BCI Responsible Investing Newsletter

BCI Responsible Investing Newsletter - October 2016

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3 bcIMC RESPONSIBLE INVESTING NEWSLETTER Public Equities Engaging with companies, regulators and policymakers on governance is one of the most important activities we perform as shareholders. Since the mid-2000s, we have focused on topics including board independence, diversity, "say on pay," 1 accountability, and board structures and processes. DIRECTOR INDEPENDENCE An effective board is independent from management. It must exert authority over management's recommendations and objectively evaluate company and executive performance. Best practice is a board that is two-thirds independent. We support proposals to divide board and management roles. The CEO and chair should not be the same person. Splitting the roles balances power between management and directors, raises accountability and ensures boards act on behalf of shareholders. We endorse appointing an independent, non-executive director as chair. This is someone who is not a current or a former executive. 2 C o m p a n i e s s h o u l d a l s o h a v e i n d e p e n d e n t b o a r d committees and set limits for directorships to encourage board refreshment. bcIMC considers voting against certain nominees when average board tenure exceeds 10 years. Barrick Gold Corp. Since 2013, bcIMC has engaged Barrick on executive pay matters that prompted a focus on board independence. O u r d i r e c t a n d g r o u p e n g a g e m e n t s t a r t e d w h e n shareholders opposed the extreme pay of $17 million, not clearly linked to performance, for a Barrick co-chairman the previous year. The issue showed deeper problems of board structure and processes including lack of independence. Barrick announced major changes 3 to its board including the retirement of its founder and chairman at the 2014 annual meeting, and the exit of two other directors. Barrick's board also nominated four new independent directors. We saw this overhaul as central to board refreshment. bcIMC wanted to see more mining expertise on the board. In 2016, bcIMC and RBC Global Asset Management co-filed two shareholder proposals asking for an extra independent director with operational mining expertise and for changes to governance. Barrick nominated a geological and mining engineer who was elected at the 2016 meeting. We withdrew the second proposal because the company agreed to provide details about its governance practices. We were also encouraged that the chairman took a major pay cut in 2015. Today, Barrick's 14-person board is nearly 80 per cent independent, up from 64 per cent in 2012. 1 bcIMC Responsible Investing Newsletter: Executive Compensation, vol. 1; issue 3, September 2014 2 Former executives will be considered independent after a five-year cooling off period, except for founders, CEOs and CFOs 3 Barrick Founder and Chairman Peter Munk to Retire at 2014 AGM, John Thornton to Assume Chairmanship http:// www.barrick.com/investors/news/news-details/2013/Barrick-Founder-and-Chairman-Peter-Munk-to-Retire-at-2014-AGM-John-Thornton-to-Assume-Chairmanship/ default.aspx HOW WE VOTE 2013–2016, AT LEAST 60% OF PROPOSALS VOTED BOARD-RELATED DIRECTOR NOMINEES 2013–2016, WE VOTED MORE THAN 50,000 DIRECTOR-RELATED PROPOSALS 22% AVERAGE AGAINST/WITHHELD

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