By: Peter Chapman, Executive Director
When TD Bank Financial Group holds its annual meeting in Toronto on Thursday morning March 30, close observers of proxy voting in Canada will consider the 2017 season officially under way.
Barring a rare high profile proxy fight, most voting at the AGMs of Canada’s public companies is routinely one-sided, with overwhelming support for management’s recommendation. One of shareholders’ most significant powers can take on the atmosphere of a rubber stamp.
But majority vote rules, Say-on-Pay votes and well-framed shareholder proposals that address important ESG risks are changing that.
On the eve of the 2017 season, let’s take a look-back at 2016 management items on the proxy that received low shareholder support, and shareholder proposals that won high shareholder support.
Majority voting rules for the Board of Directors have given new life to what had been a mundane exercise. Although no director in 2016 failed to win a majority, there were some squeakers. Topping the list of 2016 director nominees with low shareholder support was Uni-Select’s Dennis Welvaert, who snuck past the post with 54.34%. Uni-select colleagues James Buzzard (55.36%) and Jean Dulac (59.29%) were not far behind, but polled well enough to avoid the number two slot, which went to H&R Real Estate Investment Trust’s Laurence Lebovic (55.36%). With average support for TSX Composite nominees at 96.9% in 2016, clearly shareholders were less than happy with leadership at this automotive sector paint and parts company.
The prize for deepest bench on the low-vote list goes to Centerra Gold. Eight Centerra directors were among the twenty worst director votes of 2016. But with the Kyrgyz government-owned Kyrgyzaltyn JSC holding a 32% interest in Centerra and a gaping rift between the gold producer and its government partner that is no surprise. Eight directors polled between 60-63%, with the state partner withholding its votes for all but three other directors. When the 2017 annual meeting convenes on May 2, will investors see an instant re-play?
Canada’s two failed Say-on-Pay votes in 2016 received a great deal of publicity, putting Crescent Point Energy and Canadian Pacific Railways in the spotlight. The Canadian Pacific vote, at 49.90%, was also a reminder that the margin between victory and defeat can be slender, making every vote count. Less in the news, but with embarrassingly low shareholder support were Gran Tierra Energy (51.91%), Valient Pharmaceuticals (62.35%) and Alamos Gold (65.34%). Just missing the top ten list was Manulife Financial, with 77.36%. Compare these results against the average of 92% support for say-on-pay resolutions among TSX Composite companies.
If a sleepy space remains on the proxy ballot, it is auditor ratifications. Across TSX Composite, this resolution earned an average 98.5% support in 2016, with the median level of support being 99.3%.
Topping the list of worst auditor ratification votes in 2016 was Chartwell Retirement Residences with 85.58%, followed by Superior Plus Corp (88.13%), Kirkland Lake Gold (91.80%), New Flyer Industries (91.85%) and IAMGOLD Corporation (92.99%).
So much for management proposals. What about items brought by shareholders? Twenty-nine shareholder proposals were on the ballots at Canadian public companies in 2016, addressing climate change strategy, corporate political spending, human rights, pay, diversity and a myriad of governance and disclosure issues. Unusually, two shareholder proposals received management’s stamp of approval: a proposal from MEDAC calling for improved reporting on shareholder votes at Transat A.T. (99.51%) and a proposal on climate change at Suncor (98.18%) submitted by NEI Investments. Hats off to management at both companies for breaking the mold and endorsing these proposals. Next in line and top of the list facing management opposition was a human rights vote at Potash Corporation of Saskatchewan (31.64%) filed by the Congregation of the Sisters of Mercy of Newfoundland and linked to Potash’s sourcing of phosphate rock from the non-self-governing territory of Western Sahara.
The TD proxy circular is already in the mail and a flood of others will soon follow. Are shareholders restive or nonchalant? Who will shareholders put in the Say-on-Pay penalty box? Will auditor votes at Chartwell, Superior Plus and IAMGOLD be back on the worst vote list? How much attention will climate risk receive from investors after recent high-profile write-downs of oil sands assets by large US oil and gas companies? Stay tuned.