Progress in corporate governance

The possible regulation of proxy-advice firms is just one aspect of share-holder democracy that’s under regulatory scrutiny. Corporate-governance advocates are finally seeing some progress on director elections, too.

In addition to the review of the role of proxy advisors, the Ontario Securities Commission (OSC) has pledged to work on improving the functioning of the proxy-voting system and to give shareholder empowerment a boost by advocating for majority voting, the elimination of slate voting and enhanced disclosure of voting results.

These efforts finally showed some progress when the OSC approved changes, first proposed in September 2011, to the Toronto Stock Exchange’s (TSX) corporate-governance standards on Oct. 4, which will require issuers to elect directors individually, elect all directors annually and issue a news release with details of the voting results.

The changes also require issuers to disclose whether they utilize majority voting for uncontested director elections (and, if not, to explain why). However, the TSX also is now proposing to make majority voting mandatory.

When the OSC announced the approval of its governance reforms, the TSX also published a new proposal, for a 30-day comment period, that would require firms to adopt majority voting in uncontested elections. The proposed policy would give shareholders the ability to hold directors accountable, as the policy would require directors that have a majority of votes withheld to resign their position from the board and announce that resignation in a news release.

The TSX states that it is proposing these changes because it believes director-election practices in Canada are lagging other major markets. And it believes that mandatory majority voting will “bolster Canada’s reputation for supporting strong governance standards, and bring Canada closer to the practices of other major international jurisdictions.”