BMO Financial Group has a long-standing tradition as a leader in corporate governance. As we move forward, we strive to remain at the forefront of best practices.

Board Leadership, Independence and Accountability

Sound governance and ethical behaviour begin with our Board of Directors, which represents and is accountable to our shareholders and also sets the standard of good governance for the entire enterprise. The Board’s Governance and Nominating Committee is responsible for shaping our corporate governance policies and practices. The committee keeps abreast of developments in the world of corporate governance and oversees our compliance. When appropriate, it recommends new practices to the Board that will keep us at the forefront of best practices.

At BMO we believe that having independent directors – including our chairman – helps the Board operate autonomously and ensures that we are accountable to all our stakeholders. All our directors, with the exception of the CEO, are currently independent. Chairman David Galloway ensures that the Board operates independently of management and that directors have access to an independent leader.

Mr. Galloway is an ex-officio member of all Board committees of which he is not a member. In that role he is able to manage the affairs of the Board, assisting the committees and the Board to function effectively and meet their responsibilities.

Annual Director and Committee Reviews

The effectiveness of the Board’s operations is monitored by annual evaluations of the Board, its committees and each director. The director evaluations are carried out through a “peer” performance review – one of the first of its kind in Canada – which is a comprehensive survey that requires all directors to assess the contribution of each of their peers on measures ranging from ethics to strategic insight, financial literacy and business judgment.

Governance Beyond Compliance

The Board of Directors serves as an example to our entire organization by affirming that sound corporate governance means not just abiding by the rules but also embracing the spirit of those rules. In fact, some of our corporate governance practices go beyond the requirements of the law.

We are committed to building on our success in the area of corporate governance, so that we remain at the forefront of best practices. At BMO, we recognize that our governance standards must respond to changes in our organization, stakeholder expectations, regulatory requirements and evolving best practices.

Continuously Enhancing Disclosure

BMO considers disclosure to be an essential component of effective corporate governance. To a large extent, the success of the multitude of regulatory requirements, voluntary best practices and an organization’s own culture of integrity is determined by the degree to which all stakeholders of the organization are able to truly understand its operations, goals and values as well as the extent of its assets in comparison to its liabilities.

Our efforts to continuously enhance public disclosure have made us an innovator in this area. Our Board encourages, and management actively seeks, ways to provide more information, clarity and insight to our stakeholders. A hallmark of our annual report is our financial performance scorecard, which made us a pioneer in financial disclosure. The scorecard is a report and comparison of eleven important financial measures including shareholder return, return on equity, earnings per share growth, productivity and credit performance. We disclose our performance on these measures relative to Canada’s major banks and our North American peer group.

We believe that assessing performance relative to our competition puts results in an appropriate context for our stakeholders and provides further clarity. BMO has disclosed these comparatives every year since it started the practice in 1992, reporting in good years and in bad. We believe that when we are open and honest in explaining results we earn the trust of stakeholders over the long term.

Stock Exchange Guidelines

As a Canadian reporting issuer with securities listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE), our corporate governance practices meet, and in some cases exceed, the applicable guidelines adopted by the Canadian Securities Administrators (CSA), the rules of the U.S. Securities and Exchange Commission (SEC) which give effect to the provisions of the Sarbanes-Oxley Act and the NYSE standards. Our governance practices differ significantly in only one respect from those required of U.S. domestic issuers under the NYSE standards. The NYSE standards require shareholder approval of all equity compensation plans and any material revisions to such plans, regardless of whether the securities to be delivered under such plans are newly issued or purchased on the open market, subject to a few limited exceptions. The TSX rules only require shareholder approval of equity compensation plans that involve newly issued securities, subject to a few limited exceptions. The TSX rules require that equity compensation plans that do not provide for a fixed maximum number of securities to be issued must have a rolling maximum number of securities to be issued based on a fixed percentage of the issuer’s outstanding securities and must be approved by shareholders every three years. If the plan provides a procedure for its amendment, the TSX rules require shareholder approval of amendments only where the amendment involves a reduction in the exercise price or an extension of the term of options held by insiders.