Canada's largest companies are increasingly searching for international directors to add to their boards, often preferring directors with global experience over directors from other regions of Canada.
Indeed, many of Canada's biggest companies have regional boards, drawn largely from their geographic area. Although some major companies -- such as Canada's big banks -- have tried to achieve broad national representation on their boards, executive search consultants say this is not a priority for many public companies.
Instead, companies want more insights from outside of Canada's borders.
"We have had a lot of work in recruiting U.S. directors to Canadian boards," says Andrew MacDougall, managing director of executive search firm Spencer Stuart Canada. "That individual likely will have gone through what a Canadian company is currently going through. The U.S. tends to be ahead of Canada in terms of market developments."
Indeed, Canadian companies are keener than U.S. companies to add foreign directors. A Spencer Stuart review of Canada's 100 largest companies found they had an average of 2.3 international directors per board, while the top-ranked U.S. companies averaged just 0.4 international directors per board.
Mr. MacDougall said some Canadian companies want international directors even when the company doesn't operate outside of Canada. In some sectors, such as retailing, companies feel foreign directors can bring leading-edge knowledge.
"They believe that in their particular sector, they definitely need somebody who has been in the larger playing field," he said.
While some of Canada's largest oil and gas companies have diverse boards with directors from various parts of Canada -- including Petro-Canada, Shell Canada Ltd. and Imperial Oil Ltd. -- many companies in the oil patch tend to have regionally focused boards.
EnCana Corp., which is the sixth-largest company on Canada's benchmark S&P/TSX index, reported this year that 11 of its 14 directors live in Calgary, and another lives in Vancouver. The other two are from Toronto.
Companies like TransCanada Corp. and Suncor Inc. similarly draw a majority of their directors from Western Canada, but both also have two directors who live in the United States. At Canadian Natural Resources Ltd., all directors are from Calgary, except one who lives in the United States. Ensign Resource Service Group Inc.. reported this year that all its directors live in Alberta, except for one from the United States and one from Australia.
John Ferguson, chairman of Calgary-based TransAlta Inc.., said some companies simply find it more convenient to have directors who live nearby and are easily available for meetings. TransAlta, however, has tried to add directors who can add expertise in areas where the company's business is growing. The company has two U.S. directors, one from New Zealand and one from Mexico.
"At TransAlta, we know we've got significant operations in Ontario, so we know we have to have a couple of directors from Ontario," Mr. Ferguson said. "I think [regional concentration] is more true for smaller companies. I don't think it's for any other reason than convenience."
The forestry and mining sectors often tend to have regional boards, with diversification often likely to come by adding U.S. directors who know the industry sector well.
Vancouver-based International Forest Products Ltd., for example, says all but one of its directors live in the Vancouver area, and that one lives in California. Vancouver-based Pan American Silver Corp. has four directors from British Columbia and three who live in Seattle.
Paul Cantor, Canadian managing partner of search firm Russell Reynolds Associates, says he thinks it is valuable to have international diversification, but said it is not surprising that some companies are not particularly focused on finding directors from other regions of Canada.
"I'm not sure I see anything wrong with that. There are smart and competent people all over, and I'm not sure you have to go somewhere else to put diversity on your board," he said.
Indeed, Mr. Cantor said that in the past, Canada's big banks tried so hard to be regionally representative that "there were a lot of losers on bank boards, put there for regional diversification."
Mr. MacDougall, however, said that while a search for industry knowledge sometimes leads to regional concentration, many boards are regionally focused largely because the chairman and CEO prefer to choose directors from within their circle of acquaintances.
"I think what's interesting in some of these regional companies is that they actually are not per se regional in their business," he said. "Many of them are North American in one way or another."
He said companies would be wise to consider adding other perspectives, even from other industry sectors, instead of choosing directors only for social ties.
"I think you probably would benefit from input that is marketing savvy, but also brings perspectives from other areas, and not simply your own industry," he said.
Quebec boards are also often regionally focused, although some large company boards like Alcan Inc. and Power Corp of Canada. have a wide diversity of directors.
However, companies such as Quebecor., Jean Coutu Group Inc., Domtar Inc., Alimentation Couche-Tard Inc., Transcontinental Inc., Metro Inc. and Saputo Inc. all have mostly Quebec-based directors.
Guy Saint-Pierre, chairman of Royal Bank of Canada, said language is an issue for those Quebec boards that hold their board meetings in French. But he said it is always difficult for Canadian companies to convince high-profile directors to travel long distances to attend meetings.
"I was on the board of [Calgary-based] Suncor for a while, and from a time point of view, the board of Suncor took me an awful lot more time than being on the board of Bell Canada, which was just across the street [in Montreal]," he said.
Mr. Saint-Pierre said even travelling to Toronto for meetings of RBC's board is a significant time commitment.
"Sometimes I envy people from Toronto. They can go to a Royal Bank board meeting, and at 1 o'clock be back in their office and ready to work. And we have to go to the airport, and maybe miss a flight, and the next thing we're home at 5 o'clock."
He said there used to be a tradition in Montreal for Alcan and BCE to hold their board meetings within a day of each other, so that directors from other regions could be convinced to join both boards and travel just once for both meetings. That rhythm has been broken more recently, he said.
"We used to do that between Alcan and BCE because of people out West. People from Calgary who came, they insisted we had to co-ordinate."
David Beatty, a director on six public company boards who is also director of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto, said he has examined the makeup of large boards, and says many directors stick within their regional areas.
"There are a few mules who carry data back and forth across the country . . . but by and large, they look like largely independent populations," Mr. Beatty said.
He said the reasons for this are largely practical, including travel demands and language issues in Quebec. But he said the results aren't always benign.
"I think it speaks a bit about recruiting from within a limited pool of self-awareness," he said.
Mr. Beatty said he supports the trend toward increasing numbers of international directors on boards, but said it is not easy to ask people to frequently travel from overseas for board meetings. He says companies may have to accept more international directors participating by telephone or teleconference for some board meetings each year.