Trends and predictions in Canadian proxy contests

Kingsdale Shareholder Services (Kingsdale) recently released its annual Proxy Season Review. As in previous years, the report discusses trends observed in 2016 and offers predictions of what we might see looking forward. The report also outlines strategic recommendations for Canadian companies.

Trends from 2016

Contested Activity “Back to Earth”: After a record setting year in 2015, Kingsdale reports that activist activity has returned to its pre-2015 levels, which had been fairly consistent for about five years. Kingsdale attributes this reduction to strong share performance, increased adoption of defence tactics by vulnerable companies, and political and economic uncertainty, which led to “market prudence and skepticism.” Where activist situations did occur, 2016 was once again a strong year for management. In the bigger picture, this is the third consecutive year that activist success has trended downward, which may signal that companies are becoming better prepared for activist activity.

Rise of Minority Slates: Where board seats are sought, an increasing number of activists are focusing on minority slates (or “short slates”), seeking representation as opposed to control. Interestingly, the use of minority slates has become increasingly correlated to activist wins: in 2016, activists using minority slates won an impressive 80% of battles where board seats were sought, compared to a mere 11% for activists using a majority slate. The continued trend toward minority slates may be attributable to a few factors, including the increased likelihood of an activist victory. When activists seek a small representation on the Board rather than a full takeover, management may be willing to either expand the board or identify a few expendable “sacrificial lambs” among the incumbents.

The “Insider Activist”: Former CEOs, directors, and founders are increasingly targeting companies that they once led. This activity brings with it not only personal “grudge matches”, but also unique and sometimes unanticipated risks. Due to the depth of knowledge that former insiders may possess, including knowledge of non-public information, these activists may be able to refute arguments deployed by the board in its defense more easily than an outside activist. Further, insider activists may be able to exploit internal incongruities among management in an attempt to divide a board.

Looking Forward

The Rise of the Reluctavist: A “reluctavist” is a party who “begrudgingly adopts activist tactics when all other avenues are exhausted.” The report indicates that we may begin to see traditionally passive institutional investors adopting activist-like tactics, instead of simply “voting with their feet” by selling their position.

The Arrival of Short-Seller Activists: An emerging trend that combines short-selling with an activist approach may present unique challenges to Canadian companies. Short-selling activists endeavour to make money by shining a spotlight on the alleged overvaluation of a company. The unique challenge for Canadian companies arises from a number of factors, including an asymmetrical market that reacts disproportionately to bad news and a lack of visibility regarding short positions in a company. Kingsdale suggests that the most effective responses to short-selling activists tread a fine line between engaging with the activist, but not appearing overly defensive.


The report offers three key recommendations for Canadian companies looking forward:

  1. Define the Activists from the “Ankle-biters”:The current activism climate features many “pretenders”; companies should become adept at quickly determining the credibility of any activist.
  1. Pay Attention to Retail Investors: Strong ongoing turnout of retail holders – the “moms and pops” – can be the difference in a contested situation.
  1. Engage with Shareholders at the Board Level: Regularly engaging with shareholders can earn early support in a proxy contest and help the board understand shareholders’ expectations.

The author would like to thank Geoff Mens, articling student, for his assistance in preparing this legal update.

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Changes to the OBCA under Bill 218, The Burden Reduction Act, 2016

If passed, Bill 218, Burden Reduction Act, 2016 (the Bill) will make some small but welcome changes to corporate governance requirements for companies incorporated in Ontario. The Bill passed first reading in the Ontario legislature on June 8, 2016 and still has some steps to go before becoming law. However, it is hoped that the Bill will be passed during the legislative session which began earlier this month.

Board Meetings

Currently, the Business Corporations Act (Ontario) (the OBCA) requires board meetings to be held at a corporation’s registered office. In the alternative, and only if allowed by a corporation’s by-laws, a board meeting can be held at another location, provided that the majority of board meetings are held within Canada. The Bill repeals these rules and replaces them with a provision which, subject to a corporation’s articles and by-laws, removes restrictions on the locations where a board meeting may take place.

As well, the Bill removes the requirement for two-fifths of directors to be present at board meetings. Subject to a corporation’s own articles and by-laws, the board meeting quorum requirement will be satisfied so long as a majority of directors are present or the minimum number of directors required by the corporation’s articles is present.

Shareholder Meetings and Addresses

The quorum requirement for shareholders’ meetings is also clarified by the Bill. The Bill states that a quorum for shareholder meetings is met so long as a majority of shares entitled to vote at the meeting are present in person or by proxy (and irrespective of the number of persons actually present at the meeting).

Finally, the Bill also amends the OBCA by requiring a corporation to include e-mail addresses in share registers if the corporation is provided with a shareholder e-mail address.

Further details about the Bill’s legislative progress found here.

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Evolving tactical defenses by target issuers: Private placements in response to a hostile bid

The Ontario and British Columbia Securities Commissions (the Commissions) issued orders on July 22, 2016 allowing junior B.C.-based miner, Dolly Varden Silver Corp. (Dolly Varden), the target of a hostile takeover bid from Idaho-based Hecla Mining Co. (Hecla), to proceed with a proposed private placement, which was announced shortly after Hecla launched its hostile bid. While the Commissions have not yet published written reasons for the orders, their decision is notable in Canada’s new takeover bid regime.

As discussed in a previous post, Canadian securities regulators enacted harmonized amendments to Canada’s takeover bid regime earlier this year under Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids, including the requirement for a bid to remain open for a minimum deposit period of 105 days, which in practice has reduced the effectiveness of shareholders’ rights plans as a defensive measure for targets. The Dolly Varden and Hecla case was thought by many to be a test case as to whether private placements would become the new “poison pill”, with issuers using a private placement as a tactical mechanism to make a hostile bid more difficult and more expensive for an acquirer.

On June 27, 2016, Hecla announced its intention to acquire all of the outstanding shares of Dolly Varden not already owned by it and formally commenced its bid on July 8, 2016 with the filing of its offer and bid circular. Shortly after the Hecla bid was announced, Dolly Varden announced on July 5, 2016 a proposed private placement financing to raise up to $6 million (the Private Placement). On July 8 and 14, 2016, Hecla filed applications with the British Columbia Securities Commission (BCSC) and the Ontario Securities Commission, respectively, seeking an order to cease trading the Private Placement. On July 14, 2016 Dolly Varden signed an undertaking to the BCSC that it would not issue any securities under the Private Placement until the BCSC had rendered its decision. A joint hearing on the applications was held with the Commissions over two days on July 20 and 21, 2016.

The orders issued by the Commissions dismissed Hecla’s applications and in doing so, allowed Dolly Varden to proceed with the Private Placement, with the effect of diluting the target’s share capital and making it more costly for Hecla to complete its bid. Hecla had previously announced when filing its offer and bid circular that it would not proceed with the bid if the private placement was completed and accordingly withdrew its bid shortly after the orders were issued, on July 25, 2016.

Without detailed reasons from the Commissions, it is not yet known to what extent the Commissions will provide guidance on private placements in the context of hostile bids more generally. Acquirers and targets can expect that Canada’s regulators will evaluate so-called “tactical” private placements on a case by case basis, however an argument can be made that the Dolly Varden and Hecla case has, at the very least, given targets a signal they may proceed with caution in using the private placement as a tool in their defensive arsenal in Canada’s new takeover bid regime.

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Federal government proposes changes to corporate law: What it means for corporate governance and shareholder activism

On September 28, 2016, Canada’s federal government introduced a bill proposing amendments (the Amendments) to the Canada Business Corporations Act (the CBCA), among other acts. The Amendments include new requirements for electing directors, mandatory diversity disclosure, and changes to shareholder communications. These proposed changes, if enacted, will have significant effects on corporate governance and shareholder activism in Canada. Here are some of the key things issuers and investors will need to know.

 Election of directors

 The Amendments introduce several changes to the election of directors. They will require publicly traded corporations, with some prescribed exceptions, to:

  • hold annual elections for directors;
  • elect directors individually; and
  • use a majority voting standard for uncontested director elections (i.e. when the number of director candidates is the same as the number of director positions to be filled).

Annual and individual voting

These rules are similar to rules that are already in place for issuers listed on the Toronto Stock Exchange (TSX), which were announced in October 2012 and February 2014. Though most Canadian companies already hold annual elections, the Amendments will formally preclude longer director terms beyond one year for CBCA companies. The declining practice of slate voting—where shareholders can vote only for slates of directors rather than individuals—will also be disallowed. Federally incorporated issuers listed on the TSX Venture Exchange (TSXV), which already requires annual elections and restricts slate voting, will now be explicitly barred from slate voting.

Majority voting for directors

The majority voting requirement addresses a controversial issue that arises from the way Canadian directors are now elected. In Canada, corporate statutes provide for the election of directors by plurality voting, meaning that shareholders can either vote for a director or “withhold” their vote. Without a majority voting standard, a director can be elected by just one vote, regardless of the number of votes withheld. This has fed significant concerns about “zombie directors,” appointed against the will of the majority of shareholders. Director majority voting requires that in uncontested elections, a director be elected by the majority of votes cast.

The majority voting requirements will have several  practical implications. One is to address a perceived weakness in the TSX majority voting rule. The TSX rule, which applies to all issuers other than majority-controlled issuers, requires issuers to have a majority voting policy stipulating that a director who does not receive a majority of votes will tender his or her resignation within 90 days of the vote. However, the TSX rule also gives the board the power to decide whether or not to accept the resignation, and allows the board to refuse the resignation if there are “exceptional circumstances.” In practice, this provision has frequently resulted in defeated directors remaining on the board. The Amendments do not allow this discretion and state that “each candidate is elected only if the number of votes cast in their favour represents a majority of the votes cast for and against them.” In addition, federally incorporated issuers listed on the TSXV will now be required to comply with majority voting.

It remains to be seen whether the Amendments will lend further impetus to ongoing provincial law reform efforts along similar lines.

 Mandatory diversity disclosure

 The Amendments will also require publicly traded companies to disclose information with respect to the diversity of directors and senior management. While the precise details of these requirements remain to be prescribed by regulation, the government has indicated that “distributing CBCA corporations will be required to identify the gender composition of their boards and senior management and to disclose their diversity policies or explain why none are in place.”

As we have noted in a number of previous posts on the Special Situations Blog, investors and other stakeholders are increasingly demanding that boards and executive teams be diverse.  In recent years, securities regulators have tried to quicken the pace of change by adopting new measures in the face of stubborn statistics. National Instrument 58-101 Disclosure of Corporate Governance Practices contains similar “comply or explain” requirements with respect to gender, which as a practical matter now apply to all TSX-listed issuers.

The Amendments will give further force to the expectation that issuers consider gender and other forms of diversity in determining whom to nominate to their boards. Issuers without diverse boards and senior management may face an elevated prospect of “withhold” votes for their nominees, as well as criticism from the media and shareholder activists.

 Shareholder communications

The Amendments will also simplify shareholder communications. For the first time, they will allow CBCA companies to take full advantage of notice-and-access.  In 2012, the Canadian Securities Administrators adopted rules that allow companies to provide a notice of the meeting either physically, or electronically if the shareholder consents.  The notice informs shareholders (among other things) that proxy materials have been posted electronically and provides instructions on how to obtain them. Under the present iteration of the CBCA, issuers face several barriers to full implementation of notice-and-access. The Amendments will also simplify the timeframes for submitting shareholder proposals to CBCA companies by setting prescribed periods.

We expect that the Amendments will increase the attraction of using notice-and-access for CBCA companies, reducing costs for issuers. We also expect that they will simplify and enhance participation in shareholder democracy.


If you have questions about any of these matters, please contact a member of our Special Situations team.

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The authors would like to thank Joe Bricker, articling student, for his assistance in preparing this legal update.

Non-standard accounting measures: The media, regulators, and shareholders zero in

Non-standard accounting practices have been gaining in popularity among Canadian publicly traded companies. Issuers that rely solely on standard accounting metrics now make up a small minority of the companies listed in the S&P 500 and S&P/TSX 60.

Many issuers believe that non-standard measures are a better reflection of performance than Generally Accepted Accounting Principles (“GAAP”), which for Canadian issuers typically conform to International Financial Reporting Standards (“IFRS”). Yet there are growing concerns that non-GAAP measures are being used to inflate earnings and present a more positive picture of financial performance. These concerns have been expressed in the media, including in recent articles in the Wall Street Journal and the Globe and Mail and, even more significantly, have received and are expected to continue to receive increased regulatory attention.  Shareholders and other stakeholders of public companies are paying attention too. In the past year, Norton Rose Fulbright’s Special Situations team has been consulted by a number of investors and other parties contemplating launching activist campaigns that focus specifically on an issuer’s accounting practices.

In light of these developments, issuers should ensure that their accounting and related disclosure practices align with the expectations and requirements of investors and regulators.

i. Criticisms of non-standard accounting metrics

The most frequently noted concern with non-GAAP measures is that they may appear to inflate earnings artificially. For some Canadian issuers, the result is a large gap between adjusted and non-adjusted earnings. An additional concern is that because these measures are non-standard, it may be difficult for investors to understand how they are calculated. This means they may also vary from company to company, rendering comparisons difficult.

Regulators are following these developments closely. In a June speech, SEC Chair Mary Jo White said that “[i]n too many cases, the non-GAAP information, which is meant to supplement the GAAP information, has become the key message to investors, crowding out and effectively supplanting the GAAP presentation.” The Canadian Securities Administrators’ (“CSA”) Staff Notice 52-306 (Revised) (“Staff Notice 52-306”), published in January of this year, states that “Staff is concerned that investors may be confused or even misled by non-GAAP financial measures.” In a 2013 review of compliance by reporting issuers with the prior iteration of the Staff Notice, the Ontario Securities Commission (“OSC”) described the results of its review as “disappointing.”

ii. Legal considerations for Canadian Reporting Issuers

There remain valid reasons why issuers may choose to disclose non-GAAP measures. Staff Notice 52-306 specifies the principles that should guide issuers who wish to do so, which principles are in addition to other general requirements relating to accounting principles and financial statement disclosure under Canadian securities laws.  To summarize, issuers should:

  • State explicitly that the non-GAAP financial measure does not have any standardized meaning under the issuer’s GAAP and therefore may not be comparable to similar measures presented by other issuers;
  • Name the non-GAAP financial measure in a way that distinguishes it from disclosure items specified, defined or determined under an issuer’s GAAP and in a way that is not misleading. For example, in presenting EBITDA as a non-GAAP financial measure, it would be misleading to exclude amounts for items other than interest, taxes, depreciation and amortization.
  • Explain why the non-GAAP financial measure provides useful information to investors and the purposes, if any, for which management uses the non-GAAP financial measure;
  • Present with equal or greater prominence to that of the non-GAAP financial measure, the most directly comparable measure specified, defined or determined under the issuer’s GAAP presented in its financial statements;
  • Provide a clear quantitative reconciliation from the non-GAAP financial measure to the most directly comparable measure specified, defined or determined under the issuer’s GAAP and presented in its financial statements, referencing to the reconciliation when the non-GAAP financial measure first appears in the document, or in the case of content on a website, in a manner that meets this objective (for example, by providing a link to the reconciliation);
  • Ensure that the non-GAAP measure does not describe adjustments as non-recurring, infrequent or unusual when a similar loss or gain is reasonably likely to recur in the next two years, or has occurred in the past two years; and
  • Present the non-GAAP financial measure on a consistent basis from period to period; however, where an issuer changes the composition of the non-GAAP financial measure, explain the reason for the change and restate any comparative period presented.

In Staff Notice 52-306, the CSA “cautions issuers that regulatory action may be taken if an issuer discloses information in a manner considered misleading and therefore potentially harmful to the public interest.” We expect an increase in regulatory reviews and enforcement.

Use of non-GAAP measures in a manner that leaves a misleading impression of the issuer’s true financial position may also expose an issuer to class action risk. Provincial securities legislation contains statutory causes of action for misrepresentations in offering documents and continuous disclosure.

As scrutiny on this issue sharpens, Canadian public companies should carefully review their accounting and related disclosure practices to ensure adequate transparency with respect to non-GAAP metrics. This is better done proactively than at the behest of a regulator, in the teeth of an activist attack, or in the glare of media scrutiny.


If you have questions about anything discussed in this post, please contact a member of our Special Situations team.

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Norton Rose Fulbright’s Canadian Special Situations Team ranks in the top 10 of global legal advisors for shareholder activist campaigns

Global law firm Norton Rose Fulbright’s Canadian Special Situations Team has ranked in the top 10 of global legal advisors advising both companies and activists in shareholder activist campaigns and is the only Canadian firm to be represented on the global ranking. The Special Situations Team also advised on the only Canadian campaign to rank in the top 15 global campaigns by target market cap, ranking 5th.

To view the Global Shareholder Activism Scorecard, please click here.

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Corporate governance principles: The start of a new conversation?

On July 21 2016, the CEOs of thirteen high-profile public companies, asset managers and pension and mutual funds released the Commonsense Principles of Corporate Governance. The signatories include some of the most respected names in American business and were headlined by Warren Buffett of Berkshire Hathaway Inc., Mary Barra of General Motors, Larry Fink of Blackrock, Jeffrey Immelt of General Electric, and Bill McNabb of Vanguard. Their open letter states that the purpose of the group was to reach consensus on what “good corporate governance” means in the real world, and that while they recognize that there is significant variation among public companies, they nevertheless intend the principles to serve as “a starting point” for discussion. The principles themselves can be found here, and include among others:

  • Shareholder rights. Dual class voting “is not a best practice,” and a company should consider having specific sunset provisions based upon time or a triggering event.
  • Composition of boards of directors. A subset of directors should have professional experience directly related to the company’s business and directors candidates should be drawn from a rigorously diverse pool.  Boards should carefully consider a director’s service on multiple boards and other commitments to ensure directors can commit substantial time to their roles.
  • Director compensation and director evaluations. Companies should consider paying a substantial portion, as much as 50% or more, of director compensation in equity and require directors to retain a significant portion for the duration of their tenures.  Boards should have robust evaluations and “the fortitude to replace ineffective directors.”
  • Board leadership. A board’s independent directors should decide on the leadership structure and if it decides to combine the chair and CEO roles, there should be a strong independent lead director.  The lead independent director’s roles may include guiding the board’s consideration of CEO compensation and the CEO succession planning process.
  • Board committees. Boards should consider periodic rotation of leadership roles such as committee chairs and the lead independent director.
  • Tenure and retirement age. The principles do not endorse mandatory retirement age or term limits. While board refreshment should always be considered, it should be “tempered with the understanding that age and experience often brings wisdom, judgment and knowledge.”

As might be expected, most of the principles are high level and address issues that have been common sense and conventional. Indeed, many of the practices have already been adopted by most large-cap companies or are already a requirement of stock exchange regulations, such as public reporting requirements or composing boards with complementary and diverse skill sets. That said, some of the principles reflect newer ideas like rotating committee chairs and lead directors and a few are controversial, such as putting limits on dual-class voting.

What is probably most notable about the principles is what they don’t address. As Glass Lewis’ Greg Waters has pointed out, none of the public company signatories themselves have an independent chairperson, which likely ensured that a recommendation for their appointment was not made. The principles similarly neglect a number of prominent issues that shareholders and management still seem to disagree about, including key anti-takeover defences such as poison pills, supermajority vote requirements and staggered boards.

Though the principles may not be particularly ground-breaking or prescriptive, to the extent they can initiate discussion and debate at the board and c-suite level, then they may well have some impact. The prominence of the companies who have signed on will make it harder for boards and companies to argue against the instituting of such core principles and practices, and may shift the burden of proof onto corporations that don’t comply. Moreover, turning one’s mind to sound corporate governance is the first step to developing a practice and culture of transparency, long-term growth and meaningful communication between shareholders and boards. Although every company will have its own way of applying governance principles to its own specific situation, the principles are broad enough to apply in some manner to most, if not all, corporations, regardless of size, industry, or public/private status.

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The author would like to thank Robert Corbeil, articling student, for hisassistance in preparing this legal update.

Activists increase their focus on smaller issuers

Shareholder activism is often associated with campaigns involving large, high-profile issuers. Yet as the Financial Times reports in a recent article, referencing global data from Activist Insight, there has been a slight upswing this year in activism against relatively small issuers.

The data show that from the start of year to the end of July, 61 “micro-cap” companies—that is, companies with market capitalizations ranging from USD $50m to USD $250m—have been targeted by activist funds. 56 micro-cap issuers were targeted over the same period in 2015. In contrast, activism against the largest issuers has experienced a slight slowdown, with 16 companies with market capitalizations over $10b being targeted, compared with 22 over the same period last year. According to the figures, activism against companies worth less than $50m has held steady.

As the article suggests, there are several possible reasons why smaller companies have been gaining increased activist attention. These include:

  • campaigns involving smaller issuers generally demand less financial wherewithal, which may prove especially enticing to smaller funds who are newer to activist investing
  • increased M&A opportunities when smaller companies are involved
  • the potentially increased ability of activists to add strategic value at smaller companies, who may not necessarily have access to the same kinds of legal, financial and strategic advice as larger companies

The article (paywalled) can be accessed here.

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The author would like to thank Joe Bricker, articling student, for his assistance in preparing this legal update.

Board diversity: the latest metrics and government measures

The diversity of boards has become a target of greater scrutiny. This scrutiny has come not only from activist investors seeking higher returns and better governance, but from governments and various interest groups outside the corporation. It has homed in on a variety of director characteristics, including length of tenure, age, gender, and visible minority status. This post begins by discussing some of the latest metrics on board diversity in Canada. It then looks at some of the recent measures governments and regulators have been taking to increase diversity in the boardroom.

Length of tenure

According to a Financial Times analysis, the average length of tenure of directors for the Canadian companies studied is just above 7.5 years. This is among the longest length of tenure for the countries represented in the data. While the United States has a longer average tenure, at roughly 8.5 years, most European countries have lower average tenures, with Norway, Finland and the Netherlands each averaging roughly 4.5 years.


A 2015 study by Spencer Stuart, which looked at 100 TSX-listed companies with revenues over $1 Billion, states that the average age of non-executive Canadian directors was 63 as of 2015 (this study was previously discussed on this blog, in a post by Jenny Yoo). There is also some evidence that age has been increasing. For the companies in the study, the average age of non-executive directors in 2010 was 61.


In 2015, 19.5% of Canadian directors at FP 500 companies were women, according to the Canadian Board Diversity Council’s (“CBDC”) 2015 Report Card survey. This represents a 2.4% increase over 2014. While the Financial Times analysis suggests Canada has a slightly higher percentage of female directors than the United States (roughly 15%), the figure is significantly behind that in several countries, such as France (roughly 37%) and the Netherlands (roughly 42%)—though both have quota systems.

Visible minority status

The CBDC states 7.3% of directors at FP 500 companies report belonging to a visible minority. A paper by Anita Anand and Vijay Jog has suggested that roughly 5.5% of TSX directors belong to visible minorities.

What next?

There is increasing evidence that governments and regulatory agencies are willing to intervene in the area of board diversity. In Ontario, 2014 saw the introduction of a “comply or explain policy” on gender diversity by the OSC. Ontario Premier Kathleen Wynne has also encouraged companies to appoint more women to their boards, stating that by the end of 2017, companies are encouraged to set a target of appointing 30% women to their boards and achieve it within 3 to 5 years of setting it. Attention towards these kinds of measures is not confined to Canada. SEC Chair Mary Jo White indicated in a recent speech that SEC staff will be recommending that the SEC require “more meaningful” diversity disclosure on board members and nominees in proxy statements.

All of this suggests that issuers should be aware of the sharpening focus on the composition of their boards and prepared to explain how board members are chosen.

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The author would like to thank Joe Bricker, articling student, for his assistance in preparing this legal update.

Majority voting and board diversity trends

As recently highlighted in the Harvard Law School Forum on Corporate Governance and Financial Regulation, a report (the Report) by Institutional Shareholder Services (ISS) found that majority voting practices and annual board elections, along with increases in board diversity, are the new norm.

The Report examined the public filings of Standard & Poor’s U.S. “Super 1,500” companies (S&P 1500)  comprised of the S&P 500, MidCap 400 and SmallCap 600 indices from the period of July 1, 2014 through June 30, 2015.

Majority Voting and Annual Elections

Majority voting is now the clear market standard amongst S&P 500 companies, with over 88 per cent of companies in the index having adopted this practice. While larger companies had initially led the way in adopting these “accountability enhancements”, the Report notes that SmallCap 600 and MidCap 400 companies are now adopting majority voting standards at a faster pace than their S&P counterparts had in 2015.

Annual elections have also increased in prevalence, with over 60 per cent of S&P 1500 companies holding annual elections.  The largest jump occurred last year with a rise from 60 to 64 per cent. Over 80% of S&P 500 companies now hold annual elections (and only 84 boards continue to hold staggered elections).

Board Diversity

As discussed in one of our earlier posts, diversity has been a top priority for boards. Advocates for board diversity contend that different backgrounds and perspectives will enhance a board’s effectiveness and will ultimately lead to an increase in diversity throughout the corporate hierarchy.

ISS’ Report indicates that there has been a market-wide increase in board diversity over the past five years. Ninety-eight per cent of S&P 500 boards have at least one female member while 79 per cent have at least one minority board member. While the Report notes that companies with larger market caps have higher levels of gender and ethnic diversity, 90 per cent of MidCap boards and 78 per cent of SmallCap boards have at least one female or minority director, and the numbers suggest that these numbers will continue on an upward trend.

Board accountability and composition continue to inhabit the public corporate governance dialogue. Companies would be prudent to turn their attention to, if they have not already done so, incorporating what ISS calls “the new normal”.

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The author would like to thank Shreya Tekriwal, summer student, for her assistance in preparing this legal update.