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Anderson in Dialogue With Wilson (The Director's Chair) - Listed (Sep 2015)
Anderson in Dialogue With Wilson (The Director's Chair) - Listed (Sep 2015)
Listed|Fall 2015
Mike Wilson
In The Directors Chair with David W. Anderson: He had a long executive career, culminating in a decade as
president and CEO of Agrium. Now Mike Wilson is bringing it as a non-executive director on four boards
Photography by Colin Way
If you need any testimony to Mike Wilsons knowledge, experience, boardroom savvy and the high esteem in which hes held by his peers, consider
that within a year of retiring as president and CEO of Agrium Inc. at the
end of 2013, Wilson was appointed to three blue-chip boards to go with
a fourth, Celestica, where hes sat since 2011. To no ones surprise, hes made
the transition seamlessly. Here, in conversation with governance and
leadership adviser David Anderson, Wilson provides some penetrating
glimpses into his thinking. Their dialogue touches on key strategic issues,
the most important lessons Wilsons learned in dealing with shareholder
activists, and how he views his role at the table. Among the revelations:
as much as activists were one of his biggest challenges as a CEO, their approach
served to crystallize his thinking around the necessity of directors to
ask foundational questions about strategy and risk.
Mike Wilson
Current corporate directorships
Air Canada, Celestica Inc., Finning International Inc., Suncor Energy Inc.
Former leadership roles
President and CEO, Agrium Inc.; Chair, Canpotex Ltd.; President, Methanex Corp.
Community leadership
Chair, Calgary Prostate Cancer Centre
Education
P.Eng (Chemical), University of Waterloo
Current age
64
Years of board service
15
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Fall 2015|Listed
Mike Wilson
terest in mind, we have a coherent, tested strategy thats right for our
businesss long-term success.
David Anderson What are the fundamental business questions
answer if it is doing its job to ensure the medium- to long-term viability of the corporation, regardless of whether a shareholder activist is
at your door: (1) Is the CEO and the executive team delivering results?
(2) Is the strategy per use of cash appropriate? and, (3) Is the company
well structured, in terms of value-chain integration, to deliver value
over the business cycle?
Having thought through these questionsand having good answers
to themallowed us to convince Agriums shareholders that stripping
out working capital, cutting our budget for maintenance and stopping
our investments in growth would have left us in a weaker position over
Mike Wilson Yes, the insight I had was that our disagreement over
business strategy arose from having different basic business objectives and interests at the heart of what we were trying to accomplish.
As a director, I now participate in the governance-level discussion on
business strategy and make sure we understand and make appropriate
choices for our own business before any activist forces the questions
on us. And if an activist does come with questions and a particular in-
David Anderson Your second question addresses the appropriateness of the use of cash. How do you think of cash as a director?
Mike Wilson I want to know what the CEO is doing with the cash the
business is generating. I hold the view that cash should be used first
and foremost to sustain the companys assets, its brand in the market
and its businessand then reward shareholders with a dividend. Once
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Fall 2015|Listed
Mike Wilson
a company has sufficient cash to take care of these basics, cash ought
to be used to grow the company, accretively. Only after available cash
has been used serving these priorities should the board return excess
cash through increased dividends and share buybacks. Activists favour
this last priority for cash, the return of capital, and often seek to lower
working capital and stop growth initiatives to fund it. The boards role
here is to ensure the company isnt jeopardized in the medium- to longterm by undermining maintenance or by over-leveraging, ensuring the
appropriate use of cash across these three options. In some situations,
when KPIs are not keeping pace with the industry, its possible the executive team is not using cash appropriately. The board needs to understand this and manage it, not wait for someone to call it out.
David Anderson Your third question for boards to test their business has to do with company structure. How should a company
structure itself to deliver value?
Mike Wilson The question gets at the concept of business diversification and integration across the value chain. Should the company be
diversified? If the company has a diversified portfolio of businesses,
is it the right portfolio and should it be split up? The important point
is for the board to look through the business cycle and form a view as
to whether the company has the right structure to deliver value over
the medium to long term. To illustrate this, at one point in my tenure at
Agrium, almost everyone urged us to break up the company because
one section was hot and wed get a higher valuation. Two years later,
they were happy we had a diversified business, as it gave us a better
cash position and strength relative to peers at the low end of the business cycle to take advantage of opportunities. If you cant find significant advantage over the business cycle from value-chain integration,
then the company should not be diversified. A board has to take that
longer view and respond appropriately. There will always be a temptation to go for the short-term bump. But if the shareholders have confidence in the board and management, they will support your long-term
strategy. The key lies in being able to provide good answers to these
questions and not being caught flat-footed.
David Anderson Are there warning signs for boards when they
might be caught flat-footed?
Mike Wilson The biggest sign is a lack of open dialogue between the
CEO and the board on these issues. The CEO should be very open in
sharing concerns on performance and risk and in reporting performance relative to peers. You know in a board meeting if theres an open
dialogue or not. Its important that the board not be surprised. This
goes both ways: the board needs to know what the CEO is thinking
and the CEO needs to know the boards thinking on strategy, structure,
quality of the executive team and of course on the adequacy of results.
David Anderson Shareholders want greater transparency, too.
What do you think of the trend toward greater involvement on
the part of shareholders in the mandate of the board to govern?
Mike Wilson In the same way that a board shouldnt cross the line
into managements role, shareholders shouldnt cross the line into
the boards role. If a board feels it needs to manage the company, then
it should get a new CEO. I think its the same for shareholders and a
board. If shareholders feel they need to govern by telling the board
what it should do, then they need a new board. For some reason,
theres a reluctance to draw this conclusion. Instead, well-meaning
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Fall 2015|Listed