Who's on the hook for productivity? (May/June 2024)

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

WHO’S ON THE HOOK FOR PRODUCTIVITY? LEADERSHIP’S MISSING LINK STEPHEN POLOZ ON FIVE FORCES CREATING ECONOMIC UPHEAVAL

MAY/JUNE 2024

Elevate your meetings with Lumi’s state-of-the-art venues

Discover functionality and versatility at Lumi’s custom-built venues. Ideal for AGMs, investor meetings, and earnings calls, our hybrid-ready spaces feature cutting-edge audio-visual and engagement technology. From boardrooms to catering, we offer seamless event experiences.

With flexible solutions tailored to your needs, whether it’s a small earnings call or a larger AGM, Lumi ensures success every time.

“Lumi’s cutting-edge venue, studio spaces, and virtual event platform, along with their expert team, ensured a smooth and successful shareholder event, reaching our audience in a superior manner.

Winner of Best Investor Event

Toronto IR Magazine Awards 2024

Calgary . Montreal . Toronto Book your next meeting with us today

lumiglobal.com/experience

CONTENTS

Director Journal Editorial EDITOR Simon Avery ART DIRECTOR Lionel Bebbington CONTRIBUTORS Richard Blackwell, Barrie McKenna, Kimberley Young Milani, David Pike, Gerard Seijts, Serge Rivest, Qurat ul ain Siddiqui, Barbara Smith, Shirley Won

Institute of Corporate Directors 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 Shannon Hunt - Vice-president, education Kathryn Wakefield - Vice-president, chapter relations

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

COVER: ERHUI1979/iSTOCK

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.

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.

Departments Editor’s note A few good ideas for the times

CEO insights Rahul Bhardwaj on the importance of face time

Dispatches Robots with an IQ, overzealous tech recruiters, oversharing CEOs, an EV speed bump,

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

05 06

and sleepy vacationers

Issues Why agility and flexibility are more important for directors than tech credentials

Directors on the move Recent board appointments across the country

Parting shot Paddling over to the Canadian Canoe Museum

11 41 46

Features ICD Fellow insights Poonam Puri has made her name by balancing the needs of different stakeholders

The case for character A call to bring back the most overlooked component of great leadership

Canada’s growing gap Are tight, timid companies at fault for our poor productivity performance?

1601 – 250 Yonge Street, Toronto, Ontario M5B 2L7 T: 416-593-7741 F: 416-593-0636 E: info@icd.ca

04

Recommended reading In The Next Age of Uncertainty, former Bank of Canada governor Stephen Poloz explains

12 20 32 42

how we might adapt to a much riskier future

ICD.CA | 3

EDITOR’S NOTE

In praise of character It’s harder to fall short when leaders focus on what’s really important THESE DAYS, DIRECTORS and executives ADMINISTRATEURS ET équipes de diare regularly reminded of the accelerated rection se font régulièrement rappeler pace of change they need to confront, along le rythme accéléré des changements, en with the rising expectations they must plus des attentes croissantes auxquelles ils meet. The significance of shifting trends doivent répondre. On ne saurait minimiser can’t be overstated, but where should the la portée de ces tendances, mais sur quoi les board direct its attention? conseils devraient-ils tourner leur attention?

Contributors to this issue offer severLes collaborateurs de ce numéro propoal ideas. They’re not prescriptive, and they sent plusieurs idées non directives et qui don’t pretend to be universal answers to the ne prétendent pas être des réponses unichallenges of the day, but we hope you’ll find verselles, mais nous espérons que vous them timely and relevant. les trouverez opportunes et pertinentes.

Gerard Seijts and Kimberley Young Milani, Gerard Seijts et Kimberley Young Miwho both specialize in leadership at the Unilani, tous deux spécialistes du leadership versity of Western Ontario’s Ivey Business à l’Yvey School of Business de l’Université School, argue that our society is suffering from Western Ontario, soutiennent que notre Simon Avery a lack of “leadership character.” No amount of société souffre d’une carence de caractère.

Editor skill or experience can compensate for weakAucun degré de talent ou d’expérience ne savery@icd.ca ness of character, they say. Strength of charpeut compenser la faiblesse du caractère acter, on the other hand, is foundational for qui, affirment-ils, est le fondement de la vision, judgment and good decision-making. vision, du changement et d’une saine prise de décisions. Leurs recherches démontrent Their academic research shows that character que le caractère est relié à des performancis related to performance measures that ines comme le rendement sur les actifs, l’innovation, l’engagement clude return on assets, innovation, employee engagement, customer des employés, la fidélisation de la clientèle et la prise de décisions retention and ethical decision-making. As organizations build their éthiques. À mesure que les organisations bâtissent leur capacité de governance capacity, they should value and develop good character gouvernance, elles devraient privilégier et développer le caractère en as an essential ingredient for success, they say (see page 20). tant qu’ingrédient essentiel du succès (voir page 20).

Stephen Poloz, a corporate director and former governor of the Stephen Poloz, administrateur et ancien gouverneur de la BanBank of Canada, explains how five slow-moving megaforces are que du Canada, explique comment cinq grandes forces animent driving this “age of uncertainty.” In response, he urges companies lentement cet « âge d’incertitude ». En réaction, il exhorte les ento consider a plan that goes beyond the next quarter (page 42). treprises à envisager un plan allant au-delà du prochain trimestre Boards should be thinking in terms of perpetual forecasting that (page 42).

Les conseils devraient penser en termes de prévision perincludes regularly updated budgets with “financial buffers” to compétuelle comprenant des budgets régulièrement actualisés avec des pensate for the tide of unknowns, he says. « amortisseurs financiers » pour compenser le flot d’incertitudes.

And business journalist Barrie McKenna explores the notion Enfin, le journaliste d’affaires Barrie McKenna explore la notion that fixing Canada’s weak productivity growth isn’t only a probselon laquelle la faible croissance de la productivité au Canada lem for the government to tackle but also a key corporate responn’est pas seulement le problème du gouvernement, mais aussi celui sibility (page 32). When faced with how to deploy limited financial des entreprises (page 32).

Quand il faut déployer des ressources firesources, should the board elevate share buybacks to the top of nancières limitées, le conseil devrait-il placer le rachat d’actions au the list, or is it time to boost capital expenditures and research and sommet de la liste ou augmenter les dépenses en capital et en R et D? development to produce bigger gains in the future? The range of L’éventail des points de vue pourrait vous étonner.

DJ viewpoints may surprise you. DJ

4 | DIRECTOR JOURNAL

CEO INSIGHTS

The wisdom of conferences

ILLUSTRATIONS BY AARON MCCONOMY

Directors value the opportunity to converse with their peers IN THIS ISSUE, we explore leadership charDANS CE NUMÉRO, nous explorons le caracter and productivity, and how they relate actère et la productivité dans le leadership to the role of the board. Timely subjects, ceret la façon dont ils affectent le rôle du conseil. tainly, given the geopolitical, economic, social Voilà des questions pertinentes, compte tenu and environmental issues that could threaten des enjeux géopolitiques, économiques, our collective prosperity and well-being. sociaux et environnementaux qui pourThe crisis in the Middle East continues raient menacer notre prospérité et notre to reverberate globally, and half the world’s bien-être collectifs. democracies are holding elections this year, La crise au Moyen-Orient continue de se in an environment where misinformation répercuter à l’échelle mondiale et la moitié and disinformation flow on a scale we’ve des démocraties du monde tiennent des never known before. Meanwhile, monuélections cette année, dans un environnemental leaps in the power of artificial intelment ou la mésinformation et la désinforligence are pushing the capabilities of regumation circulent à une échelle jamais conlators and corporate strategists to the limit. nue auparavant. Entre-temps, les bonds Rahul Bhardwaj In my travels, directors talk to me about monumentaux des pouvoirs de l’intelligence LL.B, ICD.D how they are reframing their organizaartificielle repoussent à leurs limites les caPresident and CEO, tion’s ESG (environmental, social and govpacités des autorités réglementaires et des The Institute of Corporate Directors ernance) principles. Global momentum stratèges d’entreprise. toward sustainability reporting is growing Lors de mes déplacements, des administrabut some companies are toning down their teurs me parlent de la manière dont ils recadESG strategies – particularly how they comrent leurs principes ESG (environnementaux, municate them – in the wake of a steady sociaux et de gouvernance). L’élan mondial flow of anti-ESG sentiment, especially from short-term investors. vers les rapports environnementaux des entreprises est en croissance, Where the digital disruption of the past two decades forced commais certaines d’entre elles baissent le ton de leurs stratégies ESG – en panies to adapt, there was always a sense that technology yielded to particulier la façon dont elles les communiquent – dans la foulée d’un some form of human control. But artificial intelligence is different. sentiment anti-ESG, surtout de la part des investisseurs à court terme.

It will test operational resilience and many industries will be disLà où la perturbation numérique des deux dernières décennies a rupted. Some companies will simply be rendered irrelevant. forcé les entreprises à s’adapter, il y a toujours eu une impression que In this volatile environment, boards and their management teams la technologie permettait une certaine forme de contrôle humain. are challenged. It’s a key reason why many directors have expressed Mais l’intelligence artificielle va sérieusement mettre à l’épreuve la their enthusiasm to me about getting back together in person. In the résilience opérationnelle de plusieurs industries. face of so much change, they are looking for peer-to-peer experiences Dans cet environnement instable, les conseils et équipes de direcwhere they can engage on the issues and share insights. tion sont remis en question, confrontés qu’ils sont à un univers risThe Institute of Corporate Directors’ national conference, in Toqué et à des attentes croissantes. Voilà pourquoi beaucoup d’adminronto from June 4 to 5, will provide a safe and inspiring space in istrateurs m’ont exprimé leur enthousiasme à l’idée de se réunir à which to have these important conversations. The theme of this nouveau en personne. Devant tant de changement, le dialogue entre year’s event is “The Confident Board” and it will bring together pairs autorise le partage d’opinions et de perspectives. leaders from the worlds of corporate governance, politics, ecoLe congrès national de l’Institut des administrateurs de sociétés, nomics, international relations and more. I invite you to be part of qui aura lieu à Toronto les 4 et 5 juin, offrira un espace inspiré pour this vital exchange of ideas. You can find registration details on our tenir ces conversations. Je vous invite à participer à cet échange vital website. I’m looking forward to seeing you there. DJ d’idées. J’espère vous y rencontrer. DJ

ICD.CA | 5

COMPILED BY Qurat ul ain Siddiqui

Dispatches A digest for diligent directors

THE HEAD OF THE COMPANY creating the chips that are driving development of artificial intelligence predicts that artificial general intelligence (AGI), a more advanced version of generative AI, will be a reality by the end of the decade.

Jensen Huang, founder and CEO of Nvidia, told an audience at an economic forum held at Stanford University that if the technology is defined as the ability to pass any human test, such as engineering or medical exams, the goal could be reached in five years. Paired with leaps being made with robotics technology, the implications are hard to fully grasp today. Thanks to companies such as Emeryville, Calif.-based Covariant, robots are beginning to advance to the point where they can “handle unexpected situations in the physical world,” Cade Metz writes in The New York Times. What does that look like?

Think of an AI chatbot, vastly superior than today’s versions, melded into an 80-kilogram robot that can work in warehouses and factories and, one day, people’s homes. The robots, Metz said, will be able to draw on vast amounts of data from cameras and other sensors to identify patterns, complete tasks and even decide what to do next.

6 | DIRECTOR JOURNAL

PHOTOGRAPHY BY JING/ADOBE STOCK (LEFT), COLOURES-PIC/ADOBE STOCK (TOP RIGHT). ILLUSTRATION BY HD3DSH (RIGHT)

ROBOTS WITH IT FOR BRAINS

NEWS

BEFORE YOU PRESS ‘SEND’ Juggling tasks in the middle of a workday, we often find new emails crashing into our overflowing inbox. In a recent study, Queen’s University suggests that workplaces need to implement clear policies around the use of email, such as prohibiting co-workers from spamming each other’s inboxes and abusing the “reply all” button. “If you’re constantly interrupted at work, this will affect the performance and productivity of your team as stress can spill over from individual level to team level,” Shamel Addas, an associate professor of digital technology at the university’s Smith School of Business and one of the researchers behind the study, told The Globe and Mail. The study further recommends the use of AI tools, email prioritization features and feedback buttons to streamline inbox management to help minimize email-induced anxieties.

ELECTRIC VEHICLE ROADBLOCKS THE ELECTRIC VEHICLE (EV) market appears to be hitting some bumps in the road. While more EV models are coming to market, some car companies are easing off on expansion plans because of high development and production costs and moderating sales growth. Dealers have reduced some EV prices to incentivize sales, while also lowering their EV targets, reports Kyle Bakx of the CBC. One growing concern for consumers relates to access to charging stations. Elaine Buckberg, a senior fellow at Harvard University’s Salata Institute for Climate and Sustainability, recently recounted her EV road trip experience to an audience at a major energy summit. She described spending hours searching for a working charging station only to find four broken ones, Bakx reported.

Where the biggest concern with EVs used to be range, now it’s the availability of public charging units and the ease of finding and using them, Bakx said. It seems the infrastructure has some catching up to do.

NEW ELECTRIC VEHICLE REGISTRATIONS IN CANADA

150,000 125,000 100,000 75,000 50,000 25,000

35,523

39,036

58,726

98,589

139,501

2019

2020

2021

2022

2023

0 Source: Stats Canada

ICD.CA | 7

SPEAK UP OR SHUT UP? WHAT’S A CEO TO DO? Take a public stand on an issue, and you may alienate a portion of your stakeholders. Stay silent, and you risk being seen as indifferent or out of touch.

It’s no wonder many business leaders prefer to avoid getting involved. In fact, the public’s appetite for CEO activism appears to be waning. A recent survey by the public relations and communications agency Proof Strategies Inc. found that 49 per cent of Canadians think CEOs should speak out — which is an 8 per cent decline from 2022.

More people want CEOs to weigh in on topics suited to their expertise, such as economic growth. But fewer Canadians are keen to hear from company chiefs on matters less relevant to their business, such as international conflicts. While it may make sense for CEOs and their boards to discuss current events internally, any public positioning demands careful thought and commitment. If the CEO is going to offer an opinion on social media, their position had better be backed up by a corporate plan of action.

VOX POPULI

49%

66%

61%

75%

33%

want CEOs to speak out on “important issues such as climate change, racism and social equity”

think business leaders should take a stance on climate change

want to hear from business leaders on health-care issues

want CEOs to share their opinion on economic growth and prosperity

want to hear from business leaders on international conflicts

Source: Proof Strategies Inc.

8 | DIRECTOR JOURNAL

The tech industry is no stranger to a constantly evolving landscape, but the recent wave of layoffs – about 34,000 in January 2024 alone as reported by NBC news – has been particularly striking. Like other industries, the tech world has been facing some economic headwinds.

But the sector has also proven overzealous in hiring during times of prosperity, which created bloated teams and inefficiencies, Al Khan writes in Forbes magazine. Now, many tech firms are scrambling to trim their payrolls through mass layoffs.

This pattern of tightening belts after a hiring spree, only to repeat the cycle, has become all too common in the sector. It may be time for tech companies to adopt more strategic, conservative hiring practices that prioritize sustainable growth, he writes.

PHOTOGRAPHY BY ANDRII IEMELIANENKO (LEFT), PAULA PHOTO (RIGHT). ILLUSTRATION BY TUJUH17BELAS (TOP). ICONS BY NOUN PROJECT

RETHINKING TECH-HAPPY RECRUITMENT

NEWS

ZZZZS PLEASE ARE YOU SOMEONE who dreams of a vacation where the real adventure lies not in sightseeing, but in slumber? Well, you’re not alone. According to the Hilton Trends Report, based on a survey of over 10,000 travellers from nine countries, people are increasingly motivated by the prospect of catching some quality Zzzzs while they are on holiday.

So forget about ticking off landmarks on that bucket list or basking in the sun; the new trend is all about resting and recharging. In fact, a whopping majority of surveyed travellers cited “rest and recharge” as their top reason for jetting off in 2024. Dubbed sleep tourism, this phenomenon is reshaping how people plan their getaways, from packing essentials to picking accommodations.

A comfortable mattress is more of a vacation priority for many today than the hotel pool or local restaurants. If an establishment doesn’t have top-notch sleeping arrangements on offer, the more likely it is to get passed up for ones that do.

The quest for the perfect “sleepscape” doesn’t end there.

From bringing along personal pillows —18 per cent of surveyed travellers said they did so — to creating the ultimate sleep haven (10 per cent of respondents said they brought along white noise gadgets), holidaymakers are serious about their rest-and-relaxation time.

Feeling envious of those souls who wake up refreshed and ready to see the sights? When booking your next trip, think about working on your bed-head.

27%

say staying with a trusted brand with a consistently good mattress is important

18%

pack their favourite pillow

33%

listen to music or a podcast to help them sleep

22%

use earplugs for noise cancellation

10%

bring a white noise machine

Source: Hilton Trends Report

ICD.CA | 9

DON’T MISS CANADA’S LEADING DIRECTOR CONFERENCE,

BRINGING TOGETHER GOVERNANCE THOUGHT LEADERS.

THE CONFIDENT BOARD

2024 ICD NATIONAL DIRECTOR CONFERENCE & FELLOWSHIP AWARDS GALA METRO TORONTO CONVENTION CENTRE I JUNE 4-5, 2024

Gain valuable insights from over 25 governance leaders and experts and contribute to governance excellence through discussion forums.

CONFERENCE CO-CHAIR

CONFERENCE CO-CHAIR

CONFERENCE CO-CHAIR

HON. JOHN P. MANLEY

HEATHER MUNROE-BLUM

POONAM PURI

CONFERENCE KEYNOTE

CONFERENCE KEYNOTE

FELLOWSHIP GALA KEYNOTE

GERALD BUTTS

STEPHEN POLOZ

DAVID L. COHEN

PC, O.C., F.ICD

Vice Chair and Senior Advisor, Eurasia Group

LSM, LL.M, ICD.D

O.C., OQ, F.ICD

Special Advisor, Osler, Hoskin & Harcourt LLP and Former Bank of Canada Governor

U.S. Ambassador to Canada

ICD NATIONAL DIRECTOR CONFERENCE & FELLOWSHIP AWARDS GALA SPONSORS PREMIUM

CONFERENCE PATRON

GALA PATRON

SOUTHLEA

FOR TICKETS VISIT CONFERENCE.ICD.CA/2024

ISSUES

BY Gigi Dawe

Out with the old, in with the tried and true

PHOTOGRAPH BY WHO IS DANNY/ADOBE STOCK

The issues may change but the foundation of good governance stays the same

AS COMPANIES FACE increasingly intricate challenges, it is difficult if not impossible for their boards to assess what is coming and the potential consequences of their decisions or actions. Among other matters, boards need to consider the ethical issues associated with artificial intelligence, diversity, climate change and the effect of geopolitical events on the companies they oversee.

In speaking to directors of Canadian companies, I have learned that while they acknowledge the challenges associated with the issues they face, some believe a back-to-basics approach to governance is required. An organization’s resiliency and its ability to deal with complex events is founded on the strength of its board’s foundational governance, which includes the ability to identify, assess and manage risks and opportunities, and embed them into strategy.

The manner in which boards operate hasn’t changed in decades.

Most often, they meet four to six times a year and connect with management through board meetings. Their composition typically reflects executive leadership and industry expertise, and many boards specifically recruit former CEOs. However, to truly understand how strategy is being affected by today’s faster, more complex environment, perhaps it’s worth asking some questions: Do boards need to reconsider their structure and composition? Do they need to include more tech-savvy, innovative leaders who can push a company toward adopting new strategies? Or do traditional structures better support a board’s key responsibility – to ensure that an organization’s strategy is developed and effectively executed?

Boards are responsible for setting and approving the overall strategic direction of the company. This has always required evaluating market trends, competitive landscapes, and opportunities for growth or diversification. Strategic direction now, however, must consider and weigh issues such as climate change, AI and the impact of the current geopolitical environment, requiring at least a basic level of understanding of how these events may affect longterm sustainability. Strategy is dependent on the identification, understanding and management of material risks that affect operations, finances and the company’s reputation.

Agility trumps new expertise in the boardroom.

As the risks pile up, boards are taking on a more proactive role in strategy. Technological advancements, market disruptions and evolving consumer preferences require boards to continually assess and adapt their strategic plans. I believe that remaining agile and responsive to change is key to long-term success, not expertise in new subjects. Solid traditional board structure is necessary to deal with today’s changes and adopt new strategies. Directors must view their role as guiding the strategic direction and understanding how the plan is being successfully executed. When done right, effective engagement in strategy should lead to the creation of value for companies and ultimately enhanced relationships with management.

Making effective decisions in real time requires directors to be flexible and agile, and that requires depth of knowledge, leadership and business acumen. If your board doesn’t have what it takes, it’s time to get moving. DJ GIGI DAWE is the ICD’s vice-president of policy and research.

ICD.CA | 11

ICD Fellow Poonam Puri, who serves on many boards, has earned praise for her deep knowledge of the range of forces that shape an organization's performance.

12 | DIRECTOR JOURNAL

PHOTOGRAPHS BY David Pike

CUSTOMERS COME FIRST Trained in business and law, POONAM PURI has developed a specialty in serving boards with complicated stakeholder structures and shown a talent for tackling the big issues, Richard Blackwell writes Formée en affaires et en droit, POONAM PURI a développé une spécialité de siéger à des conseils à structures complexes et fait preuve d’un talent particulier pour s’attaquer à des enjeux difficiles, écrit Richard Blackwell

ICD.CA | 13

FOR POONAM PURI, the best way to satisfy an organization’s shareholders is to focus on its broader group of stakeholders.

“You’ve got to produce value for your shareholders, not by thinking about them as a first step, but by thinking about what your customers and clients need, and how you motivate and excite your employees to deliver the product or service you’ve envisioned,” she says. “Then, the rest will follow. How else are you going to be around in five or 10 or 50 years?”

This approach, along with a deep set of skills as a practising corporate and securities lawyer and an academic researcher specializing in governance, has made Puri a sought-after director, and an inductee as a 2024 Fellow of the Institute of Corporate Directors.

Puri’s abilities in juggling the concerns of multiple corporate constituents have served her well on many complex boards, including the Greater Toronto Airports Authority, the Ontario Securities Commission, the Canada Infrastructure Bank, Women’s College Hospital, and other mining, health care and real estate firms.

Julia Hanigsberg, CEO of Holland Bloorview Kids Rehabilitation Hospital, says Puri has been “incredibly effective” on the institution’s board because of her deep knowledge of the range of forces that shape a hospital’s performance. Puri grasps “the unique stakeholder map of hospitals, which includes governments, patients, families, donors, medical and non-medical staff, advocates and more. She ensures that the hospital serves the public interest, and that it is accountable to its stakeholders.”

Puri also fully understands the vital relationship between a board and management, Hanigsberg says, and while fulfilling her role she has been an “incredible mentor” to young and aspiring directors.

Law and business Puri’s interest in business and the law stems from her childhood experience in the 1980s, helping her entrepreneurial parents in their small land-title-search business. “Instead of going to summer camp, I was at the Toronto Registry Office doing title searches … and driving around Southern Ontario to the various registry offices with my Dad,” she says.

With an appetite for both business and research, Puri studied commerce at the University of Toronto, then earned a law degree at U of T, followed by a Master of Law at Harvard. She joined Osgoode Hall Law School as a faculty member while in her mid-20s, and has been teaching law there for more than 25 years. Along the way, she has provided advice to the Nigerian government on re-establishing its government bond market, generated important research and advice for Canadian firms facing legal challenges over the activities of their foreign subsidiaries, and helped the Bank of Canada put together a model for a potential digital currency. She also co-founded an Investor Protection Clinic at Osgoode, where law students provide free assistance and legal advice to investors who can’t afford a lawyer but who believe they have been defrauded or mistreated.

As Puri gained experience in law, teaching and research, she developed into an ideal board candidate. “I knew I wanted to specialize in corporate law and corporate governance so that I could have that mix of law and business,” she says. “That has all naturally led

14 | DIRECTOR JOURNAL

POUR POONAM PURI, le meilleur moyen de satisfaire les actionnaires d’une organisation consiste à cibler son groupe élargi de parties prenantes. « Il faut travailler pour les actionnaires non pas en songeant d’abord à eux, mais aux besoins de leurs clients et aux façons de motiver les employés en suscitant leur enthousiasme à livrer les produits et services que vous envisagez. Le reste suivra. » Cette approche, tout comme les compétences approfondies qu’elle a développées comme avocate spécialisée en affaires et en valeurs mobilières et son statut de chercheuse spécialisée en gouvernance, a fait de Mme Puri une administratrice recherchée et sélectionnée à titre de Fellow 2024 de l’Institut des administrateurs de sociétés.

Ses capacités de gérer les préoccupations de multiples composantes l’ont bien servie aux conseils de plusieurs organisations complexes, dont l’Autorité aéroportuaire du Grand Toronto, la Commission des valeurs mobilières de l’Ontario, la Banque de l’infrastructure du Canada, le Women’s College Hospital et d’autres organisations dans les domaines minier, sanitaire et de l’immobilier.

Julia Hanigsberg, cheffe de la direction du Holland Bloorview Kids Rehabilitation Hospital, affirme que Mme Puri a été « incroyablement efficace » au conseil de cette institution à cause de sa connaissance approfondie des forces qui façonnent la performance d’un hôpital. Elle comprend « la configuration unique des parties prenantes des hôpitaux. Elle s’assure que l’hôpital serve l’intérêt public et rende des comptes à ses parties prenantes ».

Droit et affaires L’intérêt de Mme Puri pour les affaires et le droit lui vient de son enfance, dans les années 1980, alors qu’elle aidait ses parents dans leur petite entreprise de recherche de titres fonciers. « Plutôt que de fréquenter les camps d’été, je me retrouvais au Bureau d’enregistrement de Toronto à la recherche de titres fonciers … et j’accompagnais mon père aux divers bureaux d’enregistrement du sud de l’Ontario. » Avec un appétit pour les affaires et la recherche, elle a étudié le commerce à l’Université de Toronto, où elle a ensuite obtenu un baccalauréat en droit, suivie d’une maîtrise en droit de Harvard. Encore dans la vingtaine, elle est devenue membre du corps professoral d’Osgoode Hall, où elle a enseigné pendant plus de 25 ans. En cours de route, elle a conseillé le gouvernement nigérian sur le rétablissement du marché des obligations, mené d’importantes recherches pour des entreprises canadiennes faisant face à des défis juridiques relatifs aux activités de leurs filiales à l’étranger et aidé la Banque du Canada à établir le modèle d’une éventuelle devise numérique. Elle a également cofondé une clinique de protection des investisseurs à Osgoode Hall, où les étudiants en droit fournissent des avis juridiques gratuits aux investisseurs qui croient avoir été floués ou victimes de fraude sans avoir les moyens de se payer un avocat. À mesure qu’elle gagnait de l’expérience, elle devenait une candidate idéale au poste d’administrateur. « Je savais que je désirais me spécialiser en droit des affaires et en gouvernance d’entreprise afin de posséder ce mélange du droit et des affaires. Cela m’a naturellement menée vers les conseils. » Elle a profité de l’expérience, des conseils et du soutien de plusieurs mentors, dont l’ancien président

‘YOU’VE GOT TO PRODUCE VALUE FOR YOUR SHAREHOLDERS, NOT BY THINKING ABOUT THEM AS A FIRST STEP, BUT BY THINKING ABOUT WHAT YOUR CUSTOMERS AND CLIENTS NEED, AND HOW YOU MOTIVATE AND EXCITE YOUR EMPLOYEES TO DELIVER THE PRODUCT OR SERVICE YOU’VE ENVISIONED.’ « IL FAUT TRAVAILLER POUR LES ACTIONNAIRES NON PAS EN SONGEANT D’ABORD À EUX, MAIS AUX BESOINS DE LEURS CLIENTS ET AUX FAÇONS DE MOTIVER LES EMPLOYÉS EN SUSCITANT LEUR ENTHOUSIASME À LIVRER LES PRODUITS ET SERVICES QUE VOUS ENVISAGEZ. LE RESTE SUIVRA. »

to me to board work as a director.” She benefited from the guidance, advice and support of many mentors, including former U of T president Rob Prichard (now chair of the law firm Torys LLP), and former Ontario Securities Commission chair Ed Waitzer.

de l’Université de Toronto Rob Prichard (aujourd’hui président du conseil du cabinet juridique Torys LLP) et l’ex-président du conseil de la Commission des valeurs mobilières de l’Ontario Ed Waitzer.

‘Complicated’ interests

Son premier conseil – mis à part un bref passage comme administratrice du journal Varsity de l’Université de Toronto durant ses études – fut celui de l’Autorité aéroportuaire du Grand Toronto, gestionnaire de l’Aéroport international Pearson, où elle a siégé de 2008 à 2017.

Pearson est un important pôle économique et – comme le précise Mme Puri – « un assortiment très complexe de parties prenantes ».

Elle y a appris ce que cela signifie d’être administrateur d’une grande organisation faisant face à un large éventail de préoccupations : restructuration de la dette, diversification, roulement du personnel de la haute direction et changements opérationnels importants. « Ce fut un tourbillon – dans le meilleur sens du mot – et une excellente expérience », conclut-elle.

D’autres postes d’administratrice ont suivi et Mme Puri a maintenant siégé à plus d’une douzaine de conseils, dont sept à l’heure actuelle. Servie par son expérience, elle possède aujourd’hui un sens aigu de ce qui fait un bon administrateur.

Les meilleurs administrateurs, soutient-elle, sont ceux qui arrivent dans une organisation avec de l’expérience et des connaissances en affaires ou qui peuvent apprendre rapidement et en profondeur. Mais ils doivent aussi comprendre l’environnement macroéconomique

Her first board — aside from a stint as a director of U of T’s Varsity newspaper while a student — was at the Greater Toronto Airports Authority, the operator of Pearson International Airport, where she served a full nine-year term from 2008 to 2017. Pearson is an important economic hub and has, as Puri puts it, “a very complicated stakeholder map.” Governments are crucial players in its direction, huge numbers of people pass through the airport every day, and the media pays attention to what’s going on there.

On the airport board, Puri learned what it means to be a director of a large organization with a dizzying range of concerns, and helped oversee debt restructuring, revenue diversification, senior management turnover, and significant operational changes. “It was a whirlwind, in the best sort of way, and an excellent experience,” she says.

Other board positions followed, and Puri has now served on more than a dozen, with seven on her plate at the moment. As a result of that experience, she has a strong sense of what makes a good board member.

The best directors, Puri says, are those who come to an organization with experience or knowledge about the business, or who

Des intérêts « complexes »

ICD.CA | 15

IT IS IMPORTANT TO HAVE A DIVERSE SET OF EXPERIENCES, SKILLS AND OPINIONS AMONG THE MEMBERS OF A BOARD, SHE SAYS, IN ORDER TO AVOID ‘GROUPTHINK.’ THAT’S PARTICULARLY KEY WHEN THE STAKES ARE HIGH AND A PROBLEM DOESN’T HAVE A CLEAR RIGHT OR WRONG ANSWER. IL EST IMPORTANT D’AVOIR UN ENSEMBLE DIVERSIFIÉ D’EXPÉRIENCES, DE COMPÉTENCES ET D’OPINIONS AU SEIN D’UN MÊME CONSEIL, DIT-ELLE, AFIN D’ÉVITER LA PENSÉE DE GROUPE. CELA EST PARTICULIÈREMENT IMPORTANT QUAND LES ENJEUX SONT ÉLEVÉS ET QU’UN PROBLÈME NE TROUVE PAS DE SOLUTION CLAIRE.

can learn the details quickly and thoroughly. But they also need to have a feel for the external macroeconomic environment, and the geopolitical factors that may affect the organization. Directors also need to look inward at the organization, she adds, and engage with its employees to understand how they are feeling, and how they are being treated.

It is important to have a diverse set of experiences, skills and opinions among the members of a board, she says, in order to avoid “groupthink.” That’s particularly key when the stakes are high and a problem doesn’t have a clear right or wrong answer. “Having a robust discussion around the boardroom table is critical,” she says.

While that may delay reaching a consensus, “hopefully you get to a stronger decision as a result of it.”

Comfortable with uncertainty One of the biggest issues to confront all boards, this year and into the future, is how to handle artificial intelligence. The balancing act, Puri says, is to ensure that opportunities for its use are seized, but

16 | DIRECTOR JOURNAL

externe et les facteurs géopolitiques susceptibles d’affecter l’organisation. Les administrateurs doivent aussi poser un regard interne sur l’organisation et maintenir le dialogue avec les employés pour comprendre leurs perceptions de la manière dont ils sont traités.

Il est important d’avoir un ensemble diversifié d’expériences, de compétences et d’opinions au sein d’un même conseil, dit-elle, afin d’éviter la pensée de groupe. Cela est particulièrement important quand les enjeux sont élevés et qu’un problème ne trouve pas de solution claire. « Il est essentiel d’avoir une discussion robuste autour de la table, dit-elle. Bien que cela puisse retarder l’atteinte d’un consensus, on est plus susceptible d’en attendre une décision solide. »

À l’aise avec l’incertitude L’un des enjeux les plus importants auxquels font face tous les conseils, maintenant et à l’avenir, est la façon de gérer l’intelligence artificielle. L’exercice d’équilibriste, explique Mme Puri, consiste à faire en sorte de saisir les occasions de l’utiliser sans en ignorer les risques considérables. « Qu’il s’agisse de l’IA dans le contexte d’une décision

ICD Fellow Poonam Puri says directors must be fully aware of any shifts in behaviour among an organization’s consumers and clients. 'What do they need and want, and how can we deliver it to them? That’s top of mind for me.'

ICD.CA | 17 21

POONAM PURI Lawyer, law professor, chair of Holland Bloorview Kids Rehabilitation Hospital Avocate, professeure de droit, présidente du conseil de Holland Bloorview Kids Rehabilitation Hospital

Born in New Delhi, India, and raised in Toronto.

Née à New-Delhi en Inde et élevée à Toronto.

52 years old; married with three daughters.

52 ans; mariée et mère de trois filles.

EDUCATION: University of Toronto, studied commerce.

FORMATION : Université de Toronto, Commerce.

Bachelor of law degree, University of Toronto.

Baccalauréat en droit, Université de Toronto.

Master of law degree, Harvard Law School.

WORK EXPERIENCE Professor of law and York Research Chair in Governance, Osgoode Hall Law School, since 1997.

Corporate/securities lawyer, Davies Ward Phillips & Vineberg LLP, since 2014.

Faculty member, Director Education Program, Rotman School of Management, U of T. CEO of Puri Consulting Ltd.

Maîtrise en droit, Faculté de droit de Harvard.

EXPÉRIENCE DE TRAVAIL Professeure de droit, Faculté de droit d’Osgoode Hall, Université York, depuis 1997.

Avocate d’affaires/droit immobilier, Davies Ward Phillips & Vineberg LLP, depuis 2014.

Membre du corps enseignant, Programme de perfectionnement des administrateurs, Rotman School of Management, U de T. Cheffe de la direction de Puri Consulting Ltée.

DIRECTORSHIPS Current: Solaris Resources Inc. Colliers International Group Inc. DHI Healthcare Trust Propel Holdings Inc. Augusta Gold Corp.

Canada Infrastructure Bank Holland Bloorview Kids Rehabilitation Hospital (Chair) Former: Canadian Apartment Properties REIT Ontario Securities Commission Department of Justice (external audit committee) Cole Engineering Ltd. Arizona Mining Inc. Women’s College Hospital Greater Toronto Airports Authority HONOURS • Peter Dey Governance Achievement Award (Governance Professionals of Canada, 2022) • Yvan Allaire Medal in Governance (Royal Society of Canada, 2021) • Law Society Medal (Law Society of Ontario, 2021) • David Walter Mundell Medal (Attorney General of Ontario, 2020) • Top 100 Most Powerful Women (Women’s Executive Network, 2023, 2011) • Canada’s Top 40 under 40 (Multiple corporate sponsors, 2005) • Arbor Award, (U of T, 2004)

18 | DIRECTOR JOURNAL

MANDATS D‘ADMINISTRATRICE Actuels : Solaris Resources Inc. Groupe Colliers International DHI Healthcare Trust Propel Holdings Inc. Augusta Gold Corp.

Banque de l’infrastructure du Canada Holland Bloorview Kids Rehabilitation Hospital (Présidente du conseil) Passés : Canadian Apartment Properties REIT Commission des valeurs mobilières de l’Ontario Ministère de la Justice (comité d’audit externe) Cole Engineering Ltd. Arizona Mining Inc. Women’s College Hospital Autorité aéroportuaire du Grand Toronto DISTINCTIONS • Peter Dey Governance Achievement Award • Médaille Yvan Allaire en gouvernance • Médaille de la Law Society • Médaille David Walter Mundell • Les 25 avocats les plus influents • Les 100 femmes les plus influentes au Canada • Canada’s Top 40 Under 40 • Arbor Award, U de T

that the considerable risks are not ignored. “Whether it is AI in the context of making crucial lending decisions, or managing a supply chain, there are important potential uses that could enhance effectiveness and allow organizations to leapfrog competitors. That said, boards need to get comfortable with the risk level with AI, and have important discussions with management to address them.” The challenge, she adds, is that change in AI technology is happening so fast, and decisions made today about its deployment could be irrelevant by next year.

But there are many other disruptive boardroom issues too, including global conflicts, pandemics, high inflation and climate change, which are forcing boards to be nimble, responsible and thoughtful, Puri says. Many of the skills directors need to handle these issues weren’t as important, or didn’t even exist five or 10 years ago. “We need people who are willing to learn, and who believe in continuous improvement for themselves as well.”

While directors must care deeply about shareholders, it is also crucial that they are fully aware of any shifts in behaviour among an organization’s consumers and clients, Puri says. “What do they need and want, and how can we deliver it to them? That’s top of mind for me.” Employees are also key stakeholders, and must be central to both management planning and board oversight, Puri adds. “How do you attract and retain the best talent who can then execute on the vision that you have?”

Environmental, social and governance issues will continue to be central to any organization’s direction, she says, as there will likely be more legislative expectations and requirements that fall under the ESG umbrella. Companies will need to seriously consider their stance on ESG issues, both to satisfy governments and to distinguish themselves from others in the same sector.

cruciale de prêt ou de gestion de la chaîne logistique, il existe des formes importantes d’utilisation susceptibles d’améliorer l’efficacité et de permettre aux organisations de dépasser leurs concurrents.

Cela dit, les conseils doivent se sentir à l’aise face au risque. » Le défi, ajoute-t-elle, c’est que le changement en matière de technologies d’IA est tellement rapide et que les décisions prises aujourd’hui quant à son déploiement pourraient s’avérer inappropriées l’an prochain.

Mais il existe aussi beaucoup d’autres enjeux perturbateurs pour les conseils – conflits mondiaux, pandémies, taux d’inflation élevés et changements climatiques – qui forcent les conseils à être agiles, responsables et réfléchis, souligne-t-elle. On doit gérer des questions qui n’étaient pas aussi importantes – ou ne se posaient même pas – il y a cinq ou dix ans. « Nous avons besoin de gens qui sont désireux d’apprendre et croient aussi en l’amélioration continue de leurs propres compétences. » Même si les administrateurs doivent avoir à cœur les intérêts des actionnaires, il est aussi crucial qu’ils soient pleinement conscients de tout changement de comportement de la part des clients de l’organisation, estime Poonam Puri. « Quels sont leurs besoins et leurs attentes et comment pouvons-nous y répondre? C’est ce qui doit être au sommet de mes préoccupations. » Les employés sont aussi des parties prenantes importantes et doivent être au centre des activités de planification de la direction et de la surveillance du conseil.

Les enjeux environnementaux, sociaux et de gouvernance continueront d’être au centre de l’orientation de toutes les organisations, ajoute-t-elle, dans la mesure où de nouvelles attentes et exigences tomberont sous le parapluie des ESG. Les entreprises devront reconsidérer leurs positions à cet égard, à la fois pour satisfaire les gouvernements et se distinguer de leurs concurrents.

Big responsibility

Quant aux contraintes juridiques imposées aux membres du conseil, elle souligne qu’il existe des exigences absolues, mais aussi plusieurs zones grises où ceux-ci doivent exercer leur propre jugement. Elle rappelle l’influence de la fameuse décision de 2008 de la Cour suprême du Canada concernant BCE Inc. qui réaffirmait que les administrateurs doivent tenir compte des intérêts de l’ensemble des parties prenantes et pas seulement des actionnaires lorsqu’il s’agit de mesurer les intérêts d’une entreprise. Cette décision laisse beaucoup de discrétion entre les mains de ceux et celles qui siègent à un conseil. « Les administrateurs ont des décisions à prendre. La loi n’en dit pas vraiment beaucoup plus. Il est donc important de songer à l’intérêt des parties prenantes, non seulement parce que la loi le suggère, mais aussi parce que c’est ainsi qu’on obtient de meilleures décisions. » Essentiellement, dit-elle, la préoccupation primordiale consiste à s’assurer qu’à tout moment, l’organisation « réponde aux besoins, aux souhaits ou aux désirs de ses consommateurs, clients, patients ou utilisateurs ».

Tous les conseils doivent aussi à l’occasion réfléchir et se tourner vers un mode plus large, plus stratégique, ajoute-t-elle. « Il faut être agile et réceptif, mais aussi libérer du temps à l’ordre du jour pour la pensée stratégique. Nous devons réserver du temps pour considérer la vue d’ensemble qu’offre le monde autour de nous. » DJ

When it comes to legal constraints on board members’ actions, Puri points out that there are certain absolute requirements for director behaviour, but also many grey areas where directors must exercise their own business judgment. She notes the influence of the famous 2008 Supreme Court of Canada decision involving BCE Inc., which reaffirmed that directors must consider the interests of all stakeholders, not just shareholders, when measuring the interests of the corporation. That puts a lot of discretion in the hands of those sitting at the boardroom table.

“The directors get to decide by exercising their business judgment.

The law doesn’t really say much more than that. So, it’s important to think about stakeholder interest because you’re going to get a better decision.” In essence, she says, the overriding concern is to make sure the organization is at all times “serving a need or a wish or a desire of your customers, clients, patients, users or whatever.”

All boards must regularly step back and shift into a broader, strategic mode, Puri says. “You’ve got to be nimble and responsive, but still make time on the agenda for strategy and strategic thinking in the absence of decision-making that has to be done today. We need to preserve time on the agenda to think about the big picture of the world around us.” DJ

De lourdes responsabilités

ICD.CA | 19

BY Gerard Seijts and Kimberley Young Milani

Out of character THE WORLD HAS ENTERED an era of converging global crises – from climate change and health, to injustice and inequality, to polarization and erosion of social cohesion, to cybersecurity and fears about AI – that are having significant and compounding effects on citizens, communities and nations, as well as organizations and economies.

At the heart of each of these crises is the failure of leadership.

Our current landscape lacks leadership that is visionary, collaborative and solution-seeking, that instills hope, and trust, and that inspires others, while also showing the ability to compromise. Put differently, much of today’s leadership is character deficient. And yet, when speaking with global leaders for our book Character: What Contemporary Leaders Can Teach Us About Building a More Just, Prosperous, and Sustainable Future, the importance of character inclusion in the practice of leadership at all levels and in all sectors was driven home. This is because character is foundational to excellence in judgment and decision-making, and no level of skill or competence can compensate for a lack of character.

20 | DIRECTOR JOURNAL

LE MONDE EST ENTRÉ DANS une ère de crises mondiales convergentes – changements climatiques et santé, injustice et inégalité, polarisation et cohésion sociale, sécurité informatique et craintes relatives à l’intelligence artificielle – qui ont des effets importants et cumulatifs sur les citoyens, les communautés et les peuples ainsi que les organisations et les économies. Chacune de ces crises porte la marque du manque de leadership.

Notre environnement actuel manque d’un leadership visionnaire, collaboratif et inspirateur de solutions qui puisse instiller l’espoir et la confiance tout en se montrant disposé au compromis. Autrement dit, une bonne partie du leadership actuel manque de caractère. Et pourtant, quand nous avons échangé avec des leaders mondiaux en vue de notre ouvrage Character: What Contemporary Leaders Can Teach Us About Building a More Just, Prosperous, and Sustainable Future, l’importance du caractère dans la pratique du leadership à tous les niveaux et dans tous les secteurs a été mentionnée. C’est parce que le

PHOTOGRAPH BY FRESH IDEA/ADOBE STOCK

Modern boards use consultants and skills matrices to help them recruit new members, often overlooking an essential component of great leadership. The authors of a new book make the case for character.

Aujourd’hui, les conseils ont recours à des consultants et des grilles de compétences pour recruter de nouveaux membres, ignorant souvent une composante essentielle du leadership. Les auteurs d’un nouvel ouvrage plaident en faveur du caractère.

ICD.CA | 21

Boeing’s cultural drift Consider the problems at Boeing. Many of these have been linked to the decision to acquire McDonnell Douglas in 1997, in what turned out to be a reverse takeover — executives from McDonnell Douglas ended up dominating and then remaking Boeing. They soon turned Boeing from an organization that was relentlessly focused on product quality and safety to one more focused on profit. Industry observers and insiders described this transition as a cultural drift: An organization once admired for its engineering rigour became one that focused on aggressive cost-cutting to preserve cash.

The engineering and manufacturing problems at the aircraft maker contributed to a series of disastrous incidents, including two fatal crashes with its 737 Max planes, a rear door plug that was expelled from the plane at 16,000 feet, mid-air blowouts of fuselage panels, and wheels that fell off. The U.S. Congress commissioned an independent audit after the 737 Max crashes in 2018 and 2019. The subsequent report revealed that Boeing’s senior management and employees had a “disconnect” on safety. Further, the report criticized the company’s handling of safety matters as “inadequate and confusing.”

Increasingly, we are seeing demands for boards to take greater responsibility for the outcomes of their organizations’ activities.

So, it’s not surprising that legitimate questions emerged after the Boeing incidents. Did the board fail to be accountable for the preservation of this iconic organization’s culture and reputation?

Was the board populated responsibly and prudently to ensure it had enough directors with expertise to ask questions about safety and risk? Did directors feel they could have candid discussions, where difficult or pointed questions could be asked without devolving into defensive debate?

Elevating character Boards need directors with strength of character to meet their fiduciary and advisory obligations, withstand pressures to conform, engage in open dialogue, and show independent thinking while balancing the need for cohesion. When board members are unable to do so – as seems to have been the case at Boeing – they inject risk into the organization. Boards, therefore, need to consider character alongside competence to ensure sound judgment and decision-making and to generate sustained excellence for the organization.

We believe that many of the major corporate crises of recent years are partly, if not mostly, the result of weak corporate governance rooted in deficiencies of character. Consider Volkswagen’s fraudulent emissions data, BP’s Deepwater Horizon oil spill, the massive fraud at health-tech firm Theranos, and Wells-Fargo’s deceitful tactics to boost fees.

Analyses of these and other events often reveal that directors and corporate boards failed in their leadership responsibilities with detrimental effects for shareholders, customers, employees, suppliers and other stakeholders. The costs – financial, human and environmental – of character-related transgressions for these organizations and their related stakeholders have been substantial.

The research-based character framework shown in Figure 1 – and

22 | DIRECTOR JOURNAL

caractère est fondamental pour l’excellence du jugement et de la prise de décisions et aucun degré de talent ou de compétence ne peut compenser le manque de caractère.

Le cas Boeing Prenons les problèmes de Boeing. Plusieurs d’entre eux ont été reliés à la décision d’acquérir McDonnell Douglas en 1997, dans ce qui s’est avéré une prise de contrôle inversée, aboutissant à la domination et au remodelage de Boeing par la haute direction de McDonnell Douglas. Celle-ci eut tôt fait de transformer une organisation résolument axée sur la qualité et la sécurité en une entreprise davantage tournée vers le profit. Les observateurs et spécialistes de l’industrie ont décrit cette transition comme une dérive culturelle : une organisation autrefois admirée pour la rigueur de son ingénierie était devenue obsédée par des coupures de coûts agressives afin de préserver ses liquidités.

Les problèmes d’ingénierie et de fabrication du constructeur aérien ont contribué à une série d’incidents désastreux, dont deux écrasements mortels d’appareils 737 Max, un bouchon de porte arrière expulsé d’un avion à 16 000 pieds d’altitude, l’explosion de deux panneaux de fuselage en plein vol et le chute de roues. Le Congrès américain a décrété la tenue d’une enquête indépendante après les écrasements d’appareils 737 Max en 2018 et 2019. Le rapport subséquent a révélé que la haute direction de Boeing et ses employés étaient « détachés » des questions de sécurité. Le rapport décrivait la gestion des enjeux de sécurité par l’entreprise comme « inadéquate et déconcertante ».

De plus en plus, on demande aux conseils d’être plus responsables des résultats des activités de leurs organisations. Il n’est donc pas étonnant que des questions légitimes émergent à la suite des incidents survenus chez Boeing. Le conseil a-t-il failli à rendre des comptes à l’égard de la préservation de la culture et de la réputation de cette organisation exemplaire? Le conseil a-t-il été doté de façon responsable et prudente pour faire en sorte de compter suffisamment d‘administrateurs ayant assez d’expertise pour poser des questions concernant le risque et la sécurité? Les administrateurs ont-ils eu le sentiment qu’ils pouvaient avoir des conversations franches et poser des questions pointues ou difficiles sans que cela tourne en débat défensif?

Promouvoir le caractère Les conseils ont besoin d’administrateurs dotés de la force de caractère nécessaire pour remplir leurs obligations fiduciaires et consultatives, résister aux pressions du conformisme, s’engager dans un dialogue ouvert et faire preuve d’une pensée indépendante tout en répondant à un besoin de cohésion. Lorsque les membres du conseil en sont incapables – comme cela semble avoir été le cas chez Boeing – ils exposent leur organisation au risque. Voilà pourquoi les conseils doivent tenir compte du caractère, en plus des compétences, pour profiter d’un jugement avisé et ainsi générer de l’excellence soutenue dans l’organisation.

Nous pensons que plusieurs des grandes crises survenues ces dernières années au sein des entreprises sont en partie, sinon

the associated behaviours described in Table 1 – are the foundations on which our book Character is based. For example, how does a lack of character among leaders combined with a lax corporate culture exacerbate risk? Julia Hoggett, the CEO of the London Stock Exchange, told us that small problems can quickly snowball.

“I have learnt that the biggest problem with risk is that a great number of the risks that ultimately blow up organizations started out as very small issues that got put in a drawer, usually because the culture didn’t make it possible to surface them. People felt the consequence of raising the problem was greater and more negative for them than the nature of the risk at the time. Then, when it got too big, they absolutely couldn’t say anything.

“As such, I have a very particular leadership approach, which is to undertake a brutally honest mark-to-market of where we are. If I think we haven’t done something well enough, I will say so. But, for my own part, if I think I have made a mistake, I will say so too, and I will try to be the first to say so. … As a leader, you need to create a sense of safety for people where they feel that you have got their back. When you first admit your part in something that has gone wrong before asking them to have to do so, it shows you are trusting them with that information. … You need to build this trust up over time.

“When I have seen risks that blow up an organization, it is often

surtout, le résultat d’une gouvernance faible enracinée dans des carences de caractère. Souvenons-nous des données frauduleuses de Volkswagen sur les émissions, du déversement de pétrole de la plate-forme Deepwater Horizon de BP, de la fraude massive de l’entreprise de technologie de la santé Theranos et des tactiques trompeuses de Wells-Fargo pour gonfler ses tarifs.

Des analyses de ces événements et de plusieurs autres révèlent souvent que les administrateurs ont failli à leurs responsabilités de leadership, entraînant des effets néfastes pour leurs actionnaires, clients, employés, fournisseurs et autres parties prenantes. Les coûts – financiers, humains et environnementaux – qu’en ont subis ces organisations sont importants.

La recherche fondée sur la structure de caractère présentée à la Figure 1 – et les comportements associés décrits dans le Tableau 1 – forment la base de notre ouvrage. Par exemple, comment le manque de caractère des leaders, combiné à une culture d’entreprise laxiste, exacerbe-t-il le risque? Julia Hoggett, cheffe de la direction de la Bourse de Londres, nous a déclaré que les problèmes mineurs peuvent rapidement faire boule de neige. « J’ai appris que le plus gros problème avec les risques, c’est qu’un grand nombre de ceux qui font éclater une organisation ont d’abord été des enjeux mineurs qu’on a rangés au placard, généralement

ICD.CA | 24

The elements of ‘character’ Judgment Makes sound decisions in a timely manner based on relevant information and critical analysis of facts. Appreciates the broader context when reaching decisions. Shows flexibility when confronted with new information or situations. Has an implicit sense of the best way to proceed. Sees into the heart of challenging issues. Reasons effectively in uncertain or ambiguous situations.

Courage Does the right thing even though it may be unpopular, actively discouraged, or result in a negative personal outcome.

Shows an unrelenting determination, confidence, and perseverance in confronting difficult situations. Rebounds quickly from setbacks.

Drive Strives for excellence.

Has a strong desire to succeed. Tackles problems with a sense of urgency. Approaches challenges with energy and passion.

Collaboration Values and actively supports development and maintenance of positive relationships among people.

Encourages open dialogue and does not react defensively when challenged. Is able to connect with others at a fundamental level, in a way that fosters the productive sharing

24 | DIRECTOR JOURNAL

of ideas. Recognizes that what happens to someone, somewhere, can affect all.

Integrity Holds oneself to a high moral standard and behaves consistently with ethical standards, even in difficult situations.

Is seen by others as behaving in a way that is consistent with personal values. Behaves consistently with organizational policies and practices.

Temperance Conducts oneself in a calm, composed manner.

Maintains the ability to think clearly and to respond reasonably in tense situations.

Completes work and solves problems in a thoughtful, careful manner. Resists excesses and stays grounded.

Accountability Willingly accepts responsibility for decisions and actions.

Is willing to step up and take ownership

of challenging issues.

Reliably delivers on expectations. Can be counted on in tough situations.

Justice Strives to ensure that individuals are treated fairly and that consequences are commensurate with contributions. Remains objective and keeps personal biases to a minimum when making decisions.

Provides others with the opportunity to voice their opinions on processes and procedures. Provides timely, specific, and candid explanations for decisions. Seeks to redress wrongdoings inside and outside the organization.

Humility Lets accomplishments speak for themselves.

Acknowledges limitations. Understands the importance of thoughtful examination of one’s own opinions and ideas. Embraces opportunities for

personal growth and development. Does not consider oneself to be more important or special than others. Is respectful of others. Understands and appreciates others’ strengths and contributions.

Humanity Demonstrates genuine concern and care for others. Appreciates and identifies with others’ values, feelings, and beliefs. Has a capacity to forgive and not hold grudges. Understands that people are fallible and offers opportunities for individuals to learn from their mistakes.

Transcendence Draws inspiration from excellence or appreciation of beauty in such areas as sports, music, arts, and design.

Sees possibility where others do not. Has an expansive view of things both in terms of taking into account the long term and broad factors.

Demonstrates a sense of purpose in life.

the culture that caused the problem. As a leader, I feel absolutely bound to make sure I’m not creating that kind of environment. It requires an element of bravery, but also humility, in the way you deal with people.”

Research data collected from members of the Institute of Corporate Directors by the Ivey Business School captured the fact that directors in the public, private and not-for-profit sectors do believe that character plays an important role in governance and organizational effectiveness. The relevance of character was deemed important in how boards recruit new members, make decisions, and work together to perform their fiduciary and other responsibilities.

As one director put it: “I believe, over the long term, character becomes the destiny of the organization. Character helps to build and sustain a business over long periods of time.”

For over 15 years, starting with the financial crisis in 2008, a central question guiding our research is: Why don’t boards take character more seriously when it comes to leadership and leadership development? Why are we leaving this critical element of leadership to chance when its impact on causing, preventing or solving a crisis is clear? Yet, our research showed that directors felt that character is often only addressed during or after a crisis, and is not a central part of board discussions at any other time. As such, boards can become complacent until a significant event happens, at which time character finally gets the attention it deserves. This then raises the questions: Why is the focus on character often minimized, relegated to the category of “soft skills”? When are we going to recognize the impact of a leader’s character on individual and organizational well-being? And when will we start to elevate character alongside competence in leadership practice?

Embracing the science The evidence is clear: These “soft skills” equate to hard numbers — of success or failure. Academic studies have shown that character is related to performance measures that include return on assets, executive performance, team performance, innovation, employee engagement, stress-coping responses, customer retention and ethical decision-making.

As academics, our role includes trying to improve society through the creation and dissemination of new knowledge and new understanding. In our research over the years, we have captured, qualified and quantified the difference character makes – in individual lives as well as the fate of teams and organizations.

And yet, for decades, the issue of character – once a central tenet of education – has been largely absent from the discourse on leadership. We can and must do better if we are to achieve a sustainable, thriving world. Organizations need leaders who can balance urgent, complex and competing stakeholder interests, while drawing on their strength of character to navigate an uncertain and volatile world. As such, we must develop leaders across all sectors who can exercise their strength of character to arrive at sound judgments.

A work in progress Both anecdotal and empirical evidence has shown us that character can be observed, measured and developed. That’s why, through

parce que la culture d’entreprise ne permettait pas d’y faire face.

Les gens pensaient que de soulever le problème présentait plus de conséquences négatives que la nature du risque posé. Et quand il est devenu trop important, ils ne pouvaient plus rien y faire. » « À ce titre, j’ai une approche très particulière du leadership qui consiste à entreprendre une évaluation brutale et honnête de la situation. Si je pense que nous n’avons pas fait assez bien les choses, je le dis. Mais si je crois que j’ai commis une erreur, je le dis aussi – et je tente d’être la première à le faire. Comme leader, on doit créer un sens de la sécurité chez les gens pour qu’ils sentent qu’on les appuie. Quand on admet sa responsabilité avant que les gens le demandent, ça démontre qu’on leur fait confiance. … Il faut bâtir cette confiance au fil du temps. » « Quand j’ai vu des risques faire voler en éclat une organisation, c’est souvent la culture qui était en cause. Comme leader, je me sens obligée de faire en sorte de ne pas créer ce type d’environnement.

Cela exige du courage, mais aussi de l’humilité. » Les données de recherche recueillies parmi les membres de l’Institut des administrateurs de sociétés par l’Ivey Business School indiquent que les administrateurs des secteurs public, privé et à but non lucratif pensent que la personnalité joue un rôle important dans la gouvernance et l’efficacité organisationnelle. Le caractère est considéré comme un élément important dans la recherche de nouveaux administrateurs, la prise de décisions et le travail d’équipe dans l’accomplissement des responsabilités fiduciaires.

Depuis plus de 15 ans, à compter de la crise financière de 2008, une question centrale guidant nos recherches est la suivante : pourquoi les conseils ne prennent-ils pas plus au sérieux le caractère quand il est question de leadership? Pourquoi laissons-nous au hasard cet élément essentiel, alors que son impact sur l’émergence, la prévention et le règlement des crises est évident? Pourtant, notre recherche démontre que les administrateurs ont l’impression que la question du caractère est abordée seulement pendant ou après une crise. Ainsi, les conseils peuvent devenir complaisants jusqu’à ce qu’un événement important survienne et ce n’est qu’à ce moment que la question du caractère obtient l’attention qu’elle mérite. Quand allons-nous enfin reconnaître l’impact de la personnalité d’un leader sur le bien-être d’une organisation? Quand commencerons-nous à promouvoir le caractère au même titre que la compétence dans la pratique du leadership?

Embrasser la science Les preuves sont claires : ces compétences comportementales valent autant que les données objectives par lesquelles on mesure le succès ou l’échec. Des travaux académiques ont démontré que le caractère est lié à des mesures de performance comme le rendement des actifs, la performance des cadres et des équipes, l’innovation, l’engagement des employés, les réactions au stress, la fidélisation de la clientèle et la prise de décisions éthiques.

Comme chercheurs, notre rôle consiste notamment à améliorer la société par la création et la diffusion de nouveaux savoirs et de nouvelles compréhensions. Au fil des ans, nous avons saisi, qualifié et quantifié la différence que le caractère peut faire pour les équipes et les organisations.

ICD.CA | 25

‘We believe character drives culture and conduct, and therefore should be brought into recruitment, selection, assessment, coaching, mentoring, succession management and a host of other areas.’ « Nous croyons que le caractère dicte la culture et le comportement.

Il devrait donc être un critère de sélection, d’évaluation, d’encadrement, de mentorat, de gestion de la relève et d’une foule d’autres activités. » education, and through outreach with organizations in the public, private, and not-for-profit sectors, we seek to inspire individuals to undertake a life-long journey to understand and cultivate character within their own lives. Our aim in Character is to make character development conscious, deliberate and informed, moving it from being a minor component of leadership education to understanding its very consequential impact on our selves, workplaces and communities. We are optimistic in our pursuit because people in all roles and ranks have the potential to learn and adapt as they make their way in life – and the development of character is no exception. It has been said that leadership is a journey – and many

26 | DIRECTOR JOURNAL

Et pourtant, depuis des décennies, l’enjeu du caractère a été largement absent du discours sur le leadership. Nous pouvons et devons faire mieux si nous voulons avoir un monde durable et prospère. Les organisations ont besoin de leaders capables de concilier les intérêts urgents, complexes et contradictoires des parties prenantes tout en misant sur leur force de caractère pour naviguer dans un monde incertain et instable.

Un monde en progression Les preuves anecdotiques et empiriques ont démontré que le caractère peut être observé, mesuré et développé. Par la formation

leaders evolve and grow as they mature and deal with personal and professional challenges that, in many cases, make them even better leaders than they are today.

Consider, for example, the events at OpenAI and the firing and rehiring of CEO Sam Altman. The firing was due to a “breakdown in the relationship and loss of trust” between Altman and the previous board. The board suggested that Altman had failed to be “consistently candid in his communications.” Altman conceded that “when I believed a former board member was harming OpenAI through some of their actions, I should have handled that situation with more grace and care.” Crises force individuals to reflect upon aspects of the self – they can shape an individual’s character and can also shape the way they embody leadership.

‘The most precious thing’ We have at least three objectives in Character. First, we outline the meaning of character. Character reflects who people are, rather than their skills or talent. It deeply influences one’s judgment and the choices people make in any given situation. Character is the essence of our being that determines whether it is our best self who shows up each and every day. This is how the president and CEO of the Teachers Insurance Annuity Association puts it:

SOUTHLEA

et la conscientisation des organisations de tous les secteurs, nous cherchons à inspirer les personnes à entreprendre un parcours permanent afin de comprendre et de cultiver le caractère dans leur propre vie. Le but de notre ouvrage est de faire du développement du caractère une activité consciente, délibérée et informée, le faisant passer du statut de composante mineure de la formation au leadership à celui d’élément très important de la personnalité, des lieux de travail et des communautés. Nous sommes optimistes à cet égard parce que les gens de tous les horizons ont un potentiel d’apprentissage et d’adaptation pour faire leur chemin dans la vie et le développement du caractère ne fait pas exception.

Songeons aux événements survenus chez OpenAI avec le congédiement et le retour du chef de la direction Sam Altman. Son renvoi était dû à une « rupture de la relation et une perte de confiance » entre lui et le conseil précédent. Celui-ci laissait entendre qu’Altman avait failli à être « toujours franc dans ses communications. » Altman avait admis que « lorsque j’ai cru qu’un ancien membre du conseil nuisait à OpenAI en raison de certaines de ses actions, j’aurais dû gérer la situation avec plus d’élégance et de soin ». Les crises forcent les individus à réfléchir sur certains aspects de leur personnalité; elles peuvent façonner le caractère d’une personne et la manière dont elle incarne le leadership.

Our new Executive Compensation Toolkit is a reference guide to reinforce an effective Human Resources Committee.

We are trusted independent compensation consultants who help solve your complex business challenges.

With over 150 professionals in more than 15 offices around the world, we help you make performance-enhancing and defensible compensation decisions in the best interests of your organization. www.southlea.com I www.gecn.com

Download your copy from the ICD website (under Board Resources)

ICD.CA | 27

28 | DIRECTOR JOURNAL

“I get introduced as Thasunda Brown Duckett, president and CEO of TIAA. But that title is rented. It describes me, but it doesn’t define me. I earned it, but I don’t own it. To own something feels entirely different. When you own something, it belongs to you.

You can claim it and proclaim it. It’s yours. When I think about the most precious thing I own, the thing that is mine, it is my character.

Character is what defines you – your attributes, qualities, and the things that distinguish you as an individual. My character shows in the way I live my life, in the way I lead, in the way I treat others, and in what I expect of myself.”

We argue that competence and commitment – largely the key themes of most leadership titles and executive education – are underpinned by character. Strength of character directly affects a leader’s determination to acquire the requisite skills for their role and whether they will make the commitment to lead in a sustained and effective manner. It requires courage, for instance, to challenge a strategy that is already in place, foresight to envisage a future different from today, humility to accept and apply constructive criticism, and collaboration to move ideas forward.

As bestselling author and organizational psychologist Adam Grant put it in Hidden Potential: “We all know people who have great cognitive skills and were not able to make good use of them because they lack character skills: They avoid discomfort, they can’t take feedback, and in many cases, they end up becoming so perfectionistic that they lose the forest in the trees.” In other words, no level of competence or commitment will work to potential without strong, well-developed character.

PHOTOGRAPH BY MAXIM ZAIKOV/ADOBE STOCK

Deliberate measures Second, we highlight how individuals are developing their character every day. For example, in an interview with Murray Sinclair, chancellor of Queen’s University and chair of Canada’s Truth and Reconciliation Commission, we asked him about his calm and measured tones, even during the most difficult situations, such as the discoveries of grave sites at residential schools. How did he develop temperance and restraint? He responded: “I think it’s probably because those are the characteristics that I most benefit from personally, and those which I always felt are the most important in the situations I find myself in, going back to my earliest upbringing. It was the way that my grandfather behaved. It was the way that those people I admired the most behaved. … There were others, of course, who didn’t behave that way, but I found that by observing the impact of the way they were doing things, I could see the downside of their loud, more abrasive behaviour. I felt that the one important thing to understand was that if people are going to listen to what you’re saying, then you need to be careful about what you say, and you need to say those things that are going to have the most impact upon them.”

We show how character development does not happen in a vacuum and can be supported or influenced by families, sports, academic institutions, professional associations, religious or spiritual communities, the arts, volunteering, and other entities. In organizations, we believe character drives culture and conduct, and

« La chose la plus précieuse » Nous avons au moins trois objectifs en publiant Character. D’abord, nous décrivons ce qu’est le caractère, qui reflète ce que sont les gens plutôt que leurs compétences ou leur talent. Il influence profondément le jugement et les choix qu’on fait dans une situation donnée. Le caractère est l’essence de notre personnalité qui détermine si nous présentons la meilleure part de nous-mêmes en toutes circonstances. C’est ainsi que le décrit la présidente et cheffe de la direction de la Teachers Insurance Annuity Association : « On me présente comme Thasunda Brown Duckett, présidente et cheffe de la direction de la TIAA. Mais il s’agit d’un titre de location. Il me décrit, mais ne me définit pas. Je l’ai mérité, mais il ne m’appartient pas. Il s’agit de deux choses entièrement différentes. Quand je possède une chose, elle m’appartient. Je peux la revendiquer et l’affirmer. Elle est à moi. Quand je pense à la chose la plus précieuse que je possède, qui m’appartient, c’est mon caractère. C’est ce qui me définit : mes attributs, mes qualités et les choses qui me distinguent en tant que personne. Mon caractère se déploie dans ma façon de vivre, de diriger, de traiter les autres et dans ce que j’attends de moi-même. » Nous soutenons que la compétence et l’engagement – qui sont largement les thèmes de la plupart des titres sur le leadership et de la formation des cadres – s’appuient sur le caractère. La force de caractère affecte directement la détermination d’un leader à acquérir les compétences requises pour occuper son rôle et diriger de façon durable et efficace. Cela exige du courage – dont celui de contester une stratégie déjà en place – la vision d’un avenir différent d’aujourd’hui, l’humilité d’accepter et d’émettre des critiques constructives et l’esprit de collaboration nécessaire pour faire avancer des idées. À titre d’auteur à succès et de psychologue des organisations, Adam Grant a écrit ceci dans son ouvrage Hidden Potential : « Nous connaissons tous des gens qui ont de grandes compétences cognitives, mais ne sont pas capables d’en faire bon usage parce qu’ils manquent de caractère. Pour éviter des malaises, ils ne peuvent accepter les commentaires et dans beaucoup de cas ils finissent par devenir tellement perfectionnistes que les arbres leur cachent la forêt ». Autrement dit, aucun degré de compétence ou d’engagement ne peut aboutir à un potentiel sans un caractère bien trempé.

Des mesures délibérées Deuxièmement, nous soulignons comment les personnes développent leur caractère chaque jour. Ainsi, nous avons demandé à Murray Sinclair, chancelier de l’Université Queen’s et président de la Commission de vérité et de réconciliation, les raisons de son calme et de son ton mesuré, même dans les situations les plus difficiles, comme la découverte de tombes sur le site de pensionnats pour Autochtones. Comment a-t-il développé sa modération et sa retenue? « C’est sans doute parce que ce sont les éléments dont j’ai le plus profité personnellement et ceux qui m’ont toujours paru les plus importants dans la situations où je me suis trouvé depuis mon plus jeune âge. C’est ainsi que mon grand-père se comportait. C’est ainsi que se comportaient les gens que j’admirais le plus. … J’en ai connu d’autres, bien sûr, qui n’agissaient pas ainsi, mais en les observant, je voyais

ICD.CA | 29

‘Strength of character underpins the agility and creativity needed to address the myriad challenges we face, the fortitude and resilience we need to bear hardships, and the ability to remain curious about and amazed by the extraordinary world we live in.’ « La force de caractère soutient l’agilité et la créativité nécessaires pour gérer les multiples défis qui se posent, la force morale et la résilience pour supporter les épreuves et la capacité de demeurer curieux et de s’émerveiller. » therefore should be brought into recruitment, selection, assessment, coaching, mentoring, succession management and a host of other areas.

An essential ingredient Third, we argue that character must be present if individuals and the organizations they lead are to survive and thrive in a state of constant uncertainty, disruption and flux. Strength of character underpins the agility and creativity needed to address the myriad challenges we face, the fortitude and resilience we need to bear hardships, and the ability to remain curious about and amazed by the extraordinary world we live in.

We understand there is a growing sense of purpose at the ICD to build the governance capacity of Canadian organizations

30 | DIRECTOR JOURNAL

l’impact négatif de leur comportement sonore et abrasif. Si vous voulez que les gens vous écoutent, vous devez faire attention à ce que vous dites et à la manière qui vous permettra d’avoir le meilleur impact. » Nous démontrons que le développement du caractère ne se produit pas dans le vide et doit être soutenu ou influencé par la famille, le sport, les institutions académiques, les communautés religieuses ou spirituelles, les arts, le bénévolat et d’autres éléments. Dans les organisations, nous croyons que le caractère dicte la culture et le comportement. Il devrait donc être un critère de sélection, d’évaluation, d’encadrement, de mentorat, de gestion de la relève et d’une foule d’autres activités.

Un ingrédient essentiel Troisièmement, nous soutenons que le caractère doit se manifester si les personnes et les organisations qu’on dirige doivent

and strengthen the trust and confidence people have in them through character-based leadership. Implementation of the best board practices – including robust leadership education and development – is critical not only for each organization, but also for the broader well-being of the country.

As we found in our research and in our interviews with leaders for our book Character, leadership grounded in character yields vital benefits to individuals, teams, organizations and communities.

There is nothing “soft” about character; rather, it is a robust and consequential aspect of leadership.

We hope that the stories featured in Character will help readers see in themselves elements of leadership that are universal and that they’ll be inspired to weave these insights into their own leadership practice. We also hope the book will encourage people to see the world as one of opportunities, not just crises, and to understand the important role character plays in all our choices. These choices can help us to turn the tide, undo past harms and create new ways of operating that lead us toward a brighter future for humans and the planet.

It is possible but it will take many of us to draw on the best part of ourselves, and to fight against being overwhelmed, cynical, selfish or just plain tired.

The 2024 Edelman Trust Barometer revealed that 59 per cent of Canadian respondents feel that business leaders are purposely trying to mislead people by saying things they know are false or gross exaggerations. And yet 59 per cent of respondents expect CEOs (and their leadership teams) to manage changes occurring in society, not just those occurring in their businesses. That’s why we end with a call to action in Character. We encourage leaders to be a beacon of hope in today’s stormy seas, lighting the way for others, and reassuring them that solid ground is present and will be found again. Skeptics may say this is unlikely to happen. We say there is no alternative that makes sense for our social, political and economic survival, our development and well-being. Our lives and the flourishing of future generations depend on it. DJ

survivre et prospérer en situation constante d’incertitude, de perturbation et de fluctuation. La force de caractère soutient l’agilité et la créativité nécessaires pour gérer les multiples défis qui se posent, la force morale et la résilience pour supporter les épreuves et la capacité de demeurer curieux et de s’émerveiller.

Nous comprenons qu’il existe à l’IAS une volonté résolue de bâtir une capacité de gouvernance chez les organisations canadiennes et de renforcer la confiance en soi des gens appuyée sur un leadership fondé sur le caractère. L’instauration des meilleures pratiques de conseil – dont une formation robuste au leadership – est essentielle non seulement pour chaque organisation, mais aussi pour le bien-être du pays dans son ensemble.

Comme nos recherches et nos entrevues avec des leaders l’ont indiqué, le leadership ancré dans le caractère génère des avantages vitaux pour les personnes, les équipes, les organisations et les communautés.

Nous espérons que notre ouvrage Character aidera ses lecteurs à découvrir en eux des éléments universels du leadership et qu’ils seront inspirés à les intégrer à leur propre pratique du leadership.

Nous espérons aussi que ce livre encouragera les gens à voir dans le monde non seulement des crises mais aussi des opportunités, et à comprendre le rôle important du caractère dans tous nos choix.

Des choix qui peuvent nous aider à changer le cours des choses et à créer de nouvelles façons de gérer menant à un avenir plus brillant pour les humains et pour la planète.

Le Baromètre de confiance Edelman 2024 a indiqué que 59 pour cent des Canadiens éprouvent le sentiment que les leaders d’affaires tentent délibérément de tromper les gens en proférant des faussetés ou de grossières exagérations. Et pourtant, 59 pour cent des répondants attendent des dirigeants qu’ils gèrent les changements qui surviennent dans la société, pas seulement dans leurs entreprises.

Voilà pourquoi notre ouvrage se conclut sur un appel à l’action.

Nous encourageons les leaders à être des phares d’espoir dans les mers agitées de notre époque. Bien des sceptiques n’y croiront pas, mais il n’y a pas d’autres options pour notre survie sociale, politique et économique. Les futures générations en dépendent. DJ

GERARD SEIJTS is a professor of organizational behaviour at the Ivey Business School, University of Western Ontario. He has co-authored several books on character, including The Character Compass: Transforming Leadership for the 21st Century (2023) and Developing Leadership Character (2015).

GERARD SEIJTS est professeur de comportement organisationnel à l’Ivey Business School de l’Université Western Ontario. Il est co-auteur de plusieurs ouvrages sur le caractère, dont The Character Compass: Transforming Leadership for the 21st Century (2023) et Developing Leadership Character (2015).

KIMBERLEY YOUNG MILANI is the director of Ivey’s Ian O. Ihnatowycz Institute for Leadership and the former director of the Institute for Women in Leadership at Brescia University College, University of Western Ontario.

KIMBERLEY YOUNG MILANI est directrice du Ian O. Ihnatowycz Institute for Leadership de l’Ivey Business School et ancienne directrice de l’Institute for Women in Leadership du Brescia University College de l’Université Western Ontario.

ICD.CA | 31

Who’s going to fix our productivity problem?

As companies look to governments to provide more incentives, business writer Barrie McKenna puts the spotlight on boards Alors que les entreprises demandent aux gouvernements d’offrir des mesures incitatives, le journaliste d’affaires Barrie McKenna place le projecteur sur les conseils

32 | DIRECTOR JOURNAL

ICD.CA | 33

ILLUSTRATIONS BY ERHUI1979/iSTOCK

SAGGING PRODUCTIVITY PERFORMANCE has become a source of growing alarm in Canada. Federal Finance Minister Chrystia Freeland calls it the economy’s “Achilles heel.” The Bank of Canada says it’s a “national emergency.”

Labour productivity – the amount of economic output generated per hour worked – is essential to generating economic growth, and more importantly, better living standards for Canadians. Higher productivity creates a sweet spot for businesses, enabling them to make greater profits, keep prices competitive and pay workers more.

Unfortunately, Canada’s historically weak productivity growth has stalled since the pandemic, pushing the country further behind other advanced economies, including the United States. Labour productivity declined in 2023 for a third consecutive year, to a point where it is now lower than it was in 2019, according to Statistics Canada.

Board tension There’s a lot governments could be doing to spur more investment in productivity-enhancing new technologies and research and development (R&D). Among them: boosting tax incentives and targeted subsidies, as well as lowering internal trade and other regulatory barriers to encourage competition.

But solving the productivity puzzle isn’t just up to government.

There’s a compelling case that it should also be a key corporate responsibility. Companies, and more specifically boards of directors, have a crucial role to play. They can push corporate leaders to spend more on things that will boost productivity over the long haul, including investments in new equipment, technology, R&D and training.

Productivity is “at the core of board worries and concerns right now,” says Estelle Métayer, a former McKinsey & Co. consultant who serves on the boards of four companies in Europe and Canada, including recreational vehicle maker BRP Inc. and food manufacturer Nortera Foods Inc. At the root of the problem is a fundamental disconnect between investors looking for short-term financial gains and an urgent corporate need for costly investments in such things as robotics, resource management software, artificial intelligence and training that could take years to show results. Métayer argues that directors nominated by equity investors are often looking out a maximum of three to five years, or far less time than it may take for investments to bear fruit.

For example, pension funds are typically reluctant to greenlight a $200-million investment that won’t pay off for seven years.

“No investor will accept that,” according to Métayer, an adjunct business professor at Montreal-based McGill University who specializes in competitive and strategic intelligence. “There is a huge tension on boards right now.”

The key to escaping the productivity trap is more “patient capital,” Métayer says.

Boards of directors have clearly defined legal obligations, most notably a fiduciary duty to look out for shareholders’ interests.

Many corporate boards are also tasked with advising on business strategy and investments. The Institute of Corporate Directors’ cor-

34 | DIRECTOR JOURNAL

LE DÉCLIN DE LA PRODUCTIVITÉ est devenu une source croissante d’inquiétude au Canada. La ministre fédérale des Finances Chrystia Freeland l’a qualifiée de « talon d’Achille » de l’économie et la Banque du Canada d’une « urgence nationale ».

La productivité – l’impact économique direct de chaque heure travaillée – est essentielle à la croissance et, surtout, à l’amélioration du niveau de vie des Canadiens. Une productivité accrue crée une situation privilégiée pour les entreprises, leur permettant d’augmenter leurs profits, d’offrir des prix concurrentiels et de payer davantage leurs employés.

Malheureusement, la faible croissance historique de la productivité au Canada stagne depuis la pandémie, augmentant ainsi le retard du pays sur les autres économies avancées, dont celle des États-Unis. La productivité du travail a décliné en 2023 pour une troisième année consécutive, à tel point qu’elle est aujourd’hui plus faible qu’elle l’était en 2019, selon Statistique Canada.

Tensions au sein des conseils Les gouvernements pourraient faire beaucoup pour stimuler l’investissement dans la recherche, le développement et l’acquisition de nouvelles technologies afin d’améliorer la productivité, dont des incitatifs fiscaux et des subventions ciblées ainsi que la réduction des obstacles réglementaires au commerce intérieur pour encourager la concurrence.

Mais la solution au casse-tête de la productivité n’est pas seulement l’affaire du gouvernement. Il est clair que ce devrait être aussi une responsabilité d’entreprise. Les compagnies, et surtout les conseils d’administration, ont un rôle crucial à jouer pour pousser leurs équipes de direction à améliorer la productivité à long terme.

La productivité est « au cœur des préoccupations des conseils », explique Estelle Métayer, ancienne consultante chez McKinsey & Co. qui siège aux conseils de quatre entreprises en Europe et au Canada. À la source du problème figure une déconnexion fondamentale entre les investisseurs à la recherche de gains financiers à court terme et l’urgente nécessité pour les entreprises de procéder à des investissements coûteux en robotique, logiciels de gestion des ressources, intelligence artificielle et formation, dont les résultats pourraient prendre des années à se manifester. Mme Métayer soutient que les administrateurs nommés par des investisseurs en capitaux lorgnent un horizon de trois à cinq ans, soit beaucoup moins de temps qu’il n’en faut pour que des investissements portent fruit.

Ainsi, les caisses de retraite sont généralement réticentes à consentir à un investissement de 200 millions $ qui ne rapportera rien pendant sept ans.

Or la clé pour échapper au piège de la productivité réside dans davantage de « capital patient », affirme-t-elle. Mme Métayer, qui est également professeure adjointe de commerce à l’Université de Montréal, souligne qu’il existe présentement de fortes tensions au sein des conseils à cet égard.

Les conseils ont des obligations juridiques clairement définies, d’abord un devoir fiduciaire de protéger les intérêts des actionnaires. Beaucoup de conseils sont aussi chargés de conseiller l’entreprise en matière de stratégie d’affaires et d’investissement. Les

porate governance guidelines, for example, give its board members responsibility for steering the organization’s strategic direction and approving capital expenditures.

“Productivity is not typically part of the objective function for a board, but it is highly correlated with a firm’s growth prospects and market value,” points out economist Dan Ciuriak, a senior fellow at the Centre for International Governance Innovation in Waterloo, Ont., where he explores the interface between innovation and international trade and investment.

“Boards can’t fulfill their fiduciary duties to the shareholders if they ignore it.”

John Manley, a former Liberal cabinet minister, deputy prime minister and current director of several large public companies, acknowledges Canada’s “insipid” productivity performance. But he doesn’t buy the argument that it’s up to corporate boards to help make it better.

“I can’t see how this macro problem is something that individual companies – boards and CEOs – have the responsibility to fix,” says Manley, who is chair of Telus Inc. and former chair of Canadian Imperial Bank of Commerce.

“The CEOs went to the same business schools as their U.S. counterparts. So, I don’t accept the notion that we’ve bred timorous business leaders in Canada.”

lignes directrices de l’Institut des administrateurs de sociétés, par exemple, confient aux membres du conseil la responsabilité de guider la direction stratégique de l’organisation et d’approuver les dépenses de capital. « La productivité ne fait généralement pas partie de la fonction objective d’un conseil, mais elle est fortement reliée aux perspectives de croissance et à la valeur boursière d’une organisation », souligne l’économiste Dan Ciuriak, senior fellow du Centre for International Governance Innovation de Waterloo, où il explore les interfaces entre l’innovation et le commerce et l’investissement internationaux. « Les conseils ne peuvent remplir leurs devoirs fiduciaires envers les actionnaires s’ils ignorent cette question », affirme-t-il John Manley, ancien ministre libéral et administrateur de plusieurs grandes entreprises, reconnaît que la performance du Canada en matière de productivité est « insipide ». Mais il n’accepte pas l’argument selon lequel il revient aux conseils d’améliorer les choses. « Je ne vois pas comment ce problème macroéconomique devrait être réglé individuellement par les entreprises », affirme M. Manley, qui préside le conseil de Telus Inc. et a aussi été président du conseil de la Banque canadienne impériale de commerce.

Les dirigeants d’entreprises, y compris les administrateurs, répondent simplement à « l’environnement dans lequel ils se trou-

Earn your ESG Designation Invest in ESG to unlock innovation and sustain growth in your organization.

www.rotmanexecutive.com/ESG

ICD.CA | 33

36 | DIRECTOR JOURNAL

There is a direct link between productivity and business investment.

And collectively, Canadian businesses have been underinvesting for years in areas that would enhance productivity.

Il existe un lien direct entre la productivité et l’investissement. Et collectivement, les entreprises canadiennes sous-investissent depuis des années dans des domaines qui stimuleraient leur productivité.

ICD.CA | 37

38 | DIRECTOR JOURNAL

Corporate decision-makers, including directors, are simply responding to “the environment in which they find themselves,” according to Manley. And in Canada, that means dealing with a small domestic market, a more restrictive regulatory environment, and a tax regime that can sometimes discourage investment, growth and risk-taking, he says.

Canadian companies face some unique challenges that are beyond their control, Manley points out. For example, Canadian telecom companies are hampered by some of the highest mobile spectrum costs in the world. Similarly, Canadian financial regulators impose strict capital and liquidity requirements on banks to keep the financial system sound. That gives Canadians peace of mind, but it may also lessen banks’ appetite for risk.

vent », dit-il. Et au Canada, cela veut dire évoluer dans un marché national de taille réduite, un environnement réglementaire plus restrictif et un régime fiscal qui peut parfois décourager l’investissement, la croissance et la prise de risque.

Les entreprises canadiennes font face à des défis uniques audelà de leur contrôle, souligne M. Manley. Ainsi, les compagnies canadiennes de télécommunications sont gênées par des coûts du spectre mobile parmi les plus élevés au monde. De la même façon, les autorités réglementaires imposent aux banques des exigences strictes en matière de capital et de liquidité afin de maintenir le sain fonctionnement du système financier. Cela offre aux Canadiens la tranquillité d’esprit, mais peut aussi réduire l’appétit des banques pour le risque.

Small and happy Another key piece of the productivity puzzle is scale. Larger companies that are more exposed to global markets tend to do more of the things that boost productivity, including product specialization, investing in R&D and generating intellectual property.

Canada’s economy, however, is dominated by small, often family-owned, companies that often struggle to gain the scale to make those kinds of investments.

But Canada’s chronically weak productivity performance also suggests a failure of imagination and ambition. Corporate director Estelle Métayer says Canadian companies aren’t just smaller. The corporate landscape is populated with many baby boom founders, now in their 60s and 70s, who have built successful businesses, but may not be “willing to put up the capital and effort” to build the company to the next phase.

“We don’t have a culture where we are hungry, and where we are systematically chasing the next cent in our cost structure,” Métayer adds.

Instead, companies are often “happy living where they are,” she says.

Un autre élément clé du casse-tête de la productivité est l’envergure. Les plus grandes organisations plus exposées aux marchés mondiaux tendent à prendre davantage de mesures pour stimuler leur productivité, dont la spécialisation de produits, l’investissement en R et D et la génération de propriété intellectuelle.

Toutefois, l’économie canadienne est dominée par des entreprises de taille réduite, souvent propriétés familiales, qui doivent fréquemment se débattre pour s’engager dans ce type d’investissements.

Mais la performance chroniquement faible du Canada en fait de productivité dénote aussi une insuffisance d’imagination et d’ambition. L’administratrice de sociétés Estelle Métayer soutient que les entreprises canadiennes ne sont pas seulement plus petites. Le paysage corporatif est peuplé de beaucoup de fondateurs issus du baby-boom qui ont atteint aujourd’hui la soixantaine et davantage.

Ils ont bâti des entreprises prospères, mais ne sont peut-être pas « prêts à investir l’argent et les efforts » nécessaires pour mener leurs compagnies à la phase suivante.

Bref, estime-t-elle, les entreprises sont souvent « heureuses de se trouver où elles sont ».

Wrong choices?

Mauvais choix?

Every day, corporate leaders make strategic decisions that can affect productivity inside the organization and beyond. Faced with limited financial resources, should a company buy back its own shares to support the stock price, or invest more in people and training?

Should it raise the dividend, or make major bets on new technology and R&D to unlock new business opportunities down the road?

There is a direct link between productivity and business investment. And collectively, Canadian businesses have been underinvesting for years in areas that would enhance productivity.

Fail to invest, and productivity suffers.

The consequences are evident in the macro numbers. Business investment in machinery and equipment contracted at a rate of nearly 6 per cent in the fourth quarter of 2023 – the fifth quarterly decline dating back to the start of 2022.

Canada’s spending on research and development is also weak compared to other rich countries. Over all, Canada ranked 22nd among all countries in per capita R&D spending by business and government in 2021, putting it in the bottom half among advanced

Chaque jour, les dirigeants d’entreprises prennent des décisions stratégiques susceptibles d’affecter la productivité au sein et audelà de leurs organisations. Face à des ressources financières limitées, une entreprise devrait-elle racheter ses propres actions pour soutenir leur valeur ou investir davantage dans les ressources humaines et la formation? Devrait-elle augmenter le dividende ou parier massivement sur les nouvelles technologies et la R&D pour débloquer du même coup de nouvelles occasions d’affaires?

Il existe un lien direct entre la productivité et l’investissement. Et collectivement, les entreprises canadiennes sous-investissent depuis des années dans des domaines qui stimuleraient leur productivité.

Les conséquences sont évidentes quand on considère les résultats macroéconomiques. L’investissement d’affaires en machinerie et équipement s’est contracté à un taux de presque 6 pour cent au quatrième trimestre de 2023 – la cinquième baisse trimestrielle depuis le début de 2022.

Les dépenses de R et D au Canada sont aussi faibles en comparaison des autres pays riches. Le pays s’est en effet classé au 22e rang

Petit et heureux

ICD.CA | 39

‘Productivity is not typically part of the objective function for a board, but it is highly correlated with a firm’s growth prospects and market value.’ « La productivité ne fait généralement pas partie de la fonction objective d’un conseil, mais elle est fortement reliée aux perspectives de croissance et à la valeur boursière d’une organisation. » economies, according to the latest available figures from the Organization for Economic Co-operation and Development.

Canada’s performance in business R&D spending is even less flattering. Research-intensive Canadian companies spend roughly a fifth of what their counterparts do globally, and roughly a tenth of what U.S. companies do (after adjusting for the relative size of their respective economies), according to a 2023 study by the Washington-based Information Technology and Innovation Foundation.

One area of particular concern is artificial intelligence. Canada is among the world’s leaders in churning out AI research, technology and AI-savvy university graduates. But it’s well behind in building out the immense computing infrastructure needed to run AI applications such as ChatGPT, which hold out so much promise for generating productivity gains by automating work and cutting labour costs.

“Canada is a leader in the discovery and creation of artificial intelligence, but we lag in adopting the technology at the organizational level,” Alain Francq, director of innovation and technology at the Conference Board of Canada, pointed out as he released a report earlier this year highlighting the productivity gains of generative AI. “To take advantage of generative AI’s potential, Canadian businesses need to break out of their historic pattern of underinvesting in research and development and adopting emerging technologies in an effort to rectify the country’s productivity gap.”

Government incentives and the structure of the economy can affect companies’ willingness to spend on machinery, technology or R&D. But that spending is also the result of countless individual corporate decisions, and conscious choices. If companies favour shortterm profits over long-term success, the result for the country will be less competition, less investment and higher costs for consumers and businesses. That makes all of us less productive. DJ BARRIE McKENNA is a veteran business writer, columnist and foreign correspondent. He spent 30 years at The Globe and Mail, posted in Washington, Ottawa and Montreal. He has also worked at the Financial Post. He is a six-time finalist for Canada’s National Newspaper Award. Born in Montreal, he now lives in Ottawa.

40 | DIRECTOR JOURNAL

mondial en dépenses de R&D par habitant par les entreprises et le gouvernement en 2021, figurant ainsi dans la seconde moitié des économies avancées, selon les plus récents chiffres de l’OCDE. La performance du Canada en dépenses de R et D par les entreprises est encore moins brillante. Les entreprises canadiennes actives dans le domaine de la recherche dépensent environ le cinquième de ce que font les autres pays, selon une étude menée par l’Information Technology and Innovation Foundation de Washington.

L’intelligence artificielle est une source d’inquiétude particulière. Le Canada figure parmi les leaders mondiaux en matière de recherche sur l’IA, la technologie et la diplomation de spécialistes dans les universités. Mais elle tire largement de l’arrière dans l’établissement de l’immense infrastructure informatique nécessaire à la gestion des applications d’IA, comme ChatGPT, qui sont si prometteuses pour la génération de gains de productivité grâce au travail automatisé et à la réduction des coûts de main-d’œuvre. « Le Canada est un leader dans la découverte et la création d’intelligence artificielle, mais nous tirons de la patte dans l’adoption de technologies à l’échelle organisationnelle », souligne Alain Francq, directeur de l’innovation et de la technologie au Conference Board du Canada. « Pour profiter du potentiel de l’IA générative, poursuit-il, les entreprises canadiennes doivent sortir de leur modèle de sous-investissement en recherche et développement afin de combler l’écart de productivité du pays. » Les mesures incitatives du gouvernement peuvent affecter la volonté des entreprises de réaliser ces investissements, mais cette volonté doit aussi s’appuyer sur une multitude de choix individuels conscients. DJ BARRIE McKENNA est un journaliste économique, chroniqueur et correspondant étranger. Il a travaillé pendant 30 ans pour le Globe and Mail comme correspondant à Washington, Ottawa et Montréal. Il a aussi travaillé au Financial Post et a été six fois finaliste du Concours canadien de journalisme. Né à Montréal, il réside aujourd’hui à Ottawa.

ICD DIRECTORS ON THE MOVE

DIRECTORS ON THE MOVE

The ICD would like to congratulate the following members on their recent board appointments Banking & Financial Services Johanne Brunet

DIRECTOR LAURENTIAN BANK OF CANADA

Benjamin Chappell, ICD.D CHAIR PRAIRIE PAYMENTS JOINT VENTURE

Rod Dewar, ICD.D

Aviation & Aerospace

Yung Wu, ICD.D DIRECTOR MDA LTD.

Energy & Power Anne-Marie Dunn, ICD.D

DIRECTOR ELEXICON ENERGY INC.

Kimberly Marshall, ICD.D

DIRECTOR ALITIS INVESTMENT COUNCIL

DIRECTOR ELEXICON ENERGY INC.

Gerrard Schmid, ICD.D

DIRECTOR ELEXICON CORP.

DIRECTOR COMPUTERSHARE

Don Coulter, ICD.D DIRECTOR MCAN FINANCIAL

Medical & Healthcare

Jennifer Quaglietta, ICD.D DIRECTOR ONTARIO MEDICAL ASSOCIATION

Tim D’Souza DIRECTOR NATIONAL NURSING ASSESSMENT SERVICE

Insurance

Mark Radha

Barbara Boyd, ICD.D DIRECTOR OSHAWA POWER & UTILITIES CORP. INC.

Real Estate

George Bass, ICD.D CHAIR APPLETON HOLDINGS LTD.

Robert Brouwer, ICD.D TRUSTEE GRANITE REAL ESTATE INVESTMENT TRUST

Professional Services

Natascha Kiernan, ICD.D

Transportation

Bernie Kollman, ICD.D DIRECTOR EDMONTON INTERNATIONAL AIRPORT

Susan MacLaurin

Renato Discenza, ICD.D DIRECTOR CATHOLIC HEALTHCARE ASSOCIATION OF ONTARIO

Kalpna Solanki

DIRECTOR WINDSOR INTERNATIONAL AIRPORT

CHAIR CARE CANADA

TRUSTEE WATER ENVIRONMENT FEDERATION

Building & Construction

Bonnie Lysyk, ICD.D

Government

DIRECTOR OMBUDSMAN FOR BANKING SERVICES AND INVESTMENTS

Patsy Coish-Snow, ICD.D DIRECTOR WORKPLACENL

Tim D’Souza

Melanie Nadeau, ICD.D

Sandy Blue, ICD.D DIRECTOR UFV - PROPERTIES DEVELOPMENT CORP.

Not-for-Profit Greg Orencsak

DIRECTOR PUBLIC POLICY FORUM

Kalpna Solanki CHAIR BC TURKEY MARKETING BOARD

Fred Haiderzada CHAIR BIG BROTHERS OF GREATER VANCOUVER

Tracey Hamilton

Technology

Paul Gibson, ICD.D

Rod Dewar, ICD.D

DIRECTOR MTE CONSULTANTS

Gordon Piercey, ICD.D

Renato Discenza, ICD.D

DIRECTOR OKANE CONSULTANTS

DIRECTOR OPENMINED

DIRECTOR TO LIVE

DIRECTOR EDMONTON INTERNATIONAL AIRPORT

DIRECTOR SERENIA LIFE FINANCIAL

Rod Dewar, ICD.D

Brian Astl

DIRECTOR GOVERNANCE PROFESSIONALS OF CANADA

GOVERNOR CANADIAN COLLEGE OF NATUROPATHIC MEDICINE

Elan MacDonald, ICD.D

DIRECTOR DOWNSVIEW AEROSPACE INNOVATION & RESEARCH

Lee Bennett, ICD.D

Patrick Gauch, ICD.D

DIRECTOR E-COMM 911

DIRECTOR COLLEGE OF IMMIGRATION AND CITIZENSHIP CONSULTANTS

DIRECTOR BUSINESS DEVELOPMENT BANK OF CANADA

Tim D’Souza

DIRECTOR BUSINESS DEVELOPMENT BANK OF CANADA

DIRECTOR CANADIAN CHIROPRACTIC EXAMINING BOARD

Dermod Coombs CHAIR FIELD HOCKEY CANADA

Paul Desjardins DIRECTOR ONTARIO CENTRE OF INNOVATION

Geoff White, ICD.D DIRECTOR FIREFIGHTERS WITHOUT BORDERS

Michael Ladha, ICD.D

Carla Carmichael, ICD.D DIRECTOR ONTARIO ENERGY BOARD

Tim D’Souza DIRECTOR CANADA REVENUE AGENCY

Brian Astl TRUSTEE ROYAL ONTARIO MUSEUM

Send your board appointment publication requests to: Sheldon Mahabir, Director of Member Engagement, smahabir@icd.ca ICD.CA | 41

BY Shirley Won

Clash of the megatrends Powerful forces are threatening to collide, putting businesses at risk, a former Bank of Canada governor warns in his new book

FORMER BANK OF CANADA GOVERNOR Stephen Poloz sees five megatrends creating massive economic upheaval. He likens these powerful forces – an aging population, technological progress, rising income inequality, mounting debt and climate change – to the tectonic plates operating beneath the Earth’s crust. In his book The Next Age of Uncertainty: How the World Can Adapt to A Riskier Future, Poloz warns that these forces can potentially collide in violent ways to impact employment, inflation, house prices, interest rates and stock markets long into the

42 | DIRECTOR JOURNAL

future. Director Journal asked Poloz, who earned a PhD in economics, how a decline in the working-age population will have far-reaching consequences, why technological progress is the most dangerous megatrend, and how business can deal with this era of uncertainty.

Your book won the 2023 National Business Book Award. What inspired you to write it?

I didn’t set out to write a book. I had moved on to my next chapter and got a couple of board appointments – one with

[energy company] Enbridge and one with [IT consulting firm] CGI. I am an economist, and have lived in the boardroom, but what do I know about energy or information technology businesses? So, I set out to bring something to the table to promote longer-term thinking.

Businesses are often preoccupied with making the numbers in a quarter, but that doesn’t sound strategic. They do have a plan, but it seems to fade away as soon as the quarter is almost over.

If you ask economists what they think

RECOMMENDED READING

Stephen Poloz, former governor of the Bank of Canada, says companies need to focus on the long term if they are going to prosper in the new age of uncertainty.

ICD.CA | 43

will happen in 2024, probably none would mention any of the five forces, except for climate change. The problem is that the forces are moving so slowly and are not relevant to someone’s narrative about what is going on now. But they are all rising in prominence at the same time, and it means that you have a big business risk.

Why do you suggest that the aging population is the most underestimated megatrend in business?

My generation, postwar baby boomers, gave [society] a surplus of workers for 50 years.

Labour unions all but disappeared during my working life. But that surplus is shifting towards a shortage, and power is going back to workers.

In the post-pandemic world, companies are grappling with employees who are negotiating to work two or three days a week at the office. If you have an operational job, you don’t have much choice. But companies like Amazon are now paying higher than the minimum wage, and more organized labour is happening.

I expect growing union membership and richer packages – not just in wages but in defined-benefit pensions, too. The era in which companies shift the retirement risk to employees through defined-contribution plans or no plan at all is behind us.

There could also be a suite of benefits to retain and attract employees. Given financial risks related to housing, companies could help backstop mortgages for them, offer mortgages directly, or even develop employee housing.

You describe technological advances as the only positive megatrend but suggest that the current fourth industrial revolution may have more destructive potential. Why?

Each past industrial revolution – whether it was the introduction of the steam engine, electricity, or the computer – has been disruptive. We all believe that the fourth [industrial] revolution – digitalization and artificial intelligence [AI] is part of that – will be as big or faster than the last one. A World Economic Forum report suggests that about 25 per cent of workers will have their work disrupted by digita-

44 | DIRECTOR JOURNAL

lization. They will lose their jobs, or their jobs will change.

But technology also brings huge productivity benefits. A lawyer, for example, can use AI to help research a case. It’s like an assistant to increase productivity. That means we are going to do more, create more value, and that value is captured in a higher productivity trend line for the economy. But there will be pain and suffering for some people, so you need a safety net to cover them.

I argue that we need something like a

guaranteed basic income. It could be similar to the Canadian Emergency Response Benefit [CERB], which provided financial support for workers affected by the Covid-19 pandemic. But CERB was not carefully designed because it was an emergency measure. With a guaranteed basic income, everyone would get it, but people who make a lot of money would essentially get it taxed back. It is not impossible to design something that doesn’t have horrible disincentives, and it would give people security.

RECOMMENDED READING

‘INCOME INEQUALITY IS THE MOST INSIDIOUS OF THE FIVE FORCES, AND IT’S HARD TO DO ANYTHING ABOUT WHEN POLITICS GETS IN THE WAY.’ Rising income inequality is another force, but you say that globalization only played a supporting role. Can you elaborate?

I think that rising income inequality is the biggest disruptor of all. You get this when there are big leaps in technology. The industrial revolution of the 1980s and 1990s changed our lives substantially, but it was not just having a computer on the desk or a cellphone. It enabled manufacturing to become a global business.

The logistics of running a company that was geographically distributed had not been contemplated. Vertical integration was the best way to maximize output, and it made sense for firms to build their own supply chains within the firm. They even owned fleets of delivery trucks to move the pieces where they were needed.

Development of computer systems and the opening of trade simultaneously drove the globalization of supply chains. Companies developed relationships with foreign suppliers arranged in a value chain to enhance efficiency. During that period, people

lost jobs, and it’s natural for them to blame trade instead of technology. But it was also something for politicians to tap into. That’s what former U.S. president Donald Trump did in escalating a trade war against China.

Rising income inequality rides beneath the populism that we have seen in politics.

In the deep past, we may have seen a revolution. That puts the Jan. 6, 2021, U.S. Capitol Hill riot by Trump supporters in perspective.

Income inequality is the most insidious of the five forces, and it’s hard to do anything about when politics gets in the way.

How can business and corporate boards deal with the new uncertainty?

The forces, which I describe, are operating relentlessly. Dealing with them is more about preparation. Instead of basing a business on economic forecasts, you run a business ensuring that it can manage through multiple scenarios – some of which can be pretty bad.

Companies will need to carry bigger financial buffers. You might have to play defence because the volatility can harm

your business, but the volatility can also present a merger-and-acquisition opportunity. Companies with a lot of debt are getting hammered by high interest rates. If you were prepared for it, you are sitting pretty.

I have been in a lot of boardrooms. What happens is that they do a risk analysis once a year and build a forecast around that.

What I am saying is that you run three or four forecasts and keep running budgets on them all year long. You don’t know which is going to be the true one.

Every company will have a different way of managing these risks, but we are going to have to spend more resources dealing with them than in the past. 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 | 45

PARTING SHOT

A museum to float your boat

PHOTOGRAPH COURTESY OF THE CANADIAN CANOE MUSEUM

The world’s largest and most significant collection of canoes, kayaks and paddled watercraft has just settled into its new home in Peterborough, Ont. The Canadian Canoe Museum houses more than 600 watercraft, whose stories play a pivotal role in understanding Canada’s past and our collective future.

The museum was originally located in an old outboard-motor factory, far from any water, in the city 110 kilometres northeast of Toronto. In 2016, the organization embarked on a successful fundraising campaign for the $40-million project, only to learn that the planned building site had been contaminated by waste from an adjacent lot. After navigating some difficult waters, and keeping donors on board, the board and its team managed to purchase a new site not far away in September 2021. Today, visitors can get to the new museum by road, along the Trans Canada Trail, or by canoe or kayak along the Trent-Severn Waterway.

Artifacts range from the great dugouts of the First Nations of the Pacific Northwest to the distinctive bark canoes of the Beothuk people of Newfoundland; from the skin-on-frame kayaks of Inuit from Baffin Island to paddled watercraft from as far away as Paraguay and the Amazon.

46 | 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 19, 2024

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.

VANCOUVER

November 18, 2024

VIRTUAL

October 17, 2024

CALGARY

October 3, 2024

TORONTO

October 4, 2024

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

APPLY ONLINE EDUCATION.ICD.CA/DEP24 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.

Institute of Corporate Directors Institut de administrateurs de sociétés 1601-250 Yonge St., Toronto, Ontario M5B 2L7

40047045