Corporate governance practices
Great-West Lifeco believes in the importance of good corporate governance and the central role played by Directors in the governance process. Great-West Lifeco believes that sound corporate governance is essential to the well being of Great-West Lifeco and its shareholders.
Great-West Lifeco is an international financial services holding company with interests in life insurance, health insurance, asset management, investment and retirement savings and reinsurance businesses.
Great-West Lifeco has operations in Canada and internationally through its subsidiaries:
- The Great-West Life Assurance Company (“Great-West Life”)
- London Life Insurance Company (“London Life”)
- The Canada Life Assurance Company (“Canada Life”)
- Great-West Life & Annuity Insurance Company (“Great-West Financial”)
- Putnam Investments, LLC (“Putnam”)
Corporate governance practices are aligned between Great-West Lifeco and Great-West Life, London Life, Canada Life and Great-West Financial. All of the directors of Great-West Lifeco are also directors of Great-West Life, London Life and Canada Life and most of the directors of Great-West Financial are also directors of Great-West Lifeco.
Each of Great-West Life, London Life, Canada Life and Great-West Financial has adopted essentially the same Board and Committee mandates and other governance structures, processes and practices as Great-West Lifeco, and the Board of Great-West Lifeco monitors whether the mandates and other governance structures, processes and practices have been implemented and/or followed by these subsidiaries.
In 2005, the Canadian Securities Administrators (the "CSA") adopted National Policy 58-201 - Corporate Governance Guidelines (the "Policy") which sets forth a number of suggested guidelines on corporate governance practices (the "CSA Guidelines"). Under the Policy, issuers are encouraged to consider the CSA Guidelines in developing their own corporate governance practices.
In the Board’s view, no single corporate governance model is superior or appropriate in all respects. The Board believes that Great-West Lifeco’s governance system is effective and is appropriate to its circumstances, and that there are in place appropriate structures and procedures to ensure the Board’s independence from management and to ensure that actual or potential conflicts of interest between Great-West Lifeco and any of its affiliates are dealt with appropriately.
Furthermore, any review of governance practices should include consideration of long-term returns to shareholders, as the Board believes this to be an important indicator of the effectiveness of a governance system.
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’.
Additional information relating to the Board, the Board Committees and the Chair of Great-West Lifeco can be found in the section entitled “Corporate Governance” in Great-West Lifeco's most recent Management Proxy Circular (PDF).
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 or Great-West Financial.
Each of Great-West Life, London Life and Canada 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 and Canada Life and who are neither officers nor employees of Power Financial or any of its affiliates.
Great-West Lifeco and Great-West Financial 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 Financial’s Conduct Review Committees review proposed transactions with related parties and approve only those transactions that they deem appropriate.