Jim Carter: Do you buy value, or build it?

In The Director’s Chair with David W. Anderson: Jim Carter may sit on four boards, in different sectors, but when it comes to creating value and long-term success, his measuring stick stays the same: get the culture right and results will follow

Mining executives and directors, Jim Carter feels your pain. The former president of Syncrude Canada, now a director on four corporate boards—Finning International, Brand Energy, Alberta Treasury Branch Financial and Irving Oil—has navigated his share of industry slumps, and his counsel for these times? Stay strong with tenacity, brand preservation and fact-based decision-making. Here, in a wide-ranging interview with governance and leadership adviser David W. Anderson, Carter also reflects on the broader priorities he feels boards and management must embrace in order to infuse companies with lasting value and stamina to endure hard times. A miner to the core, he says the industry should do more to celebrate its achievements, especially in creating employment and opportunities in aboriginal communities in the North.

Jim Carter: "Having gone through these cycles, the simple lesson is don’t even think of acquisitions at the top of market"

David Anderson Few Canadians can match your resource sector experience: a multi-decade, junior foreman-to-president adventure driven by your passions for engineering, leadership and innovations in mine operations and corporate strategy. What’s your advice for young people starting mining careers today?

Jim Carter Get as much experience as you can at the lower rungs of the ladder. Hands-on experience in the mine and on the shop floor creates a foundation that will always be with you. Get to know people; as you move up the ladder, you’ll be able to relate to employees by speaking their language. When they trust you, you’ll have a far better chance of building your workforce. Don’t stop learning. In my career, I started as a mining engineer and went into operations and learned about equipment and blasting. Then I went to learn about maintenance where all the money is spent. I focused on trades to understand the whole business. When given responsibility for the whole operation at Syncrude, I got to know the upgrading side and complexities faced by chemical engineers. It was a difficult move from mining management to management of hydrocarbon processing and power generation. I put myself through operations training, with weekends of reading. Then I got financial training. I knew I had to piece it all together to make a bigger contribution. It seems daunting, but don’t let it intimidate you.

David Anderson Does your curiosity and desire to learn continue to influence your leadership at the board level?

Jim Carter Yes, on all my boards I continue to learn from and respect experts and listen to people at all levels. On the Finning, Irving and Brand Energy boards, I can say I’m familiar with equipment, refining and maintenance given my background, but I’ve enjoyed learning about financial institutions, to contribute on the ATB Financial board.

David Anderson How important is industry experience to board service?

Jim Carter When you have expertise in an industry, you will understand the strategy management is trying to implement right away. This makes decision-making faster, bringing other directors onside more easily. With a deep foundation in an industry, it’s easier to support and motivate the management team, as well as challenge and hold them accountable, because you understand personally what management faces. But a generalist will ask questions industry people might not. I serve that function on the ATB Financial board, bringing general management experience. We need directors with both industry and executive management backgrounds, weighted three-quarters in favour of industry experience. Gender, cultural and geographic diversity is also relevant. If we don’t step up, we’ll be subject to quotas.

David Anderson Are boards delivering good value?

Jim Carter I’m concerned we may be losing the plot. The emphasis in board discussions on the business has decayed in favour of box ticking on checks and balances. I’d like to see more emphasis on getting the culture right, so people do the right thing for the right reason, not as a function of a compliance mandate. A strong compliance mandate can easily strangle a management team without resources. I like to see directors focus their agenda on what the company goes through to make money. It’s incumbent upon directors to get up to speed if they’re not from the industry or remain current if they are. Management will respond positively when the board is grounded in their reality and can mentor as a coach, reflecting on experience, not just as a judge.

David Anderson It’s clear you think people drive value. How is this belief reflected in your leadership?

Jim Carter I think honesty, integrity and caring for people really make a difference. Some may mistake this for being soft. I fired many people to run a tight ship, but only with fairness and the goals of the business ahead of any individual interest. The test for me was always the “bulletin board” test. Would you roll your eyes at something from management? I needed to be credible in the eyes of my employees. My employees and I succeeded not through rules but through a culture that took time to develop. This doesn’t get enough airtime, especially when boards are looking at M&A. The anticipated value doesn’t show up unless you get the cultures on a common plane. Our success at Syncrude was based on a workforce fully engaged, acting like owners and aligned with management. You can’t do it overnight and you don’t get immediate results. Our challenge was to attract and retain highly talented people from across the country, competing with employers across the country. We had to offer something beyond wages. Our unique culture, which supported people in the pursuit of career challenge and opportunity, allowed us to accomplish it. Boards don’t spend time and effort commensurate with the importance of people and culture.

David Anderson Company performance in the resource industry is strongly influenced by commodity prices, making pay for performance for executives seemingly straightforward, if variable. How are compensation committees themselves performing?

Jim Carter Pay for performance is a difficult subject and a challenge for compensation committees. You have to be careful you’re not paying out for performance not under CEO control. Yet it’s also important to recognize management’s degree of preparedness to take advantage of changing conditions and the steps it’s taken to preserve margins in a downturn. Generally, people accept the ups and downs in pay as a function of commodity price swings. Where it hurts is when a slump goes on for more than a couple years. Here’s where we have to recognize effort, which is counter to the performance argument. The experience of directors here can help in bridging the divide between shareholder, corporate and executive interests. We have to be reasonable and make sure that compensation is correlated to total shareholder return over a meaningful time frame, not just in a single year.

David Anderson You sit on four boards, each with a different ownership structure. How does ownership affect your experience on a board?

Jim Carter I’m on the boards of a public company, a family-owned private company, a private equity-owned company and a crown corporation. Each has pluses and minuses, depending on the situation. There is no perfect model of corporate control. Public companies have access to public capital markets and the market discipline that comes with it. These boards are often overly sensitive to quarterly results and position them for market response. Disclosures therefore take up a lot of mental energy and a greater proportion of time. Private company boards are interested in the financials, but with no public disclosures, it takes up less time. Private company directors do what many others want—talk about the business. More time is spent on where the company is going, its strategy and on drawing on the directors’ expertise, sharing in the entrepreneurial spirit of the founders. These companies tend to have significant meaning in their geography and a broader purpose than pursuing profit. It’s refreshing and rewarding.

Private equity-held company boards tend to be the most bottom-line oriented. They focus on operations, exerting discipline on management to be efficient in what they do, keeping overhead expenses down. Private equity company boards tend to show more discipline in capital investments, too. Public company boards are similar to private equity company boards in this respect, seeking shorter-term returns, but emphasize discipline in capital investment protocols. In contrast, private company boards are more comfortable relying on the experience and intuition of directors, allowing business judgment to carry the day. Crown company boards, while also being community oriented, have a constructive track record in managing their own performance, utilizing more rigorous board and peer evaluation processes. It’s beneficial to me to have the exposure to all of them.

David Anderson How can CEOs increase the chances of benefiting from a productive relationship with a board?

Jim Carter Boards provide their best value when they are shown a rationale for the long term and invited to bring a broad business perspective to the issues facing the company. If a CEO shows the board a longer-term vision, a credible strategy for achieving it and managerial discipline in not taking short-term decisions, that board will be better positioned to resist the extreme pressure in the public markets for quarterly results. Leadership at this level, like everywhere else, is about people. Show directors you’re willing to tackle tough issues and do so in a positive way. This is best achieved when the CEO is transparent and sees the board as a source of help, not a necessary evil. Treat each director as if each has value to add. The board has to do its part to create an environment in which it’s safe for the CEO to be open. The acid test is if there’s little to discuss in camera, as it’s all been said.

David Anderson The resource industry, a pillar of the Canadian economy, is in trouble around the world. How do you assess current conditions?

Jim Carter Context first; we’ve had a good run these last two decades. It’s not always been like this. I’ve been through seven downturns. It’s easy to get swayed by the business media and pundits opining on what’s happening. Yes, we do have oversupply of oil, but not nearly as large as it’s made out to be. Supply is adjusting and demand will return. It’s just a question of timing. It’s hard to predict commodity prices, so stay with the fundamentals. We get caught up with high prices and then low prices, thinking in either case they will stay with us. But it is cyclical, of course. Having gone through these cycles, the simple lesson is don’t even think of acquisitions at the top of market. Many mining companies have been investing at the peak of the market and now are staggering under debt.

David Anderson Given that reality, what are boards to do?

Jim Carter It’s important for boards and CEOs to stay anchored in the facts. Directors who have lived this before can help their CEOs get through it. Don’t cut the muscle, preserve the company brand to be able to come back. Do what you can to preserve margins and have positive cash flow. Hunker down to maintain the capacity to rebound and react when prices and opportunities come back. It can be depressing in a commodity business, and particularly demoralizing when it comes down in steps. You need tenacity to stick with it. It’s the responsibility of management to be close to the business and engage employees, to listen and earn their support. Communicate constantly to let employees know you’re doing your best to keep the enterprise going. The board can encourage and challenge management. There can be no sacred cows if the board expects management to reduce costs. Open dialogue is needed to draw on directors’ wisdom and credibly assure management it will get better.

David Anderson What are you most proud of about the mining sector?

Jim Carter Our industry is complex. To safely and profitably extract resources from the earth, you need to pull together expertise in geology, exploration, production, operations and financing. Yet to do each of these, we need the social licence of the communities we work in, because the resources we seek are in effect rented, and their development implies a big impact on stakeholders. I’m most proud of the benefits we’ve shared with aboriginal communities in the north. Mining has done more for aboriginal employment, where economic opportunities are few and far between, than any other industry. CEOs and boards of mining companies need to be more vocal in stating the contribution they make to the country. We have every reason to be more transparent in our corporate social responsibility and other reporting. Telling this story helps convince other stakeholders who might not have a favourable view. Let’s not continue letting others write the agenda. Even governments don’t understand this part of the economy, which has meant the industry is left alone to provide jobs, pay taxes and defend itself. I’d like to see mining companies and our industry associations step up and tell our story more boldly.

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: david.anderson@taggra.com. Web: www.taggra.com.

Jim Carter — Biography

Primary role Corporate director

Directorships Alberta Treasury Branch Financial; Brand Energy and Industrial Services; Finning International; Irving Oil Ltd.; The Climate Change Emissions Management Corp.

Former president Syncrude Canada Ltd.

Former chair Mining Association of Canada; Alberta Carbon Capture and Storage Development Council; Edmonton Symphony Orchestra; Francis Winspear Centre for Music

Former director EPCOR Utilities Inc.; Alberta Chamber of Resources; Alberta Research Council; Clark Builders

Education Bachelor of Engineering in Mining, Technical University of Nova Scotia (Dalhousie); Advanced Management Program, Harvard Graduate School of Business

Honours > Officer of the Order of Canada > Fellow, Canadian Academy of Engineering > Fellow, Canadian Petroleum Hall of Fame > Centennial Award, Association of Professional Engineers, Geologists and Geophysicists of Alberta > Canadian Institute of Mining, Metallurgy & Petroleum Past President’s Award and Fellowship Award > Resource Person of the Year (2005), Alberta Chamber of Resources > Honourary Doctorates: Engineering, Technical University of Nova Scotia; Science, University of Alberta; Law, University of Prince Edward Island

Years of board service 20

Photography by Jason Franson

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