Governance, Commitments and Engagement

Governance, Commitments and Engagement

Profile Disclosures

4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight. F

The Board of Directors and the management of TD are committed to leadership in corporate governance. We have designed our corporate governance policies and practices to be sure we are focused on our responsibilities to our shareholders and on creating long term shareholder value. The Board is responsible for setting “the tone at the top” for a culture of integrity and compliance throughout the bank.

TD has four committees of the Board of Directors. They are the Corporate Governance Committee, the Human Resources Committee, the Risk Committee and the Audit Committee. Each committee operates under a written charter that sets out its responsibilities and composition requirements. All committee members are directors who are independent under the Bank's Director Independence Policy. Reports of each committee are contained in our latest proxy circular.

4.2 Indicate whether the Chair of the highest governance body is also an executive officer. F

The Chairman of the Board and the Chief Executive Officer of TD Bank are separate roles.

4.3 For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members. F

The board believes that to be effective it needs to operate independently of management. This means that a large majority of the board and all committee members are not part of management and do not have relationships with the bank that would make them personally beholden to the bank and consequently interfere with the exercise of their independent judgment. For 2013, over 92% of our directors are considered independent. Please refer to our website for more information on how we determine director independence.

Our total board size is 13 members.

% of female directors 37.5%
% of visible minority directors 7.1%
% of independent directors Over 92%

(As of October 31, 2013.)

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. F

Shareholders and employees and other interested parties may communicate with the Board of Directors through the Chairman of the Board,
By mail to:
Mr. Brian M. Levitt
Chairman of the Board
The Toronto-Dominion Bank
P.O. Box 1, Toronto-Dominion Centre
Toronto, Ontario M5K 1A2
By e-mail c/o TD Shareholder Relations to tdshinfo@td.com

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization's performance (including social and environmental performance). F

TD has a balanced approach to executive compensation that is intended to attract, retain, and motivate high-performing executives to create sustainable value for shareholders over the long term.

Our Proxy Circular outlines the six key compensation principles we follow and provides detailed disclosure of our approach including how compensation is aligned with performance over time. A key part of our approach is to defer a significant portion of the compensation awarded to our executives and many other employees. This deferred compensation vests at the end of a minimum of three years, is tied to the bank’s share price, and promotes decision-making that is in the best long-term interests of the bank and its stakeholders.

Please review the 2014 Proxy Circular for full details on executive compensation, starting on page 31.

Compensation is designed to be fair and without discrimination, and we regularly conduct market research to ensure that it is competitive in the markets in which we compete. The majority of employees receive a base salary and an incentive compensation award. Typically, incentive compensation is based on a combination of financial and non-financial measures. For the majority of employees and executives, non-financial measures include Customer Experience Index and Customer WOW! Index results. Individual incentive compensation awards are also based on individual performance, again evaluated on both financial and non-financial measures.

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. F

Directors may not be eligible to stand for election if they have a potential or actual conflict of interest that is incompatible with service as a director.

It is the responsibility of a director to submit a report to the corporate governance committee whenever there is a conflict of interest or potential conflict of interest between him or her and the bank, and the committee may obtain additional information where it deems appropriate. The committee will determine an appropriate course of action for the director, always with a view to the best interests of the bank. Should a conflict become incompatible with service as a director, the director must offer his or her resignation.

Further information: PC page 72

4.7 Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity. F

The corporate governance committee determines the skills, qualities and backgrounds the board needs to fulfill its many responsibilities and mandates with a view to diverse representation on the board. It monitors board and committee composition and regularly reviews succession plans for the board, chairman of the board, and committee chairs while keeping future director recruitment needs in mind. This committee also regularly assesses existing directors’ skill and experience competencies in light of the opportunities and risks facing the bank. It seeks candidates to fill any gaps in the competencies of board members, while also considering candidate attributes and perspectives, and rigorously assesses a candidate’s ability to make a valuable contribution to the board.

With a view to recruiting needs, the corporate governance committee uses a skills/experience matrix as a tool to identify any gaps in the competencies considered most relevant to the needs of the board, being:

  • Senior Executive/Strategic Leadership
  • Financial Services
  • Risk Management
  • Talent Management & Executive Compensation
  • Audit/Accounting
  • Capital Markets/Treasury
  • Corporate Responsibility
  • Governance
  • Government/Public Affairs
  • Legal/Regulatory
  • Marketing/Brand Awareness
  • Technology
  • Other Board Experience

Directors annually self-assess their skills and experiences against these competencies. Key areas of expertise/experience for each director nominee are listed in the charts under the “Director Nominees” section of this circular. The committee reviews the matrix annually to confirm that it continues to reflect the most relevant skill and experience competencies.

Further information: PC page 72-73

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation. F

The TD Framework outlines our vision, mission and strategy, along with our Guiding Principles and expectations of leaders. It outlines in a simple way who we are, what we stand for and how we get things done. It’s easy for employees to understand and incorporate in their day-to-day work. Most importantly, it applies to everyone at TD – no matter what business, level or location.

The Guiding Principles are our most important values that help to guide the way we run our business. We use these seven principles as the basis for all bank activities.

Our Leadership Profile describes what we expect of our leaders. Great leadership is essential – it’s what differentiates successful organizations. We may not get it right all the time, but every leader – and aspiring leader – at TD is expected to strive to live by this profile every day.

Ethics and Integrity
TD’s Code of Conduct provides a framework for how we interact with one another, our shareholders, customers, communities, suppliers and competitors. Employees understand clearly that any irregular business conduct, including bribery, corruption or insider trading, will not be tolerated.

Please refer to the scorecards throughout the CR Report for the status of implementation of these codes and standards.

4.9 Procedures of the highest governance body for overseeing the organization's identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles. F

Chart of governance

Corporate responsibility is a key part of TD’s strategy and is managed within a framework of internal control, governance and risk-management processes.

The Corporate Governance Committee oversees TD Bank Group’s Corporate Responsibility Strategy and performance. Each year, the Committee reviews and assesses the draft Corporate Responsibility Report and Public Accountability Statement. The Corporate Responsibility team keeps the Committee informed of international trends and best practices in corporate disclosure of non-financial performance.

Group President and Chief Executive Officer Ed Clark has primary responsibility for ensuring TD acts as an exemplary corporate citizen.

The Corporate Citizenship Council is a senior executive committee that represents business group heads from Human Resources, Compliance, Marketing, Wealth Management, Insurance, Retail Banking, and Corporate Communications. Meeting four times a year, the council is tasked with providing input on TD’s Corporate Responsibility Strategy, assessing our performance and looking ahead to emerging environmental and social issues that may have an impact on TD and our stakeholders.

The Corporate Responsibility Steering Committee operates at the vice-president level and includes representation from TD Environment, Community Relations, Diversity, Marketing, Supply Chain, Human Resources, Retail Banking, Investor Relations, TD Economics, and Communications. The role and function of this committee are to contribute to the ongoing development of TD’s Corporate Responsibility Strategy and program improvements.

More Information:

4.10 Processes for evaluating the highest governance body's own performance, particularly with respect to economic, environmental, and social performance. F

Each year the Committees of the Board review their charters to satisfy themselves that they meet or exceed regulatory and shareholder expectations and are operating effectively. The corporate governance committee reviews changes which are then approved by the board. Each committee establishes annual objectives or key goals as a focus for its core responsibilities and activities, and to help prioritize the committee’s time and effort throughout the year. The committees measure progress against their objectives throughout the year.

The Corporate Governance Committee has oversight of the TD’s corporate responsibility strategy and performance. The following responsibilities are included in the committee charter:

  • reviewing and assessing the Bank’s corporate responsibility strategy and reporting, including monitoring its environmental and social performance; and,
  • keeping abreast of international trends and best practices in corporate disclosure of non-financial performance and updating the Board on social and environmental issues, as necessary.

More information

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization. F

Managing Risk
TD's CEO and Senior Executive Team set the tone for TD’s Risk Appetite, which helps determine our missions, vision and guiding principles. These governing objectives guide TD's risk culture where the only risks taken are those that can be understood and managed. Through our Enterprise Risk Framework and our Risk Appetite Statement, our shareholders and employees can have a common understanding of how we manage risk.

We take risks required to build our business, but only if those risks:

  1. Fit our business strategy, and can be understood and managed;
  2. Do not expose the enterprise to any significant single loss events; we don’t "bet the bank" on any single acquisition, business or product; and
  3. Do not risk harming the TD brand.

More information: AR pages p70-75

  • During 2013, TD applied our Environmental and Social Credit Risk Management Procedures to credit and lending in the wholesale, commercial and retail businesses. These procedures include assessment of our clients’ policies, procedures and performance on material environmental and related social issues, such as climate risk, biodiversity, water risk, stakeholder engagement and free, prior and informed consent of Aboriginal peoples. Within Wholesale Banking, sector specific guidelines have been developed for environmentally-sensitive sectors.
  • TD has been a signatory to the Equator Principles since 2007 and reports on Equator Principle projects within our annual Corporate Responsibility Report.
  • TDAM is a signatory to the United Nations Principles for Responsible Investment (UNPRI). Under the UNPRI, investors commit to incorporate environmental and social issues into investment analysis and decision making. TDAM applies its Sustainable Investing Policy across its operations. The Policy provides information on how TDAM is implementing the UNPRI.
  • We proactively monitor and assess policy and legislative developments, and maintain an ‘open door’ approach with environmental and community organizations, industry associations and responsible investment organizations.

Business Continuity
TD’s Business Continuity Management (BCM) Group manages operational risk at TD and routinely undertakes scenario testing and simulations to assess the potential impact of a range of natural events such as hurricanes, earthquakes, tornadoes, flooding and severe weather. We assess the impact on TD assets, clients, employees and our overall ability to continue conducting business. In 2013, our BCM Group began broadening and deepening its understanding of natural events directly affected by climate change and their potential impact on our business.

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses. F
  • United Nations Principles for Responsible Investing
  • Equator Principles
  • Principles of Free, Prior and Informed Consent
  • Universal Declaration of Human Rights
  • Leadership in Energy and Environmental Design (LEED)
4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization:
  • Has positions in governance bodies;
  • Participates in projects or committees;
  • Provides substantive funding beyond routine membership dues; or,
  • Views membership as strategic.
F

Memberships and Affiliations

4.14 List of stakeholder groups engaged by the organization. F

TD’s primary stakeholders include: customers, employees, shareholders/investors and government regulators. Our secondary stakeholders include: community organizations, industry associations, suppliers and non-governmental organizations.

4.15 Basis for identification and selection of stakeholders with whom to engage. F

Each year we conduct a formal materiality analysis to identify, prioritize and validate the evolving material issues we face. This process involves research, media scans, stakeholder consultations and internal sustainability discussions which lead to the filtering and defining of our material topics.

TD’s Stakeholder Panel was facilitated by an independent consultant from Solstice Sustainability Works, who brought together a group of external stakeholders to provide feedback on TD's 2012 Corporate Responsibility Report, validate the proposed material topics for 2013 and help shape and improve TD's approach. Each panelist was chosen as representative for their stakeholder group (e.g., Customer, NGO, Investor etc) and based on the individual’s background and experience in sustainability.

Our annual materiality process helps us track stakeholder interests and concerns and identify new issues as they emerge. The findings drive our corporate responsibility strategy and the information we provide in this report.

More Information: CR Report pages 11 and 14

2013 Stakeholder Panel Full Report (PDF)

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. F

Stakeholder Engagement Chart, CR Report page 9

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting. F

In 2013, we assessed our material topics to be: Corporate Governance, Executive Compensation, Risk Management, Ethics and Integrity, Privacy, Security and Fraud, Customer Service and Convenience, Access to Banking, Financial Education, Employee Engagement, Diversity and Inclusion, Eco-efficiency, Responsible Financing, Changing Climate, Community Investment, Public Policy, Taxes and Sourcing.

An overview of key issues and TD's response can be found on page 12-13 of our 2013 CR Report.

Stakeholder Panel Full Report (PDF)