Topic: Compliance

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ISS includes Economic Value Added in its Compensation Reports

Institutional Shareholder Services (ISS) announced earlier this year that, in its 2019 proxy research reports, it will be displaying financial ratios derived from a base measure called Economic Value Added (EVA). The EVA ratios will initially be used for informational purposes only, meaning they will not factor in to say-on-pay voting recommendations or evaluations of compensation policies. Nevertheless, boards should understand EVA’s value as a means of assessing management performance, and how ISS intends to use the measure in its reports.

EVA is an estimate of a firm’s true economic profit, that is, its after-tax operating … Continue Reading

CEO Activism: A Double-Edged Sword?

In a recent study published on SSRN by the Rock Center for Corporate Governance at Stanford University, authors David F. Larcker, Stephen Miles, Brian Tayan and Kim Wright-Violich argue that CEO activism – the practice of CEOs taking public positions on environmental, social and political issues not directly related to their business – is a “double-edged sword”: CEOs who take public positions might build loyalty with employees, customers or constituents, but these same positions can inadvertently alienate important segments of those populations.

The authors – who aimed to better understand the implications of CEO activism by examining its prevalence, the … Continue Reading

Holding up the deal: the threat of “bumpitrage” to M&A

Considering the robust global M&A markets of the last few years, it is unsurprising that activist investors have increasingly sought to leverage these transactions for their own gain. To that end, shareholder activists have developed a variety of M&A-related strategies. Most commonly, they either seek to catalyze transactions by pressuring companies into a merger or acquisition, or to scupper deals that would otherwise have gone ahead. Another commonly-used strategy involves agitating for better deal terms. Often referred to as ‘bumpitrage’, the activist investor purchases shares in a company that is subject to a takeover bid, and then rallies other shareholders … Continue Reading

Changes coming to Canadian Business Corporations Act (CBCA)

Bill C-25 received Royal Assent on May 1, 2018. The bill will amend the CBCA by: reforming certain aspects of director elections; creating requirements for public companies to disclose officer and director diversity representation; and introducing the new Notice-and-Access Regime.

While some of the CBCA amendments have come into force, many of the amendments – including those described below – will come into force on a future date. As well, certain amendments must await changes to relevant regulations. The Federal Government has published the proposed regulatory amendments and is currently accepting comments from the public. It is projected that it … Continue Reading

The Gender Question: BC Securities Commission asks for comment on disclosure requirements with respect to board gender diversity

In late 2014, the Canadian Securities Administrators (CSA) published “comply or explain” rules regarding female representation in director and executive officer positions. The requirements were codified in National Instrument 58-101 (the Disclosure Requirements) and created a positive duty for issuers in participating jurisdictions to disclose the details of female representation, including issuers’ targets, policies, and mechanisms to address female representation in director and executive officer roles. Where issuers do not adopt such mechanisms or consider female representation, they are required to explain their reasons for not doing so. The Disclosure Requirements were adopted in all CSA jurisdictions … Continue Reading

TSX Adds New Website Disclosure Requirements

In October 2017, the TSX published updates under section 473 of the TSX Company Manual placing additional disclosure obligation requirements on non-exempted TSX-listed issuers.

These updates became effective on April 1, 2018.

The TSX’s updates mandate that each TSX-listed issuer (other than Non-Corporate Issuers, Eligible Interlisted Issuers and Eligible International Interlisted Issuers (as such terms are defined in the TSX Company Manual)) will be required to maintain a publicly accessible website. These issuers are also required to post constating documents (i.e. articles of incorporation or amalgamation and by-laws) as well as the following documents, if adopted:

  • any majority voting policy;
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Corporate Governance in the Cannabis Sector

Since the introduction of Bill C-45 to legalize the production, distribution and sale of cannabis for recreational use, the cannabis sector (the Sector) has been thriving. Despite many unknowns and uncertainties surrounding the Sector, investors appear unfazed as share prices continue to surge.

Some key features of the Sector

Even though Bill C-45 has not yet passed and has been the subject of some controversy, investor reticence appears to be at a minimum. However, mirroring the volatility of the cannabis market itself, the nature of these investors has changed. Whereas in the nascent stages of the Sector investors … Continue Reading

Best Practices for Board Oversight and Disclosure of Environmental and Social Issues

In a recent post, we discussed investors’ growing interest in environmental and social (E&S) governance. As a recent report published by the Canadian Coalition for Good Governance (CCGG) demonstrates, public company boards are no less attentive to growing shareholder interest in E&S issues. The Directors’ E&S Guidebook (Guidebook), which is the product of consultations with industry leaders in the management of E&S factors, provides practical insights and recommendations for effective board oversight and disclosure of E&S matters.

Companies have good cause to respond to investor interest in E&S matters. For some, past incidents … Continue Reading

Canadian Securities Administrators are seeking comments on soliciting dealer arrangements

The Canadian Securities Administrators (the “CSA”) have issued CSA Staff Notice 61-303 and Request for Comment – Soliciting Dealer Arrangements (the “Notice”) on the use of soliciting dealer arrangements. “Soliciting dealer arrangements” generally refer to agreements entered into between issuers and investment dealers under which the issuer agrees to pay to the dealers a fee for each security successfully solicited to tender to a bid in the case of a take-over bid, or to vote in favour of a matter requiring securityholder approval. In many cases, the payment of any fee is contingent on “success” and/or … Continue Reading

ISS releases 2018 Americas Proxy Voting Guidelines Updates

On November 16, 2017, Institutional Shareholder Services (ISS) released its 2018 Americas Proxy Voting Guidelines Updates (the Updates). These updates implement changes in a number of areas, with the most significant being a gender diversity policy and new criteria for determining when a director is “overboarded”. Except where indicated below, the changes are effective for meetings held on or after February 1, 2018.

Gender Diversity

The Updates implement ISS’s proposal, in its 2018 Benchmark Policy Consultation, to implement a gender diversity policy. For S&P/TSX Composite Index companies, ISS will generally recommend a withhold vote for … Continue Reading

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 … Continue Reading

ISS Updates its Proxy Voting Guidelines for the 2015 Season

On November 6, 2014, Institutional Shareholder Services (ISS) released updates to its Canadian proxy voting guidelines for the 2015 proxy season.  The voting guidelines are effective for meetings held on or after February 1, 2015.  The following is a summary of the most significant changes.

Director Elections

  • Director Independence: ISS has made several changes to their definition of “independence” including:
    • that former CEOs will now be subject to a five year “cooling off” period, after which ISS will classify him/her, on a case-by-case basis, to be independent unless other relationships exist with the issuer or executive officer. Factors taken
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The Polarizing Effect of National Policy 25-201

In our recent post on June 24, 2014, we reported that the Canadian Securities Administrator (CSA) published for comment proposed National Policy 25-201 Guidance for Proxy Advisory Firms (NP 25-201). At its core, the purpose of NP 25-201 is to set out non-prescriptive guidelines for proxy advising firms to address issues relating to conflicts of interest, transparency, reporting standards and public consultation. Some issuers are concerned that NP 25-201 lacks the regulatory teeth to ensure compliance while certain institutional investors feel the policy is unnecessary and inefficient, suggesting that issuers take it up with their investors instead.… Continue Reading

TSX Mandates Majority Voting for Election of Directors: What Issuers Need to Know

On February 13, 2014, TSX announced amendments to the TSX Company Manual which mandate majority voting in uncontested elections of directors for TSX-listed issuers that are not majority controlled.  The purpose of these amendments, as stated by the TSX, is to improve corporate governance standards in Canada by providing a meaningful way for security holders to hold individual directors accountable.

What TSX-listed Issuers Need to Know

Effective Date of the Amendments

The amendments become effective beginning June 30, 2014 and issuers with fiscal years ending on or after June 30, 2014 must comply with the amendments at their next annual … Continue Reading

What Canadian public companies need to know about the 2014 ISS Corporate Governance Policy Updates

On November 21, 2013, Institutional Shareholder Services Inc. (ISS) issued its 2014 Corporate Governance Policy Updates applicable to issuers holding their shareholder meetings on or after February 1, 2014. Updates for the Americas, EMEA and Asia-Pacific were released. For the first time, ISS has opened a consultation period (which expires on February 14, 2014) related to long-term policy changes beyond the 2014 proxy season for a number of specific topics. ISS is shifting its focus from specific seasonal guidance to a continual focus on policy development over the year.

A summary of the key issues addressed in the … Continue Reading

Welcome to Norton Rose Fulbright Canada’s Special Situations Law blog!

We are excited to announce the launch of the Special Situations Law blog, a space for our Special Situations team members to comment and deliver insight on the legal and business developments impacting shareholder activism in Canada and globally.  The blog will house a wealth of resources and perspectives on special situations law, including:

  • incisive commentary about regulatory, legal and business developments
  • videos discussing shareholder activism
  • links to relevant case law and legislation
  • views from our global Norton Rose Fulbright colleagues in the area

The blog is led by our Canadian Special Situations team. The team has played a leading … Continue Reading

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