By Laura Keil
At their regular meeting Oct 12th, the Village of Valemount approved a policy limiting who can be on the boards of Village-owned companies, stating that anyone with real or perceived conflict of interest should not be on the board. Council did so based on legal advice and research by Village staff.
The policy has big implications for the Valemount Community Forest (VCF) and Valemount Industrial Park (VIP) boards. It means directors who make decisions for the companies cannot collect a paycheck from the companies.
This rule affects four of six sitting directors (one director recently retired and is no longer in conflict, and another had no conflicts). The Village’s policy also states that, in addition to five members of the public, one Councillor and the Village CAO will be on the board, similar to what was done prior to the community forest’s corporate restructuring in 2018. The five members of the public will be appointed by Council based on business, financial and other experience that could be valuable to the company, based on recommendations from the existing community forest board.
The policy takes effect January 2022, but existing board members may stay on until the VCF/VIP AGMs, usually held in April. The Village Councillor and CAO would also join after the AGMs.
Committee of the whole discussion
Council’s decision followed a lengthy committee-of-the-whole meeting Oct 6th (watch the video here) that allowed discussion between Council, the Community Forest Board and members of the public. The Village’s legal counsel was also on hand.
Several community forest board members and VCF staff voiced their concerns with the new conflict of interest rules, saying it will hamper the community forest’s ability to recruit new, qualified board members if working foresters aren’t permitted on the board. They also questioned why conflict of interest couldn’t be managed, rather than banned.
“What we are trying to achieve is a compliance with the legal standards that the shareholder is bound to follow,” Mayor Owen Torgerson explained. “We’re not trying to upheave the corporation. Will there be challenges? Without question.”
VCF president Ainslie Jackman said other boards manage conflicts of interest, and the community forest should be allowed to do so as well.
“When the company is successful, the Village of Valemount is successful; and the public is successful when our company is successful,” she said. “I don’t like limiting the ability of the company to have a good, important, competent board because of fear. There are ways to manage it.”
“When it comes to Council and Committees of Council, there is zero gray area there,” Mayor Torgerson said of conflict of interest regulations that guide village policy.
Counc. Sherri Gee said a solution could be creating a management board to advise the governance board on decisions. The management board would just provide advice, so could include foresters working for the company.
The Village’s legal counsel Lindsay Parcells, of Lidstone & Company Law Corporation, agreed this could be a solution.
“You establish an advisory committee or something like that of people that are actively involved in the forestry community: they’ve got the knowledge, they’ve got the experience, they can meet with the directors on a regular basis and provide their input, and directors can make decisions which they think are in the best interests of the corporation.”
He said making a compromise with conflict of interest wasn’t a good idea.
“If you’re going to consider some kind of a compromise, I think there’s more risks, particularly to those directors, as well as for the municipality.”
The cleanest course of action, in terms of limiting liability to both the Village and the board members themselves, is to have a clear conflict of interest policy that states there is zero conflict, he said.
Parcells drew attention to the fact board members could be sued if they earned money from decisions they took part in at the board room table.
“They are potentially liable to reimburse that income back to the shareholder if a conflict is found,” he said. “I understand this is a small community, you have a limited pool of people to appoint as directors, but the conflict of interest discussion also needs to consider the fact that the directors themselves can put themselves in a situation where they might face personal liability.”
Jackman said conflicts of interest rarely come up in board meetings, but when they do, the director always leaves the room.
Janey Weeks, an employee of the community forest, said in her research she found other corporations, like hospital boards, that sometimes have conflicts of interest such as having doctors as directors.
“There are some models out there where there is conflict of interest,” she said. “We need to not to be afraid of it but to deal with it, be transparent and move forward. It must be identified before each meeting and be identified during a meeting.”
Mayor Torgerson said just because someone else is doing something doesn’t make it right.
“Taking the example of another may not be the best practice.”
He also pointed out that up to two existing directors can remain, and two more could choose to do so once they retire—which could happen by next year’s AGM, allowing four of the six existing directors to continue. All current directors will remain on the board until at least next year’s AGM.
Counc. Pete Pearson said there’s a difference in how the Village must handle perceived vs. real conflicts of interest on Village-run boards.
“I don’t think at this point we can use the term ‘perceived conflict of interest,’” he said, of the community forest. “This is a direct conflict of interest. When a board member as a contractor collects a paycheck from the corporation where they’re sitting on the board, that’s not perceived. That can’t get any more straightforward. That’s what we’re trying to deal with.”
He said, perceived conflict is if he sits on another board and a decision comes to Council that could benefit that board. “I’m not making any money off it, but it’s a perceived conflict, we recuse ourselves.”
VCF board member Gordon Carson contested that, saying he’s not making decisions that affect anything to do with his business.
Counc. Gee agreed with Counc. Pearson, saying she’s never sat on a board where directors were also working for the company.
“Be it corporate, non-profit, or municipal, rule number 101, (is) ‘I declare that I do not have a pecuniary interest. I will not receive remuneration for the work that I’m doing on this board.’ And that goes from a small little organization like the food bank—I can’t even take a can of soup as soon as I sit on the board—all the way up to giant corporations, political groups.”
Counc. Hollie Blanchette initially spoke out in favour of keeping the existing board members and adding Councillors and a staff member from the village.
“When we had two counselors on the committee before it was really great; we learned what was going on we were kept up to date. I don’t always have time to go into everybody’s website of all the committees I’m on because there’s like 10. So that was just a good way to let us know what’s going on.”
Counc. Blanchette said she sees a “rift” forming between Council and the Community Forest and wants to avoid it.
Jackman said it will be exceedingly difficult to find people with forestry experience to sit on the board if those people aren’t allowed to work for the community forest. She said the existing board members’ knowledge of the industry is what has brought the community forest to where it is today—a successful business that employs dozens of people.
“What you’re assuming is that without some sort of conflict, the corporation will fail,” Mayor Torgerson said. “Is that what I’m hearing? If we eliminate conflict of interest, there will be absolutely catastrophic failure?”
“It will suffer,” Jackm an replied. “I never said catastrophic failure. Craig will suffer, I presume, without our help, without people with experience.”
Village CAO Wayne Robinson said relying on expert’s advice when needed is exactly how the Village does its business. Council itself does not need to be comprised of experts.
“We have a lift station that’s going to be put in next year. I am not an engineer and nobody on this board is an engineer. On this council, we rely on our contractors. They come and speak to staff, they also speak to council and help provide that information.” he said. “(Councillors) can be anybody of any education level whatsoever. It’s my job as a CAO to make sure that they have all the information they need to be able to make an informed decision for the benefit of the community, and I know that Craig is able to do the same thing because he is a competent manager.”
Reiner Thoni, a member of the public who works for a contractor of the community forest, said he’d like to see more due diligence by Council before a decision is made.
“Maybe talking to other community forests in BC because there is a lot of models with boards—Clearwater for example, or McBride,” he said. “In an industry, especially forestry, the margins are very tight so if you’re not efficient, the decision-making process can lead to problems.”
Robinson said the matter has already been thoroughly researched.
“I want people to rest assured that I have spent more hours than I can count researching this very topic. This has been a year that I’ve been working on this, several hours speaking to legal counsel, reaching out to other community forests, reaching out to other CAOs of other communities that own community forests. I compiled spreadsheets of information.
I did reach out to other local governments. I will say this: there is one I did not reach out to and that was McBride.”
He said he spoke to Clearwater’s community forest, but he did not inquire about whether they had conflicts of interest on their board.
“As a corporate officer, you don’t allow conflict of interest. It’s something that is ingrained within me. When it comes to my role, I have to speak out against conflict of interest or else I’m not doing my job. My assumption would be that they would not have conflict of interest because it puts the municipality and the company at risk.”
Counc. Pearson said this isn’t about finger pointing.
“We’re not trying to be the bad guys,” he said. “We live in a world of CYA [cover your ass] and this is where we can get into trouble … I don’t understand resistance because I truly believe that by having that working group that goes over the decisions and makes the recommendations that can be explained to a knowledgeable board—it doesn’t have to be industry-knowledgeable but as long as they can understand basics—that eliminates it right there, you’ve got the break.”
Owen said McBride’s community forest is not in the hole because of board selection, and Council is not trying to fill all the board seats
“We’re not trying to take over the board. There’s no question there and that should not even be an assumption.”
Cedar Valley Specialty Cuts mill owner Jason Alexander spoke up in the meeting about several community forests that have alternative models, such as Revelstoke’s which has two city councillors and a city administrator and only three members of the public, none of whom have conflict. He also pointed out that Wells Gray has a subcommittee similar to the advisory board mentioned at the meeting, and had an industry expert as the intermediary between both boards as well as the public.
Counc. Pearson said the policy is being put in place for this and future possible corporations.
“We have to be careful we’re not setting that standard for future.”
At the end of the meeting, Council recommended reducing the Village’s presence on the board to one councillor, rather than two, and keeping the CAO as a voting director. They also maintained the conflict of interest section. The amended policy was then approved at Council’s regular meeting Oct. 12th.