With the intense season of corporate annual meetings about to get underway, trends in shareholder activism are starting to emerge. According to information available so far, it looks like executive compensation, director independence and climate change will dominate voting this year.
Each year, shareholders who value their voting rights carefully consider the issues they find on their proxy circulars. For some, however, voting is not enough. These shareholders decide to become more directly involved in the process by submitting their own proposals, or resolutions, to Canadian companies under the rules set out in our corporate laws.
Among the reasons for doing so is the enormous influence that many proposals have on corporate governance in Canada. Some ideas that start out as proposals become regulatory requirements, while others become accepted best practice. Consider the following example: in 2001 and 2002, several proposals were filed with prominent Canadian companies calling for public disclosure of all fees paid to corporate auditors each year. By 2004, Canadian securities regulators required this disclosure from all public companies.
SHARE has already identified more than a hundred shareholder resolutions in its dedicatedShareholder Resolution Database. Last year, 96 resolutions were recorded. Although the majority of the proposals deal with corporate governance issues like director independence and executive compensation structure and disclosure, a significant number address social and environmental issues, particularly climate change.
A resolution round-up
The Ethical Funds Company (EFC) has filed seven proposals to date with Canadian companies for their annual meetings in 2008. Six of these proposals address EFC’s concerns about deficiencies in how some Canadian companies are addressing climate change. Each asks that the company prepare a report that deals with the specific concerns EFC has with its current practices and disclosure. The seventh proposal is filed with a Canadian issuer that has significant interests in a French company with operations in Burma. The proposal asks that the company report on its assessment of the financial and reputational risks that its interest in the French issuer represents.
Meritas Financial Inc. has filed a proposal that asks a Canadian diamond miner and retailer to develop a supplier code of conduct and report to shareholders on how it will implement and monitor compliance with the code. Another asks a company to prepare a sustainability report in accordance with the Guidelines of the Global Reporting Initiative (GRI), the most widely accepted standard in sustainability reporting.
Meritas has also filed a proposal with Canada’s five largest banks asking that each provide shareholders with an advisory vote on executive compensation.
As in past years, Robert Verdun and the Mouvement d’éducation et de défense des actionnaires (MEDAC) have filed proposals with Canadian banks on a variety of governance issues. These include proposed changes to executive compensation and its disclosure to shareholders, an increase in the number of women on boards and increased disclosure of each banks’ investments in hedge funds and subprime mortgages.
Quebec retirement plan Bâtirente has filed a proposal that calls for a report on environmental policy and performance goals with three companies in the aviation industry. Of particular interest to Bâtirente is the disclosure by each company of its plans to manage and account for greenhouse gas emissions.
Lowell Weir has once again filed proposals with National Bank of Canada. Of note are three of Mr. Weir’s ten proposals that ask that the Bank to review personnel and operations in light of substantial decreases in the value of its holdings and purchases of assets backed by sub-prime loans.
SHARE will continue to update the Shareholder Resolution Database as proposals filed with Canadian companies for 2008 develop.