Proxy Voting in Canada Needs Substantial Overhaul


Members of the Canadian Securities Administrators (“CSA”) on January 29, 2015 published CSA Staff Notice 54-303 Progress Report on Review of the Proxy Voting Infrastructure (the “Report”) regarding their review of Canada’s proxy voting infrastructure. The Report confirms that current proxy voting infrastructure is seriously flawed and needs to be modernized and improved.

Shareholder voting is one of the most important methods by which shareholders can affect governance and communicate preferences about an issuer’s management and stewardship. Issuers rely on shareholder voting to approve corporate governance matters or certain corporate transactions. Shareholder voting is therefore fundamental to, and enhances the quality and integrity of our public capital markets.

Shareholders typically do not vote in person at meetings, but instead vote by proxy. The proxy voting infrastructure is the network of organizations, systems, legal rules and market practices that support the solicitation, collection, submission and tabulation of proxy votes for a shareholder meeting. It is important that the proxy voting infrastructure is reliable, accurate and transparent and that it operates as a coherent system. It is also important for market confidence that issuers and investors perceive the infrastructure to operate in this way.

The Report identifies five improvements that need to be made to vote reconciliation:

  1. Modernizing how meeting tabulators receive information about who is entitled to vote.
  2. Ensuring that the information meeting tabulators receive is accurate and complete.
  3. Enabling each intermediary who submits proxy votes on behalf of clients to find out how many shares a meeting tabulator has calculated it is entitled to vote for the meeting (its Official Vote Entitlement).
  4. Increasing consistency in how meeting tabulators reconcile proxy votes submitted by intermediaries to Official Vote Entitlements.
  5. Establishing communication between meeting tabulators and intermediaries about whether proxy votes are accepted, rejected or pro-rated.

The CSA is directing all entities that play key roles in vote reconciliation to assess their processes and identify and implement any appropriate steps they can take to improve vote reconciliation for the 2015 proxy season. The CSA also intends in 2015 to review one or more proxy contests to determine if there are any vote reconciliation issues that are specific to proxy contests.

For the 2016 proxy season, the CSA is directing the key entities involved in vote reconciliation to develop industry protocols that, at a minimum, address the five required improvements. The CSA will oversee the development of these protocols and may consider mandating aspects of them or regulating entities in the proxy voting infrastructure as necessary.

If you have questions about proxies, contact any member of Clark Wilson’s Corporate Finance & Securities Group.