Canada: Corporate Governance Update: Canadian Developments And Trends

The end of 2013 and early 2014 saw a variety of proposals and developments in Canada on a range of corporate governance matters. Here are a few areas to watch over the course of the coming months.

1. Gender Diversity

Following up on the Staff consultation paper issued in July 2013, the Ontario Securities Commission (OSC) has proposed a "comply or explain" model regarding the representation of women on boards and in senior management. The proposal involves amendments to Form 58-101F1 Corporate Governance Disclosure which, if adopted, will require most companies listed on the Toronto Stock Exchange (TSX) and certain other non-venture issuers reporting in Ontario to provide new annual disclosure concerning gender diversity (typically in an issuer's proxy circular). The new requirements would include disclosure of, among other matters, the issuer's policies with respect to the identification and nomination of women directors; consideration of the representation of women in the director identification and selection process and in executive officer appointments; any targets regarding the representation of women in such positions; and the number and proportion of the issuer's directors and executive officers who are women. Under the "comply or explain" regime, an issuer that has not adopted a policy, given consideration to the level of representation of women or adopted targets would be required to explain why it has not done so. It is the OSC's view that the proposed amendments should encourage more effective boards and better corporate decision-making by requiring greater transparency on these matters. This transparency is also intended to assist investors when making investment and voting decisions. The OSC's comment period closes on April 16, 2014.

In a consultation paper published in December 2013 regarding possible changes to the Canada Business Corporations Act (CBCA), Industry Canada has also asked whether new measures to promote diversity (including gender diversity) within corporate boards of directors should be included in the CBCA and what such measures might entail. Any such changes to the CBCA could potentially affect nearly 235,000 federally incorporated corporations, including almost half of Canada's largest publicly traded companies. Comments have been requested by Industry Canada by May 15, 2014.

2. Director Term Limits

As part of its proposal on gender diversity, the OSC has also proposed similar "comply or explain" amendments with respect to whether or not issuers have adopted director term limits. The OSC agrees with stakeholders that regular renewal of board membership contributes to the effectiveness of a board, and director term limits can promote an appropriate level of board renewal and provide opportunities for qualified board candidates (including women). Mandatory term limits have not been proposed.

Director term limits have not previously been the subject of much attention in Canada. A recent study by the Clarkson Centre for Board Effectiveness suggests that Canadian issuers are not concerned about the impact of long tenure on board effectiveness. The proxy advisory firm Institutional Shareholder Services Inc. (ISS), however, has recently solicited feedback on director tenure and determined that institutional investors consider long director tenure to be problematic, although there are varying views regarding the nature of their concerns. Some investors are concerned that a lengthy director tenure can diminish a director's independence, while others view it as limiting a board's opportunity to refresh its membership. In this regard, more than half of the investors surveyed by ISS indicated that ISS should consider a policy on director rotation, specifically with respect to the board chair, lead director and key board committee chair positions. Issuers were not supportive of this kind of policy development. Glass Lewis & Co. (Glass Lewis) on the other hand believes that director age and term limits are typically not in the best interests of shareholders and may be indicative of a board that has a difficult time making "tough decisions". Glass Lewis points to academic literature which suggests that there is no evidence of a correlation between director performance and either length of term or age. In any event, if a board has these limits, Glass Lewis expects they will be adhered to and not waived. If a board waives its limits, Glass Lewis will consider recommending shareholders withhold votes from the nominating committee unless there is a reasonable explanation.

3. Majority Voting

In February 2014, the TSX announced rule changes requiring TSX-listed issuers, other than issuers that are majority controlled, to adopt majority voting policies for director elections at uncontested shareholders' meetings, or to amend their constating documents in order to give effect to these new requirements. The TSX rules will require directors to resign if they are not elected by a majority (50% + 1) of votes cast at an uncontested shareholders' meeting. Boards of directors would then be required to accept such resignations unless there are "exceptional circumstances". For more information, see our February 2014 MarketCaps by Alexander Lalka and Vanessa Grant.

The rule changes require that TSX-listed issuers describe their majority voting policies in their proxy materials sent out in connection with their annual meeting of shareholders. In addition, after an uncontested meeting at which directors are elected, each issuer must disseminate a press release disclosing the voting results for the election of each director.

These new requirements, which follow the voluntary adoption of majority voting by many issuers over recent years, come into force for TSX-listed issuers with fiscal years ending on or after June 30, 2014 effective as of their first annual shareholder meeting after that date.

4. Proxy Voting System

In August 2013, the Canadian Securities Administrators (CSA) published a consultation paper seeking feedback from issuers, investors and other stakeholders on approaches to address concerns regarding the integrity and reliability of the proxy voting infrastructure in Canada. The consultation paper follows, in particular, an earlier OSC staff notice on shareholder democracy published back in January 2011. While the CSA consultation paper lists many areas for discussion, it focuses on two main issues: (a) is accurate vote reconciliation occurring within the proxy voting infrastructure; and (b) what type of end-to-end vote confirmation system should be added to the proxy voting infrastructure? For more information, see our August 2013 MarketCaps by Steve Cutler, Brett Kagetsu, Kathleen Ritchie and Tina Woodside. While the initial comment period on the CSA's consultation paper closed in November 2013, various securities commissions have held or will be holding further consultation sessions with market participants and other interested parties during the early part of 2014.

Industry Canada has also requested comments on proxy voting system issues. In addition to the above issues raised by the CSA, it has specifically highlighted concerns about "overvoting" (when the voting rights attached to a share in a corporation are exercised more than once) and "empty voting" (when a shareholder has transferred its economic interest to a third party but has retained the right to vote).

The issues involved in reforming the proxy voting system are numerous, technical and highly complex, involving many market participants both in Canada and abroad. We expect that ongoing consultations and other discussions, as well as the implementation of any measures proposed to address the identified issues, will extend for many years.

5. Proxy Advisory Firms

In September 2013, the CSA provided an update on its earlier consultation paper concerning the potential regulation of proxy advisory firms. That consultation paper, issued back in June 2012, raised certain concerns about the services of proxy advisory firms (the most prominent being ISS and Glass Lewis), such as potential conflicts of interest, perceived lack of transparency, potential corporate governance implications and alleged undue reliance by institutional investors on the recommendations provided by such firms. For more information on the original consultation paper, see our June 2012 MarketCaps by David Taniguchi and Tina Woodside.

In its September 2013 update, the CSA noted that the feedback it received differed between the various groups of market participants (i.e. issuers, institutional investors, and proxy advisory firms). The CSA has determined that it prefers a policy-based approach that will give guidance on recommended practices and disclosure for proxy advisory firms to promote transparency and understanding of the services provided. The CSA intends to publish this proposed approach for comment in the first quarter of 2014. For more information, see our September 2013 MarketCaps by Martine Guimond, Tina Woodside and Ali Amadee.

6. Shareholder Activism – By-law Amendments

Shareholder activism has been much in the news in Canada, with high profile cases involving well known Canadian companies such as Agrium, Canadian Pacific Railway and TELUS. While it is beyond the scope of this newsletter to delve into the topic of shareholder activism, we expect to see continued proposals from issuers to mitigate the risks of an activist campaign. On the corporate governance front, these efforts include the adoption of amendments to existing corporate by-laws – in particular, adoption of advance notice by-laws (requiring a shareholder to give notice of its intention to nominate directors at an annual meeting of shareholders), enhanced quorum by-laws (requiring a higher quorum where a shareholder proposes to replace a majority of the board members) and by-laws to deal with "golden leashes" (disqualifying director nominees who receive certain third party compensation, thereby restricting the ability of activists to offer special compensation to its elected director nominees and not to re-elected incumbent directors).

These types of by-law amendments have drawn comments from the proxy advisory firms, such as ISS and Glass Lewis, as well as from institutional investors. For example, ISS has taken the policy position that it will generally vote against enhanced quorum by-laws, and that it will apply a "case by case analytical framework" with regards to "golden leash" by-law amendments that are put to a shareholder vote, taking into account factors such as the board's rationale for proposing such a by-law and whether the by-law materially impairs or improves shareholder rights. The issue of golden leashes has recently been particularly controversial in Canada, drawing strong views in Agrium's recent proxy battle, for example. Following the adoption of "golden leash" by-law amendments by a few U.S. companies last year, the first Canadian issuers to propose similar amendments may well be seeking shareholder approval during the course of the upcoming proxy season.

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.

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.

Events from this Firm
16 Jan 2018, Seminar, Birmingham, UK

Join Gowling WLG's pensions team as they explain some of the biggest challenges facing trustees and employers in the coming year and provide practical ways of dealing with them.

23 Jan 2018, Seminar, London, UK

Join Gowling WLG's pensions team as they explain some of the biggest challenges facing trustees and employers in the coming year and provide practical ways of dealing with them.

25 Jan 2018, Seminar, Birmingham, UK

2018 is set to be another big year in employment, with employers set to face new challenges and responsibilities. At our event, looking ahead to next year, we will be discussing four key issues you might face in 2018, providing useful tips and answering your questions.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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