The Canadian Coalition for Good Governance (CCGG) has released a policy paper entitled “Shareholder Involvement in the Director Nomination Process: Enhanced Engagement and Proxy Access”.
In the policy paper, CCGG refers to “proxy access” as the ability of shareholders to have meaningful input into the director nomination process, whether by being able to influence who the nominees are or through actually nominating directors.
Under Canadian corporate law, although shareholders elect directors, they typically are not involved with choosing the nominees for the board. CCGG stated that its view is that board composition in Canada will benefit from meaningful shareholder input into the nomination process and that such input is an essential component of shareholder democracy.
The paper sets out CCGG’s recommendations including that companies adopt policies and procedures that will enable shareholders to communicate with independent directors about board composition on a regular basis, that corporate and securities statutes be amended as necessary to include proxy access provisions consistent with those set out in CCGG’s policy paper, and that issuers adopt a proxy access policy voluntarily prior to amendments to these statutes. The paper also highlights the approach of other jurisdictions to proxy access including the United States where companies are beginning to adopt proxy access bylaws.
CCGG proposed that proxy access legislation or policy include the following components:
- shareholders holding an aggregate economic and voting interest of at least 3% or 5% of outstanding voting shares (depending on the company’s market capitalization) should be able to nominate directors to be placed on the same form of proxy as the company’s nominees;
- shareholders must hold the prescribed percentage of shares up to the time of the applicable meeting;
- disclosure about a shareholder’s nominees should be set out fairly and with the same prominence as the company’s nominees in the proxy circular along with the use of a universal proxy form for all nominees;
- shareholders do not need to hold their shares for a specific period of time before being permitted to nominate a director;
- the number of directors to be nominated by shareholders cannot exceed the lesser of 3 directors or 20% of the board;
- reasonable solicitation costs on the part of the shareholder should be paid by the company unless shareholders resolve otherwise; and
- shareholders nominating directors must represent that they are not seeking control and have the minimum prescribed ownership.