The Quality of the Shareholder Vote in Canada

The Quality of the Shareholder Vote in Canada

Mark Connelly, Michael Disney, Gillian Stacey, Tim Baron, Adam Fanaki and Richard Fridman
Executive Summary

1. Reasons for the Paper
2. Elements of an Effective System
3. Features of the System
4. Key Issues that Need to be Addressed

Reasons for the Paper

As a firm, we have extensive experience with shareholder meetings. Some of these meetings are routine, others involve proxy battles, the approval of important transactions or votes on governance matters such as shareholder rights plans or stock option plans. Together with our clients, we have encountered a variety of obstacles in making sure that votes are cast and counted at the meeting in question. We know others have had similar experiences. As a result, we have become concerned with the quality of the shareholder vote in Canada.

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Because the results of shareholder meetings are important to our clients and to the capital markets generally, we decided as a firm to devote the time and resources necessary to understand the issues that might compromise the integrity of those results1. Our intention was to then engage in discussions with others who share our interest in the quality of the shareholder vote with a view to improving the system.

The first thing we discovered was that very few people understand how the proxy voting system works from end to end. Recognizing that without a common understanding of the system itself, the capital markets community would not be in a position to identify and resolve the problems that prevent that system from being effective, we took a step back. We decided to first work to bring together the information necessary to establish that common understanding.

Following 16 months of research and discussions, we have produced a paper that describes the history, mechanics and policy issues relevant to the proxy voting system. For aspects of the system in which we are not directly involved, we have asked for the assistance of organizations integral to the operation of the system. With very few exceptions, those organizations not only answered our questions, but provided us with further information that they felt would be relevant to this project. To the extent that interested parties have further information that would improve the discussion in this paper, we hope that they will share it with us so that everyone can benefit from the common base of knowledge.

We are releasing the paper initially as a discussion paper with the hope that those with an interest in the integrity of the proxy voting system will take the time to read it and provide us with their thoughts. We have offered some suggestions for next steps on which we also invite comment. Based on the further comments we receive, we will post updated versions from time to time and will ultimately produce a final paper.

We invite all comments either directly to the authors of the paper or by sending us an email at:

Next:  Elements of an Effective System

1 Researching and writing this paper was a project undertaken by Davies Ward Phillips & Vineberg LLP and not on behalf of any client or other party. We received extensive support from a number of individuals and firms who are connected to the proxy voting system and without whose assistance this paper would not have been possible. Since some would prefer not to be named, we have thanked everyone privately. The views expressed in this paper are our own.

© 2013 Davies Ward Phillips & Vineberg LLP