Quebec to rework ag lender’s governance

Quebec’s government has moved to put a little more arm’s-length between its farmers and its ag finance agency’s board.

Acting on the Pronovost report on the future of the province’s farm and agri-food sector, Agriculture Minister Laurent Lessard on Wednesday tabled legislation to modernize the governance structure of La Financière agricole du Québec (FAQ).

The Pronovost commission’s report, released in February, had recommended that the province “immediately modify the La Financière agricole du Québec board of directors to comply with the provisions of the Act respecting the governance of state-owned enterprises.”

Lessard’s bill would increase the number of FAQ board members from 11 to 13. Of those, seven — including the board’s president — would have to qualify as “independent” board members.

The bill also calls for two administrative committees of the FAQ board to be set up to provide direction to the board on issues of ethics, governance, human resources and auditing.

The bill would also bring FAQ under the rules for provincially-run agencies on the operations of the board, on appointments of board members and vice-presidents and on disclosure and publication of information, the province said.

As the Pronovost report outlines, FAQ runs the provincial farm financing program, the farm income stabilization insurance (FISI) program, crop insurance, support programs for new farmers and a loan portfolio then worth $4.3 billion.

FAQ’s loan guarantees of up to $5 million per farm often constitute a key condition for banks and other lenders to give farmers access to credit. In 2007, 15,812 clients — more than half the province’s farmers — used FAQ financing programs.

Doesn’t meet requirements

Commission chair Jean Pronovost quoted a statement by l’Union des producteurs agricoles (UPA), the province’s one general farm organization, that “lawmakers have based La Financière agricole du Québec’s legal makeup on
a unique partnership with the agriculture sector.”

However, Pronovost noted, out of 11 current board members, five, including the chairman of the board, are today chosen from people designated by UPA, and the president/CEO, who also sits on the board, is appointed after consultation with UPA. And UPA’s president chairs FAQ’s board.

By comparison, provincial legislation on state-run enterprises requires two-thirds of board members, including the chair, to be “arm’s length” directors with “no direct or indirect relations or interests (e.g., financial, commercial, professional, or philanthropic) likely to detract from the quality of their decisions with regard to the interests of society,” Pronovost said.

Legislation on state-run agencies also dictates that a board member is limited to just two terms, consecutive or otherwise, he said.

“It is clear that the current composition of the La Financière agricole board of directors does not meet the Act’s requirements,” Pronovost wrote.

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