Director Journal – March/April 2022

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

HOW TO THRIVE IN TIMES OF TURMOIL

MARCH/APRIL 2022

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CONTENTS

Director Journal Editorial

Departments

EDITOR Simon Avery

Editor’s note

ART DIRECTOR Lionel Bebbington

Navigating the chaos

CONTRIBUTORS Richard Blackwell, Jeff Buckstein, Guy Dixon, Virginia Galt, Serge Rivest, Barbara Smith, Prasanthi Vasanthakumar, Shirley Won

CEO insights

Executive Lead Heather Wilson Senior Director, Policy & Research

Institute of Corporate Directors Rahul Bhardwaj - President and CEO Ken Gibson - Chief administrative officer Ady Jonsohn - Vice-president, education Jan Daly Mollenhauer - Vice-president, sales, marketing and membership 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

Rahul Bhardwaj on the importance of learning from other directors

Dispatches Hot-desking, global worries, Wordle wonder, green caffeine, and crazy for cats

Issues The profit equation

Directors’ dilemma Heather Wilson digs into diversity, equity and inclusion programs

Directors on the move Recent board appointments across the country

Parting shot Lessons from the siege of Leningrad

04 05 06 11 12 43 50

Features

COVER PHOTOGRAPH: JW/UNSPLASH

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.

Cover story Things feeling volatile? Get used to it

Feature The pandemic laid bare the strengths and weaknesses of health care. So now what?

Design thinking When backed by the board, this creative process can help keep your business model fresh

Climate change Net-zero by 2050 requires boards act today

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

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

Recommended reading In Risk: A User’s Guide, retired U.S. Army general Stanley McChrystal outlines 10 risk control factors that

14 24 32 38 44

can help companies better respond to crises

ICD.CA | 3

EDITOR’S NOTE

Navigating the chaos There’s a growing body of expertise on how to deal with disarray FOR A FEW YEARS NOW, boards of directors DEPUIS QUELQUES ANNÉES, les conseils have been adjusting their sights to operate in d’administration se sont ajustés à un envia more volatile environment, alternately exronnement instable, alternativement pascited and unsettled by the growing power of sionnés et perturbés par le pouvoir croistechnology and a more connected world. sant des technologies et un univers de plus The past two years have vaulted organizaen plus connecté. tions to a place of turmoil. Our cover story by Les deux dernières années ont propulsé Richard Blackwell (page 14) shares insights les organisations dans la tourmente. Nofrom battle-tested directors on how to operate tre article de couverture de Richard effectively in this new climate, dismissing the Blackwell (page 14) partage les perspecidea that we are all victims of events and laytives d’administrateurs aguerris sur les ing out practical steps to mitigate fallout and façons d’agir efficacement dans ce noueven capitalize on change. These include creveau climat, en rejetant l’idée que nous ating continuity plans, strengthening balance sommes tous victimes des événements sheets and embracing digital technologies. et en proposant des étapes pratiques afin Our main feature (page 24), written by d’en atténuer les conséquences et même Simon Avery Virginia Galt, extends this empowerment de tirer parti du changement.

Editor theme by exploring some of the critical deciNotre article principal (page 24), rédigé savery@icd.ca sion-making by the leadership teams at hospar Virginia Galt, élargit ce thème de repitals and other health-care centres during sponsabilisation en explorant des décithe pandemic. The system today stands tested sions essentielles prises par des équipes de leadership d’hôpitaux ou d’autres centres but strained, she writes, making it imperade soins de santé durant la pandémie. Le tive that everyone from politicians to practisystème demeure testé mais épuisé, écrit-elle, ce qui dicte que chationers learn from events and use these lessons and newly formed cun, des politiciens aux praticiens, tire les leçons des événements relationships to fix and improve what we have. pour corriger et améliorer la situation.

An increasingly popular process embraced by many organizaLa conception créative est un processus de plus en plus populaire tions that wish to be better prepared to meet today’s new challengchez plusieurs organisations qui souhaitent être mieux préparées es is design thinking. Jeff Buckstein (page 32) talks about how the à relever les nouveaux défis. Dans l’article « Creative by design » process can complement existing operations by adding a creative (page 32), Jeff Buckstein relate les propos de spécialistes et d’adand entrepreneurial approach to strategic thinking. ministrateurs sur la façon dont ce processus peut compléter les The fallout from both the pandemic and Russia’s war of aggression in opérations existantes en ajoutant une approche créative et entreUkraine threatens to displace the climate crisis on many agendas. But preneuriale à la pensée stratégique. with Canada now part of the global push to reduce net carbon emissions Les conséquences conjuguées de la pandémie et de l’agression to zero by 2050, Guy Dixon talks to environmental experts who warn that de l’Ukraine par la Russie menacent de déplacer la crise climatique businesses and their boards must begin to adopt climate-change stratedans les priorités de plusieurs.

Mais le Canada faisant maintenant gies immediately or they risk putting their organizations at risk (page 38). partie du mouvement mondial pour réduire les émissions de carIt seemed somewhat reassuring to conclude this issue by talking bone à zéro à l’horizon de 2050, Guy Dixon a discuté avec des exto someone who thrived in high-stakes, international crises by being perts environnementaux qui préviennent que les entreprises et prepared. Retired U.S. Army general Stanley McChrystal – who led leurs conseils doivent commencer immédiatement à adopter des his country’s top secret special operations missions and its war effort stratégies climatiques, sans quoi ils pourraient mettre leurs organiin Afghanistan – talks to Shirley Won (page 44) about his timely new sations à risque (page 38).

DJ book, Risk: A User’s Guide. DJ

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CEO INSIGHTS

A haven for directors

ILLUSTRATIONS BY AARON MCCONOMY

As leaders grapple with instability and risk, we’re here to see you through JUST A FEW YEARS AGO, one of the big IL Y A À PEINE QUELQUES ANNÉES, L’UN topics of conversation in boardrooms was des grands sujets de conversation dans les the merits of long-term strategies over shortsalles du conseil touchait les mérites des term tactics. That debate seems almost quaint stratégies à long terme par rapport aux taccompared with what occupies boards today. tiques à court terme. Ce débat paraît presque Risk is front and centre in ways we never désuet si on le compare aux préoccupations expected before – a global pandemic, war in actuelles des conseils.

Europe, runaway inflation, raging populists Le risque occupe notre attention comme and a decoupling of China and the West jamais auparavant : pandémie mondiale, are all feeding instability. For boards, the guerre en Europe, inflation galopante, popquestion is: How do you oversee your orgaulistes déchaînés et divisions entre la Chine nization in the face of such overwhelming et l’Occident sont tous des facteurs d’instachange, anger and disengagement? bilité. Pour les conseils, il s’agit de savoir The pandemic alone will produce signifcomment guider les organisations face à icant ripple effects on corporate culture, des changements, des emportements et des Rahul Bhardwaj strategy and risk. What effect, for instance, désengagements aussi importants.

LL.B, ICD.D do remote workers have on productivity and À elle seule, la pandémie entraînera de President and CEO, risk, and how do organizations best attract grandes répercussions sur la culture, les The Institute of Corporate Directors and retain talent in this new environment? stratégies et les risques d’entreprise. Ainsi, Questions such as these demand a quel effet le télétravail aura-t-il sur la producre-evaluation of the methods of good govtivité et le risque? Comment les organisations ernance. Board members need to be askpourront-elles le mieux attirer et conserver ing themselves, “Is yesterday’s oversight les talents dans ce nouvel environnement? sufficient for today’s reality?” Directors should also be taking the Ces questions exigent une réévaluation des méthodes de gouvernecessary time to reflect on how they have functioned during the nance. Les administrateurs doivent se demander si la surveillance pandemic, weighing what has worked and what hasn’t. exercée hier suffit à la réalité d’aujourd’hui. Ils doivent aussi prenThese volatile times demand that boards go beyond helping to dre le temps de réfléchir à la façon dont ils ont fonctionné durant la manage instability and rise to the challenge of leading through it. pandémie en soupesant ce qui a marché et ce qui n’a pas marché.

That requires not only responding to immediate challenges, but Les conseils doivent aller au-delà de la gestion de l’instabilité et relealso keeping focused on strategy, and maintaining the drive and opver le défi du leadership. Il faut non seulement répondre aux défis imtimism within your organization to find new opportunities. These médiats, mais aussi rester concentré sur la stratégie et maintenir le dyare key steps for moving from survive to thrive, and it helps to have namisme et l’optimisme au sein des organisations afin de dénicher de a haven on this journey where you can learn so you can change. nouvelles occasions. Ce sont les étapes clés qui permettent de prospérer As a platform for sharing diverse views and experiences from plutôt que de survivre et il est bon, dans ces conditions, de pouvoir across the country and industries, the Institute of Corporate Direccompter sur un port d’attache pour apprendre à intégrer le changement. tors is just such a haven. The exchanges we facilitate through our L’Institut des administrateurs de sociétés est une telle plateforme courses, conferences, seminars and meetings help build trust and de partage de points de vue et d’expériences. Les échanges que nous understanding – something that’s in short supply today as many facilitons permettent de bâtir la confiance et la compréhension, des people dig in and defend positions rather than listen and learn. denrées rares aujourd’hui au moment où beaucoup de gens défenBeing dead sure and dead wrong at the same time is a recipe for dent leur position plutôt que d’écouter et d’apprendre. La capacité disaster. The ability to observe, listen, learn and change is essential d’observer, d’écouter, d’apprendre et de changer est essentielle aufor all of us in these challenging times – so let’s do it together. DJ jourd’hui. Faisons-le ensemble. DJ

ICD.CA | 5

COMPILED BY Prasanthi Vasanthakumar

Dispatches A digest for diligent directors

HYBRID HICCUPS HOT DESKS ARE GETTING THE COLD SHOULDER. A popular part of the hybrid work approach, hot-desking – or hotelling – requires employees to reserve random desks every time they work on site.

But it turns out that people aren’t crazy about losing their place in the office. In The Globe and Mail, Vanmala Subramaniam finds the booking system is a buzzkill, taking away the joy of coming into the office. What if your spot isn’t near your favourite colleagues?

Maybe you’re not close to – or far enough away from – the boss?

What about your family photos and other personal items? Your favourite chair? Trivial or not, these types of gripes can damage

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corporate culture, say experts in organizational behaviour.

For employers, it’s a different calculation. The hot desks of hybrid work present significant cost savings, Subramaniam reports. One interior design leader in Toronto says 80 per cent of his clients are considering concepts like seat-sharing in their new vision of the workplace.

But is it worth the trade-off? Experts urge executives to think about the psychological functions of a personalized office space. Ultimately, bosses need to understand exactly why their employees want to come into the office.

NEWS

TROUBLING TIMES According to the World Economic Forum’s Global Risks Report 2022, 84 per cent of experts and leaders are “concerned” or “worried” about the world’s outlook. While short-and long-term risks include economic and technological factors, the most severe problems identified over the next 10 years are overwhelmingly environmental and social in nature. Here’s what’s keeping leaders up at night.

PHOTOGRAPH BY FERRANTRAITE/ISTOCK (LEFT), ICONS BY NOUN PROJECT (TOP RIGHT)

TOP 10 GLOBAL RISKS BY SEVERITY Over the next 10 years

Climate action failure

Extreme weather

Biodiversity loss

Social cohesion erosion

Livelihood crises

Infectious diseases

Human environmental damage

Natural resources crises

Debt crises

Geo-economic confrontation

Source: World Economic Forum Global Risks Report 2022

THE M_G_C OF WORDLE It was only a matter of time before someone snapped up the free word game that took the Internet by storm. With its signature green and yellow squares lighting up social media, Wordle went viral in December, attracting millions of users worldwide. The game’s simplicity is part of its charm: Every day, players get six tries to figure out a five-letter word. And there are no sign-ups, fancy graphics or ads.

In late January, The New York Times announced it had paid seven figures to acquire the online game as part of its plan to expand its subscriber base. Indeed, games and puzzles are critical to the media giant’s strategy to keep readers hooked. And the company’s success at converting millions of online readers into paid subscribers since adopting a paywall in 2011 has provided it with an enormous platform from which to host games.

Many game enthusiasts, however, were not amused. “I have never seen Twitter as immediately mad,” tweeted one Wordle whiz. “The NYT took one nice and simple thing that a lot of people really liked, a dumb bit of fun in our exhaustingly dark times, and implied that they’ll stick it behind a paywall.”

At the time of writing, Wordle is still blissfully free. But must all good things really come to an end?

ICD.CA | 7

GREEN CAFFEINE Coffee lovers could have one more reason to treasure their beloved beverage. University studies suggest spent coffee grounds can be repurposed in different ways to help the planet, Geoffrey James reports in Inc.:

Coffee grounds can reduce the carbon footprint of construction by acting as aggregates in construction materials in civil engineering applications.

(University of Melbourne)

The revolutionary home-fitness bike has had a bumpy start to the year, with the company laying off 2,800 people and replacing its CEO. Indeed, the pandemic darling has been plagued by problems for a while, including slumping sales as gyms reopened, which has spooked many investors. By February, Peloton’s stock price was down about 80 per cent from its 12-month high.

The once hip brand is also getting snubbed in popular culture, Gus Carlson observes in The Globe and Mail. Mr. Big’s death by Peloton on the Sex and the City television reboot is just one example.

Marketing experts suggest Peloton’s downfall is largely a matter of guilt by association. “People associate it with a time of lockdowns, when home exercise was the only option,” Peter Shier tells The Globe. “We resent what Covid has done to our lives and punish brands that remind us of that.”

Nonetheless, the brand consultant believes Peloton will survive if it stays true to its core purpose and promotes its many benefits.

The bike maker’s new CEO hopes to save the company by investing in online fitness content and exercise machines.

Hold on for a challenging ride.

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Spent coffee grounds can remove wastewater pollutants to create ultrapure water.

(Tianjin Chengjian University)

Coffee grounds can be used as a highly efficient biofuel.

(Erciyes University, Turkey)

These findings are especially important in light of coffee’s climate impact. Currently, six million tons of coffee grounds languish in landfills each year, where they ferment and emit methane – making millions of caffeine lovers’ morning cups an environmental hazard.

Although today’s government programs aren’t equipped to collect spent coffee grounds for recycling, some businesses are filling the void. Startups like U.K.-based BioBean are building infrastructure to monetize this coffee waste. For climateconscious entrepreneurs, this could be their next green opportunity.

PHOTOGRAPHHY BY MIROMIRO/ISTOCK (LEFT), BOGDAN FARCA (RIGHT). ICONS BY NOUN PROJECT (LEFT)

PELOTON’S CRASH

NEWS

MUST LOVE CATS Linda Upson’s problem was that she loved too many cats. The chair of Cats Protection, one of Britain’s biggest charities, reportedly didn’t see anything wrong with keeping 18 felines in a threebedroom household, writes Jacky Hardy of The Daily Telegraph.

This despite the charity’s own research that finds insufficient space in a multicat household can be stressful for animals. Welfare guidelines also advise cat owners to give their pets enough space to get away from one another.

So, when Cats Protection decided to keep Upson in the top job following an internal investigation, the claws came out. Interim CEO Charles Darley quit in protest, accusing the organization’s trustees of

lacking experience with good governance. An overwhelming love of cats may have blinded trustees to the reputational impact of owning so many, he suggested.

According to Darley, senior staff had long been concerned with the number of cats at Upson’s home and resisted using her as a spokesperson for the charity. Further, the controversy alarmed corporate sponsors and threatened funding.

In the end, Upson stepped down, claiming she didn’t want her living arrangements to detract from the charity’s important work.

But she still maintains that her 18 cats, six of whom were being fostered, are “happy and healthy.”

ICD.CA | 9

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 June 16 -18, 2022

EDMONTON

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.

June 17-19, 2022

TORONTO

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September 19-21, 2022

TORONTO

October 20-22, 2022

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November 28-30, 2022

ST. JOHN’S

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MONTREAL

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

APPLY ONLINE ICD.CA/DEP Application process is now open and is subject to availability.

Application deadlines are 4-6 weeks before the class start date.

Think beyond the boardroom.

The DEP consists of 4 modules. Modules will be in person according to local health and safety guidelines. Please note that the Montreal offering will be delivered in both English and French.

May 30 - June 1, 2022

ONLINE

ISSUES

BY Simon Avery

The profit equation

PHOTOGRAPH BY HELEN89/ISTOCK

At what point do morals trump money?

IT’S BEEN FOUR YEARS since the CEO and founder of BlackRock Inc., the world’s largest investment manager, told public companies that in addition to making profits, they must also “serve a social purpose.”

The idea that businesses should satisfy a broader community of stakeholders rather than just shareholders, and that they should adopt purposeful ESG (environmental, social and governance) policies, has been hotly debated since Larry Fink made his famous proclamation.

Critics have argued that the concepts are too vague and unmeasurable, and many contend that social agendas are best left to elected officials rather than wealthy investors and business leaders.

Russia’s invasion of Ukraine has brought the issue of principles over profits into sharp focus. Western companies have closed or shuttered their operations in Russia in droves. Many have no choice because of regulatory restrictions brought by tough government sanctions, while others are listening to prevailing public opinion and have chosen to act on their own. In the case of BlackRock, the company said it has ceased buying Russian securities for any of its funds.

“It’s been heartening to see the private sector go beyond government-imposed sanctions,” Fink wrote in a post on LinkedIn on March 10. “Russia has been essentially cut off from global capital markets, demonstrating the commitment of major brands to advance important goals that go beyond profit.”

One of the biggest Canadian brands to take a public stand has been the maker of designer parkas, Canada Goose. Saying it was “deeply concerned” by the war, the company announced it would suspend all wholesale and e-commerce sales to Russia.

For Fink, the co-ordinated corporate response to Russian President Vladimir Putin’s aggression aligns with the American’s vision of capitalism with a higher purpose.

“This ‘economic war’ demonstrates what we can achieve when companies, supported by their stakeholders, come together in the face of violence and aggression,” Fink said on LinkedIn. The challenge is that there’s violence and aggression all over the world, and most of it doesn’t deter foreign investors. Miners go where the metals are, consumer electronics companies manufacture in countries with the cheapest skilled labour, and oil giants drill in countries run by some of the world’s most oppressive regimes.

So, if economic actions against Russia represent a new corporate standard, where is the line to be drawn? If China supplies advanced weapons to Putin’s regime, for example, or if it allows Russia to

withstand economic sanctions, must Western businesses then pull out of China?

Unfortunately, part of the answer might depend on how much money is at risk.

Russia’s extensive nuclear arsenal belies the country’s relatively small economy. Its gross national product ranks below Italy’s, even though Russia has more than twice the population. In contrast, China’s economy ranks No. 2 in the world, and abandoning it could prove too financially damaging for many Western businesses.

Another titan of U.S. finance, Goldman Sachs CEO David Solomon, recently expressed a different view than Fink’s.

“I don’t think businesses are supposed to decide how global trade works in the world,” he told Time magazine. “Government sets policy and then businesses follow that policy.” DJ

Canada Goose, maker of iconic Canadian parkas, suspended sales to Russia, saying it was ‘deeply concerned’ by the country’s invasion of Ukraine.

SIMON AVERY is the editor of Director Journal and a freelance business writer.

ICD.CA | 11

The dilemma What information should my board be collecting on our organization’s diversity, equity and inclusion efforts?

Heather Wilson ICD’s Senior Director, Policy & Research

MORE BOARDS ARE PAYING ATTENTION to diversity, equity and inclusion (DEI) initiatives than in the past, especially as more shareholders and other stakeholders take a greater interest in the matter. According to Rima Ramchandani, a Toronto-based partner at the law firm Torys LLP, the focus until recently has been on the representation of women on boards and in senior management. “However, that conversation has quickly expanded beyond female representation, and turned to a broader focus on equity-deserving groups,” she says.

DEI needs to have a place on the board agenda and should also be overseen by an appropriate board committee. Robert Patzelt, an experienced not-for-profit, Crown and corporate director in Halifax, notes that a journey toward more diversity and inclusion should be approached with humility, recognizing that mistakes will inevitably be made and that organizations will need to learn from their missteps. He also recommends that directors “be brave and get comfortable with being uncomfortable.”

In many organizations, formal DEI programs may not have been established yet,

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so it’s important to ask what is being done to ensure that hiring practices, pay rates, development opportunities and promotions are being conducted equitably. It’s also essential to ensure that the organizational culture supports the inclusion of underrepresented groups. Even if no formal programs exist, boards may want to establish appropriate goals for their organization and set up the mechanisms for reporting progress on those goals.

If a formal program has been introduced, it will be important for the board to know what the goals are and how effective the program has been at meeting them. Ramchandani notes that while representation in the C-suite will continue to garner attention, boards should also have a clear understanding of what organization-wide demographic data are available and being monitored. Data are critical to establish a baseline for monitoring progress, Patzelt adds. In addition, boards should understand what, if any, sorts of reporting on DEI initiatives are being created and communicated to stakeholders.

Diversity and inclusion should be strongly linked to the strategy of the organization, says

Wendy Cukier, founder of the Diversity Institute at Ryerson University. She notes that DEI performance indicators should be “baked right in” to the board’s performance monitoring dashboard. It should also be part of the risk matrix, because getting DEI wrong can lead to a significant loss of reputation, as well as legal costs and other negative outcomes.

Boards should also make sure that DEI initiatives are being properly funded through organizational budgets, she adds.

A diversity and inclusion council can be established to bring employees together to discuss activities and to provide constructive feedback on current and future initiatives.

The right people need to be included, Patzelt says, meaning not just senior leaders but others in the organization with influence so that a broad range of perspectives is considered.

Accountability for the successful implementation of such initiatives rests with management, in particular the CEO. Goals and expectations should also be identified for business leaders throughout the organization. DEI metrics may be included in executive compensation schemes – an important mechanism boards have at their disposal to ensure that programs are given the appropriate amount of attention and resources.

Boards should also set a good example.

Both the board chair and the chair of the governance or human resources committee are critical to ensure greater diversity on the board.

Stakeholders are placing increased importance on diversity and inclusion. Directors need to understand, oversee and ensure that diversity, equity and inclusion are well integrated into the strategy, decision-making and accountability structures of the organization. DJ

ILLUSTRATION BY AARON MCCONOMY

Q.

DIRECTORS’ DILEMMA

DIRECTOR LENS • Data on programs are critical to measuring success of DEI initiatives.

• Link DEI programs to the strategy and risk matrix of the organization.

PLUS DE CONSEILS portent attention aux initiatives de diversité, équité et inclusion (DEI) que par le passé, surtout dans un contexte où davantage d’actionnaires et autres parties prenantes manifestent de l’intérêt pour ces questions. Selon Rima Ramchandari, associée du cabinet juridique Torys LLP à Toronto, on s’est principalement concentré sur la représentation des femmes aux conseils et au sein des équipes de direction. « Cependant, la question s’est rapidement élargie pour englober les groupes à la recherche d’une plus grande équité. » Les questions de DEI doivent trouver une place au conseil et faire l’objet d’une surveillance particulière de la part d’un comité approprié. Robert Patzelt, administrateur d’organismes à but non lucratif, de sociétés d’État et d’organisations à but lucratif installé à Halifax, souligne qu’on devrait aborder avec humilité le parcours menant à plus de diversité et d’inclusion, en reconnaissant le fait que des erreurs seront inévitablement commises et que les organisations devront apprendre de leurs faux pas.

Il est important de se demander ce qui est fait pour s’assurer que les pratiques d’embauche, la rémunération et les occasions de développement et de promotion sont menés menés équitablement. Il est aussi essentiel de faire en sorte que la culture organisationnelle soutienne l’inclusion de groupes sous-représentés. Même si de tels programmes n’existent pas de façon formelle, les conseils pourraient fixer des objectifs appropriés et établir les mécanismes adéquats pour suivre les progrès réalisés.

Si un programme formel a été créé, il sera important pour le conseil d’en connaître les objectifs et le degré d’efficacité en cours de route. Mme Ramchandani souligne que même si la représentation au sein des équipes de direction continuera de retenir l’attention, les conseils devront aussi posséder une compréhension claire des données démographiques disponibles et faisant l’ob-

jet d’une surveillance à l’échelle de leur organisation. Les données sont essentielles à l’établissement d’une base de comparaison pour mesurer les progrès, ajoute M. Patzelt.

La diversité et l’inclusion devraient être étroitement liées à la stratégie de l’organisation, affirme Wendy Cukier, fondatrice de l’Institut de la diversité à l’Université Ryerson. Elle souligne que les indicateurs de performance en matière de DEI devraient être intégrés au tableau de bord de surveillance de performance du conseil. Ils devraient aussi figurer dans la matrice de risque, car une mauvaise gestion des DEI peut mener à une importante perte de réputation ainsi qu’à des coûts juridiques et autres résultats négatifs. Les conseils devraient aussi faire en sorte que les initiatives de DEI soient adéquatement financées.

On pourrait aussi créer un conseil de la diversité et de l’inclusion pour permettre aux employés de discuter d’activités et offrir une rétroaction sur des initiatives actuelles et futures. Il faut y inclure les bonnes personnes, soutient M. Patzelt, afin qu’un large éventail de points de vue puisse être entendu.

Le succès de telles initiatives demeure sous la responsabilité des dirigeants, en particulier du chef de la direction. On devrait aussi identifier les objectifs et les attentes pour les leaders d’affaires à l’échelle de l’organisation. Les mesures de progrès en matière de DEI pourraient être incluses dans les plans de rémunération de l’équipe de direction – un important mécanisme dont disposent les conseils pour s’assurer qu’on accorde aux programmes le volume adéquat d’attention et de ressources.

Les parties prenantes attachent de plus en plus d’importance à la diversité et à l’inclusion. Ainsi, les administrateurs doivent comprendre ces enjeux, en assurer la surveillance et faire en sorte que la diversité, l’équité et l’inclusion soient bien intégrées dans la stratégie, la prise de décision et les structures de l’organisation. DJ

• Consider the creation of a DEI council.

• Consider tying the achievement of DEI goals to compensation.

• Boards should set a good example through successfully implementing their own DEI initiatives.

• Les données sur les programmes sont essentielles au succès des initiatives de DEI. • Lier les programmes de DEI à la stratégie et à la matrice de risque de l’organisation.

• Envisager la création d’un conseil de DEI. • Envisager de relier la réalisation des objectifs de DEI à la rémunération.

• Les conseils devraient donner l’exemple en mettant en œuvre leurs propres initiatives de DEI.

Presented in partnership with Torys LLP.

Send your comments or ideas to: Heather Wilson Senior Director, Policy & Research boardinfo@icd.ca Every issue, we will feature a question from readers or one from ICD’s complimentary research service, ICD BoardInfo icd.ca/boardinfo

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THE LONG-TERM FORECAST? INSTABILITY OVER THE PAST TWO YEARS, Canadian directors have dealt nimbly with disruption, mainly caused by the Covid-19 pandemic and the associated shakeup in the way people live and work. But what if that instability continues, as global political upheaval, climate change and health issues interrupt any sense of normalcy over the longer term?

If disruption is the new normal, directors may need to rethink how they make decisions, and reimagine how they deal with risks that come out of the blue — possibly in rapid succession and with potentially severe consequences.

“There are more contributors to volatility today than there have been for quite some time,” said Ian Bourne, chair of Teine Energy Ltd. and a former director of Ballard Power, Canadian Oil Sands Ltd.

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AU COURS DES DEUX DERNIÈRES ANNÉES, les administrateurs canadiens ont dû faire face prestement aux perturbations causées par la pandémie de Covid-19 et les bouleversements qui en ont découlé sur la vie personnelle et professionnelle des gens. Mais qu’arrivera-t-il si cette instabilité se poursuit, alors que l’instabilité politique, les changements climatiques et les enjeux de santé interrompent tout sens de la normalité à plus long terme?

Si les perturbations sont désormais la nouvelle normalité, les administrateurs devront sans doute repenser leur mode de prise de décision et revoir leur attitude face aux risques qui surviennent de nulle part – éventuellement en succession rapide et avec des conséquences potentiellement graves.

PHOTPGRAPH BY FELIX MITTERMEIER/UNSPLASH

Upheaval has become the new normal, which means boards will have to adapt to keep up, Richard Blackwell writes

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If disruption is the new normal, directors may need to rethink how they deal with risks that come out of the blue.

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and Hydro One, among others. Bourne knows turmoil — he was chair of SNC-Lavalin Group Inc. and briefly interim CEO as the company worked to recover from its fraud and corruption scandal a decade ago.

In a continuing state of upheaval, there is a need for directors to be nimble enough to change direction on a dime, Bourne said, while maintaining focus on corporate goals. The new world “calls for directors to be even more rigorous and disciplined about thinking strategically, setting priorities and holding people accountable to meet those objectives,” he said.

Good thinking In Bourne’s view, the best way to deal with greater complexity is to make sure the right people are sitting around the boardroom table.

“Boards need to get high-quality, capable people who can deal with whatever comes along.”

But that doesn’t necessarily mean recruiting a whole new cadre of directors. It means ensuring that those in place have the capacity for long-term, strategic thinking. It’s a mug’s game, however, to try to have specialized individuals on a board to deal with particular potential crises, he adds. “If you try to staff a board to deal with specific issues or priorities, the chances are that by the time you get the person on and going, the world has moved again. You can never keep up,” he said.

At SNC, for example, it was clear there was a need for a wholesale revamp of the board, Bourne said, but “it didn’t necessarily mean that we went out and got a whole bunch of people who could deal with yesterday’s problem or today’s problem. The people we were looking for were those who could deal with whatever comes along.” The most effective board members today, or in the volatile future, are those who have dealt with a variety of strategic issues over their careers, and who have “the diversity of views that you get with a wide range of thought and experiences. What you are really looking for are good thinkers who have different experiences on which to draw.”

PHOTPGRAPH BY MATTHEW WARING/UNSPLASH

Going offensive While it is tempting for a company to pull in its horns when there is turmoil on the horizon, that can be a big mistake, Bourne said. “In some cases, you do have to retrench, but in others, it is a golden opportunity. The smart boards and executive teams are the ones who can differentiate between serious risks and great opportunities.” As is always the case, a strong balance sheet will provide the bedrock for a company’s ability to pivot quickly.

One thing the pandemic has taught directors and everyone else is the meaning of quick declines and exponential growth — the rapid, accelerating change that is now part of the lexicon inside and outside the boardroom. “Boards have to get used to that speed and that level of change,” said Annalisa King, board chair at the Vancouver Airport Authority, and a director at Saputo Inc. and North West Co. Digital technology and the widespread use of social media are feeding that acceleration, she added.

External upheavals can actually help a board disrupt what might have been sluggish decision-making, King said. Indeed, the Vancouver

‘WHAT YOU ARE REALLY LOOKING FOR ARE GOOD THINKERS WHO HAVE DIFFERENT EXPERIENCES ON WHICH TO DRAW.’ « ON CHERCHE LA DIVERSITÉ DE VUES QU’ON OBTIENT D’UN VASTE ÉVENTAIL DE PENSÉES ET D’EXPÉRIENCES. » —CORPORATE DIRECTOR IAN BOURNE

« Il y a plus de facteurs d’instabilité aujourd’hui qu’il y en a eu depuis longtemps », constate Ian Bourne, président du conseil de Teine Energy Ltd et ancien administrateur de plusieurs autres sociétés. M. Bourne en connaît un bout sur la question : il était président du conseil et brièvement chef de la direction du Groupe SNC-Lavalin quand celui-ci tentait de se remettre, il y a une décennie, d’un scandale de fraude et de corruption.

En situation constante de bouleversement, les administrateurs doivent être suffisamment agiles pour changer de direction en un rien de temps, explique M. Bourne, tout en maintenant les objectifs de leur organisation. Le nouvel état de choses « invite les administrateurs à faire preuve encore davantage de rigueur et de discipline dans leur pensée stratégique, l’établissement de leurs priorités et la reddition de comptes pour atteindre ces objectifs ».

Une bonne pensée stratégique Selon M. Bourne, le meilleur moyen de se mesurer à un degré accru de complexité consiste à faire en sorte que les bonnes personnes soient assises autour de la table du conseil. « Les conseils ont besoin de gens de qualité, capables de faire face à n’importe quelle situation. » Mais cela ne signifie pas nécessairement qu’il faille installer une nouvelle équipe complète d’administrateurs. Il s’agit plutôt de s’assurer que les personnes en place soient dotées d’une capacité de réflexion à long terme. Il est inutile, toutefois, d’essayer de former un

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‘ALL THESE THINGS ARE ROLLING DOWN THE HILL AND GAINING SPEED. IF YOU ARE INCHING ALONG, YOU ARE PROBABLY FALLING BEHIND.’ « TOUS CES PHÉNOMÈNES FONT BOULE DE NEIGE ET GAGNENT DE LA VITESSE. SI VOUS TRAÎNEZ DE LA PATTE, VOUS SEREZ SANS DOUTE DÉPASSÉ. » —ANNALISA KING, CHAIR OF THE VANCOUVER AIRPORT AUTHORITY

Airport Authority decided to rethink its long-term strategy while in the middle of the pandemic. Though it might have seemed odd to redo a business model during a global travel slump, it was actually a good time to reimagine things and do some free thinking about the future, she said. The airport was able to consider potential disruptors, such as ultra-low-cost airlines and changing cargo patterns, in a more creative light when the turmoil of the pandemic was swirling around it. “We used that point of disruption to get out of the box and think about the strategic risks and how to lean into change.”

King, who is also academic director of the ICD’s strategy oversight course, said climate change is one issue that is going to be highly disruptive and add a constant level of uncertainty in the years to come. If an organization is just keeping up with issues, such as integrated reporting of climate risks or the creation of policies on social purpose, it is probably not moving fast enough. “You need to accelerate some of these things because they are inextricably linked to our shareholder value now,” King said. “All these things are rolling down the hill and gaining speed. If you are inching along, you are probably falling behind.”

Diversity dividends It’s also clear that the old ways that boards operated may no longer work, King said, and this is putting a sharper focus on board membership and composition. Coming upheavals will add even more pressure on organizations to have younger, more tech-savvy directors who can deal with accelerating change. While former CEOs or chief financial officers were once the main candidates for board membership, “now we need CIOs [chief information officers], we need people who understand marketing and social media, people with different skills and different types of diversity.”

King quotes an aphorism from one of her colleagues at the Vancouver Airport, who declared that “diversity is the antidote to disruption.” That is absolutely true, she said. “It allows you to see things from a very wide spectrum. CEOs need people coming at things from different angles” and anticipating what is coming down the road. Board discussions about those issues need to be

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conseil de gens spécialisés afin de traiter certaines crises potentielles de nature particulière, ajoute-il. « Si on tente de préparer un conseil à traiter des enjeux ou des priorités spécifiques, les chances sont qu’une fois cette personne nommée, le monde aura encore changé. » Chez SNC, par exemple, il était clair qu’il fallait une réorganisation du conseil à grande échelle, souligne M. Bourne, mais « ça ne voulait pas nécessairement dire que nous devions attirer tout un groupe de personnes capables de traiter des problèmes d’hier ou d’aujourd’hui. Les gens que nous recherchions étaient ceux qui étaient capables de réagir à n’importe quelle situation ». Les membres les plus efficaces d’un conseil sont ceux qui au cours de leur carrière ont fait face à toute une variété d’enjeux stratégiques et qui offrent « la diversité de vues qu’on obtient d’un vaste éventail de pensées et d’expériences. »

Passer à l’offensive Même s’il est tentant pour une entreprise d’opter pour la prudence lorsqu’il y a de la tourmente à l’horizon, cela peut s’avérer une grosse erreur, soutient M. Bourne. « Dans certains cas, il faut se restreindre, mais dans d’autres il y a des occasions en or. Les conseils et les équipes de direction intelligents sont ceux qui savent faire la différence entre des risques graves et d’excellentes occasions de développement. » S’il y a une chose que la pandémie a enseigné aux administrateurs, c’est la signification d’un déclin soudain et d’une croissance exponentielle – les changements rapides et accélérés qui font aujourd’hui partie du vocabulaire. « Les conseils doivent s’habituer à cette vitesse et à ce niveau de changement », affirme Annalisa King, présidente du conseil de la Vancouver Airport Authority. La technologie numérique et le recours généralisé aux médias sociaux nourrissent cette accélération, ajoute-t-elle.

Les bouleversements externes peuvent, en fait, aider un conseil à interrompre le cours de ce qui aurait pu être une prise de décision mal inspirée, explique Mme King. Ainsi, la Vancouver Airport Authority a décidé de repenser sa stratégie à long terme en plein cœur de la pandémie. Bien qu’il ait pu paraître étrange de modifier un modèle d’affaires au cours d’une chute mondiale des activités de voyage, ce fut en

done at the exploratory stage, she added, before decisions become “baked in,” in the CEO’s mind.

Small or mid-sized companies that want to respond quickly to swift changes or looming catastrophes should try to make better use of board resources, said Greg Peterson, a Calgary-based lawyer at Gowling WLG who specializes in corporate finance, mergers and acquisitions, and private equity. Peterson, who has served on boards of many small and mid-sized firms, said these companies should try to have directors with a wide range of expertise, then draw on their knowledge informally and in small groups when necessary. For example, one or two directors could form a “supply chain committee” when a crisis occurs in that area, and provide advice to management. This also has the benefit of not eating up time for the entire board.

Plan and test Companies of all sizes need a written business continuity plan to pull out of the drawer in case of disaster, Peterson said. These don’t need to be extraordinarily detailed, but they need to set out the steps for response. That might mean something as simple as stating that, in a crisis, the board will meet immediately, a special committee will be established, and the board will have a liaison with a specific individual in the management group. He noted that many companies don’t even have plans for dealing with a hostile

fait un bon moment pour réexaminer les choses et réfléchir librement à propos de l’avenir, dit-elle. L’aéroport a été en mesure d’envisager de potentiels éléments perturbateurs – comme les lignes aériennes à ultra bas prix et les modèles changeants du transport de fret – de façon plus créative, alors que les bouleversements causés par la pandémie étaient dans l’air. « Nous avons utilisé ce point de perturbation pour réfléchir hors des sentiers battus à propos des risques stratégiques et de la manière de s’inscrire dans le changement. » Mme King, qui est aussi directrice académique du cours de surveillance stratégique de l’IAS, affirme que les changements climatiques forment un enjeu qui perturbera fortement l’avenir et ajoutera un niveau constant d’incertitude dans les années qui viennent. Si une organisation se contente de se tenir au courant des enjeux elle ne va probablement pas assez vite. « Il faut accélérer certains de ces dossiers parce qu’ils sont inextricablement liés à la valeur de nos actionnaires, soutient Mme King. Tous ces événements font boule de neige et gagnent de la vitesse. Si vous traînez de la patte, vous allez sans doute être dépassé. »

Les dividendes de la diversité Il est aussi clair que les anciennes façons dont les conseils accomplissaient leurs tâches ne fonctionnent plus, ajoute-t-elle. C’est pourquoi il faut porter une attention accrue à la composition du conseil. Les bouleversements à venir ajouteront une pression supplémentaire sur

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Disruptions that could occur in the not-toodistant future include flooding, forest fires or even another pandemic.

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‘GOOD BOARDS ARE GOING TO PUT THE INFRASTRUCTURE AND THE SYSTEMS INTO PLACE NOW ... [BECAUSE] EVERY COMPANY GOES THROUGH A CRISIS THAT THEY ARE GOING TO NEED TO SOLVE.’ « LES BONS CONSEILS METTENT EN PLACE L’INFRASTRUCTURE ET LES SYSTÈMES NÉCESSAIRES AFIN D’ÊTRE PRÊTS, CAR CHAQUE ENTREPRISE TRAVERSE DES CRISES QU’IL FAUDRA RÉSOUDRE. »

PHOTPGRAPH BY KARSTEN WINEGEART/UNSPLASH

—CALGARY-BASED LAWYER GREG PETERSON

takeover. Instead, they panic and scramble to get legal advice, when they should have a reaction already prepared.

Over all, Peterson said, the key to dealing with potential future uncertainties is to prepare for them. “Good boards are going to put the infrastructure and the systems into place now, for when it happens, [because] every company goes through a crisis that they are going to need to solve.” While management often tends to focus on best-case scenarios, directors need to think a bit like lawyers and consider the worst-case scenarios, Peterson said. “It’s incumbent on directors to be a little bit more pessimistic.”

Robert McFarlane, a director at Economical Insurance and HSBC Bank Canada, and academic director of the ICD’s enterprise risk course, said the pandemic has sharply underlined the need for contingency planning and risk management. “You are ahead of the game if you’ve got plans you’ve thought of beforehand,” he said, noting that boards need to plan even for risks that seem unlikely or infrequent. “How many top-10 lists [of potential risks] included a pandemic 2½ years ago?”

While upheavals are mostly unpredictable, there is big difference between starting from scratch and being able to pull out a well-constructed contingency plan, McFarlane said. The Covid-19 pandemic is a clear example of a low-frequency/high-impact catastrophe, he notes, but there are other disruptions that could certainly occur in the not-too-distant future — for example, flooding, forest fires or another pandemic.

The first step in risk management is scenario planning, McFarlane says. Even though this is a “pretend” exercise, it is a valuable learning experience, and is increasingly practised at the board level.

It emerged about a decade ago as a tool of risk management after

les organisations afin qu’elles se dotent d’administrateurs plus jeunes, versés en technologie et capables de faire face à l’accélération du changement. « Nous avons besoin aujourd’hui de chefs de l’information, de gens qui comprennent le marketing et les médias sociaux, qui offrent des compétences différentes et différents types de diversité. » Mme King cite un aphorisme d’un collègue de l’Aéroport de Vancouver, selon lequel « la diversité est l’antidote à la perturbation ».

C’est absolument vrai, dit-elle. « Elle vous permet de voir les choses d’un très large point de vue. Les chefs de la direction ont besoin de gens qui approchent les choses d’angles différents » et qui anticipent ce qui se produira en cours de route.

Les petites ou moyennes entreprises qui souhaitent répondre prestement à des changements rapides ou à des catastrophes imminentes devraient tenter de faire un meilleur usage des ressources du conseil, croit Greg Peterson, un avocat de Calgary du cabinet juridique Gowling WLG spécialisé en financement d’entreprises, fusions et acquisitions et investissement en capital. M. Peterson, qui a siégé au conseil de plusieurs petites et moyennes entreprises, affirme que ces compagnies devraient essayer de se doter d’administrateurs ayant un large éventail d’expertise et recourir à leurs connaissances de façon informelle ou en groupes restreints le cas échéant. Par exemple, un ou deux administrateurs pourraient former un « comité de la chaîne logistique » lorsqu’une crise survient dans ce domaine et fournir des avis à la direction.

Planifier et tester Les entreprises de toutes tailles doivent s’appuyer sur un plan de continuité des affaires à consulter en cas de désastre, explique M. Peterson. Un tel plan n’a pas à être extraordinairement détaillé,

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‘YOU’RE GOING TO SEE OVER THE NEXT FIVE YEARS A LOT OF STRESS TESTING AND SCENARIO PLANNING RELATED TO CLIMATE CHANGE.’ « AU COURS DES CINQ PROCHAINES ANNÉES, ON VERRA BEAUCOUP DE SIMULATIONS DE CRISE ET DE PLANIFICATIONS DE SCÉNARIOS RELIÉES AUX CHANGEMENTS CLIMATIQUES » ­—CORPORATE DIRECTOR ROBERT MCFARLANE

cybersecurity began looming as a key corporate vulnerability. Stress testing is a “cousin” of scenario planning, McFarlane said, and is increasingly being mandated by regulators in certain sectors, such as financial services. But as potential threats loom on the horizon, this exercise won’t be limited to banks. “You’re going to see over the next five years a lot of stress testing and scenario planning related to climate change.” Indeed, any company that doesn’t have a climate change plan will likely see its cost of capital increase, he said.

Go digital University of Toronto professor David Wolfe, co-director of the Innovation Policy Lab at the Munk School of Global Affairs, says the tumultuous environment resulting from Covid is going to further reinforce the need for companies to embrace digital technology and a low-carbon economy. “The pandemic is a wake-up call” in this respect, he said.

Digital technology proved itself extraordinarily valuable during the pandemic, as companies embraced video conferencing to enable working from home, governments used electronic vaccine certificates, and communications technology allowed people to stay in touch.

“That saved the economy’s bacon,” Wolfe said. In the future, digital technology will be the No. 1 way organizations will be able to deal with

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mais doit décrire les étapes menant à une réponse. Cela peut être aussi simple que l’affirmation que dans un moment de crise, le conseil doit se réunir immédiatement, qu’il faut créer un comité spécial et que le conseil établira une liaison avec une personne spécifique dans l’équipe de direction. Il souligne par ailleurs que beaucoup d’entreprises n’ont même pas de plans de réponse à une prise de contrôle hostile.

De façon générale, affirme M. Peterson, la clé pour faire face à des incertitudes consiste à s’y préparer. « Les bons conseils mettent en place l’infrastructure et les systèmes nécessaires afin d’être prêts, car chaque entreprise traverse des crises qu’il faudra résoudre. » Même si les équipes de direction ont tendance à privilégier les scénarios optimistes, les administrateurs doivent penser un peu comme des avocats et envisager les scénarios les plus pessimistes.

Robert McFarlane, administrateur chez Economical Insurance et HSBC ainsi que directeur académique du cours sur le risque d’entreprise de l’IAS, affirme que la pandémie a brusquement mis en évidence la nécessité de planifier l’imprévu et de gérer le risque. « On est devant la parade quand on a des plans qui ont été pensés au préalable », dit-il, soulignant que les conseils ont besoin de préparer des plans en fonction de risques improbables ou même rares.

Même si les bouleversements sont imprévisibles, il existe une grande différence entre partir de zéro et être en mesure de s’en remettre à un plan d’urgence bien conçu, explique M. McFarlane.

La pandémie de Covid-19 est un exemple clair d’une catastrophe à faible incidence et à fort impact, mais il y a d’autres perturbations qui pourraient sûrement survenir dans un avenir pas si lointain, comme une inondation, des incendies de forêt ou une autre pandémie.

La première étape dans la gestion du risque est la planification de scénarios, indique M. McFarlane. Même s’il s’agit d’un exercice « imaginaire », c’est une précieuse expérience d’apprentissage qui est de plus en plus pratiquée. La planification de scénarios est apparue il y a environ une décennie comme un outil de gestion du risque, après que la sécurité informatique a commencé à figurer comme un élément clé de vulnérabilité pour les entreprises. La simulation de crise est « cousine » de la planification de scénarios et de plus en plus mandatée par les autorités réglementaires dans certains secteurs, comme les services financiers. Mais à mesure que des menaces potentielles pointeront à l’horizon, cet exercice ne sera plus limité aux banques. « Au cours des cinq prochaines années, on verra beaucoup de simulations de crise et de planifications de scénarios reliées aux changements climatiques », prévoit-il.

Le recours au numérique Le professeur David Wolfe de l’Université de Toronto, co-directeur de l’Innovation Policy Lab de la Munk School of Global Affairs, affirme que l’environnement tumultueux résultant de la Covid renforcera la nécessité pour les entreprises d’embrasser les technologies numériques et l’économie à faibles émissions de carbone.

Les technologies numériques se sont avérées extraordinairement précieuses durant la pandémie, alors que les entreprises ont embrassé la vidéoconférence pour permettre le télétravail, que les

the uncertainty that may prevail after the pandemic. His message to directors: “Adopt and apply digital technology as fast as you can.”

The other edge of the technology sword, Wolfe said, is that technological advances are increasingly going to allow competitors to strike at a firm’s core business. Organizations need to try to anticipate where disruptions to their businesses are going to come from. “The disruptors can be another company coming out of the woodwork to eat your lunch, like Amazon disrupting Walmart or TikTok disrupting Facebook. Even the most advanced technology companies are open to being disrupted.”

It is hard to predict where a challenger may emerge, but companies need to be able to pivot quickly if a disruptor does appear out of the blue, he added.

While many directors hope the world will soon return to the “normal” state we left behind in 2019, we are more likely to find ourselves facing changes in social behaviour and economic activity on a scale akin to what occurred after 1945, when the economy moved from a wartime to peacetime footing, Wolfe said. So, we’d better get ready. DJ RICHARD BLACKWELL is a former business reporter at the Financial Post and The Globe and Mail. Over three decades, he covered many sectors, including technology, financial services, media and energy.

gouvernements ont eu recours aux certificats électroniques de vaccination et que les technologies des communications ont permis aux gens de demeurer en contact. À l’avenir, les technologies numériques seront le principal outil qui permettra aux organisations d’affronter l’incertitude qui pourrait prévaloir après la pandémie.

L’autre tranchant de l’arme technologique, poursuit M. Wolfe, est le fait que les avancées technologiques permettront de plus en plus aux compétiteurs de frapper au cœur des activités principales d’une entreprise. Les organisations doivent essayer d’anticiper les zones d’où proviendront les perturbations frappant leurs activités.

Il est difficile de prévoir où un concurrent pourrait se manifester, mais les entreprises doivent être en mesure de réagir rapidement si un élément perturbateur surgit de nulle part, ajoute-t-il.

Même si beaucoup d’administrateurs espèrent que le monde reviendra bientôt à la situation « normale » que nous avons laissée en 2019, il est plus probable que nous devrons faire face à des changements dans les comportements sociaux et l’activité économique à une échelle que le monde n’a pas connue depuis 1945. Nous ferions mieux d’être prêts. DJ RICHARD BLACKWELL a été journaliste au Financial Post et au Globe and Mail. Au fil de trois décennies, il a couvert divers secteurs, dont les technologies, les services financiers, les médias et l’énergie.

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Prescription for change

PHOTOGRAPHH BY OMER YILDIZ/UNSPLASH

Innovative leadership has helped Canada’s health-care sector survive the pandemic.

But as Covid-19 retreats, it leaves a flawed and damaged system exposed. To fix it, policy makers must pay close attention to lessons learned in the fight, Virginia Galt writes AS CEO OF KINGSTON HEALTH SCIENCES CENTRE, David Pichora could never have imagined prior to the coronavirus pandemic that he would build a field hospital on the strength of just a phone call and an e-mail from the Ontario Ministry of Health.

The pace was so frenetic in the early stages of the Covid-19 crisis that the provincial government was bypassing boards of directors and going straight to hospital CEOs with directives: “Thou shalt do this, you are clear to do that. There was no avenue for the board to approve stuff like that, other than me calling up the board chair and saying, ‘Guess what I’m doing now,’” he relates.

“It was a bit disconcerting for all of us,” says Pichora, whose understatement drew a laugh from KHSC board chair Axel Thesberg.

In conversation with Director Journal, Pichora and Thesberg talked about the extraordinary situation they found themselves in as hospitals scrambled to stem the death toll from Covid-19 – and reflected on what they’d learned on the fly.

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With no time for formal board approval, Kingston Health Sciences Centre doubled the capacity of its intensive care unit and accepted the transfer of 150 critically ill Covid patients from the Greater Toronto Area.

‘We paid a very big price to protect our system – people’s businesses, people’s jobs, children’s education, mental health.

These costs are starting to come in. It doesn’t mean we didn’t do the right thing . . . but we can’t do it again.’

—Corporate director Janet Ecker, who serves on the Canadian Medical Association board

PHOTOGRAPHH BY TOWFIQU BARBHUIYA/UNSPLASH (ABOVE)

“From a governance perspective, we thought a lot about how do we continue as a board to exercise our fiduciary oversight responsibility in an environment where very significant changes are being made on a daily, hourly, weekly basis. You didn’t have the luxury of waiting for next month’s board meeting . . . those decisions had to be made very quickly and we, as a board, had to continue to oversee that,” says Thesberg, a veteran corporate director and former managing partner responsible for professional standards and risk management at KPMG Canada.

KHSC put its incident command structure into play, and notes from those daily command meetings – on what decisions had been made and why — were circulated to the board. These decisions included doubling the capacity of the intensive care unit and accepting the transfer of 150 critically ill Covid patients from overwhelmed hospitals in the Greater Toronto Area.

“There were helicopters landing and taking off one after another and land ambulances coming down between Toronto and Kingston. For a few days, Ornge [Ontario’s medical transport system] was actually using a bus, I think a converted Toronto city bus, to drive them down. It was that crazy,” said Pichora, an orthopedic surgeon who was recently reappointed to a new five-year term as CEO of KHSC. The research hospital comprises Kingston General Hospital, Hotel Dieu and the Cancer Centre of Southeastern Ontario.

Deliberations on major strategic issues are less rushed now, Thesberg says, but the pandemic experience demonstrated that change need not proceed at a snail’s pace. “I hope we can learn from it . . . and be more effective in making timely but top-quality decisions, while still exercising appropriate oversight.”

Because of KHSC’s historically strong relationship with provincial Health Ministry officials, the board had some indication of directives that might be coming down. That provided some level of comfort, Thesberg says. Another feature of KHSC’s governance model that served it well was the long-standing practice of including the entire executive team in all board meetings – so directors knew their executives had the skills and agility to make good decisions under pressure when there was no time for formal approval.

Axel Thesberg (left), chair of the Kingston Health Sciences Centre, and president David Pichora worked closely to ensure that the organization could make timely decisions in the early days of the pandemic and still have proper board oversight.

Thinking differently In British Columbia, less than a month after the Surrey Hospitals Foundation’s 2020 fundraising gala, CEO Jane Adams was designated an essential worker, outfitted in personal protective equipment and working directly with medical teams at Surrey Memorial Hospital to ascertain their needs.

Speed was of the essence when the hospital’s executive director asked whether the foundation could pay for some recently approved respiratory equipment that was in short supply. Surrey Memorial was among the first hospitals in Canada to use the new Optiflow monitors, which deliver oxygen to Covid-19 patients in a less invasive way than intubation. The foundation provided cleaning robots as well.

“Our board was wonderful,” Adams says. “We have quite a responsible way of approving equipment, but given that the needs were so profound – and the money was, fortunately, coming in quickly – we

ICD.CA | 27

‘The cracks permeating Canada’s healthcare system are widening, and patient care will continue to suffer’ without a co-ordinated plan to address the glaring deficiencies laid bare by the pandemic, says Katherine Smart, president of the Canadian Medical Association.

needed to move fast. The board put a fast-track process in place.”

At the Hospital for Sick Children (SickKids) in Toronto, the board stood solidly behind CEO Ronald Cohn in the fall of 2021 when he “made the brave and important decision” to enact a vaccination mandate, says corporate director Beth Wilson, a member of the board of trustees at SickKids and vice-chair of the board at Chartered Professional Accountants of Canada. The provincial government’s position at the time was that unvaccinated hospital workers could work if they tested negative for Covid – a policy Cohn deemed too risky because the majority of the hospital’s vulnerable young patients were not yet eligible to be vaccinated.

“Obviously, in a crisis, you are there to support the CEO and team who are making a lot of decisions in ambiguity,” Wilson says. At the same time, it is critical that boards “keep their eye on the long game, ensuring that time and resources are being directed to research and innovation . . . because there is a lot of transformation still to happen.”

The pandemic radically changed the way in-person health services were provided. “House calls” to the homeless – as well as mobile test labs and vaccine clinics in schools, mosques, shopping malls and skating rinks – freed up capacity in acute care hospitals so they could focus on the most urgent medical cases.

“A number of clinical teams came together inside SickKids and pivoted to accept some very sick adult patients into the critical care unit . . . while keeping our kids and their families safe,” Wilson says. “On the social services side, we saw a number of hospitals stepping up and being the voice for some of our marginalized populations. For example, Dr. Upton Allen [a pediatrician] at SickKids, and a number of his infectious diseases colleagues, worked together in the community – hosting town halls and public information sessions to help dispel myths and listen to concerns [about vaccine safety], supporting Black and a number of other populations that have experienced so much racism in the health-care system.”

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Many of the ingenious initiatives across the country were sparked by individual health practitioners who stepped in to fill a need.

Creative actions Leadership came from all levels. Many of the ingenious initiatives across the country were sparked by individual health practitioners who stepped in to fill a need. In Halifax, infectious disease specialist Lisa Barrett, an assistant medical professor at Dalhousie University, set up Canada’s first pop-up Covid testing clinic in a shuttered nightclub. Calgary internist and addiction specialist Monty Ghosh worked with social service agencies and local health authorities to develop screening programs and strategies to combat outbreaks in the city’s downtown shelters.

Covid was not the only challenge. In November, 2021, Surrey Memorial Hospital’s medical director Greg Haljan led an ICU team in a mad dash to treat a 14-year-old mudslide victim who needed a level of care the 10-bed hospital in Hope, B.C. could not provide. As flood waters rose, police escorted Haljan and his colleagues through back roads that had not yet been swamped, before handing them off to a CN Rail crew that took the team the rest of the way by rail. The boy was airlifted to a larger centre when the weather cleared.

Rethinking the future There are countless examples of aboveand-beyond heroics, but the pandemic has strained Canada’s fragile, fragmented

health-care system to the limit and the pace is not sustainable, says Whitehorse pediatrician Katharine Smart, president of the Canadian Medical Association. Health-care professionals who have carried the underresourced system by working long shifts in hospitals and community clinics are “beyond exhausted.” And while the worst of the coronavirus crisis appears to be over – due to high vaccination rates – it will take years to clear the backlog of surgical and other procedures that were postponed because of capacity constraints, Smart says.

“The cracks permeating Canada’s health-care system are widening, and patient care will continue to suffer” without a co-ordinated plan of action by the federal, provincial and territorial governments to address the glaring deficiencies laid bare by the pandemic. Constantly changing public health mandates – lockdowns, followed by premature reopenings, followed by lockdowns again when case counts rose – hampered the recovery. Burnout and resignations have led to severe staffing shortages, she says.

The CMA has partnered with policy officials from all levels of government to try to break down silos and help develop a cohesive, long-term plan to build a more resilient national health-care system

with the capacity to handle future surges in demand, says corporate director Janet Ecker, a former Ontario finance minister who serves on the CMA board. “That’s not easy to do in the current political environment.”

Nonetheless, the working relationships formed between political and medical leaders during the pandemic present a prime opportunity to find common ground and explore new health policy approaches.

Lockdowns were imposed in the early stages of the pandemic, before vaccines were widely available, to protect the public, Ecker says, but restrictions in the later stages were primarily imposed to protect overburdened ICUs. After two years of restrictions, a pandemic-weary public is demanding of governments: “‘What’s the plan, guys?’

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PHOTOGRAPHH BY PEOPLEIMAGES/ISTOCK

Despite the tragedy of the pandemic, there have been many advances in the sector, including greater collaboration and virtual care.

children’s education, mental health. These costs are starting to come in. It doesn’t mean we didn’t do the right thing . . . but we can’t do it again,” Ecker says.

A rare opportunity for change Despite the tragedy of the pandemic, there have been many advances in the sector. SickKids’ Wilson points to the collaboration and breaking down of silos between the health sector and social services serving children in Ontario as one example. Virtual care is another. While the technology doesn’t work for an orthopaedic surgeon, there are fields where in-person visits are not always required – as long as quality issues are satisfied, says KHSC’s Pichora.

There is much to build on coming out of this pandemic, say health policy strategists Anne Wojtak and Neil Stuart, adjunct professors at the University of Toronto’s Institute of Health Policy, Management and Evaluation. They have been tracking “the leadership lessons we are collectively amassing in real time.”

British Columbia, Alberta, Ontario and Nova Scotia had already adopted the concept of integrated regional health teams, which aim to better co-ordinate the range of services provided by family physicians, hospitals, long-term care homes and home-care providers.

The advances have been breathtaking, says Wojtak, who leads East Toronto Health Partners, which was established as one of the first Ontario Health Teams in 2019.

Infectious diseases specialists from Michael Garron Hospital fanned out into long-term care homes and schools. Family doctors spearheaded the region’s vaccination program, enlisting the support of community leaders to reach populations at risk of falling through the cracks. Chinese-Canadian physicians teamed up to establish vaccination clinics to serve elderly patients in their mother tongues of Mandarin and Cantonese. And local social service agencies jumped in with initiatives such as pop-up food banks for residents attending clinics in less prosperous areas, Wojtak relates.

In the early days, when personal protective equipment was in short supply, Michael Warner, a critical care physician at Michael Garron Hospital, “took it upon himself to call local veterinarians, dentists and businesses to ask if they had PPE to donate,” Wojtak adds. And to reserve medical-grade masks for health-care workers, a call went out to the community to sew face masks for patients and visitors. A pattern was posted on the hospital’s website. “I think we had over 300,000 masks sewn in the first six months.”

The call has also gone out to heath policy researchers across the country to document and share their observations, says Wojtak, who collaborated with Stuart on a recent article – “Resetting the Future of Healthcare Leadership” – for the publication Healthcare Quarterly.

“We cannot waste the once-in-a-generation opportunity that has been presented to us to accelerate change through the new partnerships, structures and processes we have created almost overnight with this global pandemic,” they say. DJ VIRGINIA GALT, a former business and education reporter for The Globe and Mail, covers legal, education and management issues for a number of publications.

ICD.CA | 31

CREATIVE

BY DESIGN

PHOTOGRAPH BYRONSTIK/ISTOCK

Backed by the board, the process of design thinking can help companies peg problems and keep the business fresh, Jeff Buckstein writes

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ICD.CA | 33

THE OVERSIGHT ROLE of the board continues to expand in scope and complexity as corporations adopt new approaches to survive and thrive amid tumultuous global challenges and stiff competition. One popular method embraced by a growing number of organizations is the step-by-step problem-solving process known as “design thinking.”

Design thinking complements a traditional business model by adding a creative and entrepreneurial approach that encourages employees to think strategically and experiment with new ideas, says Salman Mufti, an associate professor at the Smith School of Business at Queen’s University in Kingston.

For any organization to remain successful and prosperous today, it must use design thinking to help its business model evolve, says Angèle Beausoleil, an assistant professor of business design and innovation at the University of Toronto’s Rotman School of Management and vice-chair of Telefilm Canada. “That means rethinking, reimagining and questioning ‘how well are you serving your customer?’”

Businesses with “top-down, profit-driven” plans focused on chasing quarterly revenue targets need to shift from short-term “transactional thinking” to longer-term strategies that focus on customer acquisition and retention, she says.

Design thinking leads organizations to a set of important questions such as: “What is our market-product fit? Who are our current clients or customers? What do they need and want? And how can we better offer and deliver our product, service, program or experience, so that [clients’] needs are met?” Beausoleil says.

Getting creative “What happens in the boardroom has greatly changed in the last decade,” says Christa Dickenson, CEO of Telefilm Canada, a Crown agency headquartered in Montreal.

Board members and executives now need to embrace a learning culture, at a time when radical thinking and questioning the status quo is absolutely necessary. “To do so, you need critical thinking. You need design thinking, coupled with stringent process-management capabilities within the organization. They go hand in hand,” she says.

Design thinking can improve a traditional business model by helping an organization challenge the status quo and rethink old habits, Dickenson says.

Board members might, for example, engage in discussion and debate about existing internal practices, such as whether to reduce the corporation’s strategic planning cycle, or allow for shorter sprints to test new product or service ideas, Beausoleil adds.

Design thinking is “a disciplined, human-centred approach to creative problem solving,” says Jared Lee, principal with Juniper Strategic Advisers and a faculty member of the McGill Executive Institute of the Desautels Faculty of Management at McGill University in Montreal.

“People think [design thinking] is all intuition. This is all just throwing ideas around without any structure, which is entirely untrue. There is actually quite a lot of structure in design thinking,” he says.

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New corporate culture Design thinking democratizes an organization’s approach to innovation and problem solving by recognizing that great ideas can come from any of the people associated with it, Lee says.

Rather than impose a top-down decision-making structure, corporate leaders can take a step back and realize that many in their work force “are on the front lines closest to the problems that are faced.

They’re closest to that complexity, which is the rich source of breakthroughs,” he says.

Potential benefits can flow right through to the bottom line to improve corporate profitability, he adds. For example, design thinking can find creative ways to produce value and boost revenue. “I have seen clients come out of design-thinking projects with ideas that they move forward and eventually take to market,” Lee says.

On the opposite side of the ledger, examining internal processes with a design-thinking lens can streamline productivity and remove obstacles, thereby reducing cost, he says.

“But more importantly – and this is the client speaking as to their most important takeaways — they have discovered a new culture for themselves and opened up lines of communication through this multidisciplinary, egalitarian, iterative, team-based approach,” Lee says.

For example, by connecting people from finance, operations and marketing in a way that they were never connected before, “all of a sudden, these natural connections start to happen in ways that go beyond the immediacy of the project and ideas start to flow more freely,” he says.

Design thinking can also include some external stakeholders, such as customers or suppliers.

“If you bring in people with completely different backgrounds and domain expertise, they’re going to provide something that you normally wouldn’t get in a traditional silo type of environment,” Mufti says.

Creating a corporate culture where diverse groups of people can work well with each other “will, I think, give you a bit of an edge over competitors,” he says.

‘PEOPLE THINK [DESIGN THINKING] IS ALL INTUITION. THIS IS ALL JUST THROWING IDEAS AROUND WITHOUT ANY STRUCTURE, WHICH IS ENTIRELY UNTRUE. THERE IS ACTUALLY QUITE A LOT OF STRUCTURE IN DESIGN THINKING.’

A worthwhile commitment Many organizations are good at the initial stages of design thinking.

They will experience excitement around trying out a new, innovative idea. The challenge is how to ingrain the practice within the organization in a manner that will increase profitability, Mufti says.

For example, design thinking may help identify a particular customer problem, which then leads to a prototype-solution that is often developed by a team working independently. The challenge is to finalize and incorporate this solution into the enterprise-wide operations and technology.

A lifecycle-oriented process, supported by money and people, is all needed to formally integrate these independently developed solutions into the mainstream business. Top-level support is also needed to turn an idea from a concept into something tangible for the company.

“One of the challenges I see, especially at the board level, is that they are looking for big innovations that make a big bang and create a lot of excitement. Design thinking is, in general, more about a series of smaller innovations which, if done and embraced properly, can add up to a big innovation over a period of time,” Mufti says.

Implementing design-thinking innovation requires an upfront investment of time and energy, and an allocation of responsibility in an effort to take advantage of these opportunities, Lee says. Some organizations are hesitant to do this because design thinking carries a cost but doesn’t guarantee a return on investment.

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“Many of the benefits of design thinking, especially during early deployments, are intangible, such as improved clarity of understanding between an organization and its clientele, increased enthusiasm and energy in the workplace, new connections for learning, and collaboration across an organization. Intangibles are inherently hard to measure,” Lee says.

This is where board support and guidance are extremely valuable.

Within companies, there is often a perfection mindset that encourages immediate success when developing a new product or service. But with design thinking and other similar methodologies, early failure should be allowed in order to obtain feedback and learn quickly about what doesn’t work, Mufti says.

The biggest challenge for board members and senior executives, therefore, is to create an environment where employees are not pressured to aim for perfection, he says.

Board members need to avoid what Beausoleil refers to as “design thinking theatre,” which pays lip service to being customer-centric and to giving employees a chance to advance new ideas, instead of really encouraging a creative organizational mindset.

For design thinking to work properly, board members should understand, and ensure that management also understands, that design thinking is a process that might be more qualitative and open-ended than the traditional processes they are used to, Lee says.

For example, it might mean committing to a pilot project “without necessarily having clarity of ‘How is this going to scale to market? What is our return on investment going to be? How long is this going to take? What is the answer going to be?’” he says.

“This is a really fun way of working, if you embrace the ambiguity that comes with it and roll up your sleeves and really dive into it,” Lee says. DJ

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Christa Dickenson, CEO of Telefilm Canada, a Crown agency headquartered in Montreal, says design thinking helped her organization overcome hurdles thrown up by Covid-19.

The pandemic had a devastating effect on the film industry; cinemas across Canada closed and hundreds of productions were interrupted or stopped.

“So, Telefilm worked diligently with the Government of Canada to create and administer an insurance coverage mechanism to enable the production industry to get back on its feet. That quick thinking, the willingness to collaborate, saved 200 camera-ready projects worth $1.1-billion, supporting 20,000 jobs in fiscal 2020-21.

“That is significant. The creative thinking exhibited there was that we could get into an entirely different service offering – insurance — to come up with a solution so that our industry could resume operations,” she says.

Not only did the industry’s Covid-19 insurance fund, launched in October 2020, play a critical role in its survival, but it also provided Canadian production firms with a competitive edge on the world scene, Dickenson says.

“The lack of Covid insurance for production sets was felt worldwide, and Canada was one among few countries to pivot in 2020 to overcome this hurdle.”

-JB

PHOTOGRAPHY AYDINYNRK/ISTOCK (TOP LEFT), MATTEO BERNARDIS/UNSPLASH (ABOVE)

Design thinking in action at Telefilm Canada

1,100+

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The climate has changed PHOTPGRAPH BY MAX LAROCHELLE/UNSPLASH

Achieving net-zero emissions by 2050 requires immediate action by organizations and their boards, Guy Dixon writes

BRUCE LOURIE is suddenly getting a lot of calls from out of the blue.

Business leaders want answers about carbon regulation and the uptake of newer fuels. “What’s going on with hydrogen?,” they ask.

“Can I use biodiesel?” As Canada and much of the rest of the world move toward net-zero greenhouse gas emissions by 2050 (and in some countries, even sooner), many are seeking insights from people like Lourie, who is a familiar face on the boards of different climate groups and president of the Ivey Foundation in Toronto, which supports projects to advance a low-carbon economy in Canada.

“It’s clear that something has changed quite significantly,” he says.

The broad consensus among environmental experts and policy makers in Ottawa is that businesses and their boards, if they haven’t done so already, need to start formulating and adopting climate-change strategies immediately — as in, right now, at their next board meetings — or they will be putting their organizations at risk.

Net-zero emissions by 2050 is the law of the land. The passage of the Canadian Net-Zero Emissions Accountability Act last June creates a series of national emissions benchmarks every five years, starting with 2030 and leading to net zero by 2050. (Net zero is a state when

the greenhouse gases being released into the atmosphere are offset by methods of removing them.) This is no longer about small reductions, with companies asserting that they need more policy guidance, or boards shrugging off multidecade targets as being outside their purview. The act sets in motion a massive succession of reduction targets to shift the economy away from greenhouse gas emissions.

And although some technologies, such as carbon capture and storage, may be used to offset emissions, these solutions should be seen more as a stop-gap for only the most difficult areas of greenhouse gas reduction, according to the Net-Zero Advisory Body, which was established by the act to advise Ottawa. (The efficacy of offsets is hotly debated, as many argue that

ICD.CA | 39

Fiduciary duties There is a lot for boards to assess. The common refrain is that everything changes with net zero, from policy and regulations to business models big and small. It will also likely mean changes in the fiduciary duties of boards, with an additional layer of responsibilities. Yet, as Lourie and others note, it’s an opportunity for those who are ahead of the game.

As emissions targets are rolled out, along with stipulations on how they will be implemented and measured, boards and other governing bodies will need to determine how the targets will affect their businesses. Ticking off a few boxes, with some well-intentioned but immaterial environmental, social and good governance goals, won’t suffice, Lourie says.

“For example, as a board, the obligation would be to actually have different analyses done of what your climate risk might be under different scenarios. If you’re a board and simply say, ‘Oh well, that’s too far down the future. We don’t think that’s material,’ that’s insufficient,” he says, noting reports on director accountability and fiduciary duty by the Canada Climate Law Initiative.

It’s also expected that the costs and benefits of net zero and climate change on core operations will need to be reported front and centre in financial statements. In a world pushing to end emissions, people might be less likely to invest in companies or fund organizations in which managers and board members are sitting on their hands.

Board decisions about capital investments should be made looking at the longer-term picture, Lourie says. “And frankly, I put carbon capture in this category.” If you’re making multibillion-dollar investments in carbon capture and you’re not expecting a return on your investment for a decade, is it still a wise investment, he asks, especially if that’s the point when alternative energy production starts outpacing oil and gas.

“So, it’s essentially demonstrating that you have looked at different future scenarios. You understand the risk of those different investments. You’re reporting publicly on those things,” Lourie says.

The trouble is, hardly any companies are doing that yet, he notes, and that’s a problem for analysts and investors.

Coming clean A movement toward greater climate risk disclosure has powerful backing. Mark Carney, who served as the governor of both the Bank of England and the Bank of Canada, put the issue on the global agenda in 2015 with the creation of the Task Force on Climate-Related Financial Disclosures. The international body is developing recommendations for more effective climate-related reporting.

“If you talk to anyone in the finance sector, they basically say, ‘We need information, we need data.’ And that therefore means that

40 | DIRECTOR JOURNAL

businesses need to disclose both their current financial exposure, but also their direct carbon profiles. So, mandatory disclosure is, I think, one of the very first steps that needs to be taken,” Lourie says.

And there can’t be loopholes, he adds.

Greater transparency can’t be allowed to mean that companies are granted greater openness in explaining why they can’t be transparent for competitive reasons. “These disclosures have to be embedded in financial reporting. There have to be tools created so that financial analysts will be able to directly see climate disclosure or climate risk as one of the measures of the financial performance of a company,” he says.

The framework After decades of talk and inaction, it’s easy to think of the net-zero goal producing a vacuum in which all sides – the electricity industry, oil and gas producers, renewable energy producers, and countless other businesses from all corners, to say nothing of the general public – jump in to offer solutions haphazardly.

Yet, Rick Smith, Toronto-based president of the Canadian Institute for Climate Choices, views Canada’s net-zero law as constructive. “It’s the first time there is an architecture, a framework, for this discussion. And the first big item on the federal government’s to-do list is the launch of an emissions reduction plan for 2030 that’s due out by the end of March... and that is a very different place than where we were this time last year,” he says.

“For instance — and this is quite different and new — the emission-reduction plan is going to have sectoral emission targets.

So, all of a sudden, we’re going to take this big number of necessary carbon reduction from the federal level, and we’re going to start to disaggregate it into: What contribution does that industrial sector over there need to make to the overall reduction?

What contribution does that province over there need to make? And so, different companies, different sub-national jurisdictions, are going to have targets that they need to deliver on over the next year, five years, 10 years, and that’s the way we’re going to get there [to net zero],” Smith says.

PHOTPGRAPH BY CHRIS LEBOUTILLIER/UNSPLASH

offsets only prolong the problem and don’t eliminate greenhouse gas production quickly enough.)

The first major target toward net zero in Canada is a roughly 40-to45-per-cent reduction by 2030 (from 2005 levels, improving upon an earlier Paris Agreement target). The government’s plan for achieving that goal is scheduled for release in late March.

ICD.CA | 41

Regulators should require companies not only to report the emissions produced from their operations and the emissions produced from the power they use, but also the emissions caused by the end use of their product, says Keith Stewart of Greenpeace Canada.

The hydrogen option Different paths on how to get there will inevitably be debated, with people championing different courses of action. Take hydrogen, for instance. As electric transportation grows en masse, it’s expected that hydrogen fuel will be necessary for long-haul trucks and ships that are too big for battery power. Yet, despite the global push for investment in hydrogen, it could still remain a niche fuel. There’s also a challenge in building expensive hydrogen production facilities and infrastructure if there’s insufficient demand.

Then there’s the question of what kind of hydrogen. “Green hydrogen” production uses renewable energy and electrolysis to extract hydrogen from water. “Blue hydrogen” comes from natural gas and will require carbon capture, leading to the widespread view that green hydrogen should be the goal, even if blue hydrogen from some sources may be more readily available in the short term.

Dan Wicklum, the Calgary-based CEO of the charity Transition Accelerator, a research group that has studied hydrogen production and distribution (and is chaired by Lourie of the Ivey Foundation), prefers not to think in terms of blue or green. “We just need a hydrogen infrastructure for a hydrogen economy, and then market forces will take care of the carbon intensity of the hydrogen over time,” Wicklum argues. Currently co-chair of the Net-Zero Advisory Body, his background has been in academia, government and industry. Previously, he served as CEO of the oil and gas industry’s technology-sharing group Canada’s Oil Sands Innovation Alliance.

“There are lots of, I would say, environmental group sources that have a different story, but the independent analysis does not support their arguments. It supports the notion that blue hydrogen, hydrogen from upgrading natural gas, using the latest technologies, can do really, really well,” he says.

Keith Stewart, senior energy strategist at Greenpeace Canada in Toronto, disagrees, saying that a significant portion of the fossil fuel used in blue hydrogen production goes toward running the carbon capture, thereby only continuing the dependence on digging up fossil fuels.

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“They are figuring that sometime between 2025 and 2030, green hydrogen will be cheaper than blue,” Stewart says. “But if you are going to build the infrastructure for blue hydrogen, which is huge, it only makes sense to do that if you’re running it for 30 or 40 years.” That simply extends the life of the fossil fuel infrastructure system, he says.

Regulators should require companies not only to report the emissions produced from their operations and the emissions produced from the power they use, Stewart says, but also the emissions caused by the end use of their product, such as the exhaust from our tailpipes. The Canadian Securities Administrators is currently looking into this issue.

The debate will continue, as new reduction targets are announced and public calls for a giant reset intensify. For boards and governance bodies, “a lot of work needs to be done in terms of transparency, data collection and data analysis, [and] data comparability,” says the Ivey Foundation’s Lourie. “And this is where smart businesses and smart boards will be able to get ahead of the game.” DJ GUY DIXON is a Toronto-based writer and was, for many years, a reporter at The Globe and Mail, where he covered business, the arts, and often the intersection between the two.

ICD DIRECTORS ON THE MOVE

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

Marie-Josée Gagnon, ICD.D

DIRECTOR ONTARIO WOUND CARE

Mary Cameron, ICD.D

DIRECTOR CHAMBER OF COMMERCE OF METROPOLITAN MONTRÉAL

CHAIR HABITAT FOR HUMANITY INTERNATIONAL

Bonnie L. Andriachuk, ICD.D

Mel Leiderman, ICD.D

Barbara Kieley, ICD.D DIRECTOR RETIREMENT HOMES REGULATORY AUTHORITY

Christine Ozimek, ICD.D

DIRECTOR ALBERTA MOTOR ASSOCIATION REGIONAL ADVISORY BOARD

Government

Colin P. MacDonald, ICD.D

DIRECTOR RETIREMENT HOMES REGULATORY AUTHORITY

CHAIR ALBERTA PENSIONS SERVICES CORP.

Heather Stamp Nunes, ICD.D

Robert Falconi, ICD.D

DIRECTOR MUSICNL

VICE-CHAIR ONTARIO NORTHLAND TRANSPORTATION COMMISSION

Marie-Josée Gagnon, ICD.D

Alan Spacek

Leonard Pecore, ICD.D

CHAIR ONTARIO NORTHLAND TRANSPORTATION COMMISSION

DIRECTOR MUSICNL

Sharleen Ahmed, ICD.D

DIRECTOR CAPSANA

Geoff Davis, ICD.D

DIRECTOR EXHIBITION PLACE

CHAIR CHOICES FOR YOUTH

David Tsubouchi

Tashia Batstone, ICD.D DIRECTOR INTERNATIONAL FEDERATION OF ACCOUNTANTS

Jay Hira CHAIR MARCH OF DIMES CANADA

Hélène Fortin, ICD.D

Paulina Hiebert

G. David Cole, ICD.D

AUDIT COMMITTEE MEMBER DEPARTMENT OF JUSTICE

GOVERNOR TREZ CAPITAL

DIRECTOR CUBICFARM(R) SYSTEMS CORP.

Hélène Fortin, ICD.D

TRUSTEE BSR REIT

AUDIT AND OVERSIGHT COMMITTEE MEMBER SENATE OF CANADA

Robert Plamondon, ICD.D AUDIT AND OVERSIGHT COMMITTEE MEMBER SENATE OF CANADA

Anne-Marie Vanier AUDIT COMMITTEE MEMBER INNOVATION, SCIENCE AND ECONOMIC DEVELOPMENT CANADA GOVERNMENT OF CANADA

Denise Hamilton, ICD.D DIRECTOR ALBERTA PENSIONS SERVICES CORP.

Medical & Healthcare

Teresa Neto, ICD.D

Metals & Mining Rick Howes

DIRECTOR ANACONDA MINING INC.

Glenn Mullan, ICD.D CHAIR AZIMUT EXPLORATION INC.

Cathy McLay, ICD.D DIRECTOR KARUS GOLD CORP.

Diversified

Paul Hames, ICD.D

Judith Athaide, ICD.D

Consumer

Chitwant Kohli, ICD.D

DIRECTOR TARION WARRANTY CORP.

DIRECTOR AURORA CANNABIS INC.

Oil & Gas

Firdos Somji, ICD.D

Barbara Anie

Bernie Kollman, ICD.D TRUSTEE MELCOR REAL ESTATE INVESTMENT TRUST

DIRECTOR HSBC BANK CANADA

Andrea Nicholls DIRECTOR HSBC BANK CANADA

Professional Association

Emilio Boulianne, ICD.D

Guy Manuel, ICD.D

Sheila Leggett, ICD.D

CHAIR NEUPATH HEALTH INC.

Real Estate

Fiona Macfarlane, ICD.D

Energy & Power

Dianne Carmichael

DIRECTOR GREENFIRST FOREST PRODUCTS INC.

Banking & Financial Services

DIRECTOR CPA CANADA

DIRECTOR KIWETINOHK ENERGY CORP.

AUDIT COMMITTEE MEMBER CANADA BORDER SERVICES AGENCY GOVERNMENT OF CANADA

CHAIR NOVOLABS LTD.

DIRECTOR FEDERATED COOPERATIVES LTD.

DIRECTOR CIELO WASTE SOLUTIONS CORP.

Natural Resources

Trevor Stuthridge, ICD.D

Maureen Howe DIRECTOR FREEHOLD ROYALTIES LTD

Technology

Kulvir Singh Gill, ICD.D DIRECTOR WINDFALL GEOTEK INC.

Industrial

CHAIR LOCATIONS D’OUTILS GM

Lesley Antoun Director

WAINBEE LTD.

Insurance

Bonnie Andriachuk, ICD.D DIRECTOR ALBERTA MOTOR ASSOCIATION INSURANCE CO.

Consumer Products & Manufacturing Heather D. Ross, ICD.D ADVISORY BOARD MEMBER ATLANTIC PACKAGING PRODUCTS

Send your board appointment publication requests to: Sheldon Mahabir, Director of Member Engagement, smahabir@icd.ca ICD.CA | 43

BY Shirley Won

Why risk is so difficult to manage In his new book, Risk: A User’s Guide, retired U.S. Army general Stanley McChrystal outlines 10 risk control factors that can help companies better respond to crises.

RETIRED FOUR-STAR U.S. Army general STANLEY McCHRYSTAL spent nearly four decades managing combat risk. His last assignment was top commander of the U.S. and international forces in Afghanistan. He is probably best known, however, as a leader of the Joint Special Operations Command [JSOC], an elite counterterrorism unit. He is credited with the capture of former Iraqi leader Saddam Hussein in 2003, and the 2006 killing of Abu Musab al-Zarqawi, head of al-Qaeda in Iraq. Since

44 | DIRECTOR JOURNAL

retiring in 2010, he co-founded McChrystal Group LLC, a consulting firm applying military strategies to the corporate field, and has been teaching a leadership course at Yale University. His latest book Risk: A User’s Guide, which he co-wrote with Anna Butrico, offers a system for detecting risk and how to respond to it. Director Journal’s Shirley Won asked McChrystal how risks get ignored, why true diversity is important for boards of directors, and how he came to eat one meal a day.

RECOMMENDED READING

ICD.CA | 45

‘THE RISK OF A PAN­D EMIC, SUCH AS COVID-19, WAS CERTAINLY WELL KNOWN, BUT DEALING WITH IT GLOBALLY AND, PARTICULARLY IN THE U.S., WAS ABYSMAL.’ Why did you write a book about risk?

My experience has been in the military and 12 years in business. In the military, we had processes to calculate and mitigate risk, but the execution was more often problematic.

[Outside of the military], the risk of a pandemic, such as Covid-19, was certainly well known, but dealing with it globally and, particularly in the U.S., was abysmal. It was the same in 2005 with Hurricane Katrina in New Orleans, and financial crises too. Theoretically, we should be able to deal with these risks effectively, but don’t. We fixate on trying to predict the exact risk that will arise, its timing, or how to avoid it. What we need to do is develop the ability to deal with risks as they appear.

You suggest there are 10 “risk control factors” that organizations should strengthen to respond to any crisis or risk. As former head of the JSOC, how did you deal with communication – one of these factors — to capture al-Zarqawi?

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If you watch a movie about counterterrorism, you see bearded commandos with fancy weapons who kick open doors. That is absolutely the narrowest part of what happens because it requires intelligence gathering and co-ordination. Inside our forces, we had elite organizations – Delta Force, SEAL Team 6, Rangers and others. Instead of a dream team where everybody is co-ordinated, we had this siloed group that didn’t co-operate effectively. When I took command of the counterterrorist forces in 2003, we were dispersed across 27 countries at 76 bases, and we had to co-ordinate that network daily.

Fortunately, we had this emerging technology, which we hadn’t used even five years before, and that allowed us to connect more people easily using secure video-teleconferences. But the bigger change was cultural.

You can have technology, but absent the imperative and willingness to change and start to communicate, it doesn’t happen. We got that going and it helped to capture al-Zarqawi and we killed him.

Narrative is also another risk control factor. How did technology giant Google, a unit of Alphabet Inc., fail on that front?

Narrative is extraordinarily powerful because it is how we define ourselves and drives our behaviour. Early on, one of Google’s team members suggested using “Don’t be Evil” as a slogan. The problem was that the perceptions of evil varied. When Google won a U.S. Department of Defence contract called Project Maven in 2017, it was perceived as evil by some employees [who left the company], but not by Google leaders.

The question is not whether Project Maven was evil or not, but rather companies’ need to constantly look at their narrative, and make sure that it reflects who they really are.

Diversity, you say, can help strengthen any organization but this goal also carries risks.

How does that apply to boards of directors?

We often think that if we have people of different genders and races on a board, that we are going to have diversity. What we really

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the enemy. What you are trying to do is get a more realistic response to your plan or to test your plan for flaws. Some years ago, our firm did a war game with Scotts Miracle-Gro, a lawn and garden company which sells seeds and fertilizer. A 10-week spring selling period determines its success for the year. We wanted to find what happens when you don’t have the right amount of product at the right place; when your distribution isn’t good, and what happens if a competitor says that Scotts’ grass seeds have a negative effect on animals, which may be misinformation or intentional misinformation. What Scotts did afterwards was modify ways that it distributed its products that year. It was faster in adapting to marketplace changes than its competitors, and kept building market share. Big organizations typically get sluggish, and are slower to respond than smaller, more agile ones. You need to build up this ability to be adaptable.

You are known for eating one meal a day.

Is this your way to reduce risk?

need is diversity of perspective. That was a failure at blood-testing startup Theranos [now shut down amid allegations of fraud].

Elizabeth Holmes, its founder, brought together a board that had the perception of great competence, or people with great track records. The problem was that they didn’t know much about health care and didn’t do enough due diligence to see if Theranos could do what it was claiming to do. In my case, I was put on the board of Deutsche

Bank USA for two years because I wasn’t a banker. I could ask stupid questions, or ones that a set of bankers wouldn’t ask because of similarity of thought and background.

You suggest that war games, best known in military circles, can help mitigate risk in business. Can you give an example?

In a war game, you typically have a plan.

In the military, for example, it could be to invade Europe with some people playing

About 40 years ago when I was a lieutenant, I felt I was getting fat. I am not disciplined enough to eat three, limited-portion meals a day. It was better to defer gratification until dinner. It’s habitual now.

After I get up in the morning, I work out and put off eating until evening. It’s not for everybody, but it gives me a rhythm to life.

I weigh about the same as when I entered West Point in 1972. I think that, when you have discipline in what you do and make yourself strong, you reduce risk. If you are overweight, smoke or drink too much, you increase your health risk. That’s obvious, but it is more insidious. You also increase the risk that you may not be as effective in business or whatever. In the military, how you are perceived by your soldiers is a lot about whether they see you as a disciplined leader — personally disciplined and not just discipling them. So, I do think it does reduce risk. Still, if someone invites me to a business lunch, I will eat because I don’t want to be rude. Because I sort of famously don’t eat lunch, a lot of people don’t invite me. It’s become, I guess, part of my identity in how I view myself – my narrative – and how others view me. DJ

ICD.CA | 47

GOVERNING WITH ICD NATIONAL DIRECTOR CONFERENCE MAY 5, 2022 I 10am-5pm EDT ONLINE Join the ICD for a dynamic day featuring renowned speakers and governance experts engaging in important conversations addressing how directors must embrace challenges and change to lead thriving organizations through a rapidly evolving world.

2022 CONFERENCE KEYNOTE SPEAKERS

DOMINIC BARTON

DR. LINDA A. HILL

Global Managing Partner Emeritus, McKinsey; Past Canadian Ambassador to the People’s Republic of China; Incoming Chair, Rio Tinto

Wallace Brett Donham Professor of Business Administration; Faculty Chair, Leadership Initiative, Harvard Business School

AT A GLANCE 10:00 AM I WELCOME KEYNOTE ADDRESS

CULTIVATING AND LEVERAGING COLLECTIVE GENIUS FOR INNOVATION – Dr. Linda A. Hill

GOVERNING THE 2020s CORPORATION The Meaning of Corporate Performance in 2022 Governing the CEO Impacting Investment and Shareholder Engagement

2022 CO-CHAIRS RAYMOND CHAN CPA, CA Director, TELUS Corporation

KEYNOTE ADDRESS

COURAGE AND COMPLEXITY IN THE BOARDROOM – Dominic Barton

BUILDING AN INCLUSIVE ECONOMY Board Governance and the Importance of Economic Reconciliation Beyond the Rhetoric • Defining Canada’s Diversity Narrative • Inclusion in the Boardroom • What will it Take?

ROBERTA L. JAMIESON O.C., IPC Director, Deloitte Canada, Royal Bank of Canada; Co-Chair, Indigenous Advisory Council, CN Rail

GOVERNING A SUSTAINABLE FUTURE Net Zero Changes Governance The New World Order of Sustainability Reporting Gigatrends and the Drive to Net Positive

5:00 PM I CLOSING REMARKS

COLLEEN JOHNSTON FCPA Chair, Unity Health Toronto, Q4; Director, McCain Foods, Shopify, Private Debt Partners, Shaw Festival

MORE SPEAKERS TO BE ANNOUNCED. *Agenda and timing are subject to change.

REGISTER TODAY AT ICD.CA/CONFERENCE

LEAD SPONSORS

PREMIUM SPONSORS

CONFERENCE PATRON SPONSORS

To inquire about sponsorship opportunities, please contact Michael Weisdorf, Director, Sponsorships at mweisdorf@icd.ca or 416.593.3337.

PARTING SHOT

Photos of the Russian military’s invasion of Ukraine and its efforts to lay waste to Kyiv and other major cities bear an eerie resemblance to those from the siege of Leningrad during the Second World War. At least 670,000 civilians and soldiers died from starvation and ceaseless bombardment as German and Finnish soldiers surrounded and attacked Leningrad for almost 2½ years. Adolph Hitler had vowed to wipe Leningrad “off the face of the earth.” But he underestimated the will and resources of the besieged.

Soviet forces eventually broke through the encirclement in 1943 and drove back the enemy in January 1944, taking advantage of failing German troop morale and poor communication with the Finns. For its courage and ultimate victory, Leningrad became known as the Hero City of the Soviet Union.

It’s a lesson Russian President Vladimir Putin would do well to recall, as he tries to crush Ukraine. People under siege can be a lot tougher than autocrats giving the orders. DJ

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PHOTOGRAPHY BY B. KUDOYAROV/GETTY IMAGES

Lessons from Leningrad

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*Each RBC funded scholarship is valued at $2500. Selected recipients are responsible for taxes and any out of pocket expenses.

Make the connection between reconciliation and sustainability Stay committed, stay informed

Établir un lien entre la réconciliation et la durabilité Restez engagé, restez informé

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