The Canadian Securities Administrators (CSA) recently provided an update on their ongoing review of proxy voting infrastructure. The progress report follows the publication of CSA Consultation Paper 54-401 Review of the Proxy Voting Infrastructure in August 2013 (theConsultation Paper).
The Consultation Paper examined two issues: (i) the accuracy of vote reconciliation in the current proxy voting infrastructure; and (ii) what type of shareholder communication (end-to-end vote confirmation) should be added to the proxy voting infrastructure to allow shareholders to confirm that their proxy votes and voting instructions have been property transmitted, received and tabulated.
Following the Consultation Paper the CSA conducted roundtables, consultations and a review of six uncontested shareholder meetings in 2014 held by a variety of reporting issuers. Its findings to date generally indicate that the current proxy voting infrastructure needs to be modernized through improved communication designs and integrated processes. Specifically, the CSA outlined several key findings:
- over-voting is occurring but there was no consensus as to its cause:
- intermediaries are not able to access all information used for vote reconciliation by meeting tabulators (Official Vote Entitlement) and therefore securities regulators must take a leadership role in bringing market participants together;
- an absence of an industry-wide protocol in proxy vote reconciliation; and
- intermediaries are not able to verify whether valid proxy votes are in fact accurately accepted, rejected or pro-rated by meeting tabulators.
In response to these key findings, its progress report identified the following five improvements that must be made to the vote reconciliation process:
- modernizing how meeting tabulators receive information about who is entitled to vote;
- ensuring that the proxy vote entitlement information that meeting tabulators receive is accurate and complete;
- enabling intermediaries to access their Official Vote Entitlement for a meeting;
- increasing consistency in the process meeting tabulators employ to reconcile proxy votes submitted by intermediaries to Official Vote Entitlements; and
- establishing communication between meeting tabulators and intermediaries about whether proxy votes are accepted, rejected or pro-rated.
This year the CSA intend to review at least one proxy contest to determine if there are vote reconciliation issues specific to proxy contests. Factors as the high volume of proxy votes, revocations of proxies and dissident forms of proxies may pose specific challenges and it will be interesting to understand the impact, if any, that such factors have on the vote reconciliation process.