Board Profile - Bank of Canada

Corporate Mandate

The Bank of Canada is a Crown corporation established under the Bank of Canada Act (the Act). The Act establishes the businesses in which the Bank will engage. The Bank’s four main businesses are in the area of: monetary policy, currency, financial system and funds management. Under the Act, the Governor is responsible for monetary policy and for the other businesses of the Bank, while the Board is responsible for the governance of the Bank and oversees all its administrative functions. The Bank of Canada plays a key role in the daily economic life of Canadians. The Bank’s objectives are:

  • To contribute to the economic well-being of Canadians by:
    1. conducting monetary policy in a way that fosters confidence in the value of money
    2. promoting the safety and soundness of Canada's financial system
    3. supplying bank notes that are readily accepted without concerns about counterfeiting
  • To provide efficient and effective central banking and debt-management services
  • To communicate the Bank’s objectives openly and effectively and to be accountable for its actions

Roles and Responsibilities of the Board

The Bank of Canada Act states that the Bank shall be under the management of a Board of Directors. It also establishes a division of responsibilities between the Board and the Governor.

The powers reserved by the Act for the Board relate chiefly to the direction of the internal financial management and administration of the Bank. The Board has the responsibility for the appointment of Senior Officers of the Bank. Other responsibilities include the approval of policies with regard to staff, budget matters, internal practices, accounting and the operation of the Board.

The Board and the Governor must work in close cooperation in all matters since the control of financial and administrative matters by the Board may impinge on the ability of the Governor to perform his responsibilities under the Act including his responsibilities with respect to monetary policy.

The Board informs itself on an ongoing basis regarding all significant activities of the Bank.

In activities that fall under the authority of the Governor, including monetary policy, the Board provides oversight and advice on the manner in which they are conducted.

The attached extract from Section 3 of the Terms of Reference of the Board of Directors of the Bank of Canada explains in more detail the duties of the Board.

The Bank has a Medium-Term Plan that sets out the strategic directions for the Bank. An important aspect of the Board’s stewardship is its contribution to the development of the strategic initiatives the Bank will pursue. The Board reviews on an ongoing basis the key challenges, including the changing technological and international environment that will influence the Bank’s core businesses in the future.

Attributes of a Bank of Canada Director

To be effective, the Board needs a group of individuals whose skills and backgrounds are diverse and will complement one another. Taken together, the skills and experience of the members should equip the Board to fulfill its responsibilities for the financial management and administration of the Bank and to perform its other oversight responsibilities. This would include knowledge and experience in the following areas:

Accounting & Financial Controls

Professional skills and experience in accounting and financial controls. A professional accounting designation will normally be required of the Chair of the Audit Committee.

Human Resources

An appreciation of best practices in human resource management relating to the attraction, retention and development of staff and with specific knowledge of current trends and practices in compensation, benefits and pensions.

Corporate Governance

An understanding of issues and trends in corporate governance, with the ability to interpret implications for the Board of the Bank. Experience as a Board Member of a significant corporation and/or public institution is normally required.

Financial Markets & Institutions

Understanding of the structure, functioning and market issues associated with the operation and management of financial institutions in Canada and internationally.

All of the foregoing is based on a foundation of qualities that each Director should possess:

  • Sound judgment
  • Highest personal and professional ethics, integrity and values
  • Commitment to the Canadian public interest
  • Interest and time to prepare for and participate in the business of the Board, regularly and actively
  • Ability to work in a collegial fashion, respecting the views of others
  • Sensitivity to the organization’s public policy objectives
  • An open mind on, and interest in, public policy issues related to business and the economy

Representation

The Act requires that directors be selected from various occupations. The Board includes representation from the various geographic regions of Canada.


EXTRACT (December 2011)

TERMS OF REFERENCE
BOARD OF DIRECTORS OF THE BANK OF CANADA

3.1 Appointment of Senior Management

  1. Pursuant to Section 6 of the Act, it appoints the Governor and Senior Deputy Governor with the approval of the Governor in Council and approves their terms of employment.

  2. Pursuant to Section 7 of the Act, it approves the appointment and the terms of employment of Deputy Governors.

  3. Pursuant to Section 15 of the Act and By-law 11, through the Human Resources and Compensation Committee and the Executive Committee receives quarterly reports concerning promotions and other changes for senior officers of the Bank (SO1-SO3) and an annual report concerning staffing and employment matters.

3.2 Strategic Planning, Budget Approval, Stewardship and Risk

  1. The Board provides advice to management on the development of the Bank’s Medium-Term Plan (MTP) including a discussion of the trends and challenges that may help shape the MTP and the proposed strategic direction and priorities for the Bank. The Board approves the MTP and any significant changes to it.

  2. The Board reviews the annual Stewardship Report with a view to evaluating progress toward the achievement of the strategic objectives with special emphasis on analysis of activities to draw lessons for the future. As part of the Stewardship exercise, the Board comments on the performance of Deputy Governors to inform the performance ratings assigned by management. Once finalized, management reports on the ratings to the Human Resources and Compensation Committee.

  3. The Board reviews and comments on the Governor’s Annual Report to the Minister.

  4. On an annual basis, the Board ensures that the Bank identifies the key areas of risk that could compromise the achievement of the strategic objectives and the measures taken to manage these risks. Once per year the Board carries out an assessment of current risks on a functional basis.

3.3 Audit and Finance

Having regard to the recommendations of the Audit and Finance Committee, the Board shall approve, if it deems to be appropriate:

  1. The annual audited and interim unaudited financial statements of the Bank.

  2. The form of statement of accounts, pursuant to Section 35 of the Act.

  3. The accounting principles to be used in the presentation of the annual statement as required by By-Law 14.

  4. The annual audit plans and terms of engagement of the external auditors as well as the remuneration to be paid to the external auditors.

  5. The remuneration to be paid to the external auditors for the Review Engagement of the Bank's interim financial statement, for the Office of the Auditor General, for the three months ending 31 March as defined in the draft Engagement letter.

  6. The scope, terms of engagement and remuneration to be paid to the external auditors for any special audit requests.

  7. The annual audit plan of the Chief Internal Auditor.

  8. The annual budget for the Bank.

3.4 Other Human Resources and Compensation Matters

Having regard to the recommendations of the Human Resources and Compensation Committee, the Board shall approve, if it deems to be appropriate:

  1. The human resources policies, practices and organizational structures, all of which should provide consistency with the strategic plan, support operational effectiveness and efficiency, and maximize human resources potential.

  2. The Bank’s total compensation arrangements including but not limited to retirement benefits1, annual salary budgets; special market adjustments; performance pay; and review of the market comparator groups.

  3. Management succession planning, management/leadership development, and talent management/workforce planning strategies.

  4. Termination and severance policies/arrangements.

  5. The performance of Governing Council against the annually established duties and objectives.

  6. The remuneration, benefits and other conditions of employment of the Governor and the Senior Deputy Governor.

  7. Any report of the Human Resources and Compensation Committee for possible publication.

3.5 Pension Plan

The Bank is both the sponsor and administrator of the Bank of Canada Pension Plan and the Supplementary Pension Arrangement (collectively, the “Plans”). The Board provides oversight of the Bank’s activities in carrying out both of these roles and establishes such policies, procedures and strikes such committees as deemed necessary to exercise its oversight responsibilities. The Board’s role in the governance of the Plans is set out in the Bank of Canada Pension Governance Policy, adopted by the Board on 22 September 2011, as amended from time to time.

3.6 Corporate Governance

Having regard to the recommendations of the Corporate Governance Committee, the Board shall approve, if it deems to be appropriate:

  1. The terms of reference of the Board, its committees and the Lead Director.

  2. The composition of the committees of the Board.

  3. The appointment of the Chair of each Board committee.

  4. The process for evaluating Board effectiveness.

  5. The Board profile.

  6. The Board related policies, such as travel, expense and conflict of interest guidelines.

  7. The remuneration and allowances of directors.

3.7 Lead Director

According to the Process for the Selection of Lead Director attached to the Lead Director Terms of Reference, the Board formalizes the selection of the Lead Director by the directors appointed under Section 9 of the Act.

As outlined in the Lead Director Terms of Reference, inter alia, the Lead Director leads the process (which is established by the Corporate Governance Committee), for the Board’s annual self evaluation.

3.8 Ethical Values

The Board ensures that policies are in place to ensure the corporation operates at all times within applicable laws and regulations and with due regard to ethical standards. This includes laws relating to employee health and safety, human rights, environmental protection and standards relating to conflicts of interest.

3.9 Oversight and Advice

  1. The Board informs itself on an ongoing basis regarding all significant activities of the Bank.
  2. In activities which fall under the authority of the Governor, including monetary policy, the Board considers and evaluates the general manner in which they are conducted.
  3. In such activities the Board may contribute advice, including its sense of the public interest, in regard to how the Bank can best fulfill its responsibilities.

1. Any amendments to the Pension Plan and the Supplementary Pension Arrangement that are required by applicable legislation or to give effect to pension benefits would be reviewed and recommended to the Board by the Pension Committee.