Canada: A Look Ahead To The 2015 Proxy Season

The 2015 Proxy Season is on the doorstep. A look back at the hot topics in shareholder meetings held in the U.S. in 2014 is useful for Canadian issuers to anticipate emerging trends.

Key Shareholder Proposals

When looking at the shareholder proposals voted on at S&P 1500 companies that held their annual meetings in the first half of 2014, three themes of interest stand out.

First, corporate governance issues continue to form the bulk of shareholder proposals. Among those issues, the most common proposal involves the separation of the roles of CEO and chair. Although such resolutions gather about a third of shareholder support on average, the proposal is seldom adopted. Investors appear therefore to be satisfied with the role of the lead independent director as an alternative to an independent board chair. The U.S. position contrasts with the Canadian position where the independent chair is an accepted governance practice for the vast majority of Canadian public corporations.

While majority voting in director elections is becoming a standard practice in large U.S. corporations, it continues to form a significant portion of governance-related proposals. Most notably, majority voting proposals received on average the majority of votes cast in favour. Canada has moved ahead of the U.S. with respect to majority voting. Indeed, following the recent reform of the TSX Company Manual, listed corporations are now required to adopt majority voting for the election of directors other than at contested meetings.

Proxy access, which purports to allow shareholders to have their own director nominees included in the proxy form, remains another notable topic. It benefits from the Securities and Exchange Commission "private ordering" rule that permits shareholders to submit and vote on proxy access proposals. In 2014, support grew for the 3% / 3-year proposal discussed previously, suggesting that consensus is slowly building in favour of this model, with about 30% of the proposals voted on being adopted. Although it has been alluded to from time to time by shareholder democracy advocates, proxy access has not gained any traction so far in shareholders meetings in Canada. Still, the U.S. experience with proxy access remains relevant given that it is being debated in Canadian policy circles, namely in the context of the Industry Canada Consultation on the Canada Business Corporations Act.

Second, the number of compensation-related proposals declined in the 2014 U.S. Proxy Season, continuing a trend that began with the introduction of mandatory say-on-pay voting. The proposals tabled focus primarily on two issues: equity retention and golden parachutes. With respect to equity retention, the proposals require that senior executives retain a significant portion of their equity awards beyond retirement. While frequent, these proposals did not prove successful. The proposals that seek to prohibit single trigger vesting of equity awards marshalled greater support and passed in about 40% of the corporations targeted. From a Canadian perspective, the data suggest that the debate (which rarely translate in shareholder proposals) concerning long-term incentive vehicles and single-trigger change-in-control clauses is far from over.

Finally, it is worth noting that social and political shareholder proposals are almost as frequent as governance-related proposals. However, they are by far less successful, save for one notable exception: proposals that seek to enhance the disclosure of political and lobbying expenditures. The political contribution and lobbying proposals have generated strong support from shareholders, with a few passed in 2014. In any case, they have led corporations to expand their disclosure of such expenditures. Hitherto, political contributions have not been the subject of shareholder proposals targeting Canadian corporations. Nevertheless, political spending by corporations in Canada or abroad (in the form of direct contributions, advertisements, lobbying, or third-party memberships) is starting to attract attention. Among the issues being discussed is the opportunity for disclosure of political spending by Canadian corporations in their proxy circulars.

Say on Pay

The fourth year of mandatory say on pay in the U.S. was characterized by continuity. Indeed, the average support for S&P 1500 corporations was similar to the previous year with about 91% votes cast. There were less than 3% of failed votes and about 5% votes with less than 70% support of votes cast. The driving force behind negative votes remains the disconnection between executive pay and performance.

In Canada, say on pay is offered on a voluntary basis by corporations. Say on pay is primarily conducted at large corporations, with more than two thirds having a market capitalization over $1 billion. Average shareholder support was in line with the U.S. results at 92% of votes cast. Although a few corporations received less than 70% approval, there were no failed say on pay votes in 2014. As in the U.S., it is the misalignment between executive compensation and stock market performance that primarily determines investors' voting decisions. Looking forward, the U.S. and Canadian say on pay experience is informative for boards preparing for the upcoming proxy season, as it emphasizes the importance of explaining thoroughly the choice of performance metrics and their relation with executive compensation.

Shareholder-Director Engagement

Earlier this year, we identified shareholder engagement as one of the five developments to follow in 2014. This year's proxy season showed that shareholder engagement with directors is undoubtedly becoming a staple of the governance landscape. Last spring, the Shareholder-Director Exchange (SDX) working group was formed by advisers to corporations to regroup leading independent directors and representatives from some of the largest and most influential long-term institutional investors. To provide a framework for shareholder-director engagements, the SDX working group created the Shareholder-Director Exchange Protocol (SDX Protocol). In July 2014, a letter written by investor members of the working group was sent to Chair, Lead Directors and Corporate Secretaries of every Russell1000 corporations. The letter suggest to these corporations that they consider formally adopting a policy on shareholder-director engagement by adopting or endorsing the SDX Protocol or otherwise.

In Canada, the demand for engagement between boards and shareholders is also a reality of this new era of governance marked by greater activism. And demand for engagement on the part of investors appears to be growing. In fact, since 2010, the Canadian Coalition for Good Governance has recommended that boards adopt its model policy on engagement with shareholders and disclose it to shareholders. The recent SDX initiative suggests that boards would be well advised to discuss the format for shareholder dialogue, including the adoption of a policy.

Gender Diversity

Over the last decade, gender diversity in corporate decision-making functions has attracted increasing attention on the part of law-makers and regulators. In some countries, laws have been passed to impose quotas for female directors in publicly-traded corporations. In others, regulatory interventions have mandated disclosure regarding gender diversity in boards of directors and senior executives. Further, the importance of gender diversity reaches beyond the regulatory sphere. Indeed, a significant number of model corporate governance codes around the world have recommended that boards give proper consideration to gender diversity.

The mainstreaming of gender diversity in corporate governance is now a reality for Canadian public corporations. Last November, the 2014 edition of the Globe and Mail Report on Business Board Games focused on gender diversity. Moreover, gender diversity will soon be part of securities regulation. Indeed, a number of members of the Canadian Securities Administrators (CSA) have proposed amendments to Form 58-101F1 Corporate Governance Disclosure to deal with the composition of the board of directors of non-venture issuers that relates to gender diversity.

Specifically, the amendments require that issuers disclosure annually information pertaining to the following elements: (i) director term limits, (ii) policies regarding the representation of women on the board, (iii) the board's or nominating committee's consideration of the representation of women in the director identification and selection process, (iv) the issuer's consideration of the representation of women in executive officer positions when making executive officer appointments, (v) targets regarding the representation of women on the board and in executive officer positions, and (vi) the number of women on the board and in executive officer positions.

The amendments come into force on December 31, 2014. The new disclosure requirements apply to management information circular or annual information form filed following an issuer's financial year ending on or after December 31, 2014.

Undoubtedly, the reform has notable consequences for issuers for the coming proxy season. The new requirements impose additional disclosure requirements on items not typically addressed in proxy materials. More importantly, the amendments suggests that boards of directors should hold conversations on the items addressed by the new requirements in order to establish or refine their corporation's position on gender diversity.

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.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.