Proxy Access Roundtable
The Canadian Coalition for Good Governance (CCGG) is in the process of drafting policy on proxy access, that is, the ability of shareholders to not only elect directors, but also exercise a right to nominate directors and have those nominees placed on the same ballot as management nominees. The intended goal of this new nominee structure is to increase the levels of independence and quality of boards of directors among companies, while providing shareholders a meaningful say in who become directors.
On January 29, 2015, the Centre for the Legal Profession (CLP) and the CCGG co-hosted the “Proxy Access Roundtable” to discuss the merits of the CCGG’s draft policy. Dean Ed Iacobucci provided opening remarks, while Prof. Anita Anand, Academic Director of the CLP, outlined that the Canadian Business Corporations Act already has provisions in place for nominating directors, but that this discussion would be centred around whether we should be enhancing these rights of shareholders. Prof. Anand advised that a balance must be struck between centralized decision-making and the economic efficiency involved with giving shareholders a voice in the director nomination process.
Stephen Erlichman, Executive Director of the CCGG, then outlined that proxy access is “the right thing to do” and has the potential to enhance board performance and improve our markets. He stated that the proposal would increase proxy access through several methods, which include: allowing for reasonable solicitation costs of nominating shareholders to be paid for by the company; capping the number of nominees, which will likely be the lesser of 2 directors or 20% of the board; eliminating holding periods because holding periods are “unnecessary to restrict access to shareholders who have a long-term perspective of the company;” and allowing representation by the nominating shareholders, such that their economic ownership interest is equal to their voting interest of at least 3% or 5% as the case may be so there is no empty voting. Mr. Erlichman also suggested that Canadian companies should voluntarily adopt proxy access even if no changes to the legislation are made.
However, Stan Magidson, President, CEO and Director of the Institute of Corporate Directors, claimed that the CCGG’s proposal would undermine the basic performance and structure of corporate law. He went on to state that the cost benefit analysis for the policy falls far short of providing a convincing economic underpinning for reform. He also stated that the proposal does not enhance proxy access in any meaningful or necessary way, as Canada already has proxy access. He warned that if we adopt the CCGG’s proposal, we would be bringing a more adversarial model into Canada, which would not benefit the market. He cautioned against importing fads from other jurisdictions where we already have a superior proxy access model in Canada. He noted that Chairs and Committee Chairs of Canadian boards already meet with CCGG and are willing to engage with shareholders. Finally, Mr. Magidson stated that the onus is on the board to establish performance management systems to inform them of efficiencies around the board table and to create performance cultures to drive long-term effectiveness.
Naizam Kanji, Deputy Director, Corporate Finance, Mergers and Acquisitions of the Ontario Securities Commission, then spoke about how we must think about enhancing proxy access from the government’s framework under Canadian securities law. He stated that proxy access is necessary, but asked us to focus simply on what kind of enhancement is required. Mr. Kanji suggested that the best approach would be for the CCGG to put forth this proposal and see what comes out of the discussion. The proposal could lead to something better than what we have today, even if it is not exactly what the CCGG is currently proposing.
Finally, the Honourable Henry N. R. Jackman offered closing remarks on the topic. He stated that the CCGG proposal waives a red flag in front of the board, while advising that if you want to make an incremental change to a company, whether you are a big or small shareholder, there are lots of other ways you can change the board.
The program agenda can be downloaded by clicking See conference agenda.
