OMERS SC Boards User Manual

OMERS BOARDS

2020 COMPOSITION REVIEW

and

SC BOARD

EFFECTIVENESS REVIEW

March 23, 2021

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OMERS Boards Composition Review and SC Board Effectiveness Review

March 23, 2021

Table of Contents

1. Executive Summary ......................................................................................................2

2. Distinctions between the Two OMERS Boards ..............................................................3

3. Composition of the OMERS Boards ...............................................................................4

4. Sponsor Organizations ..................................................................................................5

5. Other Stakeholders.......................................................................................................8

6. Board Effectiveness ......................................................................................................9

7. Conclusion .................................................................................................................. 10

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OMERS Boards Composition Review and SC Board Effectiveness Review

March 23, 2021

1. Executive Summary

As provided in the Ontario Municipal Employees Retirement System Act, 2006 (the OMERS Act), the
OMERS Sponsors Corporation determines the composition of the two Boards that govern the OMERS
Plans – the OMERS Administration Corporation (AC) Board and the OMERS Sponsors Corporation (SC)
Board. The composition, desired competencies, method for nominating and appointing members and
term limits, among other things, were set out in By-Law Nos. 4 and 131.

In 2020, the SC consulted OMERS Stakeholders on these By-Laws, particularly with respect to:

• Composition of the SC and AC Boards - Certain organizations have the ability to nominate or

appoint Directors to the AC and SC Boards.

• Weighted Voting – Certain directors on the SC Board have multiple votes.

• Super-Majority Voting – Certain matters require a 2/3 majority vote.

• Arbitration for disputes relating to Plan change decisions – By-Law No. 12 provides for disputes

regarding certain Plan change decisions to be referred to a third-party arbitrator for resolution.

• Arbitration for disputes relating to nomination and appointments to the AC Board – If a

sponsor organization and the SC Board cannot agree on a nominee to the AC Board, the dispute
can be referred to a third-party arbitrator.

A number of organizations provided input and comments on the above points. On all points, the input
was varied.

Having considered the input and the issues more broadly, the SC Board decided to maintain the current
composition of the OMERS Boards, the current status of weighted voting, and the existing matters
subject to a super-majority vote. With respect to the two types of issues subject to arbitration, the SC
Board decided:

• As the SC Board intends to conduct a review in 2021 of the Plan change process currently set out

in By-Law No. 12, it would be more appropriate for any changes relating to the arbitration of
Plan change disputes to be considered in the context of that broader review of the entire
process, rather than independently. Consequently, any possible changes to the arbitration
process were deferred to be addressed as part of the broader review.

• The arbitration process relating to the disputes around the nomination and appointment of

directors to the AC Board included in By-Law No. 13 (now By-Law No. 4) will be removed for the
appointment of directors whose terms commence after January 1, 2022. This is intended to
leave the existing arbitration process in place for directors in the current nomination/
appointment process.

The purpose of this report is to outline the changes that were considered, the conclusions reached by the
SC Board, and the related rationale. The By-Laws are available at www.omers.com.

1

Subsequent to the Composition Review, By-Laws No. 4 and 13 were revised and renumbered as By-Laws No. 3 and 4, respectively,

effective February 23, 2021. The current versions of the By-Laws are available in the SC’s Governance Manual at www.omers.com
[link]

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OMERS Boards Composition Review and SC Board Effectiveness Review

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2. Distinctions between the Two OMERS Boards

The two OMERS Boards each have distinct roles and responsibilities reflective of their unique purpose
within the overall governance of OMERS.

The SC is responsible for the design of the benefits provided by the OMERS Pension Plans and the
contribution rates applicable to its members and employers. The SC also determines the composition of
the two OMERS Boards. The SC provides for strategic oversight and decision-making on major policy
directions. SC Directors owe a fiduciary duty to the OMERS Sponsor Corporation, not to any one
stakeholder organization or interest group regardless of who appoints them.

The AC is accountable for the day-to-day operations of the Plan, including the management and strategy
for investment portfolios, paying pension benefits, collecting contributions and ensuring compliance
with legislation such as those governing actuarial valuations. The AC Board has a fiduciary responsibility
in the sense that it must act only in the interests of Pension Plan members as a whole and hence in
fiduciary matters must maintain independence from Sponsors.

These distinctions in purpose lead to differences in the two Boards. While both Boards must have an
understanding of the stakeholder environment as well as the capacity2 to consider the complex issues
that come before them, the focus and emphasis is different for the two Boards. The differences:

• By-Law No. 4 (formerly No. 13) imposes capacity requirements for AC Directors and

contemplates that competencies will be developed for the AC Board as a whole, influencing
appointments.

• Similarly, AC Directors are limited to sitting four terms on the AC Board to ensure the AC Board

evolves with the pension and investment environment.

• For the SC Board there is a greater emphasis and need for a deep understanding of stakeholder

interests and long-term strategic considerations relating to Plan design. Nevertheless, in 2020,
the SC Board decided to impose the same twelve year maximum term limits on itself as were
imposed for the AC Board. Renewal and new thinking are important, balanced against a term
that is sufficiently long to provide for continuity and institutional knowledge. In addition, the SC
Board developed a competency framework setting out the skills, knowledge and experience that
the SC Board believes it needs to meet its obligations, and is using this framework in its
discussions with sponsors and in developing its education program.

• The AC Board has an independent chair which reflects the importance of the AC Board acting

independent of Sponsors. In 2020, taking effect on January 1, 2021, the SC Board adopted a
single Chair model, supported by a Vice-Chair, rather than the Co-Chair model it had in place
since 2006. While the SC Board recognizes the fundamental importance of the OMERS Pension
Plans as jointly sponsored by employees and employers, it determined that it would operate
more effectively with a single Chair approach.

2

See the governance manuals of the respective organizations at www.omers.com/omers-governance .