On January 10, 2011, the Ontario Securities Commission
("OSC") released a staff notice which provides an update
on the OSC's review of shareholder democracy issues. The OSC
has targeted three issues for further review and the potential
development of regulatory proposals. The issues are related to
director elections, shareholder voting on executive pay (i.e.,
"say-on-pay"), and the effectiveness of the proxy voting
Director Election Issues
The OSC is reviewing two issues with respect to director
elections: slate voting vs. individual director voting and
plurality voting vs. majority voting.
Slate voting refers to the practice whereby management proposes
a slate or group of directors to shareholders and shareholders are
given the option of either voting for the entire group or slate of
nominees or withholding their vote from the entire slate.
Individual director voting would allow a shareholder to cast its
vote in favour of, or withhold its vote in respect of, each
Plurality voting refers to the corporate law concept that
provides that a shareholder is only given the option of casting its
vote in favour of a nominee or withholding its vote. Votes that are
withheld do not count as votes against that nominee and, as a
result, a nominee can be elected by a single vote if the remaining
votes are withheld. Majority voting would require that a nominee
receive a majority of the votes cast in order to be elected.
The OSC is assessing whether the appropriate manner in which to
facilitate individual director voting and majority voting is
through amendments to securities laws.
"Say-on-pay" refers to the practice of providing
shareholders with a separate advisory vote on executive
compensation and "golden parachute" payments. Securities
laws in Ontario do not require reporting issuers to give
shareholders a "say-on-pay", although a number of large
public companies have done so voluntarily. The OSC is considering
the introduction of mandatory "say-on-pay" for reporting
issuers, especially given the adoption of "say-on-pay"
internationally (including in the United Kingdom, Australia,
certain European countries, and expected soon in the United
Effectiveness of Proxy Voting System
Finally, the OSC is reviewing the general effectiveness of the
proxy voting system to determine whether additional reforms are
necessary, with a view to allowing "shareholders to make
informed voting decisions and ensur[ing] that their votes are
counted". This review is in addition to the review by the
Canadian Securities Administrators (CSA) and its proposed
amendments to National Instrument 54-101 - Communications with
Beneficial Owners of Securities of a Reporting Issuer.
Opportunity to Comment
In the notice, the OSC requested comments in respect of the
foregoing and indicated that it anticipates additional
consultations with stakeholders.
We will keep you informed of further developments as they
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