Following on its proposal for enhanced proxy access published
earlier this year (see our May 29, 2015 Update, CCGG Proposes
Enhanced Proxy Access Rules), the Canadian Coalition for Good
Governance (CCGG) has published a Universal Proxy Policy
the use of a universal proxy, which lists the names of all
director nominees (whether nominated by the issuer or by dissident
shareholders) on a single proxy form, in contested director
elections of Canadian public companies, and
changes in corporate and securities laws to make such universal
The Current Regime
Under the current Canadian statutory regime (which is similar in
this regard to the U.S. regime), where there is a contested
director election, each of the company and a dissident can provide
shareholders with a separate form of proxy containing the names of
only those individuals they are recommending for election to the
board. In these circumstances, shareholders who vote by proxy (who
generally represent the holders of a significant majority of the
company's shares) must choose between mutually exclusive slates
of directors: a slate of directors nominated by the company or a
slate of directors nominated by a dissident. In contrast,
shareholders who attend the contested meeting in person can vote
for whatever combination of individuals they believe will comprise
the best board.
While this difference is the most significant issue that
generally is raised in the context of the current regime, it also
has been noted that the current regime can cause significant
confusion as a result of, among other things, multiple forms of
proxies and procedural rules that result in later proxies
superseding earlier proxies from the same shareholder.
A Universal Proxy Regime
A universal proxy would extend the flexibility afforded to
shareholders who attend meetings to shareholders who vote by proxy.
According to the CCGG, a mandatory universal proxy would improve
director accountability and enhance shareholder democracy by
aligning the rights of all shareholders, regardless of whether they
attend shareholder meetings. Similar submissions have been made to
the United States Securities and Exchange Commission (SEC) by the
Council of Institutional Investors.
Although rare, universal proxies have been used in past Canadian
proxy contests, perhaps most notably in the proxy contest between
Canadian Pacific Railway Limited and Pershing Square Capital
Management in 2012.
The CCGG is recommending that, until applicable laws are amended
to require universal proxies, each side of a proxy contest should
use either a single form of universal proxy or its own form, which
must set out all nominees with equal prominence. Whether this
recommendation is followed in any given contest likely will depend
on the perception by a company and dissidents of the strategic
benefit of a traditional or universal proxy.
The Path Forward
As with enhanced proxy access, with limited empirical data and
historical experience it is not clear that mandating a universal
proxy will necessarily enhance shareholder democracy, corporate
accountability and, ultimately, shareholder value. Supporters of
universal proxies have suggested that they allow fair treatment of
all shareholders and may stimulate settlements between issuers and
activists. Critics have raised a number of concerns, including that
universal proxies may in fact embolden activists to initiate more
proxy contests. They have also noted that where companies and
dissidents spend considerable time and resources selecting slates
of directors with a balanced range of skills, experience and
expertise, a universal proxy could result in a
"suboptimal" board that does not have the competencies
and skills that the board, as a whole, requires. Such a result
would be contrary to what the Canadian Securities Administrators
have suggested is a principal objective of the corporate governance
Notwithstanding these and other concerns, the CCGG's
recommendation, as well as an indication from the SEC's Chair
earlier this year that the SEC is encouraging the use of universal
proxies and considering similar changes to its rules, suggests that
universal proxies should be among the matters considered in
contested director elections.
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
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).