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Gary Colter
In The Directors Chair with David W. Anderson: No matter what the business, director Gary Colter says theres
no excuse for boards to cling to dated, inefficient and ineffective modes of governance
Photography by Jeff Kirk
Gary Colter
Primary roles
President, CRS Inc.; Corporate director
Current director
Canadian Pacific Railway; CIBC; Core-Mark Holding Co.; Owens-Illinois; Revera Inc.
Former executive leadership
Managing partner, Financial Advisory Services, KPMG Canada; vice-chair, KMPC Canada; managing partner, Global
Financial Advisory Services, KPMG International; member, International Executive Team, KPMG International
Former director
Saskatchewan Wheat Pool Inc.
Education
HBA, Ivey Business School, University of Western Ontario
Honours
Fellow Chartered Accountant (FCA, FCPA)
Current age
67
Age when first became a director
56
Years of board service
11 years
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Gary Colter
nance and compliance. Candidly, theyll say, Lets get this governance stuff out of the way and get on with being a director.
Does it surprise you these terms are interchanged?
Gary Colter No, but they are different. Weve had significant challenges to the stability of our system through the financial crisis, and obvious weaknesses in governance before that, which precipitated new
rules and regulations. Its an understandable response on the part of
regulators when bad things happen to create a floor of new approaches. These blanket approaches apply to low- and high-performing organizations. In reality, a lot of this is good stuff to pay attention to, as
it lessens the chance of things going wrong, but it does change the allocation of time in favour of compliance over running the business. Its
a real art to creating annual meeting plans and agendas, and allowing
them to evolve with circumstances. Its never going to be perfect. So
the challenges are to set aside enough time throughout the year and
then allocate the right proportion of time for all the other important
things where directors naturally want to add value: testing strategy,
monitoring execution against the strategic plan, building leadership
capacity and succession planning. We cant get away from compliance
issues, but we do need to balance our time to govern holistically, attending to long-term value creation and value preservation.
David W. Anderson Directors devote much more time per direc-
increasing the longevity of directors, much less underperforming directors. I look at the board as whole. The board needs to have a range
of tenures and ages amongst its directors to benefit from the different
perspectives they bring. So in addition to keeping experienced star
performers, we have to bring on younger directors. Its not healthy
when the average age of the board gets too high. The good news is
that boards are upgrading their bench strength more diligently than
ever before. I look at a directors relevant experience to the industry,
contribution to board chemistry and teamwork and quality of input
to our deliberations. I think this makes it important for age and tenure limits to be reviewed periodically based on circumstances.
David W. Anderson Some investors and regulators continue to
push for such limits because they see them as catalysts for what
you describe. Is this rooted in a scepticism of directors ability
to self-monitor performance and act accordingly?
Gary Colter I think age and term limits are used as a means of last
resort to force board renewal. Thats why some stakeholders endorse this as the solution, but its not the right answer. Lets recognize there is a core tension here between the need for continuity and
new blood. No one who is interested in the welfare of an organization wants to see a board thats either stale or green. Given whats at
stake when were talking about corporate governance, boards have
an obligation to ensure that directors continued service on a board is
based on their performance. Frankly, its a failure of the board not to
remove nonperforming directors, regardless of their age. Thats the
problem with prescriptive tenure and age limitsthey diminish the
pressure on boards to apply performance standards along the way. If
you want a competent boardone with a mix of experience and new
thinkingthen you need to have an active, comprehensive process
for managing board membership. Im talking about a rigorous director succession planning, anchored by a robust, annual evaluation.
torship now than 15 years ago. Anecdotally, some say its doubled. How far ought this to go? If director time doubled again,
would company performance improve?
Gary Colter No, we quickly reach the point of diminishing returns.
I think weve evolved to a good place in North American corporate
governance. The current division of labour works well, with boards
providing oversight and management execution. If you ask management to spend too much time in meetings with the board, it becomes
counter-productive. Management needs adequate time to go out
and perform against the strategy and business plan approved by the
board. But if things get difficult, you can always lay on more time
including an extra strategy session or a business division review.
Where directors do get called on to spend much more time is during
times of difficultywhether it be a hostile takeover, operational trouble, reputational challenge or leadership transition. Directors commit the needed time because they want their companies to do well.
and should review their policies in that light. Im not talking about
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Gary Colter
Gary Colter Doing board evaluation well is not easy. Directors get
frustrated with the time it requires, even when its 60 minutes once a
year. Typical check-the-box exercises tell you little of value, so directors wont see meaningful change. A numerical rating slightly higher
or lower year over year is essentially meaningless. The pressure then
is to reduce the time asked of directors because not much comes of it.
David W. Anderson Board self-evaluation is notoriously weak,
Gary Colter Yes, when people want to communicate with you and
tion focusing on the board as whole, individual director evaluation remains a tough bridge to cross. Is it worth the effort?
Gary Colter I support vigorous consideration of each directors individual performance because I know that when its done right, it improves
board performance and the directors experience. I dont support requiring each director to fill out a survey on every other director. Its better to have an annual meeting between the independent chair and each
director in which they discuss a range of issues, including suggestions
for any of their peers to do with style or substance. The chair is in a position to accumulate this input, add his or her own observations and then
provide feedback to each director in a thoughtful and constructive way.
being overlooked?
either not holding the respect of the board or not being engaged
enough to meet with directors. What then?
Gary Colter The functioning of the independent chair is vitally important, so the governance committee itself needs to review the chairs performance with the board, with the board chair absent the discussion.
Having separate board and governance committee chairs is useful in
this regard. The governance committee must be prepared to modify the
evaluation process to suit the people and dynamics on the board.
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