Canada: 2016 Proxy Advisory Firm Voting Guidelines: Canadian Highlights

As an early step in preparing for the upcoming proxy season, issuers should familiarize themselves with the Canadian proxy voting guidelines recently published by Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. (Glass Lewis). This bulletin briefly addresses certain of the updated topics covered by the ISS benchmark policy recommendations and Glass Lewis proxy guidelines with respect to issuers listed on the Toronto Stock Exchange (TSX) for the 2016 proxy season.

These proxy voting guidelines are the first to be released since the adoption of National Policy 25-201 Guidance for Proxy Advisory Firms by the Canadian Securities Administrators (see our May 2015 Blakes Bulletin: Issuers' Comments on Proxy Advisory Firm Regulation Fall on Deaf Ears).


Proxy advisory firms review and analyze matters put forward for consideration at shareholder meetings and make voting recommendations concerning such matters to their clients, who are typically institutional investors. The items considered range from routine matters to highly complex merger and acquisition transactions that involve a voting decision, and cover both management initiatives and shareholder proposals. A voting recommendation is generally based on the issuer's alignment with the practices and standards contained in the proxy advisory firm's voting guidelines for that proxy season.


Proxy Access

Proxy access made Canadian headlines in 2015 with the release by the Canadian Coalition for Good Governance of its publication Shareholder Involvement in the Director Nomination Process: Enhanced Engagement and Proxy Access, wherein enhanced proxy access was proposed to facilitate shareholders' nomination of directors for Canadian public companies (see our September 2015 Blakes Bulletin: Canadian Coalition for Good Governance Advocates More Proxy Access).

In its 2016 Canadian proxy voting guidelines, Glass Lewis has added a new provision concerning proxy access, noting that it "generally supports affording shareholders the right to nominate director candidates to management's proxy" and, when reviewing proposals requesting proxy access, it will consider several factors including "the specified minimum ownership and holding requirement for shareholders to nominate one or more directors, as well as company size, performance and responsiveness to shareholders."

ISS' voting guidelines for the 2016 proxy season note its support for proxy access "as an important shareholder right, one that is complementary to other best-practice corporate governance features." However, in the absence of a uniform market standard in Canada, ISS has determined not to set specific parameters and instead "take a case-by-case approach in evaluating [proxy access] proposals" (unlike its U.S. proxy voting guidelines and related FAQ, which provide specific thresholds and limits concerning aspects of such policies).

Diversity and Mechanisms for Board Renewal

In September 2015, the Canadian Securities Administrators released CSA Multilateral Staff Notice 58-307– Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices, which summarizes the findings concerning corporate governance disclosures of issuers related to gender diversity policies and mechanisms for board renewal (see our October 2015 Blakes Bulletin: Director Term Limits Not Common and Blakes Bulletin: CSA Findings from Gender Diversity Disclosure Requirements Review Released).

In its 2016 Canadian proxy voting guidelines, Glass Lewis has included expanded language regarding board diversity, noting that "boards should have diverse backgrounds and members with a breadth and depth of relevant experience" and that "shareholders are best served when boards make an effort to ensure a constituency that is not only reasonably diverse on the basis of age, race, gender and ethnicity, but also on the basis of geographic knowledge, industry experience, board tenure and culture." While Glass Lewis has not articulated a direct consequence concerning the application of this new guideline, it has added that a withhold recommendation may be issued in respect of the chair of an issuer's nominating committee where "the board's failure to ensure the board has directors with relevant experience, either through periodic director assessment or board refreshment, has contributed to a company's poor performance."

As in past years, ISS' 2016 TSX-listed company benchmark voting policies do not specifically address diversity and board tenure (although ISS' QuickScore 3.0 measures how many women are on an issuer's board and calculates "lengthy tenure" by non-executive directors based on a nine-year service threshold).

Director Overboarding

Governance commentators continue to be concerned about director "overboarding" and, in this regard, ISS notes that "[d]irectors need sufficient time and energy in order to be effective representatives of shareholders' interests." Accordingly, for the 2017 proxy season, ISS and Glass Lewis have both pre-emptively announced new policies concerning director overboarding.

Commencing with shareholder meetings occurring in February 2017, ISS will generally issue a withhold recommendation for a director where that individual:

  1. Is a CEO of a public company and sits on more than one outside public company board in addition to the company of which he/she is CEO (2016: two) or is not a CEO of a public company and sits on more than four total public company boards (2016: six), and
  2. Attended fewer than 75 per cent of his or her board and key committee meetings held within the past year without a valid reason

Effective for the 2016 proxy season, ISS has clarified that attendance will be measured across board and "key" committee meetings, with "key" committees being noted as including audit, compensation and nominating committees.

Beginning in 2017, Glass Lewis will generally recommend that shareholders withhold their votes in respect of (i) a director who is an executive officer of any public company while serving on a total of more than two public company boards (2016: three) and (ii) any other director who serves on a total of more than five public company boards (2016: six).


Equity Compensation Plans

Similar to the model introduced in the United States for the 2015 proxy season, ISS has adopted a "scorecard" model for its evaluation of equity plan proposals by TSX-listed issuers in 2016 "in order to provide for a more nuanced consideration" of such proposals. Under this approach, ISS intends to conduct an overall assessment of various features and practices related to such plans, with positively-assessed factors and negatively-assessed factors contributing to an overall score.

Scorecard factors will fall under three categories:

  1. Plan cost (as measured pursuant to shareholder value transfer relative to peer issuers)
  2. Plan features (including public disclosure of the full plan document, reasonable share dilution and the absence of problematic change in control provisions and financial as-sistance for plan participants)
  3. Grant practices (including a reasonable three-year average burn rate, performance and meaningful time vesting requirements for grants to the CEO, a clawback provision ap-plicable to equity awards, and — for issuers in the S&P/TSX Composite Index — post-exercise or post-settlement share-holding requirements)

ISS will generally recommend that shareholders vote against the plan proposal if the score indicates that the plan is not in shareholders' interests. Further, ISS will recommend that shareholders vote against the plan if certain unacceptable factors are present. ISS has published a related Frequently Asked Questions document concerning its equity plan scorecard.

Externally-Managed Issuers

In its 2016 Canadian proxy voting guidelines, ISS has added a provision concerning externally-managed issuers in order to "[p]rovide a framework for reviewing board accountability" at such issuers. According to the new policy, ISS will issue voting recommendations regarding say-on-pay resolutions, where provided, or on the election of individual directors, committee members, or the entire board, as appropriate, of externally-managed issuers that have provided "minimal or no disclosure about their management services agreements and how senior management is compensated."

Factors ISS will consider include, among others:

  • The size and scope of the management services agreement
  • Executive compensation in comparison to peers and/or similarly structured issuers
  • Overall performance
  • Related party transactions
  • Board and committee independence
  • The process for effectively managing conflicts of interest and risk mitigating factors included within the management services agreement, such as fee recoupment mechanisms

Transitional Awards

In its updated Canadian voting guidelines, Glass Lewis has included a new discussion regarding its beliefs that an issuer should disclose the details of any executive sign-on arrangements and provide:

  1. A meaningful explanation of the payments and the process by which the amounts have been determined
  2. The details of, and basis for, any payments made as compensation for forfeited awards from a previous employer
  3. Disclosure of if and how the executive's regular compensation arrangements will be affected by the additional grants


For the 2016 proxy season, Glass Lewis will generally recommend that shareholders vote against the adoption of an exclusive forum provision. Glass Lewis notes in its Canadian voting guidelines that "provisions limiting a shareholder's choice of legal venue are not in the best interests of shareholders" and "[s]uch clauses may effectively discourage the use of shareholder derivative claims by increasing their associated costs and making them more difficult to pursue." However, in certain cases Glass Lewis provides that it may support such a provision if the company:

  1. Provides a compelling argument on why the provision would directly benefit share-holders
  2. Provides evidence of abuse of legal process in other, non-favoured jurisdictions
  3. Narrowly tailors such provision to the risks involved
  4. Maintains a strong record of good corporate governance practices


  • Consistent with ISS' Canadian proxy guidelines, the Glass Lewis voting policy now provides that the quorum for a meeting of directors should be a majority of the directors of the board
  • Although not highlighted as a policy change by ISS, its proxy voting guidelines have been clarified to provide that the enumerated director independence parameters concerning relationships with a TSX-listed issuer will now be measured by reference to relationships with affiliates of the issuer as well (e.g., relative of current executive officer of the company or its affiliates)
  • In cases where the board or management has failed to sufficiently identify and manage a material environmental or social risk that did or could negatively impact shareholder value, Glass Lewis will now recommend shareholders vote against directors responsible for risk oversight in consideration of the nature of the risk and the potential effect on shareholder value
  • Glass Lewis will now consider a number of factors in determining which country-specific policy to apply to dual-listed issuers for each proposal, including but not limited to: the company's corporate governance structure and features, including whether the board structure is unique to a particular market; the nature of the proposals; the location of the company's primary listing, if one can be determined; the regulatory/governance reporting regime; and the availability and completeness of the company's proxy filings
  • ISS now notes that "performance-based equity grants are not considered to be an appropriate form of director compensation"

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
26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

12 Nov 2018, Other, Toronto, Canada

Stories aren’t falsehoods. Stories are the root of all effective human communications: they motivate, animate and clarify. If you aren’t telling stories, you probably aren’t getting your point across.

Similar Articles
Relevancy Powered by MondaqAI
Wildeboer Dellelce LLP
Stewart McKelvey
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Wildeboer Dellelce LLP
Stewart McKelvey
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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