The role of legal departments in navigating corporate governance

Legal departments play a key role in ensuring that organizations have an effective corporate governance strategy in place. Legal department leaders came together at the Canadian Legal Innovation Forum’s Mastering Corporate Governance webinar to discuss how new drivers in areas such as ESG, cyber-security and diversity and inclusion are instrumental in shifting the corporate governance landscape. They shared their thoughts on how legal department leaders can develop a strategy to support robust governance structures in their organizations by educating the board and building a strong board culture.

For Cecile Chung, general counsel and corporate secretary at Samuel & Son, having fundamental but important discussions with the board has been key to understanding the drivers of risk – cybersecurity, diversity, equity and inclusion, and ESG – and aligning that with the corporate strategy. The privately-owned steel products manufacturer does not share the typical governance challenges of a public company, but it still has a lot of activity to manage so a strong board culture is key, Chung said.

At National Bank of Canada, cybersecurity is top of mind so a technology committee was created to manage cybersecurity risk.

“There’s always going to be new risks coming along,” said Denis Brind’Amour, senior manager, governance, and assistant corporate secretary at National Bank of Canada. “We didn’t plan for the pandemic but now we have to deal with supply chain issues, and geopolitical risk. There’s always going to be something new so what’s important is to have the framework in place to be able to address these risks quickly when they arrive,” he added.

Often taking on the role of corporate secretary, general counsel are tasked with identifying risks and creating a strategy that is circulated to the board. They also have to determine which matters to bring before the board.

“It’s an iterative process,” said Bindu Cudjoe, chief legal officer, corporate secretary at Laurentian Bank of Canada. “We’re spotting risks and the board is spotting risks, and we’re putting them on each other’s agendas to consider how we’re going to manage them. There’s a lot of governance process and documentation that can be developed, and I think the corporate secretary function is key to driving that.”

Educating the board about key risks to the business is a vital role for legal departments and the corporate secretary function. At Samuel & Son, Chung has been focusing on educating the board about cybersecurity risks for the past five years.

“We are a private B2B company so unlike most boards which probably have a financial expert or operational experts, we don’t have anyone on our board with that background, so it took a lot of education sessions with our CIO,” said Chung. “We supplemented that with monthly calls with our CEO and we ended up transforming our entire IT infrastructure, which was a very significant investment.” This also raised discussions about how much to invest and which business lines to invest in first, which involved further discussions with the board about resource constraints, Chung added.

At National Bank of Canada, Brind’Amour assesses the composition of the board to determine the skills and competencies of the members so he can fill in the necessary areas with education.

“The key for us is internal training so we do a lot of deep dives with the board on specific subjects – sometimes with third-party consultants, sometimes with an employee or a mix of experts,” says Brind’Amour.

Creating a board culture is another challenge for the corporate secretary, and this challenge was further exacerbated by the pandemic and the need for remote board meetings. At Laurentian Bank, the board and executive committee have both seen many changes to their composition in the past few years, which presents an interesting opportunity from a governance perspective, according to Cudjoe.

“Managing through that kind of change and maintaining or perhaps building a culture and finding a rhythm with how we interact with one another is very interesting,” she said. “It does require sone extremely deliberate efforts to do so.” Post-pandemic, Laurentian has decided to hold half of its board meeting in person while the other half will be virtual.

Cudjoe also spoke about the importance of diversity on boards to provide perspectives from different backgrounds and different experiences.

“There is a drive towards being intentionally disruptive,” she said. “You want to create a culture that is resilient enough to help the organization through the challenges that it may face, that reflects the organization, reflects the shareholders and the stakeholders and their expectations.”