Allan C. Hutchinson is a distinguished research professor at Osgoode Hall Law School and the author of The Companies We Keep: Corporate Governance for a Democratic Society.
The commotion at Laurentian Bank LB-T, with both the chief executive and chair leaving abruptly, makes for fascinating and, in corporate terms, lurid reading. Little seems to stir commentators and observers more than upheaval and scheming in the staid corridors of Canadian banks. Hasty CEO switches, significant board reorganizations, falling share prices, opaque spin-control – the rumour mill is running apace.
In the world of Canadian banking, such turmoil runs counter to the preferred image. The general message of the banks is that, as the trusted and reliable institutions of the financial sector, all is intended to be slow, steady and predictable – no fuss; no muss. The recent events at Laurentian belie this.
It is in the same category as last year’s banking drama, in which a Bank of Nova Scotia BNS-T board member who chaired the lender’s succession committee, with no recent experience in the industry, was appointed the new chief executive officer.
The comings and goings of high-level executives and the intrigues of board dealings at has very much upset the traditional apple cart. Indeed, what is happening at Laurentian offers a shadowed window into the otherwise veiled world of Canadian corporate governance – all is not well in the boardrooms and offices of some of the country’s largest enterprises.
Laurentian is Canada’s ninth-largest publicly traded bank. Operating largely out of Quebec, it has more than $1-billion in revenue, $57-million in income, $45-billion in total assets and $2.5-billion in equity. This no mom-and-pop organization – but in the past few years it has been doing a good imitation of one.
So, in an eye-catching and praiseworthy move, Laurentian appointed Rania Llewellyn in late 2020 as the first female (and person of Egyptian and Jordanian descent) CEO of one of Canada’s largest lenders. She was given three years to whip the bank into better shape and to build on her 20-plus years of work at Scotiabank. She was considered by some observers as a diversity hire who made diversity a signature of her leadership style.
The odds are still so stacked against women in banking, and it’s embarrassing for us all
She was ousted last weekend after two years. This fit with the circumstances of her appointment. The previous long-serving CEO left unexpectedly and quickly; she was installed in a rushed process after an interim CEO took over. There was much fanfare at her appointment and her mandate to solidify the bank’s reputation and balance sheet.
But the pride and glow of her appointment soon faded. As the bank’s position became more precarious and a proposed sale did not materialize, Ms. Llewellyn was sacrificed to the prevailing wolfish demands of the market. A recent IT fiasco did not help either. While it is reasonable that a business must emphasize its bottom line, Ms. Llewellyn’s ouster shows that, for all the trumpet blasts, diversity was clearly less even a secondary goal of the bank, but more window-dressing.
Women still only account for around 5 per cent of executives at large Canadian companies. Moreover, they seem to be more easily dismissed when the economic going gets tough; men have done worse jobs and stayed longer. This ouster of Ms. Llewellyn makes a travesty of any suggestion that diversity is a genuine or significant ambition of Canadian companies – a white man (and a more marketable French-speaking one) was put back in charge.
But perhaps the most telling aspect of this affair is that all this executive action was done behind the closed doors of the Laurentian boardroom. Not only did Ms. Llewellyn go as CEO, but Michael Mueller also quit as board chair and director.
The bank’s board offered no explanation of the turmoil when it announced the departures. Hints that it was all about the IT fiasco that effectively shut the bank for a few days seem unconvincing. Days later, it was The Globe and Mail that peeled back the corporate veil.
What the bank had told shareholders was only that it will share more information about its plans when it is required to reports its fourth-quarter results in two months. There was an almost you-are-lucky-that-you-will-know-anything attitude. That December announcement is unlikely to offer any real insight into the bank’s operations. The board of directors will decide what is best and what shareholders should know.
Depressingly, none of this is new or revealing. The rules and practices of Canadian corporate governance allow and almost encourage such directorial behaviour: Follow the money, play your cards close to your chest and follow the least traditional line of resistance. Diversity and a broader social mandate are, on this basis, for losers.