Corporate Governance

Board of Directors and Board Committees

The mandate of the Board, which it discharges directly or through one of the five Board Committees, is to supervise the management of the business and affairs of Great-West Lifeco, and includes responsibility for:

Strategic planning
Review of operations, disclosure and communication policies
Oversight of financial and other internal controls
Corporate governance
Director orientation and education
Senior management compensation and oversight
Director compensation and assessment

Executive Committee

The primary mandate of the Executive Committee is, on an ongoing basis, to:

Approve strategic goals and objectives for Great-West Lifeco
Review and approve, and to monitor the implementation of, Great-West Lifeco’s annual business, financial and capital plans
Approve disclosure and communication policies
Supervise the management of the business and affairs of Great-West Lifeco when the Board is not in session

Audit Committee

The primary mandate of the Audit Committee is to:

Review the financial statements of Great-West Lifeco and public disclosure documents containing financial information and to report on such review to the Board
Be satisfied that adequate procedures are in place for the review of Great-West Lifeco’s public disclosure documents that contain financial information
Oversee the work and review the independence of the external auditors
Oversee the work of the internal auditor
Review, evaluate and approve the internal control procedures that are implemented and maintained by management

Compensation Committee

The primary mandate of the Compensation Committee is to:

Approve compensation policies and guidelines for employees of Great-West Lifeco
Approve compensation arrangements for senior officers of Great-West Lifeco
Recommend to the Board compensation arrangements for the Directors and for the President and Chief Executive Officer
Manage incentive compensation plans and equity compensation plans
Review succession plans for senior management

Governance and Nominating Committee

The primary mandate of the Governance and Nominating Committee is to:

Oversee Great-West Lifeco’s approach to governance issues
Recommend to the Board effective corporate governance policies and processes
Assess the effectiveness of the Board of Directors, of Committees of the Board and of the Directors
Recommend to the Board candidates for election as directors and candidates for appointment to Board Committees

Conduct Review Committee

The primary mandate of the Conduct Review Committee is to:

Recommend to the Board procedures for the consideration and approval of transactions with related parties
Review and, if deemed appropriate, to approve related party transactions
Recommend to the Board a code of business conduct and ethics applicable to directors, officers and employees of Great-West Lifeco

Subsidiary Boards and Board Committees

The Great-West Life, London Life, Canada Life and Great-West Life & Annuity Boards and Committees have similar mandates and, in addition, each of those companies has an Investment Committee whose primary mandate is to:

Review the investment of its funds
Monitor adherence to the investing and lending policies, standards, procedures and guidelines that have been approved by the Boards or by the appropriate Board Committees of those companies

Independence of Directors

The CSA Guidelines provide that a director is "independent" of an issuer if he or she has no direct or indirect relationship with the issuer which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of the director’s independent judgment. The Board of Directors of Great-West Lifeco agrees with this approach to assessing director independence.

However, the CSA Guidelines go on to provide that a director is considered to have such a direct or indirect relationship with an issuer (and thus not to be independent) if, among other things, the director is, or has been within the last three years, an executive officer or an employee of the issuer’s parent corporation.

In the view of the Board, the determination of director independence should be based upon whether or not the director is independent of the issuer’s management, and whether or not the director has any other relationships with the issuer which could reasonably be expected to interfere with the exercise of the director’s independent judgment. In the Board’s view, that is a question of fact that should be determined by the issuer's board of directors on a case-by-case basis without reference to any presumptions such as those currently contained in the CSA Guidelines.

The most important function of a board of directors is to oversee management in the drive to achieve long-term shareholder returns. A financially strong and long-term oriented controlling shareholder can have a significant positive impact on a corporation’s long-term returns, benefiting all shareholders and the corporation as a whole. The benefits can include the ability to encourage and support management in the pursuit of long-term strategies and the provision of directors who are experienced and knowledgeable about the business of the corporation. In the case of Great-West Lifeco, many of these attributes are provided through a governance model which has been developed over many years, and which includes a group of directors who are also officers of its controlling shareholder. The full-time job of a number of these directors is to focus on and become knowledgeable about the affairs of the controlling shareholder’s subsidiaries, such as Great-West Lifeco. They have no other relationship with Great-West Lifeco other than as directors and shareholders.

The effect of the CSA’s ‘deeming provision’ regarding director independence, if followed, would be to deny Great-West Lifeco and all of its shareholders the benefit of this governance model and to prevent the controlling shareholder from participating fully in the oversight function of Great-West Lifeco.

Any concerns which may exist in a controlled company situation about conflicts of interest or self-dealing should, in the view of the Board, be resolved directly through a committee of directors who are independent of the controlling shareholder. The governance model at Great-West Lifeco includes such a committee, the Conduct Review Committee, which is discussed below in the section entitled ‘Resolution of Conflicts’.

The CSA has acknowledged the concerns expressed by some reporting issuers, including Great-West Lifeco, as to whether the CSA’s view of director independence is appropriate to companies such as Great-West Lifeco which have a majority shareholder. On December 19, 2008, the CSA published for comment a revised version of the Policy which included, among other things, the replacement of the current prescriptive approach to independence with a more principle-based approach. Although the Board was encouraged by the new direction proposed by the CSA, the CSA has not yet proceeded with its proposed revisions. The CSA has indicated that it is still considering potential changes to the corporate governance regime. Great-West Lifeco encourages the CSA to continue its review of the “independence” definition as it relates to majority shareholders and to proceed with appropriate revisions at an early opportunity.

Additional information relating to the Board, the Board Committees and the Chairman of Great-West Lifeco can be found in the section entitled “Corporate Governance” in Great-West Lifeco's most recent Management Proxy Circular.

Resolution of Conflicts

It is the duty of the Board to supervise the management of the business and affairs of Great-West Lifeco for the benefit of all shareholders. In discharging this duty, the Board identifies and resolves any conflicts that might arise between the interests of Great-West Lifeco and the interests of Power Financial Corporation (“Power Financial”) and its affiliates.

It has been a long-standing policy of Great-West Lifeco to have transactions between Great-West Lifeco and Power Financial (or its affiliates) reviewed by Directors who are neither officers nor employees of Power Financial or any of its affiliates. Great-West Lifeco is a holding company, and to the extent that transactions that may present a conflict arise they are more likely to arise at Great-West Life, London Life, Canada Life, Crown Life or Great-West Life & Annuity.

Each of Great-West Life, London Life, Canada Life, and Crown Life is a regulated financial institution that is required by law to have a conduct review committee that establishes procedures for the review of proposed related party transactions to ensure that any such transactions are on terms and conditions at least as favourable to those companies as market terms and conditions. These conduct review committees are composed of directors who are independent of the management of Great-West Life, London Life, Canada Life and Crown Life and who are neither officers nor employees of Power Financial or any of its affiliates.

Great-West Lifeco and Great-West Life & Annuity have also established their own Conduct Review Committees composed entirely of Directors who are independent of management and who are neither officers nor employees of Power Financial or any of its affiliates. Great-West Lifeco’s and Great-West Life & Annuity’s Conduct Review Committees review proposed transactions with related parties and approve only those transactions that they deem appropriate.