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.
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