Lexpert Magazine

LEXPERT MAGAZINE | MARCH 2017 61 | IN-HOUSE ADVISOR: CORPORATE GOVERNANCE | tor. However, he notes, "If you look at the representation of women officers in our executive positions last year, it was close to one-third." As for broader diversity, he says, "there are people on the board who might not be described as WASPs, if that's the test. e board is interested in both gender diversity and ethnic diversity. We don't have a for- mal policy or target for gender or non-gen- der diversity, because our aim is to get the best candidates possible and the ones who can benefit the business the most." Notice and Access Since March 2013, provincial securities commissions have allowed corporations to use the internet to provide meeting materials to shareholders. Corporations are able to mail a streamlined set of ma- terials that includes information on how the shareholder can obtain a fuller set from the corporation's website. A stream- lined package, instead of the traditional proxy package, has the additional benefit of lowering a corporation's printing and postal costs. CBCA-incorporated companies, how- ever, have had problems using "notice and access" because of technical wording that restricts them. Bill C-25 amendments would allow the regulations to align with the provincial securities commissions for distributing corporations. Under these provisions, an issuer can merely send a short notice and form of proxy to its shareholders and avoid mailing an information circular and other proxy- related documents (e.g., financial state- ments), which it only needs to make avail- able online to shareholders. Donnelly welcomes the change, which he estimates will save HudBay Minerals $60,000 a year in printing and mailing costs. But he notes that, under C-25, us- ing the "notice and access" method would still require an exemption. "at would be cumbersome and inconvenient, so we're hoping there will be some sort of blanket exemption granted." Also, notes Donnelly, under C-25, the diversity disclosure can't be addressed through the "notice and access" method. Since the diversity disclosure is part of the information circular, having to find anoth- er way to send it to shareholders is ineffi- cient. "We're hopeful that will be addressed as the Bill evolves," he says. What C-25 Doesn't Do As significant as the issues that C-25 ad- dresses are those that it does not address. ese include several matters raised during Industry Canada's public consultation in 2014 on reform of the CBCA. No amend- ments are being proposed to expand proxy access, to mandate automatic disclosure of shareholder voting results, or to ease resi- dency requirements for directors. Especially noticeable by its absence is "say on pay" — a provision for a non- binding shareholder vote on a company's executive compensation arrangements. Such votes have recently been adopted vol- untarily by many of Canada's largest cor- porations and in the European Union, and are now mandatory in the US for corpora- tions subject to federal proxy rules under the Dodd-Frank Act. Say-on-pay votes started in Canada in 2010 at the major banks' AGMs. Of the S&P/TSX 60 Index companies, 83 per cent gave shareholders a say on pay in 2016, up from 78 per cent in 2015, according to Da- vies Governance Insights 2016. However, only 61 per cent of companies in the S&P/ TSX Composite Index did so in 2016, ver- sus 50 per cent in 2015. e rationale for not including a say-on- pay provision in Bill C-25 was articulated by Industry Canada in its discussion paper. "Another view is that current disclosure requirements for executive compensation in place under provincial securities laws ... adequately protect stakeholders, indicating that the trend in executive compensation matters reflects a move toward disclosure standards developed by provincial securi- ties regulators and away from federal regu- lation of this area through the CBCA." So, while far from a revolution in corpo- rate governance, Bill C-25's amendments to the CBCA will reinforce the trend in Canada toward increased shareholder de- mocracy and the slow advance toward di- rector diversity. AHEAD OF THE CURVE Amendments to the CBCA will have a pronounced impact on governance obligations. In-house counsel need to stay informed In-house counsel concerned about the proposed amendments to the Canada Business Corporations Act should be looking to get ahead of the curve, prepare themselves, and intervene where possible. It's still not too late to have your voice heard. Get involved. Stakeholders may yet advocate for any desired changes to Bill C-25 before the House of Commons Standing Committee on Industry, Science and Technology. Visit www.parl.gc.ca/Committees/en/INDU. Determine requirements. Consult the regulations accompanying Bill C-25 to determine which are the "prescribed corporations" that are required to make diversity disclosure. Go paperless. Once Bill C-25 is enacted and comes into force, make use of the "notice and access" provisions of provincial securities legislation to move online much of the paper-based communications to shareholders. Get diversity help. Ensure that when the board is identifying potential director candidates, the nominating committee, in addition to its own search, uses resources of organizations advancing diversity, and where necessary, seeks advice from independent search consultants. IN HOUSE INSIGHT

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