TD Bank 2009 Annual Report Download - page 17

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 CORPORATE GOVERNANCE 13
Momentum =Responsible Governance
John M. Thompson
Chairman of the Board of Directors
CORPORATE GOVERNANCE
STRENGTH IN ADVERSITY
Coming on the heels of the financial industry
crisis of 2008, the recession of 2009 shook
global markets. Jobs vanished. Family homes
and small businesses were put in jeopardy.
Customers and shareholders sought refuge in
well-established companies with strong lead-
ership and straightforward strategies –
companies such as TD Bank Financial Group.
Last year we said that TD would be recog-
nized for its lower-risk, highly integrated
customer-service focus. And we have been –
despite the financial crisis. In Canada, TD
reached out to those under financial stress,
offering strategies to help them manage their
credit obligations. In the U.S., customers
looking for safety and soundness brought
their deposits to us. Impressive retail adjusted
earnings of close to $4 billion were a major
contributor to solid adjusted earnings of more
than $4.7 billion. TD Securities achieved
strong trading revenues while considerably
reducing risk in the business. Once again TD
delivered one of the highest levels of return
on risk-weighted assets among its North
American peers.
Total shareholder return was 14 per cent
for the year. And during the financial turmoil
of the past two years, total shareholder return
remains above the Canadian and U.S. bank
peer averages on a compounded basis. While
other financial institutions struggled, we
maintained our dividend. This indicates your
Board’s confidence that TD will continue to
grow earnings over time.
TD continues to be one of the world’s most
sound, best capitalized and best managed
banks and one of the few in the world rated
triple-A by Moody’s. While the market is
still unsure about the economy, particularly
in the U.S., your Board continues to have
confidence that over time shareholders will
keep benefiting from TD’s strategy.
CORPORATE GOVERNANCE
One of the keys to corporate success in good
times and bad is corporate governance. Your
Board regularly reviews and updates our
governance practices and continues to
represent the best interests of shareholders
through a strong focus on transparency and
accountability. For the third year in a row
we were recognized for our corporate gover-
nance standards by GovernanceMetrics
International, which ranked us among the
top one percent of companies worldwide. In
addition, we tied for first place in the Report
on Business’s annual Board Games ranking.
STRONG RISK MANAGEMENT
The problems that beset the financial services
industry in 2008 put risk management policies
and procedures under considerable scrutiny
and highlighted the importance of board
oversight. Over the past few years, TD has
taken a number of steps to reduce the inherent
risk in its businesses.
In 2009, together with senior management,
we took a long, hard look at what had led to
the financial crisis and closely examined TD’s
risk management policies and procedures
against the findings.
Our ongoing objective is to make sure that
TD businesses are only taking on risks they
understand and that are manageable within
an acceptable level. And because of this
disciplined approach to risk management,
TD was one of the few global institutions
that did not require government assistance
during the financial crisis.
COMPENSATION GUIDELINES SUPPORT
CONSERVATIVE RISK CULTURE
Your Board continued to provide strategic
counsel on executive compensation. During
2009, we completed a comprehensive review
of executive compensation programs and
fine-tuned our compensation practices in
order to appropriately align them with
evolving compensation principles. We have
implemented a risk adjustment that applies
to both the annual incentive compensation
and share unit awards. An annual review
conducted by the Risk Committee and
Management Resources Committee links
compensation to the risks our businesses
assume on both a prospective and after-
the-fact basis. In addition, all executive
compensation plans now include a clawback
feature that allows for recovery of compen-
sation in circumstances where material errors
or misrepresentations have been made. These
changes position TD well in relation to the
Financial Stability Board recommendations,
which have been endorsed by many regulators
and governments, including the Government
of Canada.
In addition, in response to growing
investor interest in having a “say on pay,”
at our upcoming annual meeting, share-
holders will be able to vote on executive
compensation in an advisory capacity.
CONTINUING STRONG LEADERSHIP
Your Board continues to have great confidence
in the leadership of Ed Clark and his senior
management team. They have again demon-
strated an impressive ability to successfully
guide the bank in a challenging economy
while building for future growth. As a measure
of our confidence in Ed, your Board was very
pleased in 2009 to extend his employment
contract with the bank until at least 2013.
CHANGES TO THE BOARD
We welcomed two new Board members in
fiscal 2009, Carole Taylor of Vancouver and
Brian Levitt of Montreal. Both are valuable
additions to the Risk Committee. They bring
important strategic insights as we continue
to drive forward our vision of being the better
bank. I’d also like to express the Board’s
sincere gratitude for Brian MacNeill’s service
during his 15-year tenure on the Board.
CONFIDENCE IN THE FUTURE
Underlying economic conditions are expected
to remain challenging for the foreseeable
future. However, your Board is confident that
TD’s strategy is working. The bank is in a
position of strength for the future – we have
a solid retail base that allows us to continue
to earn during difficult economic times.
We have a conservative risk profile that has
protected us from the worst of the economic
and financial market storms, and we are
investing for long-term growth, which will
allow us to capitalize on opportunities as
we eventually emerge from the recession.
On behalf of the Board of Directors, I
would like to thank Ed Clark, his management
team and every one of our outstanding
employees for their tremendous commitment,
day in and day out, to building a better bank.
They are, without any doubt, a force to be
reckoned with and, in my view, the best team
in banking today.