Towards the end of last year, Glass, Lewis & Co., LLC (Glass Lewis), a leading governance and proxy voting firm, released its 2017 Proxy Paper Guidelines for Canada (the Guidelines) for the upcoming 2017 proxy season. Although the Guidelines contain changes compared to the guidelines released by Glass Lewis in 2016, most were foreshadowed in the 2016 guidelines so should come as no surprise. The key changes are detailed below.
Director Overboarding
When making recommendations in relation to directors, Glass Lewis will generally recommend voting against (a) a director who is an executive of any public company and serves on more than two boards of public companies; and (b) any director who serves on more than five boards of public companies. If the above thresholds are exceeded, before making its recommendation, Glass Lewis will consider the potential director’s board duties (including committees) at the other companies, attendance records and involvement on boards of private companies, as well as the size and location of the companies where he/she serves. For directors who are overboarded, Glass Lewis will not recommend against these directors serving at the company where they also serve as an executive. The rationale here is that executives will prioritize their attention to their executive duties over commitments to other, external public boards.
The same standard is relaxed with respect to TSX Venture Exchange companies and a case-by-case evaluation is applied to directors who serve for boards that are listed on both the TSX and TSX Venture Exchange.
Shareholder Rights Plans
Previously, Glass Lewis did not support plans that required take-over bids to remain open for greater than 90 days. However, in a direct response to the updated take-over bid rules established in Multilateral Instrument 62-104 and National Instrument 62-203, Glass Lewis will now support plans that require offers to be open for a maximum period of 105 days.
Say-On-Pay Proposals
Although advisory votes regarding executive compensation are not mandatory in Canada, where a company does conduct one, Glass Lewis may recommend voting against members of the compensation committee if no action is undertaken after the company fails to obtain majority approval on a say-on-pay proposal.
Equity Compensation Plans
When making a recommendation, Glass Lewis will not support full value award plans (such as restricted share plans, deferred share plans, share award plans or incentive compensation plans) that allow for a company to issue a fixed percentage of its outstanding shares above a rolling maximum of 5%.
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The author would like to thank Robert Corbeil, articling student, for his assistance in preparing this legal update.
