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Board Games Methodology: Income trusts with external management Add to ...

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.

Shareholding and compensation, worth 24 marks out of 100

11. a) Are directors required to own shares or share units? (Stock options don't count.) Four marks if the requirement is equal to at least three times the retainer paid to directors - including the value of grants of shares or share units. Two marks if there is a requirement, but it is lower than three times the value of the retainer and share units. Zero marks if there is no requirement.

11. b) How many shares do directors own? Four marks maximum, but minus one mark for each director who owns less than three times the annual retainer plus the value of grants of shares, share units or options. If a director has been on the board less than one year, the ownership requirement does not apply. If a director has been on the board one to two years, the required ownership level is reduced to one times the retainer and share units.

11. c) Are all directors increasing their share ownership over time? Does the board strive for new investment by directors? This generally means there is a mandatory director share unit program, but could mean there is any other method that leads to an increase in share ownership by directors. One mark if all directors increased their number of shares or units owned compared to the prior year. Zero if not.

12. Does the company have an external management contract? Four marks if no. Zero if yes.

13. a) Are full details provided in the proxy circular of who owns the management company? One mark if yes, zero if no.

13. b) Are full details provided in the proxy circular of how much was paid to the management company last year? One mark if yes, zero if any details are missing (such as the extra amount paid under a performance or incentive clause).

13. c) Is information provided in the proxy circular about how the top executive of the management company was paid in the previous year? Four marks if all details are provided; two marks if salary chart is given but there are details missing, such as payments earned from the individual's personal ownership stake in the management company; zero marks if no information is provided. NOTE: If executive receives options (or unit rights like options), two marks if the company does not disclose the value of gains reaped by executives from exercising stock options over the prior year.

14. a) Are there performance features in the management contract that directly tie the interests of the manager to increasing cash distributions? One mark if yes; zero marks if there is only a flat fee cash payment or if incentive fees are based only on the value of assets under management or for completing acquisitions.

14. b) Are full details provided in the proxy circular about the cost of cancelling the external management contract? Two marks if yes, zero if no.

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