Summit ignites push for proxy reform
of transparency in the voting system continues to erode confidence.
gathering of publicly traded companies, regulators, proxy services
providers, public interest groups and other stakeholders has laid the
groundwork for improving the processes by which shareholders of Canadian
public companies vote their shares at annual meetings.
Society of Corporate Secretaries (CSCS) held its first Shareholder Democracy
Summit in Toronto on October 24 and 25, providing a forum to discuss the
problems with the proxy voting process in Canada and to develop action steps
that can be taken to ensure an efficient and transparent shareholder rights
‘The simple act
of getting the stakeholders in each other’s presence and sharing information
that is presently trapped in silos affords insights that will allow all the
stakeholders to learn how they are able to contribute to improving the
existing processes,’ says CSCS chairman David Masse, who is also senior
legal counsel and assistant corporate secretary at CGI Group. CSCS is
spearheading the efforts to reform the proxy voting process in Canada, and
the summit process ‘presents an opportunity for the participants, as
Canadians, to develop an efficient modern shareholder democracy process that
will be a significant competitive advantage for Canadian capital markets and
serve as an example to US, European and Asian markets,’ Masse adds.
presenters included Winnie Sanjoto, senior legal counsel, Ontario Securities
Commission; Lucie Roy, senior policy adviser, Autorité des Marchés
Financiers; Sarah Wilson, chief executive officer, Manifest Information
Services; Laurens Vis, managing director, KAS Bank UK; Jean-Paul Valuet,
secretary general, Association Nationale des Sociétés par Actions; Ken
Bertsch, president and chief executive officer, Society of Corporate
Secretaries and Governance Professionals; Robert McCormick, chief policy
officer, Glass Lewis; Michael Jennings, proxy voting specialist,
Institutional Shareholder Services; Tom Enright, president and chief
executive officer, Canadian Investor Relations Institute; and Daniel
Chornous, chief investment officer, RBC Global Asset Management, and chair
of the Canadian Coalition for Good Governance board of directors.
Lack of transparency dominates
The majority of
the discussion revolved around the lack of voting accuracy and transparency.
Paul Schneider, senior investment associate, corporate governance for the
Ontario Teachers’ Pension Plan, noted that voting accuracy is more important
than ever before since more is riding on the votes with say on pay, and with
majority voting initiatives being pushed. He said the lack of transparency
in the system erodes all confidence in the voting, adding, ‘We only see the
vote going to Broadridge, then we see the voting results – we have no way to
know if the vote actually counted. We always have a nagging question whether
the vote counted, and we shouldn’t have to rely only on hope.’
vice president of client services for Equity Financial Trust, stunned
regulators by suggesting that the potential for over-voting or incorrect
vote tallies was considerable. When asked how often problems or potential
problems occur in the voting process, Stratigeas revealed that about 90
percent of the jobs her company handles require some type of reconciliation
process. That means there is a regularly high possibility that people’s
votes aren’t being counted, or that votes are being attributed to people who
should not be voting.
service providers argued that they could and were providing ‘end-to-end
voting confirmation’, many at the summit disagreed.
received a great deal of attention at the summit as well. Panelists
complained about the failure to build a proxy system that would adequately
address the practice. With so much difficulty in determining the identity of
voters, how can companies expect to make sure that votes can be tracked so
that if there is a lending agreement in place, they will know the identity
of the person casting the vote and be able to confirm that this person has
the right to actually cast the vote based on the provisions of the lending
There was a lot
of discussion around doing away with objecting beneficial
owner/non-objecting beneficial owner (OBO/NOBO) status for shareholders.
Bill Brolly, senior market development manager for Computershare’s Global
Capital Markets Group, admitted there was a need to improve business
processes and data interchange among participants in the shareholder voting
system. He noted that faxes are still in use to send data related to voting
and also joined a number of summit participants who questioned the continued
existence of the OBO/NOBO distinction, explaining that it was inconsistent
with resolving the business process issues that are plaguing the system.
principal Sylvia Groves, who moderated one of the summit panels, says that
regulators in attendance ‘all indicated that they are interested in creating
a system that is working better.’ However, the Alberta, Ontario and Quebec
securities commissions said they were going to need more information such as
hard data about voting processes.
from the transfer agent’s perspective, how many times does reconciliation
occur? How many times is it successful and how many times is it
unsuccessful?’ asks Groves. ‘Regulators are looking for statistics and
numbers that can support a push forward on changing the system.’
Steps toward another summit
CSCS is now
preparing for next year’s summit, which Masse says will likely focus on the
issues from a process perspective. This year’s summit materials, including
the rapporteur’s notes and transcripts of the sessions, will be posted
online. Topics to be explored next year may include:
• A complete
revamp of the business processes for sharing information among transfer
agents, the depository, the proxy agent, custodians, brokers, institutions,
voting agents and ultimately retail shareholders, coupled with information
processing standards to permit the flow of information in a consistent way
among the players.
• Creation of
a unified shareholder information and voting dashboard allowing all
shareholders to vote in the same way, with the same ability to drill down
into the supporting documentation.
processes that lend themselves to reconciliation and verification to support
third-party audit and quality assurance so that the voting process is
transparent and effective.
• Changes to
the corporation laws to allow issuers to treat registered and beneficial
• Changes to
securities regulations and corporation laws that allow the gap between the
record date and the meeting date to be all but eliminated, as well as
adjusting the proxy cutoff and voting record date, possibly to the same day.
to securities laws and regulations to provide higher standards and structure
for the role of the proxy agent.
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