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Boards recruit new faces, new visions

Demand for diversity and financial and international experience among directors is growing, ELIZABETH CHURCH reports

The Globe and Mail, Oct. 13, 2004

The clubby circle of directors who sit on Canada's largest boards is growing wider, thanks to an increasing demand for diversity, international experience and financial expertise. A Report on Business examination of the latest rounds of board appointments also shows that nearly half of the directors who joined major Canadian companies since the beginning of last year did not sit on another large board.

As well, more than one-third of those new directors were identified by firms as living or working outside Canada -- an indication of the international outlook many Canadian firms are now taking.

Even so, getting appointed to a blue-chip board is still far easier if you already hold at least one other significant director position or know someone else who does. While formal searches for directors are on the rise, many prominent chairmen say personal recommendations are still the first line of search for many of Canada's largest boards. And when it comes to picking candidates, well-known former chief executive officers remain the superstars of board recruitment drives, the numbers show.

"It is valuable to have former CEOs -- they have been there," said David Galloway, chairman of Bank of Montreal and the retired CEO of Torstar Corp. "And you do have some time when you retire, which really helps."

More than one-third of all director appointments handed out by major Canadian firms since the beginning of last year went to individuals who sat on another Canadian blue-chip board, according to a review conducted by Report on Business with the aid of statistics gathered by the Clarkson Centre for Business Ethics & Board Effectiveness at the University of Toronto. An additional 18 per cent went to company executives, or individuals with business or personal ties to the firm. Just 7.8 per cent were handed out to women who did not have ties to the company.

Statistics are for appointments made between January, 2003, and September, 2004, to the boards of the 218 companies on Toronto's S&P/TSX index as of June 15. During that period, a total of 358 board seats were filled at those firms.

The examination showed that even with the growing drive for diversity, the most popular new directors by far remain recently retired chief executive officers.

Peter Godsoe and Charles Baillie had their choice of directorships when they hung up their leadership hats at two of the country's largest banks.

Both former bankers serve on the boards of five Canadian companies listed on the S&P/TSX index.

Other current directors who added more board seats to their list since the beginning of last year include John Mayberry, the retired chief of steel maker Dofasco Inc., and Ronald Osborne, the former head of Ontario Power Generation.

Competition can be fierce for the most sought-after directors. In the case of Mr. Godsoe, the former chairman and CEO of Bank of Nova Scotia says he was courted by firms that wanted him on their board for as long as five years before he left the bank. "I guess some of them thought I was staying around too long," Mr. Godsoe said in a recent interview. "I told them when I am fully retired I will look at it."

At Finning International, chairman Conrad Pinette said the Vancouver company also got a head start recruiting former Royal Bank chairman John Cleghorn, who joined its board in 2000. "To be very forthright with you, we knew that he was about to retire and we decided to approach him early rather than late," Mr. Pinette said recently. "I'm sure if we had waited a year we would have missed the boat in terms of Mr. Cleghorn."

David McLean, chairman of Canadian National Railway, said recently retired CEOs are highly valuable directors because of their general business knowledge and their ability to make a contribution. "Active CEOs have difficulty on boards because of their time commitments." CN is one of the companies that recruited Mr. Baillie, the former Toronto-Dominion Bank chief executive officer, as a director. Mr. McLean said Mr. Baillie "had all the connections, but he was not so busy that he could not attend board meetings."

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