The OSC recently announced that it is considering regulatory changes to enhance shareholder democracy at public companies. The following issues are being considered:

Slate voting and majority voting. The OSC is assessing whether reforms to securities law are appropriate to facilitate individual director voting and majority voting in uncontested director elections. This is a key governance issue for the 2011 proxy season. The CCGG has developed a majority voting policy and is actively promoting the adoption of majority voting by assisting its members in submitting shareholder proposals to Canadian companies, and in the United States, CalPERS and other activist shareholders have been submitting proposals to U.S. companies. While many large Canadian companies already have majority voting policies, many smaller companies do not.

The effectiveness of the proxy voting system. The OSC is reviewing the proxy voting system to determine whether securities law reforms are needed to facilitate shareholders’ making informed voting decisions and having their votes counted at shareholder meetings. Issues that may be considered include “empty voting” (where the voting rights attached to shares may be exercised by someone who does not have the full, or any, economic interest in those shares) and the role of proxy advisory firms. In mid-2010, the SEC similarly solicited comment on the effectiveness of the U.S. proxy voting system. We expect the SEC to move forward with regulatory proposals, but the timing is uncertain given its focus on implementing the many new rules mandated by the Dodd-Frank Act.

Shareholder advisory votes on executive compensation. The OSC has been monitoring international developments on say-on-pay, including in the United States, the United Kingdom and Australia, where say-on-pay is already mandatory, and is considering whether to make it mandatory for Canadian public companies.

The OSC is seeking comments from market participants on the above issues until March 31, 2011, and intends to coordinate the development of any regulatory proposals with the other Canadian securities regulators.