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CLO Insights: Corporate Subsidiary Governance
Insights from David Allgood, Chief Legal Officer, Royal Bank of Canada
Parent-subsidiary relationships and corporate governance are top-of-mind topics these days for CLOs, and Royal Bank of Canada is implementing leading edge measures that promote best practices in governance for its subsidiaries. A core feature of the company’s subsidiary governance practices is its Subsidiary Governance Office (SGO)—a centralized professional corporate secretarial function for the company’s nearly 350 subsidiaries. In addition, the company has created a Subsidiary Governance and Oversight Committee chaired by the Subsidiary Governance Officer and comprised of professionals from the multi-disciplinary functions throughout the company to help ensure consistency and coordination in practices and policies relating to subsidiary governance. In this CLO Perspective, David Allgood, Executive Vice President and General Counsel for Royal Bank of Canada, shares his insights on the background and process for creating the SGO, and its composition, mission, function and accomplishments.
Getting Started: Subsidiary Governance Review
Royal Bank of Canada’s SGO was created in 2001 following an internal study on how to enhance subsidiary governance. “Prior to undertaking this study, the company had many hundreds of subsidiaries with various dispersed corporate secretaries and individuals performing corporate secretarial functions. In addition, with so many subsidiaries and no formal centralized processes to track and administer information relating to them, preparing a definitive list of subsidiaries with a high degree of confidence was a real challenge. Our new SGO and associated subsidiary governance practices have greatly enhanced our capabilities in this area and have allowed the company to implement best practices in subsidiary governance and managing subsidiary life cycles,” explains Allgood.
The six-month study was performed under Allgood’s supervision and included a review of legal corporate governance of entities within the company’s subsidiary network (which at the time estimated to be 500 in number) as well as a best practices review of subsidiary governance performance of major financial institutions in the United States and United Kingdom, and survey data from leading Canadian corporations. Key findings and recommendations were presented to the Board; among them was the creation of the SGO.
Creating a Subsidiary Governance Office
Asked for thoughts on steps that he considers important in creating a SGO, Allgood lists the following:
• Appoint a Subsidiary Governance Officer
Royal Bank of Canada’s subsidiary corporate governance review identified as a recommended best practice having a professional whose exclusive role is focusing on subsidiary governance. Accordingly, as one of the first steps in creating the SGO, a Subsidiary Governance Officer was appointed to lead the SGO and focus full-time on subsidiary governance issues for the company. The Subsidiary Governance Officer is a lawyer by background and reports organizationally to the company’s Corporate Secretary, who in turn reports to Allgood as CLO.
• Staff the SGO with competent professionals skilled in the corporate secretarial function
In addition to the Subsidiary Governance Officer, the SGO consists of around 19 professionals (including lawyers, paralegals and professional corporate secretaries), who are dedicated full-time to performing corporate secretarial and subsidiary governance responsibilities. Most of the SGO professionals are located at the company’s headquarters in Toronto. In addition, SGO professionals are located in Mississauga, London, Guernsey, New York, Delaware and the Bahamas. In addition to the SGO, there are several professionals throughout the organization who act as corporate secretary of various subsidiaries.
• Identify the company’s full portfolio of subsidiaries
This can be a remarkably difficult task—especially for a company with around 500 subsidiaries when the SGO was first created—but is a necessary and critical early step in the overall process of enhancing subsidiary governance
• Select a software program to help manage subsidiary information
With the universe of subsidiaries defined, having a reliable and centralized method for maintaining, tracking and accessing information is important for ongoing administrative efficiencies and internal controls. Royal Bank of Canada evaluated a number of software product offerings before ultimately selecting the technology that it now uses. Global Corporate Manager is licensed from Datacare Software Group and this database is managed by the SGO and used to store and manage corporate data on all RBC subsidiaries.
Read the rest of this article.
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Where the Big Ideas Are: ACC’s CLO ThinkTanks
ACC has conducted 9 CLO ThinkTanks that bring together top in-house leaders to discuss the most pressing issues they are facing including attorney-client privilege, the law department’s role in financial compliance, and compensation and career advancement for in-house lawyers. Each ThinkTank is hosted by a leading in-house lawyer from top companies like, McDonald’s, Cargill and Sara Lee Corporation. David Allgood of Royal Bank of Canada, whose insights are captured in the above article, hosted a recent CLO ThinkTank on compliance issues in Canada. Get the executive report for that and other ThinkTank sessions, including:
• The CLOs Role in Corporate Governance and Compliance in Canada
• Corporate Liability: Prosecutorial Trends and Tactics
• Law Department’s Role in Financial Compliance and Relationships with Auditors
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Find Out How Your Outside Counsel Measures Up
The results are in from the 2006 ACC/Serengeti Managing Outside Counsel survey and you can use the data to see how your outside counsel relationships (and fees) compare to those of your peers. The survey gathered data on hourly billing rates in 18 major markets, across 13 areas of legal practice, and at both the partner and associate levels. Find out if you’re paying too much for your outside legal support. The survey also gathered information on the top retention terms in-house counsel insist on when hiring outside firms, technology they are using to help manage outside firms, and top reasons for firing outside counsel partners.
• See ACC’s press release on the survey results.
• Get the a free benchmarking worksheet and the full survey results from Serengeti.
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Access Resources from ACC’s Annual Meeting
If you or your team missed ACC’s Annual Meeting, you can still get access to all of the resources that were provided to attendees. Sessions covered a wide range of topics including litigation, employment and labor law, and information technology. Top sessions included, “ Leading the Way in Privacy and Data Security Compliance,” “Care & Feeding of the Board of Directors,” and “How to Apply Successful Management Techniques to the Law Department.”
You can access the in-depth report “Pragmatic Practices for Protecting Privilege” from the Executive Leadership Series session at the meeting. For just $200, you can access all the other available course materials.
You can also check out photos from the meeting and find out who won top in-house counsel honors like the Excellence in Corporate Practice award.
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Invest in Your Department: Training for New to In-house Attorneys, Paralegals
If you have attorneys or paralegals in your department who are new to in-house, get them trained at ACC’s Corporate Counsel University. Now in its 5th year, CCU is the best training ground for new to in-house practitioners to sharpen their management and in-house practice skills. Open only to in-house counsel, CCU emphasizes practical tips and hands-on advice from seasoned in-house experts. New this year, CCU is offering expanding programming developed just for in-house paralegals. Restrictions do apply; see registration form for details. Invest in your in-house team by having them join us in St. Louis April 29-May 1, 2007 for ACC's 5th Annual Corporate Counsel University. For more details and to register, visit acc.com/ccu/07.
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