The methodology below describes in detail the questions and the scoring system we use in compliling the board games data for Income trusts with external management structures.
Board Composition, worth 32 marks out of 100 1. What percentage of the company's directors are fully independent? That means directors who are not management, relatives of management, former members of management within the previous five years, or people whose firms do business with the company - including, for example, lawyers, accountants, suppliers, consultants or investment bankers. Board Games also marks as related those directors who are controlling shareholders of the company or who work for a parent company that controls the public subsidiary. Four marks for boards with at least two-thirds independence. Two marks if more than 50 per cent of directors are independent. Zero marks if there is a majority of related directors.
2. What percentage of the audit committee is fully independent? Four marks if the committee is fully independent. Two marks if there are one or more related directors who are not management. Zero marks if a member of management is on the committee.
3. What percentage of the compensation committee - the committee that determines executive pay - is fully independent? Four marks if the committee is fully independent. Two marks if there are one or more related directors who are not management. Zero marks if a member of management is on the committee or if there is no committee.
4. What percentage of the nominating committee - the committee responsible for recommending new directors to join the board - is fully independent? Two marks if the committee is fully independent. One mark if there are one or more related directors who are not management. Zero marks if a member of management is on the committee or if there is no committee.
5. Is the role of chairperson and CEO split? Five marks if the roles are split and there is a fully independent chairperson. Two marks if they are split, but the chairperson is a related director. One mark if they are split, but the chairperson is a member of management. Zero marks if the roles are not split. (Note: There is no longer credit for not splitting the roles but having a lead director.)
6. a) Do two or more directors sit together on two or more other boards of publicly traded companies, creating the potential for a close-knit block of directors? Or, do three or more directors sit on any other corporate board? Two marks if no, zero if yes.
6. b) Do any directors sit on five or more S&P/TSX company boards? Two marks if no, zero if yes.
7. Are there any women on the board? Two marks if one-third of the board or more are women. One mark if there is at least one woman on the board. Zero marks if there are no women.
8. Does the board have a system to evaluate its performance? Three marks if there is a formal board evaluation and a formal individual director evaluation including peer review, with detailed disclosure of what sort of process is used for both. Two marks if there is a formal board evaluation and director evaluation, but no peer review. Also two marks if the company has a formal peer review process but does not mention or describe any board or committee review process. One mark if there is a formal board assessment, but not an assessment of individual directors, or if there is reference to a director assessment but not a board or committee review. Zero marks if there is no evaluation or there is only a vague description of how the assessment is done with no details of the process used.
9. Do independent directors meet without management? Three marks if they meet without management at every board meeting. Two marks if they meet without management at regular board meetings, but not all board meetings. One mark if they meet sometimes, but not every regular board meeting. Zero marks if there is no mention or if there are no meetings without management. Also zero marks if the company uses vague wording - for example, that "time is available for in-camera meetings" - that do not specify whether the meetings are actually held.
10. Does the company provide information about its director education processes for the year, and is there evidence that a formal process is in place? This could include information about educational events offered to the entire board during the year, site visits to company facilities by directors, or specifics about special briefings, courses or training offered to some or all directors. The company does not have to specify which directors received which training, but must give details about the types of educational opportunities offered or taken. One mark if yes, zero if no.