LEXPERT MAGAZINE
|
MARCH 2017 59
| IN-HOUSE ADVISOR: CORPORATE GOVERNANCE |
the CBCA with the listing requirements of
the Toronto Stock Exchange and the TSX
Venture Exchange (TSX-V), which since
2012 have required listees to hold annual
elections of directors.
Individual Director Elections
Until recently, public companies tended to
nominate a slate of directors rather than
permitting shareholders to vote on each di-
rector separately. Since 2012, however, the
Toronto Stock Exchange and TSX-V have
required listees to elect directors on an in-
dividual basis.
e CBCA amendments would now also
require that shareholders be given the right
to vote for each nominee on an individual
basis, whether the corporation is private
or public. is approach promotes greater
shareholder choice, because management's
nominees would no longer be nominated
on an "all or none" basis, and each nominee
could be evaluated by the shareholders.
"It's not as if individual nominees are
running mini-political campaigns with
shareholders," says Alex Moore, a partner
at Davies Ward Phillips & Vineberg LLP,
"but boards are reaching out
more to make sure they un-
derstand the point of view of
shareholders, that sharehold-
ers understand the point of
view of directors, and that
there's less of a disconnect."
Majority Voting
Under current law in Canada,
shareholders can either vote
for directors or withhold their
votes. is means that a direc-
tor can be elected with a single
vote, even if all other votes are
withheld. e C-25 amend-
ments stipulate that a direc-
tor cannot be elected unless a
majority of the shares that are
voted are cast for that direc-
tor. A nominee who does not
receive a majority of the votes
cast is prohibited from serving
as a director, except in "pre-
scribed circumstances."
e regulations for Bill
C-25 define those circum-
stances as: (1) the requirement
in subsection 102(2) of the
Act for at least two directors
who are not officers or em-
ployees of the corporation or
its affiliates; and (2) the Cana-
dian residency requirements
in section 105 of the Act.
Here, again, Bill C-25 treads ground
already broken by the TSX. In 2014, the
exchange adopted a majority voting re-
quirement, but the rule is only classified as
a listing standard so it could be changed at
any time, whereas the C-25 amendments
would become law. Also, the TSX rule al-
lows for a board to reject the resignation, in
"exceptional circumstances," of directors
who fail to gain a majority.
"In the most recent year," says Moore,
"we didn't see any examples of directors not
getting a majority whose resignations were
rejected. So we don't have this phenom-
enon of zombie directors where they don't
get the [majority] vote, but they're still
walking around and still on the board."
"It gives a meaningful way for sharehold-
ers to hold individual directors account-
able," says Marsh. "It gives them a stronger
voice in electing directors. Morneau She-
pell's been doing it since 2011."
at being said, the amendments on
majority voting could create problems, says
Carol Hansell, founder and senior partner
at Hansell LLP in Toronto. "If the nomi-
nee doesn't get a majority vote in favour,
essentially they're not elected. at doesn't
address the issue of failed elections, where,
say, nine positions on the board need to be
filled but only six of the nominees receive
majority votes."
As Patrick Donnelly, Vice President, Le-
gal of HudBay Minerals Inc., notes, "is
could prevent boards from acting, in cer-
tain very limited circumstances. If a num-
ber of directors don't get elected, it's pos-
sible a board can be le without a quorum
and therefore unable to act. I hope they
address that before the Bill becomes law."
(HudBay is CBCA-incorporated.)
PHIL MOHTADI
>
SEARS CANADA
The board is interested
in both gender diversity
and ethnic diversity. We don't
have a formal policy or target
for gender or non-gender
diversity, because our aim
is to get the best candidates
possible and the ones
who can benefit the
business the most.
