Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) have both released updates to their Canadian proxy voting recommendation guidelines for the 2018 proxy season.

The following summary outlines the significant changes made by ISS (ISS Updates) and Glass Lewis  (Glass Lewis Updates) to their respective Canadian proxy advisory guidelines.


Definition of Independence.  ISS has updated its definitions relating to director independence.  Previously, ISS categorized each director as an Inside Executive Director, Affiliated Outside Director or Independent Director.  The new categories are Executive Director, Non-Independent, Non-Executive Director (including former CEOs, controlling shareholders, Non-CEO executives, relatives of executives and persons with professional/financial relationships, among other things) or Independent Director.

Board Gender Diversity.  Beginning February 2019, ISS will generally recommend withholding votes for the chair of the nominating committee, or board chair if no nominating committee chair, where a company has not disclosed a formal written gender diversity policy and has no female directors.  ISS indicates that a written policy should include measurable goals or targets and clear commitments to increasing gender diversity within a reasonable period of time.  The ISS Updates also state that boilerplate or contradictory language may result in withhold recommendations.  The ISS policy will apply to all TSX companies, except companies first listed or graduated from the TSXV within two fiscal years or companies with four or fewer directors.

Director Over-boarding.  Currently, ISS policy is to recommend withholding votes for a director who is both “over-boarded” and attended less than 75% of the board and committee meetings in the prior year without a valid reason.  Beginning February 2019, regardless of attendance, ISS will generally recommend a withhold for any nominee who is over-boarded.  As a concession to the attendance criteria removal, ISS increased the number of boards that a director can serve on to five public company boards for non-CEO directors and, for directors who serve as a public company CEO, two public company boards in addition to the company at which they are CEO.  ISS will only recommend a withhold vote for outside directorships.

Majority Owned Companies and Majority Voting Policies.  The ISS Updates contain a few changes to the policies relating to majority owned companies and majority voting policies to conform with certain changes to the TSX policies with respect to those items.

Pay for Performance Evaluation.  ISS has updated its relative quantitative screen criteria to include the rankings of CEO total pay and company financial performance within a peer group, each measured over a three year period along with the previous two criteria, with details of mechanics of the updated methodology to be provided at a later date.


Board Gender Diversity.  Glass Lewis’ guidelines relating to gender diversity on a board of directors, where diversity is merely one of many considerations used when evaluating boards, will not change in 2018. However, starting in 2019, Glass Lewis will generally recommend a withhold vote for the chair of the nominating committee, and potentially other nominating committee members, where the board of directors has no female members or has not adopted a formal written gender diversity policy. Glass Lewis may not apply this policy if the company is outside of the S&P/TSX Composite index, provides a sufficient rationale for not having a female board member or discloses a plan to address the lack of diversity.

Dual-Class Share Structures.  The Glass Lewis Updates clarify that Glass Lewis views dual-class share structures, where a company has more than one class of shares which have the same economic rights but do not have the same voting rights, negatively. In particular, when evaluating corporate governance following an IPO or spin-off transaction within the previous year, Glass Lewis will consider a company’s dual-class share structure as a factor in determining if shareholder rights are being restricted indefinitely.

Board Responsiveness.  The Glass Lewis Updates indicate that boards should publically respond when over 20% of the votes cast by shareholders are against a company proposal, in particular with respect to director elections. Previously, Glass Lewis’ threshold was 25%. When there is a dual-class share structure, Glass Lewis expects a board to respond when a majority of the unaffiliated shareholders support a shareholder proposal or are against a company proposal.

Virtual Meetings.  Glass Lewis is supportive of meetings which allow shareholders to participate in an in-person shareholder meeting virtually but believes virtual-only meetings may limit shareholders’ ability to communicate with management. Accordingly, Glass Lewis will not make a recommendation solely based on a company’s use of a virtual-only meeting, but expects a company doing so to include disclosure in its proxy statement on how shareholders will be provided the same right and ability to participate at the meeting and will consider such disclosure when analyzing the corporate governance of a company. Beginning in 2019, Glass Lewis will generally recommend voting against governance committee members if such disclosure is not provided and the company is holding a virtual-only meeting.

Director Over-boarding.  Glass Lewis will generally recommend withholding votes from a director who is an executive officer of a public company and who sits on more than two public company boards.  This is in contrast to ISS, which considers directors who are public CEOs only and allows three public boards total.  Glass Lewis will consider the specific duties and responsibilities of a director in his or her position as executive officer in determining if an exception is warranted.  For directors who do not serve as executive officers of any public company, Glass Lewis will generally recommend a vote against any director that serves on more than five public company boards.

Proxy Access.  Glass Lewis generally views proxy access policies, which allow certain shareholders to include director nominees on management’s ballot, positively. If a company seeks shareholder approval to adopt US-style proxy access outside of the United States, Glass Lewis will review the regulatory landscape in the relevant country and, where it believes the relevant regulations provide adequate process access rights or prohibit the proposed provisions, Glass Lewis will recommend that shareholders vote against the proposal.