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good afternoon uh and welcome to gallon loyalty's webinar corporate governance in uncertain times after a couple of months of managing through the initial repercussions of the pandemic uh boards of directors have accepted that uncertainty is sort of the new normal and they're now asking what's next our seasoned practitioners and guest panelists are going to cover some key topics of interest for directors today but before we turn to our panel i just wanted to note that gallon wlg has already hosted several webinars relating to the impact of uh covet 19 um in terms of what it's had on m a transactions uh and also on financing activities we've been at this now for a couple of months we've listed our webinars our past webinars on on some of these slides and if you missed any of them we do have them on demand uh we have versions of those on our on our website um and you're you're welcome to go take a look at them there we have a couple of housekeeping points um you can ask questions throughout the sec session there's a q a button at the bottom of your screen um we'll try to answer your questions um towards the end of the session and obviously you should feel uh free to reach out any mem to any member of our team afterwards as well the session is being recorded and it's going to be posted on our website in a couple of days now um obviously this presentation's being put on by lawyers um and we'd be remiss if we didn't have a disclaimer um we're going to give you a high level overview today uh for general information purposes only we're not giving legal advice on a webinar um for specific advice um relating to the topic we're discussing today please contact your legal counsel um as you know the situation is extremely fluid and changing daily just the stock markets today show that information in this presentation reflects uh the laws and other uh standards that are in effect as of the date of the presentation so so to our panel um we've got uh a good panel here today with extensive experience advising and working with boards of directors first of all we've got stephen pike he's a partner in our toronto office his practice is uh focused on providing advice in corporate governance transactions operational investment and risk management issues he does work in m a transactions csr esg all sorts of different areas we've got david cohen who's a partner in our toronto office as well and he's the leader of our firm's financial institutions and services group he practices in the area of corporate and commercial financing and restructuring and insolvency law in both domestic and cross-border contexts he also coordinates our national distressed m a practice and you may have noticed that we do have a session uh coming up on that topic as well we also have greg peterson joining us from our calgary office he's the head of our corporate finance m a and private equity practice in that office he advises both public and private companies on many transactional matters and in particular has acted as counsel to special committees of various boards of directors and he's currently a director and has been in the past the director and officer of several private and public companies and lastly we're most pleased to have deborah rosati joining us today she's the founder and ceo of women get on board and she's going to be providing us with some perspectives from around the boardroom table at gallons we work very closely with debra and her team at women get on board for those of you who don't know it's a leading member based organization that connects promotes and empowers women to join corporate boards my name is kathleen ritchie i also advise public companies on m a and corporate governance matters i'm a partner in your toronto office and i head up a business law practice i'm going to moderate the discussion today we've got lots of interesting things to talk about over the next hour my job is really to try and keep us on track a long time so if we turn to our agenda for this hour um we're going to talk about some key corporate governance issues uh directors are facing today how to approach being a director in uncertain times the the role of the board when the company is on the cusp of insolvency hopefully not many people are in that boat but it is certainly a concern um setting up special committees and new challenges for the board and board decision making in the next phase of the pandemic and of course we're going to try and talk about some practical implications and share some real life stories with you as we as we go through this uh and just remember to try and share uh some of your questions with us and we'll we'll address them at the end of the session so let's turn to our first topic how do you approach being a director in uncertain times um including the duties and liabilities and critical priorities and deliverables um stephen why don't you start by setting the stage for our discussion can you give us a quick primer on director's duties uh i'd be happy to uh can everybody hear me uh well that's great um so i'm gonna give you a quick primer this could take a whole semester or more at law school but over the next few minutes i'm going to try and provide some context to what we're going to talk about so directors have duties under the common law and common laws laws really comprise of judgments in cases before courts and directors have duties under statutory law those are laws that are passed by parliament or provinces or territories example of a statutory corporate law is the canada business corporations act the cbca that's the statute under which federal limited liability corporations are incorporated in many corporate statutes across canada providing for the incorporation of for-profit and not-for-profit corporations have similar provisions so today in the interest of time i'm only going to talk about the cbca so under the cbca directors have a variety of statutory duties the overarching duty is that the directors have to manage or supervise the management of the business and affairs of the corporation that's the overriding duty and then in doing that directors also have to comply with the canada business corporations act and no provision in a contract or any other arrangement can relieve a director from that duty or relieve the director from liability for breach directors also have fiduciary duties and not to engage in a conflict of interest with the corporation or to appropriate opportunities that belong to the corporation many of you have heard of the fiduciary duty of directors and that provides that every director when they're exercising their powers and discharging their duties under the act have to act honestly in good faith and with the view to the best interests of the corporation the standard of care in which they exercise their powers and discharge their duties is the care and diligence and skill that a reasonably prudent person would exercise in comparable circumstances so it's not a standard of perfection it's not a subjective standard it's an objective standard the one takeaway from what i've been talking about so far is that the directors owe the fiduciary duty to the corporation and only to the corporation they don't owe the fiduciary duty to the shareholders or to the customers or to the employees it's only to the corporation so when directors are considering what's in the best interests of the corporation what what can they consider what whose interests can they consider and in a number of cases before the supreme court of canada in the early 2000s the bce case the uh people's department store cases you hear more about that later that the court determined that uh boards in deciding what's in the best interest of the corporation can consider the interests of shareholders of employees of suppliers of creditors of consumers of governments and of the environment and those are called stakeholders so the board can consider stakeholders and making its decisions and in 2019 the cbca canada business corporations act was amended to put into statutory law what i had just explained to you uh which came out of the bce and and other cases and so the statutory law now provides that when acting with the view to the best interests of the corporation that directors may consider but are not limited to the following factors shareholders employees pensioners retirees creditors consumers and governments as well as the environment and the long-term interest of the corporation now that's a long list and it's not intended to be exhausted so directors then have the duty to try and balance and resolve competing interests of stakeholders and they have to do that and consider the interests of stakeholders in a fair manner so uh that's going to be an issue of uh process very much for boards in terms of how they deal with the interests of stakeholders how they balance them interests out between stakeholders between stakeholders and corporation etc now when directors are making decisions they're making business decisions they're not making legal decisions they're making business decisions and what they accord in bce and in other cases a number of other cases have determined and developed is something called the business judgment rule and that means that if the board makes a decision that the court will defer to it as long as it lies within the range of reasonable alternatives so as i mentioned a couple minutes ago the boards has this overarching duty to manage or supervise the management of the business and affairs of the corporation so it makes a lot of sense that courts will not impose their business judgment they will defer to that of the board as long as it's within the range of reasonable alternatives and as we'll hear that boards can hire experts to assist them in that decision-making process kelly that's great stephen um maybe you could just very briefly talk about uh liabilities of directors well i i will do that very briefly because we could spend the whole afternoon talking about director's liabilities in a nutshell there's very broad and wide-ranging liabilities for directors and corporations which i hope all of you who are directors are aware of they include liability personal liability for breach of duties under the corporate statute for unpaid wages unpaid vacation pay pension contributions employee source deductions gst and hst collections and remittances whose personal liability under securities legislation occupational health and safety legislation environmental legislation and on and on we're going to talk about a number of these a little later in our program thanks steven so why don't we turn to how things have changed in the past few months um and how they might change for some companies in the future in this part of the discussion what we're going to do is have steven give his insights um but we're also going to get david's thoughts on the role of the board as we sort of shift into a potential uh insolvency situation what we talk about being a company in the cusp of insolvency so so stephen whether due to covet 19 or other disruptions do director's duties change in uncertain times for me in my view director's duties do not change in uncertain times i think what changes is the way in which directors fulfill those duties and primarily in the working relationship between management and the board because i think that changes as well classical corporate governance theory is that the board should be noses in and fingers out and we can call that corporate governance social distancing but in uncertain times boards and management should not be social distancing they should be building a more symbiotic and closer relationship so that businesses can take advantage of the expertise and experience of board members to support management and to optimize board effectiveness now we know that directors must always act in the best interest of the corporation but in uncertain times reports trying to determine what's in the best interests of the corporation becomes a much more arduous task in my view the best interest of the corporation is not static what was in the best interest of the corporation yesterday or a year ago maybe much different than what it is today or what it's going to be tomorrow so the duty to act honestly in good faith with the view to the best interest of the corporation that is mandatory and that doesn't change and as well there's no holiday or advance or uh any other break in terms of dealing with the duties of the directors on an ongoing basis or critical board functions like risk odors oversight those continue kathleen david what about when we head into the zone of insolvency do you see changes some of the cases that stephen mentioned um what about other stakeholders so this is a conversation really about uh a fight that's happened in the courts already that has been clearly decided in the people's jewelers case in the supreme court of canada the court made it really clear that the directors of corporation do not owe a specific fiduciary duty to creditors that is up that is a decided feature of canadian law uh it is at the supreme court level and so it is it is the law of the land but the practical application of that is as stephen said it's you know it's all of these interests that under the statute you do have to give due regard to so on the what you have to remember is that in in the in that zone of insolvency when a company is approaching a serious liquidity crisis where it may or may not survive the crisis the board of directors in exercising that fiduciary duty have to take extra care why because they're going to come under scrutiny because the decisions they make are going to be so critical to all of those stakeholders and because things like self-dealing become very apparent very quickly so they have to spend the time to understand how each of their decisions impacts each of those stakeholder groups and yes the creditors are one of those stakeholder groups and they yes they have to consider them but after exercising that that business judgment that stephen talked about they can still make a decision that's in the best interest of the corporation that is not necessarily in the best interest of a creditor and that is really where we get into the difficulty there's some other stuff that we're going to talk about a little later around the oppression remedy where really egregious decisions that are impaired creditors may give rise to personal liability of directors but in a nutshell that's what the directors have to consider this added scrutiny extends fairly deep as well it's enough you know directors need to be documenting very carefully what they do at every step of the way they need to be recording the fact that they've taken these steps they need to show the due diligence that they went through the exercise should that ever arise in litigation at a later date kevin that's great david so now we're going to talk about some examples of of changes uh in how boards are fulfilling their duties and governing in these uncertain times but but before we get right into that deborah thank you so much for joining us today it's great to have you on board so to speak and to get your insights um i'm gonna put one spot uh from the perspective of a director what's the biggest change you've experienced in the past few months well i like to characterize it that there's really three phases that directors are facing during this pandemic there was the response phase and that was really immediate so i'll give you an example and it's funny that it's falling on the heels of david's conversation one of my boards the weekend after during the lockdown we called in our we had restructuring advisors we had employment advisors at the table that weekend to determine what we were going to do on monday the following day on to deal with response and runway and cash and situation and we did temporary layoffs so that was a very immediate response the second phase is recovery what are you going to do in a recovery phase and i think i've been observing and learning and listening a lot of companies are in the recovery stage and in the recovery stage you're thinking about your future um your runway uh so it may be things that you're going to continue to reduce your cost structures you're going to even on the response page there was some immediate reduction in executive comps directors comps layoffs etc response you know are you going to get to the other side of this what do you need to do so a lot of scenario planning and then the third phase is not a lot of companies are there yet but how do you thrive and so i think you have to deal with it in those kind of phases and each one requires a different kind of lean in and a different kind of guidance from the dr from the directors and oversight at all times throughout it's about governance process so it's you've always have to keep that hat on so just quickly would you say you've had more meetings in the last few months is it correct i would probably have a board meeting every night um or one or two on a weekend easily um i say it's lean in all the way i tend to be on small cap boards so lots of um you know small boards got to be really agile so it's not for the fainted heart in any way yeah okay so so stephen can you maybe provide some examples um of how boards are fulfilling their duties and governing in these times some of the deliverables that they have their priorities sure sure um well taking a step back i mean the way in which boards typically fulfill their duties and deliverables is done in a highly planned highly scripted granular and structured manner i i reminds me of the book thinking fast and slow so it would be hard to find an example of something else that's so highly planned scripted and structured other than maybe a pilot's pre-flight checklist um but uh directors meetings are proactively well planned well organized well-timed methodical comprehensive you know generally the same agenda items year after year it's almost like proper strategies are developed plans are followed performance is measured as debra alluded to in terms of her what she's doing every day in uncertain times it can be the exact opposite of the governance process can become intense and reactive so priorities are constantly shifting directors are now being forced at their present to make decisions in compressed time frames with less or incomplete or inaccurate or ambiguous information amidst a dynamic legal and regulatory landscape with rules changing all the time but where boards have adjusted the way they operate the way they determine priorities but feel their duties they're always considering the best interests of the corporation i think that boards now need to re remember the old carpenter's adage measure twice and cut once because in the current uncertainty the board might never get a second chance or an opportunity to recalibrate the original decision that the board's making so boards are having to move and make decisions on the fly there's new priorities such as the health and safety of our employees comes first well that's a priority we didn't talk about a year ago and the deliverable that the boards have to manage anyone here a year ago of of a board agreeing to send the entire workforce to work from home no i didn't think so how about pivoting to make and sell sanitizers instead of beer no we're turning over production facilities for high-end fragrances to produce hand sanitizer to be distributed at no cost to health authorities as lvmh the global luxury brand leader did for how about providing a royalty fee license to use the confidential patented specs and software codes for commercially produced ventilator as medtronic recently did boards are thinking about their corporate purpose and how they're serving the communities in which they operate and they're making decisions based on that consideration kathleen thanks stephen david can you comment on what things look like for a company that might be facing possible insolvency sure you know the the the two comments that ring in my ears from stephen are measured twice cut once and and and you know deborah's commentary about runway the cash is king you know you're always financial covenants in a credit agreement and they all have nice sounds you know tangible net worth covenants etc they don't matter cash is king so your cash flow is what you have to be worried about and and before you can determine what you're going to do you have to figure out how long you're going to survive and then you have to find a way to survive longer so rule of thumb is you know in insolvency we try and develop 13-week cash flows well if you had developed a 13-week cash flow at the beginning of covet 19 you would have been out of cash last week so you have to come up with different plans associated with how you're going to deal with your cash flow so the boards have to look at cutting their fixed costs cutting their variable costs they need to look at the emergency support programs for government they need to look at their lenders for a source of capital they need to look to uh equity holders for a source of capital and then of course you know in small businesses friends and family and without that you can't develop the proper cash flow that's going to allow you to survive 26 weeks not 13 or 36 weeks not 13. and why do you do that well you need to know from a from a from a from my perspective as a as an advisor and insolvency to boards is you need to know where your end game is going to happen because you can't trade while you're insolvent what does that mean well if you know that you run out of money on wednesday and you're going to have employees working for two more days thursday and friday and then you shut down you've hung your your employees out for two days of wages that you don't have in the can to pay them because it's an accrual other accruals the the director and officers liabilities if you're a director on a board you want to know that that your management team has effectively provided for all of the liabilities that can accrue to a director or officer are going to be addressed within that cash flow in that time frame you don't want the music to stop and have no place to sit in the game of financial musical chairs so you know we talk about again and i'm going to talk about these a little more in a minute but wages and source deductions and gst and pension contributions you have to take the measure of those some of them are paid monthly in arrears some of them are paid by monthly in arrears you have to know when your insolvency when you run out of money is and you have to have an accurate assessment of how much these actually are and companies make assumptions about what their severance liability is going to be and what their vacation pay liability is going to be but what the board should be thinking about right now is getting a financial advisor to scrub those numbers to make sure that when they land they actually don't run off the runway and end up causing director and officer liability then they have to decide when the game is up and i like i you know what happens in in it's a natural reaction to the troubled company that you see senior executives in a company they're out racing around trying to cut costs and find a capital infusion a white night or a savior or a government program seder or whatever it is and they wear these glasses we call them rose-colored glasses and our end of the business and at some point they have to take them off and people ask me when is that because the ceo is running around not talking about an insolvency filing they're talking about something like oh i've got the money i'm just need a little more time i like to call it the difference between having a plan and having a hope if if the ceo of the company looks at the board and says i have a plan we have five days i've got three sources two of them are already confirmed i mean one more starts to come along you can probably run right to the edge of your being out of fumes on that kind but if the ceo or the cfo says well i hope to have the deal together the moment somebody started talking about hope instead of a plan you really need to be talking about preparing for a filing and by the way the time period for preparing the for the filing is actually about four weeks before that point because there's some financial work that needs to be done to know what kind of filing will be available to you and you need help from the both a restructuring lawyer and a restructuring advisory team for any size of business and that's going to help you either avoid the filing or land in the right place on it not get yourself in trouble as an officer or director kathleen david can you talk a little bit more about the liabilities that you that you've been mentioning yeah so everybody knows these liabilities but you know the extent of them can be a little bit daunting wages vacation pay severance commissions expense reimbursement for itinerant salesmen you know in certain circumstances these are director liabilities not and there is no due diligence defense to not paying them so you can't rely on the ceo or the cfo of the company saying to you as a board member we got it covered you actually have you want to talk about nosing and fingers in you're you've got your whole arm in that one you are all the way in it and you are grabbing it and making sure that it's being properly addressed because it's your pocket that you're protecting unremitted source deductions again this is what they're done uh monthly or bi-weekly depending on every two weeks depending on the the way it's structured for the corporation these have to be remitted you know exactly what they are they're very predictable and so they're not that hard to identify unremitted gst in hst it's a guess it's done two weeks in arrears you don't know what your sales volume is exactly going to be in that two weeks but you've got a reasonable approximation of it and you have to make sure that you've made the right allowances in your cash flow and if you intend to do a filing with that type of liability you need to pay it if it's not due for payment until four days after the filing you need to pre-pay it that's something that boards don't think about all the time that they actually need to pre-pay some of these priority payables before they go into a filing otherwise you know the wall comes down and they can no longer pay it because they don't have the ability to pay a pre-filing debt uh pension contributions that are deducted from source like that's like trust money folks officers and directors have to make sure that that gets remitted properly there is no due diligence defense to that um and then we get into things like the oppression remedy well what is the oppression remedy if you take an act that as a board member on behalf of the corporation that is unduly unduly whatever that means unduly prejudicial uh to the interests of and i'll just say creditors because that's who's going to be at stake here unduly prejudicial to the creditors they can actually bring a proceeding against you under the cbca or the ontario business corporations act of the canadian business corporations act to find you personally liable for the oppressive conduct so you have to when if you've done your job in the fiduciary stage the way stephen described it you've ticked all the boxes and used the judgment rule you're probably okay but you should be passing it by before you pull that trigger dividends while installing that's an easy one if you're going to let money go out to your stakeholders to your equity holders in in before in the in the zone of insolvency you're insolvent when it happens you are personally liable for those for those dividends that's a that's an open and shut and a very easy one that includes redemptions and repurchases of shares for that a breach of trust if you are actually responsible for trust funds and those trust funds get dipped into for corporate purposes you're going to be subject to a breach of trust litigation claim piercing the corporate veil this is one that's this is a really high standard uh claim to make it's very hard to prove a piercing the corporate veil case however on the evens of insolvency directors and officers sometimes do things like you know allow the family college to be moved out of corporate ownership into personal ownership right so on top of the fraudulent conveyance legislation and the insolvency legislation that can attack it they can be attacked personally because it's that tort right that tort of fraud that you can get dinged with that will actually prevent you from being able to uphold that transaction the transaction can be reviewed it can be reversed or you can be held personally liable for it um straight up risk representations if you go out and you start telling lies to people in order to induce them to deliver supplies to the company or to advance credit to you there's a really good chance you'll be sued for the misrepresentations that's just a that's just the beginning but that's what i'll end with yeah no thanks thanks david that's helpful um we're gonna start we're gonna talk a little bit more about the personal liability and now how to how to mitigate it um aside from you know fulfilling the fiduciary duties um deborah so just to put you on the spot what's the most important thing to you in terms of managing your personal liability as a director listening to david i'd run away so how do i mitigate that um i think i like to break it into three stages there's doing your due diligence before you join a board there's continued due diligence while you're on the board and then understand what happens when you leave the board so there's um and all of those you want to ensure you have protection uh you have directors and officers insurance um you also have indemnification and and again at the end of the day you know the discussions that are going on in this um panel discussion is really about making sure that you've got good due diligence good process um from a fiduciary perspective so i think for me um as i evolve in my own board journey i think of those i ensure that those the inch and it's ongoing review process too from your insurance it's not you something you just enter into you have it you you know dust it off um you know it's an ongoing review also if the company changes or goes into new jurisdictions or new areas of business uh globally what's the impact you need additional insurance um size and and obviously it's an ongoing um process to review so my two is do you know insurance if the company doesn't have dna insurance i don't think you'd be entertaining it and then ensuring that it's appropriate and also ensure that if there's any claims that come to the company that your insurer is notified of that so as a director you need to always have that on the agenda to to make sure that management is advising you and updating you on the status if there's any outstanding claims that's helpful thank you stephen do you want to sort of flesh some of that out in terms of of other things that the directors do to mitigate their personal liability um sure i'd be happy to so um and we could go on for quite a long time but it's a big picture the directors in terms of mitigating personal liability have to continue to do the job of being a director you have to prepare for a board and committee meetings you have to attend them should be asking questions and participating actively you should be making sure that delegations of authority to management are appropriate and and within the bounds of bylaws and articles etc if needed set up a special committee as greg's going to discuss later to handle specific matters so that there's adequate oversight of certain things going on within the business ensure especially today ensure that um virtual meetings are being properly minuted and that records are being kept that sometimes it's it's uh those things can slip and as david mentioned earlier um and as deborah mentioned um you've got to make sure that there's a record of decision making during uncertain times because it's those decisions that will even be more highly scrutinized than in in what's called certain times we can use that term ensure that compliance systems within the business and corporation are functioning obtain regular certifications from management and at the board level uh take all reasonable steps necessary to comply with or ensure the company is complying with legal and regulatory requirements it has to be a board agenda item avoid conflicts of interest as i mentioned before make sure that you're fostering disinterested decision making that doesn't mean you're bored it means that the directors don't have a personal interest or self-dealing with corporate opportunities take advantage of using professional advisors where the board or directors feel they're necessary you know under the canada business corporations act there's a provision that says that a director is deemed to have complied with her or his fiduciary duties under the act if the director relies in good faith on the financial statements of the corporation or a report of a person whose profession lends credibility to the communication or the report so boards should take advantage of that i think the other thing i'll mention in terms of indemnification uh as deborah mentioned their identification provisions in corporate bylaws directors should be aware of that and have them available the most recent versions if there's an indemnification agreement the director should have that in their possession and should review it um you should know that no corporate indemnity will be available unless the director has acted honestly in good faith with the view to the best interest of the corporation so they're i won't call them conditional but um uh the law has certain uh requirements um to debra's point about directors and officers insurance um i would say uh as direct as deborah has said and i completely agree that that people uh director and many directors forget about them they think they're there and they're fine here's some questions that you should be asking [Music] on your board has the board received confirmation that the dno policy is in full force in effect that the policy is in good standing that all premiums for the current period have been paid in full to david's comment earlier about payments before and after insolvency you want to make sure that your dna insurance is paid up understand when the current period ends especially as you're doing scenario planning on a going forward basis find out from management has the dno insurer given notice of non-renewal or notice of any changes to any of the terms of the policy where the coverages they're under or any limitations that they've put forward and directors need to know as deborah said they need to know must have details of exactly how and when a claim can be made under the policy you can't rely on others to make that claim if you feel that a claim needs to be made so get that information in advance the last thing i'll say about dno insurance is something that david alluded to and and i've seen it with various corporations not any that i sat on the board of up but where uh directors have had the dno policy it's been there for a long time but the dollar amount of coverage is not in sync and not aligned with the potential liabilities that directors and officers are facing so you've got a policy it's in good standing the premiums are paid up but when you do the calculations that david's talking about which is scoping out the quantum of director's pension of directors potential liabilities dno insurance is way too low so that's something that i highly recommend that board members keep an eye on and then as david had discussed and we'll hear more um you know make sure that uh potential contingencies uh emerging risks and potential consultancy filings are being uh examined so uh i what i said was a long way of saying everything that deborah said back to you kevin thanks steven um we're we're uh going a little bit over time i i wanted to give david just one last second to um i think you had one other point on on insurance that you wanted to talk about in the insolvency context i have two points the first one is an indemnity is not worth anything of the company's insolvent um so if you're counting on your indemnity and the company's insolvent you're going to be out of luck on policies this is what i would call an insolvency hack for people out there this is something you should do go and check your policy and see if it's a currency-based policy or a claims-made policy assurance-based poll occurrence-based policies you can claim after the policy period ends for an event that occurred during the time of the policy but it claims paid policy you have to make the claim while the policy is still active if the policy is terminated or if you fail to renew it um you can't make the claim outside the policy period and you have to do something called purchasing a tail on the policy you need to do that before you file for insolvency as well so that's just one more little thing that you absolutely need to take care of okay thank you very much stephen and david um we're going to turn it over to greg to talk about special committees uh now in uncertain times maybe greg if you could just introduce what special committees are sure um thank you kathleen um so first off boards can be board committees can be classified or categorized as either a standing committee or a special committee standing committees are the typical committees that we always hear of such as the audit committee compensation committee the corporate governance committee health and safety committee if you're a energy company a reserve committee standing committees are established to deal with ongoing matters such as the audit or compensation matters and they're governed by a charter that's usually already in place in contrast to standing committees we have special committees unlike standing committees special committees our committees they're established more on an ad hoc basis and established to deal with a particular issue or situation that's developed in the company and unlike a standing committee a special committee usually doesn't have a charter mandate already in place an issue arises special committee's established to specifically address that issue and then the charter is put in place and i can get into a little bit later what could go into the charter but with regard to who should be on a special committee those members should be two things number one they should be independent number two they should be disinterested parties with respect to the matter at issue otherwise the work of the committee would be vulnerable to attacks regarding the committee's objectivity or impartiality in dealing with the conflicting parties and there's numerous cases out there where special committee processes have been rejected by the courts because the committee members were from the start not truly independent nor disinterested so in summary a special committee is a subcommittee of the board formed on an ad hoc basis or form for a special or immediate purpose it's comprised of members who are independent and disinterested and its purpose is to provide the board with counsel and direction on the particular issue that's developed and i think the thing to keep in mind is that the real underlying purpose of a special committee is to ensure that the board is fulfilling those fiduciary duties just talked about by stephen and david in response to an issue a situation a problem or circumstances that's that's arisen in the company kathleen that's that's great so then could you there's a little bit of an equity right um can you um talk about uh when a special committee should be established and maybe give us a few examples sure well first off canadian law doesn't expressly mandate when a special committee must be established generally for any significant or decision a special committee should be considered and because of the potential of scrutiny of that board decision that decision should be preceded by a board process that shows that the board properly complied with its fiduciary duties the benefit of a special committee review into a board decision decision-making process is it lessens the ability for any challenge of that process so with regard to when should it be struck up on the one hand a board wants to ensure that the committee is not established too prematurely given the potential for additional costs involved and second off for the disclosure issues that arise um when you establish a special committee there's costs members of your committee generally are going to receive additional compensation due to the additional time and effort they're gonna put forth and an appropriate special committee process also typically requires that the committee be empowered at the expense of the company independent legal financial and other outside experts to a system so you have some cost when you set up a committee on the other hand the board doesn't want to wait too long and not establish a committee where our alternatives start to become limited or in hindsight the ultimate recommendation of the board is perceived as being kind of a foregone conclusion so unfortunately like many board decisions i don't want to give you the lawyer answer but it's a matter of judgment as to when a special committee should be established and and a few examples of when a special committee should be established yeah the most well there's uh basically three main ones the most common fact situation for establishing a special committee is when there's a conflict of interest situation a typical example is a going private transaction i was just last year at the end of the year special counsel to a special committee when one of the directors and management were involved in the buyout of the company the decision as to whether to go forward with the transaction that involves a conflict of interest should be made by independent directors of a special committee in order to provide that procedural safeguard to ensure that the decisions made by individuals whose judgments unclouded by outside interests or considerations so that's number one number two another fact scenario given rise to special committees is to investigate or determine an inappropriate response for any alleged eternal corporate wrongdoing whether it's financial or otherwise i was counsel to a special committee several years ago of a company that had an alleged financial impropriety by its founder its largest shareholder its most dominant director and the chairman of the board so the board in that company established a special committee to handle that difficult situation situation without any undue influence from this influential stakeholder of the company and the third common reason you establish a special committee is to ensure that the board's properly discharging its fiduciary duties when dealing with the crisis such as we have today with coven 19. uh with colon 19 we're seeing that company decisions as debra has said they're having to be made on a daily basis to adjust to the rapidly changing considerations including you know the guidelines of health organizations and governments and establishing a special committee may be the only way to help a company kind of guide its way through those choppy waters of covet 19. why don't we speak to them and i apologize echo i think it's greg's computer but um why don't you just skip quickly greg to uh yeah um what you're seeing with actual special committees doing uh being established in connection with with cobia 19. sure with large cap companies many of those companies already have what's called a risk committee so what i'm seeing is that these companies are mandating their risk committee to oversee the company's response to the pandemic these large companies the large companies that don't have a standing risk committee are establishing a special committee and those committees are holding daily meetings and they're also looking at what their other companies of similar size and nature are doing now with regard to small or mid cap size companies i don't see them establishing special committees as much a lot because they just don't have the because of the cost and the resource limitations but what they are doing is that they're um it's resulting in these multiple tasks of companies that are spreading the risk to their standing committees for example the financial and accounting risks are being handled by the audit committee the oversight of governance and reputation risk are being delegated to the governance committee and compensation and employee benefits are being handled by the comp committee uh i'm also seeing a lot of mid cap companies establish special committees with one member of each of the standing committees comprising the special committee so that's what i'm seeing out there right now that's helpful thank you greg um well we're we're uh getting closer to our our time or hour being up um and i want to move to our final topic uh deborah um you already took us through the three phases that you've sort of seen so why don't we just sort of um skip over to what what are you hearing from boards and and around the boardroom table about sort of the issue of return to work or the workplace because we're all working trust me we're all working really hard and and then some so i think some of the issues that are coming up are mental health and mental well-being um because there's really not this divide between home and work balance there's the engagement working virtually and really kind of when do you return and i think there's the concern um you can't force people into returning especially if you're not a front line or essential service um and if you are working from home how long does that extend so i mean and that that extends to the board itself we're all doing virtual meetings you know the conversations about agms are they virtual are they hybrid extended deadlines for agms so lots of concerns lots of unknowns i think people are being agile being adopted um but i think there is a concern especially for millennials there's a conversation that you know you've got you know a lot of them in 400 square foot offices or condos in toronto they can't go to their their offices um and you know they're 28 years old and you know what do they do so i think there's health safety and mental well-being i think and you know there's no one right answer as to when is the appropriate time to return i think there's conversations about a phased-in approach um i think it's regional based provincial based um sub-provinces have haven't opened up the restrictions a little more so than in ontario um and so at the end of the day i think you have to be safety comes first um and i think as board members you you want to get that update from management and you you want to be you know tracing the cases and you know contact but i there's a new term that i've heard recently um and it's really to do with the low touch economy which means it's going to be low touch everything you're going to do is going to be really contactless and low touch and it's going to have ramifications beyond covet 19 kind of where we go into the future so no definitive answer and it really depends on the company yeah and i think it's the kind of thing that you're going to get some advice on obviously um oh yes as kind of requirements and how do you manage it and i think you have to manage it with real thoughtfulness and respect yeah yeah and then maybe some of the other things that you're thinking about as you move into this sort of from the second phase to the third phase uh you know trying to to to get through the the initial repercussions but uh you know and and now move towards what i think you were calling about you know the opportunities and and trying to thrive what what have you sort of seen in that regard well kind of coming back to and i know david hit on it as well as that whole runway so you want to extend your runway if you know your revenues are down by x percentage you know and you know you've gone for all the relief programs uh rent relief whatever it is and the impact it has on your business and you don't have certainty on your future revenue streams um you want to manage do you want to mitigate your liabilities your exposures um you're going to do scenario planning you're going to do scenario a scenario b scenario c um you know if your global you know a lot of impact on just travel um supply chain so there's a lot of what-if scenarios that are going around i don't think anybody has the right answer but those are the questions you should be asking for um one of my boards we're doing weekly cash flows we're seeing we're monitoring that we're ensuring we've got coverage for directors of liability um remittances etc so you really are leaning in depending on the size of the company in the situation but you know what like i said it's not for the faint of heart and you really do need to i think as david said arm in all the way right now but but also um are you finding that you have you gotten to the point yet where you can sort of step back because this is a new world and you you probably had a board retreat in january or february and you figured out your strategic plan you know and and and now that is what we did in december we did in december and then january came so we're ready to go into the year finalizing the budget budget being finalized and boom right in the midst of uh you know so really course correct right away um and making some very dramatic decisions um within sort of week one for sure um another one you know a few weeks later you realize the impact um was a little bit more severe than you thought and so it's an ongoing process you've got to stay ahead of it you can't be behind that yeah and and at some point you also have to take a step back and think about the where are we going to be a year from now you know absolutely years from now so okay and then um you mentioned earlier uh management compensation can you give us a little bit more color on on what you're seeing around that well there's definitely and i think there you'll see um there's a lot of um data coming out now but there's definitely right away if you're extending your runway and you're laying off employees you can't you have to hold the mirror up to yourself from an executive team so um reductions you know some you know 10 15 50 you know it's it's been publicly disclosed those types of announcements um boards taking reductions in fees you can't ask management to do a reduction and as a director sit back and not make a change on another a board that we're on we're deferring completely our fees um also i think yeah and and getting and having the real conversations with management look you've got this balanced scorecard that we prepared for the upcoming year we can't evaluate on that things have changed and so you know maybe more of its milestone based of getting you through this recovery period and transactional work that's happening um you know some there's a lot of activity going on and kathleen i know you would know that and your colleagues there's a lot of opportunities out there and cash is king so if you've got the runway then you're in a very uh attractive position to be to be looking for opportunities to acquire that's absolutely correct um i think we're just about at the end of our time um deborah just maybe any final tips you know for i dare say sort of pivoting towards optimal board composition and effectiveness in these times oh good i was hoping you'd ask that question i i have four b's be innovative be inclusive be diverse and be digital savvy yes that's that's uh i don't think anybody imagined how how much zoom we would we would use uh um i i actually interestingly enough knew how to use zoom because i was on a board and for the last and it was actually a not-for-profit board and for the last three or four years we've been using zoom for director meetings so this wasn't new to me but obviously it is new to many many people um so what i'm just gonna turn to we have a few questions i think they're more dna related and it looks like one of them we've already answered uh i think uh somebody's also asking the question just of of whether um uh you know um there are some differences in liabilities for public versus um or corporate i think you mean or non-profit for not-for-profit boards and i think you'll find that um if if you look at the corporate law statutes in the common law the the the um the duties uh and the liabilities for directors of of both um corporations and not for profits are are quite similar um but we do have experts uh who help uh with not-for-profit boards so i would recommend um that you reach out to them and we're happy to put you in touch um there's also a question here about um some more stuff around and dno policies and and um you know occurrence policies uh and again i think that's something that uh i i don't profess to to have the expertise on and i'm not sure that anybody on the panel necessarily wants to to take that question if there are any other questions i'm happy to entertain them now i'll give people a second to add them um but if not we're coming up to our our time does anybody on the panel have final thoughts that they want to share everybody silent good luck with your directorship it's fun but it's also stressful but i think it's a very rewarding rewarding experience to be a director of a company and so good luck with them i would echo that greg as i said you'd run away first but i didn't really mean that i mentioned and just and you know it is rewarding and there's lots of opportunities but being able to you know we had 100 plus participants on this webinar so you can see it's an interest and i would say kudos to galling i think you've been really instrumental in getting out there and educating directors on issues that they need to be thinking about during this pandemic so thank you for the opportunity to be here and thank you deborah well with that we'll uh we'll call this the end of the webinar and and thank you to all of our participants for sticking around and listening to us and thank you to the panel thanks for watching everyone be safe and healthy take care