What performance? From economic performance to corporate citizenship: the changing nature of corporations and its impact on the role of directors and officers in Europe and North America

Third edition of the Competition and Innovation Colloquium Series

Organised by McGill University’s Centre for Intellectual Property Policy and Université de Montréal’s Centre de recherche en droit public

** Quebec Bar accreditation – 4 hours **

Registration is Mandatory for everyone (complete registration form below) – Admission fee: $60 for Non-Academic & Non-Students & Free for Academic Community & Students.

 

AGENDA

13:30-13:40 OPENING REMARKS
– Dean Daniel JUTRAS, McGill University
– Pierre-Emmanuel MOYSE, Centre for Intellectual Property Policy, McGill University

13:40 – 14:05: Keynote – The Honorable Mary K. BUSH
Good governance and corporate citizenship are Fundamental to Maximizing Shareholder Value

 

PANEL 1 – THE CHANGING NATURE OF CORPORATIONS…

14:05 – 14:25 Jean-François GAUDREAULT-DESBIENS
Comparer l’efficacité des systèmes juridiques : résister aux stéréotypes réducteurs mais prendre acte de la résilience des « canevas de raisonnement »

14:25 – 14:45 Richard JANDA
Transforming the corporation

14:45 – 15:05 Jean-François GASCON
Répondre aux attentes : La nécessaire redéfinition du rôle de la multinationale dans les pays en voie de développement

15:05-15:20 Barnali CHOUDHURY
Incentivizing the Pursuit of the Common Good: Incorporating Environmental and Social Goals into Executive Compensation Plans

15:20 – 15:40 Questions & Answers

15:40 – 15:55 BREAK

 

PANEL 2 – …AND ITS IMPACT ON THE ROLE OF DIRECTORS AND OFFICERS IN EUROPE AND NORTH AMERICA

15:55 – 16:15 Pierre-Emmanuel MOYSE
Pouvoir et gouvernance : une théorie du devoir en matière corporative / Power and Governance: A Theory of Duty in Corporate Matters

16:15 – 16:35 Michel ALBOUY
La rémunération des dirigeants ne concerne pas que les actionnaires : un regard français et européen

16h35 – 16:55 Stéphane ROUSSEAU
La rémunération excessive des dirigeants: quel rôle pour la responsabilité des administrateurs?

16:55-17:30 Questions & Answers

 

BACKGROUND

Much has been written and said about salaries and bonuses received by executives. No doubt the current crisis stigmatizes a number of practices designed to reward performance and to align compensation with the mighty objective of profit maximization for corporations: they give way to excess. The demise of Enron and of Lehman Brothers, the revelations that followed, the fraudulent use of accounting mechanisms, the dubious role of lawyers and advisers – all place the issue of compensation at the very heart of a necessary review of corporate governance. Executives and professional advisers – including lawyers – are under surveillance and the law is one instrument through which the state may take action.

Modern compensation schemes have long reflected the prevailing legal school of thought on the goal and nature of the corporation, one grounded in legal, economic and political literature derived from the Chicago School. Within this tradition, corporate governance is examined through the lens of cost-efficiency mechanisms, in isolation or to the exclusion of other parameters. This view is still predominant today. Many scholars in law and economics still continue to ignore studies of corporate governance that do not deal with economic performance (e.g. social and ethical approaches of director remuneration).

Once the basic premise of profit maximization is challenged, the prevalent justification for compensation becomes questionable. The exercise cannot consist only of aligning the company’s performance with remuneration. Even if we assume this apportionment method to be desirable, it does not accurately reflect the practice of compensation and bonuses. Recent legal cases and management literature clearly demonstrate the frequent disconnect between senior executive compensation and a company’s financial performance.
This conference will explore the theoretical and practical justifications underlying executive compensation mechanisms in light of broader questions surrounding the role of corporations in society and corporate governance. Questions of corporate liability combined with that of its directors and professional advisors has revived the late 19th to mid-20th century debate surrounding the status of corporations, not only as subjects of rights but of obligations as well.

 

TALKS (titles & abstracts)

La rémunération des dirigeants ne concerne pas que les actionnaires : un regard français et européen

Michel Albouy

La rémunération des dirigeants des grandes entreprises cotées, notamment en Europe, est devenue une question sociétale qui dépasse le seul cadre de l’assemblée générale des actionnaires. La question aujourd’hui n’est plus de savoir si les montants attribués aux dirigeants des entreprises peuvent se justifier par leurs performances financières (et à quel horizon ?) ou encore si leur niveau constitue un détournement de valeur pour leurs actionnaires (vision purement actionnariale). Avec l’explosion de ces rémunérations aux États-Unis, mais également en Europe depuis les années 2000, la question est devenue sociétale dans la mesure où ces montants faramineux pour les citoyens et leurs modes de paiements (via notamment les stock-options et les retraites « chapeaux ») sont de nature à rompre le lien social de l‘entreprise avec ses parties-prenantes (stakeholders) et à promouvoir des comportements opportunistes de la part des dirigeants de sociétés ; comportements allant à éventuellement à l’encontre des intérêts de la personnalité morale de l’entreprise et même des actionnaires. Au préalable il convient de rappeler au vu des nombreuses études empiriques réalisées que les niveaux de rémunérations des dirigeants n’ont pas grand chose à voir avec leurs performances financières pour l’actionnaire. Ce résultat est en cohérence avec la théorie de l’agence et l’opportunisme des dirigeants enracinés. Exit donc la justification économique pour l’actionnaire de ces comportements. En France, la question des rémunérations des dirigeants fait l’objet d’un débat public et avec la crise économique actuelle la pression est telle que des institutions comme l’Autorité des Marchés Financiers (AMF : French Security Exchange Commission) ont fait un certain nombre de recommandations. Pour le moment, ces recommandations et l’existence de la loi NRE (Nouvelles Réglementations Économiques) n’ont pas changé grand-chose en France. Certains politiques vont même jusqu’à imaginer un plafonnement de ces rémunérations. Utopie ou réalisme pour sauver un système qui perd ses repères ?

Incentivizing the Pursuit of the Common Good: Incorporating Environmental and Social Goals into Executive Compensation Plans

Barnali Choudhury

Agency theory postulates that agency costs can be reduced by establishing incentives that will encourage agents to act in the interests of their principles. Executives, long described as agents of shareholders, are accordingly given compensation packages that tie bonuses and options to financial criteria under the assumption that these types of incentives will encourage profit maximization, the sole interest of shareholders. Recent environmental disasters such as Deepwater Horizon, however, evidence that the interests of shareholders should not be focused solely on financial criteria. Failure to minimize environmental and social risks can be as financially devastating to a corporation as failing to pursue financially-motivated corporate strategies. Thus, under the current model of executive compensation, agency costs remain high. Recently, several corporations have begun to tie environmental and social goals (ESG) to executive compensation packages. This has led to corporate strategic decisions to reduce greenhouse gas emissions, increase product energy efficiency, and to reduce the company’s carbon footprint. In addition to benefitting society at large, these decisions have also worked to minimize corporate risks, which in the long run benefits shareholders financially as well. Still, most executive compensation packages are calculated in terms of financial criteria. This is somewhat surprising given the growing interest of shareholders in demanding a reduction of agency costs, more colloquially known as “say on pay”. For it is only by incentivizing corporate executives to pursue the common good, that shareholders can enjoy a true reduction of agency costs.

Répondre aux attentes : La nécessaire redéfinition du rôle de la multinationale dans les pays en voie de développement

Jean-François Gascon

La démonstration que les pays en voie de développement jouent aujourd’hui un rôle prépondérant dans la croissance mondiale n’est plus à faire. Cependant, une analyse plus approfondie du phénomène permet de constater non seulement une croissance économique accrue dans plusieurs régions du globe, mais également une progression extraordinaire au niveau des attentes sociétales des populations : mouvements sociaux de masse au Maghreb, explosion des conflits de travail en Chine, succès électoraux de la gauche politique en Amérique latine.
Face à cette rapide évolution des environnements, l’entreprise multinationale se voit aujourd’hui forcée de s’adapter, d’innover en vue de répondre aux nouvelles attentes des populations et à un élargissement considérable des stakeholders. Le rendement, longtemps le seul facteur d’analyse, doit aujourd’hui cohabiter avec de nouvelles notions d’analyse, la licence sociale pour opérer, le développement durable, la responsabilité sociale corporative, la gestion des risques. Cette nécessité ne peut être abordée de façon purement volontaire, elle devient primordiale pour le succès des opérations et l’intégration de l’entreprise dans l’environnement.

 

Comparer l’efficacité des systèmes juridiques : résister aux stéréotypes réducteurs mais prendre acte de la résilience des « canevas de raisonnement »

Jean-François Gaudreault-Desbiens

Les présupposés de certaines grilles d’analyse « économistes » comparant la performance des traditions de common law et de droit civil en matière d’économie et de gouvernance laissent entrevoir l’influence de stéréotypes réducteurs de cette dernière tradition. En revanche, une étude plus approfondie des principaux cadres théoriques sollicitant le droit et la science économique révèle une réalité plus complexe quant à l’évaluation de la performance relative de ces traditions : en effet, le lien entre l’adoption d’une grille d’analyse économiste et la critique négative de la tradition romaniste est contingent plutôt que nécessaire. Mais résister aux stéréotypes réducteurs d’une tradition juridique ne permet pas pour autant d’occulter la résilience de « canevas de raisonnement » dans une tradition ou dans une autre, qui se sont sédimentés au fil des siècles, qui découlent notamment de conceptions différentes des rapports individu-société civile-État, privé-public, formel-informel ou de la normativité elle-même, et dont l’action, à la manière d’une doxa, se fait souvent souterraine. Sans être toujours déterminants – d’autres variables socioéconomiques contemporaines peuvent avoir une influence plus considérable -, ces canevas de raisonnement n’en expliquent pas moins certains patterns régulateurs archétypaux.

 

Transforming the corporation

Richard Janda

The fiduciary conception of the corporation is in the midst of significant transformation and is confronted with a growing legitimacy crisis. Corporations are not simply discrete economic agents but are now vectors of governance, in an economy operating increasingly outside planetary boundaries. Whereas corporations cannot be democratized, they can deepen and differentiate their fiduciary obligations. In particular this means an evolution in the ideas of corporate social responsibility and citizenship to make the corporation govern its resources and social impacts with a view to stabilizing and reducing consumption.

Power and Governance: A Theory of Duty in Corporate Matters

Pierre-Emmanuel MOYSE

The notion of power in civil law has long been infused in the overarching concept of subjective rights. The notion of subjective right has historically attracted if not consumed minds and judicial constructions. The subjective right, it must be recalled, is understood in continental civil law theory as an individual prerogative in the legal subject against others, including the State; a selfish right to some – un droit égoiste – for it is awarded to the owner for his personal interest solely. The ownership right, sphere of autonomy, is often presented as the quintessential subjective right. Being absolute it suffers, in theory at least, no exception, no encroachment. The notion of power on the other hand, reflects a somewhat different reality. Underdeveloped in civil law and misunderstood by the exegesis scholars of the historical school, it is almost evanescent. The notion of power is a prerogative which is entrusted upon its holder in and for the interest of another person, an interest therefore at least partially separate from his. The basic distinction between right and power exposes the contrast between the doctrines of abuse of right and misuse of power (détournement de pouvoir). While the abuse of right theory has tried with varying success to discipline selfish rights by subjecting them to a social purpose, the theory of misuse of power catalyzes the legal relationship and directs it in the sense of the purpose for which power was conferred in the first place. Control of this misuse of power captures all of the ends which stray from the purposes of the exercise of that power.

By definition, control of the misuse of power implies that the act was accomplished by the author in the objective limits of his powers. There is therefore no question of invoking their illegality per se. The usefulness of the misuse of power theory, that is not without resemblances with the notion of fiduciary obligations in common law, is of particular interest in situations where certain behaviors of administrators which, while remaining legal, are under scrutiny. The concept of misuse of power in private law therefore offers an interesting avenue to address issues of accountability in corporate law. Directors or administrative officers are vested with powers in the civilian sense and their actions may very well lead to excess. The misuse of power theory has indeed been used to protect minority shareholders against the arbitrariness of the majority of the board; it could just as well rescind the resolutions granting excessive compensation. According to fundamental principles of commercial law, the end goal of the corporation is the joint sharing of pecuniary profits or savings. It can thus be argued that any intentional breach of the collective objective represents a misuse of power.

Stéphane Rousseau
La rémunération excessive des dirigeants: quel rôle pour la responsabilité des administrateurs? | Excessive executive compensation: what role for directors’ liability?

Les critiques de la rémunération des dirigeants sont bien connues. En revanche, l’encadrement de la rémunération des dirigeants pose des défis importants qui font en sorte qu’il n’est pas aisé d’endiguer les excès. Cette question continue de soulever les débats en matière de gouvernance d’entreprise. En principe, la détermination de la rémunération des dirigeants incombe au conseil d’administration. Il est donc tentant d’avoir recours au mécanisme de la responsabilité civile pour inciter les administrateurs à fixer une rémunération des dirigeants qui soit “dans l’intérêt de la société”. Est-il opportun d’accroître la responsabilité des administrateurs en matière de rémunération des dirigeants pour mettre un terme aux excès?

 

SPEAKERS BIOGRAPHIES

Michel Albouy
Michel Albouy is professor of finance at Pierre Mendès France University of Grenoble. As a recognized specialist in finance, he is also a member of the scientific board of the Autorité des Marchés Financiers (French Security Exchange Commission). His work is mainly concerned with researching and teaching in Corporate Finance: Financial Statements Analysis, Investment and Financing Decisions, Dividend Policy, Mergers & Acquisitions, Valuation and Creating Value trough Corporate Restructuring, and Corporate Governance.
He has published more than 100 articles in professionals and academic journals and 10 books. Professor Albouy is a member of the editorial board of the Revue Française de Gestion, and of Finance-Contrôle-Stratégie, two leading French reviews in management and finance. At Pierre Mendès France University he founded and directed the Center for Applied Research in Management Sciences (CERAG), a center linked with the National Center for Scientific Research (CNRS). He was Dean of the Business Administration Institute (IAE) of the University of Grenoble from 1992 to 1997.
He holds an engineering degree from the Ecole Nationale Supérieure d’Arts et Métiers (Paris), a Master in Finance from Paris-Dauphine University and a Ph.D. in Business Administration from the University of Texas (Austin), and the Agrégation in Management Sciences.

The Honorable Mary K. Bush
Mary K. Bush is a leading expert, advisor, and speaker on international finance, banking, and corporate governance. She has served three U.S. Presidents. Ms. Bush gained her reputation through developing cutting edge financial and business strategies that have helped transform markets throughout the world. Her achievements include: leading the creation of new methods of securities financings for private sector companies; developing new funding structures at the IMF and World Bank for Emerging Market countries that agreed to free-market, business friendly reforms; strengthening oversight systems for international lending institutions; and Chairing a Presidential Commission on reforming US foreign aid. The Secretary of the US Treasury, in 2007, appointed her to the US Treasury Advisory Committee on the Auditing Profession to evaluate the future of that industry. Ms. Bush is highly regarded for her global and strategic perspective on business, government and international matters in her governance work on corporate boards. Since 1991, Ms. Bush has been President of Bush International, a firm that advises governments on strengthening banking systems and capital markets and on strategies to support free enterprise. The firm also advises corporate clients on financing and market development strategies. From 1994 to 1997, she also hosted “Markets and Technology,” a nationwide cable television program on global business and economic matters. She is a frequent speaker on business and financial issues and has periodically been a guest commentator on financial market matters on PBS’s NewsHour with Jim Lehrer, CNN, CSPAN, Fox News Channel 8 and America’s Voice Network. In 2006, President Bush appointed her chairman of the HELP Commission.
From 1995 to 1996, Ms. Bush served as Financial Advisor at the District of Columbia Financial Responsibility and Management Assistance Authority (the Control Board). In this position, she advised the Board and the DC Government on financing matters and investor relations issues. From 1989 to 1991, Ms. Bush was Managing Director (Chief Operating Officer) of the Federal Housing Finance Board – the oversight body for the nation’s twelve Federal Home Loan Banks (FHLB’s). Ms. Bush provided leadership on several challenges faced by the FHLB’s as the primary source of funding for the Savings & Loan industry. Her accomplishments included strengthening portfolio risk analysis and oversight, creating an affordable housing program, and developing a dividend policy to balance the FHLB’s stability with S & L cash needs. She also oversaw the monthly $1 billion capital market funding. Prior to the Federal Housing Finance Board, Ms. Bush was the senior executive (Vice President, International Finance) at Fannie Mae for international financial market matters. Among her successes were major new institutional investors (including Central Banks) in Asia and Europe for Fannie Mae securities and the first mutual fund of Fannie Mae mortgage-backed securities (a $500 million transaction). Ms. Bush was appointed by the President and confirmed by the Senate in 1982 and in 1984 as United States Alternate Executive Director of the International Monetary Fund (IMF) Board. She led the development of the Structural Adjustment Facility through which the IMF/World Bank lent several billion dollars to developing countries. During the 1980’s debt crisis, she led the reform of IMF accounting practices to incorporate GAAP in accounting for past due loans. In 1982 and 1983, Ms. Bush was Executive Assistant to the Deputy Secretary of the US Treasury Department. She worked with top management of the Treasury on sovereign debt problems and economic and banking issues. In the 1970’s, she was with New York City banks – Bankers Trust, Citibank and Chase Manhattan. Of note was the first private placement by a commercial bank for a Fortune 500 acquisition financing. Boards include Discover Financial Services, Marriott International, ManTech International and The Pioneer Family of Mutual Funds. Board committee service and/or Chairmanships: Audit, Finance, Compensation, Nominating and Governance and Pensions and Investments. Former Boards include United Airlines and MGIC. Ms. Bush also serves on the board of the Investment Company Institute, on the US Advisory Board of the Global Leadership Foundation and is a member of the Kennedy Center Community Advisory Board. She holds an M.B.A. from the University of Chicago and a B.A., Phi Beta Kappa, Magna Cum Laude, from Fisk University. She was born in Birmingham, Alabama and resides in Chevy Chase, Maryland.

Barnali Choudhury
Barnali Choudhury is an Assistant Professor at McGill University, Faculty of Law. She holds a Ph.D. from the University of Zurich, an LL.M. from Columbia University, an LL.B. from Queen’s University, and a B.Comm. from McMaster University. She teaches and researches in the areas of corporate and international economic law and her publications can be found in the Columbia Journal of Transnational Law, the University of Pennsylvania Journal of Business Law, and Northwestern’s Journal of International Law and Business. Prior to joining academia, she practiced in the areas of corporate and international investment law.

Jean-François Gascon
Jean-François Gascon is Vice-President, Capacity Building for the SNC-Lavalin Group, one of the largest Engineering & Construction firm on the globe. He is considered a key international expert in the field of Project Sustainability, a growing field of Sustainable Development addressing the design and implementation of sustainable development strategies on infrastructure and industrial projects in developing countries. Over the last decade, Mr Gascon successfully designed, developed and implemented LRDITM programs (Local Resource Development Initiative), SNC-Lavalin’s best practice in Project Sustainability, on different mega-projects in mining, energy and water infrastructure in Asia, Africa and Latin America. He helps organizations like Barrick Gold, Inmet, Sumitomo, Kores, Sherritt International, the African Development Bank and the Canadian International Development Agency (CIDA) on the implementation of sustainable strategies on projects across the globe.
Previously, Mr Gascon served as a Senior Ministerial Advisor for the government of Canada at CIDA and the Department of Foreign Affairs and International Trade (DFAIT). In 2010, he received the ARISTA award “Leader without Borders” from the Jeune Chambre de Commerce de Montréal. Mr Gascon is a McGill Law alumnus.

Jean-François Gaudrault-Desbiens
Jean-François Gaudreault-DesBiens is Associate Dean, Research, and Canada Research Chair in North American and Comparative Juridical and Cultural Identities at the Faculty of Law of the Université de Montréal. He has also taught at the faculties of law of the University of Toronto and of McGill University, in addition to having been visiting Professor at different universities outside of Canada. His teaching and research interests are constitutional law (domestic and comparative), legal theory and epistemology, and the sociology of legal cultures. His most recent work focuses on the legal theory of federalism, on the legal treatment of religious claims, and on the relations between the civil law and common law traditions in a globalized economy. He has published several books and articles in French, English, Spanish and Catalan. A member of the Québec and Ontario Bars, he is the Canadian correspondent for the British journal Public Law.

Pierre-Emmanuel Moyse

Having joined the McGill Faculty of Law in 2006 as a Wainwright Junior Fellow, Pierre-Emmanuel Moyse is an assistant professor specializing in property systems (intellectual property, civil law property), legal theory, competition and commercial law. Professor Moyse is also an active member of the Centre for Intellectual Property Policy (CIPP), a researcher with the Regroupement droit et changements Université de Montréal-McGill University-Université Laval and collaborates with the Canada-Europe Transatlantic Dialogue (Strategic Knowledge Cluster). He is also heading the Competition and Innovation conference series since its creation in 2008. Professor Moyse is a member of the Quebec Bar since 2000.

Professor Moyse has published numerous articles in both Canadian and international publications and seats on the Editorial Board of the Cahiers de propriété intellectuelle. He was awarded several grants for his personal research and, notably, for his work on the abuse of right theory in intellectual property. Professor Moyse is presently working on a international collaborative project with the Centre d’études et de recherche en droit de l’immatériel (Paris XI) entitled “Terroir, Virtual Terroir and Intellectual Property”.

 

Richard Janda

Professor Janda teaches business associations, administrative law, competition law, economic regulation, and air transport regulation at McGill Faculty of Law. He was Law Clerk to Justices Le Dain and Cory of the Supreme Court of Canada and is a past Director of the Centre for the Study of Regulated Industries at McGill. His main current research areas are the legal basis of domestic and global corporate social responsibility and the regulatory regimes governing domestic and global public goods. Apart from his academic contributions, has been involved in work for the WTO, ICAO, OECD, the World Bank, a number of Canadian public agencies as well as work in a number of developing countries.

 

Stéphane ROUSSEAU
Stéphane Rousseau holds the Chair in Business Law and International trade and is full professor at the Faculty of Law of the Université de Montréal.. Professor Rousseau holds a Doctorate in Juridical Science from the University of Toronto and a master’s degree in law from Université Laval. He is member of the Québec Bar. He specializes in corporate law, corporate governance, securities law and law and economics. He is coauthor of three recent books: (with Raymonde Crête), Droit des sociétés par actions, 2e éd. (Éditions Thémis, 2008); (with Ejan Mackaay), Analyse économique du droit, 2e éd. (Dalloz/Éditions Thémis, 2008) et (with Patrick Desalliers), Les devoirs des administrateurs lors d’une prise de contrôle – Étude comparative du droit du Delaware et du droit canadien (Éditions Thémis, 2007). He is the founder of the blog Gouvernance. He has given conferences in academic and professional settings in Canada as well as abroad in numerous countries (Argentina, Australia, Brazil, China, France, Unites States, and Tunisia). He was awarded the André-Morel teaching excellence prize in 2007.

This content has been updated on August 16, 2015 at 21:30.

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