FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

 

For the month of: March, 2020    Commission File Number: 001-13354

BANK OF MONTREAL

(Name of Registrant)

 

100 King Street West

1 First Canadian Place

Toronto, Ontario

Canada, M5X 1A1

  

129 rue Saint-Jacques

Montreal, Quebec

Canada, H2Y 1L6

(Executive Offices)    (Head Office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F              Form 40-F  

 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  Yes    No  

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-                    .

 

 

INCORPORATION BY REFERENCE

The information contained in this Form 6-K and any exhibits hereto shall be deemed filed with the Securities and Exchange Commission (“SEC”) solely for purposes of incorporation by reference into and as part of the following registration statements of the registrant on file with and declared effective by the SEC:

 

  1.

Registration Statement – Form F-3 – File No. 333-217200

 

  2.

Registration Statement – Form F-3 – File No. 333-214934

 

  3.

Registration Statement – Form S-8 – File No. 333-191591

 

  4.

Registration Statement – Form S-8 –File No. 333-180968

 

  5.

Registration Statement – Form S-8 – File No. 333-177579

 

  6.

Registration Statement – Form S-8 – File No. 333-177568

 

  7.

Registration Statement – Form S-8 – File No. 333-176479

 

  8.

Registration Statement – Form S-8 – File No. 333-175413

 

  9.

Registration Statement – Form S-8 – File No. 333-175412

 

  10.

Registration Statement – Form S-8 – File No. 333-113096

 

  11.

Registration Statement – Form S-8 – File No. 333-14260

 

  12.

Registration Statement – Form S-8 – File No. 33-92112

 

  13.

Registration Statement – Form S-8 – File No. 333-207739

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    BANK OF MONTREAL
    By:  

/s/ Thomas E. Flynn

    Name:   Thomas E. Flynn
    Title:   Chief Financial Officer
    By:  

/s/ Barbara M. Muir

    Name:   Barbara M. Muir
    Title:   Corporate Secretary

Date: March 6, 2020


EXHIBIT INDEX

 

Exhibit    Description of Exhibit
99.1    Notice of Annual Meeting of Shareholders on March 31, 2020 and Proxy Circular
99.2    Form of Proxy
Table of Contents

Exhibit 99.1

 

LOGO

Annual Meeting March 31, 2020 | Bank of Montreal Notice of Annual Meeting of Shareholders and Management Proxy Circular Your vote matters. Please take a moment to vote. Your participation as a Shareholder is important to us. This document tells you who can vote, what you will be voting on and how to vote.


Table of Contents

Your Vote Matters

Choose to vote in one of three ways:

   

Vote online by visiting www.investorvote.com (registered shareholders, including BMO employees) or www.proxyvote.com (non-registered shareholders)

   

Vote by returning the enclosed form of proxy or voting instruction form by mail or fax

   

Vote in person at the annual meeting of Shareholders

Detailed voting instructions for non-registered and registered shareholders can be found starting on page 8 of this Management Proxy Circular.

 

Location of Annual Meeting Of Shareholders

 

BMO IFL

3550 Pharmacy Ave.

Toronto, Ontario

 

PARKING

Located on the West side of the building.

   LOGO

DIRECTIONS

From West:

   

401 Eastbound to Don Valley Parkway (DVP) exit

   

Take 404 North to Steeles and Woodbine exit (Exit 22)

   

Stay right and turn right on to Steeles Avenue

   

At the 3rd set of lights, turn right on Pharmacy Ave. and turn into 1st driveway on the right

From East:

   

401 Westbound to Don Valley Parkway (DVP) exit

   

Take 404 North to Steeles and Woodbine exit (Exit 22)

   

Stay right and turn right on to Steeles Avenue

   

At the 3rd set of lights, turn right on Pharmacy Ave. and turn into 1st driveway on the right

From North:

   

404 South to Steeles and Woodbine exit (Exit 22)

   

Turn left on to Steeles Avenue

   

At the 4th set of lights, turn right on Pharmacy Ave. and turn into 1st driveway on the right

From South:

   

Don Valley Parkway (DVP) North which becomes 404 North

   

Take Steeles and Woodbine exit (Exit 22)

   

Stay right and turn right on to Steeles Avenue

   

At the 3rd set of lights, turn right on Pharmacy Ave. and turn into 1st driveway on the right

 

1           Bank of Montreal Management Proxy Circular


Table of Contents

Letter to Shareholders

Dear Fellow Shareholder,

The Annual Meeting of Shareholders this year is scheduled to be held on March 31. This is the most important opportunity of the year for you to participate in the governance of your company, and we hope you will join us. As always, the annual meeting allows you to hear directly from management and your elected representatives on the Board of Directors about how the Bank performed over the previous fiscal year and where it is heading in the year ahead, and to cast your vote on the business matters brought before the meeting.

The business to be conducted is set out in the pages of this Notice of Meeting and Management Proxy Circular.

This document should be read in conjunction with our 2019 Annual Report, which lays out the Bank’s financial performance for the fiscal year ended October 31, 2019, as well as our 2019 Sustainability Report and Public Accountability Statement.

In 2019, BMO continued to show clear progress against our strategy. We delivered good revenue and income growth, reflecting the strength and quality of our diversified businesses. We finished the year with strong performance and are well positioned to accelerate through the coming year.

Adjusted net income was $6.2 billion, an increase of 4% over the previous year; return on equity was 13.7%. Adjusted earnings per share grew by 5% to $9.43. And we increased the declared dividend by 7%, extending BMO’s unbroken dividend record since 1829.

Our progress in putting our strategy into action reflects the conviction behind it. In 2019, we came together as an organization to talk about the core beliefs that have driven our bank’s success from the beginning. Many voices helped unlock a simple, powerful statement of purpose: Boldly Grow the Good in business and life.

Everything we do at BMO is grounded in our Purpose. It attaches intention to our priorities and gives direction to our growth. It informs all of our efforts to accelerate positive change – for our customers, our employees and the communities where we do business. And it amplifies the unique strengths we bring to creating shared value with our stakeholders.

Please take the time to review the valuable information included in this Proxy Circular, where you will also find an explanation of the voting instructions. Whether you plan to attend the Annual Meeting in person or virtually, we invite you to register your vote on the various business matters in advance of the meeting. In casting your votes, we encourage you to consider the benefits of online voting, which is both secure and instantaneous. If you prefer, you may still register your position on proxy matters through the mail. Whichever method you choose, your participation matters to your Board of Directors and the management team. Please make your vote count.

As was discussed in the Annual Report this is a year of transition for your Board of Directors, as three longstanding directors retire. George Cope, one of Canada’s most accomplished and respected business leaders, will be the next Board Chair. He knows the Bank well, having served as a director for over 13 years, and he enjoys the unanimous support of the board. In addition, Philip S. Orsino and Don M. Wilson III will retire They each have served the Bank with great dedication and distinction and we thank them for their valuable contribution.

Again this year, we are holding our Annual Meeting at the BMO Institute for Learning. The Institute is the centrepiece of our commitment to continuing education, advanced leadership development and enabling innovation. We are constantly evolving to make our customers’ banking experiences more personal and intuitive. The IFL was built with that in mind – and we are proud to showcase it.

If you are unable to attend the Annual Meeting in person, you can attend virtually at www.bmo.com/home/about/banking/investor-relations/annual-general-meeting. Either way, we hope you will participate. Our fellow directors and the management team look forward to welcoming you on March 31.

LOGO

 

 

LOGO

 

J. Robert S. Prichard   Darryl White
Chair of the Board   Chief Executive Officer

February 6, 2020

 

You may obtain a copy of this Management Proxy Circular by downloading it from

www.bmo.com/corporategovernance or by calling the Corporate Secretary’s Department at (416) 867-6785.

 

Bank of Montreal Management Proxy Circular       2  


Table of Contents

Table of Contents

 

Letter to Shareholders

     2  

Notice of Annual Meeting of Shareholders of Bank of Montreal

     4  

Management Proxy Circular

     5  

Annual Meeting of Shareholders

     5  

Management Proxy Circular

     5  

Date of Circular

     5  

Business of the Meeting

     5  

BMO’s Financial Statements

     5  

Electing the Board of Directors

     5  

Appointing Auditors

     5  

Voting on our Approach to Executive Compensation

     6  

Voting on Amending the Bank of Montreal Amended and Restated Stock Option Plan

     7  

Shareholder Proposals

     8  

Voting Information

     8  

Items of Business

     8  

Who Can Vote

     9  

Voting Instructions for Non-registered Shareholders

     9  

Voting Instructions for Registered Shareholders

     9  

Voting by Proxy

     9  

Confidentiality

     11  

Contacting the Bank’s Transfer Agent

     11  

Shareholder Questions at the Meeting

     11  

Shareholder Proposals Next Year

     11  

Directors

     12  

Nominees for Election to Board of Directors

     12  

Continuing Education and Skills

     20  

Directors’ Compensation and Attendance

     25  

Corporate Governance

     29  

Report of the Audit and Conduct Review Committee

     29  

Report of the Governance and Nominating Committee

     31  

Report of the Human Resources Committee

     32  

Report of the Risk Review Committee

     34  

Statement of Corporate Governance Practices

     36  

Board Mandate

     49  

Indebtedness of Directors and Executive Officers

     50  

Directors’ and Officers’ Insurance

     51  

Normal Course Issuer Bid

     51  

Shareholder Proposals

     52  

Message from the Chair of the Human Resources Committee

     57  

Compensation Discussion and Analysis

     59  

2019 Overview

     59  

A Guide to this Year’s CD&A

     63  

Compensation Governance and Oversight

     64  

BMO’s Approach to Executive Compensation

     68  

2019 Performance and Compensation

     83  

2019 Compensation for the Named Executive Officers

     86  

Executive Compensation Tables

     98  

Additional Disclosure

     109  

Directors’ Approval

     111  

 

3           Bank of Montreal Management Proxy Circular


Table of Contents

Notice of Annual Meeting of

Shareholders of Bank of Montreal

 

When:   Tuesday, March 31, 2020 at 9:30 a.m. (local time)
Where:   BMO Financial Group Institute for Learning
       3550 Pharmacy Avenue, Toronto, Ontario

The meeting will be held for the following purposes:

 

1.

receive the consolidated financial statements of Bank of Montreal (the “Bank”) for the financial year ended October 31, 2019; and the Shareholders’ auditors’ report on those statements;

2.

elect the Board of Directors for 2020;

3.

appoint the Shareholders’ auditors for 2020;

4.

consider and, if deemed fit, approve an advisory resolution on the Bank’s approach to executive compensation (see the management proxy circular for the resolution);

5.

to consider, and if deemed appropriate, approve amendments to the Bank of Montreal Amended and Restated Stock Option Plan;

6.

consider the Shareholder proposals set out starting on page 52 of the management proxy circular; and

7.

transact any other business properly brought before the meeting.

Our website will carry live coverage of the meeting, as well as a recording after the meeting. Online, you can also find our 2019 Annual Report, our Sustainability Report & Public Accountability Statement, our quarterly results, presentations to the investment community, and other useful information about us.

Holders of common shares (“Shares”) as at February 3, 2020, will be entitled to vote at the meeting. The number of eligible votes* that may be cast at the meeting is 639,627,837, such number being the total number of Shares of the Bank outstanding at market close on February 3, 2020.

Whether or not you plan to attend the meeting in person, please complete the enclosed form of proxy or voting instruction form and return it in the postage prepaid envelope provided, or follow the instructions on the form in order to vote your Shares. For your vote to be recorded, your proxy vote must be received by our transfer agent, Computershare Trust Company of Canada, no later than 5:00 p.m. (Eastern Daylight Time) on March 30, 2020. To vote in person at the meeting, please see the section “Voting Information” on page 8 of the management proxy circular.

By order of the Board of Directors,

 

LOGO

Barbara M. Muir

SVP, Chief Legal Officer – Corporate & Corporate Secretary

February 6, 2020

 

*

The actual number of eligible votes may be fewer due to voting restrictions set forth in the Bank Act (Canada) as described on page 11 under “Who Cannot Vote”.

 

Bank of Montreal Management Proxy Circular       4  


Table of Contents

Management Proxy Circular

Annual Meeting of Shareholders

The annual meeting of holders of Shares (“Shareholders”) of the Bank on March 31, 2020 is our opportunity to discuss the Bank’s performance and our plans for the future. It is also your opportunity to vote on important matters. We encourage you to vote.

Management Proxy Circular

This Management Proxy Circular provides Shareholders with important information to make voting decisions. References to “BMO”, the “Bank”, “we”, “our” or “us” mean Bank of Montreal and, where applicable, our subsidiaries. References to “Shareholders” mean common shareholders of the Bank and references to “Shares” mean common shares of the Bank. References to the “Board” mean Bank of Montreal’s Board of Directors.

Date of Circular

This circular is dated February 6, 2020, and all information, unless indicated otherwise, is as at that date.

Business of the Meeting

The meeting will cover the following five items of business:

 

1.

BMO’s Financial Statements

You can find BMO’s consolidated financial statements for the year ended October 31, 2019 in our 2019 Annual Report.

 

2.

Electing the Board of Directors

Information about the director nominees starts on page 12. All nominees were elected as directors at the Bank’s 2019 annual meeting of Shareholders. The directors you elect at this year’s meeting will hold office from the close of the meeting until the next annual meeting or until their successors are elected or appointed.

The Board recommends that you vote FOR the election as director each nominee whose name is set out under the heading “Nominees for Election to Board of Directors”.

If Robert Prichard or Darryl White is your proxyholder and you have not given instructions on how to vote, he will vote for all of the nominees listed in this circular. If, for any reason, at the time of the meeting any of the nominees are unable to serve, and unless you have specified otherwise, Robert Prichard or Darryl White may, at their discretion, vote for any number of substitute nominees.

Majority vote for directors

The Bank has a majority voting policy for the election of directors. If a director standing for election or re-election in an uncontested election receives more withhold votes than for votes, he or she must promptly offer to resign. In such case, the Governance and Nominating Committee will recommend to the Board whether to accept or reject the resignation, and the Board shall accept the resignation absent exceptional circumstances. The nominee will not participate in the decision to accept or reject the resignation.

 

3.

Appointing Auditors

The directors propose to appoint KPMG LLP as the Shareholders’ auditors for the 2020 fiscal year. KPMG LLP has been one of the Bank’s auditing firms since 1990, and became the Bank’s sole auditing firm on November 1, 2003.

The Board recommends that you vote FOR the appointment of KPMG LLP as auditor.

If Robert Prichard or Darryl White is your proxyholder and you have not given instructions on how to vote, he will vote for the appointment of KPMG LLP as the Shareholders’ auditors.

 

5           Bank of Montreal Management Proxy Circular


Table of Contents

Independence of auditors

We have a strict policy limiting other services that the Shareholders’ auditors can provide to the Bank. Moreover, the Audit and Conduct Review Committee or its delegate pre-approves all services from the Shareholders’ auditors in accordance with the Bank’s Auditor Independence Standard, either on a case-by-case basis or in annual budgets for specific services. This helps protect the audit function from conflicts of interest and helps ensure the independence of the Shareholders’ auditors. A rigorous process is applied under this standard to ensure that all the services provided by the Shareholders’ auditors comply with the standard and professional standards and securities regulations.

Shareholders’ auditors’ fees

Aggregate fees paid to the Shareholders’ auditors during the fiscal years ended October 31, 2019 and 2018 were as follows:

 

 

  Fees ($ millions) (1)

 

  

 

2019

 

    

 

2018

 

 

  Audit fees

   $ 19.6      $ 18.2  

  Audit-related fees (2)

     2.8        2.2  

  Tax fees

             

  All other fees (3)

     1.9        2.1  

 

  Total

 

  

 

$

 

 

24.3

 

 

 

 

  

 

$

 

 

22.5

 

 

 

 

 

  (1)

The classification of fees is based on applicable Canadian securities laws and U.S. Securities and Exchange Commission definitions.

  (2)

Audit-related fees for 2019 and 2018 relate to fees paid for accounting advice, specified procedures on our Management Proxy Circular and other specified procedures.

  (3)

All other fees for 2019 and 2018 relate primarily to fees paid for reviews of compliance with regulatory requirements for financial information and reports on internal controls over services provided by various BMO Financial Group businesses. They also include costs of translation services.

 

4.

Voting on our Approach to Executive Compensation

The governing objective of our executive compensation program is to align executive interests with the interests of stakeholders, including Shareholders. This objective is reflected in our philosophy of pay for performance based on competitive market practice, without encouraging excessive or inappropriate risk-taking. You can find details of our executive compensation program starting on page 68.

The Bank believes that our approach to executive compensation is aligned with the Bank’s best interests as executives and stakeholders share common goals: success of the Bank, including improved Shareholder value. Independent studies commissioned by the Bank’s Human Resources Committee support our approach.

We are asking you to vote on the way we compensate our executives. This vote is advisory and non-binding. However, it will influence how the Human Resources Committee looks at compensation in the future. At the 2019 Annual Meeting of Shareholders, this resolution was approved with 94.08% of Shares voted in favour.

The Board recommends that you vote FOR the approach to executive compensation.

“Resolved, on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the Shareholders accept the approach to executive compensation disclosed in the Management Proxy Circular delivered in advance of the 2020 Annual Meeting of Shareholders of the Bank.”

If Robert Prichard or Darryl White is your proxyholder and you have not given instructions on how to vote, he will vote for this resolution.

You can contact the Corporate Secretary’s Department with comments and questions on our executive compensation program or you can communicate directly with the Board of Directors. Applicable contact information is on page 48.

 

Bank of Montreal Management Proxy Circular       6  


Table of Contents
5.

Voting on Amending the Bank of Montreal Amended and Restated Stock Option Plan

The purpose of the Bank of Montreal Amended and Restated Stock Option Plan (the “Plan”) is to align incentives for executives with the creation of shareholder value for the long term. The Bank established the Plan in 1994 upon shareholder and regulatory approval. Details of the current Plan are included in the Compensation Discussion and Analysis on page 71 (Long-Term Incentive Plan) and starting on page 104.

Shareholders are asked to consider a resolution to increase the maximum number of Common Shares of the Bank that may be issued pursuant to the exercise of options under the Plan by 12,000,000 Common Shares (the “Limit Increase”). The Limit Increase has been approved by the Toronto Stock Exchange conditional upon, among other things, shareholder approval.

The Bank adheres to prudent governance standards regarding the use of options as an element of compensation. The total number of Common Shares reserved for the Plan, minus those options that have been exercised, is limited to 7.5% or less of the total number of issued and outstanding Common Shares of the Bank. This reduces the future dilutive effects of stock options on share value.

The Limit Increase proposed is expected to provide a sustainable inventory for between 6 to 8 years. The last limit increase proposed by the Bank was in 2009, and while it was expected to provide 6 years of additional inventory, the Bank evolved its stock option granting practices to maintain the inventory for 11 years. The enhanced practices include:

 

the vesting schedules of options was lengthened, from 25% per year for the first four years post-grant to 50% vesting in third and fourth years post-grant;

 

eligibility for stock option awards to executives was limited to those at the senior vice-president level and above;

 

stock options were limited to no more than 10% of total variable pay for senior vice-presidents and executive vice-presidents, and 20% for senior executives and the CEO; and

 

forfeiture and clawback provisions were expanded.

In 2019, 87 executives received stock option grants. This practice does not result in significant concentration for any single officer.

Shareholders previously authorized the issuance of 72,200,000 Common Shares under the Plan. The last limit increase was approved by 84.1% of shareholders on March 3, 2009. Through the judicious use of stock options, the Bank has not required a further limit increase for over 11 years. As of December 31, 2019, taking into account options that have been forfeited, cancelled or expired, a net total of 70,648,270 options have been granted to participants in the Plan. Since the Plan was adopted, option exercises have resulted in the issuance of 63,928,315 Common Shares. As of December 31, 2019, 1,515,730 stock options remain available for grant, which is insufficient for future anticipated grants.

The Bank’s overhang, dilution and burn rate measures for the most recent fiscal year for the Plan are set out below and are within best practice guidelines:

Measure (1)

 

 

  Overhang

  number of options available to be issued plus options outstanding but not exercised / total number of common shares outstanding at the end of the fiscal year

 

 

 

1.34%

 

  Dilution

  number of options issued but not exercised / total number of common shares outstanding at the end of the fiscal year

 

 

 

0.95%

 

  Burn rate (2)

  total number of options issued in a fiscal year / weighted average number of common shares outstanding at the end of the fiscal year

 

 

 

0.15%

 

  (1)

All figures are calculated as a percentage of Common Shares outstanding (including treasury shares) on October 31, 2019.

  (2)

The burn rate is expressed as a percentage calculated by dividing the number of options granted during the fiscal year (976,087) by the weighted average number of common shares outstanding at the end of the fiscal year (638,881,000).

For more information, see page 105 of this Circular.

 

7           Bank of Montreal Management Proxy Circular


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If the proposed Limit Increase is approved, the total number of Common Shares reserved for the Plan, minus options that have been exercised, will represent approximately 3.17% of the total number of issued and outstanding Common Shares of the Bank. The following chart shows the number of Common Shares available for issuance under the Stock Option Plan before and after the proposed Limit Increase.

LOGO

On December 16, 2019, the Board approved an increase in the number of Common Shares available for issue under the Plan, subject to obtaining shareholder and TSX approval. On January 16, 2020, the TSX conditionally approved the increase subject to shareholder approval.

The Board recommends that you vote FOR the amendments to the Bank of Montreal Amended and Restated Stock Option Plan.

“THAT the Bank of Montreal Amended and Restated Stock Option Plan (the “Plan”) be amended to provide that the number of Common Shares of Bank of Montreal issuable pursuant to the exercise of options under the Plan be increased by an additional 12,000,000 Common Shares, such that the reserve will be 84,200,000.”

To be effective, the resolution must be passed by a majority of the votes cast thereon in person or by proxy by the shareholders at the meeting. The persons designated in the enclosed form of proxy, unless otherwise instructed, intend to vote for the foregoing resolution.

 

6.

Shareholder Proposals

The Mouvement d’éducation et de défense des actionnaires (“MÉDAC”) has submitted two shareholder proposals and Harrington Investments Inc. has submitted one shareholder proposal to the Bank to be included in this management proxy circular. These Shareholder proposals submitted for your vote, along with the Bank’s responses to them, are set out starting at page 52. You may vote for, against, or abstain from voting on each of them.

The Board recommends shareholders vote AGAINST each of these shareholder proposals.

If Robert Prichard or Darryl White is your proxyholder and you have not given instructions on how to vote, he will vote against each of these proposals.

Voting Information

Items of Business

At the meeting, you will vote on:

 

 

Election of directors

 

Appointment of the Shareholders’ auditors

 

Approval of approach to executive compensation

 

Amending the Bank of Montreal Amended and Restated Stock Option Plan

 

Shareholder Proposals

 

Bank of Montreal Management Proxy Circular       8  


Table of Contents

Each item of business, other than the election of directors, needs approval by a majority (more than 50%) of the votes cast in order to be approved.

Who Can Vote

You have the right to vote – one vote per Share – if you owned Shares on February 3, 2020, unless you are described below under “Who Cannot Vote”. On that date, we had 639,627,837 Common Shares outstanding.

Voting Instructions for Non-Registered Shareholders

You are a non-registered Shareholder if the Shares you own are registered for you in the name of an intermediary, such as a bank, investment dealer, securities broker or trust company. Most Shareholders are non-registered Shareholders. If you are a non-registered Shareholder, your intermediary will send you a voting instruction form with this circular. We may not have records of your shareholdings as a non-registered Shareholder, so you must follow the instructions from your intermediary to vote.

If you wish to vote in person at the meeting, insert your name in the space provided for the proxyholder appointment on the voting instruction form, and return it as instructed by your intermediary. Do not complete the voting section of the voting instruction form, since you will vote in person at the meeting. When you arrive at the meeting, please register with our transfer agent, Computershare Trust Company of Canada. If no space is provided for you to insert your name on the form, please contact your intermediary for instructions.

If you do not intend to attend the meeting and vote in person, you can either mark your voting instructions on the voting instruction form or choose another person – called a proxyholder – to attend the meeting and vote your Shares for you. In either case, you will need to complete and return your voting instruction form as instructed by your intermediary.

Voting Instructions for Registered Shareholders

You are a registered Shareholder if the Shares you own are registered directly in your name. If that is the case, your name appears on your Share certificate or a statement from a direct registration system confirming your shareholdings.

If you wish to vote in person at the meeting, do not complete or return the enclosed proxy form but bring it with you to the meeting. When you arrive at the meeting, please register with our transfer agent, Computershare.

If you do not intend to attend the meeting and vote in person, you can either mark your voting instructions in the voting section of the proxy form or choose another person – called a proxyholder – to attend the meeting and vote your Shares for you. In either case, you will need to complete and return the enclosed proxy form to Computershare.

Voting by Proxy

Choosing Your Proxyholder

The enclosed proxy form or voting instruction form names Robert Prichard or Darryl White, each a director of the Bank, as your proxyholder. If you wish to appoint a different proxyholder, write that person’s or company’s name in the blank space on the form or, if voting online, in accordance with the online voting instructions. Your proxyholder does not have to be a Shareholder of the Bank. Make sure your chosen proxyholder will attend the meeting and vote for you. If you do not appoint a different proxyholder in your returned proxy form or voting instruction form, then Robert Prichard or Darryl White will vote for you.

How Your Proxyholder Will Vote

For the election of directors and the appointment of the Shareholders’ auditors, you may either vote for or withhold. For the advisory vote on the Bank’s approach to Executive Compensation, you may vote for or against. For the approval of the amendment of the Bank of Montreal Amended and Restated Stock Option Plan, you may vote for or against. For the shareholder proposals, you may

 

9           Bank of Montreal Management Proxy Circular


Table of Contents

vote for, against or abstain. If you have given voting instructions in your proxy form or voting instruction form, your proxyholder must vote according to those instructions. If you have not given voting instructions in your proxy form or voting instruction form, your proxyholder will decide how to vote. Your proxyholder will also decide how to vote on any amendment or variation to any of the matters in the notice of the meeting or any new matters that are properly brought before the meeting.

If you properly complete and return your proxy form or voting instruction form, but do not appoint a different proxyholder and do not give specific voting instructions, Robert Prichard or Darryl White will vote for you as follows:

 

for the election of the nominee directors to the Board

 

for the appointment of the Shareholders’ auditors

 

for the advisory resolution approving the Bank’s approach to executive compensation

 

for the amendment to the Bank of Montreal Amended and Restated Stock Option Plan

 

against the Shareholder proposals

Returning the Proxy Form

If you are a registered Shareholder, the enclosed proxy form tells you how to submit your voting instructions. Our transfer agent, Computershare, must receive your proxy by no later than 5:00 p.m. (Eastern Daylight Time) on March 30, 2020 (or the last business day before any adjournment, if the meeting is adjourned). You may return your proxy form in one of the following ways:

 

by mail, in the envelope provided

 

by fax, to 1-866-249-7775 (if faxing within Canada and the United States) or 416-263-9524 (other countries)

 

online by going to www.investorvote.com and following the instructions on the screen

Returning the Voting Instruction Form

If you are a non-registered Shareholder, return your voting instructions using one of the methods noted on the voting instruction form provided by your intermediary. Remember that your intermediary must receive your voting instructions in sufficient time for your intermediary to act on them. For your votes to count, they must be received by Computershare by no later than 5:00 p.m. (Eastern Daylight Time) on March 30, 2020 (or the last business day before any adjournment, if the meeting is adjourned).

Changing Your Voting Instructions

If you are a registered Shareholder and you change your mind about how you have voted before the meeting, you must deliver a signed written notice changing your instructions to one of the following people:

 

the Corporate Secretary of the Bank not later than 5:00 p.m. (Eastern Daylight Time) on the last business day before the meeting (or any adjournment, if the meeting is adjourned) at the address, fax number or email provided on page 48 of this circular

 

the Chair of the Board before the meeting starts or any adjourned meeting reconvenes.

You may also change your instructions by voting in person at the meeting after registering with our transfer agent, Computershare, at the meeting.

If you are a non-registered Shareholder and have returned your voting instructions to your intermediary and change your mind about your vote, or decide to attend the meeting and vote in person, contact your intermediary to find out what to do.

Voting Instructions for Employee Shareholders

If you hold Shares through the Bank of Montreal Employee Share Ownership Plan or Employee Share Purchase Plan, you may vote your Shares in one of the following ways:

 

online by visiting www.investorvote.com and following the online instructions

 

by following the Voting Instructions for Non-Registered Shareholders above

We Encourage You to Vote

We encourage you to vote. This circular is being sent to you for the purpose of soliciting proxies by the Bank’s management for use at the meeting. Costs of the solicitation, including the costs of distributing materials to all beneficial owners, are paid by the Bank. We may also contact you by

 

Bank of Montreal Management Proxy Circular       10  


Table of Contents

letter, email or phone call to ask you to vote, using our outside agency, Gryphon Advisors Inc. We expect to pay approximately $40,000 for their services, plus charges for any telephone calls. They can be reached toll-free at 1-833-266-0365 or by email at inquiries@gryphonadvisors.ca.

Who Cannot Vote

Shares beneficially owned by the following entities and persons cannot be voted (unless in circumstances approved by the Minister of Finance):

 

the Government of Canada or any of its agencies

 

the government of a province or any of its agencies

 

the government of a foreign country or any political subdivision of a foreign country or any of its agencies

 

any person who has acquired more than 10% of any class of Shares of the Bank.

Also, if a person, or an entity controlled by a person, beneficially owns Shares that are, in the aggregate, more than 20% of the eligible votes that may be cast, that person or entity may not cast any vote on the Shares (unless permitted by the Minister of Finance).

To the knowledge of the Bank’s directors and officers, as at February 3, 2020, no one person or entity beneficially owned, directly or indirectly, or exercised control or direction over more than 10% of the Bank’s outstanding Shares.

Confidentiality

To keep voting confidential, Computershare counts all proxies. Computershare only discusses proxies with the Bank when legally necessary, when a Shareholder clearly intends to communicate with management, or when there is a proxy contest.

Contacting the Bank’s Transfer Agent

For general Shareholder inquiries, contact our transfer agent:

by mail at:

Computershare Trust Company of Canada

100 University Avenue

8th Floor, North Tower

Toronto, Ontario

M5J 2Y1

by telephone:

within Canada and the United States at 1-800-340-5021

from all other countries at 514-982-7555

by email at:

service@computershare.com

by fax:

within Canada and the United States at 1-888-453-0330

from all other countries at 416-263-9394

Shareholder Questions at the Meeting

You can ask questions about the Bank and its business in any of the following ways:

  1.

In person at the meeting

  2.

In writing when you register for the meeting with Computershare

  3.

During the webcast at www.bmo.com/home/about/banking/investor-relations/annual- general-meeting

  4.

Prior to the meeting, by email to the Corporate Secretary at corp.secretary@bmo.com

  5.

Prior to the meeting, by mail to the Corporate Secretary at the address provided on page 48

Shareholder Proposals Next Year

Proposals for the next annual meeting of Shareholders must be submitted by November 9, 2020. The Board has adopted a Proxy Access Policy, which provides an additional way for shareholders to submit director nominations. This Policy can be found at https://www.bmo.com/home/about/banking/corporate-governance/select-documents

 

11           Bank of Montreal Management Proxy Circular


Table of Contents

Directors

The Board is responsible for supervising the management of the business and affairs of the Bank. As Shareholders, you elect the members of the Board. This section provides information about the director nominees for election to the Board, their continuing education and skills, their compensation and their attendance at meetings.

Nominees for Election to Board of Directors

The effective management of an organization of the Bank’s size and scope requires dedication, diversity and experience. Pie charts (a) and (b) below provide summary information about the geographical mix and tenure of the non-employee director nominees. Pie chart (c) shows the attendance of non-employee director nominees serving on the Board at the end of fiscal 2019. The director nominee profiles on pages 13 to 18 provide detailed information about each nominee for election to the Board, including their expertise, committee memberships, meeting attendance, public board memberships and voting results for last year’s director elections. The profiles also disclose information on the securities held by the nominees as at February 6, 2020, as well as the value of their total compensation earned in fiscal 2019.

 

 

LOGO

 

   

 

Gender Diversity

 

45%

 

of our independent director nominees are women.

 

 

LOGO

 

 

 
   
   

Experience

 

100%

 

of our independent director nominees have experience in accounting and finance, human resources, investment banking/mergers & acquisitions, risk management and strategic planning and have other board experience.

 

 

LOGO

 

 

 

 

Bank of Montreal Management Proxy Circular       12  


Table of Contents

 

 

 

    

 

 

LOGO

Janice M. Babiak

CPA (US), CA (UK), CISM,
CISA

 

Age: 62

Nashville, Tennessee

United States

Director Since: 2012

Independent (1)

 

2019 Votes for: 98.53%

   

Jan Babiak, a Corporate Director, is a former Managing Partner at Ernst & Young LLP (EY), an accounting firm. From 1982 until the end of 2009, and based in the United Kingdom from 1990 onwards, she held a number of roles including global assurance and advisory P&L leadership roles in Technology Security and Risk Services and Regulatory and Public Policy; and she founded and led their global Climate Change and Sustainability Services practice. She also served on EY’s management board for Northern Europe, Middle East, India and Africa. Her current listed company portfolio includes serving on the board of Walgreens Boots Alliance, Inc. where she chairs the Audit Committee and serves on the Finance Committee. She joined the board of Euromoney Institutional Investor PLC beginning December 1, 2017 and serves on its Nominations Committee, Remuneration Committee and as its Senior Independent Director. She recently completed her final term having served nine years as a Council member for the Institute of Chartered Accountants in England and Wales but continues to serve on select working groups. She received a B.B.A. in Accounting from the University of Oklahoma and an M.B.A from Baldwin Wallace University and holds international information systems security and control, as well as US and UK accounting qualifications.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

  

 

ATTENDANCE

 

 

 

ATTENDANCE (TOTAL)

 

    Board of Directors   

10 of 10 (100%)

 

21 of 21 (100%)

    Audit and Conduct Review   

  6 of   6 (100%)

 
    Governance & Nominating Committee   

  5 of   5 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

 

CURRENT BOARD COMMITTEE MEMBERSHIPS

 

    Walgreens Boots Alliance, Inc.   

April 2012 – Present

  Audit (Chair)
         Finance
    Euromoney Institutional Investor PLC    December 2017 – Present   Nominations
         Remuneration Committee
      Experian plc   

April 2014 – January 2016

 

 

   SECURITIES HELD

 

   

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units
(DSUs) 
(3)(9)

 

  Total of

Shares

and DSUs

 

 

Total

Amount
at Risk 
(4)

 

   

 

Minimum

Required (5)

 

 

 

 

  Amount Exceeding
Minimum Required 
(5)

 

 

Total Amount at Risk as a Multiple of Annual Retainer (6)

 

 

2020

  500   22,632   23,132  

$ 2,370,336

  $  600,000     $ 1,770,336  

11

 

2019

  500   18,757   19,257  

$ 1,870,625

  $  600,000     $ 1,270,625  

8.7

 

Net Change

 

    3,875     3,875  

$    499,711

    $    499,711  

2.3

 

   VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

   

$300,000 ($300,000 in DSUs)

 

 

 

 

 

    

 

LOGO

Sophie Brochu, C.M.

 

Age: 56

Bromont, Quebec

Canada

Director Since: 2011

Independent (1)

 

2019 Votes for: 99.48%

   

Sophie Brochu, a Corporate Director, has been active in the energy industry for more than 30 years. A graduate in economics from Université Laval, she began her career in 1987 at SOQUIP, a Quebec Crown Corporation. In 1997 she joined Énergir, as Vice President, Business Development. In 2007, after holding various positions in the company, she became President and Chief Executive Officer, a position she held until December 2019. Ms. Brochu serves on the Board of Directors of BCE/Bell and CGI Inc. Involved with Centraide of Greater Montréal, Ms. Brochu is Chair of Fondation Forces Avenir, which promotes students’ involvement in their communities. She is founder of “ruelle de l’avenir”, a project aimed at encouraging students in the Centre-Sud and Hochelaga neighbourhoods of Montréal to remain in school. Ms. Brochu is a member of the Order of Canada.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

 

ATTENDANCE

 

 

 

ATTENDANCE (TOTAL)

 

    Board of Directors  

10 of 10 (100%)

 

16 of 16 (100%)

    Audit and Conduct Review  

  6 of   6 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

 

CURRENT BOARD COMMITTEE MEMBERSHIPS

 

    Bell Canada  

2010 – Present

 

Corporate Governance

       

Management Resources and Compensation

    BCE Inc.  

2010 – Present

 

Corporate Governance

       

Management Resources and Compensation

    CGI Inc.  

2019 – Present

 

Corporate Governance

 

   SECURITIES HELD

 

   

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units (DSUs) (3)(9)

 

 

Total of

Shares

and DSUs

 

 

Total

Amount
at Risk 
(4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at

Risk as a Multiple of Annual Retainer (6)

 

 

2020

  500  

25,984

 

26,484

 

$ 2,713,815

 

$ 600,000

 

$ 2,113,815

 

12.6

 

2019

  500  

22,815

 

23,315

 

$ 2,264,819

 

$ 600,000

 

$ 1,664,819

 

10.5

 

Net Change

 

 

  3,169

 

  3,169

 

$    448,996

   

$    448,996

 

2.1

 

   VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

   

$215,000 ($215,000 in DSUs)

 

13           Bank of Montreal Management Proxy Circular


Table of Contents

 

 

    

 

LOGO

Craig W. Broderick

 

Age: 60

Greenwich, Connecticut

United States

Director Since: 2018 Independent (1)

 

2019 Votes for:

99.62%

   

Craig Broderick is a Corporate Director. He is a Senior Director at Goldman, Sachs & Co., an investment banking firm, from which he retired as an active employee in January 2018. He was, until then, the firm’s Chief Risk Officer, a member of its Management Committee, and Chair or co-chair of key risk committees. He spent 32 years with Goldman Sachs, primarily in the risk field. He holds a BA from the College of William and Mary. He is active with his alma mater, including serving nine years as a Trustee, and was chair of its Investment Committee.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

  10 of 10 (100%)

 

18 of 18 (100%)

    Risk Review  

  8 of 8 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST

 

 

CURRENT BOARD COMMITTEE

 

   

None

 

   

N/A

         

 

   SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

 

Deferred
Share Units
(DSUs) 
(3)(9)

 

 

Total of

Shares and DSUs

 

 

Total Amount
at Risk 
(4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of Annual Retainer (6)

 

  2020  

5,000

 

2,881

 

7,881

 

$ 807,566

 

$ 600,000

 

 $207,566

 

3.8

  2019  

5,000

 

   443

 

5,443

 

$ 528,733

 

$ 600,000

 

($  71,267)

 

2.5

 

Net Change

 

 

2,438

 

2,438

 

$ 278,833

   

 $278,833

 

1.3

 

   VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $ 235,000 ($235,000 in DSUs)

 

 

 

 

    

 

 

LOGO

George A. Cope, C.M.

 

Age: 58

Toronto, Ontario

Canada

Director Since: 2006

Independent (1)

 

2019 Votes for: 97.83%

   

George Cope, a Corporate Director, has served in public-company chief executive officer roles in the Canadian communications industry for more than 25 years, earning a reputation as an innovative operational and financial strategist, builder of next-generation broadband networks and leader of high-performance teams. Mr. Cope served as President and Chief Executive Officer of BCE Inc. and Bell Canada, the country’s largest communications company, from 2008-2020. Mr. Cope retired from Bell on January 5, 2020. Mr. Cope was appointed to the Order of Canada in 2014, inducted into the Canadian Business Hall of Fame in 2018 and recognized as: Report on Business CEO of the Year, Corporate Citizen Award (2019), one of Harvard Business Review’s top 100 Best-Performing CEOs in the World (2019); Canada’s Outstanding CEO of the Year (2015); Ivey Business Leader of the Year (2013); Marketer of the Year (1997); and one of Canada’s first Top 40 Under 40 (1996). A graduate of the Ivey School of Business at Western University (HBA ’84) and a member of the school’s advisory board, Mr. Cope has also been awarded honorary doctorates by Western, the University of Windsor, Trent University and Queen’s University. He served as Chair of United Way Toronto in 2013, and received the Queen’s Diamond Jubilee Medal for Bell Let’s Talk in 2012 and the Richard Ivey School Distinguished Service Award in 2009. Mr. Cope also serves on the Boards of Maple Leaf Sports & Entertainment, Brain Canada and CGI Inc.

 

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

20 of 21 (95%)

    Governance and Nominating  

  4 of   5 (80%)

 
    Human Resources  

  7 of   7 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

 

CURRENT BOARD

COMMITTEE MEMBERSHIPS

 

    CGI Inc.  

Jan 2020 – Present

 

Corporate Governance, Human Resources

    Bell Canada  

2008 – 2020

 

None

    BCE Inc.  

2008 – 2020

 

None

         

 

   SECURITIES HELD

 

   

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of

Shares and DSUs

 

 

Total

Amount at Risk (4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of Annual Retainer (6)

 

  2020  

25,660

 

44,891

 

70,551

 

$ 7,229,361

 

$ 600,000

 

$ 6,629,361

 

33.6

  2019  

25,660

 

40,814

 

66,474

 

$ 6,457,284

 

$ 600,000

 

$ 5,857,284

 

30.0

 

Net Change

 

 

  4,077

 

  4,077

 

$    772,077

   

$    772,077

 

3.6

 

   VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

    $230,000 ($230,000 in DSUs)

 

Bank of Montreal Management Proxy Circular       14  


Table of Contents

 

 

 

 

    

 

LOGO

Christine A. Edwards

 

Age: 67

Chicago, Illinois

United States

Director Since: 2010

Independent (1)

 

2019 Votes for: 99.23%

   

Christine Edwards is a Capital Partner and chairs the Bank Regulatory Practice Group of Winston & Strawn LLP, an International law firm headquartered in the US. Prior to joining Winston & Strawn in 2003, she was Executive Vice-President and Chief Legal Officer at several Fortune 250 Financial Services Companies including Bank One Corporation and Morgan Stanley. In those roles she had responsibility for each company’s law, compliance, regulatory and government relations functions. Ms. Edwards is ranked nationally in the area of Financial Services and Securities Regulation by Chambers USA and America’s Leading Lawyers for Business; is an Illinois Super Lawyer and is listed in The Legal 500. Ms. Edwards is Vice-Chair of the Board of Trustees and serves on the Executive, Audit and Nominating and Governance Committees for Rush University Medical Center, a leading academic medical center in Chicago. In Washington D.C., Ms. Edwards serves on the Leadership Board of the U.S. Chamber of Commerce Center for Capital Markets Competitiveness. Ms. Edwards received a B.A. in English and Education from the University of Maryland and a J.D., with honors, from the University of Maryland School of Law.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP*

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

30 of 30 (100%)

    Governance and Nominating (Chair)  

  5 of   5 (100%)

 
    Risk Review  

  8 of   8 (100%)

 
    Human Resources  

  7 of   7 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

 

CURRENT BOARD

COMMITTEE MEMBERSHIPS

 

   

None

   

N/A

 

 

SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of Shares and DSUs

 

 

Total
Amount at Risk 
(4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at

Risk as a Multiple of

Annual Retainer (6)

 

  2020  

3,325

 

35,774

 

39,099

 

$ 4,006,475

 

$ 600,000

 

$ 3,406,475

 

18.6

  2019  

3,325

 

30,082

 

33,407

 

$ 3,245,156

 

$ 600,000

 

$ 2,645,156

 

15.1

 

Net Change

 

 

  5,692

 

  5,692

 

$    761,319

   

$    761,319

 

3.55

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $378,505 ($378,505 in DSUs)

*

 

Ms. Edwards was not a member of the Audit and Conduct Review Committee, but attended 6 of 6 meetings of such committee.

 

 

 

 

 

 

    

 

LOGO

Dr. Martin S. Eichenbaum

 

Age: 65

Glencoe, Illinois

United States

Director Since: 2015

Independent (1)

 

2019 Votes for: 99.55%

   

Dr. Martin Eichenbaum is the Charles Moskos Professor of Economics at Northwestern University (where he has been a Professor since 1988) and co-director of the Center for International Economics and Development at Northwestern University. He is an International Fellow of the C.D. Howe Institute and a fellow of both the American Academy of Arts and Sciences and the Econometric Society. He is also an Associate of the National Bureau of Economic Research (NBER) and a co-editor of its Macro Annual. He spent four years as the co-editor of the American Economic Review. He has served as a consultant to the Federal Reserve Banks of Atlanta and Chicago and the International Monetary Fund. He received a Bachelor of Commerce from McGill University and a Doctorate in Economics from the University of Minnesota.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

24 of 24 (100%)

    Audit and Conduct Review  

  6 of   6 (100%)

 
    Risk Review  

  8 of   8 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

CURRENT BOARD

COMMITTEE MEMBERSHIPS

 

   

None

   

N/A

 

 

SECURITIES HELD

 

   

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of

Shares

and DSUs

 

 

Total

Amount at Risk (4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at

Risk as a Multiple of Annual Retainer (6)

 

 

2020

 

500

 

12,913

 

13,413

 

$ 1,374,430

 

$ 600,000

 

$ 774,430

 

6.4

 

2019

 

500

 

  9,924

 

10,424

 

$ 1,012,587

 

$ 600,000

 

$ 412,587

 

4.7

 

Net Change

 

 

  2,989

 

  2,989

 

$    361,843

   

$ 361,843

 

1.7

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $250,000 ($250,000 in DSUs)

 

15           Bank of Montreal Management Proxy Circular


Table of Contents

 

 

 

    

 

 

 

LOGO

Ronald H. Farmer

 

Age: 69

Toronto, Ontario

Canada

Director Since: 2003

Independent (1)

 

2019 Votes for: 96.54%

 

   

Ron Farmer is Managing Director of Mosaic Capital Partners, a Toronto-based management and holding company with interests in several private companies. Prior to joining Mosaic in 2003, he spent 25 years with McKinsey & Company, serving as the Managing Partner for the Canadian practice from 1991 to 1997. Mr. Farmer is a director of Integran Technologies and PowerMetal Technologies. He also serves on the Dean’s Advisory Council of the Schulich School of Business. He holds a B.A. and an M.B.A. from Western University.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

30 of 30 (100%)

    Governance and Nominating  

  5 of   5 (100%)

 
    Human Resources (Chair)  

  7 of   7 (100%)

 
    Risk Review Committee  

  8 of   8 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

CURRENT BOARD COMMITTEE MEMBERSHIP

 

   

Valeant Pharmaceuticals International Inc.

 

 

2011 – 2016

 

 

SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of Shares and DSUs

 

 

Total
Amount at Risk 
(4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of

Annual Retainer (6)

 

  2020  

9,000

 

70,237

 

79,237

 

$ 8,119,415

 

$ 600,000

 

$ 7,519,415

 

37.8

  2019  

9,000

 

64,499

 

73,499

 

$ 7,139,693

 

$ 600,000

 

$ 6,539,693

 

33.2

 

Net Change

 

 

  5,738

 

  5,738

 

$    979,722

   

$    979,722

 

4.6

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $295,000 ($295,000 in DSUs)

 

 

 

 

    

 

 

LOGO

David Harquail

 

Age: 63

Toronto, Ontario

Canada

Director Since: 2018

Independent (1)

 

2019 Votes for: 99.61%

   

David Harquail is Chief Executive Officer of Franco-Nevada Corporation, a leading gold mining and energy royalty company. Mr. Harquail is also Chair of the World Gold Council which works to stimulate the demand for gold on behalf of the leading gold producers. He is currently active on the United Way Toronto & York Region Campaign Cabinet and has over 35 years of experience on public and non-profit boards and task force advisories. Mr. Harquail holds a B.A.Sc. in Geological Engineering from the University of Toronto, an MBA from McGill University and is a registered Professional Engineer in Ontario. He is also a major benefactor of the Harquail School of Earth Sciences and its Mineral Exploration Research Centre (MERC) at Laurentian University in Sudbury as well as the Harquail Centre for Neuromodulation at Sunnybrook Health Sciences Centre in Toronto.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

16 of 16 (100%)

    Audit and Conduct Review Committee  

6 of 6 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

CURRENT BOARD COMMITTEE MEMBERSHIP

 

   

Franco-Nevada Corporation

 

 

2007 – Present

  None

SECURITIES HELD

 

Year

 

 

Shares (2)

 

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of
Shares
and DSUs

 

 

Total Amount at Risk (4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of

Annual Retainer (6)

 

 

2020

  18,174  

3,480

  21,654  

$ 2,218,885

 

$ 600,000

 

$ 1,618,885

 

10.3

 

2019

  18,000  

1,215

  19,215  

$ 1,866,545

 

$ 600,000

 

$ 1,266,545

 

8.7

 

Net Change

       174  

2,265

    2,439  

$    352,340

   

$    352,340

 

1.6

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $215,000 ($215,000 in DSUs)

 

Bank of Montreal Management Proxy Circular       16  


Table of Contents

 

 

 

    

 

 

LOGO

Linda S. Huber

 

Age: 61

New York, New York

United States

Director Since: 2017

Independent (1)

 

2019 Votes for: 99.65%

   

Linda S. Huber is Chief Financial Officer and Treasurer at MSCI Inc., where she manages the Company’s global finance and investor relations functions. Prior to joining MSCI in April 2019, she was Executive Vice President and Chief Financial Officer of Moody’s Corporation until June 2018, where she had executive responsibility for the corporation’s global finance activities, information technology, communications and corporate services functions, as well as The Moody’s Foundation. Before joining Moody’s in 2005, Ms. Huber served in several increasingly senior roles in financial services, having served as Executive Vice President and Chief Financial Officer at U.S. Trust Company, a subsidiary of Charles Schwab & Company, Inc.; Managing Director at Freeman & Co.; Vice President of Corporate Strategy and Development and Vice President and Assistant Treasurer at PepsiCo. Ms. Huber also held the rank of Captain in the U.S. Army and during her four years of military service, she received two Meritorious Service Medals and became airborne qualified. Ms. Huber holds an M.B.A. from the Stanford Graduate School of Business and a B.S. (with high honors) in business and economics from Lehigh University.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

23 of 24 (96%)

    Audit and Conduct Review  

  6 of   6 (100%)

 
    Risk Review Committee  

  7 of   8 (88%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

CURRENT BOARD COMMITTEE MEMBERSHIP

 

     

None

 

   

N/A

 

SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of
Shares
and DSUs

 

 

Total
Amount at Risk 
(4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of

Annual Retainer (6)

 

 

2020

  1,858  

4,760

  6,618  

$ 678,146

 

$ 600,000

 

$    78,146

 

3.2

 

2019

  1,718  

2,283

  4,001  

$ 388,657

 

$ 600,000

 

$ (211,343)

 

1.8

 

Net Change

     140  

2,477

  2,617  

$ 289,489

   

$  289,489

 

1.4

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $250,000 ($231,667 in DSUs; $18,333 in Shares)

 

 

 

 

    

 

 

 

LOGO

Eric R. La Flèche

 

Age: 58

Montreal, Quebec

Canada

Director Since: 2012

Independent (1)

 

2019 Votes for: 99.61%

   

Eric La Flèche is President and Chief Executive Officer of Metro Inc., a leading Canadian food and pharmacy retailer and distributor, since April 2008. He joined Metro in 1991 and has held several positions of increasing responsibility, including Executive Vice-President and Chief Operating Officer from 2005 to 2008. Mr. La Flèche holds an M.B.A. from Harvard Business School and a civil law degree cum laude from the University of Ottawa. He is a long-time volunteer with Centraide of Greater Montreal (2015 Campaign Co-Chair) and serves on the advisory board of Tel-Jeunes, the leading kids help phone service in Quebec. In 2015, Mr. La Flèche was recognized as CEO of the Year in Quebec by Les Affaires, a leading business publication.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

17 of 17 (100%)

    Risk Review*  

  4 of   4 (100%)

 
    Human Resources Committee**  

  3 of   3 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

CURRENT BOARD

COMMITTEE MEMBERSHIPS

 

    Metro Inc.  

2008 – Present

 

None

 

 

SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of

Shares and DSUs

 

 

Total

Amount at

Risk (4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of

Annual Retainer (6)

 

  2020  

7,000

 

21,864

 

28,864

 

$ 2,957,694

 

$ 600,000

 

$ 2,357,694

 

13.8

  2019  

7,000

 

18,861

 

25,861

 

$ 2,512,138

 

$ 600,000

 

$ 1,912,138

 

11.7

 

Net Change

 

 

  3,003

 

  3,003

 

$    445,556

   

$    445,556

 

2.1

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $215,000 ($215,000 in DSUs)

*

  Effective April 2, 2019, Mr. La Flèche ceased to be a member of the Risk Review Committee.

**

  Effective April 2, 2019, Mr. La Flèche became a member of the Human Resources Committee.

 

 

17           Bank of Montreal Management Proxy Circular


Table of Contents

 

 

 

    

 

 

LOGO

Lorraine Mitchelmore

 

Age: 57

Calgary, Alberta

Canada

Director Since: 2015

Independent (1)

 

2019 Votes for: 99.62%

   

Lorraine Mitchelmore, a Corporate Director, was until September 2018, the President and Chief Executive Officer of Enlighten Innovations Inc. She is also the Former Executive Vice President Heavy Oil for Shell, and Former Shell Canada Limited President and Canada Country Chair. Ms. Mitchelmore has over 30 years’ experience in the international Oil and Gas industry, including areas of risk management, business strategy, operations, and employee health and safety. Prior to joining Shell in 2002, Ms. Mitchelmore worked with PetroCanada, Chevron, and BHP Petroleum. Ms. Mitchelmore holds a BSc in Geophysics from Memorial University of Newfoundland, an MSc in Geophysics from the University of Melbourne, Australia and an MBA from Kingston Business School in London, England. Ms. Mitchelmore currently serves on the Catalyst Canada Board of Advisors, Suncor Energy Inc. Board of Directors and was the recent chair of the Federal Resources of the Future Economic Strategy Table. She is also the Founder and co-chair of Smart Prosperity.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

ATTENDANCE

 

 

ATTENDANCE (TOTAL)

    Board of Directors  

10 of 10 (100%)

 

25 of 25 (100%)

    Risk Review  

  8 of   8 (100%)

 
    Human Resources  

  7 of   7 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

CURRENT BOARD

COMMITTEE MEMBERSHIPS

 

   

Suncor Energy Inc.

 

 

2019 - Present

 

 

SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

Deferred

Share Units

(DSUs) (3)(9)

 

 

Total of

Shares and DSUs

 

 

Total

Amount at Risk (4)

 

 

Minimum Required (5)

 

 

Amount Exceeding Minimum Required (5)

 

 

Total Amount at Risk as a Multiple of Annual Retainer (6)

 

 

2020

 

500

 

12,913

 

13,413

 

$ 1,374,430

 

$ 600,000

 

$ 774,430

 

6.4

 

2019

 

500

 

  9,924

 

10,424

 

$ 1,012,587

 

$ 600,000

 

$ 412,587

 

4.7

 

Net Change

 

 

  2,989

 

  2,989

 

$    361,843

   

$ 361,843

 

1.7

 

VALUE OF TOTAL COMPENSATION RECEIVED IN FISCAL 2019

 

    $250,000 ($250,000 in DSUs)

 

 

 

    

 

 

LOGO

Darryl White

 

Age: 48

Toronto, Ontario

Canada

Director Since: 2017

Non-Independent (1)

 

2019 Votes for: 99.56%

   

Darryl White is Chief Executive Officer of BMO Financial Group and was appointed in 2017. Mr. White first joined the Bank’s investment and corporate banking team in 1994. He is a director of BMO Financial Corp., the bank’s U.S. holding company. He is a member of the Ottawa-based Business Council of Canada and Washington, D.C.-based The Business Council. He also serves as a member of the Mayor of Beijing’s International Business Leaders Advisory Council. He serves as Vice-Chair of the Catalyst Canada Advisory Board and is a past member of the Advisory Council of Women in Capital Markets. Mr. White has strong ties to United Way Centraide. In 2018, he became Co-Chair of the Inclusive Local Economic Opportunity Roundtable, a partnership between BMO and United Way Greater Toronto that brings together business and community leaders to develop approaches to reduce economic disparity in the region. Mr. White serves as a director of Unity Health Toronto, which includes St. Michael’s Hospital, St. Joseph’s Health Centre and Providence Healthcare. He is also a director of the National Hockey League’s Montreal Canadiens, and Alpine Canada, the governing body for alpine, para-alpine and ski cross racing in Canada. Mr. White is a graduate of Western University’s Ivey Business School, and has completed the Advanced Management Program at the Harvard Business School.

 

 

 

    BOARD/COMMITTEE MEMBERSHIP

 

 

 

ATTENDANCE

 

 

 

ATTENDANCE (TOTAL)

 

    Board of Directors  

10 of 10 (100%)

 

10 of 10 (100%)

    Audit and Conduct Review*  

  6 of   6 (100%)

 
    Governance and Nominating*  

  5 of   5 (100%)

 
    Human Resources*  

  7 of   7 (100%)

 
    Risk Review*  

  8 of   8 (100%)

 
 

    PUBLIC BOARD MEMBERSHIP DURING THE LAST FIVE YEARS

 

 

 

CURRENT BOARD COMMITTEE MEMBERSHIP

 

    None     N/A

 

SECURITIES HELD

 

 

Year

 

 

Shares (2)

 

 

Units (7)

 

 

Total of Shares and Units

 

 

Total Amount at Risk (4)

 

 

Minimum Required (8)

 

 

Amount Exceeding

Minimum Required (8)

 

   
  2020  

20,870

 

187,535

 

208,405

 

$ 21,355,260

 

$ 8,000,000

 

$ 13,355,260

 
  2019  

20,750

 

174,309

 

195,059

 

$ 18,948,031

 

$ 8,000,000

 

$ 10,948,031

 
    Net Change  

120

 

  13,226

 

  13,346

 

$   2,407,229

     

$   2,407,229

   

*

 

During fiscal 2019, Mr. White attended Committee meetings, in full or in part as appropriate, at the request of the Committees but was not a member of any such Committee.

 

   

 

Bank of Montreal Management Proxy Circular       18  


Table of Contents
(1)

“Independent” refers to the Board’s determination of whether a director is “independent” under the standards adopted by the Board as described under the heading “Director Independence” on page 38. Mr. White is not independent under the standards as he is an executive of the Bank.

(2)

“Shares” refers to the number of Shares beneficially owned, or over which control or direction is exercised, by the nominee as at February 6, 2020 and February 7, 2019, the respective information dates of this, and last year’s management proxy circulars.

(3)

“DSUs” refers to the number of deferred share units held by the nominee under the Deferred Share Unit Plans referenced on page 26 as at February 6, 2020 in respect of 2019 and February 7, 2019 in respect of 2018.

(4)

The “Total Amount at Risk” is determined by multiplying the number of Shares, DSUs and Units held by each nominee as at February 6, 2020 in respect of 2019 and February 7, 2019 in respect of 2018 by the closing price of the Shares on the Toronto Stock Exchange (“TSX”) on each such date ($102.47 and $97.14, respectively).

(5)

“Minimum Required” refers to the minimum value of Shares and/or DSUs the director is required to hold under the Board’s share ownership requirements. Under the fee structure adopted as of fiscal 2012, non-employee directors are required to hold at least eight times the cash portion of their annual retainer fee in Shares or DSUs. This is equivalent to the amount required under the prior fee structure which required Share and/or DSU holdings of at least six times the annual retainer. Newly appointed board members would be expected to build up the minimum share ownership requirement over time, which is accelerated by all remuneration being required to be paid in DSUs or in Shares until the requirement is met. See page 25.

(6)

“Total Amount at Risk as a Multiple of Annual Retainer” is determined by dividing “Total Amount at Risk” by the aggregate of the cash retainer and equity portion of the annual director fee ($215,000 under the fee structure as at February 6, 2020 – see page 25 “Directors’ Compensation and Attendance”).

(7)

“Units” refers to the number of deferred share units under the Bank’s Deferred Share Unit Plan for Executives, and restricted share units and performance share units under the Bank’s Mid-Term Incentive Plan for Executives held by Mr. White as at February 6, 2020. Note that Mr. White was not entitled to receive DSUs under the directors’ Deferred Share Unit Plans referenced on page 25.

(8)

Mr. White’s share ownership requirements as an executive of the Bank are described under “Executives are required to have an equity stake” on page 78. Requirements are determined as a multiple of base salary.

(9)

The market or payout values of vested share-based awards (“DSUs”) not paid out or distributed to the nominee directors as at October 31, 2019 using the closing Share price on the TSX on that date ($97.50) were: Jan M. Babiak ($2,112,825), Sophie Brochu ($2,456,610), Craig W. Broderick ($222,007) George A. Cope ($4,278,007), Christine A. Edwards ($3,330,795), Martin S. Eichenbaum ($1,186,673), Ron H. Farmer ($6,708,878), David Harquail ($284,505), Linda S. Huber ($399,750), Eric R. La Flèche ($2,059,005), and Lorraine Mitchelmore ($1,186,673).

 

19           Bank of Montreal Management Proxy Circular


Table of Contents

Continuing Education and Skills

Continuing Education

All directors are required to continuously advance their knowledge of the Bank’s business, the financial services sectors in which it operates, emerging trends and issues and significant strategic initiatives.

To assist directors in understanding their responsibilities and updating their knowledge of issues affecting our businesses, we provide directors with an ongoing education program. The Bank’s Governance and Nominating Committee is responsible for (i) overseeing the orientation program for new directors and committee members with respect to their Board responsibilities, the role of the board and its committees and the contribution individual directors are expected to make, and (ii) overseeing the programs for providing continuing education for all directors and committee members.

On an ongoing basis, the Bank provides many opportunities for directors to read and hear about specialized and complex topics relevant to the Bank’s operations, and to make site visits. In particular, directors:

   

receive timely access to comprehensive materials and relevant information prior to each Board and committee meeting;

   

receive regular deep dive presentations on relevant topics, including technology and technological innovation; and

   

have full access to our senior management and employees and participate in our Executives Meet Directors Program.

During the 2019 fiscal year, directors participated in educational sessions and roundtable sessions and received educational materials on the topics outlined below. They also received quarterly and ad hoc briefings on regulatory developments.

 

  Quarter

 

 

Topic

 

 

 

Audience (Board/
Committee)

 

 

  Q1 2019

 

 

Cyber Security Update

 

 

 

Board

 

 

 

Debt Machine – Financial Times – January 21 to February 14, 2019 (Series)

 

 

 

Board

 

 

 

AML Regulatory Landscape update on: Canadian AML Regulations and US Regulatory Guidance; the Cannabis Act; the Monetary Authority of Singapore’s guidance for effective Transaction Monitoring controls; the Hong Kong Monetary Authority’s Good Practice paper on the performance of sanctions screening systems; and the People’s Bank of China’s Administrative Guidance on Management of AML/CTF and Sanctions Measures for Financial Institutions

 

 

 

Audit & Conduct Review

 

 

 

Regulatory Review: Conduct and Consumer/Investor Protection Measures to Address Sales Practices and Advisor Standards; Revised OSFI Corporate Governance Guidelines; Regulator Interest in Climate Change Strategy; Implementation of US Regulatory Reform

 

 

 

Audit & Conduct Review

 

 

 

Economic Outlook – Dodging a Bullet: The United States-Mexico-Canada Trade Agreement removed a dark cloud over Canada. BMO Capital Markets Economic Research

 

 

 

Risk Review

 

 

 

Bill C-86 Update

 

 

 

Governance and Nominating

 

 

 

CBCA Amendments – Diversity

 

 

 

Governance and Nominating

 

 

 

OSFI Revised Corporate Governance Guidelines

 

 

 

Governance and Nominating

 

 

Bank of Montreal Management Proxy Circular       20  


Table of Contents

  Quarter

 

 

Topic

 

 

 

Audience (Board/
Committee)

 

 

  Q2 2019

 

 

Global Cybersecurity and BMO Financial Crimes Unit Update

 

 

 

Board

 

 

 

BMO’s Approach to Philanthropy

 

 

 

Board

 

 

 

Rewriting the Rules in Retail Banking – McKinsey & Company – February 2019

 

 

 

Board

 

 

 

Workplace of the Future

 

 

 

Board

 

 

 

AML Regulatory Update: Update on Canadian AML Regulations; Canadian Parliamentary review of Canadian AML regime; New FINTRAC Guidance; OFAC Venezuela Sanctions; Update on the Cannabis Act

 

 

 

Audit & Conduct Review

 

 

 

Regulatory Review: Australia Royal Commission Report on Misconduct; Bill C-86 Introduces Significant Changes for FIs; FCAC to Review the Complaints Processes of Canadian FIs; State-Based Fiduciary Rules Take Shape in the US; NYDFS Guidance on Whistleblowing Programs; HKMA Introduces Conduct and Culture Self-Assessments; FCA and CBI Focus on Culture and Conduct; Canada launches Open Banking Consultations; Hong Kong’s SFC proposes to update Funds Regime; UK PRA statement on Climate Change; Implementation of US Regulatory Reform; California Privacy Legislation

 

 

 

Audit & Conduct Review

 

 

 

Agriculture Review

 

 

 

Risk Review

 

 

 

Securitization Primer

 

 

 

Risk Review

 

 

 

Economic Outlook: The Big Fade. BMO Capital Markets Economic Research

 

 

 

Risk Review

 

 

 

Mining Industry Review

 

 

 

Risk Review

 

 

 

Oil and Gas Industry Review

 

 

 

Risk Review

 

 

  Q3 2019

 

 

Economic Outlook with BMO’s Chief Economist

 

 

 

Board

 

 

 

The Economist – Banking Services: Tech’s raid on the banks – May 2, 2019

 

 

 

Board

 

 

 

Tour of the Financial Crimes Unit Fusion Centre

 

 

 

Board

 

 

 

AML Regulatory Update: Amendments to the Canadian AML Regulations; Federal Budget impacts on AML/TF; FINTRAC Operational Alert on romance fraud and mass marketing fraud; FATF Mutual Evaluation Report of China; OFAC Enforcement Actions

 

 

 

Audit and Conduct Review

 

 

 

Regulatory Developments: International update on culture and conduct; update on the Canadian government’s commitment to modernization and innovation; Canadian and US regulatory initiatives on digitization, cloud computing, risk modelling and cyber risk; US regulatory reform on stress testing, recovery and resolution planning, the Volcker Rule and too-big-to-fail reforms.

 

 

 

Audit and Conduct Review

 

 

 

US Credit Losses Standard: A Tool for Audit Committees

 

 

 

Audit and Conduct Review

 

 

 

Economic Outlook: Certain Marvel. BMO Capital Markets Economic Research

 

 

 

Risk Review

 

 

 

Goldman Sachs Corporate Director Symposium

 

 

 

RRC Member

 

 

 

Institute of Corporate Directors National Conference

 

 

 

Board Chair, HRC Chair, ACRC Member

 

 

 

Corporate Governance Weekly Conference

 

 

 

GNC Chair and ACRC Chair

 

 

21           Bank of Montreal Management Proxy Circular


Table of Contents

  Quarter

 

 

Topic

 

 

 

Audience (Board/
Committee)

 

  Q3 2019

  (cont.)

 

 

Women’s Corporate Directors’ Global Institute Board Education Summit – Harnessing the Transformative Power of Technology

 

 

 

ACRC Chair

 

GNC Chair

 

 

KPMG 2019 Board Leadership Conference

 

 

 

ACRC Chair

 

   

 

BMO Capital Markets Conference Call on the Brexit Vote

 

 

 

GNC Chair HRC Chair

 

 

  Q4 2019

 

 

Climate Change Briefing

 

 

 

Audit and Conduct Review

 

 

 

Canadian AML Regulatory Amendments; FINTRAC Administrative Monetary Penalties Approach and Guidance; AML Assessments; European Union 5th Money Laundering Directive; Brexit; China new Institutional Risk Assessment requirements; Office of Foreign Assets Control jurisdictional sanctions

 

 

 

Audit and Conduct Review

 

 

 

Regulatory Focus: on Seniors and Vulnerable Customers; Investor Protection; the Financial Stability Board’s Cyber Toolkit; the Senate Committee’s Report on Open Banking; the Canadian Government’s new Digital Charter; and the international regulatory increased focus on climate change risk and disclosures

 

 

 

Audit and Conduct Review

 

 

 

Commercial Real Estate Industry Review

 

 

 

Risk Review

 

 

 

Central Counterparties

 

 

 

Risk Review

 

 

 

National Association of Corporate Directors Chicago Chapter, Getting the Board Ready for the Future of Cyber.

 

 

 

GNC Chair

 

In 2013, the Governance and Nominating Committee oversaw the implementation of an online director education program (the Board Learning App), developed in conjunction with the Bank’s Institute for Learning, consisting of didactic and self-directed learning via electronic medium. Launched in April 2013, this learning application responds to the need for continuous financial industry and risk learning in support of the complex and evolving role of the Board of Directors at the Bank. In 2018 the Board Learning App was redesigned to align with the expectations of modern learners and to provide the Board of Directors a greater variety of learning resources, on a broader range of topics and more frequently. The content framework for the learning application consists of 6 core topic pillars: (1) financial; (2) customer/client; (3) risk; (4) regulatory; (5) change; and (6) people.

 

Bank of Montreal Management Proxy Circular       22  


Table of Contents

As part of the redesigned platform, directors are provided with internal and external educational materials related to each of the six content areas. The content is curated by subject-matter-experts (SMEs) from across the Bank. SMEs and content providers also play a role in setting the context for the way material is presented. The learning application is updated periodically with new resources, building on additional topics as they relate to the six core areas and the Bank’s strategic priorities. Over the last year, directors were provided with the following educational materials through the Board Learning App:

 

 

Internal or External Material

 

 

 

Topics

 

  

 

Audience

 

Internal  

Enterprise AML Office

  The Washing Machine (monthly newsletters)

Environmental, Social and Governance

  Corporate & Environmental Sustainability: Building Brand & Community Good

Technology

  Accelerating BMO’s Digital Progress

  Advancing our Digital Future

Human Resources

  Building the Bank of the Future Through our Talent

Line of Business Deep Dives

  Securitization Primer

   All Board members
External  

Industry Research

  Synergy and disruption: Ten trends shaping fintech, McKinsey & Company, December 2018

  Gartner FI.R.ST – The Gartner Journal of Finance, Risk, Strategy / Digital Edition

BMO’s Technology Transformation

  How BMO is Accelerating through Technology / T&Os Technology Transformation Q3 Infographic

  BMO QuickPay wins 2018 Banking Technology Award for Digital Innovation

BMO’s Innovation & Accelerations

  REBA – The robot helping LRC simplify their compliance processes

  Nov 2018 Hack-a-thon & Tech Conference

   All Board members

The following mandatory and recommended training was also made available to the full Board through the Board Learning App:

   

Essentials of Risk Management

   

AML Training for the Board of Directors

   

Volcker Rule Essentials for the Board of Directors

In addition, directors are encouraged to participate in relevant external education seminars and in 2019 several did.

 

23           Bank of Montreal Management Proxy Circular


Table of Contents

Skills Matrix

Non-employee directors confirm their skills and experience in February of each year. The information is used to assess the overall strength and diversity of the Board. All non-employee nominee directors possess the following skills: Other Board Experience (2), Accounting and Finance (4), Mergers & Acquisitions (5), Risk Management (6), Human Resources (7), and Strategic Planning (10). Non-employee nominee Directors also possess the following skills:

 

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

 

LOGO

 

 

Executive Leadership (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Services (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Responsibility/Sustainability (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legal (9)

 

 

 

 

 

 

Retail (11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Information Technology & Security (12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Policy (13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Experience as a senior executive/officer of a publicly listed company or major organization.

(2)

Served as a board member of a public, private or non-profit entity.

(3)

Oversight, advisory or operational experience in the financial services industry other than serving as a director of the Bank.

(4)

Knowledge of and experience with financial accounting and reporting, corporate finance and familiarity with internal financial/ accounting controls, Canadian or U.S. Generally Accepted Accounting Principles and/or International Financial Reporting Standards.

(5)

Experience with investment banking or mergers and acquisitions.

(6)

Knowledge of, and experience with internal risk controls, risk assessments and reporting.

(7)

Experience with benefit, pension and compensation programs (in particular, executive compensation programs).

(8)

Understanding and experience with corporate responsibility practices and the constituents involved in sustainable development practices.

(9)

Experience as a lawyer either in private practice or in-house with a publicly listed company or major organization.

(10)

Experience in the development and implementation of a strategic direction of a large organization.

(11)

Experience as a senior executive in a major products, services or distribution company.

(12)

Experience or knowledge relating to the information technology and security needs of a major organization.

(13)

Experience in the workings of government and public policy.

 

Bank of Montreal Management Proxy Circular       24  


Table of Contents

Directors’ Compensation and Attendance

Directors’ Compensation – Fiscal 2019

Starting in fiscal 2012, the Board adopted a flat fee structure for director compensation. The flat fee structure is simpler to administer and disclose and aligns better with the job of being a director of the Bank. A director’s duty is to be available to assist and represent the Bank 365 days a year. Attendance at meetings is an important part of that but not the whole job. Providing advice outside of meetings, identifying opportunities for the Bank and generally being attentive to the best interests of the Bank at all times, including meeting increased regulatory requirements, are important elements of the role of the director. A flat fee structure better compensates for this responsibility.

 

 

  Description of fee (1)

 

 

 

Fiscal 2019 Amounts

 

 

  Annual retainer fee (including membership on one committee)

 

 

 

$215,000 ($140,000 in DSUs

and $75,000 in cash) (2)(3)

 

 

  Fee for each additional committee membership in excess of one

 

 

 

$15,000

 

 

  Fee for each special Board meeting in excess of five per year

 

 

 

$2,000

 

 

  Fee for each special committee meeting in excess of five per year

 

 

 

$1,500

 

  Chair retainer fees:  

  Chairman of the Board

 

$425,000 per year ($175,000 in

DSUs and $250,000 in cash) (2)(4)

  Audit and Conduct Review Committee

  $50,000 per year

  Governance and Nominating Committee

  $35,000 per year (5)

  Human Resources Committee

  $50,000 per year

  Risk Review Committee

 

 

$50,000 per year

 

 

Directors receive a $20,000 annual travel allowance where their principal residence is (i) 2 or more time zones away from Toronto.; or (ii) across a border from Canada.

 

 

(1)

We only pay non-employee directors. They are also reimbursed for expenses incurred in the course of carrying out their duties as a director.

(2)

Subject to election by directors to take all or a portion of the cash retainer in additional DSUs (Deferred Share Units) or Shares – see below.

(3)

The annual retainer fee (including membership on one committee) will increase from $215,000 to $225,000 effective April 1, 2020, with the increase to be paid in additional DSUs.

(4)

Includes the directors’ annual retainer fee and all committee membership fees. The annual retainer fee for the Chair of the Board will increase from $425,000 to $435,000 effective April 1, 2020, with the increase to be paid in additional DSUs.

(5)

The annual retainer fee for the Chair of the Governance and Nominating Committee will increase from $35,000 to $50,000 effective April 1, 2020.

Directors’ Compensation and Required Share Ownership

Each non-employee director must hold at least eight times the cash portion of the annual director retainer in Shares and/or DSUs based on the greater of the following: (i) the closing price of the Shares at the end of the fiscal year and (ii) their acquisition cost (for Shares) or value at the time credited (for DSUs). Newly appointed Board members would be expected to build up the minimum share ownership requirement over time, which is accelerated by all remuneration being required to be paid in DSUs or in Shares until the requirement is met.

Directors must receive a minimum of $140,000 of their $215,000 annual retainer fee in DSUs. The Chair of the Board must receive a minimum of $175,000 of his $425,000 annual retainer fee in DSUs. Directors may also elect to take all or a part of the cash portion of their annual retainer in additional DSUs or Shares. This election also applies to any fees for chair retainers, committee memberships, special meetings and travel allowance. For 2019, all non-employee directors who served in fiscal 2019 elected to receive all of their remuneration in DSUs, except for Ms. Huber who elected to receive all of her non-equity remuneration in Shares in the first two months of the first Quarter of Fiscal 2019 and in DSUs for the remainder of the fiscal year.

 

25           Bank of Montreal Management Proxy Circular


Table of Contents

Shares and DSUs Owned by Non-employee Directors*

February 6, 2020:

 

Total Shares: 172,225

 

Total DSUs: 514,476

 

Total Value of Shares: $17,647,896

 

Total value of DSUs: $ 52,718,356

 

Total value of Shares and DSUs: $70,366,252

(based on the closing price of Shares on the TSX of $102.47 on February 6, 2020).

 

*

These numbers include the holdings of Messrs. J. Robert S. Prichard, Philip S. Orsino and Don M. Wilson III, who are retiring from the Board of Directors effective March 31, 2020. Their holdings as at February 6, 2020, are as follows: Mr. Prichard holds 11,500 Shares and 116,607 DSUs; Mr. Orsino holds 75,208 Shares and 87,494 DSUs and Mr. Wilson holds 13,500 Shares and 52,046 DSUs.

As at October 31, 2019, all non-employee directors met the minimum share ownership requirement.

What are Deferred Share Units (DSUs)?

DSUs (or deferred share units) are ownership interests that have the same economic value as Shares. Non-employee directors of the Bank and its subsidiary, BMO Financial Corp., receive DSUs under the terms of their respective DSU plans. The DSUs vest immediately, and accrue dividend equivalents when dividends are paid on Shares. Directors are not paid out their DSUs until they leave the Board and the boards of all Bank affiliates. At that time, they may receive payment for their DSUs in cash or in Shares purchased on the open market.

Directors’ Compensation for Fiscal 2019

The following table sets out compensation paid by the Bank, BMO Financial Corp. and BMO Harris Bank National Association to non-employee directors who served as directors during fiscal 2019 (all expressed in Canadian dollars).

 

    

 

Board Retainer ($)

 

                                         
  Director

 

 

Cash
($)

 

   

Stock Based

Compensation

(DSUs)

($)

 

   

Chair

Retainer

($)

 

   

Additional

Committee

Fees

($)

 

   

Travel

Fees

($)

 

   

Other Fees

 

 

   

Total

 

   

Portion of
cash

fees taken in

DSUs

(%)

 

 

Total DSUs
value
vested
or
earned
($) (1)

 

 
                 

 

 

  Janice M. Babiak (2)

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

 

 

 

 

 

 

50,000

 

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

 

20,000

 

 

 

         

 

 

 

 

 

300,000

 

 

 

 

 

 

100

 

 

 

 

 

 

300,000

 

 

 

                 

 

 

  Sophie Brochu

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

                                 

 

 

 

 

 

215,000

 

 

 

 

 

 

100

 

 

 

 

 

 

215,000

 

 

 

                 

 

 

  Craig Broderick

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

                 

 

 

 

 

 

20,000

 

 

 

         

 

 

 

 

 

235,000

 

 

 

 

 

 

100

 

 

 

 

 

 

235,000

 

 

 

                 

 

 

  George A. Cope

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

         

 

 

 

 

 

15,000

 

 

 

                 

 

 

 

 

 

230,000

 

 

 

 

 

 

100

 

 

 

 

 

 

230,000

 

 

 

                 

 

  Christine A. Edwards (2)

 

 

 

 

 

75,000

 

 

 

 

 

 

140,000

 

 

 

 

 

 

35,000

 

 

 

 

 

 

30,000

 

 

 

 

 

 

20,000

 

 

 

 

 

 

93,191 

 

(3) 

 

 

 

 

393,191

 

 

 

 

84 (3)

 

 

 

 

378,505

 

 

                 

 

 

  Martin S. Eichenbaum

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

         

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

 

20,000

 

 

 

         

 

 

 

 

 

250,000

 

 

 

 

 

 

100

 

 

 

 

 

 

250,000

 

 

 

                 

 

 

  Ronald H. Farmer (2)

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

 

 

 

 

 

 

50,000

 

 

 

 

 

 

 

 

 

30,000

 

 

 

                 

 

 

 

 

 

295,000

 

 

 

 

 

 

100

 

 

 

 

 

 

295,000

 

 

 

                 

 

 

  David Harquail

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

                                 

 

 

 

 

 

215,000

 

 

 

 

 

 

100

 

 

 

 

 

 

215,000

 

 

 

                 

 

 

  Linda S. Huber

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

         

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

20,000

 

 

 

         

 

 

 

 

 

250,000

 

 

 

 

 

 

83 (4)

 

 

 

 

 

 

231,667

 

 

 

                 

 

 

  Eric R. La Flèche

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

                                 

 

 

 

 

 

215,000

 

 

 

 

 

 

100

 

 

 

 

 

 

215,000

 

 

 

                 

 

 

  Lorraine Mitchelmore

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

         

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

 

20,000

 

 

 

         

 

 

 

 

 

250,000

 

 

 

 

 

 

100

 

 

 

 

 

 

250,000

 

 

 

                 

 

 

  Philip S. Orsino

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

         

 

 

 

 

 

15,000

 

 

 

                 

 

 

 

 

 

230,000

 

 

 

 

 

 

100

 

 

 

 

 

 

230,000

 

 

 

                 

 

 

  J. Robert S. Prichard (2)

 

 

 

 

 

 

250,000

 

 

 

 

 

 

 

 

 

175,000

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

 

 

 

 

218,489 

 

 

(5) 

 

 

 

 

 

 

643,489

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

643,489

 

 

 

 

 

 

                 

 

 

  Don M. Wilson III (2)

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

 

 

 

 

 

 

50,000

 

 

 

 

 

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

20,000

 

 

 

         

 

 

 

 

 

315,000

 

 

 

 

 

 

100

 

 

 

 

 

 

315,000

 

 

 

  Total

 

                                           

 

Total fees

paid in DSUs:

$4,003,661
Total fees
paid in Shares:
$18,333.34

Total fees

paid in cash:

$14,686

 

     

 

(1)

Includes the value at grant date of compensation paid in fiscal 2019 in the form of DSUs, but does not include dividends paid in fiscal 2019 in the form of additional DSUs on each director’s aggregate DSU holdings accumulated in 2019 and during the course of service as a director.

 

Bank of Montreal Management Proxy Circular       26  


Table of Contents
(2)

Ms. Edwards is Chair of the Governance and Nominating Committee. Mr. Farmer is Chair of the Human Resources Committee. Ms. Babiak is Chair of the Audit and Conduct Review Committee. Mr. Prichard is Chair of the Board. Mr. Wilson III is Chair of the Risk Review Committee.

(3)

Ms. Edwards was appointed to the Board of BMO Financial Corp., a U.S. subsidiary of the Bank, on May 22, 2019. She was paid US$59,382 in compensation between the date of her appointment and October 31, 2019. Such amount was paid in US dollars and converted to Canadian dollars for purposes of this disclosure at the rate of exchange at the grant dates of US$1.00 = Cdn$1.305 at July 17, 2019 and US$1.00 = Cdn$1.3294 at October 10, 2019. Ms. Edwards took this full amount in DSUs. Ms. Edwards was also appointed to the Board of BMO Harris National Association (see Compensation from Subsidiaries/Affiliates section below) on May 22, 2019. She was paid US$8,997 for the period from May 22, 2019 to September 30, 2019, and US$2,106 for the period from October 1, 2019 to October 31, 2019, for a total amount of US$11,103. Converted to Cdn $ for the purpose of this disclosure, this equals $14,868 at a rate of exchange on the payment date of US$1.00 = Cdn$1.3243 at September 30, 2019, and $1.00 = Cdn$1.3160 at October 31, 2019. This amount was paid in US$ to Ms. Edwards in cash.

(4)

In Q1 2019, Ms. Huber elected to receive two-thirds of her Director Fee in BMO Common Shares and one-third in DSUs. Therefore, for Q1 2019, the total fees paid to Ms. Huber in BMO Common Shares were $18,333.34 and the total fees paid in DSUs were $44,166.66. In Q2, Q3 and Q4 2019, Ms. Huber elected to receive all of her remuneration in DSUs.

(5)

Mr. Prichard earned US$165,000 for serving as a director of BMO Financial Corp. Such amount was paid in US dollars and converted to Canadian dollars for purposes of this disclosure at the rates of exchange at the grant dates of US$1.00 = Cdn$1.3266 at January 15, 2019; US$1.00 = Cdn$1.3354 at April 15, 2019; US$1.00 = Cdn$1.305 at July 17, 2019; and US$1.00 = Cdn$1.3294 at October 10, 2019. Mr. Prichard took this full amount in DSUs.

Compensation from Subsidiaries/Affiliates

From time to time, non-employee Bank directors serve as directors of subsidiaries and affiliates of the Bank. They are paid for their services and reimbursed for travel and other expenses incurred in attending Board and committee meetings. During fiscal 2019, Mr. Prichard and Ms. Edwards were the only non-employee Bank directors who were paid for serving as directors of a Bank subsidiary or affiliate. Both Mr. Prichard and Ms. Edwards were directors of BMO Financial Corp., our U.S. bank holding company. The BMO Financial Corp. Director retainer is US$165,000 per fiscal year. Mr. Prichard, who was appointed to the BFC Board on May 17, 2012, took his fiscal 2019 annual retainer fee of US$165,000 in DSUs, pursuant to a plan offered to directors of BMO Financial Corp. Ms. Edwards was appointed to the BFC Board on May 22, 2019. She was paid US$59,382 in compensation between the date of her appointment and October 31, 2019. She also took her full fee in DSUs. Ms. Edwards was also appointed to the Board of BMO Harris Bank National Association on May 22, 2019. This wholly-owned subsidiary of Bank of Montreal provides banking, trust and other services in the United States and internationally either directly or indirectly through its subsidiaries. Ms. Edwards was paid US$11,103 in compensation between her date of appointment and October 31, 2019. These fees were paid in cash.

 

27           Bank of Montreal Management Proxy Circular


Table of Contents

Directors’ Attendance for Fiscal 2019

The table below shows a summary of the nominee directors’ attendance for fiscal 2019.

 

  Summary of
  Attendance of Directors
 

Board

(10 meetings)

 

Audit & Conduct
Review
Committee

(6 meetings)

  Governance &
Nominating
Committee
(5 meetings)
  Human
Resources
Committee
(7 meetings)
  Risk Review
Committee
(8 meetings)
  TOTAL
  #   %   #   %   #   %   #   %   #   %   %   
                     

  BABIAK

    10    100    6    100    5    100               100   
                     

  BROCHU

  10   100   6   100               100   
                     

  BRODERICK

  10   100               8   100   100   
                     

  COPE

  10   100       4   80   7   100       96   
                     

  EDWARDS (1)

  10   100       5   100    7    100    8    100   100   
                     

  EICHENBAUM

  10   100   6   100           8   100   100   
                     

  FARMER

  10   100       5   100   7   100   8   100   100   
                     

  HARQUAIL

  10   100   6   100               100   
                     

  HUBER

  10   100   6   100           7   88   96   
                     

  LA FLÈCHE(2)

  10   100           3   100   4   100   100   
                     

  MITCHELMORE

  10   100           7   100   8   100   100   
                     

  WHITE (3)

  10   100                   100   
                     

  Average Percentage

    100%     100%     95%     100%     98%   99% 

Notes

(1)

Ms. Edwards attended Audit and Conduct Review Committee meetings as a guest

(2)

Mr. La Flèche ceased to be a member of the Risk Review Committee effective April 2, 2019. He became a member of the Human Resources Committee effective April 2, 2019.

(3)

Mr. White attended meetings as a guest of the respective committee in 2019.

More Disclosure About our Directors

To the Bank’s knowledge, as at February 6, 2020 or within the last 10 years, no nominee director of the Bank is or has:

(a)   been a director, chief executive officer or chief financial officer of any company (including the Bank):
  (i)

subject to an order (including a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation) for a period of more than 30 consecutive days, that was issued while the proposed director was acting in the capacity as director, chief executive officer or chief financial officer; or

  (ii)

subject to an order (including a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation) for a period of more than 30 consecutive days, that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or

(b)   been a director or executive officer of any company (including the Bank), that while that person was acting in that capacity, or within a year of the person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(c)   become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the nominee director.

 

Bank of Montreal Management Proxy Circular       28  


Table of Contents

Corporate Governance

Bank of Montreal embraces high standards of corporate governance, which reflect not only applicable legal and regulatory requirements but also evolving best practices. We believe sound corporate governance is the foundation for responsible business behaviour towards our key stakeholders. For a complete discussion of our corporate governance practices, please refer to our Statement of Corporate Governance Practices starting on page 36.

This section includes reports of the Audit and Conduct Review Committee, the Governance and Nominating Committee, the Human Resources Committee and the Risk Review Committee, summarizing the responsibilities of the committees of the Board and highlighting key accomplishments in 2019.

Report of the Audit and Conduct Review Committee

 

Members: Jan Babiak (Chair) Sophie Brochu, Dr. Martin Eichenbaum, David Harquail, Linda Huber, and Philip Orsino

 

The Board has determined that each member of the Audit and Conduct Review Committee is “financially literate”, as such term is defined under the rules of the Canadian Securities Administrators and the Securities and Exchange Commission (“SEC”) and New York Stock Exchange (“NYSE”) and National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) standards and that Ms. Babiak, Ms. Huber, and Mr. Orsino are “Audit Committee Financial Experts” as such term is defined under SEC rules.

Primary Responsibilities: The Audit and Conduct Review Committee is responsible for assisting the Board in fulfilling its oversight responsibilities for the integrity of the Bank’s financial reporting; the effectiveness of the Bank’s internal controls; the independent auditor’s qualifications, independence and performance; the Bank’s compliance with legal and regulatory requirements; transactions involving related parties; conflicts of interest and confidential information; sustainability initiatives and practices and standards of ethical business conduct. In addition, the Committee acts as the audit and conduct review committee of certain designated subsidiaries.

2019 Highlights

As part of or in addition to fulfilling its responsibilities outlined in its mandate, the Committee:

Financial Reporting and Internal Controls

 

 

Recommended for approval by the Board the Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards and related Management’s Discussion and Analysis, financial releases, and the Annual Information Form.

 

Reviewed updates on the Bank’s work in connection with the adoption of new accounting standards.

 

Evaluated the appropriateness of the Bank’s accounting and financial reporting and the effectiveness of the Bank’s internal control framework, in keeping with the Committee’s ongoing assessment of the effectiveness of the Bank’s oversight functions.

 

Reviewed and approved the Finance function’s budget, resources and strategic priorities for fiscal 2020.

 

Reviewed the performance and effectiveness of the Chief Financial Officer and the effectiveness of the Finance function for fiscal 2019.

Internal Auditor

 

Reviewed the independence and performance of the Chief Auditor and the Corporate Audit function and approved the Corporate Audit function’s budget and audit plan for fiscal 2020, including organizational structure, resource plan and strategic priorities.

 

Approved the Corporate Audit Mandate.

Shareholders’ Auditors

 

Reviewed the independence, including length of service and performance of the Shareholders’ Auditors, and approved the audit plan for fiscal 2020, including resources, qualifications, and fees for audit and non-audit services.

 

Reviewed and approved shareholder auditor and key team member rotation.

 

Reviewed regulatory expectations of audit committees related to external auditors.

 

Conducted an annual assessment of the Shareholders’ Auditors, as recommended by the Chartered Professional Accountants Canada/Canadian Public Accountability Board (CPAB) and the Basel Committee on Banking Supervision relating to audit quality. Items assessed included industry knowledge, objectivity, quality, candor of communication, and technical expertise.

 

Reviewed quarterly reports on Audit Quality Indicators.

 

29           Bank of Montreal Management Proxy Circular


Table of Contents
 

Reviewed reports issued by the Public Company Accounting Oversight Board and CPAB.

 

Reviewed approach to the inclusion of Key Audit Matters/Critical Audit Matters in the Shareholders’ Auditors’ Reports.

Legal & Regulatory Compliance

 

 

Reviewed the report of an independent third party on the effectiveness of the Legal & Regulatory Compliance (LRC) function.

 

Reviewed the effectiveness of the key controls through which legal and regulatory issues are managed, including reports on significant legislative and regulatory developments, significant litigation, compliance with banking laws and regulatory matters, material transactions with related parties, and the Bank’s whistleblowing regime.

 

Received reports on compliance testing and monitoring issues, and regulatory examinations.

 

Monitored current market issues and legal and regulatory developments having an impact on the Bank’s operations and material correspondence with regulators.

 

Received reports from management regarding the Bank’s regulatory capital ratios.

 

Reviewed the Volcker Rule Compliance Program Enterprise Annual Report.

 

Reviewed reports from the Ombudsman, the Chief Ethics and Conduct Officer, and the Chief Sustainability Officer.

 

Reviewed reports on the monitoring and reporting on misconduct.

 

Reviewed regular reports on evolving information and cyber security risks and mitigation plans, risk management and regulatory matters.

 

Approved the Committee’s Charter, orientation program for new Committee members, the LRC function’s mandate, organizational structure, budget and strategic priorities for fiscal 2020, the Regulatory Risk Appetite Statement, the Bank’s Modern Slavery Act Statement and the Bank’s Sustainability Report and Public Accountability Statement (“PAS”).

 

Reviewed the performance and effectiveness of the General Counsel and Chief Compliance Officer and the effectiveness of the LRC function for fiscal 2019.

Information Technology Matters

 

 

Reviewed regular reports on information technology matters, including digital channels, data and analytics, process digitization, IT infrastructure improvements, mandatory portfolio implementation, and provided oversight of information and cyber security and the establishment of the Financial Crimes Unit

 

Reviewed reports on the financial reporting IT system.

Anti-Money Laundering / Anti-Terrorist Financing and Sanctions Measures (collectively “AML Program”)

 

 

Reviewed the effectiveness of the key risk controls, objectives, and outcomes of the AML Program, including reports on legislative and regulatory developments, result of regulatory examinations and audits, training, customer due diligence, sanctions compliance, risk assessment, and mandatory reporting requirements.

Subsidiary Oversight

 

 

Continued to act as Audit and Conduct Review Committee of designated subsidiaries of Bank of Montreal.

 

Recommended for approval by the Boards of the designated subsidiaries the Consolidated Financial Statements of designated subsidiaries of Bank of Montreal.

The Committee Chair led a review of meeting materials and presentations to satisfy the Committee’s requirements as to quality, clarity, completeness, relevance and timeliness. The Committee met routinely in private with each of the Shareholders’ Auditors, Chief Auditor, Chief Financial Officer and General Counsel as well as with the Chief Compliance Officer, without management present.

The Committee is satisfied that it has fulfilled its mandate for the year ended October 31, 2019. The mandate is contained in the Committee’s Charter at https://www.bmo.com/home/about/banking/ corporate-governance/select-documents.

 

LOGO

Jan M. Babiak

Chair

 

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Report of the Governance and Nominating Committee

 

Members: Christine Edwards (Chair), Jan Babiak, George Cope, Ron Farmer, Robert Prichard, Don Wilson III

Primary Responsibilities: The Governance and Nominating Committee is responsible for developing governance principles and guidelines for the Bank, identifying and recommending candidates for election or appointment to the Board, reviewing the Bank’s process for orientation, and the assessment of the Board, its committees and directors.

2019 Highlights

As part of or in addition to fulfilling each of its responsibilities as outlined in its mandate, the Committee:

Director Assessments and Board Composition

 

 

Evaluated the composition, size, tenure, competencies and skills of the Board, Board committees and Board committee members.

 

Undertook the annual assessment of the effectiveness of the Chair of the Board, the Board, the Board committee chairs and each Board committee, and reviewed the continued suitability and effectiveness of the current assessment process. With input from the results of this assessment process, developed the annual objectives of the Board and the Committee.

 

Oversaw the process whereby the Chair of the Board and each Board committee chair developed annual objectives which are used in the above annual assessments.

 

Oversaw the peer review process for all existing directors and reviewed the overall results.

 

Performed the annual 2019 Annual Assessment of the Expertise and Experience of the Human Resources Committee.

 

Assessed the effectiveness of the Bank’s strategy session.

Governance Commitment

 

 

Organized a process whereby the GNC Chair, Board Chair and Chairs of the Boards of the other Bank Committees worked with Management to identify improvements to the quality and quantity of Board materials for efficiency and clarity.

 

Identified and implemented efficiencies in the Board meeting calendar.

 

Reviewed the Bank’s system of corporate governance to ensure compliance with applicable legal and regulatory requirements. For a complete discussion of the Bank’s corporate governance practices, see the Statement of Corporate Governance Practices starting on page 36 of this circular or www.bmo.com/corporategovernance.

 

Reviewed significant changes in governance rules and regulations and considered the impact on the Bank.

 

Assessed the independence, shareholdings and attendance of each director and supervised the assessment of the suitability of directors in accordance with applicable regulations.

 

Monitored the Bank’s practices related to governance against emerging best practices, including Board and Shareholder engagement matters and the quality and quantity of Board and Committee materials and management presentations.

 

Reviewed the Board Communication Guidelines.

 

Evaluated Shareholder proposals submitted for the Bank’s Annual Meeting of Shareholders.

 

Approved the Bank’s corporate governance documents (including the Board Mandate, the Committee’s and Board committee Charters, Position Descriptions and the Board Approval/Oversight Guidelines and related policy).

 

Reviewed the Board’s practices against the OSFI Corporate Governance Guidelines.

Director Education

 

 

Coordinated issues-based discussions for director education purposes, including in respect of technology, cyber security and data analytics.

 

Continued the development and effective use of the online director education program developed in conjunction with the Bank’s Institute for Learning consisting of didactic learning via electronic medium and self-directed learning.

 

Reviewed and refreshed the orientation programs for new directors and Board committee members, applied and monitored the progress of orientation for two new Board members.

 

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Oversaw deep dives related to information technology (including fintech) and information security to support the Board of Directors’ oversight responsibility with respect to technology and strategy.

Subsidiary Oversight

 

 

Reviewed the Bank’s Legal Entity Report related to subsidiary governance oversight.

Succession Planning and Director Compensation

 

 

Established, initiated and monitored the Chair succession process that resulted in the unanimous nomination of the next Board Chair for election at the 2020 Annual General Meeting of Shareholders.

 

Performed the annual review of director compensation and proposed changes to the annual fee retainer, the Board Chair retainer and the retainer of the Governance and Nominating Committee Chair to align with the market.

The Committee met regularly without management being present.

The Committee is satisfied that it has fulfilled its mandate for the year ended October 31, 2019. The mandate is contained in the Committee’s Charter at www.bmo.com/corporategovernance.

 

LOGO

Christine A. Edwards

Chair

Report of the Human Resources Committee

 

Members: Ron Farmer (Chair), George Cope, Christine Edwards, Eric La Flèche, Lorraine Mitchelmore, Robert Prichard, and Don Wilson III

 

As required by its Committee mandate, members of this Committee have, or must acquire within a reasonable period of time following their appointment, a thorough understanding of issues relating to human resources and compensation, so they can fully contribute to achieving the Committee’s objectives. The Governance and Nominating Committee completed an annual review of the Committee’s membership in August 2019, and concluded that the Committee has an appropriate level of expertise and experience related to risk management for financial institutions and compensation practices.

Primary Responsibilities: The Human Resources Committee oversees human resources strategies, including compensation and talent management.

2019 Highlights

As part of or in addition to fulfilling each of its responsibilities as outlined in its mandate, the Committee:

Talent and Succession Planning

 

 

Supported the continued evolution of BMO’s operating model to drive greater effectiveness and efficiency, simplify how we work and reduce unnecessary duplication.

 

Oversaw the creation of an enterprise Financial Crimes Unit, leveraging an industry-leading model that integrates the capabilities of cybersecurity, information security, fraud, physical security and global crisis management.

 

Reviewed and approved BMO’s senior leadership talent pipeline, including succession plans and development commitments, to ensure that effective processes and strategies are in place to identify and assess candidates for our senior and most critical roles.

 

Appointed new leaders to key roles and functions as part of succession planning, including Chief Human Resources Officer & Head of People & Culture; Group Head, North American Personal Banking & U.S. Business Banking; Head, Personal Wealth Canada & Asia, and Chief Anti-Money Laundering Officer.

 

Advanced our progress against multi-year diversity and inclusion goals, and declared a bold commitment to zero barriers to inclusion as a key pillar of BMO’s purpose.

 

Reviewed the results of BMO Pulse, our employee engagement survey.

 

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Assessed management’s learning plan to build a workforce of the future through re-skilling of employees by growing their digital and technical acumen.

Compensation Oversight and Governance

 

 

Reviewed BMO’s recoupment policy and enhanced the clawback provisions for fiscal 2019.

 

Reviewed the number of shares available for issue under BMO’s stock option plan and the compensation value factor (CVF) methodology used to determine the number of stock options granted to BMO executives, and adopted a 5-year CVF averaging approach for fiscal 2019 to more prudently manage risk.

 

Confirmed with an independent advisor that BMO’s compensation programs continue to align with the bank’s Risk Appetite Framework, the Financial Stability Board’s (FSB) Principles for Sound Compensation Practices, the Office of the Superintendent of Financial Institution’s (OSFI) requirements and the requirements of each jurisdiction where we operate.

 

Worked with BMO Financial Corp.’s (U.S.) Human Resources Committee to confirm its compensation programs align with the U.S. Federal Reserve’s Guidance on Sound Incentive Compensation Policies.

 

Conducted a market review of BMO’s Performance Share Unit (PSU) plan to validate that the current plan design remains competitive.

 

Reviewed the performance and independence of the Committee’s independent compensation advisor.

 

Met with shareholder advisors and institutional investors to discuss BMO’s compensation program and practices.

CEO and Senior Executive Compensation

 

 

Reviewed reports on the CEO’s pay for performance, and determined that CEO pay is aligned to bank and individual performance.

 

Assessed the CEO’s performance against his fiscal 2019 objectives, and recommended the assessment and his compensation to the independent members of the Board for approval.

 

Reviewed the fiscal 2019 performance assessments for BMO’s most senior executives and heads of oversight functions, and approved the assessments and their compensation.

 

Reviewed and approved incentive compensation for top earning employees and executives.

Other Strategic Matters

 

 

Approved performance goals for the executive incentive plans for fiscal 2020 which align with BMO’s business strategy, annual goals and good governance.

 

Conducted a comprehensive market review of Canadian retirement programs.

 

Clarified the linkage in this year’s Compensation Discussion and Analysis (CD&A) that describes how environmental, social and governance issues are factored into BMO’s annual compensation decision-making processes.

 

Reviewed BMO’s approach to designing the workplace of the future.

The Committee met regularly without management present. We also met with our independent compensation advisor without management present.

The Committee is satisfied that it has fulfilled its mandate for the year ended October 31, 2019. The mandate is contained in the Committee’s Charter at www.bmo.com/corporategovernance.

 

LOGO

Ron Farmer

Chair

 

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Report of the Risk Review Committee

 

Members: Don M. Wilson III (Chair), Craig Broderick, Christine Edwards, Dr. Martin Eichenbaum, Ronald H. Farmer, Linda Huber, Lorraine Mitchelmore, Philip Orsino, Robert Prichard

Primary responsibilities: The Risk Review Committee is responsible for assisting the Board in fulfilling its oversight responsibilities for the Bank’s identification and management of risk; adherence to risk management Corporate Policies; and compliance with risk-related regulatory requirements.

2019 Highlights

As part of or in addition to fulfilling each of its responsibilities as outlined in its mandate, the Committee:

Risk Appetite Framework and Governance

 

 

Reviewed, and recommended for approval by the Board, the Risk Appetite Framework, including the Risk Appetite Statement and Key Risk Metrics.

 

Reviewed the proposed exposure limits to be delegated to the Chief Executive Officer and recommended approval to the Board.

 

Reviewed and approved the risk management function’s budget, resource plan and strategic priorities for fiscal 2020.

 

Reviewed findings and audit results from the Chief Auditor and associated action plans.

 

Approved the Chief Risk Officer’s (CRO) Mandate and reviewed the performance and effectiveness of the CRO and the effectiveness of the Risk function for fiscal 2019.

 

Reviewed presentations and held discussions with management on further embedding risk culture.

 

Reviewed status of compliance with Risk Data Aggregation and Risk Reporting and Basel Pillar I requirements.

 

Reviewed attestations from the CRO related to the Bank’s level of risk, processes and controls, models and risk culture and independence.

Identification and Management of Risk

 

 

Engaged management in in-depth discussions at each Committee meeting on risk management and risk strategies related to key businesses and products.

 

Reviewed and approved the Capital Adequacy Assessment Plan and the Enterprise Economic Capital Limit, and monitored the Bank’s quarterly capital position.

 

Considered the results and implications of sector-specific and enterprise-wide stress tests.

 

Regularly assessed the Bank’s credit, market, liquidity and funding risk positions against the Risk Appetite Statement and approved exposure limits.

 

Reviewed the quality and performance of the credit portfolio, including watchlist and impaired loans, and the provisions and allowances for credit losses.

 

Reviewed revisions to the top and emerging risk framework and discussed the top and emerging risks of the Bank including: recession risk; information, cybersecurity & privacy; oil & gas; technology; and the risk of low or negative interest rates.

 

Reviewed performance against Key Risk Metrics and management action plans to remediate any metric that falls outside of the Bank’s risk appetite.

Adherence to Risk Management Corporate Policies

 

 

Discussed and approved risk-related corporate policies and applicable risk limits.

 

Approved, ratified or reviewed exposures that exceeded prescribed risk limits.

 

Discussed and approved revised exception approval framework proposed by management.

Compliance with Regulatory Requirements

 

 

Periodically engaged regulators in discussions on key risks in the Bank.

 

Reviewed regulatory communications with management and discussed action plans.

 

Approved the Corporate Insurance Program.

 

Reviewed and, where required, approved reports and presentations that were provided in satisfaction of regulatory requirements.

 

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The Committee met regularly in private with the Chief Risk Officer, and in private with the CEO, and also without management being present.

The Committee is satisfied that it has fulfilled its mandate for the year ended October 31, 2019. The mandate is contained in the Committee’s Charter at www.bmo.com/corporate-governance.

 

LOGO

Don M. Wilson III

Chair

 

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Statement of Corporate

Governance Practices

 

At a glance

   

Our high corporate governance standards reflect emerging best practices and meet or exceed applicable legal, regulatory, Toronto Stock Exchange (“TSX”), New York Stock Exchange (“NYSE”) and NASDAQ requirements

   

We monitor regulatory changes and best practices in corporate governance to ensure we have leading governance practices

   

BMO was awarded the Governance Professionals of Canada’s 2019 Governance Award for Best Practices in Subsidiary Governance for the third consecutive year

Overview

Good corporate governance is important – to our Shareholders, our customers, our employees, the communities we operate in – and to us. Being clear about our expectations around governance supports ethical conduct and allows us to do a better job running our business, and complying with the laws and standards that apply to us.

Good governance starts with our Board of Directors (“Board”). We get the Board composition and structure right by having well-informed people with diverse backgrounds, relevant experience, and independence from management. We gain from their expertise and pay them fairly in return. Directors serve on committees that specialize in key areas: audit and conduct review, governance and nominating, human resources, and risk review.

This document communicates our corporate governance practices to you, our Shareholder, as at February 6, 2020.

 

     CORPORATE GOVERNANCE

 

Size of the Board

 

 

 

 15*

 

 

Director Tenure Policy

 

 

 

 

Number of independent directors

 

 

 

 14*

 

 

 

Directors’ Conflict of Interest Policy

 

 

 

 

 

All committee members are independent

 

 

 

 

 

 

 

Board and Committee Chair term limits

 

 

 

 

 

Directors are elected annually

 

 

 

 

 

 

 

Director Share Ownership Guidelines

 

 

 

 

 

Directors are elected individually (no slate voting)

 

 

 

 

 

 

 

New Director Orientation

 

 

 

 

 

Majority Voting Policy for the election of directors

 

 

 

 

 

 

 

Continuing Director Development

 

 

 

 

 

Annual advisory vote on approach to executive compensation

 

 

 

 

 

 

 

Regular assessments of the Board and its committees

 

 

 

 

 

The roles of Board Chair and CEO are separate

 

 

 

 

 

 

 

Code of Conduct rooted in our values

 

 

 

 

 

Policy on Interlocking Directors

 

 

 

 

 

 

 

Legal Entities Report and leading subsidiary governance practices

 

 

 

 

 

Directors cannot hedge their BMO securities

 

 

 

 

 

 

 

Non-executive directors cannot participate in BMO stock option plans

 

 

 

 

       

 

Proxy Access Policy

 

 

 

*

The size of the Board will be 12 with 11 independent directors following the 2020 Annual Meeting of Shareholders, subject to shareholder approval.

I. Board Structure

 

At a glance

   

Our Board’s role is to do what is in the best interests of the Bank, through a rigorous approach to accountability, performance and corporate governance

   

Regular assessment of the Board helps ensure it has the appropriate number of members and diverse expertise to make effective decisions

   

The Board annually reviews written position descriptions for the Chair of the Board (“Chair”), the Chief Executive Officer (“CEO”), committee chairs, and directors

 

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Role of our Board

The Board provides stewardship, including direction-setting and general oversight of the Bank’s management and operations to do what is in the best interests of the Bank. The Board’s Mandate, set out on pages 49 and 50, outlines its general responsibilities. The Board Approval/Oversight Guidelines define its roles and responsibilities, plus those of management, and also specify accountability within the Bank. The Bank Act (Canada) requires certain important matters, such as approval of financial statements and dividends, be approved by the Board and not delegated to Board committees.

The Board oversees subsidiary operations, with the Governance and Nominating Committee receiving and reviewing an annual report of the Bank’s legal entity structure.

The Governance and Nominating Committee defines our approach to corporate governance. This committee reviews our corporate governance framework, guidelines and practices to ensure they meet or exceed industry and Shareholder expectations, the regulatory environment, and best practices.

Composition of our Board

The Board considers its size annually, while the Governance and Nominating Committee does so regularly. At the beginning of 2020, there were 15 directors on the Board. Factors that are considered in determining Board size include the ability to ensure a high level of engagement of Board members, a high quality of discussion with management, the calibre and scope of its members’ expertise, thoughtful director succession, and the ability to ensure Board committees have sufficient members and the required expertise. The Board has adopted a written Board Diversity Policy to facilitate more effective governance. In so doing, the Board positions itself to be made up of highly qualified directors whose diverse backgrounds reflect the changing demographics of the markets in which the Bank operates, the talent available with the expertise required, and the Bank’s evolving customer and employee base. A diverse Board helps us make better decisions. The Board Diversity Policy includes the goal that each gender comprise at least one-third of the independent directors, and the Governance and Nominating Committee considers this when undertaking the process of recruiting new Board members. The Board believes a relatively smaller Board size is more effective, while recognizing the need to maintain flexibility to address certain needs or opportunities as they arise. Twelve of the current 15 directors will stand for election at the 2020 Shareholder meeting. The Board believes the Board’s proposed size of 12 directors is appropriate and effective. The Board currently has five women directors, representing 45% of the independent directors standing, and 41% of all Directors, for election.

Directors are elected for a term of one year. Between Annual Shareholder meetings, the Board may appoint additional directors. The Board believes that its membership has the expertise, skills, geographic representation, gender diversity, and size to make effective decisions and staff Board committees appropriately.

Key Position Descriptions

The Board reviews and approves position descriptions (available on our website) annually for the Board Chair, committee chairs, and directors. The Board also develops the position description for the CEO, with the CEO’s input, which is approved annually by the Human Resources Committee.

II. Independence

 

 

At a glance

   

All nominees standing for election at the annual meeting of Shareholders are independent and unaffiliated, except Darryl White, CEO

 
   

The independent Chair allows the Board to operate independently of management and provides leadership to the independent directors

 
   

In camera sessions, attended only by the independent directors, are held at every Board meeting and every committee meeting

 

 

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Director Independence

The Board believes that it must be independent of management to be effective. The Board has adopted Director Independence Standards (“Standards”) to assess whether a director is independent. The Standards take into consideration the definition of affiliated persons under the Bank Act (Canada) and definitions of independence from the Canadian Securities Administrators (“CSA”), NYSE, and NASDAQ. The Standards are available on our website.

The Board, with help from the Governance and Nominating Committee, uses the Standards to assess personal, business, and other relationships and dealings between directors and the Bank and between directors and the Bank’s affiliates. The Board considers biographical material, reports, and questionnaires completed by directors as well as Bank records and reports, and information on entities with which the directors are involved. The Board considers these relationships keeping in mind both the importance to the Bank and the importance to, and impact on, the people and organizations with which the director has relationships.

The Board considers a director independent if he or she does not have a material relationship with the Bank or any of its affiliates that could interfere with his or her exercise of independent judgment. Certain relationships (for example, being an officer of the Bank) automatically mean a director is not independent. The threshold for independence is higher for members of our Audit and Conduct Review Committee, as the CSA and NYSE require.

Darryl White has a material relationship with the Bank because he is the Bank’s CEO. Under the Bank Act (Canada), the Bank’s CEO must be a member of the Board. All other directors and nominees standing for election to the Board on March 31, 2020 are independent and unaffiliated. The Board’s policies limit the number of inside directors to two.

All members of the Audit and Conduct Review Committee meet the applicable additional Canadian and U.S. independence requirements for membership on public company audit committees. While the Bank has lending, banking, and other commercial arrangements with some of the directors and entities they have relationships with, the Board is satisfied that those directors are independent under the Standards.

Information on the director nominees standing for election is on pages 13 to 18, which includes other public company boards on which they serve, the value of their equity holdings in the Bank, and their attendance record for all Board and committee meetings in fiscal 2019.

Board Interlocks and Outside Board Memberships

The Governance and Nominating Committee monitors the outside boards on which our directors serve to determine if there are circumstances that would impact a director’s ability to exercise independent judgment and to confirm each director has enough time to fulfill his or her commitments to us. An interlock occurs when two or more Board members are also fellow board members of another public company. The Board has adopted a policy that no more than two directors may serve on the same public company board without the prior consent of the Governance and Nominating Committee. In considering whether or not to permit more than two directors to serve on the same board, that committee takes into account all relevant considerations including, in particular, the total number of Board interlocks at that time.

The only Board interlock is between George Cope and Sophie Brochu, who are both directors of CGI Inc. The Board has determined this relationship does not impair the exercise of independent judgment by these Board members.

The following table sets out interlocking board memberships of the Bank’s directors.

 

 

  Company Name

 

  

 

Director

 

  

 

Committee Membership (at other

public company)

 

 

   CGI Inc.

  

 

Sophie Brochu

 

  

 

Corporate Governance Committee

 

    

 

George Cope

 

  

 

Corporate Governance Committee, Human Resources Committee

 

Independent Board Chair

The roles of Board Chair and CEO are separate. The Chair manages the Board’s affairs to ensure that the Board functions effectively and meets its obligations and responsibilities, including

 

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responsibilities to Shareholders. The position description for the Chair, available on our website, sets out the Chair’s key responsibilities, which include setting Board meeting agendas in consultation with the CEO and Corporate Secretary and chairing all Board meetings.

The Chair provides leadership to the directors and helps ensure the Board is independent from management. Each Board meeting includes time for independent directors to meet without management present. During those meetings, the Board Chair will lead discussions on matters that arise during the meeting or other matters, including matters related to succession planning, risk management and strategy. Every Board committee meeting also has a scheduled session without management present.

The Governance and Nominating Committee establishes, initiates and monitors the Chair succession process based on corporate governance best practice. This process is led by the current Chair or, if he or she is being considered for reappointment, the Chair of the Governance and Nominating Committee. The process includes identification of issues facing the Bank, individual consultations with all directors, as well as determination of the most appropriate process for the Board to make a final decision, which may involve deliberation and a vote if there is more than one person with significant support. Under current Bank policies, the normal term for the role of Chair is five years with a possibility of renewal for up to three more years. The Board conducted, since August 2018, a careful and deliberative succession process leading to the unanimous endorsement of George A. Cope as the next Chair.

Other Independence Mechanisms

The Chair and each committee can engage outside consultants, paid for by the Bank, without consulting management. This helps ensure they receive independent advice as they feel necessary. Also, none of our Audit and Conduct Review Committee members may serve on more than three public company audit committees without Board approval.

III. Orientation and Continuing Education

 

 

At a glance

   

New directors learn about our business through BMO’s director orientation program, including one-on-one meetings with the heads of each of our principal business groups and corporate functions

 
   

The Governance and Nominating Committee is responsible for directors’ continuing education

 

Director Orientation

The Governance and Nominating Committee is responsible for orienting and educating new directors. The orientation program’s purpose is to (i) provide new directors with the information necessary to understand the financial industry and board operations; (ii) provide new directors with the historical background of the Bank, including the current issues and opportunities BMO Financial Group is facing; and (iii) facilitate a smooth transition for new directors into their roles as Board members. Upon joining the Board and as soon as possible within the first six months following appointment/election, new directors are provided an orientation by the Chair of the Board, the chairs of the Board committees (as applicable) and the CEO to gain an understanding of the Bank’s history, culture, current status and strategic direction, including how the Bank differs from its competitors. New directors also receive orientation material explaining our structure, director governance information, compliance requirements for directors, and corporate policies. The material provided also includes our bylaws, recent public disclosure documents, and agendas and minutes for Board and committee meetings for the preceding 12 months. New directors meet individually with the heads of each of our principal business groups and corporate functions to learn about our business.

Each Board committee also has an orientation program. New Board committee members receive orientation material for each committee on which they serve. New members also have individual meetings with the committee chair and the head of the supporting corporate group, as well as with other senior officers (as applicable).

Continuing Director Development

The Governance and Nominating Committee is responsible for the continuing education and development of our directors. Directors receive presentations on Bank operations throughout the

 

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year. They also receive materials and reading recommendations from the Chair, committee chairs, the CEO, and the Corporate Secretary. Topics include corporate governance, executive compensation, financial reporting and strategy, succession planning, key accounting considerations, risk assessment, technology, cyber security and disclosure, and Canadian and U.S. securities law developments and global regulatory developments. Directors are also encouraged to participate in relevant external education seminars at our expense.

The Chair of the Governance and Nominating Committee, in conjunction with the Corporate Secretary, identifies relevant and timely information to complement and enhance the Directors’ understanding of the Bank, its products and services and the risks it faces, as well as developments in corporate and risk governance and regulatory matters. Continuing education and development of our directors in 2019 is summarized on pages 20 to 23. Directors identify their specific continuing education needs in discussions with management, the Board and committees. Committee meeting minutes are also provided to all directors who are not on the committee.

In addition, Board dinner sessions are scheduled along with regularly scheduled Board meetings to further our governance objectives by strengthening the collegial working relationship among directors and senior management. These dinner sessions are also used to hold educational sessions on important topics for the Bank’s business and strategic direction.

IV. Strategic Planning and Risk Oversight

 

At a glance

   

Our enterprise-wide strategy is developed by management. The Board oversees the strategic planning process and reviews and approves our strategic plans

 
   

The annual strategy session provides a forum for directors to give management constructive feedback on strategic plans, as do the related updates provided to the Board throughout the fiscal year

 
   

We are guided by an integrated risk management framework that is embedded in our daily business activities and planning process. The Risk Review Committee of the Board reviews our risk management framework on a regular basis

 

Strategic Planning

The Board provides governance and oversight to strategic planning at BMO and oversees the execution of the strategies. In this capacity, the Board reviews and approves our strategic plans, including key priorities, opportunities, risks, competitive position, financial projections and other key performance indicators for each of our principal business groups and our technology & operations function. The Board in conjunction with the strategies also reviews and approves the Bank’s Business and Capital Plan. The full Board is responsible for strategic planning related to technological innovation, enterprise data, analytics, AI strategies and governance, cyber security and digitech partnerships.

The Board has an annual strategy session that includes Management, where there are discussions on: the existing strategy and any changes to it, resulting from both internal and external factors; any new strategic priorities that could provide opportunity for growth; risks relating to the current and future strategy; and, the financial impact of the recommended strategy. The session helps directors better appreciate planning priorities and progress made on strategic plans. Directors give management constructive feedback on our strategic plans and the strategy session itself. At the conclusion of this annual strategy session, the Board approves the Bank’s strategic plan.

Directors receive updates on the progress of our strategic plans, including those for each principal business group, throughout the fiscal year.

Risk Oversight

Our enterprise-wide risk management framework, approved by the Board, is comprised of a governance structure that includes a robust committee structure and a comprehensive set of corporate policies, which are approved by the Board or its committees, together with supporting corporate standards and operating guidelines. This enterprise-wide risk management framework is governed through a hierarchy of management committees and individual responsibilities. All

 

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elements of our risk management framework are reviewed on a regular basis by the Risk Review Committee of the Board to provide effective guidance for the governance of our risk-taking activities. See pages 34 and 45 for information on the responsibilities of the Risk Review Committee.

Further information on our risk management framework, including the risk oversight responsibilities of the Board and its committees, our risk appetite, risk policies and limits, is set out in our 2019 Annual Report to Shareholders under the heading Enterprise-Wide Risk Management on pages 68 to 106 of our Management’s Discussion and Analysis for the fiscal year ended October 31, 2019 (available on our website).

V. Subsidiary Governance

 

At a glance

   

We have a Subsidiary Governance Office (“SGO”) dedicated to identifying and implementing best-in-class subsidiary governance practices

 
   

Our subsidiary governance framework is a critical tool for risk management

 
   

Our subsidiary governance practices assist the parent company board with its oversight of the activities of the subsidiaries and the enterprise’s organizational structure

 
   

BMO was awarded the Governance Professionals of Canada’s Excellence in Governance Award for Best Practices in Subsidiary Governance in each of 2017, 2018 and 2019

 

Risk Management

BMO had 198 subsidiaries in 26 jurisdictions as at October 31, 2019. Effective subsidiary governance is important to us. It is a critical risk management tool. Our subsidiary governance framework applies globally and consists of: (i) a legal entity framework, (ii) assessments of the governance requirements of each subsidiary; and (iii) legal entity reporting to the Governance and Nominating Committee. The Legal Entity Manual captures a set of procedures to establish, operate and dissolve legal entities. Subsidiary boards have structures that comply with the governing law of the subsidiary, and are composed of executives as management directors, and include qualified independent non-executive directors where required by law or regulator preference. Directors of subsidiary boards are nominated based on their independence from the business and on board skills matrices approved by the subsidiary board. Under the Legal Entity Manual, each subsidiary is assessed as to its complexity based on criteria which include: size of assets, whether the subsidiary is operating, client-facing and/or regulated, and then placed into one of four categories of ascending degrees of governance. The operating directive creates uniform governance best practice, ensures proper oversight of each legal entity, and promotes thoughtful, effective and efficient processes around governance and clarifies the roles and responsibilities of the directors, officers and corporate units. The subsidiary’s corporate secretary works with the subsidiary board to implement the governance tools that are appropriate for the subsidiary and for the Bank. The governance tools and board procedures are aligned with those of the parent board.

Parent Company Oversight

The SGO supports the BMO board’s oversight of the activities of the subsidiaries and the enterprise’s organizational structure. The controls adopted ensure that accurate information is provided to the parent board. For example, the SGO provides the Governance and Nominating Committee with an annual Legal Entities Report that includes information on:

   

The structure of the subsidiary boards;

   

Statistics on subsidiaries by operating group, jurisdiction and assets;

   

The location of branches, representative offices and agencies;

   

Subsidiaries created, renamed, amalgamated and dissolved within the reporting period, with an explanation of the action; as well as

   

Spotlight information on relevant topics such as the background of non-executive directors, and the oversight of the Bank’s branches.

Our Board Approval and Oversight Requirements Policy and related guidelines require certain subsidiary related information to be escalated to a senior management committee or to the Bank’s board.

Parent board oversight over the activities of the subsidiaries also occurs through business reporting, which includes deep dives on line of business and legal entity activities, with linkage to the overall business strategy. In addition, there are regular communications between the Chairs of the parent and US holding company board committees.

 

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VI. Ethical Business Conduct

 

At a glance

   

Our Code of Conduct is rooted in our values and outlines our expectations for ethical behaviour

 
   

We support an ethical culture by providing an environment where concerns can be raised without fear of retaliation

 
   

BMO was named one of the World’s Most Ethical Companies by the Ethisphere Institute in 2020 for the third consecutive year

 

Code of Conduct and Ethics

BMO’s Code of Conduct, rooted in our values, outlines our expectations for ethical behaviour. The Code applies to all officers, employees and directors and is approved by the Board. In addition to mandatory officer and employee training every year, all officers, employees and directors must confirm that they have read, understood, complied and will continue to comply with the Code. The Chief Ethics and Conduct Officer is responsible for ensuring that awareness and understanding of ethical business principles are embedded in all aspects of our business and reports to the Audit and Conduct Review Committee of the Board on the state of ethical conduct in the organization.

A key element to fostering an ethical culture is providing a “Speak Up” environment where concerns can be raised without fear of retaliation. We support this and provide various resources for employees to raise concerns. We offer employees the option of reporting potential violations through a secure, confidential and, if desired, anonymous third party service.

The Board has also implemented whistleblower procedures for officers, employees and other stakeholders to confidentially and anonymously report concerns about accounting, internal accounting controls, or auditing matters. All concerns are investigated and breaches of the Code are dealt with expeditiously.

Insider Trading Policies

BMO has controls and safeguards to monitor personal trading of executive officers and other officers and employees in key positions for insider trading. All officers and employees covered by our insider trading policies are required to disclose trading accounts to BMO’s compliance group to make arrangements to ensure that all trading activity in these accounts may be monitored. In addition, those officers and employees covered by these policies are required to pre-clear any securities trade with the Bank’s compliance group. BMO’s policies restrict directors, executive officers and certain other employees from personal trading in BMO securities during blackout periods that precede the release of BMO’s financial results. These restrictions are referred to as the BMO Windows Trading Program.

Director Conflict of Interest Policy

To ensure ethical and independent decision-making by the Board, we have a Directors’ Conflict of Interest Policy that provides general guidelines on conflicts of interest and related obligations to the Board should one arise. We also have a protocol to identify and deal with director conflicts of interest. Directors or executive officers with a material interest in a matter do not receive related Board or committee materials, and are not present for any related discussion or vote.

VII. Directors – Becoming a Director, Serving as a Director, Assessment, and Resignation Policy

 

At a glance

   

Shareholders vote for individual directors – not for a slate of candidates and directors who do not get a majority of votes must offer to resign

 
   

Directors must offer to resign if they do not attend at least 75% of meetings of the Board and committees on which they serve

 
   

Individual directors evaluate the Board, its committees, and each other

 
   

The Governance and Nominating Committee uses the results of these assessments to recommend the mix of directors, process improvements, and continuing education opportunities

 
   

Directors must hold eight times their annual cash retainer in Shares or deferred share units

 
   

Directors cannot hedge their Shares or other securities

 

 

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Becoming a Director – Nomination and Election of Directors

The Governance and Nominating Committee decides what skills and competencies the Board requires, assesses the skills of current Board members and identifies and recommends suitable director candidates, with the assistance of professional search firms as needed. We believe our directors should have the highest personal and professional ethics and integrity and be committed to serving the interests of the Bank, our Shareholders and other stakeholders. The Governance and Nominating Committee assesses the need for skills to manage the Bank’s risks and opportunities. This assessment helps determine if the Board needs new directors. In keeping with the Board’s Diversity Policy, potential candidates are screened for several attributes including ethics and integrity, range of experience, good business judgment, areas of expertise, personal skills and qualities, gender, age, ethnicity and geographic background. Professional search firms are provided with these attributes as an essential element of their search mandates, as applicable. The Governance and Nominating Committee also takes into consideration possible conflicts, and the candidate’s ability to devote sufficient time and commitment as a director. The Board has set a goal that each gender comprise at least one-third of the independent directors.

The policy on majority voting to elect directors is described on page 5 and is available on our website. See page 24 for a skills matrix setting out the skills and expertise of each of the nominee directors standing for election at the 2020 Shareholder meeting.

Board Tenure

The nominee non-employee directors on the Board average 7 years of service on the Board. Service ranges from 18 months to 16 years.

The Board approved a new approach to its Director Tenure Policy in 2009, as refined in 2011, 2013, 2015 and 2016, to ensure ongoing Board renewal, sustain Board performance, and add expertise. Directors who joined the Board prior to January 1, 2010 may serve until the earlier of when they turn 70 years of age or they have served 20 years. Directors who joined the Board on or after January 1, 2010, may serve until the earlier of when they turn 70 years of age or they have served 15 years. However, all directors will be allowed to serve for at least ten years, regardless of their age. In addition, the Chair may serve a full five year term as Chair, regardless of his or her age or how long he or she has been on the Board, and his or her term may be renewed for up to three more years. The Board has also approved term limits for the chairs of its committees – for committee chairs appointed after December 31, 2014, the normal term is five years with a possibility of renewal for up to three more years. In exceptional circumstances, to further the best interests of the Bank, the Board may on an annual basis decide in individual cases to waive the term and/or age limits stated above for directors, the Board Chair and committee chairs.

An officer will resign from the Board when no longer employed by the Bank. However, the Board may request a former CEO to continue as a director for a term not longer than two years.

Expectations and Responsibilities of Directors

Directors must devote sufficient time and energy to their role as a Bank director to effectively discharge their duties to the Bank and the Board. Directors are expected to review meeting materials in advance of meetings to facilitate discussion and to probe and, as appropriate, challenge management, while making informed business judgments and exercising oversight. Board meeting dates are established well in advance and directors are expected to be prepared for and to attend all required meetings. Annually, directors must attend at least 75% of all meetings of the Board and the committees on which they serve or offer to resign at the end of the fiscal year.

Director Compensation

The Governance and Nominating Committee annually reviews and benchmarks directors’ compensation against the Bank’s competitors to ensure it is competitive and consistent with the responsibilities of directors. A flat fee structure was adopted in fiscal 2012 (see page 25 for further information about our director compensation philosophy). Directors’ compensation is disclosed on pages 25 and 26.

The Board approved amendments to the director share ownership guidelines, effective October 25, 2011, in conjunction with the adoption of its flat fee structure. Each non-employee director must hold at least eight times the cash retainer portion of his or her annual fee in either Shares or deferred share units. Newly appointed board members would be expected to build up the minimum share ownership requirement over time, which is accelerated by all remuneration being required to be paid in DSUs or in Shares until the requirement is met. At February 6, 2020, all non-employee

 

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directors met the minimum share ownership requirements. Directors’ current Share and deferred share unit holdings are listed in their respective profiles on pages 13 to 18.

The Board has adopted a policy prohibiting directors, senior executive officers and employees of the Bank from hedging their economic interest in Bank Shares, securities or related financial instruments.

Assessment of the Board, Committees, Directors, and Chairs

Each director annually completes an anonymous Board self-assessment survey, the results of which are compiled confidentially by an outside consultant, and has an annual one-on-one interview with the Chair. The interview typically covers the operation of the Board, the adequacy of information provided to directors, Board structure, agenda planning for Board meetings, and strategic direction and process. The Board uses a skills matrix (see page 24) to review the skills of directors and the Board as a whole. The matrix outlines skills and experience based on broad categories relating to business and management skills and capabilities.

Each Board committee is separately evaluated through the annual survey. The assessment process is similar to that for the Board. It includes each director’s views on the operation of the committees, the adequacy of information provided to committee members, and agenda planning for committee meetings, taking into account the relevant committee charters.

The annual survey also includes a peer evaluation process for feedback on the effectiveness of individual directors. Every director assesses the contribution of each of their peers relative to the performance standards for the director position description. The results are also compiled confidentially by an outside consultant. The Chair receives the results of each director’s peer assessment and meets with each director to discuss them.

The Governance and Nominating Committee assesses the Chair’s performance annually, with input from each director, taking into account the position description. The results are reviewed with the Board and the Chair.

The contribution and effectiveness of each committee’s chair are assessed annually against their respective committee objectives and the standards of their respective position description. The Chair discusses the results with each committee chair individually.

The Governance and Nominating Committee monitors and tracks progress of improvement opportunities identified through the self-assessment process, and the Board and its committees continuously refine various aspects of their practices as a result of the assessments. For example:

(i) each year, issues are identified which help with creating annual objectives for the Board, (ii) these objectives are set out at the beginning of each Board package and are discussed at each Board meeting in order to see whether it is making progress in meeting them, and (iii) the assessments inform the Board’s meeting agenda, as well as the agendas of the Board’s committee meetings.

Resignation Policy

Directors must offer to resign if they:

   

change their principal occupation,

   

fail to receive a majority of votes for election at an uncontested Shareholder meeting, or

   

fail to meet the annual 75% meeting attendance requirement.

The Governance and Nominating Committee will recommend to the Board whether to accept or reject the resignation, unless the resignation is a result of failing to achieve a majority vote at an annual shareholder meeting, in which case it will be accepted absent exceptional circumstances.

VIII. Committees of the Board

 

At a glance

   

The Board’s four committees each consist entirely of independent directors

   

The roles and responsibilities of each committee are set out in formal written charters (available on our website)

 

The Audit and Conduct Review Committee—oversees the integrity of our financial reporting, the effectiveness of our internal controls (including internal control over financial reporting), disclosure controls and procedures, our compliance with legal and regulatory requirements and the organizational structure, resources and effectiveness of the finance, legal & regulatory compliance and anti-money laundering functions. This committee also reviews and assesses the qualifications, independence, and performance of the Shareholders’ auditors.

 

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It sets standards of ethical business conduct for directors, senior management, and employees. It approves the Sustainability Report (formerly known as the Environmental, Social and Governance Report) & Public Accountability Statement and oversees sustainability governance. It oversees procedures for complying with self-dealing provisions of the Bank Act (Canada). It also monitors consumer protection measures and procedures for dealing with customer complaints, plus the use and disclosure of personal customer and employee information.

In addition to being independent, each member of the Audit and Conduct Review Committee is financially literate, as defined in CSA, SEC, and NYSE rules or standards. Jan Babiak, Linda Huber and Philip Orsino are Audit Committee Financial Experts as defined by SEC rules. Definitions of “financially literate” and “Audit Committee Financial Experts” are found in the Audit and Conduct Review Committee Charter (available on our website).

See pages 29 and 30 for a report on this committee’s membership and activities in 2019. Additional Information respecting this committee is set out in our 2019 Annual Information Form under “Audit and Conduct Review Committee Information”.

The Governance and Nominating Committee—develops governance principles and guidelines for the Board and the Bank. It identifies and recommends candidates for election or appointment to the Board, and reviews our process for orienting and assessing the Board, its committees, and directors. This committee also reviews Shareholder proposals and recommends appropriate responses. Each year, the Governance and Nominating Committee reviews all Board committee charters, position descriptions, and the Board’s mandate to confirm that they meet or exceed all regulatory requirements and best practices.

See pages 31 and 32 for a report on this committee’s membership and activities in 2019.

The Human Resources Committee—helps the Board fulfill its oversight duties for the appointment, evaluation, compensation and succession planning of the CEO and other senior executives. It oversees the Bank’s strategy for attracting, retaining and developing high quality leaders at all levels with the capabilities to execute the Bank’s strategic goals. This committee has oversight over the philosophy and principles of compensation programs, the design and application of material compensation programs, and share ownership guidelines. This committee is responsible for overseeing that the Bank’s material compensation programs meet the Bank’s compensation principles and risk profile and do not encourage excessive risk-taking.

The Human Resources Committee works with a full-time executive responsible for talent strategies. It annually reviews succession planning for the CEO and all senior executives. This includes a thorough review of potential successors’ capabilities and development plans. This committee also annually reviews the in-depth talent and succession report for the entire executive group. This assessment, which includes roundtable talent assessments of the Bank’s executives, also details the current and projected leadership demographics, vacancy risks and capabilities and readiness of the successor pool. This committee also reviews detailed reporting on the profile, capabilities and development planning of the Bank’s emerging leaders against the projected executive needs of the Bank. In addition, the Human Resources Committee assesses the enterprise’s culture, including our progress against our diversity, inclusion and employee engagement strategy and representation goals for women, people with disabilities, visible minorities, Indigenous people, the LGBTQA community and other groups.

See pages 32 and 33 for a report on this committee’s membership and activities in 2019.

The Risk Review Committee—helps the Board perform its oversight duties for identifying and managing risk and complying with risk-related regulatory requirements. At least annually, this committee reviews and recommends to the Board the Bank’s Risk Appetite Framework, which includes the Risk Appetite Statement. The committee also reviews the organizational structure, resources and effectiveness of the risk management function. In addition, it reviews and, as applicable, approves our risk management corporate policies, reviews and/or ratifies transactions involving a material amount of risk and recommends to the Board the limits and risk-taking authority to be delegated to the CEO.

See pages 34 and 35 for a report on this committee’s membership and activities in 2019.

 

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IX. Communications and Shareholder Engagement

 

At a glance

   

The management Disclosure Committee oversees the timely public release of material information about the Bank

   

Disclosure controls and procedures ensure material information is effectively communicated internally

   

Our Shareholder Engagement Policy (available on our website) promotes open dialogue and the exchange of ideas with Shareholders

The Audit and Conduct Review Committee reviews and approves the Disclosure Policy every other year. The policy covers the timely distribution of all material non-public information. It sets out guidance for determining material information and ensures proper (non-selective) disclosure and wide distribution of material information.

The Disclosure Committee consists of members of senior management including the Chief Financial Officer (“CFO”), who chairs it. This committee reviews all annual and interim filings and oversees the timely public release of material information about the Bank. The CFO and General Counsel together decide what information is material and therefore publicly disclosed.

We have a rigorous attestation process to support the certifications by the CEO and the CFO on the adequacy of our financial disclosure. Our most senior executives must make representations (quarterly and annually) to our Chief Accountant. This includes declaring that any potentially material issues they know of have been escalated to the Chief Accountant under our financial governance processes. The representations are specific to the executive’s area of responsibility.

Maintaining an ongoing dialogue with our shareholders is important for the Board, and our Shareholder Engagement Policy, which encourages open dialogue and the exchange of ideas, sets out the ways in which Shareholders can communicate with the Board and management. We communicate with Shareholders and other stakeholders through various channels, including our annual report, management proxy circular, annual information form, Sustainability Report & Public Accountability Statement, quarterly reports, news releases, website, industry conferences and other meetings. In addition, our quarterly earnings call is open to all, and features a live webcast and question and answer period. We also hold our annual meeting of Shareholders, with a live webcast, so all our Shareholders can participate. In addition, our website provides extensive information about the Board, its mandate, the Board committees and their charters, and our directors.

Feedback from institutional Shareholders comes from one-on-one or group meetings, and by email or telephone from retail Shareholders, in addition to regular informal interactions on specific questions between our Investor Relations department and Shareholders. Every two years, our Chair hosts a luncheon with our largest institutional Shareholders, without BMO management present. Our Chair hosted an institutional shareholders’ luncheon in January 2019 that included all of our Board committee chairs and representatives of 9 investor firms and the Canadian Coalition for Good Governance. Afterwards, our Investor Relations team and senior leaders followed up with attendees to address any outstanding concerns related to management activities.

Our Corporate Secretary’s department, Investor Relations team and ESG/Sustainability team maintain an ongoing dialogue with a variety of stakeholders in order to understand what’s important to them and to discuss topical issues. They also reply promptly to Shareholder concerns and take appropriate action. The Board believes these procedures reflect best practices in Shareholder engagement.

To communicate directly with the Board, Shareholders can use the contact details below, in item XV, “Contacting our Board”.

X. Succession Planning for Senior Management

The Board is responsible for appointing the CEO and other members of senior leadership; monitoring senior leadership’s performance, goals, assessments and rewards; developing, reviewing and monitoring the CEO succession plan; and reviewing at least yearly the succession strategy for all other senior leadership positions.

The Human Resources Committee reviews BMO’s senior leadership pipeline every year and has developed succession plans for the CEO and other senior executive roles. In fiscal 2019, the Committee appointed new leaders to key functions as part of its succession planning: Chief Technology and Operations Officer; Chief Risk Officer; Group Head, BMO Capital Markets; Chief Anti-Money Laundering Officer, Head, People & Culture and Chief Human Resources Officer; and Group Head, North American Personal Banking & US Business Banking.

 

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XI. Gender Diversity in Senior Management

 

At a glance:

   

40% of our senior leader roles, and more than one-third of our independent directors, are women

   

We are the only Bank in the top 25 companies listed in the Thomson Reuters Global Diversity & Inclusion Index

   

BMO was recognized in the 2020 Bloomberg Gender Equality Index for the fifth consecutive year

   

In 2019, BMO was honoured with a Women Corporate Directors Visionary Award for its decades long commitment to advancing women in leadership

 

BMO’s commitment to gender diversity is evident across all levels of the organization. Representation of women remains significant at all levels at BMO, with a strong overall representation rate of 54.6%. Today, 40% of our senior leader roles (including the executive and managing director levels) and more than one third of our independent board members are women. In 2019, BMO was the first Canadian bank to sign the United Nation’s Women’s Empowerment Principles. We were also listed on the Bloomberg Gender-Equality Index for the fifth year in a row. Our commitment to gender diversity also aligns with our pursuit of sustainable business opportunities, such as our commitment to make $3 billion in capital available for women business owners in Canada over three years.

As part of the Bank’s leading talent practices, we work to ensure gender diversity in our succession slates (which include three potential successors for every executive position), as well as in candidate slates for all open executive officer positions. To monitor our progress on the advancement of women and develop a healthy pipeline of female talent, we also:

   

Identify top talent and implement development plans for high-potential women

   

Monitor the number of women in senior leadership roles and those in the pipeline as emerging leaders at monthly talent roundtable meetings with senior leaders

   

Identify and remove barriers that women commonly encounter in their careers to provide access to leadership and development opportunities

   

Require that the profiles of diverse executives be reviewed and considered for openings on subsidiary boards

By achieving gender diversity and an equitable and supportive workplace, the Bank maximizes the potential of its workforce, broadens the perspective in decision-making and enhances client service throughout all lines of business.

Our vision 2020 target is equitable representation with a minimum of 40% men or women at senior leadership level. We have already achieved 40.6% as at October 31, 2019. In 2020, we will establish new representation goals and diversity & inclusion priorities to take us to 2025. Our gender diversity representation goals do not explicitly focus on our executive officer positions; however, our overall company goal creates a healthy feeder pool that supports planning and succession strategies at the most senior levels of the Bank. This focus allows us to ensure the continued growth of women among our senior leadership ranks. As of October 31, 2019, 4 out of 12 (or 33%) executive officer positions, as well as the position of Chief Auditor, were held by women.

XII. Sustainability

 

At a glance:

   

Released our Sustainability Report to coincide with our Annual Report, to align our sustainability disclosure with our financial disclosure

   

Rolled out training focused on the Task Force on Climate-related Financial Disclosure (TCFD) and climate change for our Board of Directors on the emerging risks and opportunities associated with climate change

   

Aligned our climate-related disclosure with TCFD recommendations

   

Developed an innovative TCFD Index showing integration of our disclosure

As part of the Bank’s Purpose to “Boldly Grow the Good – in business and in life”, BMO has committed $400 billion for sustainable finance by 2025. The $400 billion includes mobilizing $150 billion in capital to support companies pursuing sustainable outcomes. This includes $250 billion in client investments, which, as trusted advisors, we will help to align with sustainable objectives. The Bank is also seeding the Impact Investment Fund with $250 million of its own capital and inviting clients to invest alongside it.

 

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Board-level oversight of sustainability disclosure and governance is embedded in the charter of our Board’s Audit and Conduct Review Committee. This committee meets with the Chief Sustainability Officer and the General Counsel to review and discuss sustainability topics like climate change and matters reported to the BMO Sustainability Council. The Sustainability Report, including the climate related disclosure, is also reviewed by the full Board of Directors. BMO’s directors are evaluated based on a skills matrix that specifically includes experience related to sustainability. The Board also receives training on sustainability topics. For example, climate change risk and disclosure training was developed and made available to all BMO directors as part of BMO’s implementation of the recommendations of the Task Force on Climate-related Financial Disclosures.

XIII. Compliance with Stock Exchange Standards

Our Shares are listed for trading on the TSX as well as on the NYSE. We are classified as a ‘foreign private issuer’ under the New York Stock Exchange Listed Company Manual (“NYSE Rules”) and because certain of our other securities are listed on the NASDAQ, under the Nasdaq Stock Market Rules (“Nasdaq Rules”).

We are therefore permitted to follow home country practice instead of certain governance requirements set out in the NYSE Rules or the Nasdaq Rules, respectively, provided that we disclose any significant differences between our governance practices and those required to be followed by U.S. domestic companies under the NYSE Rules or the Nasdaq Rules. Further information regarding these differences is available on our website at www.bmo.com/home/about/banking/corporate- governance/select-documents.

XIV. Additional Governance Information

This statement refers to documents on our website at www.bmo.com/corporategovernance. Print copies are available to Shareholders free of charge who ask the Corporate Secretary’s department at:

Bank of Montreal

21st Floor, 1 First Canadian Place Toronto, Ontario M5X 1A1

Telephone: (416) 867-6785 Fax: (416) 867-6793

Email: corp.secretary@bmo.com

Financial information about us is in our consolidated financial statements and management’s discussion and analysis for the fiscal year ended October 31, 2019. Copies of these reports are available from the Corporate Secretary’s department at the address above. This (and other information about the Bank) is available on our website, on SEDAR (System for Electronic Document Analysis and Retrieval) at www.sedar.com, and on the SEC website at www.sec.gov/info/edgar.shtml.

Documents available on our website or from our Corporate Secretary’s department include:

   

Our Code of Conduct

   

Our By-Laws

   

The Board Mandate and charters for each of the Board’s committees

   

Position descriptions for each of the Chair, the committee chairs and the directors

   

Director Independence Standards

   

Statement of Corporate Governance Practices

   

Director Conflict of Interest Policy

   

Board Diversity Policy

   

Shareholder Engagement Policy

   

Proxy Access Policy

   

Majority Voting Policy

   

Sustainability Report & Public Accountability Statement

XV. Contacting our Board

Shareholders, employees and other interested parties may communicate directly with the Board through the Chair, by writing to:

Chair of the Board of Directors

BMO Financial Group

P.O. Box 1, First Canadian Place

100 King Street West

Toronto, Ontario M5X 1A1

Email: board.directors@bmo.com

 

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Board Mandate

The Board of the Bank is responsible for supervising the management of the business and affairs of the Bank. In carrying out these responsibilities and discharging its obligations, the Board will, either directly or through its committees, perform the duties set out in this Board Mandate and such other duties as necessary or appropriate, including:

1.   Culture of Integrity

1.1

approving and monitoring compliance with BMO’s Code of Conduct; and

1.2

satisfying itself, to the extent feasible, as to the integrity of the Chief Executive Officer and other executive officers and that the Chief Executive Officer and other executive officers create a culture of integrity throughout the organization.

2.   Governance

2.1

providing stewardship and using its collective expertise, skills, experiences and competencies, to probe, provide proactive, timely, objective and thoughtful guidance to, and oversight of, senior management;

2.2

developing the Bank’s approach to corporate governance, including establishing and maintaining a set of corporate governance principles and guidelines;

2.3

establishing appropriate structures and procedures to allow the Board to function independently of management;

2.4

establishing Board committees, appointing Board committee chairs and approving their respective charters to assist the Board in carrying out its duties and responsibilities;

2.5

evaluating, on a regular basis, the Board, its committees and individual directors, and reviewing the size, composition and policies of the Board and its committees with a view to the effectiveness, contribution, skills and independence of the Board and its members;

2.6

approving the Bank’s Board Approval/Oversight Guidelines, which set out the roles and responsibilities of the Board and management; and

2.7

overseeing the process pursuant to which the Office of the Superintendent of Financial Institutions (“OSFI”) is to be promptly notified of any potential changes to the membership of the Board and senior management.

3.   Strategic Planning Process

3.1

overseeing the Bank’s strategic planning process and annually approving a strategic plan, which takes into account, among other things, the opportunities and risks of the Bank’s business, its risk appetite, levels of capital and liquidity, emerging trends, and the competitive environment in the industry;

3.2

supervising the implementation and effectiveness of the Bank’s approved strategic and operating plans taking into consideration its risk appetite framework;

3.3

reviewing, approving and monitoring performance against the Bank’s financial objectives, plans and actions, including significant capital allocations and expenditures and the declaration of dividends; and

3.4

reviewing and approving all major initiatives, corporate decisions and transactions, as well as applicable funding transactions.

4.   Risk Management, Internal Controls and Organizational Structure

4.1

overseeing that processes are in place to identify the principal risks of the Bank’s businesses and requiring the implementation of appropriate systems to measure and manage these risks;

4.2

reviewing and approving at least annually the Risk Appetite Framework (as defined in the Risk Review Committee charter);

4.3

monitoring risk management activities for sufficient independence, status and visibility;

4.4

reviewing and approving at least annually significant policies and practices that require respect for, and compliance with, applicable legal, regulatory and internal requirements and obtaining reasonable assurance about the Bank’s compliance;

4.5

overseeing the Bank’s internal controls and management information systems and monitoring their integrity and effectiveness;

 

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4.6

reviewing reports provided by management on the effectiveness of internal control over financial reporting;

4.7

reviewing and approving at least annually the Bank’s organizational structure; and

4.8

satisfying itself, to the extent feasible, that the Chief Executive Officer and other executive officers promote an appropriate and sound risk culture throughout the organization.

5.   Communications and Public Disclosure

5.1

reviewing and approving the Bank’s significant disclosure documents including financial statements;

5.2

approving the Bank’s disclosure policy that provides for timely and accurate disclosure to analysts, shareholders, employees and the public that meets all applicable legal and regulatory requirements and guidelines;

5.3

periodically assessing the Bank’s Shareholder Engagement Policy and monitoring feedback received from the Bank’s stakeholders; and

5.4

overseeing a process whereby shareholders and other stakeholders may communicate directly with the Bank’s independent directors through the Chair of the Board by furnishing publicly available instructions in the Bank’s management proxy circular and/or on its website.

6. Evaluation and Succession Planning

6.1

overseeing the Bank’s succession planning processes including the appointment, training, compensation and performance assessment of the Chair of the Board, Board committee chairs, independent directors, the Chief Executive Officer and other senior executives as well as the heads of the oversight functions;

6.2

establishing annual performance expectations and corporate goals and objectives for the Chief Executive Officer, monitoring progress against those expectations and dismissing and replacing the Chief Executive Officer as necessary;

6.3

approving the selection criteria for new directors, nominating directors for election, appointing Board committee members, and reviewing the independence of directors; and

6.4

establishing expectations and responsibilities of the Chair of the Board, the Chief Executive Officer, the chairs of each committee of the Board and other directors, wh