As we previously discussed, the use of share buybacks has accelerated in recent years, both in Canada and the United States. This has sparked anxious debate over the extent to which buybacks can form part of an effective long-term growth strategy. Particularly in the United States—where buybacks hit a record of more than $1 trillion USD in 2018 following tax reforms—commentators have blamed buybacks for various ills, including wage stagnation, income inequality, and underinvestment in R&D. In response, some U.S. legislators have sought to curb their use, such as by tying buybacks to conditions including paying employees a certain … Continue Reading
Walied Soliman and Orestes Pasparakis, co-chairs of Norton Rose Fulbright’s Canadian Special Situations team, will host a 60-minute webinar on corporate governance, shareholder activism, and hostile M&A on Tuesday, February 12, 2019 at 12 p.m. EST. To sign up, please click here.
Our Special Situations team played a leading role in some of the most complex and high-profile corporate governance, shareholder activism and hostile M&A matters of 2018. The webinar will highlight some of the key trends and developments in 2018 and trends taking shape in 2019.
This will be essential viewing for directors and executives at public companies, … Continue Reading
Earlier this year, Commissioner Robert Jackson Jr. of the US Securities and Exchange Commission declared that cybersecurity is “the most pressing issue in corporate governance today.” Indeed, widespread digitization has fundamentally transformed the way that people do business, ushering in new heights of efficiency and connectivity. It has also created significant risk management issues for public companies in all sectors, from securing consumer information to responding to data breaches.
However, despite the growth of digitization and its concomitant risks for public companies, it appears that many board members still rely on outdated and unsafe software to protect sensitive materials and … Continue Reading
In the day and age of virtual reality and delivery dinner at the click of a button, it seems almost comical to think that we use sliced bread to explain an invention’s usefulness.
Given today’s unprecedented surge in technology, it is perhaps unsurprising that the EY Center for Board Matters (“EY”) reported digital transformation as one of the most important priorities for boards. However, while it may be tempting for boards to focus on emerging competitors, tech-savvy employees, and the onset of new risks, this transformation can – and maybe should – include digitizing board meetings. Implementing board portals, digital … Continue Reading
Kingsdale Advisors has released its annual Proxy Season Review for 2018. The Review examines trends observed in 2018, predicts issues on the horizon, and provides advice to both issuers and activists in the marketplace.
In what follows, we pick out just a few of the important trends that emerge from Kingsdale’s analysis. The complete report can be viewed here.
Public activist activity remains healthy
Kingsdale counts 29 public proxy contests for the year to date. Though not reaching the high-water mark set in 2015 (55), the 29 public fights so far this year are up by 38%, as compared … Continue Reading
Recently, there has been a trend among both Canadian and United States companies to buy back their shares in order to boost stock prices. In the past – most notably during the “Buyback Bonanza” of 2007 – this strategy has been employed by companies as a mechanism to decrease the amount of outstanding shares, thereby increasing the value of the stock.
For years some have criticized share buybacks, asserting that focusing on short term increases in stock prices and profits is detrimental to long term economic growth. They argue that as individuals invest more in the short term, there … Continue Reading
Recently, Activist Insight released a report on activist short selling. Activist short selling is when investors publicly bet on a stock going down in value. Among other interesting trends, the report shows that Canada ranks number 3 in the world for activist short campaigns. The data suggest that Canadian companies should be on high alert about the possibility of an activist short play.
The global number of activist short campaigns is trending downward
2015 represented a high water mark for activist short selling, with 274 campaigns globally. Since 2015, numbers have trended downward, with 263 campaigns in 2016, 186 in … Continue Reading
Background: Registered Shareholders and Beneficial Shareholders
While a registered shareholder holds its shares directly with a company and can be contacted through its transfer agent, a beneficial shareholder does not have the shares registered in its name. Instead, a securities depository is the registered shareholder. There are two types of beneficial shareholders, a Non-Objecting Beneficial Owner (NOBO) and an Objecting Beneficial Owner (OBO). A NOBO has authorized a financial intermediary to disclose its identity and share position. An OBO has taken affirmative steps to object to such disclosure. Therefore, while a NOBO can be contacted directly, … Continue Reading
Corporations are facing increasing pressure to offer more transparency and disclosure with respect to their governance practices that promote environmental and social sustainability. This year’s trends in Environment Social Governance (ESG) in the context of Canadian corporate governance indicate that more and more corporations are including ESG as part of their core mandates and that investors are looking and asking for more ESG-related disclosures in making investment decisions.
What is ESG?
ESG is a general term used in the capital markets referring to non-financial performance indicators including sustainability, ethics and corporate governance factors, which measure the sustainability and … Continue Reading
In our latest memo, members of Norton Rose Fulbright’s Canadian Special Situations team weigh in on proxy access. The memo is written by Walied Soliman and Orestes Pasparakis, Partners and Co-Chairs of our Canadian Special Situations team, and Joe Bricker, Associate. The memo is reproduced below:
Recently, two prominent Canadian companies became the first major issuers to adopt proxy access policies.
These policies allow shareholders to nominate directors to serve on a company’s board and have their nominees featured in management’s circular and form of proxy. Typically, they afford nomination rights to one or more shareholders (up to 20) who … Continue Reading
As discussed in our earlier blog post, the Kingsdale Advisors’ (Kingsdale) annual Proxy Season Review for 2017 identified ESG trends as one of several issues on the horizon for public companies. Kingsdale noted that heightened scrutiny from investors could translate into a demand for enhanced disclosure on the part of issuers.
The three factors that form ESG are integrated into investment analyses to determine the sustainability and future financial performance of companies. These factors are also used as tools by companies to analyze, evaluate and to better understand the overall risks and opportunities that their businesses are … Continue Reading
Issuers contemplating initial coin offerings (ICOs) would be wise to consider the recent decision of impak Finance Inc. (Impak) by the Autorité des marchés financiers’ and the Ontario Securities Commission.
Background and Decision
Impak launched an ICO for impak Coin (MPK Tokens), which Impak describes as a cryptocurrency with a social purpose. The proceeds of the ICO are intended to fund the development of impak.eco, an online social network 100% dedicated to the “impact economy”.
Prior to the launch of its ICO, Impak submitted its proposed business model to the Canadian Securities Administrators regulatory … Continue Reading
The Canadian Securities Administrators (CSA) have recently released finalized guidance and protocols for meeting vote reconciliation under CSA Staff-Notice 54-305 Meeting Vote Reconciliation Protocols (the Protocols) which are implemented on a voluntary basis. The Protocols mark the latest step in a systemic review that began in 2013 to bring greater transparency and simplicity in vote tabulation specifically for shares held through intermediaries.
As discussed in our previous update, the Protocols are primarily intended to address the issue that all votes of beneficial holders are properly tabulated to ensure that true beneficial holders can exercise their right … Continue Reading
Following recent amendments to Canada’s takeover bid rules, private placements in the face of hostile bids have become newly controversial. Private placements in the context of proxy contests have received less attention. Yet this is somewhat surprising, because they are another facet of the same underlying question: whether regulators should allow a financing that may significantly affect the voting power of hostile shareholders in an ongoing shareholder persuasion campaign.
The Alberta Securities Commission (ASC) has just released its reasons for upholding the TSXV’s allowance of a private placement in the context of a proxy contest, without requiring shareholder … Continue Reading
In a move that may encourage shareholder activism and increase the potential for proxy contests, the Securities and Exchange Commission (SEC) has voted to propose amendments to the U.S. federal proxy rules (the Proposed Rules). As discussed in a previous post, the Proposed Rules will require parties in all “non-exempt” solicitations in a contested director election to use universal proxy cards that include the name of all board of director nominees (i.e., both dissident and management nominees). As such, shareholders voting by proxy would be able to vote for a combination of management and dissident candidates. … Continue Reading
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.
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 … Continue Reading
The majority of shareholders in Canada hold their shares through a broker or other intermediary which in turn holds their shares with the Canadian Depository for Securities Limited (CDS). Most voting at shareholder meetings therefore occurs within a layered, complex and opaque proxy system. This leads to uncertainty as to whether all of the votes of the true beneficial shareholders are properly tabulated. The Canadian Securities Administrators (CSA) have announced proposed changes to the process of vote counting and reconciliation, which will hopefully result in a more accurate, reliable and accountable voting system.
The CSA has proposed new protocols for … Continue Reading
Yesterday morning, the Canadian Securities Administrators (the CSA) published the long-awaited amendments to Canada’s take-over bid regime (the Amendments) under Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids. We believe that these Amendments may result in the increased use of proxy fights and bully M&A tactics by acquirors to effect acquisitions of commodity issuers.
Key Features of Amendments
There are three key features of the Amendments affecting “non-exempt” take-over bids:
- 105 Day Requirement. Take-over bids must remain open for a minimum deposit period of 105 days (the 105 Day Requirement) (as opposed to the
ISS’ preliminary postseason review for 2015 provides a report on U.S. activism trends in 2015. ISS identifies five key takeaways from the first half of 2015:
- Proxy access proposals arrived in a big way this season, with almost 120 proposals and average votes in favour of 54.4% (a jump of more than 20 percentage points from 2014). A typical proposal grants shareholders who have held 3% of the company’s shares for 3 years the ability to include, in the company’s management proxy circular, nominees for up to 25 per cent of the board. As discussed in our previous posts by
In a recent speech focusing on proxy-related issues, Securities and Exchange Commission (SEC) Chair Mary Jo White has indicated that the SEC is working to propose new rules concerning universal proxies. She also encouraged companies to adopt them even before the SEC weighs in on this area.
Currently in the United States, it is generally not possible for shareholders to choose freely from among the management and dissident slates in contested director elections unless they attend the meeting and vote in person. Accordingly, in most circumstances shareholders are required to vote for entire slates of directors.
Universal proxies allow shareholders … Continue Reading
On April 30, 2015, the Canadian Securities Administrators (CSA) adopted National Policy 25-201 Guidance for Proxy Advisory Firms (the Policy). The Policy provides non-prescriptive and non-exhaustive guidance on recommended practices and disclosure for proxy advisory firms. The guidance is intended to promote transparency in the processes leading to vote recommendations and the development of proxy voting guidelines, and to foster understanding among market participants about the activities of proxy advisory firms.
The guidance is a response by the CSA to certain concerns about the services of proxy advisory firms and their potential impact on Canadian capital markets. … Continue Reading
The Canadian Securities Administrators (CSA) recently provided an update on their ongoing review of proxy voting infrastructure. The progress report follows the publication of CSA Consultation Paper 54-401 Review of the Proxy Voting Infrastructure in August 2013 (the Consultation Paper).
The Consultation Paper examined two issues: (i) the accuracy of vote reconciliation in the current proxy voting infrastructure; and (ii) what type of shareholder communication (end-to-end vote confirmation) should be added to the proxy voting infrastructure to allow shareholders to confirm that their proxy votes and voting instructions have been property transmitted, received and tabulated.
Following the … Continue Reading
According to the recently published Global Institutional Investors Insight survey, shareholder activism is on the rise. The survey, which canvassed over 500 institutional investor and sell-side research analysts from across North American, European and Asian markets, reports that more than three quarters (77%) of those surveyed believe that activism levels will increase in the coming three years and become more prevalent worldwide.
The survey also highlights the four most prevalent factors that investors evaluate when considering whether to invest in a company:
- Good track record in meeting earnings expectations (65% of investors).
- An equity story that is clearly defined