The 2014 Proxy Season is quickly approaching. In 2013, U.S.
trends have emerged with respect to the proposals filed by
shareholders with S&P 500 and Russell 2000 corporations. Four
main themes of interest stand out.
First, shareholder proposals have again been filed to implement
proxy access. The proposals seek to allow a shareholder or a group
of shareholders under certain conditions to have their own director
candidates included in the proxy form. Such proxy access would be
conditional on the shareholders holding a certain threshold of the
corporation's shares (e.g. 3%) for a certain period of time
(e.g. 3 years).
Second, U.S. corporations continue to be targeted with majority
voting proposals introduced for the stated purpose of improving
shareholder democracy. While majority voting is becoming standard
in large U.S. corporations, with 84% of S&P 500 corporations
having now adopted such a policy, majority voting is not as
prevalent among small and medium-sized public corporations.
Third, proposals seeking to eliminate staggered boards in favor
of a system of annual election of directors have again attracted
attention this year.
Finally, while the value of separating the roles of chair and
CEO in the U.S. remains the subject of debate, a number of
proposals on the subject have been received. The proposals tend to
target financial institutions whose governance practices have been
criticized in the wake of the financial crisis.
From a Canadian perspective, we note that some of those
proposals have been addressed by
new rules of the Toronto Stock Exchange. The TSX mandated the
annual election of directors on an individual basis. Although true
classified boards were not permissible under Canadian corporate
law, directors can no longer be elected by slate or for terms of
more than one year. Moreover, listed issuers must either adopt a
majority voting policy or disclose in their annual proxy circular
the reasons why they have not done so (comply or explain). And,
where the listed issuer does not have a majority voting policy, it
must notify the TSX where one director receives more withheld votes
than votes in favour.
It is also worth emphasizing two differences between Canada and
the U.S. in respect of shareholder democracy. The first is that
Canadian corporate law already provides a form of proxy access
through the shareholder proposal mechanism. However, shareholder
proposals are seldom used to nominate candidates. Second, the
separation of the roles of chairman and CEO is an accepted practice
of governance with the majority of Canadian public
Say on Pay
In the U.S., 2013 marks the third year since Say-on-Pay became
mandatory for public corporations. Even though the Dodd-Frank Act
leaves the choice to shareholders to decide whether they opt for an
annual, biennial or triennial advisory vote, the vast majority of
public corporations (80% of companies in the Russell 3000 index)
hold annual say-on-pay votes.
For the first half of 2013, the average support for say-on-pay
proposals was 92%, up from 90% in 2012. Proxy voting advisory firm
ISS continued to exercise an influence on say-on-pay results.
ISS recommended voting against management compensation
packages in 10% of the 473 recommendations issued hitherto, in
contrast with 13.3% negative recommendations in last year's
proxy season. Where ISS issued a negative recommendation, half of
the companies targeted received less than 70% support for their
say-on-pay proposal. Although compensation assessments involve a
number of quantitative and qualitative factors, pay for performance
remains a central determinant of ISS recommendations.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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