Interesting: OSC seeks public input on reformshttps://www.ctv.ca/generic/generated/static/business/article1864092.html
OSC seeks public input on reforms
JANET McFARLAND
TheOntario Securities Commission is reviewing reforms that could make theprovince the first jurisdiction in Canada to require companies to giveshareholders an annual “say on pay” on executive compensation
TheOSC is calling for public comment on issues of shareholder democracy,including the way directors are elected at annual meetings and themechanics of vote counting.
“They are important issues in the world we live in,” Leslie Byberg, the OSC’s director of corporate finance, said on Monday.
Shareholdergroups have pushed hard for reforms, especially on director voting. TheCanadian Coalition for Good Governance (CCGG), which represents most ofthe country’s largest institutional investors, has lobbied the OSC tointroduce regulations on shareholder democracy issues.
“These arekey fundamental issues the coalition has been focused on since we werefounded,” said CCGG executive director Stephen Griggs. He said the CCGGknows some other provinces don’t support the reforms, but the measuresare “the key blocks to good governance” and should be adoptednationally.
The OSC has not detailed its reform proposals, butinstead is asking for public comment by March 31 on the issues broadly,including say-on-pay voting. That practice already been adoptedvoluntarily by 45 large public companies in Canada, which hold annualnon-binding votes on pay practices.
The OSC noted that a number ofEuropean countries, including Britain, require say-on-pay votes, andthe United States is moving to impose a similar obligation under theDodd-Frank Act.
Monday's call for comments is a first step in thereform process. The OSC will draft new regulations once it reviews thepublic responses and will seek further comment later on specificproposals.
Ontario could also become the first province in Canadato require companies to let shareholders vote for each director on aboard individually, rather than as an entire slate. The practice haslong been endorsed by shareholder groups because it allows investors totarget individual directors they do not support without having to voteagainst the entire board.
The OSC also is considering goingfurther, to champion a practice known as “majority voting,” whichrequires directors to resign if they fail to win a majority of votes inannual shareholder voting. (Under the existing proxy voting system,shareholders can only vote “yes” or withhold their votes for a director,but cannot vote “no” to oppose a nominee.)
Laura O’Neill,director of law and policy at Vancouver-based shareholder rights groupSHARE (Shareholder Association for Research and Education), saidindividual director voting and majority voting are “bare minimum”requirements for public companies and should become mandatory acrossCanada.
While some large companies already comply voluntarily, Ms.O’Neill said regulators need to compel holdouts to conform – includingcompanies with dual-class shares.
“You really have roadblocks youcan’t get over, so we have a bifurcated market place,” she said. “That’ssomething the regulators can clear away.”
The OSC is also seekingcomments on other reforms to the proxy voting system relating to themechanics of voting, including ensuring that shareholder votes arecounted properly.
A group of lawyers from Toronto law firm DaviesWard Phillips & Vineberg LLP released a lengthy report last fallcriticizing flaws in the voting system, arguing that there are too manyinstances of votes being counted twice and others missed entirely.
Davieslawyer Carol Hansell said she hopes reforms to the mechanics of votingare not overshadowed by other issues, because the fixes are “very, verynecessary,” adding: “What difference does it make if you’ve got majorityvoting or say-on-pay if you can’t tell how the votes are beingcounted?”
Ms. Hansell said a task force of experts should be created to understand the issues and design solutions.