The Globe and Mail's annual Board Games project unveils updated criteria for evaluating corporate governance practices, emphasizing diversity, board tenure, and executive independence.
For the 24th consecutive year, Report on Business ’s Board Games project will evaluate the performance of Canada’s corporate boards using a comprehensive set of governance standards exceeding the minimum requirements mandated by regulators. The Globe and Mail has pledged to publish the Board Games evaluation criteria at the outset of the annual corporate “proxy season.
” This period witnesses the issuance of management information circulars by most Canadian companies, containing the majority of the data upon which Board Games is based. The Globe’s data partner, Global Governance Advisors, will meticulously analyze the boards of directors of companies and trusts listed in the S&P/TSX Composite Index, assessing the quality of their governance practices and transparency. A significant addition to the criteria this year mandates that companies disclose any adjustments made to standard IFRS/GAAP accounting figures when establishing financial targets or determining executive compensation payouts. This explanation, provided within the proxy circular, must include a table reconciling the company’s adjusted figures with their corresponding IFRS/GAAP figures. This new criterion mirrors a policy implemented by proxy advisor Glass Lewis & Co. Inc.Furthermore, Board Games has streamlined its criteria for evaluating a company’s approach to diversity. While the requirements for the number of diverse directors on the board remain unchanged, the criteria for discussing and disclosing diversity policies for women and other underrepresented groups have been consolidated into a single measure. This change acknowledges that many companies adopt a unified diversity policy encompassing all groups. (Note that the total number of points allocated to diversity criteria remains consistent with 2024.) Notably, a new criterion requires the average tenure of a company’s board of directors to be less than 10 years, and stipulates that no independent director, except for the chair, should have served for more than 12 years at the time of the annual meeting. Companies are required to disclose the average tenure of their board of directors, eliminating the need for shareholders to calculate it independently. Directors who previously held full-time CEO positions within a company will no longer be classified as independent, as there is no longer a “cooling off” period allowing them to regain independent status. This criterion is modelled after a policy change implemented by proxy advisor Institutional Shareholder Services Inc. Directors related to a “significant” shareholder, defined as owning 10 percent or more of the company, will also no longer be considered independent. Previously, a director representing a controlling shareholder with 30 percent or more ownership was deemed related and thus not independent. A new criterion mandates that no board member can concurrently hold a full-time executive position in another public company, with an exception for related company boards. Independent directors must meet without management present at every regular meeting for companies to receive full credit under this criterion. Previously, Board Games awarded partial credit if independent directors met at some, but not all, meetings. Board Games has also revised the definition of performance-based stock awards to exclude shares or options that vest based solely on nominal price appreciation, without a relative comparison to peers or an index. Companies must now disclose how their boards address artificial intelligence issues, alongside information technology and cybersecurity matters. For full credit, board audit committees must now comprise at least two current or former CPAs (chartered professional or certified public accountants) or chief financial officers. Previously, one was sufficient for full credit. For 2025, Board Games has eliminated criteria for disclosing equity holdings for CEOs and directors. This change acknowledges that many companies provide comprehensive disclosure of holdings while failing to meet one of the numerous elements within the criteria. The elimination of equity holding disclosure reduces the total number of Board Games criteria to 36, down from 38 last year. Board Composition and Oversight, 1 through 14, worth 46 marks out of 100THREE marks if more than 50 per cent of directors are independent.For a director to qualify as independent as measured for this question, the director must have no links to the company beyond their role as a director
CORPORATE GOVERNANCE BOARD OF DIRECTORS DIVERSITY EXECUTIVE COMPENSATION ACCOUNTING STANDARDS BOARD TENURE INDEPENDENT DIRECTORS
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