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Chapter 4
Governance

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Who’s in charge of your investments?

Profit drives business. A company’s growth and success is often dependent on the dedication and effectiveness of its management.

What do we know about the leaders of the companies in which we invest? Who are they and what are their financial philosophies? These questions are critical to investors concerned about the profitability of their investments.

The Desjardins responsible investment fund performs a governance review, evaluating the board of directors’ diversity policies and executive compensation.

The goal is to give you the opportunity to make informed choices about your financial future and the world you want to live in. Responsible investment is your chance to make a difference by influencing the policies and the operations of the companies you invest in.

Performance Bonuses Gouvernance

Gouvernance

Bonuses must be earned

Awarding performance bonuses is both a common practice and a sound one in a variable compensation context. Reward programs can act as performance incentives for employees, while allowing companies to better recruit qualified candidates for key positions.

In the current economy, however, the system has come under criticism, particularly in light of the many instances of excess that have made the headlines in recent years.

Disproportionate bonuses are awarded on a regular basis, often in spite of inconclusive results or obvious deficits. A lack of connection between a company's performance and the compensation of its key executives may cast doubt on the work done by the board of directors.

Executive compensation has been rising steadily for the last 20 years. In Canada, the ratio of median compensation for CEOs to the average salary of private sector workers increased from 62: 1 in 1998 to a peak of 159: 1 in 2013 and was 140: 1 in 2016.

Responsible investment allows you to invest in your future while focusing on companies that promote a responsible system of performance and incentive bonuses. The only way to fight excess is to encourage restraint.

Diversity gouvernance

gouvernance

Who gets the last word?

Are the directors of the companies in which you invest all cut from the same cloth? If they share similar worldviews, there will be little room for innovation.

Diversity on a company’s board of directors is one of the main governance issues covered by the Desjardins’ responsible investment since a lack of diversity can limit company growth. It will also prevent new ideas from being developed.

Today, women represent only 23.9% of the boards of directors of the companies that make up the TSX Composite Index. It is to encourage board chairmen and CEOs to achieve a better gender balance on their boards and senior management that Desjardins has joined the Canadian Club 30%.

It is vital that companies promote diversity on their boards to advance the most talented and creative candidates, regardless of their gender or ethnicity. By investing in companies whose boards have been vetted by the RI fund, you encourage not only social justice but also the success of healthy companies whose primary aim is to grow your investments, rather than to preserve the power of a small group of individuals.

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