Although studies have shown that organisations with strong, positive cultures have been shown to outperform their peers and the absence of a healthy culture can create or exacerbate significant risks, the National Association of Corporate Directors’ (NACD) 2017 Blue Ribbon Commission found that US companies are still not taking it sufficiently seriously.
The NACD said that in its recent survey less than half of directors reported that their boards assess the alignment between the company’s purpose and values and its strategy, and only 50% say they understand the “buzz at the bottom”—the collective behaviours, norms, and values at the front lines of their organisations, among their rank-and-file employees.
According to the NACD, the commission which was a group of more than 30 directors and leading governance professionals, aimed to change these statistics by calling on boards of all sizes and sectors to apply the same leading-edge risk-oversight practices to culture oversight as they would to the management of any other risk they oversee.
The commission’s report contains recommendations and specific actions board members can take to elevate culture-oversight practices in key areas including chief executive selection and evaluation; executive compensation design; discussions with management about strategy, risk, and performance; and assessing culture inside the boardroom.
The commission also produced a toolkit to help boards to benchmark their current practices and implement improvements in culture. This included boardroom discussion guides with specific questions on a range of culture-related topics; guidelines for developing board-level culture metrics and reporting; “red flags” that indicate potential breakdowns in culture and templates for board-member guiding principles and director codes of conduct.
NACD chief executive Peter Gleason said: “Having a healthy, resilient culture is essential if companies want to be able to adapt to new business dynamics and competitive challenges. Simply put, healthy cultures pay off. NACD’s Blue Ribbon Commission Reports have set the standard for effective boardroom practice for two decades. Our goal this year is to offer boards practical guidance and tools to help their organizations harness the power of culture as a competitive differentiator.”
Toronto stock exchange issues new disclosure rules
Final amendments have been issued to the Toronto Stock Exchanges’s company manual which requires more online disclosure of corporate governance documents and has revised the disclosure requirements for security-based remuneration arrangements effective for fiscal years ending on or after October 31, 2017.
By no later than 1st April 2018, TSX-listed issuers are required to post online the company’s articles of incorporation and other company documents including its bylaws; its majority voting policy; advance notice policy; position descriptions for the chairman of the board and the lead director (if applicable); board mandate; and board committee charters.
In an article by law firm Osler, Oskin & Harcourt it was stated that under the security-based remuneration arrangements TSX-listed issuers are required to disclose in their proxy circulars: the annual burn rate for each security-based remuneration plan for the last three years; where a security-based compensation arrangement includes a multiplier that increases the number of shares to be issued on settlement based on performance, the effect of that multiplier on the burn rate; and vesting and term requirements for all security-based compensation plans, not just stock option plans.
In addition, information on security-based compensation arrangements now should be given as at the end of the most recently completed financial year instead of the date of the meeting materials (a change consistent with executive compensation disclosure requirements under securities laws), according to the legal update. However, if shareholder approval of a security-based compensation arrangement is being sought at the relevant shareholders meeting, the information must be provided as at the date of the meeting materials.Last Updated: 10 November 2017