The Board of Directors of Tarion Warranty Corporation is committed to a series of governance policies that are intended to support the oversight role of the Board and to ensure that the Board acts in the best interest of the company (fiduciary duty), taking into account its consumer protection mandate and the interests of its stakeholders (duty of care). Some highlights of the Board’s current governance practices include the following:
To ensure the independence of the Board and management, the Board is composed entirely of independent professionals chosen via a nomination process. The Chair of the Board is then elected by the board members.
Tarion’s Board of Directors has 16 members who are nominated in accordance with the by-laws of the company. The Board of Directors consists of a number of individuals having knowledge of the interests of all stakeholders. The by-laws of the company provide for the appointment of Directors as follows:
- Five (5) nominees appointed by the Minister of Government and Consumer Services;
- Eight (8) nominees put forward by the Ontario Home Builders’ Association (OHBA) and selected by the Nominations Committee; and
- Three (3) nominees nominated at large and selected by the Nominations Committee.
Nominated directors are chosen based on needs identified in a competency framework/skills matrix. The three candidates nominated at large cannot be:
- an employee of the company;
- employed by or directly associated with the Ministry;
- an officer, director, employee, principal or person directing operations of a current new home vendor or builder in Ontario (“Ontario Builder”); nor
- an officer, director, employee or principal of an association comprised of and/or representing Ontario Builders.
The Board and its committees meet regularly according to a schedule established each year by the Board, and at such other times as the Board may determine necessary for uninterrupted running of the company’s business. Meeting agendas are developed in consultation with the Board and committee chairs, respectively. The Chair is responsible for ensuring that a suitably comprehensive information package is sent to each director in advance of each meeting.
Directors are expected to be fully prepared for each Board and committee meeting. At a minimum, they are required to have read the material provided to them prior to the meeting. During the meetings, each director is expected to take an active role in discussion and decision making. To facilitate this, the Chair is responsible for fostering an environment that is conducive to open discussion and debate.
The Board and its committees meet without the presence of management for some portion of each of their meetings.
The Audit Committee of the Board is composed entirely of independent directors whose responsibilities are set forth in a detailed Committee Terms of Reference. The Committee has the ability to deal directly with the external auditor regarding the company’s annual financial statements, and with the external actuary regarding the warranty liabilities of the company, or any independent advisor for receiving assurance on any issues. Consistent with the best practices of regulated financial institutions, Tarion has established an internal audit mandate. To fulfill this mandate, the company has engaged the services of a public accounting firm to provide internal auditing to maintain and improve the company’s internal control environment. The internal auditor has a direct reporting relationship to the Audit Committee.
The Board, together with the Audit Committee, monitors, reviews and approves corporate policies that govern management of capital and the enterprise-wide integrated risk management framework, as well as compliance with company policies and regulatory requirements. A risk management sub-committee, composed of Tarion’s senior managers, also identifies emerging issues and regularly reports to the Audit Committee. The Board annually conducts a detailed assessment of all corporate risks and appropriate mitigating actions. These risks are reviewed as to their likelihood and severity. Every identified risk is assigned to one of the standing committees of the Board and reviewed quarterly.
In 2018 the Board undertook a comprehensive review of Tarion’s existing risk appetite framework and revised the company’s risk inventory and metrics while implementing a comprehensive own risk and solvency assessment (ORSA) as per guidelines issued by the Office of the Superintendent of Financial Institutions (OSFI) for federally regulated insurers.
The Board engages in a strategic planning process each year that takes into account business policy initiatives and opportunities, operational and financial risks, and emerging risks and opportunities. Throughout the year, the Board reviews corporate performance against the company’s annual business plan and the current strategic plan.
ANNUAL PERFORMANCE OBJECTIVES
The Board approves the annual corporate business plan and key performance indicators. The Board evaluates the CEO against performance objectives established by the Board. This evaluation is conducted in an in-camera session and is supported by a mid-year review of the CEO’s performance. The CEO reports annually to the Board through the Human Resources & Compensation Committee on senior management performance and succession planning.
CODE OF CONDUCT & GOVERNANCE PRACTICES
The Board has adopted a Code of Conduct & Governance Practices, Confidentiality and Conflict of Interest Policy that each member of the Board is required to sign annually. This Code is intended to help the directors fulfill their responsibilities to the company with appropriate discipline and dedication and to communicate the Board’s expectations throughout the company.
DIRECTOR ORIENTATION (ON-BOARDING) AND CONTINUING EDUCATION
The Governance Committee is responsible for providing an orientation and continuing education program for the directors. Newly appointed directors attend orientation sessions that are intended to familiarize them with our business and operations, including management structure, strategic plans, finances, opportunities and risk. New directors can meet with management and other members of the Board. New directors are also provided with a package of detailed information to assist them in learning about the organization.
As part of ongoing education, management personnel or outside experts make presentations from time to time to educate the Board on specialized topics, new issues and developments in consumer protection and legal, regulatory and industry initiatives.
All directors are members of the Institute of Corporate Directors, which offers director education programs and provides access to current research and publications to enhance knowledge concerning governance and director responsibilities.