How the votes added up at Canada’s Big Banks

By March 18, 2008News

Six of Canada’s seven largest banks have held their 2008 shareholder meetings, and a brief review of the voting results from shareholder proposals provides some interesting information. Each bank has reported the vote tally for the 82 resolutions on their collective ballots, and while shareholder proposals for non-binding advisory votes on executive compensation (so-called “say-on-pay”) mademajor headlines by averaging 40.3% support at four of the banks, the results from other resolutions are also noteworthy.

The Mouvement d’Éducation et de Défense des Actionnaires (MÉDAC) filed a total of nine different proposals, nearly all of which were voted at each of the six banks. Of all proposals filed by the MEDAC, the issue that found the greatest support asked CIBC, Royal Bank, BMO, BNS, National Bank and Laurentian Bank to provide specific disclosure on any “direct or indirect interests in “hedge” funds as well as high-risk mortgage loans”.

A number of banks have had to take substantial write downs to the value of assets they hold that are linked to the U.S. subprime mortgage market’s fortunes. These write downs have had a direct and very negative impact on the value of bank shares.  So perhaps it was not particularly surprising that the call for increased disclosure of bank exposure to the subprime market carried a high level of shareholder favour.

Average support for this proposal was 14.5%, compared with average support of between 1.6% and 6% for the other proposals the MEDAC filed.

Another MEDAC proposal invited shareholders to vote for or against establishing a policy that an equal number of women and men sit on the boards of CIBC, Royal Bank, BMO, BNS, National Bank and Laurentian Bank within three years.

Currently, bank directors are overwhelmingly male—on average, only one-fifth of board representatives are female. MEDAC’s ‘gender parity’ proposal garnered the largest level of support at Royal Bank, where 7.12% of votes were cast in support of it. Royal Bank’s board had the second lowest proportion of women among its director nominees of the six banks. The proposal received overall average support of 5.42%, which makes it the third most supported MEDAC proposal, behind the disclosure of hedge fund/high-risk mortgage loan exposure and a disclosure request regarding executive compensation.

A proposal that “majority voting be given full effect” was filed by Robert Verdun at the following four banks: CIBC, Royal Bank, BMO and BNS.  These four banks have adopted a majority voting policy in director elections. The policy requires that if a director  fails to receive votes in support equal to at least half of total votes cast on his or her nomination, that director must resign. This resignation will then be given consideration by the board and either accepted or rejected.

The implementation of Mr. Verdun’s proposal would change the policy so that the resignation of any director who fails to secure the majority support of shareholders would take effect unconditionally. The board would not have the opportunity to consider the resignation and reject it.

SHARE supported this proposal, and we were surprised that it did not attract more support from shareholders. Average support was just 8.84% across four votes. Why should a director who does not enjoy the confidence of shareholders continue to serve? We cannot think of a compelling reason.

Complete vote results, along with full text and other details of each proposal, can be found in SHARE’s shareholder proposal database.