Five questions with Magna International

Bassem Shakeel, pictured left, joined Magna International in 1999 and has served in a variety of capacities, including assistant secretary and secretary, and has worked on offerings, spin-offs, M&A, regulatory compliance and securities. He also serves as a member of the Ontario Securities Commission’s continuous disclosure advisory committee. Shakeel recently discussed his professional philosophy with deputy editor Aarti Maharaj.

1. Your company recently transitioned from founder-controlled to widely held, then transformed its corporate governance practices. As a corporate secretary, what were the most valuable lessons you learned during the process?

There were several lessons that really stuck out. First and foremost was the importance of a strong corporate culture. While the change in our ownership structure was a significant milestone for our shareholders, many of our employees (currently more than 100,000) and other stakeholders closely associate the company with its founder. In bringing the control structure to an end, I believe it was relatively easy to assure concerned employees and other stakeholders that the company itself would continue in all of the ways that made it successful in the past, because the strong, entrepreneurial corporate culture which has been developed over the prior 50 or more years would continue to form the base on which the company would build in the future.

Another lesson was that to be meaningful and effective, a system of corporate governance has to be something more than just a collection of so-called ‘best practices’. Since the mid-1980s we have had a number of core governance principles reflected in a ‘Corporate Constitution’, which was embedded in our articles of incorporation. For example, almost 20 years before SOX, our Corporate Constitution required a majority of independent directors on our board. It also established a minimum dividend policy and had formulas for the distribution of profits to other stakeholders such as employees, management and the communities in which we operate, as well as for R&D spending. These elements are tied together in a coherent system, which we believe has had an enormous impact on our growth from a company with around 5,000 employees and $320 million in sales in 1984 to one with almost 100,000 employees and around $25 billion in sales in 2010.

2. What is the crux of good corporate governance, in your opinion?

I know what it isn’t – it isn’t necessarily the arbitrary rules that often appear to be developed by people who have never set foot in any boardroom - good governance is much more subjective than that. Is a director over the age of 70 or 72 or 75 too old to serve on a board? It depends on the individual and the company, but if you have a mandatory retirement age, shareholders could lose their best representative in the boardroom. Is a director who serves on more than 4 or 5 boards ‘overboarded’? It depends on a  lot of factors specific to that director and the other companies’ for which he or she serves as a director. Does a board with only the CEO as a non-independent  director  serve shareholders better than a board which has a few, but still a minority, of non-independent directors? Not necessarily.

I understand the need for these kinds of rules, but they do not guarantee good governance. At the end of the day, you can have a theoretically perfect system of governance as defined by the governance community, but it means nothing if a company fails to responsibly generate profits and grow its business. In our industry, we witnessed a number of companies destroying enormous amounts of shareholder value through bankruptcy, particularly in 2008/09. I can’t imagine that any of the shareholders who saw their value destroyed would sit back and say, ‘Oh well, at least the company had a good governance rating.’

3. What has been your most significant challenge as a corporate secretary, and how did you overcome it?
I became the corporate secretary when I was around 39 years old and had been with the company for nine years. My predecessor had retired after being with the company for over 25 years, most or all of which was in the role of secretary. I was around half the age of our eldest director and a generation younger than our youngest, and I wasn’t confident that I would have any credibility with our directors.

I started off in the role knowing that it would take time to develop the confidence of each director and felt I could best do so by filling the role of an effective information provider. This wasn’t necessarily about providing data on emerging issues and regulatory developments, which they were already getting from multiple sources, but had more to do with information specific to the industry and our company. It probably helped me that we had three new directors at the time with whom I had the most frequent contact. I think that as I helped them better understand the company and the industry, I was able to gain their confidence and through them, that of the other directors as well.

4. If a new corporate secretary sought your advice on how best to add value to the role, what would you advise?

I think one of the biggest ways a corporate secretary can add value is by providing a board with some context as to the matters in front of it. Directors get a lot of information from the corporate secretary and elsewhere about their legal duties, procedural considerations, hot-button issues and so on, but there are few places they can go to get the full context of any matter in front of them. A good corporate secretary can help directors better understand everything from factors impacting the company’s industry and operations, to its culture, to the personalities that drive it. A lot of these are factors that a director may not ask about in the boardroom or may not want to discuss with the CEO, but they may help the director better understand the ‘why’ or ‘why now’ of any non-routine matter that he or she has to decide on.

5. In many in-house legal departments, the corporate secretary wears several hats. Your role seems to be a dedicated corporate secretary role. Any thoughts on whether one approach is better than the other?

Before stepping into this job, I was involved in a wide variety of work and filled many different duties. While my current role is quite specialized, I don’t think I could perform it effectively without having the background I gained from the other work I have done here. On the other hand, the demands of the role are pretty significant and it can be difficult to balance it with too many other responsibilities, so I am happy to be able to dedicate my time exclusively to it.