According to a number of commentators, shareholder activism has
become the new normal, with activist investors focusing on a broad
range of issues, from governance to operations. Interventions have
targeted, for example, board composition, executive compensation,
dividend policy and proposed mergers. Activists typically employ a
variety of tools to advance their goals, such as behind-the-scene
diplomacy, letters to management or the board, proxy fights and
shareholder proposals for board nomination. Further, shareholder
activism is not a phenomenon confined to the U.S. Indeed,
throughout 2013, activist investors have targeted Canadian
corporations, benefiting from some of the unique features of
corporate and securities law that facilitate their
Shareholder activism has translated into an increase in
board-shareholder engagement initiatives over the last years. This
trend shows no sign of abating in the current environment. Boards
of directors of companies around the world are thus undertaking
various initiatives to engage with shareholders. Engagement
practices can take many forms, such as private meetings with the
board of directors, letters to shareholders and online
communications aimed at a large group of investors. Engagement with
shareholders can improve mutual understanding while allowing
companies to develop investor trust. Such engagement can also help
companies to avoid unexpected shareholder contests.
Still, shareholder engagement does raise a number of challenges.
Boards of directors must identify the shareholders with whom
engagement will be meaningful. They must communicate a consistent
message and avoid any misunderstandings. Engagement practices also
take time and need to be undertaken by directors and officers with
the relevant communications skills. Given these challenges, there
remain a core number of directors who believe that the board
"does not and should not" communicate directly with
There is no reason to think that shareholder activism will
dissipate in 2014. Certainly, pending regulatory reforms in Canada
with respect to defensive tactics, early-warning disclosure and
proxy-voting advisors will influence such activism. But, as this
phenomenon matures, it will be interesting to watch the direction
taken by activists, and the resulting response from companies
including in terms of shareholder engagement, over the next
In a paper published in the Business Lawyer in
2010, Chancellor Leo Strine of the Delaware Chancery Court
aptly summarized the two potential paths. On the one hand,
corporate managers will be pushed "to be highly responsive to
the immediate pressures and incentives of capital markets". On
the other hand, if activists shareholders do not "push an
agenda that appropriately focuses on the long term, the
responsiveness of managers to the incentives they face can result
in business strategies that involve excessive risk and, perhaps
most worrying, underinvestment in future growth".
This is the fourth in a series of five posts intended to
consider securities regulatory developments to watch in 2014.
Watch for the remaining post over the course of the next week.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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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