As we discussed in our previous post, when a board finds itself in the crosshairs of an activist, establishing a special committee of unconflicted directors with clear marching orders from the board may allow for more thoughtful decision-making under pressure and lend credibility to the company’s response, particularly where management’s performance is under attack. 

As we discussed in our previous post, a board faced with the arrival of an activist on the scene can benefit from establishing a special committee of independent directors.  While a quick response time is one of the more obvious benefits of having a small group of directors lead the charge, a committee of

Much has been written about how companies can prepare for, and hopefully avoid, a confrontation with an activist shareholder.  While many boards are heeding the call for greater shareholder engagement and oversight of management, each year witnesses a significant number of activist campaigns and proxy contests.  So what is a board to do when

On March 31, 2015, the Canadian Securities Administrators issued their highly anticipated proposal to make the most significant changes to the Canadian take-over bid regime in years, one of the stated goals of which is to “rebalance the current dynamics” between bidders, boards and shareholders. The three principal changes would (i) mandate a 50% minimum

Fasken Martineau’s 2015 Canadian Hostile Take-Over Bid Study sets out the results of a ten-year empirical analysis of hostile take-over bids in Canada.

Key findings include: When initiating a public contest for control, a hostile bidder was successful more than half the time; however, a change of control was by no means inevitable, with targets

Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) have both released updates to their Canadian proxy voting recommendation guidelines for the 2015 proxy season. The items updated include those pertaining to the definition of independence, advance notice requirements, by-law amendments, private placements, treatment of majority voting policies, shareholder rights plans and advance notice policies.

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


Definition of Independence. The current guidelines recommend that votes be withheld for any “insider” or “affiliated outside director” where the board does not have a majority of independent directors or the board lacks a separate compensation or nominating committee.  The ISS Updates provide that an assessment as to independence will be made on a case-by-case basis.  ISS will deem a former CEO to be independent for the purposes of serving on the board or any key committee, including the audit committee, after a five year cooling off period unless certain factors indicate otherwise.  Specifically, the ISS Updates include a provision that deems any director nominee who has any material relationship with the issuer or with any one or more members of management of the issuer not to be independent.  A material relationship is defined as a relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on behalf of shareholders.  ISS will also recommend a withhold vote from any director who has served as the CEO of the issuer within the past five years and is a member of the audit or compensation committee.

Advance Notice Policies. With respect to Advance Notice Policies, ISS will generally recommend that investors withhold votes from individual directors, committee members, or the entire board as appropriate in situations where an Advance Notice Policy has been adopted by the board but has not been included on the voting agenda at the next shareholders’ meeting.  The rationale behind the recommendation is that certain problematic provisions included within these bylaws/policies could potentially interfere with a shareholder’s ability to nominate directors.  ISS is of the view that the ability for shareholders to put forward potential nominees is a fundamental right and should not be amended by management or the board without shareholders’ approval.  ISS considers the following features problematic:

  • for a notice of annual meeting given not less than 50 days prior to the meeting date, the notification timeframe within the advance notice requirement should allow shareholders the ability to provide notice of director nominations at any time not less than 30 days prior to the meeting.  The notification timeframe should not be subject to any maximum notice period for annual meetings.  If notice of annual meeting is given less than 50 days prior to the meeting date, a provision to require shareholder notice by close of business on the 10th day following first public announcement of the annual meeting is supportable.  In the case of a special meeting, a requirement that a nominating shareholder must provide notice by close of business on the 15th day following first public announcement of the special shareholders’ meeting is also acceptable;
  • the board’s inability to waive all sections of the advance notice policy, in its sole discretion;
    Continue Reading 2015 ISS and Glass Lewis Updates

The Canadian Securities Regulators (the CSA) have just agreed on major changes that are set to transform the take-over bid regime that has prevailed in Canada during the last three decades.  CSA Notice 62-306 (the CSA Proposal), issued on September 11, 2014, reconciles the competing proposals for poison pill reform initially introduced in

A follow up to our ground-breaking 2013 Canadian Proxy Contest Study, our 2014 Update sheds additional light on some of the issues and trends that we previously identified and raises a few new issues for further thought.  Among the highlights of last year’s Canadian market experience in proxy contests were the following:

  1. 2013 witnessed a

Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) have both released updates to their Canadian proxy voting recommendation guidelines for the 2014 proxy season. Glass Lewis released its updates on December 13, 2013 and ISS released its updates on November 21, 2013. The items updated include those pertaining to corporate governance standards, shareholder rights and executive compensation.

The following summary outlines the significant changes made by both ISS and Glass Lewis to their respective Canadian proxy advisory guidelines. These changes will apply to shareholder meetings held on or after February 1, 2014.

Corporate Governance

Director Over-boarding – TSX Companies

ISS will generally consider a director to be “over-boarded” when he or she is a CEO of a public company who sits on more than two additional outside public company boards, or where a director who is not a CEO of a public company sits on more than six public company boards. Based on feedback obtained, ISS has implemented a double-trigger overboarding policy pursuant to which it will generally recommend a withhold vote from an individual director nominee where the director is overboarded and has attended less than 75% of his or her respective board and committee meetings held within the past year without a valid reason.

Persistent Problematic Audit-Related Practices – TSX Companies

ISS will make case-by-case recommendations on members of an audit committee and, in some cases, the entire board if adverse accounting practices are identified and are determined to reach a “level of serious concern.” Some examples provided by ISS of such adverse accounting practices are: accounting fraud, misapplication of applicable accounting standards, or material weaknesses identified in the internal control process. ISS further notes that the analysis of the accounting practices should include a review of the severity, breadth, chronological sequence and duration, as well as efforts by the company to remediate the issue.

Director Independence – TSX and TSXV Companies
Continue Reading 2014 Updates to Canadian Proxy Advisory Guidelines

This is the second installment of a series of posts in which I will be critically examining a number of arguments made by proponents of the view that the time has come for Canadian securities regulators to “vacate the field” of poison pill regulation, leaving oversight of shareholder rights plans to the courts. Evaluating the soundness of their arguments has become a matter of potentially far-reaching consequence following a proposal to reform poison pill regulation put forth earlier this year by the Canadian securities regulators,[1] in which they effectively propose to adopt — in my view, inappropriately — the recommendation that they “vacate the field” of poison pill regulation. The views expressed in this post, as in all of my posts, are mine alone and should not be taken to represent the views of my partners.

In my last contribution to Timely Disclosure I highlighted the repeated failure by proponents of the “vacate the field” perspective on poison pill regulation to appreciate that Canadian securities regulators have a legitimate basis, firmly rooted in their statutory mandates of investor protection and capital market fairness and efficiency, and quite independent of any basis the courts may have, for regulating poison pills. Their oversight in this regard has spawned a confused belief that, in applying the defensive tactics policy to prevent poison pills from interfering indefinitely with the ability of target company shareholders to respond to an unsolicited takeover bid, Canadian securities regulators have been specifying the contents, and monitoring the observance, of the fiduciary duties of target company directors. Echoes of that confusion reverberate through a number of the arguments made by the “vacate the field” crowd.

How the confusion underpinning the “vacate the field” perspective undermines the argument that poison pill regulation by the Canadian securities regulators is ultra vires

The most straight-forward version of the “vacate the field” argument, and the one that most obviously suffers from the confusion at issue, invites us to conclude, based upon little more than the observation (admittedly correct, so far as it goes) that it is the proper function of courts to interpret and enforce rights and duties that arise under corporate law, that the regulation of poison pills by Canadian securities regulators is, ipso facto, ultra vires and places a “thumb on the scale”[2] of poison pill regulation, generating (perverse) adjudicative outcomes that depart from those one might expect were poison pill regulation left to the courts (as it is in the United States).
Continue Reading Give to Caesar what is due to Caesar II: On the supposed inconsistency between corporate law and poison pill regulation by the Canadian Securities Regulators