Governance changes at Saskatchewan Wheat Pool could set up two competing factions at the board table.
A financial restructuring package that company bondholders were expected to approve Feb. 4 includes changing the board from 12 farmer-member directors to eight farmers and four independent directors.
And one of those independents will become lead director, assuming responsibility as vice-chair of the board and chair of the strategic and business planning committee, and for managing the board.
The lead director will also chair the nominating-corporate governance committee and the compensation committee.
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“This actually gives the bondholders a considerable amount of influence,” said University of Saskatchewan agricultural economist Murray Fulton. “This lead director will be a very powerful person.”
The proposed changes were announced Feb. 3 by pool CEO Mayo Schmidt as part of a deal brokered the previous weekend to keep the company in business.
“The company intends to implement governance changes that would recognize the economic contribution of our lenders while allowing the company to maintain its co-operative heritage,” Schmidt said at a news conference.
Pool delegates will still elect all the directors, but an ad hoc committee representing 42 percent of bondholders will have considerable influence over at least the first slate of independent candidates.
“The initial slate and the identity of the lead director will be individuals selected by the board who are acceptable to Goodmans LLP and Ernst & Young Inc., as advisers to the ad hoc committee of medium term noteholders, acting reasonably,” said information provided by the pool.
After the initial slate is elected, independent candidates would be identified by the board’s nominating committee and presented to the delegates’ annual meeting for election.
Marvin Wiens, pool president and board chair, said the board will recommend to delegates that the changes be made. The annual meeting is scheduled for Feb. 12-13.
District boundaries will have to be redrawn to elect eight farmer directors instead of 12.
The boundaries were just changed a couple of years ago to reflect the company’s move to 12 districts from 16 and to include part of Alberta and Manitoba.
“It will provide the strength of the traditional farmer board along with the strength of an outside independent group that will bring additional expertise to the board,” Wiens said of the new structure.
Fulton said it will be interesting to watch how the relationship between the lead director and the president sorts itself out.
“This is really in essence removing many of the things that the president would have been responsible for,” he said.
Fulton said these changes institutionalize what already happens behind the scenes at many board
tables, where two factions develop and stand-offs occur.
But he also said this may not end up to be in the best interests of the bondholders. They want more power at the board table and they’ve received it initially, he said.
Once the independent directors are elected, however, they can do their own thing, he said.
If two factions develop and the two do not work together effectively, it could be detrimental to the company, Fulton added.
