The Directors Chair

36 Listed //Summer 2011

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The Directors Chair

Fifty years of fresh air

The unifying theme of Purdy Crawfords career has been a dedication to
progress, renewal and moving the ball forward
Interview by David W. Anderson
Photography by Jeff Kirk

Few have made a greater mark on Canadas regulatory and business landscape than Purdy Crawford. From early in his career when he helped draft
Ontarios securities laws, to his recent role in unlocking the asset-backed
commercial paper (ABCP) imbroglio, Crawford has been a go-to leader. Along the
way, hes run a top law firm, chaired numerous boards and remains an important
source of counsel for the governance community at large. In this issues instalment
of The Directors Chair, Crawford dishes on his career and Canadian boards
in a wide-ranging discussion with Listed contributing editor and governance
expert David W. Anderson.

Purdy Crawford
Primary role
Counsel, Osler, Hoskin & Harcourt
Additional roles
Director, Maple Leaf Foods Inc., Director, The Second Cup Coffee Co. Ltd., Director, LED Roadway Lighting
Former president
Imasco Ltd.
Former senior partner
Osler, Hoskin & Harcourt
Former chair
Imasco Ltd., CT Financial Services, Canada Trust Mortgage Co., Allstream Inc. (formerly AT&T Canada)
Former director
Canadian National Railway Co., Foot Locker, Inc., Inco Ltd., Petro-Canada, Canada Trust, Allstream Inc., Emera Inc.
(formerly Nova Scotia Power), Ganong Bros. Ltd.
Former committees
Chair, Pan-Canadian Investor Committee (Restructuring $32 billion ABCP); Chair, Single Securities Regulator for
Canada Panel (Crawford Panel); Chair, Five-Year Review Advisory Committee Under the Securities Act (Ontario);
Member, TSE Committee on Corporate Governance (Dey Committee)
Education
BA, Mount Allison (1952), LLB, Dalhousie (1955), LLM, Harvard (1956)
Honours
kCompanion of the Order of Canada
kFive Honorary Doctorates of Laws: Mount Allison University, Dalhousie University, University of Cape Breton,
University of Windsor, University of New Brunswick
kMember, Canadian Business Hall of Fame
kFellow, Institute of Corporate Directors
Current age
79
Years of board service
49

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The Directors Chair

David W. Anderson Youre held in high esteem within the Canadian business and legal communities, and for good reasonthe influence of your
work is to be found in our corporate laws, executive practice and boardroom
leadership. How did it begin?
Purdy Crawford In the late 1960s, the Government of Ontario set up a
committee chaired by Jack Kimberwho was head of the Ontario Securities
Commission at the timeto look at securities law. Several lawyers including
myself, Howard Beck and Marty Friedland served on that committee, following which Jack got Howard and I involved in drafting Ontarios new securities
lawwhich is still in force. We learned from and copied the fundamental
thinking of the U.S. Federal Acts of 1933 and 1934. Those experiences
resulted in a lot of doors opening for me, including reviewing corporate standards
and securities laws in Ontario and chairing a panel that recommended a
single market regulator for Canada.
David W. Anderson Youve reached the top of the professional services
world, having run Osler, a major Canadian law firm, and the top of the
business world, chair and CEO of Imasco and chair of many other boards,
including Allstream. How did you make that transition from leadership
in the legal profession to business leadership?
Purdy Crawford I faced a significant learning curve on the operational side
when I took on my first corporate leadership role. Frankly, I didnt know
how big companies were run. However, I found that having both a lawyering
background and an early interest in business and investing served me well.
My professional work taught me a lot about operations from an arms length
vantage point and I could relate well to executives who were excellent operatorspeople like Ed Clark at Canada Trust and David Bloom at Shoppers
Drug Martwhom I knew from my board service.
David W. Anderson Your evident passion for business extends to your
involved investment approach. Do you see a connection between your avid
and successful investing experience and your business accomplishments?
Purdy Crawford Yes, I do my own investing, other than tax shelters, and I
invest entirely in equities. In my third year of law practice, I borrowed all
the money I could and have been investing ever since. In the 1970s, I became
an early investor with Warren Buffett. I read the analysts reports and then do
my own analysis before making decisions. I think a good investor makes a
better businessperson and a good businessperson should be a better investor.
David W. Anderson For many years while a practicing lawyer you taught

law in Toronto. As a teacher, what did you learn?

Purdy Crawford One of my great experiences was part-time teaching. I
taught a tax course at Osgoode taking the tougher path of teaching based on
the statute, not just based on cases. I learned quickly to be articulate in front
of students. I then taught corporate finance at the University of Toronto with
Frank Iacobucci. I learned that I was at my best as a teacher when I knew
the least. It created for me an enthusiasm, discovering the material along with
the students. When the learning slowed I lost enthusiasm and knew it was
time to quit teaching.
David W. Anderson As a director, you are able to call upon both your
background as a lawyer and CEO. How have these experiences shaped your

thinking as a director?
Purdy Crawford Being an executive has made a bigger contribution to my
effectiveness as a director. Indeed, the restraint of my lawyering instincts helps
me as a director. Sometimes lawyers cant get over being a lawyer. In the boardroom, they go through documents as if a lawyer. Being an executive has taught
me to let my lawyers do their work, just as I let the financial people do theirs.
David W. Anderson You faced a highly engaged board as CEO of Imasco,
which was somewhat usual for that time. How did you react to that?
Purdy Crawford The Imasco board [in the late 1980s, early 1990s] was a
demanding one. I had to make sure I related to them on their terms. I had
38 Listed //Summer 2011

confidence in myself and thus didnt get uptight when I got beaten up and
criticized by the board. I knew thats what they were there for. The board has to
control the CEO in a positive sense. The buck stops with the board so they
must hold the CEO accountable. As a director, I get concerned when dealing
with a CEO who responds defensively to criticism by the board. It can mean
something negative and you have to watch things carefully. Of course, too
much confidence in a CEO can lead to different types of problems.
David W. Anderson As a CEO you honed a distinctive leadership style. In
what ways has your CEO experience informed your behaviour as a director?
Purdy Crawford Ill give you a concrete example: in the boardroom, I try to

avoid embarrassing people. I remember after the 1995 referendum in Quebec,

I was in a board meeting of a Quebec-based company and a local lawyer came
in and gave a wrong opinion. I talked with him outside of the meeting and he
came back to the board and corrected the mistake. I knew we needed the
right advice and found a way to make sure the board got it without embarrassing this young lawyer.

Ive never agreed with those who say

only the CEO should deal with investors.
Investors want to wrestle with the big
issues, which directors are in a good
position to address
David W. Anderson Youve witnessedand encouragedmany changes
in how boards function. Is there one change that you think has had a
particularly positive impact on governance?
Purdy Crawford The development of the in camera meeting is one of the
most important weve had. It lets non-executive directors express their views
and concerns openly. Some say that directors ought to do so anyway, but the
reality is you dont always get it. Having had the in camera discussion, its vital
that the board chair briefs the CEO on what the board thinks.
David W. Anderson Investors have also changed their approach, becoming
more involved in their companies and searching for ways to exert more
influence. One such route is by nomination of directors, breaking the boards
power to self-nominate. Are you in favour?
Purdy Crawford Im not against shareholders nominating directors. In the
U.S., the new law sets out a means to do this. Whether thats the right solution,
I dont know, but Im in favour of shareholders having a bigger role in the
selection of directors. Major shareholders should be consulted on director
nominations but not given a veto. They own the company, so why deny
them a place at the table?
David W. Anderson Many lawyers advise directors not to talk to investors,
creating a fear around selective disclosure. Whats your view?
Purdy Crawford Ive never agreed with those who say only the CEO should
deal with investors. Investors want to wrestle with the big issues, which
directors are in a good position to address. The trend in governance is clearly
towards the board using its power and that includes more activities with
investors. Im a great believer in directors communicating with shareholders.
David W. Anderson Youve had decades of influence on corporate governance practices in Canada. Recently, your declared status as an independent
director on the Maple Leaf Foods board has been challenged. How do you
think of your own independence as a director?
Purdy Crawford Im independent under all the existing policies and laws.
In general, some investors may take the view that if you dont agree with
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The Directors Chair

them, youre not independent, and so they may encourage a stricter definition
of independence. The reality is that independence alone is not able to do what
most expect of it. Economic studies suggest that companies providing the best
returns are not the ones at the top of the governance rankings for definitional
independence. The push for strong definitional independence tends to disenfranchise major shareholders think of the Westin, Desmarais and Thomson
family-controlled companies receiving lower ratings for family representatives being on their boards. Im not against rules of independence; clearly,
independence is vital. If youre not independent under existing rules, its fair
to say you may not be factually independent. However, you can be caught by
the rules and still think and act independently. I appreciate the difficulty in
getting the right balance, but I can say that nobody challenges Mike McCain
more than I do.
David W. Anderson When and why is independence important?
Purdy Crawford There are two circumstances in corporate decision-making

when director independence is vital for a board: the relationship between

the company and third parties, and the boards relationship with management. When dealing with third parties in non-arms length transactions, its
important to have an independent group of directors. If a board has a lot
of this going on, it should set up a standing committee to meet this need.
Relationships with management are inherently more difficult. The hardest thing
as a director is to get a board to face up to the fact they have to do something
about an underperforming CEO. Directors should make sure their board is
able to use its ultimate power to deal with managementincluding the power
to remove the CEO.
David W. Anderson In making those tough decisions to curtail a CEOs
tenure, has it been your experience that formal CEO evaluation processes
are helpful in making the case?
Purdy Crawford Ive gone through several CEO removals. In one case, the
board took action based on its deep knowledge of the CEOs performance and
it did so without reference to formal evaluation. In another case, when the
board wanted to consider a new CEO, I spoke with the chair of the HR committee
to review the boards formal assessment of the current CEOs performance. It
turned out directors had given him good marks in their most recent survey,
making it tougher to make the case for change. So Im not a believer in director
surveys that are constructed as a simple check-the-boxes exercise.
David W. Anderson Tending to the quality of CEO leadership is of central
importance for boards. Where have you seen it done well?
Purdy Crawford Im a great believer in leadership. Maple Leaf Foods created
a leadership institute in which Michael McCain, the CEO, participates fully,
being very open to the give and take of discussion. Its very important that
leadership development be done throughout the ranks even though its hard
for the board to see it; you have to ensure it is being done through the CEO
and head of HR. But not many boards do executive succession planning well.
My best experience in succession was when I chaired the HR committee at
CN before it went public. I had the head of HR report to me as reporting to the
CEO. He was prepared to be frank with me in evaluating the CEO and others.
We had a succession plan and coaches for a whole group of people down in
the ranks and a detailed plan for the top five. We even had the coaches talk to
the HR committee.
David W. Anderson Motivating leaders to do well is another challenge.
Why do so many boards seemingly have such a hard time with executive compensation?
Purdy Crawford Its difficult and we dont do a good job of it. Boards have to
manage CEO compensation such that the CEO feels control and accountability,
when in fact so many things are outside of their control. For example, we havent
factored in commodity prices well. Where possible, CEO pay should be
insulated from the effects of commodity prices and other major factors the
CEO doesnt control.
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David W. Anderson The federal government has referred the Securities

Actits legislation to create a national regulatorto the Supreme Court
for a judgment on the Acts constitutionality. Whats your view as to
the current effort to end Canadas position as the only OECD country
without a national securities regulator?
Purdy Crawford A lot of the structure being developed for the proposed
regulator is based on my panels earlier work. I think the approach to give
provinces the choice to opt in to the framework is right, and Im in favour of
the proposed structure that creates both a chief regulator and a chief adjudicator.
The Canadian Securities Transition Office has done good work.

You can be caught by the rules and still

think and act independently. I appreciate
the difficulty in getting the right balance,
but I can say that nobody challenges
Mike McCain more than I do
David W. Anderson Why are so many of the provinces arguing against
this Act before the Supreme Court?
Purdy Crawford All the objections are entirely provincial, not national, in
scope. Quebecs objection is more historical, being against centralization.
Alberta feels that local interests will be ignored. Objections are driven by politicians, public servants and local professionals afraid theyll lose provincial
revenue, business opportunities and influence. Politicians like a local regulator
because its a revenue raiser. Local professionalsmostly accountants and
lawyershave an incentive to get companies registered in each area. So theres
empire building and turf protection. Finally, local business people like a
friendly regulator who they can get along with wellso theyre more likely
to get decisions in their favour.
David W. Anderson But is there validity in the notion that local input
and flexibility regarding local conditions is also useful?
Purdy Crawford Yes, and the proponents of the national regulator are bending
over backwards to have functions performed in various parts of the country
and have avoided a head office in Ontariothe obvious place for one.
David W. Anderson On the positive side, whats the logic of a national
regulator and can the current system of provincial cooperation under
the Canadian Securities Administrators (CSA) not meet that test?
Purdy Crawford The CSA provides a lowest common denominator standard.
The time it takes to get an issue cleared through the CSA is so long it may be
irrelevant in some cases. Theres no sense of urgency. A national regulator
could raise and implement higher standards than the CSAand do so faster.
Importantly, a national regulator would also be better at enforcement, as
resources would be allocated where needed. The relationship between
criminal lawwhich is a federal responsibilityand a single national regulator
would be stronger and more effective. Finally, the big negative of our current
patchwork system is that it requires foreign issuers to register in up to
12 jurisdictions, causing some to stay away. Quite rightly, they see it
as excessive.

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.
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