How directors are appointed
Directors' are appointed by the federal finance minister in consultation with the participating provinces, and with the assistance of a nominating committee, for a term of 3 years.
The nomination process is designed to ensure that only those with expertise in investment, business and finance are appointed to the board.
The chair of the nominating committee is federally appointed, and each participating provincial government appoints one representative. The nominating committee recommends candidates for appointment and re-appointment to the federal finance minister. In turn, the federal finance minister makes the appointments in consultation with the provincial finance ministers.
The legislation disqualifies certain individuals from being directors (see CPP Investment Board Act).
How long directors serve
Each director is appointed for a term of three years and is eligible to be re-appointed twice for a maximum of three terms (or nine years of service). To ensure continuity, the terms are staggered so that no more than half of the terms expire in the same year.
The founding directors were appointed in October. At that time our first chairperson was selected in consultation with the provinces and the members of the board of directors.
The responsibilities of directors
The principal duty of the board of directors is to oversee the management of the business affairs of the CPP Investment Board. Specific duties include:
- Establishing investment policies, standards and procedures
- Appointing an independent auditor
- Approving procedures to identify and resolve conflicts of interest
- Developing a code of conduct for directors, officers and employees
- Appointing the president and chief executive officer
- Monitoring management, including decisions requiring board approval and assessing management's performance
- Assessing the performance of the board itself
- Approving financial statements.
Procedures for the assessment of Board performance
Soon after its inception in October 1998, the board established an annual process for evaluating its own performance and that of its committees. In May 2005, the board incorporated a Chairperson Effectiveness Assessment process. The assessments are conducted through confidential questionnaires that are summarized by an independent consultant. The summaries are reviewed by the full board and provide a basis for action plans for improvement. The board conducts a confidential annual peer review to assist each director in identifying self-development initiatives and assist in providing the external nominating committee with guidance when it considers individual re-appointments. The chairperson also meets formally with each director as part of the board and individual director assessment process.
Board Expectations of Management
Management is expected to comply with the Canada Pension Plan Investment Board Act and Regulations as well as all policies approved by the board. Management develops, with involvement from the board, the strategic direction of the organization in response to its growing asset management responsibilities and the ever changing outlook for capital markets. The strategy incorporates risk management policies and controls as well as monitoring and reporting mechanisms.
Management is charged with developing benchmarks that objectively measure the performance of markets and asset classes in which CPP assets are invested. Benchmarks assist the board in evaluating management’s investment performance and structuring performance-based compensation incentives.
Management is expected to make full and timely disclosure to the board and the public of all material activities, including new investments, the engagement of operational and investment partners, quarterly and annual financial results, and developments that may affect the CPP Investment Board’s reputation.
How directors are paid
Directors remuneration includes an annual retainer of $32,500 for each director. Non-teleconference meeting fees are $1,500 for board meetings and $1,500 for committee meetings. The chair of a committee receives an annual retainer of $10,000. Separate fees are not paid for investment committee meetings when they are held on the same day as board meetings, which is the custom. The chair of the board of directors receives $140,000 in annual compensation but is not eligible to receive annual or committee chair retainers or meeting fees unless the fees relate to public meetings.