team to feel supported,” Warmbold says.

A different tone has to enter the conversation, she adds. Managers have to know that they can come to the board with strategies not entirely nailed down. “The board has to work with management as they evolve in their thinking, rather than just having things served up to them.” In this atmosphere, “communications levels have to go way up and you have to get a bit more engaged, while respecting management’s role.”

Know your people Warmbold’s words come from a career of close observation, starting with her work in the audit practice of a major accounting firm.

Her watchfulness was useful as she moved to the Canada Development Investment Corp., a Crown entity that guided federal assets and Ottawa’s divestment and transition of properties.

The organization’s board consisted of a Who’s Who of Canadian corporate talent. She watched these executives closely, admiring how, for example, Antoine Turmel, the legendary builder of Quebec grocery chain Provigo, could pose probing questions that forced management to think more deeply.

Warmbold made a career shift to the investment management industry, where she found herself dealing with the fallout from the financial crisis of 2007-2008. She participated in the committee mandated with sorting out the Canadian debacle in asset-backed commercial paper, a market that had seized up in the wake of the U.S. mortgage meltdown.

That committee was headed by corporate lawyer Purdy Crawford, who became a role model in patiently navigating the cacophonous range of interests. In “just watching his skill in chairing the meetings and getting consensus on tricky and thorny issues – I haven’t seen anyone else that skilled.”

savent que ce n’est pas infaillible. « On sait que quelque chose d’inattendu finira par se produire. » « Il faut bâtir cette résilience pour faire face à des situations changeantes et développer ce genre de muscle dans son ADN », poursuit-il.

Les gens comme Mme Warmbold sont des atouts précieux, affirme M. Regent, parce qu’ils ont l’expérience des situations difficiles et savent qu’il est important « de rester calme, de ne pas dramatiser, de s’en tenir aux faits, de garder l’esprit ouvert et de travailler en groupe cohérent. » Mais comment un conseil peut-il intégrer un tel « gène de la préparation » lorsque – comme le souligne Mme Warmbold – les crises prennent rarement la même forme? Bien sûr, le prochain défi sera sans doute entièrement nouveau, ce qui signifie que « les conseils et les équipes de direction doivent faire preuve d’agilité et d’adaptabilité. Ils doivent avoir des yeux autour de la tête pour voir ce qui s’en vient » et en même temps être réalistes quant à ce qu’il est possible de faire.

Dans ces moments, « on a besoin d’une relation solide et ouverte et de beaucoup de confiance entre la direction et le conseil. Il faut le bon chef de la direction et il faut que celui-ci et son équipe se sentent soutenus », explique-t-elle.

Il faut aborder la conversation d’un ton différent, ajoute-t-elle.

Les cadres doivent savoir qu’ils peuvent se présenter au conseil avec des stratégies qui ne sont pas complètement déterminées. « Le conseil doit accompagner la direction dans sa réflexion à mesure qu’elle évolue plutôt que de lui imposer les choses. » Dans ce type d’atmosphère, « les niveaux de communication doivent s’élever. Il faut être plus engagé, tout en respectant le rôle de la direction. »

Connaître son monde Les paroles de Benita Warmbold s’appuient sur une carrière d’observation serrée, qui a débuté par une pratique d’audit au sein d’un grand cabinet comptable. Sa vigilance s’est avérée très utile lorsqu’elle est passée par la Corporation de développement des investissements du Canada, une société d’État qui guide les investissements, la cession et la transition de propriétés fédérales.

Le conseil d’administration de l’organisation est composé des meilleurs talents corporatifs au Canada. Elle a étudié de près ces dirigeants, admirant notamment Antoine Turmel, le bâtisseur légendaire de la chaîne d’alimentation Provigo, qui est en mesure de poser des questions qui forcent les équipes de direction à réfléchir profondément.

Mme Warmbold a effectué un changement de carrière vers le secteur de la gestion de placements, où elle s’est trouvée à gérer les retombées de la crise financière de 2007-2008. Elle a participé au comité mandaté pour résoudre le fiasco des papiers commerciaux adossés à des actifs, un marché qui s’était détérioré dans la foulée de l’effondrement du marché immobilier américain.

Ce comité était dirigé par l’avocat d’entreprise Purdy Crawford (décédé en 2014) qui, malgré les conflits et débats incessants, savait qu’une solution était possible. « Purdy avait pris le temps de nous connaître », explique celle qui tente de mettre en pratique ce trait particulier.

ICD.CA | 19

WARMBOLD LEARNED THAT YOU MAY NOT KNOW IT AT THE MOMENT BUT THERE IS A PATH THROUGH THE MOST IMPENETRABLE BARRIER. MME WARMBOLD A APPRIS QU’ON NE LE SAIT PEUT-ÊTRE PAS SUR LE MOMENT, MAIS QU’IL EXISTE TOUJOURS UN MOYEN DE FRANCHIR LES BARRIÈRES LES PLUS IMPÉNÉTRABLES. Despite the relentless conflict and debate, Crawford (who died in 2014) knew there had to be a way to forge a solution. Warmbold learned that you may not know it at the moment but there is a path through the most impenetrable barrier.

One underestimated trait was that “Purdy took the time to get to know you.” It is something she tries to take to her boards. “It is a team sport and it is good to know people beyond their career and board input.”

True and tested Warmbold spent the final decade of her management career as a senior officer at the Canada Pension Plan Investment Board, which sits at the heart of the Canadian retirement funding system. One of the greatest jobs in Canada, she believes, was her tenure as chief financial officer of CPPIB, an entity with global reach and heft. When she retired from that dream job, the natural transition was to create a portfolio of board activities.

Among the boards she joined was engineering giant SNC-Lavalin, a company that has embodied the very definition of “corporate crisis.” It was entangled in a bribery scandal that shook the foundations of the company and rippled through the corridors of political power.

William Young, the veteran corporate director who became SNC chair in the fall of 2020, has come to appreciate the stable presence

20 | DIRECTOR JOURNAL

Vrai et vérifié Mme Warmbold a passé la dernière décennie de sa carrière de gestionnaire à titre de haute dirigeante de l’Office d’investissement du Régime de pensions du Canada, qui est au cœur du système de financement de la retraite au Canada. Son mandat de chef de la direction financière de l’OIRPC est l’un des meilleurs emplois au Canada, croit-elle.

Entre autres conseils où elle a siégé figure celui du géant de l’ingénierie SNC-Lavalin, une entreprise qui incarne la définition même d’une « crise d’entreprise ».

William Young, administrateur aguerri qui est devenu président du conseil de SNC à l’automne 2020, en est venu à apprécier la sol-

Colleagues say part of Benita Warmbold's success as a director comes from her empathy and ability to engage with others.

of Benita Warmbold, who chairs the audit committee, a very complex mandate. On the board, she is “one person I can rely on for a sensible point of view.” Warmbold exhibits coolness under pressure, but also a solid grasp of what good governance looks like in a way that novice public-company directors might not.

Young admires her “great engagement style at the board. Sometimes you have directors whose intervention style is that they are provocative and drop a bomb, or make a point in extreme fashion.

But Benita is generally very understated but very impactful in what she says,” which garners a lot of respect. “Her interventions are pretty effective because people are listening to her quite closely.”

Young adds that “she’s got a high degree of empathy for management

ide présence de Benita Warmbold, qui préside le comité d’audit de l’entreprise, un mandat très complexe. Au conseil, elle est « une personne sur qui on peut compter pour exprimer un point de vue raisonnable », dit-il.

Outre son calme sous la pression et sa solide compréhension de ce qu’est la bonne gouvernance, M. Young admire chez elle « son grand style d’engagement au sein du conseil. Certains administrateurs ont des propos provocants, aiment lâcher des bombes ou argumenter de façon extrême. Mais Benita est généralement très sobre, mais très efficace dans ses interventions », ce qui lui vaut beaucoup de respect.

M. Young ajoute que Mme Warmbold a un haut degré d’empathie

ICD.CA | 21

‘THIS IS A MARATHON, NOT A SPRINT; YOU HAVE TO PACE YOURSELF OR YOU ARE NOT GOING TO MAKE IT AND THAT WOULD NOT BE GOOD FOR ANYBODY.’ « J’AI RAPPELÉ AUX GENS QUE C’ÉTAIT UN MARATHON, PAS UN SPRINT; IL FAUT TROUVER SON RYTHME, SINON ON N’Y ARRIVERA PAS ET C’EST TOUT LE MONDE QUI EN SOUFFRIRAIT. » without kind of giving up on the important task of watching out for the shareholder.

“She understands that the management process, especially in a crisis context, can be very tricky.”

Indeed, Warmbold’s display of humanity is viewed as one of her calling cards. It means asking questions as simple as “How is the team doing?” During the Covid endurance test, “I reminded people ‘This is a marathon, not a sprint; you have to pace yourself or you are not going to make it and that would not be good for anybody.’”

Senior managers would welcome this approach because, as they were working flat out, “they want to know the board has got their back, that [directors] are with you, and if you need them, they will support you in the right ways.”

Scotiabank chair Aaron Regent agrees that in crises “you have to overcommunicate.” Boards have to meet more frequently, so that in a fast-changing situation, every director is up-to-date and has the same information. And the board must provide real-time feedback and information to management.

At these times, Warmbold reiterates, you can identify the people around the table who have had to work their way through challenging situations “and those who have been a little more sheltered.”

You want to see a high degree of resilience in the management team, and at the board table.

Having that right mix of experience is not simply a matter of enlisting older members to a team, she observes. In these times, you can often find crisis-hardened veterans among younger candidates.

That is one of the perverse benefits of living through a pandemic and geopolitical upheaval. At a time of constant turmoil, emerging leaders are, by necessity, gaining their battle scars more quickly than ever before. Ideally, that will mean more people with the quiet wisdom of Benita Warmbold sitting around the table. DJ GORDON PITTS is a Toronto journalist whose latest book, Unicorn in the Woods: How East Coast Geeks and Dreamers Are Changing the Game, was longlisted for a National Business Book award.

22 | DIRECTOR JOURNAL

pour la direction sans pour autant perdre de vue l’importante tâche de surveiller les intérêts des actionnaires.

Bien sûr, l’humanité qu’elle affiche est considérée comme une de ses cartes de visite. Cela implique de poser des questions aussi simples que « Comment va l’équipe? » Pendant la pandémie, « j’ai rappelé aux gens que c’était un marathon, pas un sprint; il faut trouver son rythme, sinon on n’y arrivera pas et c’est tout le monde qui en souffrirait. » Les membres de la haute direction aimaient cette approche, parce qu’il travaillaient d’arrache-pied. « Ils veulent savoir s’ils ont l’appui du conseil et si celui-ci les supporte de la bonne façon. » La président du conseil de la Banque Scotia convient qu’en situation de crise, « on ne communique jamais trop. » Les conseils doivent se réunir plus souvent, de sorte qu’en situation de changements rapides, chaque administrateur soit à jour et dispose de la même information que les autres.

Durant ces moments, rappelle Mme Warmbold, on peut identifier autour de la table les gens qui ont dû traverser des situations difficiles « et ceux qui ont été un peu mieux protégés. » Quand on peut compter sur un mélange adéquat d’expériences, il ne s’agit pas seulement d’intégrer des membres plus âgés dans une équipe, observe-t-elle. Dans ces situations, on peut d’ailleurs souvent trouver parmi de plus jeunes candidats des vétérans qui ont été aguerris par des crises. » Voilà l’un des avantages pervers d’avoir traversé une pandémie et des bouleversements géopolitiques. Dans des situations de tumulte constant, les leaders en émergence sont ceux qui, par nécessité, essuient plus rapidement que jamais auparavant des cicatrices dans la bataille. Idéalement, cela signifie qu’il y a autour de la table plus de gens prêts à faire preuve de la sagesse sereine de Benita Warmbold. DJ GORDON PITTS est un journaliste de Toronto dont le plus récent ouvrage, Unicorn in the Woods: How East Coast Geeks and Dreamers Are Changing the Game, a été sélectionné pour le National Business Book Award.

BENITA WARMBOLD, F.ICD Chair of the Canadian Public Accountability Board; director of Bank of Nova Scotia, Methanex and SNC-Lavalin.

Présidente du conseil d’administration du Conseil Canadien sur la reddition de comptes; administratrice de la Banque Scotia, Methanex et SNC-Lavalin.

65 years old

65 ans.

Based in Toronto, where she was born and raised.

Vit à Toronto, sa ville d’origine.

EDUCATION Honours commerce degree from Queen’s University.

FORMATION Diplômée en commerce de l’Université Queen’s avec distinction.

MANAGEMENT CAREER In 1980, joined accounting firm Peat Marwick (later to become KPMG).

Stayed for nine years, her last post being senior manager, audit.

CARRIÈRE DE GESTIONNAIRE S’est jointe en 1980 au cabinet comptable Peat Marwick (devenu KPMG), où elle est demeurée neuf ans, son dernier poste étant celui de directrice principale de l’audit.

In 1989, moved to Canada Development Investment Corp., a Crown corporation mandated with holding federal business assets and managing transitions. Rose to executive vice-president before leaving in 1997. Among her briefs were the sale of Telesat and Nordion, a secondary share offering in Cameco, and the acquisition of an interest in the Hibernia oilfield.

Joined Northwater Capital Management and served as managing director and chief financial officer, from 1997 to 2008. The firm specialized in innovative investment tools.

In 2008, moved to the Canada Pension Plan Investment Board as senior vice-president and chief operations officer. CPPIB is Canada’s largest pension fund with about $570-billion under administration.

In 2013, became CPPIB’s senior managing director and chief financial officer until her retirement in 2017.

DIRECTORSHIPS Chair of Canadian Public Accountability Board since 2018; director since 2011 to present.

Director of Bank of Nova Scotia, 2018 to present.

Director of SNC-Lavalin, 2017 to present.

Director of Methanex Corp., 2016 to present.

Director of Crestone Peak Resources, 2017 to its acquisition in 2021.

Board member, Toronto’s Women’s College Hospital from 2014 to 2019.

Served on boards and committees of Queen’s University from 2009 until recently. Member of the board of trustees, from 2015 until 2021.

First corporate board: Harris Steel, from 2006 to 2007, when the company was sold.

OTHER ROLES A director of the Toronto Financial Services Alliance, from 2010 to 2015, a public-private partnership to raise the city’s status as a financial centre.

In 2007-2008, participated in the committee formed to deal with Canada’s asset-backed commercial paper crisis, led by corporate lawyer Purdy Crawford.

Has served on numerous other boards and committees, including health-care foundations.

En 1989, elle passe à la Corporation de développement des investissements du Canada, où elle a occupé le poste de viceprésidente exécutive avant de quitter l’organisme en 1997. Entre autres dossiers, elle a géré les ventes de Télésat et Nordion, un placement secondaire de titres dans Cameco et l’acquisition d’une participation dans le champ pétrolifère Hibernia.

De 1997 à 2008, elle a œuvré chez Northwater Capital Management – une firme spécialisée en outils d’investissement innovants – où elle a été directrice générale et cheffe de la direction financière.

En 2008, elle devient vice-présidente principale et cheffe de l’exploitation à l’Office d’investissement du Régime de pensions du Canada, le plus important régime de retraite au pays avec des actifs de 570 milliards $.

En 2013, elle accède au poste de directrice principale et cheffe de la direction financière de l’OIRPC jusqu’à sa retraite en 2017.

MANDATS D’ADMINISTRATRICE Présidente du conseil du Conseil canadien sur la reddition de comptes depuis 2018, administratrice depuis 2011.

Administratrice de la Banque Scotia depuis 2018.

Administratrice de SNC-Lavalin depuis 2017.

Administratrice de Methanex Corp. depuis 2016.

Administratrice de Crestone Peak Resources de 2017 jusqu’à son acquisition de 2021.

Membre du conseil du Toronto’s Women’s College Hospital de 2014 à 2019.

A siégé aux conseils et comités de l’Université Queen’s de 2009 jusqu’à récemment.

Premier mandat d’administratrice : Harris Steel en 2006 et 2007.

AUTRES MANDATS Administratrice de la Toronto Financial Services Alliance de 2010 à 2015.

En 2007-2008, membre du comité chargé de résoudre le problème des papiers commerciaux adossés à des actifs.

A siégé à de nombreux autres conseils et comités.

ICD.CA | 23

ILLUSTRATIONS BY Sébastien Thibault

Getting a grip on artificial intelligence Generative AI could prove a blessing and a curse, bolstering human knowledge and productivity, while allowing nefarious players to distort our sense of the truth. For now, directors should focus on learning the applications and implications of the technology for their organization and its people, Richard Blackwell writes L’IA générative s’avère à la fois une bénédiction et une malédiction, qui stimule la connaissance et la productivité tout en permettant à des individus malfaisants de fausser notre conception de la vérité. Pour l’instant, les administrateurs devraient se concentrer sur l’apprentissage des applications et des implications de la technologie pour leur organisation et ses gens, écrit Richard Blackwell.

24 | DIRECTOR JOURNAL

ICD.CA | 25

AS THE UPHEAVAL of the pandemic subsides, directors have a new and uncertain issue to address: How to effectively provide oversight for the adoption of artificial intelligence technologies.

The rapid uptake of easily accessible AI platforms, such as ChatGPT, Microsoft Bing and Google Bard, are already making an impact across many organizations. While some employees are keen to try these new tools – which draw on massive amounts of data to craft human-like responses to people’s queries – others worry they may lose their jobs and want to make sure they have the skills to survive. Managers must figure out how to effectively use AI to improve productivity, while dealing with those worker concerns.

Directors must be up to speed if they are to provide oversight and guidance, even if they also harbour fears that they, too, might eventually be replaced by an algorithm.

The end of the world?

In recent months, there has been a chorus of warnings about AI and its potential dangers. Historian and author Yuval Noah Harari was among those cautioning that AI could destroy civilization, while AI pioneer Geoffrey Hinton said “bad actors” will use it for “bad things,” flooding the internet with fake material. Some scientists, and indeed experts creating the new technology, have gone so far as to warn of possible human extinction.

Of course, there is a more optimistic view. Some economists predict a huge increase in productivity as a result of AI, and thus broad economic gains. Future regulation will slow any job losses, they say, many new jobs will be created, and whole new industries will be developed. Meanwhile, construction work and jobs that focus on human contact are unlikely to be as affected. At the highest corporate level, the technology could even prove helpful in making the boardroom more efficient, by helping directors get a handle on big data, testing their assumptions, and suggesting courses of action that might have been overlooked.

Like so many previous disruptive technological advances, AI is a tool that offers a number of opportunities, while also presenting significant risks that must be addressed at the board level. Used correctly, AI can help take emotion and bias out of decision-making in some situations — such as choosing a stock portfolio or hiring an employee. But it can also entrench bias, because it draws on historical information that may be discriminatory. And, as many people have found, if they’ve tried using ChatGPT to help write a report, the output from AI algorithms can be rife with errors, fabrications and omissions.

Preparing employees The biggest shake-up from the rise of AI will likely be among knowledge workers who perform rote or repetitive tasks or who do routine research or writing. A broad range of more complex functions, such as those performed by programmers, lawyers and financial advisors, could also be hit. Consequently, it is crucial that boards and managers work to reassure employees, shift them to jobs that need human input, and help them “AI-proof” their skill sets.

Rachelle Gagnon, vice-president of people and culture at Champlain

26 | DIRECTOR JOURNAL

ALORS QUE S’ESTOMPENT les bouleversements liés à la pandémie, les administrateurs doivent maintenant faire face à un nouvel enjeu, source d’incertitude : comment superviser efficacement l’adoption des technologies d’intelligence artificielle.

L’adoption rapide de plateformes d’AI facilement accessibles – ChatGPT, Microsoft Bing et Google Bard – suscite déjà un impact chez plusieurs organisations. Alors que certains employés sont enthousiastes à l’idée d’essayer ces nouveaux outils – qui tirent des volumes massifs de données pour offrir des réponses aux interrogations des gens – d’autres s’inquiètent d’une éventuelle perte d’emploi et veulent s’assurer qu’ils ont les compétences nécessaires pour survivre. Les gestionnaires doivent imaginer des façons d’utiliser efficacement l’IA pour améliorer la productivité tout en répondant aux préoccupations de leurs travailleurs. Quant aux administrateurs, ils doivent se tenir à jour s’ils veulent offrir de la supervision et de l’orientation sur la question – même s’ils éprouvent la crainte d’être eux aussi remplacés par un algorithme.

La fin du monde?

On a entendu récemment toute une salve d’avertissements sur l’IA et ses dangers potentiels. L’historien et auteur Yuval Noah Harari est parmi ceux qui craignaient que l’IA puisse détruire la civilisation alors que l’innovateur Geoffrey Hinton a prévenu que de « mauvais acteurs » allaient l’utiliser pour de « mauvais desseins » en inondant Internet de fausses informations. Certains scientifiques sont même allés jusqu’à évoquer la possible extinction de l’espèce humaine. Évidemment, il existe une perspective plus optimiste. Certains économistes prédisent que l’IA entraînera une immense augmentation de la productivité, donc de vastes gains économiques. La réglementation future ralentira les pertes d’emploi, disent-ils, beaucoup de nouveaux emplois seront créés et des industries entièrement nouvelles seront mises sur pied. Entretemps, le secteur de la construction et des postes fondés sur le contact humain sont peu susceptibles d’être affectés. Au niveau le plus élevé des entreprises, cette technologie pourrait même s’avérer utile en rendant les conseils d’administration plus efficaces, en aidant les administrateurs à obtenir des données d’importance considérable, en vérifiant leurs hypothèses et en suggérant des avenues qui auraient pu avoir été ignorées.

Comme tant d’avancées technologiques déstabilisantes dans le passé, l’IA est un outil qui offre des opportunités, tout en présentant des risques importants. Utilisée adéquatement, l’IA peut éliminer l’émotion et le biais du processus décisionnel dans certaines circonstances, comme lorsqu’il s’agit de choisir un portefeuille d’actions ou d’embaucher un employé. Mais elle peut aussi ancrer un biais parce qu’elle peut se fonder sur des informations historiques discriminatoires. Et, comme l’ont découvert bien des gens qui utilisent ChatGPT pour rédiger un rapport, les résultats provenant d’algorithmes d’IA peuvent être truffés d’erreurs, d’inventions et d’omissions.

Préparer les employés Le plus grand bouleversement issu de la montée de l’IA touchera probablement les travailleurs du savoir qui s’adonnent à des tâches répétitives ou à de la recherche ou de la rédaction de routine.

The biggest shakeup from the rise of AI will likely be among knowledge workers who perform rote or repetitive tasks or who do routine research or writing.

Le plus grand bouleversement issu de la montée de l’IA touchera probablement les travailleurs du savoir qui s’adonnent à des tâches répétitives ou à de la recherche ou de la rédaction de routine.

Seafood in Dieppe, N.B., says AI has become an “accelerant” to the rapid pace of change that is already affecting companies and employees, and is forcing them to become more resilient and adaptable. The old adage that you hire for attitude, not just for skills, is even more relevant in the age of AI, she says.

Gagnon, who was formerly chair of New Brunswick Liquor Corp., and is currently chair of the ICD’s Maritime chapter, says potential employees clearly need to demonstrate “human skills” — such as the ability to communicate, collaborate, think strategically and be creative – because those are the kinds of things that can’t be replicated by AI. “The idea of technology coming in and replacing people’s jobs is not new,” she says, “But AI is bringing technology to another level.”

Financial technology advisor Betty DeVita, who serves on the board of Home Capital Group Inc. and was formerly chair and CEO

Un large éventail de fonctions plus complexes – programmeurs, avocats, conseillers financiers – pourraient aussi être touchées. Il est donc essentiel que les conseils et les gestionnaires s’attachent à rassurer les employés, à les diriger vers des postes exigeant une intervention humaine et les aident à acquérir les compétences nécessaires pour maîtriser la technologie IA. Rachelle Gagnon, vice-présidente personnel et culture chez Champlain Seafood, à Dieppe au Nouveau-Brunswick, affirme que l’IA est devenue un « accélérant » du rythme rapide du changement qui affecte déjà les entreprises et leurs employés, en les forçant à devenir plus résilients et plus adaptables. Le vieil adage selon lequel on vous embauche pour votre attitude, pas seulement pour vos compétences, apparaît plus pertinent à l’ère de l’IA, dit-elle.

Mme Gagnon, présidente du conseil de la section régionale des Maritimes de l’IAS, soutient que les employés potentiels doivent clairement faire preuve de « compétences humaines » – comme la capacité de communication, de collaboration, de pensée stratégique et de créativité – parce que ce sont des attributs qui ne peuvent pas être reproduits par l’IA. « La notion d’une technologie à venir qui retire leur emploi aux gens n’est pas nouvelle, dit-elle. Mais l’IAS porte la technologie à un autre niveau. » La conseillère en technologie financière Betty DeVita, qui siège au conseil du Home Capital Group Inc. et fut auparavant présidente du conseil et cheffe de la direction de Citibank Canada, admet que beaucoup de compétences humaines ne peuvent pas être assumées par l’IA. « Il n’y a rien pour remplacer le contact direct et l’établissement de rapports entre humains », dit-elle. La « marque » d’une personne et son expertise créative seront toujours précieuses. Pour l’instant, du moins, « je crois que nous continuerons d’avoir un processus de développement de solutions créatives qui proviendront des gens. » Mais Mme DeVita soutient que l’IAS peut s’avérer un outil puissant pour servir de point de départ à des projets. Plutôt que de commencer avec une page blanche, l’idée d’une personne peut immédiatement être élargie grâce à l’IAS. « Par la suite, on l’embellit et on y ajoute sa propre créativité. C’est un tremplin vers une solution. C’est une combinaison de touche humaine et d’automatisation qui permet une incroyable économie de temps et des améliorations à la productivité. » La clé, selon Mme DeVita, consiste à comprendre les avantages de mailler l’IA aux compétences humaines, tout en envisageant les risques, les questions de confidentialité et les structures de gouvernance pour maximiser les gains et minimiser les inconvénients. Le conseil a un rôle essentiel à jouer dans ce processus, dit-elle.

Hassan el Bouhali, conseiller technique et chef de la technologie à la Fondation Mastercard, affirme qu’il est essentiel de transformer l’anxiété des employés à l’égard de l’IAS en enthousiasme pour ce qu’elle peut apporter de positif. Comme les technologies transformatrices antérieures comme l’Internet, l’IA représentera un atout considérable pour bien des gens. « Elle aidera les gens à exécuter leurs tâches mieux et plus rapidement. Et une fois qu’ils auront acquis les compétences pour l’adopter et l’utiliser de façon appropriée, ils ne pourront plus s’en passer. » M. el Bouhali explique cependant que l’IA entraînera sans aucun doute des pertes d’emploi, parce qu’elle peut automatiser des pro-

ICD.CA | 27

of Citibank Canada, agrees there are many human skills that cannot be displaced by AI. “There is nothing that replaces face-to-face contact and building relationships,” she says. A person’s “brand” and their creative expertise will always be valued. For the moment, at least, “I’m a believer that we’ll continue to have a creative-solution-development process that will come from people.”

Still, DeVita says AI can be a powerful tool to use as a starting point for projects. Instead of beginning with a blank page, a person’s idea can be expanded immediately using AI. “Then you embellish that and add your creativity to it. It jump-starts the overall solution. There is a combo of human plus automation that provides incredible time savings and productivity improvements.”

The key, DeVita says, is to understand the benefits of meshing AI with human attributes, and then consider risks, privacy issues and governance structures, to get the most gains and mitigate any downside. The board has a key role in this process, she says, by setting the strategy to take advantage of the revolution while dealing with any threats.

Hassan el Bouhali, a Toronto-based tech advisor and chief technology officer at Mastercard Foundation, says it is crucial to transform employee anxiety over AI into excitement for what the technology can do to help. Like earlier transformative technologies such as the internet, AI will be a huge boon for many. “It will help people do their work faster and better. And once they gain the skills to adopt it and use it properly, they will not be able to work without it any more. The productivity promise is obvious.”

Still, el Bouhali said, there is no question that AI will lead to job losses, because it can automate entire processes, not just individual transactions. And AI is likely to be adapted by organizations much more quickly than earlier technological breakthroughs, because it is “almost frictionless” to implement. But new job opportunities will be created, and those will be stimulating for employees who are trained to use AI properly.

He adds one note of caution: The use of AI needs to be supervised carefully, and employees should be discouraged from “playing with the tools” and randomly using them to make decisions. “There are so many risks of things going wrong at so many levels.”

Directors first need to thoroughly educate themselves so they understand AI and its uses, and clarify in their minds ‘what is real and what is hype.’

Les administrateurs doivent d’abord se former rigoureusement afin de comprendre l’IA et ses applications et clarifier dans leur esprit « ce qui est vrai et ce qui tient de la rumeur médiatique. »

A wake-up call

Une prise de conscience

Directors first need to thoroughly educate themselves so they understand AI and its uses, and clarify in their minds “what is real and what is hype,” el Bouhali says. Next, the central board role is to think deeply about how AI will potentially disrupt their industry and their organization’s business model. “That is the true risk of this. It’s more than putting people out of jobs. It’s about putting business out of revenue.”

Brian O’Neil, president of Toronto private equity firm A Faire Aujourd’hui Inc., suggests that boards and managers should spend sufficient time investigating AI and its potential applications in the organization to avoid panic-driven decisions. “We need to approach AI as innovation — perhaps extraordinary innovation — and act accordingly,” he says, while understanding that it is not necessarily going to upend the world, either for good or bad. O’Neil is not

Les administrateurs doivent d’abord se former rigoureusement afin de comprendre l’IA et ses applications et clarifier dans leur esprit « ce qui est vrai et ce qui tient de la rumeur médiatique », explique M. el Bouhali. Ensuite, le rôle central du conseil consiste à réfléchir à fond sur la manière dont l’IA va perturber éventuellement leur industrie et le modèle d’affaires de leur organisation. « Voilà le véritable risque de l’affaire. Il s’agit de bien plus que de mettre des gens à pied. Il s’agit de ne pas mettre une entreprise à risque de perdre ses revenus. » Brian O’Neil, président de la société torontoise d’investissement privé À Faire Aujourd’hui Inc., estime que les conseils et les gestionnaires devraient longuement investiguer l’IA et ses applications potentielles au sein de l’organisation, afin d’éviter des décisions dictées par la panique. « Nous devons approcher l’IA comme toute innovation et agir en conséquence », dit-il, tout en comprenant

28 | DIRECTOR JOURNAL

—Hassan el Bouhali, chief technology officer, Mastercard Foundation.

cessus entiers et pas seulement des transactions individuelles. Et l’IA sera probablement adaptée par les organisations beaucoup plus rapidement que d’autres avancées technologiques parce qu’elle peut être adoptée « presque sans intervention supplémentaire ».

Mais de nouveaux emplois seront créés et ils seront stimulants pour les employés formés pour l’utiliser de façon appropriée.

Il ajoute toutefois une note de prudence. L’utilisation de l’IAS doit être soigneusement supervisée et les employés devraient être dissuadés de « jouer avec ces outils » et de les utiliser de manière aléatoire pour prendre des décisions. « Il y a tellement de risques que les choses tournent mal à tellement de niveaux. »

ICD.CA | 29

‘All boards will wake up to this, via the way we always wake up: by a shocking revelation of where [AI] is being used in a way that was non-transparent to those who should have been the decision-makers.’ « La prise de confiance des conseils se produira comme toujours ainsi : par la révélation bouleversante qu’il a été utilisé de façon non transparente à l’insu de ceux qui auraient dû en décider. » —Brian O’Neil, president of private equity firm A Faire Aujourd’hui

in the “end-of-humanity” camp, noting that “dystopias and utopias are shockingly rare.”

As with any major change, boards need to examine the impact of AI on people, risk and strategy, says O’Neil, who serves on a wide range of boards including the Business Development Bank of Canada. “How do you arm your people with tools ... so that your [organization] continues to be successful, and is not made redundant or irrelevant or is left behind because others are embracing the tools that are coming from this innovation?” At a minimum, O’Neil says, directors and managers should be finding out how their organization’s employees are already using AI. He notes that many of these tools “favour content over accuracy,” and that needs to be taken into account when evaluating their output. It’s crucial, for example, that directors be informed if a report to the board has been generated by ChatGPT. Boards do not want to find out, after the fact, that the CEO’s latest speech was partly generated by an AI tool. “All boards will wake up to this, via the way we always wake up: by a shocking revelation of where it is being used in a way that was non-transparent to those who should have been the decision-makers.”

When it comes to using AI in the boardroom itself, O’Neil sees the technology as a potential leap forward. Directors are humans who use their own experience, and the advice of experts, to make crucial decisions. If, in addition, they can take advantage of a reli-

30 | DIRECTOR JOURNAL

qu’elle ne va pas nécessairement changer le monde, en bien ou en mal. M. O’Neil n’est pas dans le camp de ceux qui annoncent la « fin de l’humanité », notant au passage que « les dystopies autant que les utopies sont extrêmement rares. » Comme pour tout changement majeur, il faut que les conseils examinent l’impact de l’IA sur leur personnel, les risques courus et la stratégie à adopter, souligne M. O’Neil, qui siège à un vaste éventail de conseils, dont la Banque de développement du Canada. « De quels outils allez-vous armer vos gens … afin que votre organisation continue de prospérer et qu’elle ne devienne pas redondante ou non pertinente et qu’elle ne traîne pas de la patte parce que d’autres ont adopté les outils issus de cette innovation? » Au minimum, ajoute M. O’Neil, les administrateurs et gestionnaires devraient savoir comment leurs employés utilisent déjà l’intelligence artificielle. Beaucoup de ces outils, dit-il, « favorisent le contenu aux dépens de la précision » et cela doit être pris en compte lorsqu’il s’agit d’évaluer leur rendement.

Les conseils ne veulent pas découvrir après le fait que le dernier discours du chef de la direction a été partiellement généré par un outil d’IA. « La prise de confiance des conseils se produira comme toujours ainsi : par la révélation bouleversante qu’il a été utilisé de façon non transparente à l’insu de ceux qui auraient dû en décider. » Quant à l’utilisation de l’IA au conseil, M. O’Neil considère la

able “scraping and distilling tool” that can draw on the vast history of human knowledge, that’s a huge benefit, he says. If these tools can help directors discover that their current problem was effectively dealt with by another organization some time in the past, that will be worth its weight in gold.

For the foreseeable future, AI is likely to remain a powerful tool to help human directors, not replace them, O’Neil insists. “Are we going to vote the Magic 8 Ball into a governance position? I don’t see it. People with chromosomes will still make the decisions.” DJ

technologie comme un pas en avant. Les administrateurs sont des êtres humains qui se fient à leur propre expérience et à l’avis d’experts pour prendre des décisions cruciales. Si en plus ils peuvent tirer parti d’un outil capable de puiser dans la vaste histoire des connaissances humaines, c’est un immense avantage, selon lui.

Dans l’avenir prévisible, l’IA demeurera sans doute un outil puissant qui aidera les administrateurs sans les remplacer, insiste Brian O’Neil. « Ce sont des gens dotés de chromosomes qui continueront de prendre les décisions. » DJ

RICHARD BLACKWELL is a former business reporter at the Financial Post and The Globe and Mail. Over three decades, he covered many sectors, including technology, financial services, media and energy.

RICHARD BLACKWELL a été journaliste d’affaires au Financial Post et au Globe and Mail. Au fil de trois décennies, il a couvert divers secteurs, dont les technologies, les services financiers, les médias et l’énergie.

DIGITAL DIRECTORS Used properly, AI should enhance the work of directors, not replace them Bien utilisée, l’IAS devrait optimiser la tâche des administrateurs, non les remplacer In 2014, a Hong Kong venture capital fund “appointed” an artificial intelligence algorithm to the firm’s investment committee board of directors.

It helped to choose which disruptive biotech advances the company would invest in. AI has come a long way since that publicity stunt almost a decade ago, but it is still not ready to actually displace directors from their board seats. It could soon, however, be involved in the selection of directors.

Academic research has floated the idea of using the same techniques to choose board members that are already being applied to employee selection at lower levels of the corporate ladder.

A paper published in 2021 in the Review of Financial Studies suggested that a complex algorithm was capable of predicting which potential directors would perform well. The paper concluded that, at a minimum, using machine-learning algorithms could expand the range of potential directors considered for a position, by identifying people who might otherwise be overlooked. The paper noted, though, that there needs to be a careful balance between human and machine input on these kinds of decisions — making use of the respective strength of both. And while an AI algorithm could evaluate some aspects of a board member’s performance, it would have trouble sorting out the impact of decisions that were made collectively by board members.

In the meantime, AI is clearly a tool that can help in board decisions, by scanning vast quantities of data and then predicting — or testing — possible future events based on that information. It could bring to light issues and options that human directors may not have considered. And AI could become an everyday tool to help with more mundane tasks, such as helping directors write reports or translate material.

Mastercard Foundation’s chief technology officer Hassan el Bouhali says AI may be particularly useful in analyzing corporate financial data to see whether past board and management decisions stand up to scrutiny. Boards had better embrace this kind of analysis, he said, because if they don’t make use of these tools, activist investors will be doing it for them.

- RB

En 2014, un fonds de capital de risque de Hong Kong a « nommé » au comité d’investissement de son conseil d’administration un algorithme qui l’a aidé à choisir dans quelles avancées biotechnologiques il devrait investir. L’IA a vu beaucoup d’eau couler sous les ponts depuis ce coup publicitaire, mais elle n’est toujours pas mûre pour éjecter les administrateurs de leurs sièges. Elle pourrait bientôt, toutefois, être impliquée dans la sélection d’administrateurs. La recherche académique a caressé l’idée d’utiliser les mêmes techniques pour choisir les membres du conseil que celles appliquée dans la sélection d’employés au bas de l’échelle hiérarchique.

Un document publié en 2021 dans la Review of Financial Studies a suggéré qu’un algorithme complexe serait en mesure de prédire quels candidats administrateurs seraient performants. Le document concluait qu’au minimum, des algorithmes d’apprentissage automatique pourraient élargir l’éventail de candidats envisagés pour un poste d’administrateur en identifiant ceux qui autrement pourraient être ignorés. On y soulignait cependant qu’il faut établir un judicieux équilibre entre l’apport humain et celui de la machine dans ce genre de décision. Même si un algorithme pourrait évaluer certains aspects de la performance individuelle, il aurait de la difficulté à prévoir l’impact des décisions prises collectivement par les administrateurs.

Entretemps, l’IA est clairement un outil susceptible de contribuer aux décisions du conseil en parcourant d’énormes quantités de données pour ensuite prédire d’éventuels événements en fonction de ces informations. Elle pourrait mettre en lumière des enjeux ou des options que les administrateurs pourraient ne pas avoir envisagés. L’IA pourrait devenir un outil quotidien.

- RB

ICD.CA | 31

32 | DIRECTOR JOURNAL

PHOTOGRAPH BY MARCIO ISENSEE/ISTOCK

GETTING BACK TO NATURE

Stakeholders are starting to pay attention to humanity’s role in the destruction of nature. But for many boards, oversight of biodiversity is uncharted terrain, Prasanthi Vasanthakumar writes

ICD.CA | 33

IMAGINE A LITTLE BIRD. The bird scatters seeds that grow into a Douglas fir, an evergreen tree native to British Columbia. This tree is processed into one of the finest timbers for construction and used to build a house. That house is then marketed, sold, heated, furnished and insured. But none of this would be possible if it weren’t for the little bird.

From the builder and furniture maker to the realtor and insurance provider, “that whole value chain is sustained by those birds,” says Megan Leslie, CEO of World Wildlife Fund Canada. “We need to make sure that bird has a home. When we think about nature and how connected we are to it, it’s amazing.”

The challenge for many businesses is connecting the dots between nature and their activities. Some connections are obvious.

For example, natural disasters like landslides, forest fires, drought and floods can disrupt markets and supply chains: crops are damaged, trucks can’t carry products across the country, employees can’t get to work, and customers aren’t out and about shopping.

Other links are less apparent but financially substantial nonetheless, says Leslie, such as when extensive use of pesticides and herbicides kills pollinators, leading to reduced agricultural yields and higher prices for grocers and customers. That is one of the reasons the Taskforce on Nature-related Financial Disclosures (TNFD) is being developed.

About the TNFD The TNFD, which builds on the Taskforce on Climate-related Financial Disclosures (TCFD), consists of 40 international members representing financial institutions, corporations and market service providers with over US$20-trillion in assets. It is finalizing a framework that businesses can use to identify and communicate their effects and dependencies on nature, and the associated risks and opportunities. The goal is to reduce nature loss and integrate nature-positive strategies into decision-making.

“What [the TNFD is] doing is trying to quantify that [economic risk] for you, when it’s not just the landslide that you can see, but maybe the impacts you can’t see,” Leslie says. “So, what is the financial risk to you that comes from nature not being healthy? The way that nature impacts business is everywhere and everything, and what the Taskforce on Nature-related Financial Disclosures is trying to do is show business how integrated it is.”

According to a report from PricewaterhouseCoopers (PwC), more than half of the world’s gross domestic product – or US$58-trillion – depends on nature. Yet global wildlife populations have declined by nearly 70 per cent in the past five decades, and more than a million species face extinction owing to human activity.

“These are key indicators that these systems are at tipping points,” says Daniel O’Brien, a TNFD member and registered professional biologist. “If we move beyond these [planetary] boundaries, then things start to break down. So, there’s a real sense of urgency, but there’s also uncertainty, right? … But we can’t not do anything. So, the guidance and framework is really about taking those initial first steps to map out where your business is operating.”

As a first step, O’Brien, who is a partner at PwC Canada and leads

34 | DIRECTOR JOURNAL

its ESG and sustainability practice, advises organizations to closely examine their business activities. Where do you source your inputs? Where do your products end up downstream? What are the nature impacts and dependencies in your business operations, and along your value chain?

The TNFD offers guidelines to help organizations assess their impact and their risks.

Everything is connected With biodiversity and climate change making their way onto the business agenda, boards have a lot to make sense of today – and biodiversity is a particularly complicated subject.

“Biodiversity and climate change are linked together in complex and dynamic ways,” says Robert Walker, a climate governance expert for the Canada Climate Law Initiative. “But what’s important to wrap your mind around is that biodiversity is not the same as climate change, and in many ways, is a more complex issue, is more locally based, more ecosystem-based, as compared to climate, which – it’s hard to believe – is relatively simple in terms of having one number to look for, and that is emissions to the atmosphere.”

The link between climate change and biodiversity means that solving for one problem can sometimes exacerbate the other, says Walker, who serves on the boards of the International Institute for Sustainable Development (IISD) and TreebuddyEarth, a technology service that supports the planting and care of trees.

The hunt for critical minerals like cobalt – a “miracle metal” in the clean energy transition – is a perfect example of this Catch-22. In addition to the widespread use of child labour, the cobalt rush in the Democratic Republic of the Congo has led to toxic dumping, which harms human health and devastates landscapes, water and crops.

“It’s hard to talk about either biodiversity loss or climate change without sounding completely alarmist,” Walker says. “And it can be a bit depressing because we’re human … [But] there’s no shortage of ideas.

There’s no shortage of technologies. It’s a matter of awareness, strategy, capital allocation. Let’s get going.”

‘There’s no shortage of ideas. There’s no shortage of technologies.

It’s a matter of awareness, strategy, capital allocation.

Let’s get going.’ ­

—Robert Walker, Climate governance expert, Canada Climate Law Initiative

On the bright side, ecosystems and their biodiversity can act as carbon sinks to mitigate climate change. According to the UN Environment Program, about one-third of the greenhouse gas emission reductions needed in the next decade could come from improving nature’s ability to absorb emissions.

“That’s 13 times greater than if we were to electrify the entire transportation sector,” O’Brien says. “So, we already have the mechanisms to abate or reduce carbon emissions. We just need to protect it and nurture it. We need to ensure that we’re not degrading those systems. And there’s also a lot of potential economic activities associated with those so-called nature-based solutions.”

A world of opportunity Improving our relationship with the natural world can seem daunting, but has enormous potential. Investors are certainly paying close attention. A study of Canadian institutional investors finds that nearly half placed biodiversity as a top-three ESG (environmental, social and governance) focus area, up from 16 per cent six months earlier. Banks are making lofty, sustainable finance commitments and will need places to put that money, observes O’Brien. Companies that show they are moving the needle through nature-positive business models will have access to low-cost credit and debt.

Consumer preferences are shifting, too, he says. As customers look for brands that are reducing their impact on the planet, nature-positive business models will command a larger market share.

Reducing our impact on nature also makes sense from a dollars-and-cents perspective. When you decrease the use of resources, make processes more efficient and cut waste, you can often save a lot of money, O’Brien adds.

For Megan Leslie, nature-based solutions can be an opportunity to marry climate and nature goals with Indigenous reconciliation. In addition to acting as carbon sinks, restored landscapes can be rich ecosystems that are less likely to flood, catch fire or turn into landslides, she says. When you restore the land around Indigenous priorities, it can be an act of reconciliation.

“There’s a lot of opportunity here,” Leslie says. “What better [means of] reconciliation than righting the wrongs of destroying the land?”

Robert Walker also sees immense potential for technology and innovation in mitigating damage to our environment.

Thousands of companies are establishing technologies to address the 17 Sustainable Development Goals (SDGs), which include halting biodiversity loss.

For example, a robot technology in agriculture can plant seeds and apply pesticides in an ecosystem-specific way that limits knockon effects, he says. To stay on top of these emerging technologies, investors are building tools and using machine-learning techniques to identify the companies they want to back.

“There’s a whole world out there of opportunity that is going to come as this ecological transition happens,” Walker says. “A lot of companies can be and are positioning themselves to ignite that transition.”

The legal landscape Not everyone is inventing new technologies to support nature, but Liane Langstaff is noticing a shift in many organizations. As an environmental lawyer at Gowling WLG (Canada) LLP, Langstaff helps clients obtain permits to build projects and comply with chemical and waste management regulations.

“Up until now, we’ve been looking at biodiversity on a project-by-project basis,” Langstaff says. “And what we’re seeing is greater attention to strategic biodiversity risk, and not just on a project-by-project basis, and not just in those typical sectors.

ICD.CA | 35

—Liane Langstaff, Gowling WLG So, I think this is where Canadian business is going. We’re starting to look at material biodiversity impacts and dependencies on other sectors that we wouldn’t have typically considered in the past.”

For example, she said, construction companies look at where they purchase wood, battery businesses consider where their minerals come from, and food and beverage producers check to see whether their palm oil is causing deforestation.

There’s a good reason to ask these questions. Langstaff expects the next frontier of biodiversity litigation to focus on business supply chains.

Board action In this rapidly evolving landscape, boards will have to do their homework. As a first order of business, boards should question their capacity to understand biodiversity issues, Walker says. This means assessing board composition, and gaining access to skills and expertise, whether through board recruitment, training or outside consulting.

“Having their own independent advice on biodiversity risks would be critical,” he says.

From there, he advises boards to ask management how the company identifies and addresses biodiversity risks. What tools

36 | DIRECTOR JOURNAL

does it use? Does it anticipate disclosure to the TNFD? Is it on top of stewardship initiatives like the Nature Action 100 (a group of institutional investors pushing for corporate action on biodiversity decline)?

What questions on nature loss does it expect from investors?

Directors should also ensure the organization has the right structures in place, so biodiversity isn’t fenced-off in a sustainability-focused department. Instead, the functional units responsible for biodiversity issues should be integrated with other parts of the business, such as corporate risk, compliance and finance, so it’s considered with other enterprise risks, O’Brien says.

Many boards can take comfort in knowing they may have done much of the legwork already.

“This topic is often overwhelming,” O’Brien says. “A lot of companies are like, ‘Oh, we’re just getting our heads wrapped around climate, and now you want us to look at nature and biodiversity.’ But what I would say is, the TNFD and many of these frameworks are designed to integrate. If you’re already looking at climate-related disclosures and risks, then you probably have most of the governance and structures in place to adopt nature-related risks. And then if you look at the two frameworks, they deliberately line up almost exactly, with a few exceptions.”

O’Brien also reminds directors that companies aren’t expected to be “100-percent ready” to report on climate and nature any time soon. There’s an understanding it will be a gradual progression as frameworks are adopted. But instead of waiting for regulatory requirements to be finalized, he urges boards and companies to get a handle now on their impact and dependencies on nature.

“A lot of these risks are pretty significant and things are getting worse,” O’Brien says.

“They’re not getting better in terms of the severity and frequency of extreme weather events, for example. … There’s that expression, ‘You can’t let perfect be the enemy of the good.’ You have to take those initial steps. Otherwise, you’re always going to be in the analysis stage and never putting anything into motion.”

ICONS BY NOUN PROJECT

‘We’ve always focused on, ‘Thou shalt not kill’ a species, but I think the next stage is a recognition that we’ve lost a lot of species and habitats already, so what are you doing as a business to restore, to be a good corporate steward, but also, to think strategically so that you are furthering the ecosystem services you need for your business?’

Shifting tides

ture-positive solutions go beyond avoiding, reducing or neutralizing environmental impacts to “trying to do more good than harm.”

It means looking beyond your own business footprint to how you can contribute to larger conservation priorities within the region.

“That’s a real shift and you’re starting to see commitments that companies are making about becoming nature-positive by 2030 or 2050,” he says. DJ

After the UN biodiversity conference COP15 in Montreal late last year, Liane Langstaff noticed a greater emphasis on biodiversity enhancement versus preservation.

“We’ve always focused on, ‘Thou shalt not kill’ a species, but I think the next stage is a recognition that we’ve lost a lot of species and habitats already, so what are you doing as a business to restore, to be a good corporate steward, but also, to think strategically so that you are furthering the ecosystem services you need for your business?”

This concept is what O’Brien refers to as “nature-positive.” For many companies in high-impact sectors like mining, biodiversity and nature-related disclosures are part and parcel of business. But na-

PRASANTHI VASANTHAKUMAR is the ICD’s manager of editorial content.

INVESTMENTS IN BIODIVERSITY As CEO of World Wildlife Fund Canada, Megan Leslie helps corporations invest in nature. Here are some examples: AVIVA Aviva Canada Inc. is restoring landscapes in Canada. This investment makes business sense for the U.K.-based insurance company that insures communities against floods and fires. But while doing this work, Aviva is also looking at restoring wildlife habitat, sequestering carbon and supporting Indigenous communities. The company published its first biodiversity policy in 2021.

MAPLE LEAF FOODS Maple Leaf Foods Inc. is investing in the science needed to measure and monitor carbon in landscapes. With a commitment to net zero, the company is looking at the effect of its farming practices on landscapes.

LOBLAW As part of its biodiversity goals, Loblaw’s garden centres ensure a certain percentage of plants sold are native to the area, which helps pollinators like birds and bees. In urban spaces, plants within a neighbourhood can create a corridor of native habitat. By selling these native plants, Loblaw Cos. Ltd. has also strengthened the local grassroots industry, which includes Indigenous-owned nurseries.

Boards can empower management to pursue biodiversity initiatives by unlocking the funds to do this work, Leslie says. It also means linking performance goals with nature-related objectives. “That shows commitment from the top,” she says.

NATURAL ASSETS

48%

US$10-trillion

395 million

Investors who placed biodiversity in their top three ESG focus areas in December 2022 – up from 16 per cent six months earlier.

New annual business value created by nature-positive solutions by 2030.

Jobs created by 2030 from naturepositive solutions.

Sources: PwC, World Economic Forum, Millani

ICD.CA | 37

A new age of shareholder activism INCREASED SHAREHOLDER ACTIVISM is having a big impact on Canadian boardrooms across the country, taking its toll on directors. That’s especially the case when a proxy battle is sparked, putting control of the boardroom at stake, as recent high-profile battles at companies including Aimia Inc., Suncor Energy Inc. and First Capital REIT can attest.

“Proxy fights are not only expensive, resource-consuming, [and] time-consuming, they’re also emotionally, physically, [and] mentally exhausting for people who are involved in them. Boards need to understand that when they’re getting into these situations, they really need to steel themselves for a long fight [for control of the company],” says Ian Robertson, CEO of Kingsdale Advisors, a Toronto-headquartered firm that helps public companies with shareholder, governance and transaction-related matters.

38 | DIRECTOR JOURNAL

The threat can also become personal. “It’s not uncommon in these situations where an activist would go out and hire a private investigator to do a deep dive individually on the directors, and at least use portions of the information in a fight,” he warns.

There were, according to Kingsdale data, 35 proxy contests across Canada between July 1, 2022 and May 25, 2023.

“Our firm has been in business for 20 years and the last 14 months have been the busiest that we have had to date,” Robertson says. “There’s always a lot of speculation about ‘Is activism going away or is it

PHOTOGRAPHY BY YINYANG/ISTOCK

Big investors are antsy. Canadian boards need to up their game and have a plan in case an activist comes knocking, Jeff Buckstein writes

ICD.CA | 39

here to stay?’ Everything I have seen is saying, ‘Not only is it here to stay; it’s going to accelerate.’”

Certain sectors such as real estate investment trusts (REITs), technology, industrials and mining have been particularly ripe for proxy action. “Part of what’s driving the activity in those industries are low valuations, opportunities for M&A, and just a sense there are a lot of opportunities here for companies that haven’t been explored,” says Robertson.

There is also much more activity going on behind the scenes, with only about one-third of activist approaches becoming public knowledge, he notes.

Most shareholder activists today stop short of demanding wholesale change.

Today, rather than hostile bids and takeovers, which have a low rate of success, there tend to be more engaged discussions or consensual takeovers, says Fred Mifflin, vice-chair of Blair Franklin Capital Partners in Toronto. “I think the activist route has replaced what was happening historically in hostile takeovers. With activism, you could effect change without having to buy 100 per cent of the company. I think that’s why it has proven to be so effective,” he explains.

Scott Leckie, principal and chair of 7th Merchant Corp., a private merchant bank in Toronto, says he has seen many situations initiated by activists that end with a negotiated settlement, through which there are board changes. The new board members might or might not be the members the activists were originally seeking to install, but the net result is a change to the board composition.

Subsequent changes to management could also follow, explains Leckie, who is also a director of financial software company Abaxx Technologies Inc., and chair of that company’s audit committee.

Wide-ranging agenda The agenda of shareholder activists varies widely, although many are focused on traditional metrics of financial performance.

Most shareholder activists are investor groups that see an opportunity in the gap between the actual and prospective stock value of the company they are interested in. “They think they can, by being active, close that gap and take advantage of the arbitrage,” says Michael Detlefsen, managing director of Pomegranate Capital Advisors Inc. in Toronto.

Directors need to understand that activists can cause reputational damage to a company, says Detlefsen, who serves on the boards of Rubicon Organics Inc., Phoenix Canada Oil Co. Ltd., and Sunrise Foods International Inc., a private company. They might, for instance, accuse it of greenwashing its environmental record, or they could launch a direct frontal assault on its governance practices or financial performance, he says.

If, for example, a corporate stock has precipitously declined, activists can raise damaging public questions such as “Where was the board? Where was management? Why don’t they seem to be doing anything about it?” The board could get tagged with a perception of ineffectiveness, which is a reputational risk, he says.

Likewise, if a company’s compensation committee is viewed

40 | DIRECTOR JOURNAL

as having paid itself and the CEO and management too much in relation to performance or without benchmarking pay against comparable companies, that can also be very damaging to the entire board, Detlefsen adds.

Economic conditions, including volatile stock markets, poor performance by certain companies and rising interest rates in a slowing economy, have shone a brighter light on corporate weaknesses, and are the main reasons behind the increase in shareholder activism today, Mifflin says.

Environmental, social and governance (ESG) issues have also become an area of greater focus for boards and activists.

Canadian securities regulators are focused on ESG and climate-related disclosure and, as more information is provided

The old adage about prevention being better than a cure also applies to director diligence in the face of shareholder activism. by companies and clearer rules are developed about what needs to be disclosed, “there will be more ammunition given to activists … to be able to deploy their strategies,” says Karrin Powys-Lybbe, a partner with Torys LLP in Toronto.

A board’s duties The old adage about prevention being better than a cure also applies to director diligence in the face of shareholder activism. Directors need to be aware that activists are generally looking for cer-

tain red flags on their company’s financial and operational performance. Attention to such details could dissuade activists from targeting them.

For example, continual turnover on the board or among management is an operational risk that might make a company more susceptible to shareholder activism, Leckie says.

ICD.CA | 41

‘I think there’s a tendency to sort of shut the door and circle the wagons, and that’s detrimental because often the activists do have good points.’

­—Mi­chael Detlefsen, managing director, Pomegranate Capital Advi­sors

Capital allocation is also critical. If a company is not getting a satisfactory return on invested capital, it leaves an opening for activists to come in and attack, Detlefsen adds.

“A lot of companies I’ve seen who’ve come under attack, they’ve taken on a massive project [such as] a pipeline [or a] massive new factory where they are spending capital equal to more than 25 or 30 per cent of the total value of shares in the company,” says Detlefsen.

“And so, the activists can come in and say ‘You’re betting the farm. Have you really thought about how to manage this? How to mitigate the risks? It doesn’t look like you have,’ and so they’re highly critical that way.”

Boards, along with management, need to ensure they are managing their debt load and working capital, and are aware of any discounts to underlying assets. In the REIT space, for example, activists might take aim at the significant discount on commercial properties coming out of the pandemic, Robertson says.

Boards and management need to ensure they perform in such a way that their stock price is fully valued, and the company is at the top of its peer group. “There is nothing that prevents activism or hostile takeovers more than a fully valued stock price,” says Mifflin.

Even when a company is performing well, and that is reflected in its stock price, boards cannot rest on their laurels and assume that nobody will take a run at them. “Fortunes can change. Markets can change,” Mifflin warns.

Boards should, therefore, figure out how they will engage “in the

42 | DIRECTOR JOURNAL

event somebody comes calling,” he adds.

It is also important for the board to look inward, with respect to issues such as tenure and share ownership and up-to-date expertise, and be willing to refresh its membership as needed, Robertson says.

“You always need to be thinking about ‘While I may have the board I need for today, what about tomorrow? How do I get ahead of what a shareholder is likely to point out to me about my board? What is the transition process?’”

A well-functioning board should include directors with a well-rounded set of experiences, including from other industries and professional backgrounds. “Some of the best questions will be asked by somebody who’s not actually 100 per cent up to speed with the specifics of the industry or the company, but that has a broader knowledge and curiosity about how things work,” Leckie says.

Such questions could bring up interesting new perspectives that might not otherwise have come under consideration because of the

tendency for people with similar backgrounds in similar fields to think alike, he adds.

Experts also stress that engaging with activists can potentially yield positive results.

“I think there’s a tendency to sort of shut the door and circle the wagons, and that’s detrimental because often the activists do have good points. If management or the board is willing to listen and think about it hard, and make some changes, it can improve the performance of the company,” Detlefsen says.

“It doesn’t necessarily lead to a proxy battle or an all-out litigious environment. There’s no harm in listening,” he adds.

“I think the mistake that some companies make is they try to slough off the activists. These are smart people and they may have very good ideas, and good recommendations of board candidates,” says Leckie, who notes that their suggestions may be beneficial because boards are always looking for renewal and high-quality individuals.

That type of symbiotic relationship might prove to be the wave of the future, serving the vested interests of both board members and activists, with the latter now appearing to be entrenched for the long haul.

Critical limits Once an investor purchases at least 10 per cent of a Canadian company, that information must be publicly disclosed. That is a much richer holding than the 5-per-cent threshold set in U.S. capital markets, says Leckie.

A NEW TOOL FOR ACTIVISTS Amendments to the Canada Business Corporations Act (CBCA), which came into force in 2022, changed how shareholders of publicly listed corporations can vote for directors in uncontested elections.

Rather than simply withholding a vote, and allowing directors to be installed with a plurality, shareholders can now register votes against, meaning outright majority support is now required for election or re-election to a board. If more votes are cast against than cast in favour, the election or re-election bid would fail, says Ian Robertson, CEO of Kingsdale Advisors in Toronto.

“We’ve already had three campaigns this year where a shareholder who would lack the means to run a full formal campaign goes out and solicits their own proxies,” says Robertson, in the hope that targeted candidates would fall below the 50-per-cent threshold and resign.

“It’s a new mechanism, in that it’s been formalized. A lot of

However, even though an activist in Canada doesn’t need to disclose their position until they reach 10 per cent, they only require a 5-per-cent stake to requisition a meeting of shareholders over a matter of interest to them, at which time their identity would become visible, Robertson says.

“That means that if I am an activist [and] I want to get some wins under my belt, Canada is an excellent jurisdiction to do that,” he says.

However, boards also have certain defensive tools at their disposal, particularly where shareholder activism leads to prospects for a hostile takeover.

In 2016, Canadian Securities Administrators tripled the minimum amount of time that a proposed takeover bid must remain on the table, to 105 days from 35 days, with certain exceptions.

“The playing field in Canada has become much more difficult for hostile bids, and we’ve seen fewer hostile bids as a result of that change, among others,” Powys-Lybbe says.

“It used to be that shareholder-rights plans, or what people called ‘poison pills,’ were implemented by boards in order to give them more time in the face of a hostile offer. In Canada, the rules have been changed to essentially mandate that everyone’s got time. And so, the 105 days means there’s time for a board to find an alternative, or to make their case as to why the company shouldn’t be sold,” she says.

Canadian boards also enjoy a relative degree of flexibility compared with their U.S. counterparts with respect to expressing their point of view.

In the United States, the Securities and Exchange Commission has tighter rules and restrictions regarding communicating with other shareholders. For example, prior to sending a proxy circular, it needs to be reviewed by the SEC, but in Canada, a circular can be sent without having to go through any third-party regulatory review, Robertson says. DJ

companies have historically had majority voting policies and withhold votes. But the introduction of formal ‘against votes,’ I would say, [is] a tool activists can use to express their displeasure with a company, short of running a full, expensive campaign,” he says.

– JB

JEFF BUCKSTEIN is an Ottawa-based freelance business writer with a CPA, CGA designation. He writes about personal finance, accounting and other business-related issues and current events.

ICD.CA | 43

ICD DIRECTORS ON THE MOVE

DIRECTORS ON THE MOVE The ICD would like to congratulate the following members on their recent board appointments Not-for-Profit

David Oikle, ICD.D DIRECTOR CANADIAN REAL ESTATE ASSOCIATION

Peter Dinsdale, ICD.D DIRECTOR CANADIAN OLYMPIC COMMITTEE

Pina D’Agostino, ICD.D DIRECTOR ONTARIO CENTRE OF INNOVATION

Amir Shami, ICD.D DIRECTOR EDMONTON CHAMBER OF COMMERCE

Brenda Nowakowski, ICD.D DIRECTOR SASKATOON PRAIRIELAND PARK

Theresa Redburn, ICD.D DIRECTOR ONTARIO 211 SERVICES

Craig Storey, ICD.D DIRECTOR ALS SOCIETY OF CANADA

Craig Storey, ICD.D DIRECTOR CAA ATLANTIC

Ken Kawall DIRECTOR CAA NIAGARA

Diane Friedman, ICD.D DIRECTOR VEHICLE SALES AUTHORITY OF BC

Frank Florio, ICD.D CHAIR ONTARIO BIOSCIENCE INNOVATION ORGANIZATION

Tracey Wallace, ICD.D VICE-CHAIR YMCA CANADA

Steve Mennill, ICD.D DIRECTOR EVERGREEN CANADA

Government

Ray Block, ICD.D CHAIR WORKERS’ COMPENSATION BOARD - ALBERTA

Francesco Mannarino, ICD.D DIRECTOR EDMONTON GLOBAL

Melissa Sonberg, ICD.D DIRECTOR CANADA POST

Allan Seckel, ICD.D CHAIR LEGAL AID BC

Banking & Financial Services

John Nyholt, ICD.D

Natalia Lishchyna, ICD.D

DIRECTOR COMPASS FOODBANK AND OUTREACH CENTRE

CHAIR UKRAINIAN CREDIT UNION LTD.

John Nyholt, ICD.D

Janet Cloud, ICD.D

DIRECTOR INDWELL COMMUNITY HOMES

DIRECTOR DUCA FINANCIAL SERVICES CREDIT UNION LTD.

Margie Parikh DIRECTOR LIFT IMPACT PARTNERS

Elaine Lajeunesse, ICD.D

Angela Armstrong

DIRECTOR DESJARDINS GROUP

DIRECTOR LIFT IMPACT PARTNERS

Robert Jankovic, ICD.D

Edward Perlmutter DIRECTOR LIGHTHOUSE CREDIT UNION

Scott Kashuba, ICD.D CHAIR BRIDGEWATER BANK

Insurance

Barbara Bellissimo DIRECTOR HSB CANADA

Education

Carolann Harding, ICD.D

ADVISORY BOARD DIRECTOR LAYFIELD GROUP

ADVISORY BOARD MEMBER FACULTY OF BUSINESS ADMINISTRATION MEMORIAL UNIVERSITY OF NEWFOUNDLAND

Valerie Chort

Services

Manufacturing Heather Kennedy

INDEPENDENT DIRECTOR LEGRAND

Oil & Gas

Mary Vitug DIRECTOR STORAGEVAULT CANADA INC.

Holly Benson, ICD.D DIRECTOR CALFRAC WELL SERVICES LTD.

Tim Beatty, ICD.D DIRECTOR STAMPEDE DRILLING INC.

Natural Resources

Nicolle Butcher, ICD.D DIRECTOR INTERFOR CORP.

Transportation

Allan Seckel, ICD.D DIRECTOR TRANSLINK

CHAIR COPPERFIN CREDIT UNION

Send your board appointment publication requests to: Sheldon Mahabir, Director of Member Engagement, smahabir@icd.ca 44 | DIRECTOR JOURNAL

ICD-ROTMAN DIRECTORS EDUCATION PROGRAM.

CANADA’S LEADING PROGRAM FOR DIRECTORS. The ICD-Rotman Directors Education Program is the leading educational program for experienced board directors seeking to advance their contributions to Canada’s boardrooms and beyond.

UPCOMING DEP START DATES EDMONTON

September 21, 2023

A joint initiative of ICD and Rotman, this comprehensive program offers both a national and local perspective, through leading business schools across Canada. With the goal of building competencies deemed necessary to be an effective director in today’s challenging world, the DEP provides insight from both an academic and real-world, director lens perspective. Course participants benefit from the rich experience of their peers in navigating their role within complex board dynamics. Completion of the DEP and success in the ICD led examination process, leads to the highly recognized ICD.D designation, within a one-year timeframe.

TORONTO

October 2, 2023

WINNIPEG

October 12, 2023

ONLINE

October 16, 2023

CALGARY

October 26, 2023

HALIFAX

November 16, 2023

MONTREAL

April 19, 2024

Interested experienced directors are encouraged to submit their application to the ICD, along with references, for consideration into the program.

APPLY ONLINE ICD.CA/DEP Call 416.593.3325 or email education@icd.ca for a personal consultation.

Think beyond the boardroom.

Application process is now open and is subject to availability. Application deadlines are 4-6 weeks before the class start date.

BY Shirley Won

The great Canadian slide The country is on course to soon lose status as a G20 nation.

If we don’t reduce bureaucracy and protectionism and overcome widespread complacency, Mexico, Vietnam, the Philippines and others could surpass Canada’s economic might, argue authors Walid Hejazi, Dany Assaf and Joe Manget

CANADIANS ARE FOCUSED on rising interest rates and inflation, but there are other numbers – perhaps more troubling – to worry about. In 1967, when Canada celebrated its 100th birthday, it was the world’s ninth-largest economy (ranked by gross domestic product based on purchasing power parity). Today, it is the 17th largest. In terms of income per person, Canada ranked third in 1967 after the United States and Switzerland. It has now fallen to 15th.

In Everybody’s Business: How to Ensure Canadian Prosperity through the Twen-

46 | DIRECTOR JOURNAL

ty-First Century, co-authors Dany Assaf, Walid Hejazi and Joe Manget warn that further declines in economic rankings loom unless Canada shifts away from traditional economic drivers and protectionist policies to allow innovation by ambitious entrepreneurs to flourish. Director Journal asked Hejazi, a professor of international business at the University of Toronto’s Rotman School of Management, why Canada has fallen in prosperity rankings, how to turn the ship around, and what’s the risk in remaining complacent.

The research for this book includes interviewing more than 100 politicians, chief executives, union officials and other thought leaders. What was the motivation for writing it?

It began when my co-authors, Dany Assaf [partner and co-chair of the competition and foreign investment group at Torys LLP] and Joe Manget [chair and CEO of EHN Canada, a chain of mental health and addiction treatment centres], attended a Toronto Maple Leafs game in 2014. They began thinking about when the team last won the

RECOMMENDED READING

Canadian companies are not as innovative and productive as they need to be for Canada’s economy to remain competitive with rising nations’, says author Walid Hejazi.

ICD.CA | 47

Stanley Cup in 1967. That led to a discussion about Canada’s future, and its poor productivity performance. They approached me, and we looked at the data, which surprised us. In 1967, Canada ranked third in terms of income per person, but fell to 15th by its 150th birthday in 2017. By Canada’s 200th birthday [in 2067], our analysis shows that we are going to be 22nd. Our country is part of the G20 [group of developed economies], but given current growth rates, it will very soon fall out of the top 20 largest economies in the world. These are alarm bells.

Your book predicts that Canada’s size of economy could be surpassed over the next 50 years by countries such as Mexico, Thailand, Nigeria, Vietnam, Iran and the Philippines, among others. How can that be?

These countries are hungry and want to advance. They are adopting new technologies and modernizing their economies. They are developing rapidly and are catching up to countries like Canada. The world is not going to stand still and wait for Canada to wake up. Size of economy is important because it speaks to our country’s influence on the global stage. If we were to become the world’s 25th largest economy, our influence diminishes rapidly.

Why is Canada falling so far behind?

Canadian companies are not as innovative and productive as they need to be. We have relied on two big sources for our prosperity, but that’s changing. Because we are next door to the United States, we have had easy access to that market. But that is coming into question as the U.S. becomes more protectionist. Seventy-five per cent of our exports go the U.S., so we need to diversify.

Secondly, we have a lot of natural resources.

However, we pull them out of the ground and send them to the U.S., China or Europe, and bring them back as processed materials or final products. We should be doing these activities in Canada.

How can we have a stronger resource sector?

We support the federal government’s [recently announced] $13-billion subsidy to

48 | DIRECTOR JOURNAL

Volkswagen to build an electric-vehicle battery plant in St. Thomas, Ont. We are thrilled that the government had the vision to help the Canadian economy pivot. When you think about the electrification of the world to move away from fossil fuels, this is what we need. If we did not get the battery plant, all those critical minerals in Northern Ontario’s Ring of Fire region would have been mined and sent to the U.S. Now,

many research jobs are going to be created to support that, and other related industries are going to want to locate here.

Your book laments how entrepreneurship is being held back in Canada. What changes are needed?

Surveys by the World Economic Forum and others indicate that dealing with an inefficient government bureaucracy is the big-

RECOMMENDED READING

ONE PROBLEM IS THERE IS SO MUCH PROTECTIONISM THAT COMPANIES BECOME COMFORTABLE AND DON’T NEED TO INNOVATE. THE TELECOM SECTOR IS CONTROLLED BY THREE COMPANIES, WHILE THERE ARE UNBELIEVABLE AMOUNTS OF PROTECTION IN THE AIRLINE INDUSTRY. THAT’S WHY WE PAY HIGH PRICES FOR CELLPHONES AND AIRFARES. gest challenge that companies face doing business in Canada. We are not anti-government in any way, but governments need to allow companies to operate without massive hurdles in adhering to regulations.

High tax rates are also a problem. According to Bill Robson, CEO of the C.D. Howe Institute, Canada needs to keep its top personal tax rate [now at 53.5 per cent] below 50 per cent. That is a psychological threshold. Canada is in a situation where interest rates are going up and that last thing that we want is governments relying on higher taxes to pay the bills. When you raise taxes, you stifle the economy. As Canada’s taxes continue to rise, what happens is that a lot of businesses don’t want to locate here.

That’s why so many Canadians just leave, and we lose.

What can be done to encourage innovation in Canada?

If you look at countries in Europe that are about the same economic size as Canada, they are doing better when it comes to innovation. It’s unbelievable how Switzerland – remember, we were second after that country in income per person in 1967– is taking off in innovations relative

to Canada. One problem is there is so much protectionism that companies become comfortable and don’t need to innovate. The telecom sector is controlled by three companies, while there are unbelievable amounts of protection in the airline industry. That’s why we pay high prices for cellphones and airfares. We make an exception for the banking sector, however, because it delivers stability in exchange for protection. Secondly, it is so difficult for startups to get access to funding from domestic banks and venture capital. The collapse of [U.S.-based] Silicon Valley Bank, which was expected to fund 40 per cent of Canada’s technology and life sciences ventures, is going to set back the startup scene. Thirdly, there are subsidies, such as the Scientific Research & Experimental Development [SR&ED] tax credits, to help companies do research and development.

The problem is that it is administered by the Canada Revenue Agency. The program should not be wrapped within another objective of getting to see company books.

A lot of these credits are also not paid out because most companies must hire consulting firms to administer them due to their complexity.

What are the dangers if Canadians remain complacent?

The analogy I like to use is diabetes. With diabetes, you have all the symptoms, but you don’t feel them. Once you do feel the symptoms, the disease has already advanced, but could have been prevented. If we remain complacent and these key issues are not discussed with more intensity and governments don’t take them seriously, Canada will continue to fall behind. If the government response is simply to raise taxes, our prosperity slides, and we won’t have the ability to fund health care, education or build hospitals and other infrastructure. If the issues become everyone’s business, we are optimistic. Governments need to change from a backward-looking view to the economy of the future, which requires innovation, and to create an environment that enables individuals to be entrepreneurial and to commercialize their businesses. DJ SHIRLEY WON is a Toronto-based freelance journalist and former business and investment reporter for The Globe and Mail.

She also worked as a business reporter for the Montreal Gazette, covering transportation, real estate, retail and banking.

ICD.CA | 49

PARTING SHOT

A really cold war?

PHOTOGRAPH BY ANNIE SPRATT/UNSPLASH

As climate change obliterates the Arctic’s sea ice, the world’s superpowers are jockeying to claim newly thawed shipping corridors and riches beneath the sea floor, including oil, gold and critical minerals. Russia is shoring up its military at the top of the world, China is lurking as a self-proclaimed “polar great power,” and the United States is paying close attention. But the most formidable foe may be the cold and forbidding land itself.

Moving through cold and snow takes immense time and energy. With an average winter temperature of – 34 C, frostbite and hypothermia are ever-present risks. Soldiers must focus on mundane details, such as how to minimize sweating or dry their boots overnight, while they learn how to construct thermal shelters and melt ice for drinking water.

Canada is also trying to reassert its Arctic sovereignty and may have an advantage over the superpowers, if it takes the opportunity to learn from the best – the Inuit, who have inhabited the Far North for thousands of years.

50 | DIRECTOR JOURNAL

THINK BEYOND THE BOARDROOM WITH THE ICD As a director, your learning journey is never over. ICD courses are developed for directors, by directors and offer a personalized and interactive learning experience through engaged live instructor-led sessions, and a dynamic alumni portal to stay connected with your director peers for continued learning and support.

Those that have taken the ICD-Rotman Directors Education Program keep their skills sharp and up-to-date by earning continuing education units (CEUs) with each developed course they take.

Developed with:

BOARD FUNDAMENTALS

BOARD FUNDAMENTALS

BOARD FUNDAMENTALS

AUDIT COMMITTEE EFFECTIVENESS.

BOARDROOM FINANCIAL ESSENTIALS.

BOARD OVERSIGHT OF STRATEGY.

BEYOND THE TRADITIONAL ROLE OF COMPLIANCE OVERSIGHT

THE ROLE OF THE BOARD IN FINANCIAL OVERSIGHT

Learn about the intricacies of key relationships, emerging issues and the committee’s role in enterprise risk.

Advance your financial knowledge so you can confidently make sound financial decisions.

OPTIMIZE BOARD ENGAGEMENT IN THE STRATEGIC OVERSIGHT PROCESS

ONLINE APPLY BY:

ONLINE APPLY BY:

October 17, 2023 September 26, 2023

Developed with:

September 19, 2023 August 29, 2023

Understand the importance of director engagement in oversight of strategy and asking the right questions throughout the process.

ONLINE APPLY BY:

September 20, 2023 August 30, 2023

Sponsored by:

BOARD FUNDAMENTALS

BOARD FUNDAMENTALS

DIRECTOR EFFECTIVENESS

ENTERPRISE RISK OVERSIGHT FOR DIRECTORS.

HUMAN RESOURCE & COMPENSATION COMMITTEE EFFECTIVENESS.

CHAIRING BOARDS.

NAVIGATING THE MODERN RISK LANDSCAPE

OPTIMIZE THE BOARD’S UNDERSTANDING OF HUMAN CAPITAL OVERSIGHT

STRATEGIES FOR LEADING HIGHLY EFFECTIVE BOARDS

Acquire a deeper understanding of the board’s role and how to participate in the risk oversight process constructively.

ONLINE APPLY BY:

October 18, 2023 September 27, 2023

Understand the considerations of talent management, CEO, succession planning and executive compensation, as well as increased scrutiny of these issues by stakeholders.

ONLINE APPLY BY:

September 27, 2023 September 6, 2023

TO ELEVATE YOUR DIRECTORSHIP IN 2023, VISIT ICD.CA/CALENDAR Not sure which course is the right fit for you?

Call 416.593.3341 or email education@icd.ca for a personal consultation.

Learn how to use forward-thinking strategies to engage and empower your board members to achieve higher levels of performance and contribution.

ONLINE APPLY BY:

September 26, 2023 September 5, 2023

Better, cleaner, greener data Sustainability reporting that goes beyond the expected Reporting expectations are changing—so must you.

Ensure your data is ready to tell a full story.

Learn more at deloitte.ca/esg-reporting

Institute of Corporate Directors Institut de administrateurs de sociétés 2701-250 Yonge St., Toronto, Ontario M5B 2L7

40047045