Inside RBC’s work to improve corporate governance

Canada’s Office of the Superintendent of Financial Institutions (OSFI) in September 2018 issued a revised corporate governance guideline that was more principles-based and contained fewer prescriptive elements. In doing so, OSFI granted boards at financial services firms greater discretion over how they meet its corporate governance expectations.

Royal Bank of Canada’s (RBC) corporate secretariat and the corporate and oversight functions used this increased flexibility to improve the board’s oversight of strategy and RBC’s corporate governance practices. The secretariat went back to the drawing board and reviewed what is required of the board and each committee, according to Martin-Pierre Boulianne, senior legal counsel, special governance adviser and assistant secretary. The team interviewed committee chairs and other board members to find out what they would like to improve.

A key resulting improvement was enhanced board and committee effectiveness via meetings, forward agendas and materials. This was done in part by looking at what actions could be taken ahead of meetings to avoid spending time on unnecessary discussions. The team also looked at the documents that management gives to board members to focus them on key information. The aim was to avoid meetings involving repetition of what is in those materials and instead make strides toward constructive discussions, Boulianne explains. Despite great progress having been made, he describes the review as a continuing effort, noting that there is always a way to improve a board’s effectiveness and efficiency.

Another improvement under the review has been to increase directors’ focus on key issues such as strategy, risk and talent. The governance committee has also continued to improve board and committee reporting on conduct and culture matters. The aim is to proactively monitor emerging trends and best practices ‘to help refine a holistic approach to overseeing these critical issues,’ the company points out.

Over the past year, the board has overseen improvements in RBC’s approach to climate change. These include: creating an enterprise climate-change strategy; improving the bank’s capabilities in climate risk-management by conducting portfolio, client and scenario analysis and ramping up the bank’s capacity, data and analytics to assess risks; enhancing climate-related disclosures to bring them closer in line with the Task Force on Climate-related Financial Disclosures’ recommendations by integrating them into the annual report and RBC’s ESG performance report and public accountability statement. The governance committee also recruited a third-party consultant to help identify skills and experiences needed on the board to support RBC’s future strategic objectives and review the board matrix to ensure it focuses on talent the board will need.

In addition, RBC undertook a major revamp of its proxy circular. The changes include structural, drafting and design updates intended to engage institutional investors and enhance the circular’s accessibility to retail investors. Boulianne explains that the process included talking to people at RBC to review the entire text of the proxy and reframe it with plain language using simplified text, shorter sentences and less technical language. He notes that there was also an increased use of graphics, tables and workflows to take the burden off the text. ‘We got some positive feedback from shareholders,’ he says.

RBC takes a proactive and broad approach to shareholder engagement, which it says leads to constructive exchanges and often helps clarify the goals of governance advocates who submit shareholder proposals. This approach has led to the withdrawal of 64 shareholder proposals by their proponents over the past nine years, the bank says.

This article originally appeared in the latest Corporate Secretary special report.