Northwest & Ethical Investments has filed a shareholder proposal with Power Corporation, asking the financial services conglomerate to ensure the independence of at least two-thirds of its board of directors.
NEI – the parent company of Ethical Funds – notes that only five of Power’s 17 directors are completely independent, well short of best practices. Power has argued that as a holding company, best practices do not apply to them. NEI responds that Power has not addressed the underlying reasons why independence is important, and preferred.
“Firstly, independence is intended to avoid group think and provide a diversity of viewpoints and opinions,” NEI said in a proxy alert e-mail. “In addition to the time shareholders expect directors to devote to overseeing their company – time directors on too many boards cannot devote – oversight of the company is best accomplished with independent, unbiased directors. The best practice that a majority of directors be independent is well-founded and established into several listing requirements.
“Secondly, independence is necessary to make impartial business decisions with regards to the value of subsidiaries and holdings. Fundamentally, and by law, directors are tasked with acting in the best interests of the corporation and directors that sit on related boards (or manage related companies) have conflicted interests. Regardless of company structure, independent directors are necessary for good governance.”
In addition, NEI has asked Power to limit the number of board and committee “interlocks” among related companies. Twelve of Power Corporation’s directors also sit on the board of Power Financial and ten sit on at least two boards of related companies (Power subsidiaries include IGM Financial and Great West Life).
“In essence, Power Corporation wants the privilege of access to the capital markets without the responsibility of complying with best practices,” NEI says.
Power has also been asked to produce a report outlining how it evaluates investments according to its corporate social responsibility statement and its commitment to the Universal Declaration of Human Rights.
Power has investments in countries where human rights violations are of international concern, including Burma and Sudan, NEI noted in a separate proxy alert. “Power fails to disclose to shareholders procedures for determining how these investments comply with its CSR statement.”
The proposals will be voted on at Power’s annual general meeting on May 13.
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