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.

ISS

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.


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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.

ISS

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;
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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
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