Long-serving boards and board renewal policies may face
increasing scrutiny in the 2015 proxy season. Canada's
Institute of Corporate Directors (ICD) recently
released a position paper, Beyond Term Limits: Using Performance
Management to Guide Board Renewal (the ICD
Paper) which calls on boards of directors to rethink their
board renewal policies and encourages a more proactive and flexible
approach to renewal, focusing on director performance and
cautioning against over-reliance on term limits.
The ICD Paper questions the effectiveness of term limits to
ensure adequate board renewal, and instead encourages boards to
center their renewal policy around comprehensive board evaluations.
For many boards, annual evaluations may be a routine check-the-box
exercise. The ICD argues that rigorous and regular evaluations of
board composition and director performance can help identify
opportunities for change and improvement on the board. The
ICD's view is that a fulsome evaluation of each director's
performance in connection with the corporation's strategy will
shine a light on under-performing directors, help create
accountability and improve overall board performance.
It may be challenging for some boards with long-serving
directors to engage in what can be a difficult dialogue around
director under-performance and potential stagnation on the board.
The ICD Paper suggests using various forms of evaluation, including
full board, self and peer evaluations to identify potential issues.
A board may also choose an evaluation method to best suit its needs
and personalities, including written questionnaires, surveys,
interviews, full board discussion or often, a combination.
Evaluations, argues the ICD Paper, should focus on how a
director's skill-set, experience and behavioral competencies
contribute to the overall performance of the board.
According to the ICD Paper, this issue is timely for Canadian
boards, with the average age of non-executive directors in Canada
having risen to 63 in 2014, as compared with 60 in 2009, and the
average director tenure having risen from eight years in 2009 to
nine in 2014.
With this trend and enhanced disclosure rules in mind,
shareholders may increasingly focus on board renewal and director
performance in the upcoming proxy season. It is prudent for boards
to be proactive and transparent in improving their renewal policies
and ensuring an effective evaluation system is in place, giving
investors confidence that the board's composition, skill-set
and performance are in line with the corporation's long-term
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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