Canada: TSX Moves Towards Greater Shareholder Democracy For Listed Issuers


The Toronto Stock Exchange published for comment proposed amendments (the Amendments) to its Company Manual which, once adopted, will impose requirements on TSX listed issuers which aim to improve corporate governance standards relating to the election of directors.

The Amendments1 would require issuers listed on TSX to:

  • elect directors individually instead of by slate;
  • hold annual elections for all directors;
  • disclose annually whether they have adopted a majority voting policy for directors for uncontested meetings and, if not, to explain their practices for electing directors and why they have not adopted a majority voting policy; and
  • advise the TSX if a director receives a majority of "withhold" votes (if a majority voting policy has not been adopted).

The Amendments, are subject to a 30 day comment period (which ends October 11, 2011) and will become effective upon approval of the Ontario Securities Commission.


The Amendments would preclude TSX listed issuers from proposing the election of directors by "slate" rather than individual elections. In its notice accompanying the amendments, the TSX notes that 83% of listed issuers in the S&P/TSX Composite Index (the Index) hold individual director elections. Moreover, TSX Venture Exchange issuers are currently required to hold individual elections for directors.

The TSX indicated that it considers the votes received for each director to be valuable information for the market and has requested comments on whether the disclosure of these results should be mandated.

The Amendments would also require each director to be elected annually, thereby prohibiting staggered elections pursuant to which a subset of directors is elected each year, which may be viewed as a means of entrenching a board. The TSX notes that 98% of issuers in the Index hold annual director elections.

Although these practices are widely adopted by issuers in the Index, the TSX considers that making these requirements universal can be seen as the natural evolution towards shareholder democracy.


In an effort to address shareholder concerns with plurality voting, pursuant to which securityholders vote "for" or "withhold" from voting for each director (rather than vote "for" or "against" each director), the Amendments propose requiring TSX listed issuers to disclose annually (in a management information circular) whether they have adopted a majority voting policy and, if not, provide additional prescribed disclosure. A typical majority voting policy provides that a director who receives a majority of "withhold" votes must tender his or her resignation, subject to limited discretion of the board not to accept a resignation. The adoption of a majority voting policy allows issuers to maintain a plurality voting standard, which is generally required for Canadian incorporated corporations, while compelling the board of an issuer to consider the votes of those who choose not to vote for a director.

The Amendments stop short of mandating majority voting. The TSX indicates that because of the lower level of current adoption (57% of issuers in the Index), it believes the disclosure model is the most appropriate measure at this time. However, the TSX has specifically requested comments on whether majority voting should be mandated.

In opting for mandatory disclosure rather than mandatory adoption of majority voting policies, the TSX sought to address concerns that a mandatory majority voting policy may be inconsistent with the corporate and securities laws requirements relating to proxy solicitation pursuant to which plurality voting is required for Canadian corporations or result in the election of too few directors. However, the TSX notes that these concerns have not been experienced by the issuers that have adopted minority voting policies.

In addition to disclosure regarding their policies, the Amendments include the requirement for an issuer which has not adopted a majority voting policy to advise the TSX if a director received a majority of "withhold" votes. The TSX intends to follow up with the issuer and director to understand the issuer's intentions and corporate governance practices and the directors views on serving as a director in light of the voting results. Accordingly, this requirement may be seen as a means to prompt greater adoption of minority voting policies.


The Amendments are consistent with the recommendations and policies of many investor advocates. For example, the Canadian Coalition for Good Governance (CCGG) adopted in 2006 a majority voting policy for Canadian issuers. According to CCGG, if a nominee has more "withhold" votes than votes in favour then that nominee will not have received the support of a majority of shareholders, despite being duly elected under corporate law. According to the CCGG policy, a nominee who receives more "withhold" votes than "for" would immediately tender his or her resignation and the board would be expected to accept it, subject to the existence of extraordinary circumstances. Where a director resigns consequent to receiving more "withhold" than "for" votes, CCGG advises that a board has several options regarding the manner in which the resigning director is replaced. A board may, for example, leave the vacancy open until the next annual meeting, fill the vacancy with a suitable candidate, or call a special shareholder meeting to elect a new director.

Similarly, Institutional Shareholder Services (ISS), in its 2011 Canadian Proxy Voting Guidelines Summary, recommends that clients withhold from voting for directors of certain companies where the company has not adopted a majority voting policy and the director has displayed poor attendance of board and committee meetings. ISS also recommends voting in favour of a majority voting policy in the election of directors.

The TSX acknowledged that the Ontario Securities Commission (OSC) published for comment in January 2011 its Staff Notice 54-701, in which the OSC advises that it is determining whether reforms to securities law are appropriate to facilitate individual director voting and majority voting for director elections of reporting issuers.

That review is ongoing. In proposing the adoption of the Amendments, the TSX is once again taking the lead among Canadian regulatory authorities in respect of corporate governance, rather than waiting for future initiatives of Canadian Securities Administrators.


1. Amendments to Part IV of the Toronto Stock Exchange ("TSX") Company Manual (the "Manual") (September 9, 2011), available at:

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