On March 8, 2016, the Institute of Corporate Directors (ICD) released its guidance on director-shareholder engagement in response to demands from investors, including activist shareholders, for increased and better dialogue with their corporate boards. While traditionally management has been primarily responsible for interacting with shareholders, ICD now believes that directors can play a meaningful role in shareholder engagement and may serve to mitigate tensions related to board and corporate governance. In the words of its President and CEO, Stan Magidson, the approach of the ICD is to see this as an opportunity to “build bridges, enhance mutual understanding and provide valuable insights.” The ICD guidance is framed around six core recommendations: knowing your investors, recognizing the benefits of engagement, adopting a strategic and tailored process, framing your discussion appropriately, addressing the real decision-makers and making the most of what comes out of the discussion. Its ultimate aim, as noted, is to encourage a productive climate of mutual trust between Canadian corporations and their shareholders.

ICD recognizes that to a certain extent this type of engagement is already taking place, whether directly, through ad hoc meetings with institutional investors, or indirectly, through the efforts of such organizations as the Canadian Coalition for Good Governance. The change that the guidance recommends is essentially to formalize the director-shareholder engagement process and make it more board-driven. While the U.S. Shareholder-Director Exchange Protocol (“SDX Protocol”), in place since 2014, was a useful reference for the ICD as it developed its guidance, differences in the U.S. marketplace and in the legal understanding of directors’ duties in Canada necessitated a unique “made-in-Canada” approach.

For further information, please see ICD Guidance for Director-Shareholder Engagement.