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The Directors Chair

Claude Lamoureux

Making smart moves seem easy

In The Directors Chair with David W. Anderson: Claude Lamoureux isnt the first CEO and senior director to
stress the importance of meeting, listening to and trusting the people you lead. But he might have perfected it
Photography by Jeff Kirk

When it comes to a track record of smart management, sound investment

decisions and excellent governance, few organizations can top the Ontario
Teachers Pension Plan. For that, Claude Lamoureux, Teachers president
and CEO for 17 years, starting with its founding in 1990, deserves much of the
acclaim. Yet Lamoureuxs success at Teachers marks just one installment in
a long and still-growing list of achievements. Others include his 25 years as a
senior executive and, ultimately, CEO of Metropolitan Life Holdings Ltd.; his
role in cofounding the Canadian Coalition for Good Governance in 2002; and
his present and past service on well over a dozen private, public and nonprofit boards. Here, in conversation with leadership and governance adviser
David W. Anderson, Lamoureux shares some of his many insights and lessons
learned about leadership, effective board governance and business success.

Claude Lamoureux
Primary role
Corporate director
Board chair
Orbite Aluminae, Cordiant Capital
Director
Maple Leaf Foods, Industrial Alliance Insurance and Financial Group. Non-corporate: St. Michaels Hospital, The Canadian
Institute for Advanced Research, York University Foundation
Former director
Domtar Inc., Xstrata plc, Atrium Innovations Inc., Finch Asset Management. Non-corporate: Canadian Coalition for Good
Governance, FAIR Canada (Foundation for Advancement of Investor Rights), Institute of Corporate Directors, International
Corporate Governance Network, Canadian Institute of Chartered Accountants, Institut pour la Gouvernance des Organismes
Publics et Privs, The Learning Partnership
Former CEO
Ontario Teachers Pension Plan, Metropolitan Life Holdings Ltd.
Education and certifications
BA, Universit de Montral; B. Comm, Universit Laval; Fellow of the Canadian Institute of Actuaries;
Fellow of the Society of Actuaries, ICD.D (Institute of Corporate Directors)
Honours
kOfficer of the Order of Canada

kOfficer of the Order of Ontario

kOfficier Ordre National du Qubec
kFellow of Institute of Corporate Directors
kHonorary doctorates: Glendon College (York University), HEC (University of Montreal)

Current age
71
Years of board service
30 on private boards, 6 on public boards

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The Directors Chair

Claude Lamoureux

David W. Anderson Whats the hardest part about being an effec-

tive leader?
Claude Lamoureux You have to make a lot of decisionschallenging in scope, complexity and riskbut implementation is the tough
part. My job at MetLife, in charge of operations across Canada, was
much tougher than the one at Teachers, where everyone was in
the same building. To be a good leader you have to be present with
peoplein their workspace, not your own. Thats where you learn
whats happening, pick up ideas and understand the impact of your
decisions. As CEO, nothing happens in your office; it all happens
beyond your door. But too many people stay inside, hidden from
those who matter.
David W. Anderson How were you so effective at implementing

your decisions?
Claude Lamoureux People have to understand your strategy, what

Claude Lamoureux Getting the right answer for the company trumps
hierarchy. You cant undermine your managers, and though they may
feel it on occasion, you have to make sure they are aware of the issues.
I simply let my direct reports know of the problems I found and asked
them what they were doing about it. People got used to the fact that I
would talk to anyone and everyone. Things changed for the better. The
reality was that there were stupid things going on. No clocks were allowed in the office, because management didnt want people to watch
the clock. Give me a break! I got clocks installed. A manager didnt buy
a computer when I told him to do so in order to get productivity up. So,
I told him to bring me the purchase order and I signed it myself. You
have to demonstrate you want change and empower people to act. The
last thing I wanted was people resisting change in my name. Inertia is
great for most people because they dont want to change. Someone has
to start. I did.

you want them to do and have the tools to make it happen. I met with
small groups of people regularly from across the company. Coffee
with Claude, I called it. I had meetings everywhere, including the
mailroom. I went to learn about what was happening in places where
things actually happened. If you want to know whats going on, you
have to talk to your customers and employees directly. If anyone wanted to talk to me, they did. I would ask people if I could help them if they
looked lost and start up a conversation. They didnt always know who
I was, so I learned a lot.

Universities still dedicate much of the

teaching time to finance and accounting,
not how to deal with people and get
things done. If a CEO doesnt go around
and talk to people inside and outside
the company, theyre missing the boat.

David W. Anderson Youve got a particular style of engagementa

combination of social ease, genuine interest, striking candour
and unassuming charm. Its disarming and rare. How did you leverage your style to learn from customers and employees?
Claude Lamoureux The easy thing for me is to meet with people.
I found that in talking to people, earning their trust, I got into a
flow of conversation in which people told me what I should know.
This is how you find out the problems. People know whats not
working well in their organization. These conversations were essential to helping me understand problems and how to fix them. I
spent time with people across the organization from junior clerk
to senior executive, from new to long-tenured employees. I liked
to ask, What do you think of this place? and What do you need
to do your job better?

David W. Anderson When you got the ball rolling, how did you
deal with the inevitable mistakes people made trying to follow
your lead?
Claude Lamoureux Making mistakes isnt bad. Its what you do after
thats important. We all make mistakes. I didnt punish people for honest mistakes.
David W. Anderson What role did your board play in setting you

up for success as CEO?

Claude Lamoureux Gerry Bouey, Teachers board chair and former

had as a CEO with your customers and employees not more

common?
Claude Lamoureux CEOs of large companies often remain physically
isolated from the people that matter most. They also dont create or
use the opportunities to host productive meetings with staff or customers. I met weekly with staff to confirm priorities, review projects
and communicate what was going on. I think universities still dedicate much of the teaching time to finance and accounting and such,
not how to deal with people and get things done. Its essential to learn
these things. If a CEO doesnt go around and talk to people inside and
outside the company, theyre missing the boat.

governor of the Bank of Canada, asked me how Id run the pension

plan. I said Id run it like a corporationbased upon broad limits of
authority and with full transparency. He agreed, hired me and thats
how it ran. My board empowered me from the start to run the business.
That allowed us to be the first pension plan to do derivatives. The received wisdom was that pension plans only worked with new income,
but Bob Bertrams idea to use derivatives allowed us to diversify much
faster. The board said yes. We made mistakes but they didnt kill us.
They didnt over-control, but watched and were flexible. We earned directors trust and when we asked for more authority, they gave it to us.
We wanted to go into private equity but knew wed have our greatest
advantage if we could be the investor with the fastest response in the
market. So the board agreed to hold meetings within 24 hours if there
was an investment opportunity that exceeded our authority. Many
boards didnt show that flexibility to management and thus failed to
accommodate the market reality. Jim Leech wanted OTPP to be the
first call from any investor, and we made that a competitive advantage.

David W. Anderson When talking extensively to employees junior

to your own direct reports, how did you deal with those who felt
cut out of the loop or undermined?

David W. Anderson Having a board that far-sighted and responsive says something remarkable about its composition. How did
Teachers board end up with consistently good directors?

David W. Anderson Why is the depth and quality of dialogue you

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The Directors Chair

Claude Lamoureux

Claude Lamoureux From early on the board had two constituen-

cies: the teachers, who appointed four directors via their union,
and the province of Ontario, which appointed four directors via
the government. Both had to agree on the chair. Unions typically
appoint their own members to such boards, but Margaret Wilson,
the general secretary of the teachers union, understood we were
dealing with a lot of money and the best thing for the teachers was
to have three of the four union directors from the outside, chosen
specifically for their understanding of investments and capital
markets. As management, we would suggest names for nominations to the government and union, and in general, we got the
people we needed to have a strategic board. Our transparency to
both our constituentsunion and governmentestablished the
necessary trust in our judgment as to who would contribute best
on the board. As a result, Ontario Teachers Pension Plan is one of
the best-governed pension plans in the world.
David W. Anderson In those early days, few companies had boards
and management teams working so effectively. Many directors
and advisers reject the term partnership but you embrace it.
Claude Lamoureux The board certainly was our partner. Yes, the
board supervised me and had final authority, but you have to treat
them like partners to get the most out of the relationship. Even
when I had clear authority, say in what I could raise in the capital
markets, I would call on the board for their opinion. Some CEOs
dont do that. If I had a tough decision, I would call the chair.
You have to show your board whats happening. When the CEO
doesnt tell the board things, its a problem. I dont understand
why anyone would lie or hide things from their board. I also exposed the board to all the senior people. I made sure the chair
met one-on-one with all the senior people we hired. I saw the
same partnership at work when I was on the board of Xstrata. We
would visit mines around the world without the CEO. He encouraged us to go and tell him if we saw any problems. Many CEOs
would say No, I have to be there. Trust is liberating.
David W. Anderson How do businesses get in trouble?
Claude Lamoureux I can think of three broad reasons. First, having the

wrong management. This may mean a CEO who doesnt understand

capital markets. The time to raise money is when you dont need it.
When you come to the table asking for money at the last minute, youre
at a disadvantage and the cost of capital becomes punitive. It can also
mean having a CEO with a big ego or a management team that doesnt
listen to and trust employees. This is costly, as General Motors is experiencing with recalls. Employees knew what was going on, but no
one wanted to tell the truth through the channels provided. A second
reason is simply being in the wrong business. But a competent CEO
will recover. Look to good venture capitalists; they realize when they
are in the wrong business and move quickly. A final reason concerns
accounting practices. Not keeping the books current, pushing the envelope on accounting and not treating the external auditor as a partner
are concerns for me. I prefer to pay more for the external auditor and
get solid answersdo I have the right CFO and the best team I can get
in accounting and treasury?
David W. Anderson Are there systemic challenges to boards func-

tioning proactively?

Claude Lamoureux Ive watched many boards do their work. The reality is that as a director, youre relying on management for information. Some CEOs, though, dont see the board as a partnerby that I
mean some CEOs dont tell the whole story. The board of CP Railway
tried to make changes, but the CEO told them how it couldnt be done.
Eventually you have to make a choice: accept the reasons for poor performance given by the CEO or change the CEO. Its easier to accept the
reasons given because directors think, The CEO knows more than me.
David W. Anderson What do boards consistently get wrong that

makes it harder to do their job?

Claude Lamoureux Most boards dont do a good job reviewing CEO

performance. Meaningful performance appraisal of CEOs is rare, so I

see this as a risk. Many CEOs think boards dont have the knowledge
to judge themand theyre often right. You have to get the board and
CEO together to figure this out. Boards have to be able to tell their CEO
what and how to improve.

A CEO has to treat the board like partners

to get the most out of the relationship.
If I had a tough decision, Id call the chair.
You have to show your board whats
happening. When the CEO doesnt tell
the board things, its a problem.
David W. Anderson Given that boards know relatively little about
their own CEOs performance, how do directors know when to
change the CEO?
Claude Lamoureux Its a gut feeling. Its tough to fire someone, unless
the failure is big, obvious and harmful. Theres a strong tendency to
give the CEO leeway. When in fact you know its time for the CEO to
go, its often two years late. When a CEO retires, you see a new CEO
step up and you think, Wow, we should have done this five years ago!
The same thing applies to employees, but coming to a decision is harder at the board because you have to persuade otherswho often have
relationships.
David W. Anderson Tell me whats hard to do as a director that

appears simple from the outside.

Claude Lamoureux Everything to do with compensation! If you

want to change it, get on a board and try it yourself. Its impossible. You cant just make the change; you have to earn your stripes
first, building your reputation within the board. A new director
has to gain credibility to have an impact over time. And thats part
of the problem, because in time people can get too close to the
CEO. Being on a board is not an easy job.
David W. Anderson, MBA, PhD, ICD.D is president of The
Anderson Governance Group in Toronto, an independent
advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises
directors, executives, investors and regulators based
on his international research and practice. E-mail:
david.anderson@taggra.com. Web: www.taggra.com

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