This case was presented in the summer of 2010 for the Corporate Governance course at JMSB. Presented a case on Loblaw company to recommend to the Concordia University Pension Fund to either invest or not invest in Loblaw.

1. Loblaw Companies Ltd. A Recommendation for the Concordia Pension Fund Mark Bundang Zachary Elias David Mascitto Eric Wand Lei Wang

2. Loblaws: A History Loblaw started in 1919 by Theodore Pringle Loblaw Grew to 80 stores George Weston Limited acquired Loblaw in 1947 Incorporated Loblaw Companies in 1956 Maintains 63% control of the company Family-owned “Controlled Company” Succession of control from father to son

3. Loblaws: Current Status Over 1000 stores across Canada and the United States Over 30B in sales per year Controls a Financial Institution (PC Financial) 140,000 employees Voted one of Canada’s Top 100 Employers Top 10 Companies to Work For One of Canada’s Greenest Employers in 2010

4. Strategic Outlook Loblaw Companies Ltd is committed to a strategy developed under three core themes: Simplify, Innovate and Grow. Weston: to be the best provider of bakery solutions and fresh dairy products to its customers. Loblaws: to be the best in one-stop shopping for everyday household needs for Canadian consumers

7. Share identical risks?

8. “Internal Control over Financial Reporting”

9. “Enterprise Risks and Risk Management”

10. Share identical Responsibility-auditor?

11. “Management’s Statement of Responsibility for Financial Reporting”

13. Board Composition 13 nominees (and current directors) 11 men + 2 women 7 independents + 6 non-independents Diverse experience Retail, professional sports, banking, technology All have extensive executive management experience in corporations other than Loblaw and Weston (except Galen Jr.)

14. Executive Chairman Deputy Chair and President Allan L. Leighton Executive Chairman position created specifically for Galen Jr. 4 years ago. Galen Jr.’s experience pales in comparison to rest of board. Mr. Leighton is strategically placed to guide and mentor Galen Jr. Galen G. Weston

15. Typical Director Profile

16. Loblaw Interlocking Overview Public Board Interlocking is minimal 5 of 13 are interlocked with BCE or Weston Interlocking may not be black & white Alan Leighton is Deputy Chairman of Loblaw and Weston Gordon Currie is Exec. Vice President and Chief Legal Officer at Loblaw and Weston

17. Public Board Interlocking

18. Committee Membership

19. Governance Committee 5 of 13 directors sit on board (incl. Chair) Responsible to oversee compensation Evaluate director performance “It’s like grading your own midterm” – Professor Riven

20. Executive Committee

21. Executive Committee Maintains a basic charter Hold key positions at Loblaw and Weston Deputy Chairman Executive Chairman Engages when ``it is not practicable for the full board to meet`` No meeting in 2009

22. Audit Committee Made up entirely of independent directors Members are financially literate Oversee financial reporting, internal controls, disclosure controls, etc. Must approve of any non-audit services provided by external auditors Comply with applicable securities law rules

23. Financial Compensation Compensation is determined by Corporate Governance Committee Directors can Opt for Deferred Share Units (DSU) as compensation Choose the amount of DSUs they will receive All but one Director receive DSUs--with varying proportions (ex. 100%, 50%, 86%) DSU demonstrate a commitment to the long-term success of the company

24. CCGG Guidelines: Disclosure Practices Section B.1 – Director selection and orientation: Missing the skills matrix of its director talents Missing an attendance list for orientation and continuing education programs Section B.2 – Director background Missing each director's "area of expertise" in the biographies

25. Disclosure Practices (cont’d) Section B.3 – Director share ownership guidelines and continual reinvestment Missing year-over-year change in share or DSU ownership for each director Section B.4 – Director compensation / reinvestment programs and option plans Loblaw's met with all the disclosure standards

26. Shareholder Relations Approximately 40% of the company is owned by external shareholders. Commendable Shareholder Relations for the “Minority” Excellent Communication Timely Reports Webcasts of Earnings Reports and Quarterly Statements Strict set of rules in its “Disclosure Policy”

27. Environmental Footprint

28. Recommendation Based on the financials and the corporate governance of Loblaw Companies Ltd.: Buy! Risks: Galen Jr. is young and inexperienced, but has surrounded himself with strong board members and leaders.

29. Questions?

30. Non-Public Board Conflict of Interest

31. Loblaw Pros vs. Cons

32. Closing Thoughts Loblaw is fairly transparent to board and committee membership Successfully leverages of NP 58-201 New Director Orientation Continuous Training Board Nominations Succession Planning “Don`t just look at board independence and size of a board... Look at the quality of the directors” – Shropshire, C.

33. Shrinking Environmental Impact Leadership in Energy and Environmental Design (LEED) Loblaws Superstores Sustainable Site Development Water / Energy Efficiency (Solar, Wind power) Materials Selection Indoor Environmental Quality First to establish “bag-less” service Plastic bags are bio-degradeable

34. Green Is Good Business PC Organics! Save your health (at a healthy price premium) No More Plastic Bags! Unless you pay 5 cents for each one Less Packaging! Lower manufacturing costs, but you pay the same price PC G.R.E.E.N! (44 products) Save the environment and feel so good about it. Margins are so tight that a 50M savings equals 5B in sales!