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Board Governance Best Practices and Stories/Experiences Shared
Melinda Park: [00:00:03] And I think unfortunately, when situations, especially when they get tense, everybody starts to think they need the perfect solution. Everybody is perceived either pro or con or this or that, and we don't really give ourselves the grace to act as human beings in a tense situation and then try and resolve it. What governance can do is provide some of the framework such that when things are tense, when things are coming at you that you couldn't have anticipated, it gives you a bit of a framework and a guide such that some of the bad and some of the really ugly can be avoided.
Munir Haque: [00:00:42] Hello everyone, and welcome to another episode of The Boardroom 180 Podcast. I'm your host, Munir Haque, an executive coach and senior board strategist. I have partnered with Action Edge Executive Development to lead their governance and political acumen division. In each episode, we meet with governance leaders and step into their boardrooms, where decisions shape the world around us.
Munir Haque: [00:01:01] Hello, everybody. Today's guest is Melinda Park. Melinda is a partner in the Securities and Capital Markets group for the law firm of Borden Ladner Gervais LLP in Calgary. She's the first woman to serve as a chair of the firm's board in their history. She's practiced law for over 20 years, representing corporate clients on securities and corporate matters, including mergers and acquisitions, reverse takeovers, going public in Canada, and financing by way of prospectus and private placement offerings. She advises clients on structuring business transactions, corporate governance and continuous disclosure for companies listed on both the TSX Venture Exchange and the TSX. Melinda regularly advises boards of directors and committees of public and private companies. In 2017, the Women's Executive Network named Melinda one of the 100 Most Powerful Women in Canada. She's also been recognized in the 2015, 2017, 2018, and 2019 editions of The Best Lawyers in Canada. And she has her ICD.D designation from the Institute of Corporate Directors. Welcome to the show, Melinda. Thanks for joining us.
Melinda Park: [00:02:16] Thank you very much. Pleasure to be here.
Munir Haque: [00:02:18] Maybe what we can do is start a little bit more about your background and BLG the law firm, what kind of services you provide.
Melinda Park: [00:02:26] Oh, sure. Well, the beautiful thing about BLG, it's Borden Ladner Gervais, but BLG rolls off the tongue a little easier, is that we are one of Canada's largest law firms, and sometimes we are the largest. I think it all depends on how the numbers go on any given day and how many students we have, and that gives us the luxury of being able to provide our clients with access to legal advice all the way across the country, both our national and international clients. So even if you're regionally based, but you have something that gets impacted in another province, we can be there. And definitely if you're international, we can be there on a national platform. So that's a real, I think, valuable platform for me as an individual lawyer then, because when we're giving counsel to our clients, specifically when you know you have the whole team behind you in all areas of expertise, it makes it a little easier to go through the complexities that corporate clients are having nowadays.
Munir Haque: [00:03:25] I can imagine that. I'm sure you didn't start out in corporate governance, or maybe you did, but what drew you to the corporate end or spectrum of the profession?
Melinda Park: [00:03:36] So my career has been going for quite a while, and I think, as my mom would say, Melinda's always been a nosy girl. And so the beauty of that, if you turn it on its head when you're in the practice of law, is that I've always been intrigued by how corporate entities function. I've been intrigued by how people within a corporate entity make the company work. I have a commerce background, so I have a Bachelor of Commerce. So I had the fundamentals of financial statements, organizational behavior and all those types of things. And when I layered the law on top of it, I found that I was still drawn to the corporate beast, the animal that we have that is neither human nor animated, but it is something that, in our Western civilization, is core to how we do so many things. What corporate law allowed me to do is to be at the boardroom. And I must say that that's an absolutely fascinating place to be, and it's a place I've never tired of having the privilege of sitting at. And being the lawyer in the corporate environment and in the boardroom, I think, is an incredibly unique place to be because you're seeing the decisions being made, you're seeing the conversations, you're seeing the tension. And yet they're not your decisions. It's not your tension. You're able to sit as an objective participant and guide, I'm going to use the word influence. I don't mean undue influence, I mean participate in an active way in shepherding conversations such that the conclusion with the information that is before them is the best that it could be.
Melinda Park: [00:05:18] Or at least when they make the decision, they have the information or some of the risks that they need to consider. So that to me is an absolutely fascinating place to be. And as I built my practice and as I started to find the places that I was most passionate about, it always returned. How do I want to be at the board table? How do I want to assist the boards, the management teams, the committees? And then as you get that experience as a lawyer, as you start to see unique, complex, good, bad, everything in between situations, you then really start to build your governance expertise. Because governance, no matter what we want to say, is a backbone of what we do. And you'd be surprised how many companies end up doing it poorly. And yet there isn't, I'll use the old fashioned word, there isn't a library book where you can go check it out and say, if you do these five things in governance, thou shalt be compliant and be successful. It is a very organic, evolving, growing. And so as you sit with more boards, as you look at resolution, as you see developments, and as a lawyer, as you look at case law and periodicals and writings and experts, it starts to become more finessed and honed and ever evolving, which is why it's a really fun place to be.
Munir Haque: [00:06:42] Well, I'll tell you what, I've been on enough boards to know that when the chair asks the lawyer's opinion, everybody stops what they're doing and they listen. So it's, as you put it, it's often a very respected position on a board that influences a lot of the decisions. And they look at it often from a different perspective than other people on the board that are maybe already in industry or in community. And I think lawyers often have a way of separating themselves from that, even if they are part of the same industry and part of that community. They have a way of separating themselves from that and giving that perspective, like how this is looked at from the outside.
Melinda Park: [00:07:25] Oh, Munir, I completely agree. I think one of the benefits of having more of an external objective ear at the table is when it-and it can devolve, because there are people who are getting passionate about their companies, they bring their area of expertise. But when you have somebody external who can sit, often you can say, I hear that comment, but why don't we raise it back up to what it is that we're actually needing to resolve today? Or, I see that we're going this direction, but chair, perhaps we can bring it back to something. Because that objectivity, that level of legal analysis can often be the calming influence or the redirection that may assist the board and management to get back to where they need to be in order to discuss and resolve.
Munir Haque: [00:08:11] I don't know if you had a chance at all to listen to our trailer, but one of the things that I mention in the trailer is that we want to look at the good, the bad and the ugly. And having a lawyer on the show is my cue to really see if we can get some ugly or, with the right legal advice, potentially ugly, things on the table to talk about. And I said this in almost every podcast that I've done so far, it's easier to learn from mistakes than it is from successes. Other people's, not necessarily your own, but from other people's. If you're learning from other people's experiences, it's often easier to learn from mistakes. I'm not sure if you want to start here or if you can start here, just in general terms, what are you seeing? You've served on a lot of boards. You've advised a lot of boards. What are you seeing as common mistakes or issues that get them into problems or what are essentially the triggers where they do say, well, we need a lawyer.
Melinda Park: [00:09:12] Well, when they say we need a lawyer, it's usually too late. So the problem is already manifested or the situation has already occurred. I think one of the most important things for teams, whether or not they are management teams, the board itself or committees, they need to give themselves the grace of understanding they're human beings. And I think unfortunately, when situations, especially when they get tense, everybody starts to think they need the perfect solution. Everybody is perceived either pro or con or this or that, and we don't really give ourselves the grace to act as human beings in a tense situation and then try and resolve it. What governance can do is provide some of the framework such that when things are tense, when things are coming at you that you couldn't have anticipated, it gives you a bit of a framework and a guide such that some of the bad and some of the really ugly can be avoided. And I think, Munir, one of the things I'd like to start with is, we also need to give ourselves the grace, again I'll use that word, or recognition that we will not make perfect decisions. And often what can also happen is that boards and companies themselves end up being paralyzed because they analyze it to death. They try to find the perfect decision because they're so scared of risk. I mean, that's one of the things that, when people have asked me again, why do I do what I do for as long as I have? I've always said, I'm not a lawyer's lawyer, I'm a business lawyer. And sometimes people are afraid to get lawyers involved because they're afraid that the answer will be no, that they're afraid it's always going to be, there's risk.
Melinda Park: [00:10:58] Well, how many companies have you worked with, talked to, been involved with that have said, oh, we're in the business of zero risk. And so you need to have alignment of what that risk tolerance is, how it is that you're going to work through the risk and still come up with a decision. And governance can move you through that so that paralysis doesn't set in. And to be frank, if the ugly does occur, if the bad happens and the **** really hits the fan, you can at least step back as that team and say, but we followed process with the information we had at the time. You can take comfort that with the governance structure you had as you applied it. It didn't work out perfectly, but you still applied what you had, and you did it with the best knowledge that was available to you at the time, and you applied it in the appropriate way, getting the expertise and the information that you needed. And that's what governance can do. I'd love to say it will change everything, but it won't.
Melinda Park: [00:12:02] And just a little segue here, I'm an absolute Olympic junkie. My husband jokes that I know nothing about sports. And every winter and every summer Olympics, I watch everything, every minor remote sport that's out there I become passionate about. And so I've had the luxury over the last couple of days to be listening. I'm intrigued with what comes out of our athletics on a world stage and some of the tidbits that we can use. And this one, I wrote it down because I thought it aligns with what we're talking about. It was some commentators talking about some racing, and the one said, you may not be able to win the race with your start, but you can definitely lose the race with it. And I was thinking about that, I'm going, that's governance. Governance may not avoid every bad and ugly situation that ends up happening to a company, but man, if you don't have good governance, you can certainly lose your path or frankly, even lose your company. So, I like to think we're all world class athletes here and whatever profession we've chosen, but that one really resonated with me. It's not just something. Part of the discussion the analysts were having with this Olympic conversation is, everybody talks about the finish, nobody talks about the start. And also in business, people talk about the result, they don't talk about the process and how you got there. And what governance does is it establishes that. Grounds it. It's assisting in really bad situations. Often good governance is invisible when it's working well and the company is doing wonderfully. It really comes to bear and you can see how it's been grounded or not, when things aren't as good. So I think, Munir, we're going to use this Olympic analogy. It's the backbone, and it might not win the company's goal, but it certainly can help you lose the company's goal.
Munir Haque: [00:13:56] I think you touched on something there in terms of risk tolerance. And I think there's some value in the board, potentially during onboarding or the first 90 days that they have those discussions on what kind of tolerance are we looking at and what are the risks that we have. And so I think a lot of boards have an issue with aligning on that. Where I've seen some boards, when they're up against making a decision, it's like death from a thousand cuts. They ask a lot of questions. To a point where every decision gets deferred to another meeting and they're just more often, putting a lot of stress on management to try to respond to some of these questions that really some of them are peripheral to the issue. But it's a question that comes up at the board, so management sometimes feels they have to respond to it. Maybe that's the, and you can comment on it, maybe that's the job of the chair to actually be able to rein some of that in and make sure that everybody is on the same level when they're approaching these.
Melinda Park: [00:15:04] That is such a loaded conversation that we could have, because absolutely, it's how are things prepared for the board? How is their strategic discussions with the board. So there is an alignment of risk. I have seen board situations where the board is running off half cocked on aggregating all the businesses that are within their path. And management is trying to grow organically. Well, think of those two things. Think about how diverse and how different those are. And they come to the meetings and they're all prepared, and yet they're never speaking the same language on risk. They're never speaking the same language on what it is that in the next 12 to 18 months, to three years to five years, it is that the company wants to accomplish.
Melinda Park: [00:15:46] So I really think that if the board and management are not aligned, you cannot have good governance. Because even though the well-intentioned conversations are happening, as I mentioned, you're not speaking the same language. If the risk tolerance is not aligned, then you are going to have cross purpose conversations all the time. It does not mean, and please let me be very, very clear here, you should never have a board that is a yes-board. You should never have a chair that is a yes-chair to the CEO or the management of the company. If there is not a healthy tension between the board and management, I'm suggesting the board is not doing their job. And frankly, management needs that tension. If anybody can tell me company decisions are 100% when they come from management, I'm going to say no. I was trying to think of a more clever word, but I can't think of one. You and I have better results when we talk about them, when we push and we pull and we discuss, any conversation will result in a better outcome, I believe. So there needs to be that healthy conversation between the board and management.
Melinda Park: [00:17:01] So when that happens, that tension that I'm saying is a very healthy word, it's not a dysfunctional word. It can devolve to unhealthy conversation. Again, why governance is so important, because it puts those guardrails. It devolves into unhealthy conversations when side conversations are happening. I've seen where the chair doesn't really want to talk to the entire board, so has individual conversations with board members in an attempt to get alignment prior to meeting at the board. I've seen CEOs and presidents have offline conversations with certain board members to try and pitch their thought prior to a meeting. Good governance would suggest the voice comes from the chair. The ear comes to the chair. The CEO and the chair have a healthy, functioning relationship. So it's all those micro relationships that with good governance, become the norm. And when you see things going sideways or off the rails, you've got your guideposts to come back to. If you don't have those guideposts, it's really easy to devolve into the unhealthy nature of misalignment and unhealthy tension.
Munir Haque: [00:18:15] One of the things you mentioned reminded me of something that one of my bosses used to say, and coincidentally, he was a lawyer, too. You were talking about the interaction between the management, if one's always agreeing with the other. He'd always say, if you're in a business relationship, a partnership, and your partner always agrees with you, then you don't need the other partner. You need somebody who's going to push you, who's going to make sure that the best solution has come forward, the best decisions. So, it's difficult for that one person to be able to make all the correct decisions. It just reminded me of that.
Melinda Park: [00:18:53] I think one of the appropriate things that happens in case law is we want, as a Canadian place of decision making, there's what's called the business judgment rule. And that platform is, perfection is not expected, but the business judgment that is applied and the rigor that's around it, if done appropriately, allows the board to make decisions when risk is sitting there, when decisions may not be perfect. And I think what happens, to go back to what you said before, is some people are so scared of making mistakes that they can never even apply the business judgment rule because they're looking for the zero answer. And when you layer that on with a lack of diversity, so I'm going to add diversity to your comment about if it's a yes-board. Yes-boards often happen unintentionally when everybody has the same area of expertise, particularly when they're the business area of expertise. I have seen boards where it has been a group of people who all really, really understand their business and they really, really understand their industry. And where do the conversations devolve to? Their industry. What it is that they know. They don't even consider what it is that they don't know, because they're so immersed in what it is that they do know. And if you don't have diversity at your board, and we'll discuss that in a second, nobody brings you back up and says, hey great, I'm glad we've talked about the size of tires for the last 20 minutes, but what are we going to do about this competitor that's out there, or, oh I don't know, cybersecurity, which might be something that they hadn't discussed in the last ten years of their business.
Melinda Park: [00:20:36] And so I think that's really important. And I'm not preaching diversity for the sake of diversity. I'm preaching diversity of thought. And thought often comes in different packaging, and so the two go hand in hand. But I've given presentations on the relevance of having younger people on boards and what it is that they can offer. And when you look at specific industries and how cybersecurity, artificial intelligence, that kind of IT aspect is hitting every single industry, regardless of what it is. Mining exploration used to be, you can do whatever it is, as long as you're a mining expert and be fairly safe, and your risk is about mining. Now, how do you apply your cybersecurity? How do you apply the use of artificial intelligence? How do you do that? And often the people who are best capable of speaking to that or assessing those risks or, heaven forbid, introducing those risks, will be younger people. Will be people who have grown up with that level of interaction with technology that maybe somebody older just wasn't exposed to. So the youth experience, talent, gender, all those types of things bring a diversity of thought so that when you have to think of issues, you have as much a robust conversation and bringing things to the fore that you otherwise might not have.
Munir Haque: [00:22:01] I think that leads into the next topic that I want to talk about was evolution of governance. You talked about evolving technologies and how that's changing it. In general, you've been advising and sitting on boards for a while now. So my guess is, over time, your advice has potentially changed because of the governance environment and how trends have changed and there's different risks. So if you want to point to some of the changes you've seen, and what were the driving factors behind why those changes happened.
Melinda Park: [00:22:33] The interesting thing about governance is it's shaped almost in a Venn diagram. Because we have our law, we have case law because in Canadian provinces other than Quebec, we deal with the common law. And then we have the academia, the experts, the writings, all of those things that we have. And for governance especially, all of those three have been extraordinarily impactful. And as you can imagine, all of them are live. Statutes change, case law gets expanded and becomes more fulsome, and of course, writings. And as our communities change and morph, the thought leaders have different opinions. So for me, early on in my practice in 1994, there was what was called the day report. So if anybody ever wants to find it, don't look for D-A-Y, look for D-E-Y as it was chaired by Peter Dey, and that was really one of the first concentrated, dedicated conversations on governance and it was called 'Where Were the Directors?'. And that became one of the guideposts that a lot of corporate lawyers would look to, it's where governance really started building. Talking about independent board members really came out of there. And you're thinking about, what do you mean? What was this concept of independent board members? We take it as normal now, and yet it was real conversation not that long ago.
Melinda Park: [00:24:03] Recently, in December 2022, there was another set of documents that came out, and this one was created by the TMX Group, who deals with public companies and the Institute of Corporate Directors. And they spent, I think, over a year trying to see where we should be going with governance, where have we been, what should we do? And that one was called Charting the Future of Canadian Governance. And so that looked at it all again. And what's really interesting is they were, in some people's minds, very much what the norm was. And for other people, they were pushing the boundaries a bit, which again, is the healthy tension that we have. And in fact, that was to the extent that in September of 2023, there was a bit of a pullback on some of the statements that had been made. And one of the reasons has been this evolution over many years as to, what is the role of the corporate entity? And in this case, because we're talking more about private public companies, it's more the corporate citizen. What's it like to be a company or a corporation in the Canadian landscape, and how does governance play a part of that? Who are your stakeholders? Why are those stakeholders there? What's your obligation to them in those types of things?
Melinda Park: [00:25:29] And the reason I mentioned the pushback is because it was the Venn diagram. And the pushback was, if we are so concerned and so considerate of all the stakeholders, we've lost sight of the business judgment rule. Because if you're going to take everybody into account, which isn't really what the report said, but again, it's the tension and the conversation that was happening, are you losing the point that at some point in time boards have to make decisions, they have to be allowed to make those decisions. And the anchor has always been in Canada, for at least since longer than I've been practicing, that there is the business judgment rule and if applied with discipline and with care and with skill, that is still the appropriate threshold and guideline. So to answer your question in a very long way, it's a conversation that has been going on for a long time, and it happens in the boardrooms, it happens in the courtrooms, and it happens with the thought leaders. And as you move through, you will see that there was the Carver model where boards are just supposed to sit there. Then you had the fingers in, noses out, which meant don't get too nosy, but just kind of know your stuff. And we were evolving to more than that. And I think one of the reasons is there is not the luxury of time.
Melinda Park: [00:26:54] Things happen so quickly now that if boards aren't fully engaged, you do not have the luxury of saying, well, we can discuss that next quarter, or can you write a report on that and we can talk about it at our year end strategy session. Cybersecurity, artificial intelligence, like those aren't once every two year conversations. And I think the evolution on governance now is a much more proactive rather than reactive role. It is more important to have information and education available so that conversations can happen more than just fingers out, because I don't think boards have the excuse of just saying, oh, somebody else will do that. Cybersecurity isn't me, I don't have to worry about that. There's a really interesting situation that happened last year. It is the Vancouver Island University, and it was an auditor general review and opinion. And the reason I raise it, even though it isn't a corporate citizen, it related to the fact that they said they had good governance, they had policies, they had mandates, they had review processes. And this was about a cybersecurity situation.
Melinda Park: [00:28:20] And the results that came through are really interesting because what they ended up saying was, you had established roles and responsibilities. They were written down, you had mandates, but they were out of date. You hadn't looked at them in a near enough timeline so that when things like cybersecurity risk and things happened, what was in 2020 is completely irrelevant to what's in 2024. Look at how quickly that has moved. They also said that the board didn't stay relevant as it related to cybersecurity, that they had all of these policies and procedures. But the education on even how to apply those wasn't there, so how are you going to actively be part of a board and organization and risk assessment if you don't even know what's happening in cybersecurity? Not that you need to be an expert, but they said your education is falling behind. This also sets to the diversity that we talked about before, Munir. If you don't have some of these complexities on your board or this knowledge or expertise on your board, your board can't even help management understand where some of the holes are sitting. And then lastly, what the Auditor General said, if you have all of this and you even built your risk framework, they had a risk framework, if you can believe it, but they didn't review it. And when they reviewed it, it was a year, year and a half in lag.
Melinda Park: [00:29:48] So when we talk about the good, bad and the ugly, and when we talk about how things have changed, they did what they thought they should. They had governance mandates, they had things that should have helped them, but life was running at a speed that their governance structure couldn't keep up with and didn't keep up with. And so, again, use our Olympics analogy. You have to be able to run with what is happening. You can't be, if the Olympic standards are X and you're X plus 100, you're never going to get to the Olympics. And boards cannot become complacent and think because they have governance procedures, one, that aren't applied, or two, that are running out of date, that they're going to have a successful governance process. And I think, again, when I speak in theory about governance, governance has to be active. It should be we 'do' good governance, not that we 'have' good governance. 'Do' is active, it's a verb, it has to be live. 'Have' is passive, it's in a binder somewhere. Although nowadays it's somewhere on your board vantage or your diligence website. But if it's not actively being applied, if you aren't doing good governance, you run the risk that this university, with all good intentions, had all good intentions. It did everything that it thought if it would have ticked the box was supposed to do. But they didn't live it. They had it, but they didn't live it.
Munir Haque: [00:31:23] I tell you what, it's becoming evident to me that other than being an Olympic junkie, you're also a bit of a governance junkie. And it's very refreshing having that kind of energy in the conversation here. You've provided me so many segues into other areas that I want to talk about, that I'm finding it challenging to find what to talk about next. Maybe what I'll do is talk a little bit about governance today. Like if you're just looking at 2024, what are the significant issues that people listening to the podcast who are serving on boards, what are they experiencing at their board tables right now that are challenging in terms of governance?
Melinda Park: [00:32:05] I still don't think we do a great job at board training. I think that people believe everybody who's coming to the table is an expert, is competent, is well qualified, and they are, at least in most cases they are. But what they don't understand is the energy, the culture, the process, the integration of the human beings in that particular entity, in that company, in that not for profit. And board training is imperative. The worst board training is handing everybody a binder that's 250 pages thick and says, here you go, here's all our mandates. Make sure you sign the Conflict of Interest section. Make sure you've read your code of ethics, see you at the next meeting. Take the time. And the other thing I think we do wrong is we just do board training for the new people. And we sometimes expect that the existing board members have enough time in their day to stay up to speed to see how that board book may have been amended, or that board binder because a board book is more often. So, I think the education and the board training needs to take a higher level of priority in governance.
Melinda Park: [00:33:26] And when we talk to in-house counsel for the companies that are large enough to have in-house counsel, we really believe that that can be at the table of in-house counsel. To say to their management team, we need to be a bit more disciplined in our board training, we need to provide strategic sessions that are dedicated to it. And then the other things that we do is, in our board meetings, we need to make sure that the materials that are being provided. And this is the problem, I think, with having electronic means of board books. I don't know if you've seen, but you can now have board books that are 500, 600, 700 pages. Why? Because your schedules are, well, I just drag this over and I just drag that over and I just drag that over. And board members now are reviewing or determining what to review when you have absolutely oversized board books on a quarter. And so I would again suggest that there is a discipline attached to what gets provided to a board so that good conversation can happen at the board meetings. The weight that the board members have then is, you got to read the stuff and they're easy excuse is, well, come on people, there were 700 pages there. I didn't know which parts were the relevant page.
Melinda Park: [00:34:49] So you cannot give your board members the easy excuse of, there was so much minutia, I didn't know what was relevant. Because board members have to use their time prudently as well. So what I see in governance right now is managing that board book and making sure that it becomes relevant. A third thing quickly before I forget, is that there needs to be good conversation on what is at a board meeting and what management presents. And this ties directly to how you even started the conversation, Munir. There are so many things happening at the speed of light, and board members can bring all these other kind of situations that they might want to see, that they might want more information on. That strategic sessions are really important to set alignment for the next 6 months to 12 months or three years. If you don't have a strategy and what it is that you need to bring, all you're going to do is have board meetings that have 1 to 4 and then 1 to 6, and then 1 to 8, and then 1 to 10, and you keep adding on to your board meetings and losing sight again of what it is that your board and your management team have to accomplish.
Munir Haque: [00:35:56] Maybe just a little bit of a plug there for Action Edge Executive Services. It's something that we can help, especially new boards, find that alignment. Often these boards already have a strategy and vision, but it's about having that conversation, even about existing strategy and vision, to ensure that everybody understands them the same way. I agree with you, onboarding and training is very key to it where we can either work with the board, work with, as you said, in-house counsel, the chair and maybe the CEO in terms of developing 90 day plans in terms of how the board is progressing. As well as doing one on one coaching with the chair, because a lot of this comes down to the chair to being able to filter a lot of this stuff. I think it's also very prudent that even during the recruitment process for finding board members, that there is a good understanding of the time commitment. It's not just about sitting at the board table. And I think one of the challenges is, and I've seen, is that people who sit on boards are busy people.
Munir Haque: [00:37:29] And if you want to put extra strategy sessions in there, extra training sessions, even team building type stuff, it's hard to find time when everybody is available, and you can't do all of that during a board meeting, because that's typically what's in everybody's calendar. So I think that commitment has to be even as early as the recruitment process, so that people understand what the commitment is. And I do strongly agree with the amount of information that does come to the board. It needs to be filtered a bit and understood about some of the stuff is just for information, but there is stuff that's specifically for decisions and understanding where that line is. That's part of that relationship between the board and the management team, which is a bit of a segue into my next question about the board and management team. How have you seen that evolve over time, between the chair and the CEO or just in terms of the duty of the management or the CEO.
Melinda Park: [00:38:36] Well, when you look at, as I was mentioning, when the Dey report came out in the early 90s, the whole concept of independence on a board table has really been moving and changing in the last many years. It used to be that it was, often, companies had board members that there were many, many management people on the board. And then in the last 30 some years we've really moved towards, independence on a board is very important. And now if you're publicly traded and certain things, people are looking at 100% independence. That may not be viable or feasible for some smaller companies or for not for profits, clearly, especially if you have partners. But again, the whole concept of independence was that natural separation between management and board. It goes back to our prior conversation about what does a healthy tension mean. And as that became one of our underpinnings in Canadian governance, you start to see that board meetings and management meetings, preparation for board meetings by management and the communication between board and management started to become more formalized. And I think I mentioned it's absolutely imperative that you have a strong chair, absolutely that you have a strong chair of the audit committee as well, because often the chair of your audit committee has a lot of direct communication with the management team.
Melinda Park: [00:40:06] I think you need to have good training there, because when you have good board members, and this is something that I read just recently, Munir, and I loved it and I'd never heard of it discussed this way. They were talking about having FIPs on your board. And the FIP is formally important people. And the whole concept there was, CEOs are used to leading. They're used to making decisions and they're used to being listened to. And when you have a number of people on your board that either are CEOs or were CEOs, they have that energy and that decision making kind of cloak still on them. And if there isn't that separation of why you're there as a board member and why you're there as management, and sometimes those are mutually exclusive, and the board is there to support the management, it's not there to be management, that you can run into these other issues or conflicts or unhealthy tension or a devolvement into unhealthy practices. So where we are today with boards is you need a strong chair. More than ever, you need a strong chair. Because when you have skilled board members, they may want to go in certain directions that may or may not be prudent at that time. You need to harness that. You need to be able to keep it prudent and healthy. But for example, if there's a board member who's pounding the table on cybersecurity and your management team is saying, yeah, we'll get to that, that's on our priority list for 2025. It's the chair who's going to be knocking every day on the CEO's board going, that's a luxury we just don't have. We can't go there.
Melinda Park: [00:41:49] There's cases, there's all kinds of things that have come out recently where cybersecurity was ancillary to the business but came and really screwed things up because management was focused on the business and this outlier elephant that should have been right in the room being discussed was just being pushed forward and further and further down the line. So the CEO and the chair have to have a good relationship. Board members cannot be hesitant to raise issues, but they also have to understand that all of their issues may not be the prudent and appropriate issues to be on the short term or whatever list, which is why I think good governance has board meetings and management teams with hot lists. You have a list that's green, yellow and red. Good governance allows board members to have a voice. I think buckets are always appropriate. Where in this bucket or where should this topic be placed? What's the bucket that we should put it in? Because if you start suggesting that board members are of little value, and unless they speak only to what you want to have spoken about, they lose their energy. Why am I here becomes the conversation, that kind of thing. But they all can't be raised to the top priority. So having really good buckets so that board members are heard, management team understands things, and then you might very quickly move something from green all the way to red as situations arise. But at least they're on your list somewhere.
Munir Haque: [00:43:25] So, part of your advisory roles. Is there any tools that you're currently using, or that you advise your clients or your boards to be using, to help facilitate this relationship between the board and management? You talked a little bit about the dashboard, your hot list. Is that something that you specifically give to them as a tool saying you should be using this?
Melinda Park: [00:43:53] I think at the outset, one of my biggest pieces of advice to companies, management teams and boards is, precedents are your worst enemy. And the reason they're your worst enemy is because they're baked and they look beautiful and you think that they're going to work. The reason I start my answer with that is, the best governance models and the best relationships between a CEO and a chair right now, if that's what we're discussing, is, let's figure out what the rhythm is. Let's figure out what actually works so that people aren't taking things out of context because the chair expected a call every week and the CEO is going, dude, I don't have time. If I do that, I'm not going to get my stuff done. So figure out how you work as human beings, because it's a very human relationship that these two people have, and they're going to be guiding strategic emergency planning, all of those types of things. So before you start implementing document 7.5A that you had off of your shelf, you start to figure out what's your rhythm, how do you respond to each other, what is the communication that's going to work, and how do you interpret each other? Because then you find out what works best for you.
Melinda Park: [00:45:12] I have always said that if you have a set of policies, for example, if you have your code of conduct, and it's got all of these things, and underneath it you have disclosure documents and all these things, and the chair actively goes through them and ticks them off, but they don't work for your company, but you've told the world you have them, you're in a worse situation than if you just organically figured out what was going to happen. I think that kind of answers your question. You do need documentation and plans and lists and data sheets and things. But first, before you apply what you may have or you ask the lawyer for their package, let's spend some time, and often that is with an advisor. Often that is with your lawyer or someone like your firm. Let's figure out what the rhythm of communication is going to be. Let's see how we connect and then let's build on that. And once you have that rhythm, and that's really helpful for a management team that might see board members come in and out. Because if you find something that works, I'm not saying this is counterintuitive to what I just said, but it allows you to start to understand what the new chair might bring to the table. Why? Because you've already, in a disciplined way, worked through what works for you.
Munir Haque: [00:46:28] Well, thanks for that. We don't have much time left, so I thought I'd open it up a little bit. During our conversation in our pre-interview, you talked a little bit about the concepts of ESG, environmental, social and governance. Everybody has been focused on the ES before, and now it's time to look at the G. So I just wondered if you wanted to expand on that and then go on to talk about anything else you feel that we haven't captured that you want to tell us about, that you've prepared for? Because I know you came prepared.
Melinda Park: [00:47:01] These are topics that, as you can tell, I really enjoy. And I think I enjoy them not because of the dry corporate law aspect, but because companies and boards and management teams are full of human beings. And when you see that and you recognize that, it's really easy to stay engaged in what it is that happens when a company environment gets baked and put together. And the 'E' has always been important, and in fact, ESG is often seen as just the environmental concerns. And while environmental concerns are important, if you don't have strong 'S', which are the social considerations that become more and more relevant in our world. If you don't have the strong 'G' for a corporate entity, you're going to fall down on your 'S', and depending on what environment you're in, you can almost always fall down on your 'E'. So if you're talking to a governance lawyer, maybe it should be GES because as I mentioned before, it's the starting place, when we were talking about the race. It's the platform, it's the backbone. Governance allows you to do things well when things are falling apart. Knowing that you can do things well when things are going well is fabulous. But we all know, what do people say, your true sense of being comes out when you're in a crisis, or what you're made of comes out when you're managing a negative circumstance. Good governance comes out when you're in the middle of something. And I would say that in 2024, going forward even more rapidly than it has in the past, companies are going to see things that they didn't see before, whether it's the 'S' or the 'E', and if you don't have a strong 'G', it's going to be really hard to deal with things quickly.
Melinda Park: [00:49:00] You're always going to be trying to start from scratch. You're going to be trying to find something from a precedent binder. You're going to be scrambling, talking to people who are arguing with you, and you don't have a protocol in place. An example we had recently is it was a very talented board, it was a huge crisis. And every board member started talking to each other and trying to reach the lawyers and trying to reach the accountants and trying to reach the management team. And until we could wrap our arms around them and say, there needs to be discipline, where's your governance on how boards even communicate, like how fundamental was that? And yet in a time of crisis, everybody scattered to the winds and was having all of it. I got to reach the president. I got to talk to the auditor. No, you don't. But collectively, we can find a solution. And governance is a backbone. Really wrapped a quick triage around that and was able to move forward. But without that backbone it would have taken way longer and probably a bit more of a crisis would have, I think, got established because where the tendency was to go in crisis. So in summary, crisis is going to happen with companies now. Crisis will happen with charities. I sit on the board and I've been part of boards of charities, and often charities are in places where crisis is happening. You really need good governance as you deal with what's happening as a board, because your management team is in the trenches in those circumstances. So good backbone governance is so important. If there's one message I can leave, Munir, it's that.
Munir Haque: [00:50:38] Well that's great. One of the notable quotables that I got out of that was, fall down on your 'S'. I'll be using that. Don't fall down on your 'S'. With that, last minute or so, is there anything else that you'd want to say?
Melinda Park: [00:50:53] The only thing, Munir, is we've touched on governance, but in Canada it really wraps its ears and eyes and everything around corporate law. The laws that are governing whatever entity it is, that there is case law. So there are so many more things that we could talk about, and it's why having advisors are so important. I've seen boards where they come from another jurisdiction, and they think they know what's going on in this board and they don't. So we live in a complex environment, our companies exist in a complex environment, and board members and management teams can't forget that.
Munir Haque: [00:51:26] Tell you what, I'd love to have you back on again and we can really drill down on a specific element in governance and drill down a little bit more on that. And I think people think, I think your comment might have been is that kind of stuff is a little bit dry, but we're hoping people are listening to this to actually get real world advice on challenges that are happening. And like I said, it was great having a governance junkie on here, and I hope to have you on here again. For those people listening who want to find out more about this governance junkie that we have on today, where can they find out more about you?
Melinda Park: [00:52:04] I'm a practicing lawyer at the law firm of Borden Ladner Gervais as we mentioned. My email is mpark@blg.com. I'm on LinkedIn. How else do you want to reach? I have phone numbers for people who still use the phones, and obviously on our website you can find me as well. And it'd be a pleasure to speak to anybody who has any further questions, or if I poked and prodded or got a little too raw on some things that people want to challenge me on.
Munir Haque: [00:52:32] We carry a lot of that information in our show notes. So if anybody's interested, they can find your website and contact information in the show notes. So once again, as I sit here on my 'S', I want to say thank you for joining us today. I think it was very good. And I could tell from the pre-interview we had that this was going to be an easy conversation to have, no stress on my part. And we got to a lot of stuff. So thank you, Melinda, again for being on the show.
Melinda Park: [00:53:02] It was a pleasure. I appreciate it, I really enjoyed this. It's engaging and I thank you for giving me your time.
Munir Haque: [00:53:08] Okay, thank you.
Melinda Park: [00:53:09] Okay, bye.
Munir Haque: [00:53:10] Thanks everyone for listening to the Boardroom 180 Podcast. You can learn more about me and Action Edge Executive Development on our website at aeednow.com. Fill out the form if you want me to reach out to you, or if you have any thoughts for future subjects or guests on the podcast. We also have a free board self-evaluation that will be linked on our website. You and your board can fill this out either individually or together, and it gives you a bit of a quick temperature check on how your board health is. As always, don't forget to hit like and subscribe to the Boardroom 180 Podcast. It helps us grow and bring more governance insights. We're recording from the Pushysix Studios in Calgary, Alberta with production assistance from Astronomic Audio. You can find their info and the links to the AEX forums in the show notes. We've come full circle to conclude this episode of The Boardroom 180 Podcast. Goodbye and good governance.