Board Profile - Canada Post Corporation

Corporation Mandate

Canada Post is a financially self-sustaining Crown corporation, which reports to the Government of Canada, that’s a vital part of the Canadian economy, employs 72,000 Canadians within the Canada Post group, and connects millions of individuals, communities and companies to each other and to the world. Canada Post and its affiliates spend more than $2.8 billion annually on goods and services, thereby creating an additional 30,000 jobs. Every business day, Canada Post delivers some 45 million pieces of mail to approximately 15 million residential and business addresses; this delivery network expands by about 200,000 addresses every year. There are more than 23,000 delivery routes in Canada. Canada Post also has more than 6,600 post offices, giving it the largest retail network in Canada.

Roles and Responsibilities

The role of the Board of Directors is explicitly supported by the statutory framework within which Canada Post operates (the Canada Post Corporation Act and the Financial Administration Act), the Corporation’s bylaws, and its Statement of Board Values and Board Charter.

The Board is responsible for overall guidance on the strategy, business plans and related affairs of the Corporation. It is responsible for overseeing Canada Post on behalf of the Shareholder. In carrying out its oversight role, it is the Board that holds management accountable for business performance and achievement of the Corporation’s other objectives. To fulfill these responsibilities, the Board is called upon to exercise judgment in the following areas:

  • Canada Post's Strategic direction and Corporate Plans;
  • major contracts;
  • safeguarding Canada Post's resources;
  • establishing and implementing processes for the recruitment of senior officers and Board members;
  • monitoring corporate performance; and
  • providing timely reports to the Shareholder.

As overseer of a $7-billion commercial and financially self-sufficient enterprise, the Board must bring strong business judgment, and valuable experience and insight in other fields, to the stewardship of the Corporation. In order to provide strong oversight for such a large, complex and important company, the Board must devote approximately 35 days per year to its deliberations.

Challenges, Issues, and Initiatives

Definition of risk

The pace of globalization and technology has broadened the risks that companies need to consider. Canada Post’s competition is more prevalent than ever, and slim margins make it even more important to understand and mitigate risks to ensure that we maintain and grow our profitability, particularly in light of the major investment program we initiated in 2007. Canada Post defines risk as any event or condition that could impact the Corporation’s ability to meet its key strategic, financial and organizational objectives.

Funding Requirements

Given the significant investment required for critical infrastructure renewal under Postal Transformation and potential pension funding requirements, the need for increasing financing sources remains a significant risk. Currently, the amount Canada Post can borrow in the market is capped at $300 million, subject to approval by the Minister of Finance. This borrowing limit does not match our needs. Access to outside capital is a critical step to making the investments necessary to ensure continued service by renewing our physical infrastructure, equipment and technology.

Economic Impact

Canada Post will be undergoing its important transition to the Modern Post at a time when economic performance forecasts are increasingly pessimistic. All Canadian businesses, including Canada Post, its subsidiaries and customers, will be affected by shifting market expectations and conditions. In addition to their potential negative effect on revenue growth, financial markets also have an important impact on the valuation and expenses pertaining to the Canada Post Pension Plan. Of particular note are the risks associated with the fluctuation of interest rates affecting the value of both the Pension Plan’s assets and the obligations thereby impacting the planned level of funding. In addition, Canada Post is assessing its options relating to the Modern Post renewal. The total amount of incremental capital spending will be based on what we can afford.

Competition

The company continues to face aggressive competition in its market segments as well. These trends and pressures will continue to put pressure on market shares, volumes and pricing. Globalization has introduced our competitive products, especially parcels and express/courier, to intense and increasing competition from well-resourced multinational corporations. The rise of the Internet as a marketing channel has created a new competitive challenge to direct mail. The speed of technological advances and the resulting customer demands pose an additional risk if we are not able to respond to market expectations in a timely manner.

Decline in Volumes

After predicting erosion for many years, Canada Post experienced a significant decline in lettermail volumes in 2008. Increased competition from international outbound re-mailers, shifts to electronic bill presentment, and consolidation of bills mean this erosion will likely continue. Although at this time, lettermail volumes are not expected to erode sharply in the near future, the economic downturn could cause accelerated declines. As well, experience from Posts around the world suggests volumes will continue to decline every year. At the same time, our costs continue to grow while the number of addresses increases across the country and the volume of lettermail received by each address is declining.

Public Policy Considerations

As a Crown corporation, Canada Post’s ability to plan and execute business strategy is influenced by public-policy considerations. The company’s legal framework requires the Corporation to provide a universal service, while operating on a self-sustaining financial basis. Often public-policy objectives are established to take priority over commercial considerations.

Health and Safety

Safety and health concerns are other major risks for Canada Post. These concerns can be divided between accidents or injuries due to unsafe working conditions or human error and ergonomic issues. Reducing the level of accidents for all employees continues to be a main focus for the company.

Core Attributes, Competencies and Experience

This section describes the skills and behaviours that should be demonstrated by all the directors.

Financial Literacy

The ability to read and assess financial statements.

Informed Judgment

The ability to provide wise, thoughtful counsel, to analyze, ask relevant questions at the strategic level, consider the different stakeholders’ perspectives, understand situations and problems by addressing underlying issues.

Integrity and Accountability

Demonstrating high ethical standards and integrity, being willing to act on and remain accountable for Board decisions, meeting the accountabilities outlined in the law, by-laws and rules of the Board, seeing oneself as serving the interests of Canadians, and supporting the corporation’s commitment to corporate social responsibility, including the interests of its key stakeholders.

Impact and Influence

The awareness of the impact of organizational issues, policies and decisions on public interest and concern. The capacity to be sensitive to the differing needs and agendas of multiple stakeholders and to act to convince or influence others in order to have a specific impact or effect.

Board Experience

Previous Board experience preferably in a for-profit organization, and at the minimum in a not-for-profit organization.

Specific Skills, Knowledge and Experience

This section describes the skills and knowledge that are needed for the Board as a whole, but not necessarily in each director.

Corporate Governance

Knowledge of principles of good corporate governance, including familiarity with current developments and emerging practices with respect to duties of directors towards the corporation, such as the duty to disclose, duties with respect to conflicts of interest and other duties of a legal and ethical nature.

Financial Expertise

CA or CGA professional designation, having had experience in the audit of large complex corporations.

Knowledge of Human Resources

Having had extensive experience at a senior level in managing the Human Resources function of a large corporation. Determining Human Resources strategies in order to reach corporate objectives, hiring, training and retaining appropriate resources, setting principles and policies for compensation.

Knowledge of Information Technology

Having had extensive experience at a senior level in managing the Information Technology function of a large Corporation. Determining Information Technology strategies in order to reach corporate objectives, application development, application management and software.

Knowledge of public and social policy, government and stakeholder relations

Having extensive experience of the processes for formulating and implementing public and social policy objectives and of organizational structure of government (whether federal or provincial), its rules, guidelines and practices. The ability to understand and take the interests of different stakeholders, including customers and potential customers, into account in the decision making process.

Large enterprise CEO

CEO – having had the experience of being responsible for the management of a large sophisticated commercial corporation whether public or privately held in Canada, management of a network, and being versed in best practices in governance.

Performance Management and Evaluation

Experience in monitoring corporate performance against the strategic and business plans, including assessing operating results to evaluate whether the business is being properly managed; the ability to assess the effectiveness of the Board in fulfilling its responsibilities, including monitoring the effectiveness of individual directors; and experience in developing indicators to measure Executive performance and assess the performance of the CEO.

Risk Assessment and Risk Management

The ability to identify the principal risks of Canada Post’s businesses and ensure that appropriate systems are in place to manage these risks.

Senior position in investments generally

Extensive experience at a senior level in the investment industry as a professional, investment analyst or Chartered Financial Analyst (CFA) involved in determining the strategy, policies, broad principles for the Investment activities, as well as approving transactions.

Strategic Planning

The abilities necessary to provide input to management on emerging trends and issues, to review and provide input on corporate plan and sector strategies, and to review and approve Canada Post’s financial objectives, plans and actions, including capital allocations and expenditures, marketing and sales.

Other Skills

Experience and skills in other areas not mentioned above that may be needed on the Board as determined by the Board or its Nominating Committee, from time to time.

Representation

In addition to representation in terms of commercial sector and experience (as outlined in the preceding sections), the membership of Canada Post’s Board should represent the geographical regions of Canada and maintain gender and cultural representation, and efforts should be taken to ensure that the Board represents the diversity of Canada’s population.

Working Conditions

In light of the size of the company in terms of number of employees, value of investment and dollar value of business transacted, it should be anticipated that board members will devote at least 35 days a year to the business of the company. This includes Board meetings, Committee meetings, travel time and participation in an annual multi-day strategy session. While it is important to ensure that there is a fresh view brought to the Board, given the complexity of the business it is equally important to ensure that there is continuity at the Board. Hence terms of Board members should be set so as to ensure that there is continuity of experience and recollection of corporate history.