Thursday February 13, 2014 was an important day for shareholder democracy in Canada. We know that athletes train many years in order to reach the Olympics, but the Canadian Coalition for Good Governance (CCGG) also has worked publicly and behind the scenes for many years to bring majority voting to Canada. Finally, last week the Toronto Stock Exchange (TSX) agreed to adopt a listing requirement effective June 30, 2014 pursuant to which TSX listed companies (other than those which are majority controlled) must adopt a majority voting policy which requires each director of a TSX listed issuer to be elected by a majority of the votes cast with respect to his or her election other than at contested meetings.
Posts Tagged ‘Majority voting’
This third annual edition of Governance Insights presents Davies’ analysis of the corporate governance practices of Canadian public companies over the course of 2013 and the trends and issues that influenced and shaped them.
We expect 2014 to be an active year for governance themes with greater calls for diversity on boards, a growing shareholder voice on “say on pay” resolutions, and further regulatory initiatives around proxy voting and the regulation of proxy advisory firms. We also anticipate continued discussion on shareholder activism and scrutiny of the tools and strategies used by issuers and shareholders.
The Florida State Board of Administration (the “SBA”) takes steps on behalf of its participants, beneficiaries, retirees, and other clients to strengthen shareowner rights and promote leading corporate governance practices among its equity investments in both U.S. and international capital markets. The SBA adopts and reports clearly stated, understandable, and consistent policies to guide its approach to key issues. These policies are disclosed to all clients and beneficiaries.
The SBA supports the adoption of internationally recognized governance practices for well-managed corporations including independent boards, transparent board procedures, performance-based executive compensation, accurate accounting and audit practices, and policies covering issues such as succession planning and meaningful shareowner participation. The SBA also expects companies to adopt rigorous stock ownership and retention guidelines, and implement well designed incentive plans with disclosures that clearly explain board decisions surrounding executive compensation.
Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150).  In this report, we present statistical information for a subset of the data we have collected over the years. These include:
- makeup of board leadership
- number of insider directors
- gender diversity on boards of directors
- size and number of meetings for boards and their primary committees
- frequency and number of other standing committees
- majority voting
- board classification
- use of a dual-class voting structure
- frequency and coverage of executive officer and director stock ownership guidelines
- frequency and number of shareholder proposals
- number of executive officers
For many years, the proactive engagement of shareholders on corporate governance matters has been limited to just a handful of companies. However, over the past few years companies have shown a greater willingness to engage, particularly after the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) made advisory votes on executive compensation (commonly referred to as “say-on-pay”) a mandatory voting item for most publicly traded U.S. companies. Last year we reported on the explosive growth in the level of engagement between public companies and investors on corporate governance matters, with both sides lauding the benefits of such engagement. Investors’ proxy departments have reported the benefits of gaining an early understanding of the issues a company is facing and the rationale behind decisions the company made beyond what is disclosed in the proxy statement. Meanwhile, issuers have found value in gaining firsthand knowledge of the nuances of investors’ proxy voting guidelines.
Given that both sides have seen the benefits of such an exchange, there has again been a significant rise in the number of engagement programs initiated by companies this year. As one would expect, there were a variety of reasons that companies sought to engage in outreach campaigns. While most companies engaged in order to improve on their past voting results, many others have aimed to establish a dialogue in order to maintain positive results. The scope of programs also tended to vary with many being quite expansive. These included lengthy off-season engagements with institutions, multiple contacts with the same institution during the year, in-person visits with investors and inclusion of members of the board of directors in the discussion. Some companies went so far as to proactively reach out to their top 100, 150 and even 200 institutional investors.
The California State Teachers’ Retirement System (CalSTRS) was established in 1913 for the benefit of California’s public school teachers. This year we celebrate our 100th anniversary serving the retirement needs of our 862,000 members and beneficiaries. The long-term nature of CalSTRS liabilities, and our responsibilities as fiduciaries to the educators of California, makes us keenly interested in governance issues that affect our investment portfolio. We expect the companies in our portfolio to be responsible stewards of our capital and we have an obligation to effectively engage those companies while balancing risks and rewards.
This year, CalSTRS published its inaugural corporate governance report to communicate our governance program priorities to the investment community. While we pursue a variety of initiatives throughout the year, our engagements focused on four main themes:
…continue reading: CalSTRS Releases First Annual Corporate Governance Report
During this year’s annual meeting season, issuers experienced better outcomes on say on pay (SOP) and shareholder resolutions, underpinned by a high degree of engagement and responsiveness to past votes. With SOP in its third year, companies addressed many of investors’ and proxy advisors’ pivotal compensation concerns, which was reflected in a modest improvement in average SOP support and proportionately fewer failed votes.
Similarly, although the volume of shareholder resolutions on ballots was nearly comparable to the first half of 2012, average support declined across many categories and there were 27% fewer majority votes (See Table 1). This was due in large part to corporate actions on resolutions that are traditionally high vote-getters, such as board declassification, adoption of majority voting in director elections, and the repeal of supermajority voting provisions, resulting in the withdrawal or omission of the shareholder proposal. Indeed, issuers made a conscious effort to avoid the prospect of majority votes, mindful of potential fallout against directors by proxy advisory firms. Beginning in 2014, ISS will oppose board members who fail to adequately address shareholder resolutions that are approved by a majority of votes cast in the prior year, while Glass Lewis is scrutinizing board responses to those that receive as little as 25% support (see our January newsletter).
On July 11, 2013, the Securities and Exchange Commission published a proposal by the New York Stock Exchange to amend Section 312.07 of the Listed Company Manual, which became effective immediately. Section 312.07 has been revised to remove the requirement that the total votes cast on proposals requiring shareholder approval under the NYSE rules must represent over 50% in interest of all securities entitled to vote on the proposal. The release notes that listed companies are subject to quorum requirements under the laws of their states of incorporation and their governing documents and that requiring companies to comply with a separate NYSE quorum requirement causes confusion and is not necessary for investor protection. In addition, neither NASDAQ nor NYSE MKT has a similar quorum requirement and the removal eliminates a long-standing difference in the treatment of broker non-votes for quorum purposes.
The NYSE rules continue to provide that matters requiring shareholder approval under NYSE rules must receive the support of a majority of votes cast (that is, votes cast “for” must exceed votes cast “against” plus abstentions); the recent change eliminates only the separate quorum requirement.
Exit consents are often used as a restructuring tool by issuers of bonds. Issuers invite bondholders to exchange their existing bonds for new bonds (usually with a lower principal amount). In order to participate in the exchange, bondholders must agree to vote in favour of a resolution that amends the terms of the existing bonds so as to negatively affect (or, in Assénagon,  substantially destroy) their value. This is referred to as ‘covenant-stripping’. If the issuer does not achieve the majority needed to pass the resolution, the covenant-strip and the exchange do not happen. But if the resolution is passed, each participating holder’s bonds are exchanged for the new bonds, and the terms of the old bonds are amended to remove most of the protective covenants. This incentivises bondholders to participate in the exchange: accepting the new bonds (even though they will usually have a lower face amount than the existing bonds) may be preferable to being ‘left behind’ in the old bonds, which will cease to have any meaningful covenant protection.
Facts of the case
Anglo Irish Bank Corporation Limited (the “Bank”) suffered severe financial difficulties as a result of the financial crisis, and was nationalised in January 2009. As part of its restructuring, the Bank proposed an exchange offer whereby:
Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for all Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150).  In this report, we present statistical information for a subset of the data we have collected over the years. These include: