CORPORATE GOVERNANCE – Interesting Examples of Self- Assessments

Self-evaluations are now seen in other forum and make useful points of comparison for anyone undertaking a comprehensive look at this vital area.

In 2006, the OSC drafted NI 81-107 – Independent Review Committee for Investment Funds.  The National Instrument sets out a comprehensive code of the Independent Review Committee’s role and functions and includes a requirement for the IRC to conduct self-evaluations as set out below.

These regular assessments also ask the IRC to evaluate the adequacy and effectiveness of the manager’s work product and adherence to policies, procedures and standing instructions.  Query whether a board might someday be called upon to do something similar in evaluating and commenting on its management’s effectiveness and disclosing same to the stakeholders.

Enjoy reading the section from NI 81-107 and of the OSC’s Commentary.

4.2 Regular assessments
(1) At least annually, the independent review committee must review and assess the adequacy
and effectiveness of
(a) the manager’s written policies and procedures required under section 2.2;
(b) any standing instruction it has provided to the manager under section 5.4;
(c) the manager’s and the investment fund’s compliance with any conditions imposed by
the independent review committee in a recommendation or approval it has provided
to the manager; and
(d) any subcommittee to which the independent review committee has delegated, under
paragraph 3.11(1)(d), any of its functions.
(2) At least annually, the independent review committee must review and assess
(a) the independence of its members; and
(b) the compensation of its members.
(3) At least annually, the independent review committee must review and assess its effectiveness
as a committee, as well as the effectiveness and contribution of each of its members.
(4) The review by the independent review committee required under subsection (3) must include
a consideration of
(a) the independent review committee’s written charter referred to in section 3.6;
(b) the competencies and knowledge each member is expected to bring to the
independent review committee;
(c) the level of complexity of the issues reasonably expected to be raised by members in
connection with the matters under review by the independent review committee; and
(d) the ability of each member to contribute the necessary time required to serve
effectively on the independent review committee.

Commentary
1. Section 4.2 sets out the minimum assessments the independent review committee
must perform. Subject to these requirements, the IRC may establish a process for
(and determine the frequency of) additional assessments as it sees fit.
2. The annual self-assessment by the IRC should improve performance by strengthening
each member’s understanding of his or her role and fostering better communication
and greater cohesiveness among members.
3. When evaluating individual performance, it is expected that the IRC consider factors
such as the member’s attendance and participation in meetings, continuing education
activities and industry knowledge. The manager may also provide IRC members with
feedback which the IRC may consider.
It is expected the self-assessment should focus on both substantive and procedural
aspects of the IRC’s operations. When evaluating the IRC’s structure and
effectiveness, the IRC should consider factors such as the following:
       • the frequency of meetings;
       • the substance of meeting agendas;
       • the policies and procedures that the manager has established to refer matters to the
       IRC;
       • the usefulness of the materials provided to the members of the IRC;
       • the collective experience and background of the members of the IRC;
       • the number of funds the IRC oversees; and
       • the amount and form of compensation the members receive from an individual
       investment fund and in aggregate from the fund family.
4. The CSA expect the members of an IRC to respond appropriately to address any
weaknesses found in a self-assessment. For example, it may be necessary to improve
the IRC members’ continuing education, recommend ways to improve the quality and
sufficiency of the information provided to them, or recommend to the manager
decreasing the number of investment funds under the IRC’s oversight.
In rare circumstances, the IRC may consider removing a member of the IRC as
contemplated under paragraph 3.10(2)(c) as a result of the self-assessment.