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Review Committee
Presented to:
Makivik Annual General Meeting
March 20-24, 2017
1
Background
Makiviks Financial Sustainability
Beneficiaries Equity has not kept up Compensation Monies Inflation Population Growth
with inflation and population growth. $417.4 $643.8 million
Makivik now has to serve three times the
population compared to 40 years ago
with the same purchasing power as 40
years ago; 274.1
47.7
The KPMG Structural Review clearly
stated that in order to better achieve its
objectives, Makivik would need to cut its 210.5 210.5
expenses by $3 million per year as well
as increase the income generated from
its investments.
159.2 159.2
3
Makiviks Financial Sustainability
Realized revenues excluding Sanarrutik, Ungaluk
35,000,000
and Nunavik Inuit Trust recoveries versus actual
expenditures
30,000,000
actual expenditures;
-
2017-
2010 2011 2012 2013 2014 2015 2016
Budget
Revenues 9,275,989 11,262,23 8,372,614 9,154,496 16,506,67 22,900,60 28,696,00 23,073,61
Expenditures 16,845,87 22,006,20 18,832,08 21,509,75 23,078,60 22,793,87 20,116,63 23,491,80
Total (44,989,800)
Structural Review Committee
Membership:
9
Land Claims
Organization
Development
Corporation
Makivik
Corporation
Bradley Air
Kautaq Nunavik Nunavik
Services (First Air Inuit NEAS Halutik Fuels
Construction Geomatics Creations
Air)
10
Committee Recommendations to the Makivik Board
of Directors
The Committee is of the opinion that in order to improve Makiviks business
operations and improve its ability to take greater advantage of new
business opportunities, it is in order for Makivik to create a separate
business development arm;
The Committee is also of the opinion that decisions must be made based on
clear business fundamentals set apart from any political influence;
The Committee, therefore, recommends the creation of a new corporate
entity which would hold all of the voting shares in Makiviks wholly-owned
subsidiaries and with Power of Attorney and Proxy to represent Makivik in
non-wholly owned subsidiaries and JVs; 11
Proposed Corporate Structure
Makivik
Corporation
Makivik would own
100% of voting and
Makivik would own Makivik would continue to own
participating
voting and participating shares
100% of participating shares in Dev Co
in non-wholly owned
shares ($) Dev Co subsidiaries and joint ventures
of wholly owned
Dev Co would own however would grant Power of
subsidiaries
100% voting shares Attorney and Proxy to Dev Co
to vote all Makivik
shares/holdings.
3 JBNQA Beneficiaries with business experience who are not employees of Makivik
nor members of the Makivik Board of Directors;
3 individuals who are independent from Makivik (ie. not employees of Makivik or its
subsidiaries) and not members of the Makivik Board of Directors with both
business experience and a professional designation who may or may not be a
JBNQA Beneficiary.
Activities that enhance the economic base, sustainability and competitiveness of the Nunavik region
Strategic planning
Labour market development
Feasibility studies
Marketing studies
Export market research (developing and expanding export markets)
Enhancing access to economic and business information & services
Supporting innovation, applied research & development / commercialization
Economic Development Department will continue to be the gateway and facilitator as concerns Companies seeking
business opportunities within the Nunavik region and will work in collaboration with DevCo senior management.
20
DevCo DevCo
Pros Cons
Creates a structure which enables business decisions which minimizes
political interference; There will be a transitional period in which leadership and the population
Brings independent, professional and expert input into business decision- will have to adjust to Makivik no longer having direct control over its
making; subsidiaries (this was/is not the case for the other Land Claim
organizations as their DevCos were created from the beginning);
Assures the selection of qualified, professional management of Devco and
operating companies who are rewarded based on DevCo's overall While minimal, there will be additional costs at least at the start-up phase,
performance or that of an operating company; including pre-incorporation and set-up costs;
Avoids costly decisions or non-decisions in terms of closing money-losing Does not guarantee improved profitability of subsidiaries
ventures (eg. Nunavik BioSciences, Cruise North, Nunacell which
combined have cost $20 million to date);
As both DevCo and the Operating Companies will be run from a purely
business point of view, opens up more possibilities in terms of Joint
Ventures with third parties;
The ability to move much faster to take advantage of business
opportunities and to resolve any inter-operating company conflicts;
Cost savings as a result of synergies amongst the various operating
companies is anticipated;
As Makivik's financial sustainability can more likely be achieved through
DevCo, Makivik Executive will be freed up to attend to the other three
strategic goals namely: promoting the Inuit way of life, promoting
learning and skills development and protecting beneficiary treaty and
non-treaty rights;
The proposed Board structure of Devco and Operating Companies is
designed to educate and mentor beneficiary directors in the functioning
and governance of a Board;
Depoliticizes the business decision-making process at the operating
company level which should lead to increased efficiencies and increased 21
profitability;
Resolution of the Makivik Board of Directors and Next Steps
By Resolution 2017-4, the Makivik Board of Directors at their meeting held in Ivujivik, Quebec
from February 21-24, 2017 adopted and approved the recommendations of the Structural
Review Committee and thereby the creation of a new Development Corporation with the
objective of improving Makiviks business operations and its ability to take greater advantage of
new business opportunities.
The Board of Directors also created an Implementation Committee consisting of the same
membership as the Structural Review Committee who, over the next few months, will be
responsible for:
- incorporating the development corporation and making the required changes to the share
structures of Makiviks subsidiaries etc.
- developing guiding policies for the new company and the various subsidiaries;
- reviewing the selection criteria for new Board Members and making recommendations to
the Makivik Board of Directors with regard to the appointment of the Board of Directors
of the development corporation and the initial Boards of Directors of First Air and Air Inuit;
- initiating the search for a new Chief Executive Officer of the development corporation;
and
- drafting a budget for the first year of the development corporations operations.
The Implementation Committee is to report back to the Makivik Board of Directors with regard
to the above tasks by no later than June 15, 2017. 22