PDAC 2013: Directors’ Duties

Yesterday afternoon’s short course offered much discussion and some divisive debate on the subject of directors’ duties.  Doug Bryce and Jeremy Fraiberg of the mining team at Osler, Hoskin & Harcourt LLP provided the legal framework and some background on directors’ duties in Canada. They were joined on the panel by Peter Dey and Wesley Voorheis, who presented practical examples based on their combined decades (maybe even a century?) of governance experience.

The material reviewed by the Osler lawyers was particularly interesting as a follow up to Prof. Lynn Stout’s presentation on the myth of shareholder primacy at last year’s Responsible Investment Conference. Mr. Fraiberg opined that the Supreme Court of Canada has shied away from the ‘Revlon duty’, a decision of the Delaware courts affirming directors’ duty to maximize shareholder value.  Rather, Canadian courts have held that the duty is contextual, and is not confined to short term profit or share value. 

In honouring their fiduciary duty, the directors may consider the impact of decisions on various stakeholders, and they must consider the impact of decisions on affected stakeholders. Peter Dey added that it is becoming increasingly important for Boards to look at longer term impacts and results, a positive development.  

Mr. Dey continued with an update on what’s happening within boards today. He endorsed the use of a skill matrix to ensure a balanced board with a depth of knowledge. He also suggested that ‘you look at your stakeholders and make sure that you have directors that can address the issues that are important to those stakeholders.’ This bodes well for more diversity on Boards over time as a broader range of stakeholder interests achieve legitimacy.    

Significant discussion was generated by the idea put forward by both Mr. Dey and Mr. Voorheis that board decisions be unanimous. Ultimately, the audience agreed that consensus was the goal of every board, and that a board that consistently had, for example, an 8/4 or 6/2 split was dysfunctional. However, whether a director should record their dissent to a particular decision, and how much discussion for and against a motion should occur to bring recalcitrant directors onside created heated debate on both sides of the issue. It may be that more experienced directors are able to reach a consensus in a way that newer directors are not, and that working together on a Board is also a learned skill.   

The afternoon ended with a brief discussion of three case studies, as the amount of interesting and relevant commentary on the earlier material left us a bit short of time. Overall, an excellent start to what is always a thought provoking conference.