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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. The RI fund is your chance to make a difference by influencing the image 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. These 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. While considered unacceptable in private institutions, the appearance of this practice in public institutions is also worrisome.

RI funds allow you to invest for 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 fund. While the issue is often not fully understood by the public, a lack of diversity can limit company growth. It will also prevent new ideas from being developed.

An assessment of diversity on boards of directors, conducted by Spencer Stuart in 2013, found that women and ethnic minorities accounted for only 18 % of management committees in the S&P 500. The study reveals that some major multinationals have no women and/or members of an ethnic minority on their board of directors. In Canada, the Securities Commission of Ontario found that women occupied only 10.5% of directorships in companies on the S&P/TSX Composite Index and the S&P/TSX SmallCap Index.

It is vital that companies promote diversity on their boards in order 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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