Insider Stephen Erlichman
Who Since September, executive director of the Canadian Coalition for Good Governance
Involvement The CCGG, which is led by and represents Canadian institutional shareholders, has emerged as the country’s most influential shareholder rights organization. It actively campaigns for initiatives like majority voting and say-on-pay, and promotes good governance via policy papers and best practices documents. Recently, it pioneered the practice of meeting directly with the chairs and boards of companies its members hold. While board-driven, the CCGG’s point person is its executive director. From 2008 until early 2011, that was Stephen Griggs. Now that power and responsibility has passed to his successor, corporate securities lawyer Stephen Erlichman.
Listed You started this job only recently. How did it come about?
Stephen Erlichman I knew this position was available and asked Stephen Griggs if it made sense for a person like me—you know, a person with a Harvard MBA, a bunch of law degrees and who has done a lot of things over the last 30 years including policy issues—to consider it. He told me I’d love it. So I went to lunch with David Denison, past chair of the CCGG, and he asked if I would send my resume. That started the process.
Listed What should people know about you?
Stephen Erlichman I’m a corporate securities lawyer who has practiced for 30 years, so I’ve seen just about everything in the area—from M&A to corporate finance to private equity. I’m probably best-known for investment products and probably the report for the Canadian Securities Administrators in 2000 on my recommendations to establish a governance regime for mutual funds across Canada. There are a handful of laws in Canada that flow directly from that report.
Listed The CCGG has spent a lot of time meeting with corporate directors in recent years to talk about a myriad of issues. Do you expect that to continue?
Stephen Erlichman We are still meeting with 40 or 50 companies a year. We’re trying to meet with the chairman of the board and the chair of the compensation committee. I’m already scheduled to start some. We’ll be doing these together with at least one board member. Where these companies are doing things in terms of governance that are outside [CCGG] guidelines, we try to get them to change. We started at the top level with the thought process that if we can get the big companies to do things like majority voting, ultimately you will get other companies to follow.
What we’ve found is it isn’t just CCGG-driven. And there are various companies calling us asking to do a board engagement so they can find out what they are doing right and what they can do better.
Listed Executive, and specifically CEO, compensation has been a hot-button topic for your organization. But CEO salaries still make headlines. Why?
Stephen Erlichman The issue with compensation is creating a system that best aligns management with the interests of the stakeholders of the company and not just the short-term stakeholders, but the long-term stakeholders. The compensation system established in the last 15 years that focuses a lot on options wasn’t thought out that well. It misaligns the interests of management versus shareholders because it means management is primarily interested in getting the option price in the money because they make most of their money through options. There’s a movement trying to best align the interests of management with the long-term perspective of the company. A lot of people think it is time to look at not the quantity of compensation, but the structures, with the focus on shareholders and other key stakeholders.
Listed For a working lawyer, you’ve been an active writer and quite outspoken on numerous topics related to securities reform. It would seem to make you a good fit for this role.
Stephen Erlichman In my writing I’ve been critical of some of the things we do in Canada and nudged people to do things a different way. Hopefully when I have a chance to sit back in this role I can look at what we can do better and what we can do better for Canada. That was ultimately one of the reasons I took this on.
Interview by Robert Thompson