RiskMetrics Group ("RMG"), a major institutional
shareholder advisory group, has changed its policy concerning the
election of directors to the boards of Canadian public issuers. In
an open letter to all TSX-listed issuers, RMG urged the adoption of
voting for directors on an individual basis (rather than on a slate
basis) and indicated that starting next February it would recommend
that its institutional clients withhold votes on all slates.
Canadian boards have historically been elected by slate, meaning
that shareholders vote for the directors who are up for election
together as a group, rather than for each director individually.
Shareholders have two options: they can either vote for the entire
slate or they can withhold their votes. Recently, however, an
increasing number of issuers have adopted individual voting, where
shareholders can vote for or withhold in respect of each director
individually. According to RMG, as of December, 2008 36% of
S&P/TSX Composite Index companies had slate ballots (although
by June of 2009 the number had apparently declined to 25%).
This trend towards individual voting dovetails with the Canadian
Coalition for Good Governance's Corporate Governance
Guidelines for Building High Performance Boards, which sets as
one of its minimum standards that shareholders should be allowed to
vote for individual directors. Further, a similar trend in favour
of shareholder involvement in electing boards is visible in the
United States, where the Securities and Exchange Commission has
proposed new rules that would allow shareholders holding 1%, 3% or
5% of shares, depending on the size of the company, to nominate
their own directors to be included in a company's proxy
RMG, like other supporters of voting for directors on an
individual basis, argues that by insulating individual directors in
a larger, indivisible group, slate ballots protect those directors
from shareholder action (and thus from proper accountability) and
prevent institutional shareholders from effectively implementing
RMG's open letter is further evidence of the enduring trend
in favour of activist shareholder involvement and increasing
governance-oriented reform. Issuers whose directors are elected on
a slate basis should be aware of RMG's new policy for the 2010
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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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