The Canadian Council for Good Governance (the “CCGG”) has stated that proxy access is high on their agenda. Proxy access generally refers to the ability of shareholders to nominate their own candidates for the board and have those nominees included in management proxy materials alongside management nominees. The CCGG is in the process of drafting its policy on the topic.
Stephen Erlichman, the Executive Director of the CCGG, summarized the CCGG’s concerns with the current Canadian proxy access approach:
“We have no proxy access in Canada other than this provision in most of the corporate statutes that says that if you’re a five per cent shareholder you can do a shareholder proposal to nominate a director. It’s used very rarely and it allows the company, if it wants to, to attach the proposal as an appendix to its proxy circular… So it’s not an effective way to have proxy access in Canada.”
In its December 2014 review of the consultation drafts of the Provincial Capital Markets Act and the Capital Markets Stability Act, the CCGG stated that “[i]t is onerous and prohibitively expensive for shareholders to propose alternate directors for election and to actively solicit other shareholders to vote for their nominees…”
The CCGG went on to express its support for allowing shareholders who hold 3% of the outstanding shares, in aggregate, to be able to nominate up to 25% of the directors and to have information about those nominees included in the management proxy information circular in the same manner as the company’s nominees.
In its May 2014 review of Industry Canada’s Consultation Paper on the Canada Business Corporations Act, the CCGG also outlines its stance on proxy access.
To discuss the merits of the CCGG’s draft policy, the CCGG recently co-hosted a proxy access roundtable with the Centre for the Legal Profession. Mr. Erlichman stated that proxy access is “the right thing to do” and that the CCGG’s policy would, among other things, allow for reasonable solicitation costs of nominating shareholders to be paid for by the company, cap the number of nominees and eliminate holding periods.
An opposing view came from Stan Magidson, President, CEO and Director of the Institute of Corporate Directors. Mr. Magidson stated that “the cost benefit analysis for the policy falls far short of providing a convincing economic underpinning for reform” and that “the proposal does not enhance proxy access in any meaningful or necessary way.” Mr. Magidson warned that the CCGG’s proposal would bring, if adopted, a more adversarial model to Canada.