The Proxy advisory firm Glass, Lewis & Co., LLC
("Glass Lewis") has released its
Canadian policy updates for the 2016 proxy season, on the heels of
the release by Institutional Shareholder Services Inc. (ISS) of its
2016 policy updates (see our November 23, 2015 Update, ISS 2016 Proxy Season Policy Updates).
Glass Lewis's policy updates provide new guidance on
director overboarding, audit committee over-commitment, proxy
access, certain by-law amendments, board performance and
transitional awards. Other than the change affecting overboarding,
which will be fully implemented for the 2017 proxy season, the
updated guidelines will be effective for shareholder meetings held
on or after February 1, 2016.
Director Overboarding & Audit Committee
Like ISS, Glass Lewis has introduced an enhanced standard for
evaluating whether a director serves on an excessive number of
boards. Historically, it has recommended voting against a director
who (a) serves as an executive officer of a public company while
serving on more than a total of three boards or (b) is not a public
company executive and serves on more than a total of six public
company boards. The updated guidance on "overboarding" is
For shareholder meetings held in
2016, Glass Lewis will base its voting recommendation on existing
thresholds but will note as a concern instances where a director
(a) who serves as an executive of a public company serves on more
than a total of two boards or (b) serves on more than five public
company boards (the "New
Commencing in 2017, Glass Lewis will
recommend a "withhold" vote for a director who meets the
New Thresholds. A "withhold" recommendation will be
limited to companies where the director does not serve as an
Glass Lewis will continue to apply a more lenient standard for
TSX Venture Exchange listed companies, with directors generally
being permitted to serve on up to nine boards. Glass Lewis has also
adopted a more lenient standard for over-commitment of audit
committee members of TSX Venture Exchange companies. It will
generally consider directors serving on up to four audit committees
to be reasonable (or five for directors with financial
Glass Lewis has clarified its approach to evaluating proxy
access proposals, noting that it generally supports affording
shareholders the right to nominate candidates to management's
proxy. Glass Lewis will consider several factors when evaluating
whether to support a proposal for proxy access, including minimum
share ownership and holding requirements for nominating directors,
company size, performance and responsiveness to shareholders.
Glass Lewis has also updated its guidance regarding amendments
to a company's charter or by-laws in the following areas:
Forum: Glass Lewis will generally
recommend against any by-law or charter amendment to adopt an
exclusive forum provision. However, it may support the provision if
the company provides a compelling argument on why the provision
would directly benefit shareholders.
Quorum: In addition to its existing
guidance on quorum requirements at shareholder meetings, Glass
Lewis has indicated that it will generally consider a majority of
the directors of the board to constitute an acceptable quorum for a
meeting of directors.
Glass Lewis has clarified its policy on board performance in the
Composition: Glass Lewis may
recommend a "withhold" vote for the chair of the
nominating committee where Glass Lewis concludes that the
board's failure to ensure that its directors have relevant
experience has contributed to the company's poor
Environmental and Social
Risk Oversight: Where Glass Lewis
perceives that the board or management has failed to sufficiently
identify and manage a material environmental or social risk that
could reduce shareholder value, it will recommend a
"withhold" vote for directors who are responsible for
such risk oversight.
Glass Lewis did not specify how it intends to determine a
connection between the company's performance and the nominating
committee's purported failure or how it will assess
identification and management of environmental and social
Glass Lewis has also provided guidance on transitional awards
granted to executives. Glass Lewis requires such awards be clearly
disclosed, with a meaningful explanation of how the payments were
determined, and will evaluate transitional awards in the context of
the company's overall incentive strategy, granting practice and
current operating environment.
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.
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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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