Bank of Montreal 1997 Annual Report Download - page 98

Bank of Montreal 180th Annual Report 199792
Corporate Governance
The directors have the responsibility for
safeguarding the integrity of the Bank’s
internal control systems, and for ensuring
ethical behaviour and compliance with
laws and regulations. These responsibilities
are vested principally in the Board’s Audit
Committee, although the Conduct Review
and Risk Review Committees also have
specific compliance responsibilities. Res-
ponsibility for the review of material
transactions which fall outside the ordi-
nary course of Bank business remains
with the full Board.
To oversee and evaluate the management
of the affairs of the Bank effectively, the
Board must have at its disposal a compre-
hensive and relevant system of measuring
the Bank’s performance, one defined by and
consistent with the Bank’s strategic goals.
Accordingly, the directors receive timely,
comprehensive information regarding the
Bank’s performance, benchmarked against
domestic and international peer groups.
Objectives for the other stakeholder
groups have also been established, based
on management’s assessment of how
performance on these objectives will affect
profitability and, in turn, shareholder value.
Annual all-day strategy sessions are
conducted to ensure directors are fully
versed in the strategic planning process so
that they may fulfill their responsibilities
for approving the Bank’s corporate philo-
sophy and mission, providing input on
emerging trends and approving manage-
ment’s strategic plans.
These sessions afford the directors
the opportunity to gain full appreciation
of the Bank’s planning priorities and
to give constructive feedback. Included
in these sessions are an analysis of
important risk factors and details of
the specific systems in place to man-
age these risks.
As a supplement to the all-day strategy
sessions, the Board receives systematic
updates on the Bank’s various lines of
business at regular Board meetings.
Further, new directors are introduced
to the business of banking through a
comprehensive orientation and education
program. Rotation of committee assign-
ments offers directors exposure to Bank
management issues and enables them to be
better informed and more involved.
Recognizing the broad responsibilities
and ever-increasing accountabilities of
directors, as part of its 1991 governance
study the Bank developed guidelines
denoting precisely and clearly the roles and
responsibilities of the Board and manage-
ment. The purpose of the Approval and
Oversight Guidelines is to ensure that lines
of accountability exist within the Bank,
and that directors have the information
necessary to exercise informed and proper
diligence and to discharge their supervisory
responsibilities promptly and effectively.
Each year, the Bank commissions an outside
consultant to conduct a comprehensive
corporate governance survey. The survey
solicits each director’s frank and critical
views on a number of subjects, including:
Board and committee administration
and performance, the quality of the Bank’s
strategy, and the performance of its man-
agement. Results of the survey are reviewed
with the Board, and the findings are inte-
gral to planning the following year’s agenda
for the Board and its committees.
The Board has also adopted a Charter
of Expectations for Directors, which en
u-
merates the specific responsibilities to be
discharged by the Bank’s directors and
the individual roles expected of them. The
charter also stipulates the personal and
professional characteristics expected of all
directors and provides benchmarks against
which a director will be assessed by his/her
peers. These criteria also form a recruit-
ment model for use in the screening and
selection of future Board members.
A comprehensive formal program of
individual director performance assess-
ment and feedback was approved by the
Board in 1997, and is now in place. Under
the program, each director will receive
detailed annual feedback on the quality
of his/her contribution.
The Board conducts a dual performance
evaluation of the Chairman and Chief
Executive Officer. The Human Resources
and Management Compensation Com-
mittee undertakes an annual written
assessment of the performance of the Chief
Executive Officer which covers the Bank’s
financial performance and condition; mar-
keting and customer satisfaction; human
resources management; technology and
infrastructure management; community
service and Bank reputation; and strategic
positioning. The Board Governance and
Administration Committee conducts an
independent performance evaluation of
the Chairman and CEO with respect to his
role as Chairman.
For the Board to be effective, it must be
of a workable size, with each director
equipped and empowered to discharge his
or her responsibilities.
In January 1997, Bank of Montreal
reduced its Board from 21 to 18 directors.
Only three directors qualify as “related”
pursuant to the relationship rules set forth
in the Bank Act, which are more restrictive
than the guidelines adopted by the Toronto
and Montreal stock exchanges. One director
is “related” as his company is a major cus-
tomer of the Bank. The other two are the
Chairman and CEO and the President and
COO, who are “related” by virtue of being
employees of the Bank. (The Bank Act
states that no more than two-thirds of the
directors may be “related”.)
The movement to a smaller, more
workable number of directors has enabled
the Bank to restructure its committees,
increase the involvement of individual
directors, and improve the decision-
making process.
Board effectiveness has been advanced
significantly with the introduction of
an electronic directors’ network, which
enables the Bank to provide more
comprehensive and timely information
to directors. Directors are now fully
conversant with the technology, and the
network is relied upon as the principal
means of communication with directors.
Access to Information and Measures of Corporate Performance
Assessment of the Functioning of the Board and of Directors
Board Effectiveness