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MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
MANA 695O - Corporate Governance - Loblaw Case
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MANA 695O - Corporate Governance - Loblaw Case

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This case was presented in the summer of 2010 for the Corporate Governance course at JMSB. Presented a case on Loblaw company to recommend to the Concordia University Pension Fund to either invest or …

This case was presented in the summer of 2010 for the Corporate Governance course at JMSB. Presented a case on Loblaw company to recommend to the Concordia University Pension Fund to either invest or not invest in Loblaw.

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  • At the time of the release of the management proxy circular, the board had nominated 13 individuals who are currently directors with Loblaw Companies. The average number of years that a director is on the board is 5.4 years. Of the 13 directors, 7 are independent and 6 are non-independent (which is acceptable due to the “Controlled Company” status of the company). The boards experience is relatively diverse ranging from Retail, Professional Sports, Banking, and Technology. Finally, with the exception of Galen G. Weston, all the nominees have extensive executive management experience in corporations other than Loblaw and Weston. They have all held the CEO, President, Executive Vice President, or Chair positions at various corporations.
  • At the time of the release of the management proxy circular, the board had nominated 13 individuals who are currently directors with Loblaw Companies. The average number of years that a director is on the board is 5.4 years. Of the 13 directors, 7 are independent and 6 are non-independent (which is acceptable due to the “Controlled Company” status of the company). The boards experience is relatively diverse ranging from Retail, Professional Sports, Banking, and Technology. Finally, with the exception of Galen G. Weston, all the nominees have extensive executive management experience in corporations other than Loblaw and Weston. They have all held the CEO, President, Executive Vice President, or Chair positions at various corporations.
  • Galen Jr. has worked full time at Loblaw for the past eight years and had been most recently senior vice-president of corporate development. Prior to that, he was vice-president of operations for the No Frills division (Olijnyk, 2006). Now 37 years old with 4 years at the helm of the Loblaw board, Galen Jr.’s tally of experience still pales in comparison to that of any other nominee on the board currently. Galen Jr. is supported by the experience of Allan Leighton (Deputy Chair and President) and Anthony Graham. Mr. Leighton is strategically placed to guide and mentor Galen Jr. This is considered to be a plus for the company considering that Mr. Leighton was once a President and CEO of Wal-Mart (EU division), Loblaw’s strongest competitor.
  • Transcript

    • 1. Loblaw Companies Ltd.<br />A Recommendation for the Concordia Pension Fund<br />Mark Bundang <br />Zachary Elias<br />David Mascitto<br />Eric Wand<br />Lei Wang <br />
    • 2. Loblaws: A History<br />Loblaw started in 1919 by Theodore Pringle Loblaw<br />Grew to 80 stores<br />George Weston Limited acquired Loblaw in 1947<br />Incorporated Loblaw Companies in 1956<br />Maintains 63% control of the company<br />Family-owned “Controlled Company”<br />Succession of control from father to son<br />
    • 3. Loblaws: Current Status<br />Over 1000 stores across Canada and the United States<br />Over 30B in sales per year<br />Controls a Financial Institution (PC Financial)<br />140,000 employees<br />Voted one of Canada’s Top 100 Employers<br />Top 10 Companies to Work For<br />One of Canada’s Greenest Employers in 2010<br />
    • 4. Strategic Outlook<br />Loblaw Companies Ltd is committed to a strategy developed under three core themes: Simplify, Innovate and Grow. <br />Weston: to be the best provider of bakery solutions and fresh dairy products to its customers.<br />Loblaws: to be the best in one-stop shopping for everyday household needs for Canadian consumers<br />
    • 5. Financial Outlook<br /><ul><li>Key Indicators
    • 6. Cash Flow</li></li></ul><li>Financial Outlook (cont’d)<br /><ul><li>Loblaws &amp; Weston
    • 7. Share identical risks?
    • 8. “Internal Control over Financial Reporting”
    • 9. “Enterprise Risks and Risk Management”
    • 10. Share identical Responsibility-auditor?
    • 11. “Management’s Statement of Responsibility for Financial Reporting”
    • 12. “Independent Auditor’s report”</li></li></ul><li>Board Composition<br />Stephen E. <br />Bachand<br />Paul M. <br />Beeston<br />Gordon A.M. <br />Currie<br />Anthony S. <br />Fell<br />Anthony R. <br />Graham<br />John S. <br />Lacey<br />Allan L. <br />Leighton<br />Nancy H.O. <br />Lockhart<br />Pierre <br />Michaud<br />Thomas <br />O&apos;Neill<br />Karen <br />Radford<br />Galen G. <br />Weston<br />John D. <br />Wetmore<br />
    • 13. Board Composition<br />13 nominees (and current directors) <br />11 men + 2 women<br />7 independents + 6 non-independents<br />Diverse experience<br />Retail, professional sports, banking, technology<br />All have extensive executive management experience in corporations other than Loblaw and Weston (except Galen Jr.)<br />
    • 14. Executive Chairman<br />Deputy Chair and President<br />Allan L. Leighton<br />Executive Chairman position created specifically for Galen Jr. 4 years ago.<br />Galen Jr.’s experience pales in comparison to rest of board.<br />Mr. Leighton is strategically placed to guide and mentor Galen Jr. <br />Galen G. Weston<br />
    • 15. Typical Director Profile<br />
    • 16. Loblaw Interlocking Overview<br />Public Board Interlocking is minimal<br />5 of 13 are interlocked with BCE or Weston<br />Interlocking may not be black &amp; white<br />Alan Leighton is Deputy Chairman of Loblaw and Weston<br />Gordon Currie is Exec. Vice President and Chief Legal Officer at Loblaw and Weston<br />
    • 17. Public Board Interlocking<br />
    • 18. Committee Membership<br />
    • 19. Governance Committee<br />5 of 13 directors sit on board (incl. Chair)<br />Responsible to oversee compensation<br />Evaluate director performance<br />“It’s like grading your own midterm” – Professor Riven<br />
    • 20. Executive Committee<br />
    • 21. Executive Committee<br />Maintains a basic charter<br />Hold key positions at Loblaw and Weston<br />Deputy Chairman<br />Executive Chairman<br />Engages when ``it is not practicable for the full board to meet``<br />No meeting in 2009<br />
    • 22. Audit Committee<br />Made up entirely of independent directors<br />Members are financially literate<br />Oversee financial reporting, internal controls, disclosure controls, etc.<br />Must approve of any non-audit services provided by external auditors<br />Comply with applicable securities law rules<br />
    • 23. Financial Compensation<br />Compensation is determined by Corporate Governance Committee<br />Directors can<br />Opt for Deferred Share Units (DSU) as compensation<br />Choose the amount of DSUs they will receive<br />All but one Director receive DSUs--with varying proportions (ex. 100%, 50%, 86%)<br />DSU demonstrate a commitment to the long-term success of the company<br />
    • 24. CCGG Guidelines: Disclosure Practices<br />Section B.1 – Director selection and orientation: <br />Missing the skills matrix of its director talents<br />Missing an attendance list for orientation and continuing education programs<br />Section B.2 – Director background<br />Missing each director&apos;s &quot;area of expertise&quot; in the biographies<br />
    • 25. Disclosure Practices (cont’d)<br />Section B.3 – Director share ownership guidelines and continual reinvestment <br />Missing year-over-year change in share or DSU ownership for each director<br />Section B.4 – Director compensation / reinvestment programs and option plans<br />Loblaw&apos;s met with all the disclosure standards<br />
    • 26. Shareholder Relations<br />Approximately 40% of the company is owned by external shareholders.<br />Commendable Shareholder Relations for the “Minority”<br />Excellent Communication<br />Timely Reports<br />Webcasts of Earnings Reports and Quarterly Statements<br />Strict set of rules in its “Disclosure Policy”<br />
    • 27. Environmental Footprint<br />
    • 28. Recommendation<br />Based on the financials and the corporate governance of Loblaw Companies Ltd.:<br />Buy!<br />Risks:<br />Galen Jr. is young and inexperienced, but has surrounded himself with strong board members and leaders.<br />
    • 29. Questions?<br />
    • 30. Non-Public Board Conflict of Interest<br />
    • 31. Loblaw Pros vs. Cons<br />
    • 32. Closing Thoughts<br />Loblaw is fairly transparent to board and committee membership<br />Successfully leverages of NP 58-201<br />New Director Orientation<br />Continuous Training<br />Board Nominations<br />Succession Planning<br />“Don`t just look at board independence and size of a board... Look at the quality of the directors” – Shropshire, C.<br />
    • 33. Shrinking Environmental Impact<br />Leadership in Energy and Environmental Design (LEED) Loblaws Superstores<br />Sustainable Site Development<br />Water / Energy Efficiency (Solar, Wind power)<br />Materials Selection<br />Indoor Environmental Quality<br />First to establish “bag-less” service<br />Plastic bags are bio-degradeable<br />
    • 34. Green Is Good Business<br />PC Organics!<br />Save your health (at a healthy price premium)<br />No More Plastic Bags!<br />Unless you pay 5 cents for each one<br />Less Packaging!<br />Lower manufacturing costs, but you pay the same price<br />PC G.R.E.E.N! (44 products)<br />Save the environment and feel so good about it.<br />Margins are so tight that a 50M savings equals 5B in sales!<br />

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