Canada: ISS Proposes Amendments To 2014 Canadian Proxy Voting Policy

Last Updated: November 4 2013
Article by Neill May and Matthew Segal

On October 22, 2013, proxy advisory firm Institutional Shareholder Services Inc. (ISS) released three proposed amendments to its Canadian proxy voting policy for public comment. Proxy advisory firms such as ISS make voting recommendations to institutional holders of publicly-traded securities, and in some cases effectively exercise voting rights on behalf of their institutional clients. They can exercise significant influence on voting outcomes. Subject to feedback received before 3 p.m. (EST) on November 4, 2013, ISS plans to release its 2014 Canadian proxy voting policy in November, affecting shareholder meetings held on or after February 1, 2014.

The Proposed Amendments

1. Director Overboarding

The proposed amendments add overboarding (sitting on too many boards) to the existing attendance criteria for TSX-listed issuers. Under its current policy, ISS issues a withhold recommendation on a director if he or she has attended fewer than 75% of board and committee meetings held within the past year without a valid reason for the absences and has shown a pattern of low attendance at prior years' committee and board meetings. ISS expressed concern that an "overboarded" director may be unable to fulfill his or her responsibilities because of excessive time commitments. ISS considers a director to be overboarded if he or she either sits on more than six boards or serves as the CEO of a public issuer and serves on more than two boards (in addition to the issuer for which he or she is the CEO). ISS estimated that roughly 25% of directors for all TSX-listed issuers were overboarded in 2012.

Under the proposed amendments, ISS will recommend that shareholders withhold votes from directors that are both overboarded and have attended fewer than 75% of board and committee meetings in the past year (without a valid reason for the absences). In other words, directors considered to be overboarded will be affected based on low attendance for only one year (without a prior pattern of low attendance from prior years).

2. Quantitative Pay for Performance Screen

The second proposal simplifies the quantitative pay-for-performance measures used by ISS to measure senior executive compensation relative to issuer performance (used to identify issuers where ISS considers that a more in-depth qualitative analysis of the issuer's executive compensation is warranted). ISS's Relative Degree of Alignment (RDA) measures the difference between an issuer's total shareholder return (TSR) rank and the CEO's total pay rank within a peer group. Currently, the screen used by ISS measures the two rankings over both one and three year periods, using a weighted average of the two (40% and 60%, respectively).

ISS proposes to simplify the methodology by calculating the difference between the issuer's TSR rank and the CEO's total pay rank only over a three‐year period (or as many full fiscal years that the issuer has been publicly-traded and has disclosed pay data). The one-year period calculation would be discarded from the analysis.

This change is intended to provide a better view on long-term performance and alignment (by minimizing the effects of short-term volatility). ISS estimated that 7% of listed issuers would be affected by this change.

3. Problematic Audit-Related Issues

The final proposal is to adopt a policy of case-by-case analysis when recommending a vote on members of the audit committee and potentially the full board if adverse accounting practices are identified that rise to a level of serious concern, such as accounting fraud, misapplication of applicable accounting standards, or persistent material weaknesses identified in the internal control process.

The proposal for a case-by-case analysis is made in recognition, as expressed by ISS, of the need to assess the severity, breadth, chronological sequence and duration of any adverse accounting practices, and the issuer's disclosed efforts to remediate or correct the issue.


The Canadian Securities Administrators (CSA) are currently engaged in a process to consider potential regulation of proxy advisory firms such as ISS (as described in our recent update, Canadian Securities Regulators to Regulate Proxy Advisory Firms). The concerns expressed to date through the CSA process include (i) the need for transparency and disclosure about proxy advisors' methodologies, and (ii) mistakes and inaccuracies in proxy advisors' reports. The fact that the proposed amendments include a proposal to simplify certain analytical tools may reflect a movement to address some of the regulators' (and other marketplace actors') concerns. Proxy advisory firms are also sometimes subject to criticism concerning perceived inflexibility in the application of their policy guidelines; the proposal to take into consideration an issuer's particular circumstances (where accounting issues occur) may also represent an effort to mitigate concerns expressed.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions