Governance at BDCMichel Bergeron, Vice-President - Corporate Relations

ADFIAP - October 2009

Governance at BDC

Governance at BDC

What is Corporate Governance? It refers to:

What are the structures, systems and practices for overseeing the direction and management of an organization, so that it carries out its mandate and objectives effectively.

Governance at BDC

Governance changes in Canada in last 15 years

Few Governance Committees

Executive Committees were the norm

CEO – had most of the power

No performance evaluation of the Board

Role of the Board was decorative

No independence

Focus of the Board now more on high level strategies

Governance at BDC

Governance at BDC (cont’d)

Canada’s approach to governance in Crown corporations:

Arm’s length = Autonomy

Counterbalanced by Accountability and Transparency

Need to have clearly defined roles and structures through a well defined legal framework

Governance at BDC

Governance at BDC (cont’d)

A fine balance between:Autonomy:

Non-partisan, non political provider of serviceIn charge of its operationsAble to resist inappropriate pressureHas a Board of Directors comprised of independent directorsClearly defined mandate – Sustainable financially

Accountability:ParliamentBoardMinisterManagement

Governance at BDC

Governance at BDC (cont’d)

Parliamentof Canada

Minister of Industry

BDC Board of Directors

BDCManagement

BDC Act Financial Administration Act

Access to Information

Governance at BDC

Governance at BDC (cont’d)

Parliament’s Oversight:Annual Report (every year):

-Public (AG)

Annual Audit – 2 Auditors

-Private

Corporate Plan (every year)

Special Exam (every 5 years)

Legislative Review (every 10 years)

Access to Information Act (ongoing)

Governance at BDC

Governance at BDC (cont’d)

What is the Board’s roleIs a steward to BDC

Ensures that BDC’s activities are aligned with its public policy mandate

Is responsible for:Approving BDC’s strategic direction and corporate plan, and monitoring progressEnsuring BDC is identifying and managing its risksEstablishing compensation policies, and reviewing and approving management’s succession planReviewing BDC’s internal controls and management information systems

Governance at BDC

Governance at BDC (cont’d)

What is the Board’s roleIs responsible for:

Overseeing communication and public disclosureSetting performance targets and monitoring progressOverseeing BDC’s pension plan, and establishing its fund policies and practicesEnsuring the highest standards of corporate governance

Governance at BDC

Governance at BDC (cont’d)

How does good governance happen? The Chairperson plays a leading role in leading in Governance by fostering certain behaviours:

IntegrityIndependence of Mind (for both directors and management)The right tone at the top (from the Chairperson and the CEO)Promoting transparency and discussion

Governance at BDC

Governance at BDC (cont’d)

The Chairperson ensures that:

The Board adopts a clear description of its roleThe right committees are created and they have clear responsibilities (Terms of Reference). BDC’s Board has five committees:

Human ResourcesAuditCredit/Investment & RiskGovernance/NominatingPension Funds Investment

Formal interface with Shareholder – Through the Minister

Governance at BDC

Governance at BDC (cont’d)

The Chairperson ensures that:

The Board, the Committees and the Directors evaluate their performance yearly

The Directors receive proper orientation and continuing education

Governance at BDC

Governance at BDC (cont’d)

Other areas where the Chairperson will impact Governance:

Effective recruitment of Directors with the right skills and competencies for the Board

Effective contribution stems from knowledgeable and well informed oversight

Governance at BDC

Composition of the board

Senior people with expertise in:credit (at a large financial institution)risk managementventure capitalinvestments (general)chief executive officer of a large enterpriseownership or leadership of an SMEfinancial literacy and expertise

Governance at BDC

Governance at BDC (cont’d)

Also means, the Board focuses on Corporate Strategies:Participates actively in the development and approval of the Corporate Plan:

Meets yearly in the fall, followed by many discussions and approval of the Corporate Plan in January

Reviews and approves strategic programs and policies including HR compensation policies, succession planning, performance evaluation of the CEO

Recommends candidates with the right set of skills and competencies for the Chairperson and CEO positions for appointment by Government

Governance at BDC

Governance at BDC (cont’d)

Workplace environment Conductive to Good Governance

Core ValuesEthicsClient connectionTeam spiritAccountabilityWork-life balance

Employee Code of Conduct, Ethics and ValuesBoard Code of ConductClear Policy on disclosure of wrongdoing: referred to Audit CommitteeReferral Policy

Governance at BDC

The board

Average year: 6 to 10 meetings

Fiscal 2009: 15 meetings.

For a summary of our important decisions, please see the annual report

1-888-INFO-BDC www.bdc.caBusiness Development Bank of Canada Head Office 5 Place Ville Marie, Suite 300, Montréal, Quebec H3B 5E7