Board Interlocks
2010 – Power Corporation
WHEREAS: The role of directors is to represent shareholders and supervise management – a role that requires independence. The Council of Institutional Investors defines an independent director as “someone whose only nontrivial professional, familial or financial connection to the corporation, its chairman, CEO or any other executive officer is his or her directorship. Stated most simply, an independent director is a person whose directorship constitutes his or her only connection to the corporation”.
The Canadian Coalition for Good Governance (CCGG) specifically identifies interlocking board relationships as problematic in its Building High Performance Boards guidelines. The CCGG suggests that too many such relationships signal a degree of inter-related interests that might be detrimental to director independence.
Power Corporation and its related companies are fraught with interlocking board relationships. At Power Corporation, 12 of 18 directors also sit on the Board of Power Financial. In addition, 10 of 18 directors sit on at least two Boards of Power Corporation related companies (Power Financial, Power Corporation, Great West Lifeco, IGM Financial, Groupe Bruxelles Lambert and Pargesa SA). Upon examination of all six inter-related boards two common directors sit on every one of these six boards.
When best practice dictates that two-thirds (66%) of a Board of Directors should be independent, a mere 5 of 17 Power Corporation directors (29%) are completely independent – not on the Board of any Power Corporation affiliated company. Governance bodies such as the Canadian Securities Administrators, the Canadian Coalition for Good Governance, and the Council of Institutional Investors all have standards on independence that Power Financial is not aligned with.
Power Corporation is a “diversified international management and holding company with interests in companies that are active in the financial services, communications and other business sectors”. It is a large complicated company that demands the undivided and independent attention of its directors.
Power Corporation placed 150 out of 157 companies in the Globe and Mail’s annual corporate governance report (http://www.theglobeandmail.com/report-on-business/board-games/board-games-2009/article1375949/#custom). In this report, the company scored particularly low on board composition which includes questions on overall independence, independence for key committees and interlocking relationships.
BE IT RESOLVED THAT: The Board consider adoption of a policy that would limit the number of board and committee interlocks among related companies and disclose to shareholders how the company is taking steps to ensure that two thirds of the Board is independent as promoted by governance best practices.