1. Hospital Board of Directors “Best Practices” 2010 Joshua Liswood, Partner Miller Thomson, LLP January 12, 2010

2. The issues Incorporation Governance Fiduciary Duties in tough financial times Conflict of Interest

3. The Hospital Corporation Private not-for profit; non-share capital corporation Incorporated further to the “Corporations Act” Ultimate decision and oversight authority with the Board and Members Ownership with the Corporation.

4. Governance Differences between directors and management Directors are responsible for establishing policies and procedures while management is responsible for implementing them Directors must measure management’s implementation

5. Board Composition Statutory requirements Ex-officio; elected Nominating process and criteria

6. Governance Sources of Directors’ Duties and Responsibilities Common law governing corporations Public Hospitals Act, especially Regulation 965 Ontario Corporations Act Articles and by-laws of institution Any general legislation that applies to all Directors (e.g. Criminal Code)

7. Governance Duties of Directors Fiduciary duty –exercise power in good faith and honesty –exercise unfettered discretion in decision- making –avoid conflicts of interest Duties of care and skill –act according to a minimum standard of care –act with prudence –anticipate probable consequences of courses of action

8. Governance Directors’ Liability –s. 13 of Public Hospitals Act in certain situations, gives protection to persons acting in good faith within a hospital structure –Personal responsibility to ensure corporate compliance with legislation –Possible sanctions : criminal, penalties under Corporations Act, Income Tax Act, applicable employee and workplace liability statutes

9. Governance “Due Diligence” Defence Applies if Director can show he or she took reasonable care in carrying out responsibilities to corporation “Balance of probabilities”

10. Conflict of Interest? “Conflict of Interest” means any situation in which another interest or relationship impairs the ability of a Director to carry out the duties and responsibilities of a Director in an actual, potential, or perceived manner.

11. Conflict of Interest? Pecuniary or Financial Interest A Director is said to have a pecuniary or financial interest in a decision when the Director (or an Associate) stands to gain by that decision, either in the form of money, gifts, favours, gratuities, or other special considerations.

12. Conflict of Interest? Undue Influence Interests that impede a Director in his or her duty to promote the greater interest of the whole community served by the Corporation is a violation of the Director’s entrusted responsibility to the community at large.

13. When is a Director in a Conflict of Interest? Adverse Interest A Director is said to have an adverse interest to the Corporation when that Director is a party to a claim, application or proceeding against the Corporation.

14. How to Protect Against Conflict of Interest? Expand scope of conflict of interest in Bylaws Address both actual and potential conflict of interest Address conflict of interest perceived by other Directors Provide procedural mechanism for declaring and addressing conflict of interest

15. Questions? Joshua Liswood jliswood@millerthomson.com 416.595.8525 THANK YOU!!!