Hockey Canada: Is it really changing course?

Cromwell’s Final Report on Hockey Canada sees the organization at a “crossroads”. His extensive review of its governance found serious gaps that require a foundational overhaul. While there are many roots to the problems at Hockey Canada, the buck stops at the board table. Directors have the ultimate fiduciary responsibility for any organization, whether it be corporate or non-profit. And Hockey Canada’s directors failed in their oversight of management. Cromwell’s report makes 39 recommendations. Now we wait and see if Hockey Canada adopts these recommendations, and when.

Since 2014, Hockey Canada has hired outside experts three times to do governance reviews. Cromwell is the third independent evaluation. This is an unusually high number of governance reviews. Maybe previous directors also had concerns about their ability to oversee management and hired outside experts to find solutions. Cromwell’s report notes that not all of the recommendations made in the 2016 review have been enacted (p. 171) For the love of our game, we all need to pay attention and see that Cromwell’s work and these recommendations are not benched.

Charity Intelligence's previous reports on Hockey Canada:

Hockey Canada - the Cromwell Report Part 1 with details on the National Equity Fund surplus creating the 3rd fund, the Insurance Rate Stabilization Fund

Hockey Canada: What can we do? A call for our Minister to regulate financial transparency, August 2, 2022

Hockey Canada's audited financial statements 2021-2014

 

Change is hard. Cromwell eludes to the ingrained approaches and attitudes that give rise to strong resistance to change. Cromwell’s report also gives us an inside peek at what Hockey Canada sees as the key sticking points of governance reform. These are:

  1. Equal gender representation on the board, namely more women.
  2. Who elects the Chair, the Members or the Directors?
  3. Athletes on the board.

On October 15, 2022, following the departure of Hockey Canada’s CEO and interim Chair, the 13 provincial Members of Hockey Canada held an emergency meeting to review Cromwell’s recommendations. It is the provincial Members and not apparently Hockey Canada’s directors that hold the authority to amend Hockey Canada’s by-laws. While by-law changes appear mundane, these are like an organization’s constitution. The by-laws allocate authority, just like the division of powers between different levels of government.

The October 15, 2022 by-law changes pave the way for a transition board of directors that will serve for just one year. Cromwell welcomes the first steps made.

Yet in these by-law changes, the other terms of the by-laws were not changed. Cromwell had specifically recommended these changes. Cromwell notes that it is unrealistic for these changes to be properly considered and put into effect in October. Yet the Members did act quickly, held an emergency meeting and made some by-law changes. We sincerely hope our initial concerns are laid to rest with the December 17 election results.

 

Directors elect the board chair 

At the emergency meeting, the Members amended the Chair’s term to cater to the transitionary board. But the Members did not change who elects the Chair. This remains that the Members shall elect the Chair.

One of Cromwell’s strongest recommendations is that Directors elect the Chair, not the Members. This would strengthen the Chair’s independence and accountability in overseeing Hockey Canada. It removes any potential conflict, it removes the Chair's reliance on Members for their votes. It is confusing. To help explain this better, it is as if the Prime Minister is elected by the provincial premiers rather than chosen by the members of Parliament. As Cromwell found, the chain of command is a complex web that needs to be untangled for better governance. We interpret one of the key themes throughout his recommendations is to strengthen the power of the directors and fetter the power of the provincial Members.

Similarly, at the special meeting, Hockey Canada’s Members changed the by-laws to have an interim board of directors serve for one year for this transition year. But no change was made to how long a director serves. Going forward, after this transition year, Cromwell recommends that directors should serve for three years. (p. 203) A longer term should improve the directors’ oversight.

There is no mention of by-law changes to include any directors who are athletes.

 

More women on the board

On October 11, having received Cromwell’s initial report and recommendations, Hockey Canada asked Cromwell for clarification about adding more women directors. It asked if Cromwell recommends this change for the December election or should the provincial Members consider it further? (p. 203)

Hockey Canada has previously received this advice to add more women as directors at least three times. In 2019, Hockey Canada’s internal task team on female hockey recommended more women in leadership positions at Hockey Canada in both management and at the board. The 2020 COC Code also calls for gender parity at the board table. Hockey Canada’s very own Action Plan of July 2022 also points to more diversity on its board:

 “Beginning in 2018, Hockey Canada committed to increase the diversity of its Board of Directors so that it is more representative of all Canadians. Our bylaws were amended in 2018 to ensure that our Board’s composition includes at least two women. Directors elected have increased the Board’s gender and ethnic diversity. The Nominating Committee looks forward to building on this progress at our upcoming 2022 elections.”

Hockey Canada’s Action Plan July 2022

Cromwell answers “now” as in December 17, 2022. Since Hockey Canada will have a clean slate of directors elected in December, women’s representation on the board should be no less than 40%.

 

Will these changes in governance work?

Good governance is hard to assess. Indeed, Sports Canada reviewed Hockey Canada’s governance in June 2022 and Hockey Canada says it got top marks. Governance is vulnerable to gaming; policies, structures and organization charts can easily mask actual practices. Cromwell’s investigation uncovered critical failures that are invisible to outside analysis.

The new Hockey Canada directors that will be elected on December 17, 2022 have a mountain of work to accomplish. What goes unsaid is that Hockey Canada’s directors’ biggest decision is selecting a new chief executive who possesses integrity and devotion to Hockey Canada. Get this decision wrong, and little else matters.

“Over the years, many new rules and guidelines pertaining to board composition and duties have come into being. The bedrock challenge for directors, nevertheless, remains constant: Find and retain a talented CEO – possessing integrity for sure – who will be devoted to the company. Often that task is hard. When the board gets it right, they need to do little else. But if they mess it up …. “

Warren Buffett on Corporate Governance

Independent directors: pit bulls or cocker spaniels?

Cromwell’s report focuses on reforming Hockey Canada’s board, giving more powers to the directors and how directors are selected and elected. He notes that the status quo has failed to put forward the right people with the right skills as directors. Cromwell calls for independent directors to be the majority of the new board. An independent director is one who is not a director, officer or staff with Hockey Canada, a provincial Hockey Canada Member, or any other hockey club, league or team.[1]

Some board changes will be easy to assess. We will be able to see if the new board has at least 40% women and an athlete director.

What is far harder to gauge is the independence of directors. Independence is more than just being not aligned. Effective governance requires directors to have independent judgement and the integrity and backbone to make management accountable. As Warren Buffett describes, effective governance requires “pit bull” directors, not “cocker spaniels”.

Yet when seeking directors, too often pit bulls are overlooked. It’s the cocker spaniel – the “good” director that doesn’t seriously challenge management - that gets picked.

“Almost all of the directors I have met over the years have been decent, likable and intelligent. They dressed well, made good neighbours and were fine citizens. I’ve enjoyed their company. Nevertheless, many of the good souls are people whom I would never have chosen to handle money or business matters. It simply was not their game.”

Berkshire Hathaway 2019 Annual Report, Warren Buffett’s Letter to Shareholders on Board of Directors

[1] “Independent” means a person who at the time of the appointment is not a) an officer, director or staff of Hockey Canada; b) an officer, director or staff of any Member; c) an officer, director or staff of any organization that is a member of a Member (including without limitation a local Minor Hockey Association); or d) an officer, director or staff of any other hockey club, league or team.

 

Hockey Canada’s failure has many root causes. Cromwell finds that the causes of this current crisis “are not of recent origin. Some who have been quick to announce their loss of confidence in Hockey Canada have been slow to acknowledge their own past contributions to its troubles…. Many could have done more to address the issues sooner.” (p. 13)

Cromwell believes that strengthening the governance of Hockey Canada will lay the foundation for it to address the toxic culture of hockey and the requirement for broader culture change, more support for women’s and para hockey, the eligibility of Hockey Canada members, a restructure of the relationship between Hockey Canada and the Canadian Hockey League and Canadian Junior Hockey League, and reform of the Canadian Development Model of junior players.

Cromwell makes 39 recommendations to overhaul Hockey Canada’s governance. We hope Cromwell’s recommendations are adopted in full and quickly. Canadians too need to pay more attention and watch over Hockey Canada so these reforms are enacted quickly.

 

Cromwell’s Recommendations

  1. Disclose all publicly available information to the Members on the nature of legal claims and settlements and how these settlements will be funded.
  2. To improve the oversight and transparency of the National Equity Fund, establish a formal policy on the National Equity Fund particularly how these funds are collected, how they can be used, and how this is reported to Directors.
  3. Increase the number of Directors from nine to 13.
  4. Amend the bylaws to a minimum /maximum number of Directors rather than the existing specific number.
  5. Gender equity on the board: a maximum of 60% of Directors from one gender.
  6. Athlete representation on the board: someone who has been on the national team, competed internationally within the last eight years.
  7. Majority of Directors are independent.
  8. Increase the Directors’ term from two years to three years.
  9. Stagger the Directors’ terms to provide board continuity.
  10. Increase term limits to three consecutive terms (nine years).
  11. Increase the term limit for the Board Chair to six years (two consecutive terms) from four years.
  12. Nine individuals on the Nominating Committee that vets the nominations for Directors.
  13. Nominating Committee composition: individuals should be a majority that are independent, Members appoint no more than two individuals, Directors appoint at least one and a maximum of two directors, one member shall be an athlete representative.
  14. Update or replace the Nominating Committee terms of reference.
  15. Review and update the Board Matrix to help select competence and diversity of skills for Directors’ nominations. Do immediately.
  16. Use the Board Matrix, including the 2022 election, to get specific skills and competencies for the Board of Directors.
  17. Strongly encourage the Nominating Committee to hire board recruitment firm to recruit qualified candidates.
  18. Nominating Committee review and vet all candidates put forward to create a short-list. Only candidates with skills, track record and competencies identified by the Nominating Committee shall be nominated.
  19. DONE October 15, 2022 - Change the by-law wording to make it consistent that all nominations go through the Nominating Committee before being presented to the Members for vote.
  20. Nominating Committee to write regular reports to Members and Directors on its progress and on its recruiting work. Both the Members and Directors should be able to provide comments.
  21. The Nominating Committee should have the authority and discretion to determine who is on the final election ballots and the number of Directors.
  22. The Directors and not the Members elect the Board Chair.
  23. Update and revise the qualities and competencies of the Board Chair.
  24. Amend the by-laws to authorize the Directors to appoint additional Directors.
  25. Divide the Audit and Finance Committee into two separate and independent committees.
  26. Adopt new terms of reference “job descriptions” for the Audit and the Finance Committees.
  27. Recommend disbanding the Human Resources Committee and moving its relevant duties to other committees.
  28. Give more responsibilities to the Risk Management Committee, including regular reports from Hockey Canada staff and the RMC advising the Board on any material government investigations, litigation, and legal disputes.
  29. On the Governance Committee, one independent individual who is not a Director nor on other provincial or hockey associations.
  30. The Governance Committee assumes responsibility for Directors’ orientation, support and continuing education, annual evaluation of the Directors and the Board. Recommend hiring a governance consultant to serve as a resource person and advise.
  31. The Governance Committee is responsible for Board ethics and Director conduct.
  32. Dissolve the Program Standards Committee which has been inactive since 2018.
  33. Maintain the Female Hockey Program Committee which plays a critical role in advancing a clearly defined strategic plan objective and initiative.
  34. The Directors, in consultation with the CEO, re-evaluate the Task Teams. If the Task Teams are not specific and short-term in nature, reconstruct these Task Teams into operating committees or other working groups.
  35. The Directors have sole responsibility in approving the audited financial statements, not the Members.
  36. Take and record written minutes for all meetings of Members, Forums and Congresses.
  37. Review in-depth the committee structure to a) streamline to better meet the needs of the new Board, b) restructure or disband Committees or Task Teams that are no longer relevant or that are operationally focused and perform staff functions, and c) clearly define each committee’s duty, who is responsible, and to whom it reports.
  38. Amend the by-laws to include only general language that provides the Directors the authority to establish and disband committees and working groups as needed.
  39. Make the committee write formal reports to the Directors that have a standard format, and are clear and concise with a focus on providing the Directors with the information required for their fiduciary oversight.

 

Sources:

The Honourable Thomas Cromwell, C.C. Final Report: Hockey Canada Governance, October 31, 2022

Grant Robertson, Hockey Canada scored poorly in governance review before sexual-assault settlement controversy, Globe and Mail, August 15, 2022.

Ashley Burke, “Hockey Canada moved cash from fund used for sexual assault claims to avoid encouraging more claims: report", CBC News, October 21, 2022

Hockey Canada’s Governance Structure

“A Statement from the 13 Provincial and Territorial Hockey Canada Branches” October 15, 2022

Warren Buffett on Corporate Governance, Letter to Shareholders, Berkshire Hathaway 2019 Annual Report 

 

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