The Ontario Securities Commission yesterday published a staff notice advising on its review of issues relating to shareholder democracy. According to the notice, the OSC is considering the development of regulatory proposals relating to director elections, say-on-pay and the effectiveness of the proxy voting system. The purpose of the notice is to provide an update on its work in this area given the OSC's stated commitment to reviewing protections for shareholders' rights and corporate governance as stated in its 2010-2011 Statement of Priorities and in its submissions to the Standing Committee on Government Agencies.
With respect to slate voting and majority voting, the OSC is considering whether securities laws should be amended to facilitate individual director voting (as opposed to slate voting) and majority voting (as opposed to requiring a simple plurality) for director elections of reporting issuers. These issues have received increased attention in the last few years, with the Canadian Coalition for Good Governance recommending a majority voting standard and a prohibition on slate voting.
In the area of executive compensation, the OSC is considering whether to introduce mandatory shareholder advisory votes on executive compensation or "say-on-pay". On this point, the OSC specifically cited the movement towards mandatory say-on-pay in Australia, the U.K. and parts of Europe and the expected implementation of say-on-pay in the U.S. as a result of Dodd-Frank. As we've discussed in the past, Canada's largest financial services companies have already begun allowing shareholders to vote on executive compensation resolutions.
Finally, the OSC will also look at the need for general reforms to the proxy voting system. Specifically, the OSC recognizes "the need for an effective proxy voting system that allows shareholders to make informed voting decisions and ensures that their votes are counted at shareholder meetings." This review will be in addition to proposals published earlier to amend National Instrument 54-101 Communication with Beneficial Owners. In the U.S., the SEC also initiated a comprehensive review of the proxy system in July 2010.
The OSC intends to coordinate its review with other CSA members and is accepting comments until March 31 on whether proposals on these issues should be developed and if so, the appropriate scope of such proposals. For more information, see OSC Staff Notice 54-701 Regulatory Developments Regarding Shareholder Democracy Issues.
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