Corporate Governance at Royal Bank of Canada

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Case Details:

Case Code : CGOX009
Case Length : 18 Pages
Period : 2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Royal Bank of Canada
Industry : Financial Services
Countries : Canada

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Transparency impacts everything from strategy to culture, as well as a corporation's relationship with its various stakeholders. The Naked Corporation is a breakthrough - a timely and excellent perspective on successfully operating in today's open environment.¹

-Gordon M. Nixon, Chairman & CEO, RBC Financial Group².

Introduction

Royal Bank of Canada (RBC), headquartered in Toronto, Ontario, was the largest financial services group in Canada. In 2003, it ranked #337 in the Fortune Global 500 and #80 in Forbes Global 2000 and had a market capitalization of C$41.6 billion and an asset base of C$413 billion.³ ($ 1.0 = C$ 1.31108)

On 26^th November 2003, RBC received the Overall Award of Excellence for corporate reporting at the CICA⁴. The Judging panels⁵ presented RBC with top scores in four categories: 1) Annual Reporting, 2) Corporate Governance Disclosure, 3) Electronic Disclosure and 4) Sustainable Development Reporting.⁶

Corporate Governance | Case Study in Management, Operations, Strategies, Corporate Governance, Case Studies

In August 2003⁷, the Canadian Business magazine ranked RBC as the second best board⁸ in Canada. RBC had been ranked No.1 in 2001. RBC had adopted what observers considered many best practices in corporate governance. RBC's directors (in 2001) had to hold at least $100,000 in stock and had to stand for re-election every year.

Any re-pricing of the stock options was not approved. The board published the attendance of each director at the Board and Committee meetings. The bank also scored high grades on the 'independence' of its directors. Out of the 19 directors standing for election, in 2002, only one director represented the bank's management. RBC had also decided to split the offices of the CEO and the Chairman.⁹

In 2001, had launched a Subsidiary Governance Office (SGO) in order to enhance governance practices in its subsidiaries. It installed sophisticated software that allowed quick and easy access to up-to-date information on all parts of its global network...

Excerpts >>

1] Book Release statement, The Naked Corporation: How the Age of Transparency is Revolutionizing Business, October 2003.

2] Royal Bank of Canada Operated with this name.

3] RBC, Annual Report 2003.

4] Canadian Institute of Chartered Accountants.

5] The judging panel included the CICA, Toronto Society of Financial Analysts, Canadian Institute of Investor Relations, Social Investment Organization, International Institute for Sustainable Development and the Institute of Corporate Directors.

6] "RBC Grabs Top Prize at Reporting Awards," camagazine, 26th November 2003.

7] Andy Holloway, Matthew McClearn, "The Best and the Worst Boards," Canadian Business, 4th August 2003.

8] Finning International was ranked first. RBC Grade on different parameters: Independence – 9/10, Board accountability – 14/14, Performance – 5/6 and 3 Yr. Return Vs. TSX – 10/10 (Total grade: 38/40).

9] John Gray; Andy Holloway, "The Director's Cut," Canadian Business, 29th September 2001.