Council of Institutional Investors

Eye on International
Canadian Governance Group Advocates for Adoption of Proxy Access
Thursday, August 7, 2014
by: Matthew Frakes

Section: CII Governance Alert

The Canadian Coalition for Good Governance (CCGG) is renewing its push for Canadian companies to grant shareholders proxy access rights and crafting a policy statement on the issue.

In May, the CCGG submitted extensive comments to Industry Canada, the department of the Canadian government responsible for handling the country’s economy, on its review of the Canada Business Corporations Act. The CCGG’s commentary endorsed proxy access and proposes a 3 percent ownership threshold as appropriate for a shareholder or group of shareholders wishing to place their director nominees on a company’s ballot. The shareholder proposals calling for proxy access in the United States that continue to receive the most significant shareholder support propose this same 3 percent ownership requirement with a three-year holding period to afford the right only to long-term investors. However, the CCGG’s commentary asserted that it “does not believe that a holding period is necessary to ensure that proxy access is restricted to shareholders with a long term perspective on the company.” Stephen Erlichman, CCGG executive director, said his organization supports the view that a shareholder who has bought a significant stake in a company within the past year holds the same long-term perspective as any other shareholder in the company. To prevent shareholders from using proxy access to gain control of a company’s board, the CCGG recommended that the number of shareholder board nominees placed on a company’s ballot be capped at 25 percent of total board seats.

Erlichman stressed that the specifics of the CCGG’s formula for proxy access are still under consideration and that the commentary submitted to Industry Canada is just a working model. The CCGG, he said, is conducting a comprehensive analysis of global developments in proxy access. A report on this analysis, and the policy positions that will come out of it, will be considered by the CCGG’s Public Policy Committee and then made publicly available by year’s end.

Once released, the analysis and policy position will be the foundation for a renewed push from the CCGG to urge the adoption of proxy access rights through changes to Canadian companies’ bylaws and, ideally, Canadian corporate law. The issue also will be one of the focal points during the CCGG’s yearly engagement program with independent directors on Canadian boards.

Erlichman admitted the CCGG will face an uphill battle in its push for proxy access but expressed confidence that, in the long run, its advocacy on the issue will yield successful results. He pointed to the Toronto Stock Exchange’s adoption last year of a majority voting requirement in its listing standards, a change the CCGG had long pushed. 
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