With an exemplary career in wealth management and capital market finance, Helen Kearns, president and CEO of Bell Kearns & Associates Ltd., not only knows as much as anyone about making and managing money, but also how to anticipate and repel setbacks on the way to achieving long-term goals. It’s a combination of skill and savvy that has made her a valuable contributor as a director on the boards of two of the country’s leading pension funds and, prior to that, at the Toronto Stock Exchange. Here, in conversation with governance and leadership adviser David Anderson, Kearns explains how a rigorous approach to decision-making and an unwavering, strategic focus on long-term goals can help boards block out noise and short-term distractions. She also reflects on some of the highlights of her board career and how a commitment to continuous learning keeps her director skills sharp.
David Anderson Before you became known for your talent putting capital to work, you found early success as a journalist with Business Week and The Gazette in Montreal. How did that prepare you for taking risks with other people’s money?
Helen Kearns Being a journalist was the best training ground for my career. It has helped me to this day by training me to assimilate information and pull out salient points. What’s the headline? What’s driving the story? As a corporate director, I need to get to the heart of what’s important to understand what it’s all about. I focus on what’s going to move the organization forward, the opportunities and strategic direction.
David Anderson You made a strategic review of the business a condition of your continued service on the TSX board in 1996. That’s an unusual move for a director. What prompted you to do this?
Helen Kearns I had a unique perspective on the evolution of the markets because at both Richardson Greenshields and then at the newly formed Kearns Capital we were underwriting companies that were changing the world, in a fast-changing world. Companies such as Newbridge, JDS Fitel and Vienna Systems, among many others, were upending the way in which business was being done. The Internet and telecommunications were exploding underneath us and boundaries were disappearing. In the face of this, I saw an exchange that was focusing on rote trading rules and its technology platform instead of the essential question: How will we compete? I wasn’t trying to be difficult but the reality was, in asking for that condition as part of accepting another term on the board, I simply didn’t have time to waste. I had launched my own firm that was very involved in underwriting many of these companies. It was frustrating to realize, as a Canadian, that our exchange was seen as a minor player in raising capital when in fact we were excellent at creating new technologies. We had the talent. Our tools, our exchange, had to become better. It seemed obvious to me that a strategic review could help both management and the board at a time when the dynamics of the industry were changing rapidly and we needed an appropriate response at both the management and board levels.
David Anderson This type of strategic review can help a board affect change. Was this the case with the TSX board?
Helen Kearns Yes, it was an important lesson on the need for the board to identify strategic priorities. It was a lesson on differentiating between information that is prepared for the board and identifying information that the board wants and needs. The board should always have time set aside for identifying and discussing the strategic imperatives of an organization and how is it competing in the larger context. The review served its purpose by reminding the board to ask of itself key questions: What trends should we be watching outside of the organization? How should we measure ourselves against those trends? What information does the board need to have these discussions?
David Anderson Twenty years on, what has been the impact of the major initiatives undertaken by the TSX as a result of that strategic review—in particular, demutualization and consolidation?
Helen Kearns I think that most people would agree the TSX is a stronger, more professionally managed organization today than it was 15-20 years ago. Having five separate exchanges across the country hurt our ability to compete globally. Now the Canadian market is recognized globally as being highly competitive in several areas of financing and raising capital. For example, the Canadian market is world class in mine financing and capital raising.
David Anderson In today’s interdependent global markets, it’s of vital interest to our public companies that Canada’s capital markets are healthy. What’s working and not working well in our capital markets?
Helen Kearns What’s working well is the leadership role being played globally by our large pension funds. I am biased because I am on the board of AIMCo, but I know from my experience on the Ontario Teachers’ Pension Plan board and from the leadership roles taken by CPPIB, the Caisse, HOOPP and many others that these organizations are renowned for their investment prowess and their stand on important governance issues. There’s a broad awareness among Canadians that these organizations are world class, have integrity and demonstrate practices that are worth emulating. Leaders such as Lamoureux, Cook-Bennett and Bouey set out the foundational governance of Teachers and deserve credit for creating this Canadian success in the institutional space. They set the example of keeping management independent and protected from the political interests of government, of running it like a business, allowing it to take risks, of hiring the CEO directly and paying for performance. This is a textbook case of why governance matters. It allows for long-term thinking. It is through their actions that Canadian pension funds have carved out an important role as investment and thought leaders on the global stage.
What is not working as well, in my mind, is public confidence in the integrity of the public markets. Edelman, a PR firm, says that less than 20% of people think CEOs consistently tell the truth. Regular exposure to bad corporate behaviour erodes the perception of leadership and integrity in our capital markets.
David Anderson Does a lack of public confidence in the public markets affect the practice of companies accessing capital in those markets?
Helen Kearns Yes, I think it does. We’re seeing too much short-term thinking, particularly in public capital markets. This is challenging for companies that want to develop a long-term strategy. Companies become enmeshed in the tyranny of quarterly reporting. As news organizations create content around the earnings cycle, the importance of “managing investor expectations” takes centre stage. Management incentives are built upon attaining share price gains. At the same time there has been explosive growth in index funds. So we have funds—with a weaker shareholder link to the corporation, I would argue—chasing fewer companies. It is no wonder there is greater volatility. This is hardly a stable environment for developing a long-term strategic growth plan. Large pension funds and to some extent private equity firms can fill this void with capital invested in private companies that is patient and willing to invest long term. And so it should come as no surprise that recent studies have shown that the number of publicly traded companies in the United States has fallen from 8,000 in 1999 to something like 5,000 now.
David Anderson What have you learned managing people’s money—both on the institutional side and as an investment adviser, that has made you a better director, whether on the TSX, Ontario Teachers’ Pension Plan or AIMCo boards?
Helen Kearns I have learned two things: the value of an independent perspective in navigating the world and the necessity of a framework for decision-making that reinforces disciplined thinking and action. Shareholders and management teams appreciate the independence of a board in guiding and adjudicating a business. While easier said than done, independent thinking is the best way to add value while managing conflicting interests. Rigorous decision-making is necessary if you take a long-term approach, as I do, to creating and preserving value.
Managing capital has taught me to establish and follow a framework in which decisions are taken based on research and the weighing of options in light of strategic direction and risk tolerance. This framework gives a board the discipline to stick with the plan, in part by shielding us from short-term noise our emotions can’t help but to react to.
On the investment side, we provide the tools to set the proper governance in place and the appropriate level of risk to achieve the returns we are seeking. We identify the managers who can achieve value-added returns over the long term and monitor and measure performance and risk across a wide array of metrics. It’s hard work to focus on long-term results and diversify risk, but that’s what it takes to achieve value-added returns. This hard-won focus on the long term, along with our protocol to monitor all asset classes and their performance, dovetails nicely with my work on a pension fund board like AIMCo. I immediately understand the backdrop against which our fund managers are making asset decisions.
David Anderson Considering your service on these boards, are there common misperceptions people may have about directorship?
Helen Kearns It’s more work than people think. While it’s difficult to generalize, I know that the sheer volume of information when I started at Teachers was daunting. There’s a lot of detail to digest to get up to speed on business model and performance drivers and then to stay current. People who join a board may not realize that they have to devote a lot of time—usually full weekends to have enough uninterrupted time—to absorb all of the materials. Despite joining a board because you’ve got relevant skills and experience, you don’t know until you get to the table how your skills and experience will add value. It’s interesting to see how sets of directors learn to interact to get the right information in a way that’s valuable to everyone. The key I think is to ask questions that show you realize you’re not there to manage the business, but rather to enhance your perspective as to how the information fits into the bigger picture. I also think it’s easy to miss the fact that the world of governance is changing right along with the broader world of business. People might think there’s little need to work at staying current on being a good director. But I found there is a need for continuous learning at the board level.
David Anderson You hold the director education designation from the Institute of Corporate Directors (ICD). Given your previous director experience, how was that useful?
Helen Kearns I remember debating whether to take the ICD director course. It was easy for me to think, having been on the TSX board for the Dey and Saucier reports, that my knowledge of corporate governance practice was sufficient. I decided to take the ICD course in 2009, not expecting to learn anything brand new, but on the principle of continuous learning. It taught me a valuable lesson; I realized that governance does in fact change over time, not just in the codes and regulations and the expectations for director contributions, but in the substance of governance strategy and oversight. Governance mores, like social mores, evolve and change over time.
I really valued the module on information technology governance. IT governance wasn’t identified and developed as a discipline in decades past, nor had it ever been a part of my previous board experience. I immediately saw the value to boards and management in having an IT governance framework. It allows management to clearly explain the complexity and risk associated with each IT project. It also made for more productive conversations between board and management and lifted a cloud of uncertainty around IT. Our job as directors is to help the organization achieve excellence. Staying on top of governance, just like any other discipline in business, is necessary.
David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail: email@example.com. Web: www.taggra.com.
Helen Kearns — Biography
Primary role President and CEO, Bell Kearns & Associates Ltd.
Additional roles Director, Alberta Investment Management Corp. (AIMCo); Director, Ontario College of Art and Design University (OCADU), and chair, investment committee
Former leadership positions President, Nasdaq Canada (2001-2004); President, Kearns Capital Ltd. (1996-1999); Senior vice-president, head, institutional sales and trading, Richardson Greenshields of Canada Ltd. (1993-1995)
Former chair/lead director Lead director, KingSett Capital Canadian Real Estate Income Fund (2008-2014); Chair, governance committee, MS Society Research Foundation (2011-2014)
Former director Ontario Teachers’ Pension Plan (2005-2011); Toronto Stock Exchange (1993-1999); MS Society Research Foundation (2005-2015); National Ballet School of Canada (1996-2004)
Education Bachelor of Arts (Honours), Bishop’s University; ICD.D, Institute of Corporate Directors
Honours > John Molson School of Business Award of Distinction (2002) > Montreal Board of Trade Women of Distinction Award (2002) > “Women on the Move” Entrepreneur of the Year Award (1997) > 100 Most Powerful Women in Canada by the Financial Post (2004)
Current age 62
Years of board service 25
Photography: Jeff Kirk