In October, 2024, TD Bank NA pled guilty to money laundering charges and agreed to pay U.S. authorities more than US$3 billion in fines. The ongoing scandal derailed TD’s 2023 attempted purchase of First Horizon, and as part of the settlement, TD’s U.S. subsidiaries will have their growth capped.

This is a governance failure which shareholders are concerned may be systemic in nature. A column in Canada’s national newspaper concluded that TD board members earned a “black mark” and questioned their ongoing tenure1. Canada’s bank supervisor Peter Routledge specifically referred viewers to this piece on a television appearance2.

TD’s governance failure may extend beyond money laundering. Several independent assessments show the bank well off track to meet its net zero commitment3, and directors have been unresponsive to significant shareholder votes asking for clarity on how the bank will address these concerns4.

TD’s Corporate Governance Guideline5 outlines how the board operates. Under “board feedback process,” the Guideline is unclear on the issue of committee accountability, and silent regarding consequences for lapses or underperformance.

The Guideline indicates that board members should have a broad spectrum of competencies that reflect the nature and scope of the bank’s business and refers to the Key Areas of Expertise / Experience matrix disclosed in TD’s annual proxy circular6.

Yet this matrix uses broad categories that leave shareholders guessing about specific competencies. For example, “Audit/Accounting” does not necessarily include skills related to money laundering. Or, “Environmental, Social, and Governance” does not necessarily include experience related to net zero.

The Guideline considers the challenge of “Other Directorships and Board Interlocks Policy” as a matter of time management of directors and not also as a potential systemic conflict of interest if directors must discharge their fiduciary duty at seemingly incompatible businesses. TD has more cross-posting of directors at fossil fuel companies than any other Canadian bank despite its net zero commitment. It considers two of these directors as satisfying its ESG category in its director expertise/experience matrix.

Because it is difficult for a board to assess itself, shareholders request an external review of TD’s board governance policies and director selection criteria with a view to improving director accountability and competency for existing risks and emerging priorities like net zero, the results of which are presented in the bank’s 2025 proxy circular, together with the bank’s response.