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

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