The EY Centre for Board Matters (EYC) recently published its annual report setting out key takeaways from 2016's proxy season in the United States. Canadian issuers should take note of the developments in the US as trends south of the border will impact the proxy landscape in Canada.

Investor Communications

One of the takeaways from the 2016 proxy season was that proxy circulars have developed into a tool for communication to investors. For more companies, this annual disclosure is being used to engage investors by communicating companies' goals and guiding principles.

Further, over the last few years, proxy disclosure has become more reader-friendly, incorporating tools such covering letters to shareholders, executive summaries, information in tabular form and enhanced formatting and graphics.

Environmental Considerations

Environmental and social concerns were a leading theme in shareholder proposal submissions in 2016. EYC reports that support for proposals on climate risk jumped from 7% in 2011 to 28% in 2016.

Successful environmental shareholder proposals have included a proposal for a company to issue a sustainability report with greenhouse gas emissions reduction goals and a proposal for a company to report on methane emissions. Environmental shareholder proposals this year also dealt with topics such as political spending and lobbying and labour and human rights practices.

Proxy Access

In a previous post, we discussed the trends in the US, and, to a lesser degree, in Canada, toward proxy access and the use of proxy access by-laws. The EYC report confirms that this topic continues to be a live issue for companies in 2016.

Proxy access allows shareholders to influence who governs a company by giving certain shareholders the right to nominate candidates to the board of directors. According to the report, a third of S&P 500 companies have adopted proxy access provisions over the last two years. This year almost 200 companies received proxy access shareholder proposals in advance of their annual meetings. Sixty per cent of such companies adopted proxy access by-laws prior to their shareholders' meetings.

Typically proxy access by-laws allow a shareholder (or a group of up to 20 shareholders) to make director nominations if it holds 3% of the outstanding shares of an issuer for at least 3 years. Such shareholders may nominate up to 20-25% of a board.

Key Lessons

EYC's takeaways from the 2016 proxy season may be valuable to issuers as they plan for their 2017 shareholder meetings. These takeaways, particularly the concerns expressed in shareholder proposals, may also help inform boards and management with respect to the strategic direction for their companies in the coming months.

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