FIGURE 9-1: P ercentage of Cannabis Issuers with Same Individual Acting as CEO and Board Chair and with Non-Independent Board Chair
40% of 20 prominent Canadian LPs had the same individual acting as CEO and board chair. Of those LPs, 65% had a board chair who was not independent for purposes of NP 58-201.
80
Same Individual Non-Independent
65%
70
60
50
40%
40
30%
30
20%
20
10
0
2018
2020 (As of September 15)
SIGNIFICANT EXECUTIVE AND BOARD TURNOVER IN THE CANNABIS INDUSTRY
Since the flurry of financing and M&A activity that took place in 2017 and 2018, the cannabis industry has seen significant turnover at the executive and board levels. Of the 20 LPs reviewed, roughly 55% have a different CEO today than they did as at the later of the date of recreational legalization (October 17, 2018) and the date the issuer first became publicly listed. 203 While some of that turnover has been proactive and aimed at improving corporate governance by bringing in a more experienced leadership team or improving skills and competencies at the board level, some high- profile board and executive shakeups have resulted from significant shareholder action or have occurred in response to poor financial performance.
For example, since Constellation Brands Inc., listed on the New York Stock Exchange (NYSE), invested approximately $5 billion in exchange for a 38% ownership stake in TSX- and NYSE-listed Canopy Growth Corporation, Canopy has experienced a complete overhaul of its board and the termination of its founder and long-time CEO, Bruce Linton. Similarly, on the heels of disappointing financial performance, Terry Booth, founder of Aurora Cannabis, stepped down as CEO in February 2020 after having brokered some of the most high-profile transactions in the sector – namely, acquiring MedReleaf for $3.2 billion and CanniMed Therapeutics Inc. for $1.1 billion. Other cannabis issuers have also been forced to replace executives and directors in light of public controversies stemming from poor corporate governance practices.
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Governance Insights 2020
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