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IGM Financial Inc. (the “Corporation”) believes in the importance of good corporate governance and the central role played by directors in the governance process. The Corporation believes that sound corporate governance is essential to the well being of the Corporation and its shareholders.
The Corporation is a financial services company. The Corporation’s two major operating units are Investors Group Inc. and Mackenzie Financial Corporation. Power Financial Corporation (“Power Financial”) holds in the aggregate, directly or indirectly, 59.3% of the outstanding common shares of the Corporation. Corporate governance practices are completely integrated between the Corporation, Investors Group Inc. and Mackenzie Inc. The directors of Investors Group Inc. and Mackenzie Inc. are the same as the directors of the Corporation with the exception of one additional director on the Board of Mackenzie Inc. Each of the Corporation, Investors Group Inc. and Mackenzie Inc. have adopted essentially the same Board and Committee mandates and other governance structures, processes and practices as the Corporation, and the Board of the Corporation monitors whether the mandates and other governance structures, processes and practices have been implemented and/or followed by these subsidiaries.
In 2005 the Canadian Securities Administrators (the “CSA”) adopted National Policy 58-201 – Corporate Governance Guidelines (the “Policy”) which sets forth a number of suggested guidelines on corporate governance practices (the “CSA Guidelines”). Issuers are encouraged to consider the CSA Guidelines in developing their own corporate governance practices.
In the Board’s view no single corporate governance model is superior or appropriate in all cases. The Board believes that the Corporation’s governance system is effective and is appropriate to its circumstances, and that there are in place effective structures and procedures to ensure the Boards’ independence from management and to ensure that conflicts of interest between the Corporation and any of its related parties, including Power Financial, are dealt with appropriately. Furthermore, any review of governance practices should include consideration of long-term returns to shareholders, as the Board believes this to be an important indicator of the effectiveness of a governance system.
Board of Directors
The mandate of the Board, which it discharges directly or through one of the seven Board Committees, is to supervise the management of the business and affairs of the Corporation, and includes responsibility for strategic planning, review of operations, corporate policies including disclosure and communication policies, oversight of financial and other internal controls, corporate governance, director orientation and education, senior management compensation and oversight and director compensation and assessment.
The primary mandate of the Executive Committee is, on an ongoing basis, to approve strategic goals and objectives for the Corporation, to review and approve, and to monitor the implementation of, the Corporation’s annual business, financial and capital plans, to approve corporate policies including communication and disclosure policies, and to supervise the management of the business and affairs of the Corporation when the Board is not in session.
The primary mandate of the Audit Committee is to review the financial statements of the Corporation and public disclosure documents containing financial information and to report on such review to the Board, to be satisfied that adequate procedures are in place for the review of the Corporation’s public disclosure documents that contain financial information, to oversee the work and review the independence of the external auditors, to oversee the work of the internal auditor, to review, evaluate and approve the internal control procedures that are implemented and maintained by management and to review compliance with applicable laws.
The primary mandate of the Compensation Committee is to review and approve compensation policies and guidelines for employees of the Corporation, to review and approve compensation arrangements for senior officers of the Corporation, to approve grants under equity compensation plans for all employees, to review and recommend to the Board compensation arrangements for the Co-Presidents and Chief Executive Officers (“Co-Presidents”), to recommend to the Board compensation arrangements for the directors, the Chairman of the Board of Directors and Chairmen of the Committees, to recommend to the Board incentive compensation plans, equity compensation plans, registered plans, supplemental pension plans and other compensation plans for employees as it deems appropriate and to review succession plans for senior management.
The primary mandate of the Governance and Nominating Committee is to oversee the Corporation’s approach to corporate governance and to recommend to the Board corporate governance practices consistent with the Corporation’s commitment to high standards of corporate governance, to assess the effectiveness of the Board of Directors, of Committees of the Board and of the directors and to recommend to the Board candidates for election as directors and for appointment to Board Committees.
The primary mandate of the Related Party and Conduct Review Committee is to recommend to the Board procedures for the consideration and approval of transactions with related parties and to review and, if deemed appropriate to approve, such related party transactions and to recommend to the Board procedures to resolve conflicts of interest (including techniques for the identification of potential conflict situations). Both the Corporation and Investors Group Inc. have an Investment Committee whose primary mandate is to review the investment of their proprietary assets and to monitor adherence to the investment policies, procedures and guidelines that have been approved by the Boards. The primary mandate of the Public Policy Committee is to monitor the Corporation’s performance in responding to its social responsibilities and to the public interest in the conduct of its business, which includes the review and assessment of the Corporation’s policies, programs and procedures concerning charitable contributions, special projects in response to community needs, and participation in the determination of public policy affecting the Corporation’s operations.
(a) Independence of Directors
The CSA Guidelines provide that a director is “independent” of an issuer if he or she has no direct or indirect relationship with the issuer which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of the director’s independent judgment. The Corporation’s Board of Directors agrees with this approach to assessing director independence.
However, the CSA Guidelines go on to provide that a director is deemed to have such a direct or indirect relationship with an issuer (and thus not to be independent) if the director is, or has been within the last three years, an executive officer or an employee of the issuer’s parent corporation. The Board of Directors of the Corporation strongly disagrees with this view of “deemed” non-independence. The Board believes that the presumption that an executive officer of a parent corporation is unable to exercise independent judgment in discharging his or her duties to a corporation is unfounded and without merit (in fact, the Board believes that shareholders of the Corporation expect that the directors who are affiliated with Power Financial, as a majority shareholder, will participate actively in the governance of the Corporation at the Board and Committee levels). In the view of the Board, the determination of director independence should be based upon whether or not the director is independent of the Corporation’s management, and whether or not the director has any other relationships with the Corporation which could reasonably be expected to interfere with the exercise of the director’s independent judgment. In the Board’s view, that is a question of fact that should be determined by the issuer’s board of directors on a case by case basis, without reference to any presumption such as the CSA has made.
The CSA has acknowledged the concerns expressed by some reporting issuers as to whether the CSA’s view of director independence is appropriate to companies such as the Corporation which have a majority shareholder. Thus, the Policy states that the CSA “intend[s] over the next year to carefully consider these concerns in the context of a study to examine the governance of controlled companies’ and that it will consider whether to change how this Policy ... treat[s] controlled companies”. The Board of Directors of the Corporation notes the importance to investors, large or small, of this undertaking by the CSA.
(b) Resolution of Conflicts
It is the duty of the Board to supervise the management of the business and affairs of the Corporation for the benefit of all shareholders. In discharging this duty, the Board identifies and resolves conflicts that might arise between the interests of the Corporation and the interests of Power Financial and its affiliates. The Corporation has established a Related Party and Conduct Review Committee composed entirely of directors who are independent of management and who are neither officers, employees nor directors of Power Financial or any of its affiliates (except for those members of the Committee who are directors of the Corporation and its subsidiaries). The Corporation’s Related Party and Conduct Review Committee reviews transactions with “related parties” of the Corporation and approves only those transactions that it deems appropriate.
Board Membership
Fourteen directors are standing for re-election to the Board at the Meeting. In the Board’s view 12 of the 14 directors, namely Ms. Susan Sherk, Messrs. Daniel Johnson, Rt. Hon. Donald F. Mazankowski, John McCallum, Roy W. Piper, André Desmarais, Paul Desmarais, Jr., Robert Gratton, R. Jeffrey Orr, Michel Plessis-Bélair, Gérard Veilleux and Raymond L. McFeetors are independent of management and have no other relationships that could reasonably interfere with the exercise of their independent judgment in discharging their duties to the Corporation. Messrs. Murray J. Taylor and Charles R. Sims, Co-Presidents and Chief Executive Officers of the Corporation, are not independent.
The following directors are also independent within the meaning of the CSA Guidelines: Ms. Susan Sherk, Rt. Hon. Donald F. Mazankowski, and Messrs. John McCallum and Roy W. Piper.
The following directors are deemed not to be independent within the meaning of the CSA Guidelines, namely Messrs. André Desmarais, Paul Desmarais, Jr., Robert Gratton, Daniel Johnson, R. Jeffrey Orr, Michel Plessis–Bélair and Gérard Veilleux. All of these directors are executive officers of Power Financial or otherwise receive some compensation from Power Corporation of Canada (“Power Corporation”) or Power Financial, and on that basis alone are deemed by the CSA Guidelines to be non-independent. Mr. Raymond L. McFeetors is President and Chief Executive Officer of Great-West Lifeco Inc., The Great-West Life Assurance Company, Great-West Life & Annuity Insurance Company, London Life Insurance Company and The Canada Life Assurance Company, all of which are affiliates of the Corporation. Under the CSA Guidelines, these relationships also deem him to be non-independent. A majority of the Corporation’s directors are not independent within the meaning of the CSA Guidelines. However, the Board notes that all of these directors are independent of management and have no relationships whatsoever with the Corporation other than as directors and shareholders, and that in the Board’s view they can reasonably be expected to exercise independent judgment in discharging their duties to the Corporation.
Committee Membership
The Audit Committee and the Related Party and Conduct Review Committee are composed entirely of Directors who are independent within the meaning of the CSA Guidelines. The Compensation Committee, the Governance and Nominating Committee and the Public Policy Committee are composed entirely of directors who are independent of management and, in the Board’s view, this ensures an objective process for determining compensation for the Corporation’s directors and officers, and it ensures an objective process for the nomination of directors. However, some members of the Governance and Nominating Committee, the Compensation Committee and the Public Policy Committee are deemed not to be independent within the meaning of the CSA Guidelines only because they are executive officers of Power Corporation or Power Financial. All but two of the directors on the Executive Committee are independent of management.
Meetings of Independent Directors
The Chairman of the Board is responsible for ensuring that the Directors who are independent of management have opportunities to meet without management present. All independent Directors are encouraged by the Chairman of the Board to have open and candid discussions with the Chairman or with the Co-Presidents.
The Board has adopted a policy relating to meetings of independent Directors at Board and Committee meetings. The Directors on the Board who are independent of management meet at least twice annually without members of management present. Each of the Compensation Committee, Governance and Nominating Committee and Public Policy Committee are comprised of Directors who are independent of management. These Committees, as well as the Executive Committee, meet without members of management in attendance as follows: Executive Committee – two times per year, Compensation Committee – three times per year, Governance and Nominating Committee – at every meeting, Public Policy Committee - once per year. Each of the Audit Committee and the Related Party and Conduct Review Committee are comprised entirely of Directors who are independent within the meaning of the CSA Guidelines. Those Committees meet without members of management in attendance as follows: Audit Committee – five times per year, Related Party and Conduct Review Committee – at every meeting. All of the independent members of the Board within the meaning of the CSA Guidelines are members of the Audit Committee or the Related Party and Conduct Review Committee or both Committees.
Board and Committee Mandates
The Board has adopted a Charter for itself and for each of its seven Committees. The Board’s Charter is attached as Schedule “A”. The mandates of all seven Committees are described earlier in this Management Proxy Circular.
Chairman of the Board
The Chairman of the Board is independent of management, and in the Board’s view has no other relationships that could reasonably interfere with the exercise of his independent judgment or with his leading the Board to exercise independent judgment on matters that come before it. However, he is deemed not to be an independent director within the meaning of the CSA Guidelines, only because he was the President and Chief Executive Officer of Power Financial until May 9, 2005 and is currently the Chairman of Power Financial.
Director Affiliations and Attendance
Additional information relating to Directors standing for election, including other public company boards on which they serve as well as their attendance records for all Board and Committee meetings held since January 1, 2006, can be found in the sections entitled “Election of Directors” and “Board of Directors – Meetings Held and Attendance of Directors” earlier in this Management Proxy Circular.
Chairmen and CEO Position Description
The Board has approved written position descriptions for the Chairman of the Board and for the Chairmen of each Board Committee. In general terms, the Chairman of the Board and the Chairmen of the Board Committees are responsible for ensuring that the Board or Committee is able to fulfill its duties and responsibilities in an effective manner, for planning and organizing the activities of the Board and of the Committee, for ensuring that delegated Committee functions are carried out and reported as necessary, for facilitating effective interaction with management and for engaging outside advisors where necessary.
The Board has approved a written position description for the Co-Presidents. In general terms, the Co-Presidents are responsible for managing the strategic and operational performance of the Corporation in accordance with the goals, policies and objectives set from time to time by the Board, including developing for the Board’s approval the Corporation’s strategic plans and initiatives and developing sound operating strategies to implement such plans, for developing and implementing policies to identify and manage the risks inherent in the Corporation’s businesses, for setting an operational environment that is performance driven, for assisting the Board with succession planning, and for representing the Corporation to its major stakeholders.
Orientation and Continuing Education
The Governance and Nominating Committee is responsible for director orientation and education and for ensuring that newly elected directors are provided with a comprehensive orientation as to the nature and operation of the business and affairs of the Corporation and the Corporation’s major operating subsidiaries and as to the role of the Board and its Committees, and existing directors are periodically updated in respect of the foregoing.
In order to orient new directors as to the nature and operation of the Corporation’s business, they are also given the opportunity to meet with members of the Corporation’s executive management team and with members of the executive management teams of the Corporation’s major operating subsidiaries to discuss the Corporation’s businesses and activities.
The orientation program is designed to assist the directors in fully understanding the nature and operation of the Corporation’s business (and the businesses of its major operating subsidiaries), the role of the Board and its Committees, and the contributions that individual directors are expected to make.
Ethical Business Conduct
Mackenzie Financial Corporation, and Investors Group Inc. have adopted written conduct policies (the “Conduct Policies”) that govern their directors, officers and employees and those of their respective subsidiaries. Copies of the Conduct Policies can be found at www.sedar.com. Copies of the Conduct Policies are also available by contacting the Corporation’s Chief Compliance Officer.
The Board oversees compliance with the Conduct Policies through the Corporation’s Chief Compliance Officer, who monitors compliance with the Compliance Policies and reports to the relevant audit committee on such compliance at least annually. Officers and employees must report known and suspected breaches of the Conduct Policies to the Chief Compliance Officer. All reported breaches and results of investigations are reported to the relevant audit committee by the Chief Compliance Officer.
In order to ensure that directors exercise independent judgment in considering transactions and agreements in respect of which a director or an executive officer has a material interest, the director or executive officer having a conflict of interest must declare his/her interest and excuse himself or herself from the meeting during the consideration of and voting on that particular matter. If a conflict of interest arises on a non-material matter, the director must declare his/her interest and abstain from discussion and voting. Any potential conflicts that may arise between the Corporation and related parties, including Power Corporation and Power Financial, relating to transactions between those companies or companies controlled by Power Corporation or Power Financial, are dealt with by the Related Party and Conduct Review Committee as described earlier in this circular.
Nomination and Assessment of Directors
The Board has established a Governance and Nominating Committee which is responsible for identifying new candidates for board nomination and for recommending to the Board qualifications for directors including among other things, the competencies, skills, experience, and level of commitment required to fulfill Board responsibilities. After considering the competencies and skills that existing directors possess and that each new nominee will bring to the Board, and after considering the appropriate level of representation on the Board by directors who are independent of management and who are neither officers nor employees of any affiliates of the Corporation, the Committee identifies candidates qualified for Board membership, and recommends to the Board nominees to be placed before shareholders at the next annual general meeting.
The Committee, and subsequently the Board, is mindful of the importance of having a Board with a balance of competencies, skills and experience as well as geographic representation. The Committee and the Board believe that these factors and the continuity of membership are critical to the Board’s efficient operation.
The Corporation has adopted a form of proxy which gives shareholders the ability to vote for or withhold from voting for each individual Director proposed for re-election to the Board of Directors of the Corporation.
Compensation Committee
The Board has established a Compensation Committee which is responsible for reviewing and approving compensation policies and guidelines for employees of the Corporation. The Compensation Committee reviews and recommends to the Board compensation arrangements for the Co-Presidents, reviews and approves compensation arrangements for the senior officers of the Corporation, and approves grants under equity compensation plans for all employees. The Compensation Committee also reviews and recommends to the Board compensation arrangements for the Directors, the Chairman of the Board and the Chairmen of Board Committees. The Compensation Committee recommends to the Board such incentive compensation plans, equity compensation plans, registered plans, supplemental pension plans and other compensation plans for employees as it deems appropriate. The Compensation Committee also reviews succession plans for senior officers of the Corporation. The Boards of the Corporation’s major operating subsidiaries have also established Compensation Committees with similar mandates.
Further particulars of the process by which compensation for the Corporation’s directors and officers is determined is set forth earlier in this Management Proxy Circular under the headings “Compensation of Directors”, “Statement of Executive Compensation” and “Report of the Compensation Committee on Executive Compensation”.
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