Canada: Proxy Season 2019 – Key Things to Know

Last Updated: March 7 2019
Article by Al Wiens, Mark Wilson, Patricia Good and Troy Pocaluyko
Most Popular Article in Canada, March 2019

In leading up to the 2019 proxy season, both investors and issuers should be aware of numerous developments in the areas of corporate governance and securities laws. To prepare for the upcoming proxy season, issuers and investors should be aware of the Canadian proxy voting guidelines issued by proxy advisory firms Glass, Lewis & Co. ("Glass Lewis") and Institutional Shareholder Services ("ISS") as well as the various developments initiated by the Toronto Stock Exchange ("TSX"), the Ontario Securities Commission (the "OSC") and the Canadian Securities Administrators (the "CSA"). To assist in this preparation, below is a summary of several significant developments to keep in mind for the 2019 proxy season.

Board Diversity

Once again, overall diversity in corporate boardrooms is one of the most heavily discussed areas in corporate governance. On May 1, 2018, Bill C-25, which proposed to amend the Canada Business Corporations Act (the "CBCA") with respect to gender diversity disclosure, among other things, received Royal Assent. The amendments to the CBCA pursuant to Bill C-25 (the "Amendments") include similar reporting requirements as found in National Instrument 58-101 – Disclosure of Corporate Governance Practices ("NI 58-101") which require that all TSX-listed issuers make certain disclosures regarding their gender diversity policy. However, the Amendments expand the required disclosure beyond gender to also apply to members of "designate groups" (as per the Employment Equity Act) including aboriginal peoples, persons with disabilities, members of visible minorities and potentially others.

Even though Bill C-25 has received Royal Assent, the provisions will only come into force once the corresponding regulations have been adopted. The corresponding regulations are in draft form and are expected to be finalized approximately 18-24 months from the date of receiving Royal Assent meaning that CBCA corporations will likely not be required to comply with the diversity disclosure requirements until the 2020 or 2021 proxy season.

Issuers should continue to anticipate that their diversity disclosure will be reviewed and scrutinized by the OSC and CSA in 2019. Despite the focus on increasing gender diversity on boards and the mandatory disclosure requirements, the representation of women in boardrooms has increased only minimally. On September 27, 2018, the CSA published Multilateral Staff Notice 58-310 – Report on Fourth Staff Review of Disclosure Regarding Women on Boards and in Executive Officer Positions (the "Gender Diversity Review"), which reviewed TSX-listed issuers' compliance with the gender diversity disclosure requirements under NI 58-101. This was the fourth annual review conducted by the CSA on this issue and, similar to the third annual review discussed in our prior update, the Gender Diversity Review revealed that there again has been an increase in the percentage of women on corporate boards this past year, but this increase has been relatively modest. Of the 648 TSX-listed issuers reviewed by the CSA, only 66 percent had at least one woman on their board as compared to 61 percent last year. In total, women only occupied 15 percent of all board seats of these issuers as compared to 14 percent last year.

In keeping with the focus of increasing gender diversity on boards, ISS and Glass Lewis have further revised their gender diversity policies. ISS has expanded its gender diversity policy to not only apply to S&P/TSX Composite Index companies but also to apply to all "widely held" TSX-listed companies, being other TSX-listed companies designated as such by ISS based on the number of ISS clients holding securities in the company. ISS generally will recommend a "withhold" vote for the chair of the nominating committee or the equivalent committee (or the chair of the board if no such individual or committee has been identified) if a company has not adopted a formal written gender diversity policy and no female directors serve on its board. Comparatively, Glass Lewis generally will recommend a "withhold" vote if a company does not have at least one woman on the board but may also recommend a vote "against" the chair of the nominating committee if the board has not adopted a formal written diversity policy. However, these recommendations may be limited to issuers in the S&P/TSX Composite Index and may not apply if boards have provided a sufficient rationale for not having any female directors or have disclosed a plan to address this issue.

Majority Voting

Bill C-25 will also result in certain amendments to the majority voting regime for public CBCA companies not already listed on the TSX. As a result of the Amendments, rather than giving shareholders the option to vote "for" or to "withhold" their vote in director elections, shareholders would have the option to vote "for" or "against" a director nominee in director elections. Pursuant to the Amendments, if a director nominee fails to receive more "for" votes than "against" votes, he or she will not be elected and will be ineligible to be appointed to any vacancies on the board before the next meeting of shareholders, which is consistent with the TSX Company Manual requirements. To help mitigate business disruption while an issuer is seeking a replacement, the Amendments provide a 90-day grace period for the incumbent director during which he or she can continue to serve until replaced. Once again, even though Bill C-25 has received Royal Assent, these provisions can only come into force once the corresponding regulations have been adopted meaning that CBCA corporations will likely not be required to comply with the majority voting requirements until the 2020 or 2021 proxy season.

On this issue, Glass Lewis believes that once a director nominee fails to obtain the majority of votes cast at a meeting, there should be no further actions needed by the board or committees to have the nominee removed from the board.

Environmental and Social Risk Oversight

Regulators and investors are increasingly focused on how issuers are overseeing environmental and social issues and are seeking enhanced disclosure on environmental, social and governance matters. Issuers should anticipate increased scrutiny and review by the OSC and CSA of their environmental and social disclosure in the 2019 proxy season. Both Glass Lewis and ISS have amended their respective voting recommendations relating to social and environmental matters for the 2019 proxy season.

Glass Lewis believes that companies should have in place appropriate board-level oversight of material risks (including those that are social or environmental in nature) to ensure the company is adequately mitigating such risks and capitalizing on related opportunities. Consequently, where it is clear that environmental or social risks have not properly been managed or mitigated to the detriment, or potential detriment, of shareholder value, Glass Lewis may consider recommending a vote "against" members of the board who are responsible for oversight of environmental and social risks. If there is an absence of explicit board oversight, Glass Lewis may recommend a vote "against" members of the audit committee or any other committee responsible for risk oversight. However, in making these determinations, Glass Lewis will review the situation on a case-by-case basis looking at its effect on shareholder value and any response made or corrective action taken by the company.

In determining whether a shareholder proposal will protect or enhance shareholder value, ISS will consider certain prescribed factors such as: whether the environmental or social issues presented should be more appropriately dealt with through government regulation or legislation; whether the company has already appropriately responded to the issues raised; whether the proposal is unduly burdensome on the company; and whether there are significant controversies, fines, penalties or litigation associated with the company's environmental or social practices. ISS will review shareholder proposals and continue to make voting recommendations on a case-by-case basis.

Virtual-Only Shareholder Meetings

As noted in our previous update, virtual shareholder meetings are slowly becoming more popular as technology can enable more shareholders to participate in shareholder meetings. Pursuant to Glass Lewis' policy regarding virtual-only shareholder meetings, Glass Lewis may recommend a vote "against" members of the governance committee where the board is planning to hold a virtual-only shareholder meeting if the company does not provide adequate disclosure confirming that shareholders will be given the same rights and opportunities to participate as they would at an in-person meeting. Examples of adequate disclosure include addressing the ability of shareholders to ask questions during the meeting and the procedures, if any, for posting appropriate questions received during the meeting, as well as addressing technical and logistical issues related to accessing the virtual meeting and procedures for accessing technical support.

Executive Compensation

With respect to executive compensation, Glass Lewis has expanded its policy in the following areas: (i) contractual payments and arrangements; (ii) grants of front-loaded awards; and (iii) recoupment or "clawback" provisions.

  1. In terms of contractual payments and arrangements, Glass Lewis has indicated that there should be clear disclosure and a meaningful explanation of the payments made and the process by which the amounts were reached; however, excessive sign-on awards may support or drive a negative recommendation. In its expanded policy, Glass Lewis stated that it would consider Canadian market practice and the size and design of entitlements when evaluating severance and sign-on arrangements, but multiyear guarantees for a minimum payout level under an incentive arrangement may drive "against" recommendations.
  2. For front-loaded awards, Glass Lewis has cautioned shareholders about a company's choice to award a large grant that is intended to serve as compensation for multiple years rather than granting cash and equity awards annually due to the risk that these front-loaded awards may preclude improvements or changes reflective of evolving business strategies. Consequently, Glass Lewis will consider the rationale, quantum and design of the grants and will expect a company's commitment not to grant additional awards for a defined period of time.
  3. With respect to clawback provisions, Glass Lewis is supportive of clawback provisions in order to encourage executives and senior management to take a more comprehensive view of risks when making business decisions and has noted it is becoming more focused on the specific terms of an issuer's recoupment policy. While the terms of an issuer's recoupment policy will not directly affect Glass Lewis' recommendations, including an appropriately robust policy will influence the overall appearance of a company's compensation program.

As discussed in our prior update, the practice of "say-on-pay" or granting shareholders advisory votes on executive compensation programs is said to enhance board accountability and transparency by linking executive compensation to issuer performance and by more closely aligning the interests of executives to those of the issuer. Approximately 180 companies, as compared to 160 last year, have voluntarily adopted this practice. Both ISS and Glass Lewis generally support this practice and believe each company should design and apply specific compensation policies and practices that are appropriate to the circumstances of the company. However, ISS and Glass Lewis will recommend a vote "against" a say-on-pay proposal if specific policies and practices fail to demonstrate a link between compensation and performance or in instances where there is evidence of a pattern of poor pay-for-performance practices, there is unclear or questionable disclosure regarding the overall compensation structure, or the board exhibits a significant level of poor communication and responsiveness to shareholders. For more information regarding the say-on-pay mechanism, please see our prior update.

Director Commitments

In order to effectively perform his or her duties, a director must be able to devote sufficient time and energy to the affairs of the board of an issuer. As such, both Glass Lewis and ISS are mindful as to whether an individual director is "overboarded" by serving on too many public company boards. Glass Lewis did not make any changes to its existing policy regarding director commitments and reconfirmed that it will generally recommend a vote "against" an individual director nominee if he or she serves on more than two public company boards in the case of an executive officer and, in all other cases, if he or she serves on more than five public company boards.

As anticipated, ISS has revised its overboarding guidelines for directors of Canadian issuers. An individual director nominee will be considered to be "overboarded", and ISS will generally issue a recommendation to "withhold" a vote, if such individual is a Chief Executive Officer of a public company who serves on the boards of more than two public companies besides his or her own or where the individual is not a Chief Executive Officer but sits on more than five public boards. As mentioned in our prior update, ISS' requirement that within the previous year a director must have also attended less than 75 percent of his or her board or committee meetings without a valid reason to be classified as "overboarded" has been removed.

Board Skills

In order to permit a meaningful assessment of a board, Glass Lewis believes issuers should disclose sufficient information relating to a board's skills and competencies. From 2019, Glass Lewis' analysis of director elections will include board skills matrices for S&P/TSX 60 Index companies to assess such competencies and identify any potential skills gaps.

Ratification of Auditor

To consider auditor ratification proposals, Glass Lewis codified additional factors it will consider including the auditor's tenure, a pattern of inaccurate audits and any ongoing litigation or significant controversies that call into question an auditor's effectiveness. Glass Lewis stated that in limited cases, these factors may contribute to a recommendation "against" auditor ratification.

Director and Officer Indemnification

Glass Lewis did not change its current policy towards director and officer indemnification and maintains its position that directors and officers should be held to the highest standard when carrying out their duties; however, in its 2019 policy, its approach to analyzing indemnification provisions for directors and officers was clarified. Accordingly, Glass Lewis found a reasonable degree of protection to allow for measured risk-taking is in the best interests of shareholders and, as such, it is appropriate for a company to provide indemnification and/or enroll in liability insurance to cover its directors and officers, provided that the terms of such agreements are reasonable.

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.

Patricia Good
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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