Last week, Glass Lewis & Co. (Glass Lewis), a top governance analysis and proxy voting firm, released its 2016 proxy season guidelines for Canada and the United States, as well as its guidelines for evaluating shareholder initiatives.
Here, we summarize what’s new in Glass Lewis’ 2016 Canada Policy Guidelines (the Guidelines) for the upcoming 2016 proxy season:
- Dual-listed Companies – when making recommendations in relation to companies listed on exchanges in more than one country, Glass Lewis will consider the location of the company’s primary exchange listing, its corporate governance and other features to determine which jurisdiction’s policy guidelines will be the most relevant.
- Environmental/Social Risk Oversight – Glass Lewis will suggest voting against any director who was responsible for overseeing environmental/social risks but failed to identify and manage that risk to the detriment of shareholder value.
- Proxy Access – Glass Lewis continues to support shareholder rights to nominate director candidates to the management’s proxy. In evaluating shareholder proposals that request such proxy access, Glass Lewis will consider the minimum ownership and holding thresholds which allow shareholders to nominate directors and the company’s size, performance and responsiveness to shareholders.
- Exclusive Forum Provisions – Glass Lewis will generally recommend voting against charter or bylaw provisions that include provisions that place limits on a shareholder’s choice of legal venue. Glass Lewis’ view is that such provisions are contrary to shareholders’ best interests because they could operate to discourage shareholders from bringing claims. However, if a company with strong governance can show that such an exclusive forum provision directly benefits shareholders, and other jurisdictions present the potential for abuse of legal process, Glass Lewis may support an exclusive forum provision in those circumstances.
- Director Overboarding – although Glass Lewis will continue to recommend voting against executive directors who serve on three boards and non-executive directors who serve on six boards, the Guidelines note that director commitments continue to be a concern. Starting in 2017, executive directors and non-executive directors will be scrutinized if they serve on more than two and five boards, respectively.
- TSX-V – Audit Committee Over-Commitment – although Glass Lewis recommends voting against audit committee members who sit on excessive public company audit committees, the Guidelines have relaxed the threshold for audit committee members of companies listed on the TSX Venture Exchange. In such circumstances, four audit committees will be reasonable (five for directors with financial expertise).
- Nominating Committee Performance – the Guidelines suggest voting against the chair of the nominating committee when the company has performed poorly and where that result has been contributed to by the board’s failure to ensure that the board has directors with relevant experience.
- Director Quorum Requirements – the Guidelines suggest that the majority of directors be the requisite quorum when considering whether to adopt or amend a company’s charter or bylaws.
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