With changes to federal corporate law, new governance requirements — including a ban on slate voting and mandatory majority voting — take effect today.
Revisions to the Canada Business Corporations Act (CBCA) and related legislation that set out the rules for companies at the federal level came into force on August 31. The amendments are meant to address a range of corporate governance issues including “inefficiencies in the current board election voting system” and inconsistencies in document retention practices, according to an analysis of the reforms in the Canada Gazette.
Among other things, the changes require majority voting, that shareholders vote for directors individually, and that shareholders can vote “against” a director, rather than simply withholding a vote.
By altering the director election process, the amendments are intended to improve board quality and enhance shareholder democracy, the report said.
In terms of board quality, the amendments are expected to enhance corporate boards by, “providing a more effective way to remove underperforming or undesired directors… [which should] encourage directors to improve their contributions and accountability to the board.”
These changes “will allow shareholders to influence boards more effectively and make boards more responsive and accountable to shareholders compared to the traditional voting approach,” the analysis said, adding that “shareholders will also have a greater ability to propose and obtain approval on shareholder proposals.”
The report noted that the changes aren’t expected to impose significant additional costs on public companies, since the Toronto Stock Exchange already imposes many of the director election requirements.