You and your board are approaching the finish line of yet another calendar year. If you haven’t done so already, you’ll soon be wrapping up the last of your 2019 committee and board meetings. That may leave you happily in the home stretch with respect to this year’s minutes, and you and your directors with a limited series of social or other organizational events on your respective radar screens for the seven business weeks left in the year.

You’ve earned the right to pause and look back – hopefully with well-deserved satisfaction – on your board’s development and its leadership over the course of this year. While you’re at it, give yourself credit for your own leadership and your contributions to good governance.

I’ve spoken at governance-themed conferences in three countries over the last quarter, sharing insights with corporate secretaries and other governance professionals from a range of sectors. At annual conferences hosted by Governance Professionals of Canada (GPC), the Barbados Stock Exchange (BSE) and at Diligent’s Modern Governance Summit in the United States, I spent time with delegates. In conversation, I recognized commonalities that are shared across borders and sectors. These include commitments to high performance in the role of trusted advisor, and in practices reflecting high governance standards.

With the focus you bring to the role, I suspect you’re unlikely to spend an inordinate amount of time reflecting on achievements, either yours or your board’s. Rather, you likely already have a firm grasp of your board’s 2020 priorities and how it should be planning for the year ahead.

Looking Forward For Canadian Boards

When considering how Canadian boards should be planning for 2020, there are some commonalities with boards in other countries – as was the case with the delegates I met at recent conferences. In other instances, some planning considerations reflect Canadian practices that are specific to this country but that may be of interest to anyone paying attention to expectations associated with environmental and social governance (ESG).

For example, Canadian boards and their governance professionals would do well to review the Canadian Securities Administrators’ (CSA’s) Staff Notice 51-358, Reporting of Climate Change-related Risks. While this August 1, 2019, notice is directed to listed businesses that are required to comply with Canadian securities legislation, other boards may find it informative.

As explained in the CSA’s Staff Notice 51-358, Canadian securities legislation dictates that issuers (reporting issuers) shall disclose material risks affecting their businesses and, as practicable, the financial implications of those risks. Staff Notice 51-358 doesn’t represent new legal requirements. Rather, it’s intended to clarify those already in effect and is intended to provide businesses with guidance on “identifying and improving their disclosure of material risks posed by climate change.” Governance professionals will find Staff Notice 51-358 a companion piece to CSA Staff Notice 51-333, Environmental Reporting Guidance.

This latest guidance on the topic of disclosure of climate change-related risks reflects the CSA’s findings that institutional and other investors “…have become increasingly focused on climate change-related risks and have expressed concern that they are receiving insufficient disclosure of these risks from issuers.”

So, while 56% of the 734 US public company directors who participated in PwC’s 2019 Annual Corporate Directors’ Survey said that investors devote too much attention to environmental/sustainability issues, regulators are paying attention to investors’ disclosure expectations.

While the CSA prepared Staff Notice 51-358 specifically for issuers, its recommendations reinforce the significance for Canadian (and all) boards of the need for effective succession planning and onboarding. For example, the CSA encourages assessments of both board and management expertise associated with climate change-related risks that are specific to an organization’s sector. How many boards do you know that reflect such expertise on their board matrices?

The CSA highlights the significance of knowing what questions should be asked when it comes to climate change-related opportunities and risks. Staff Notice 51-358 contains questions derived from the Engagement Guide for Asset Owners & Asset Managers, published by SASB, the Sustainability Accounting Oversight Board, and from Climate Change Briefing: Questions for Directors to Ask, published by CPA Canada, Chartered Professional Accountants Canada.

The following are but a sampling of the CSA-published questions1 that you and your boards may want to consider:

  • “Is the board provided with appropriate orientation and information to help members understand sector-specific climate change-related issues?”
  • “Is the board comfortable with the methodology used by management to capture the nature of climate change-related risks and to assess the materiality of such risks?”
  • “Has management implemented effective systems, procedures and controls to gather reliable and timely climate change-related information for purposes of management analysis, decision-making and disclosure to investors, regulators and other stakeholders?”

Creating the Right Culture Within Both the Boardroom & Your Organization

It’s often observed that the expectations of directors and governance professionals continue their upward trajectory, and this is not without impact on management. Even with the benefit of having relevant questions served up on a proverbial (electronic) platter, your board and the CEO need to nurture and maintain a culture in which such questioning is seen as not merely acceptable, but highly appropriate. When it comes to board culture, you as a governance professional can have a direct impact through your onboarding design or recommendations.

Boards would do well to continue to keep technological and reputational considerations front of mind as they build agendas and consider proposals. When the board reviews significant proposals for approval, do the executive summaries reflect these criteria as well as financial considerations? Directors need to have a sufficient level of understanding of cybersecurity, artificial intelligence (AI), data and data privacy so that they can ask relevant questions. These may represent opportunities for board development, at a strategy session or during regular meetings. With the rise of both third-party risks and security rating services (SRS), boards will want to ensure they have confidence in the organization’s cyber practices.

On the reputational front, your board needs to be aware of stakeholder activism. It’s timely to review and ensure satisfaction with the organization’s social media policy and with its crisis management (response) plan. Just as management embarks on crisis management scenarios or tabletop exercises, the board should be similarly prepared.

The Impact of Cannabis Legalization

Canada’s cannabis industry was legalized just over a year ago, and it’s not only the boards of cannabis companies that should be discussing results. The Conference Board of Canada recently hosted Cannabis at Work One Year Later, a conference for employers wanting to learn the results of primary research and discuss cannabis greatest workplace impacts following legalization. While maintaining distinctions between oversight and management, Canadian boards and their HR committees should expect some discussion on the topic. Has the organisation appropriately updated policies? Has management ensured that employees have ready access to policies and guidelines? Have there been any direct or indirect occupational health and safety (OHS) or cultural impacts?

Cultures, both board and organizational, should be making their way onto 2020 board agendas. Organizations can benefit when their boards not only exemplify the desired culture, but also understand and monitor actual culture. For the board to effectively lead and govern, your 2020 plans may include renewed focus on director onboarding as well as ongoing development, engagement, transparency and resilience. Committing to conducting and taking action on routine evaluations can help ensure that your board has the right combinations of expertise and commitment, and a healthy culture.