2017 Proxy Advisory Firm Voting Guidelines: Canadian Highlights

by Blake, Cassels & Graydon LLP

As an early step in preparing for the upcoming proxy season, issuers should familiarize themselves with the Canadian proxy voting guidelines recently published by Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. (Glass Lewis). This bulletin addresses certain of the updated topics covered by the ISS benchmark policy recommendations and Glass Lewis proxy guidelines regarding issuers listed on the Toronto Stock Exchange for the 2017 proxy season.


Proxy advisory firms review and analyze matters put forward for consideration at shareholder meetings and make voting recommendations concerning such matters to their clients, who are typically institutional investors. The items considered range from routine matters to highly complex merger and acquisition transactions that involve a voting decision, and cover both management initiatives and shareholder proposals. A voting recommendation is generally based on the issuer’s alignment with the practices and standards contained in the proxy advisory firm’s voting guidelines for that proxy season.


Director Overboarding

Governance commentators continue to be concerned about director overboarding and, in this regard, ISS notes that “[d]irectors must be able to devote sufficient time and energy to a board in order to be effective representatives of shareholders’ interests”, while Glass Lewis states that “an overcommitted director can pose a material risk to a company’s shareholders”. Accordingly, as forewarned in 2015, for the 2017 proxy season, ISS and Glass Lewis have both implemented new policies concerning director overboarding.

ISS will now generally issue a withhold recommendation in respect of electing a director where that individual: is a CEO of a public company and sits on more than one outside public company board in addition to the company of which he/she is CEO (2016: two) or is not a CEO of a public company and sits on more than four total public company boards (2016: six), and attended less than 75 per cent of his/her board and committee (2016: board and key committee) meetings held within the past year without a valid reason. Although raised for discussion earlier in the 2017 policy formulation process, ISS has not provided special consideration to service on subsidiary boards within the context of overboarding.

Glass Lewis will now generally recommend that shareholders withhold their votes in respect of a director who is an executive officer of any public company while serving on a total of more than two public company boards (2016: three) or any other director who serves on more than five public company boards (2016: six). Glass Lewis further adds that it may also consider the director’s attendance record at all companies on which the director serves on the board, the size and location of the companies, the director’s board duties at the companies in question, whether the director serves on the board of any large privately-held companies and the director’s tenure on the boards in question, as well as any publicly disclosed rationale provided for the director’s continued board service.

Director Compensation

In its 2017 Canadian proxy voting guidelines, ISS has added a guideline concerning problematic practices relating to director compensation. Director compensation has been receiving more attention from governance commentators in the past few years, with particular focus on the fact that it is the directors themselves who are determining their own compensation. ISS will now generally issue a withhold voting recommendation for members of an issuer’s compensation committee if the issuer’s director compensation practices pose a risk of compromising a non-employee director’s independence or otherwise appear problematic from the perspective of shareholders. In particular, ISS identifies as problematic examples: excessive (relative to standard market practice) inducement grants issued upon the appointment or election of a new director (which may also “foster divergent incentives between those directors who have recently received such awards and those who have not”); and granting of performance-based equity to non-employee directors.

Auditor Appointments

For the 2017 proxy season, ISS has refined the formula it uses to assess whether non-audit fees paid to an issuer’s auditors are comparatively excessive and therefore could risk “potential conflicts of interest and possible compromise of auditor independence”. ISS now recognizes that certain tax compliance and preparation services (i.e., preparation of original and amended tax returns, refund claims and tax payment planning) are most economically provided by an issuer’s audit firm. Accordingly, a withhold recommendation will now generally be recommended for election of each member of the prior year’s audit committee and the appointment of auditors where non-audit (other) fees paid to the issuer’s audit firm exceed the sum of audit fees, audit-related fees and tax compliance/preparation fees. In the view of ISS, non-audit (other) fees still include tax advice, planning or consulting fees paid to the issuer’s audit firm.

Issuers should consider disclosing not just the aggregate tax fees in their annual information form (as required by Form 52-110F1), but also the fees associated with the different types of tax services provided by their audit firm.

Shareholder Rights Plans

Reflecting recent amendments to National Instrument 62-104 (see our February 2016 Blakes Bulletin: ​Finish Line in Sight: New Take-Over Bid Rules Are Coming) to support implementation or amendments to a shareholder rights plan, ISS and Glass Lewis will now require that the minimum period for a “permitted bid” (i.e., a take-over bid that does not trigger the plan) be not greater than 105 days (ISS 2016: 60 days; Glass Lewis 2016: 90 days).

Compensation Committee Performance

In its 2017 proxy voting guidelines, Glass Lewis has made a number of changes to its assessment criteria concerning compensation committee performance. In particular, Glass Lewis may recommend that shareholders withhold their votes from:

  • All members of the compensation committee if the committee fails to address shareholder concerns following an issuer’s failure to secure majority approval of a say-on-pay proposal, and
  • The compensation committee chair or all members of the compensation committee if the prior year’s say-on-pay proposal was approved, but greater than 25 per cent of votes were cast against the proposal, and the issuer’s board did not subsequently respond sufficiently to the vote, including by actively engaging shareholders on this issue

In addition, Glass Lewis has revised its guidelines to provide that they will recommend that shareholders withhold their votes from the compensation committee chair or all members of the compensation committee in a variety of situations, even if a say-on-pay vote is held (2016: only if no say-on-pay vote), including if the compensation discussion and analysis disclosure in an issuer’s management proxy circular is viewed as being deficient, the issuer has entered into excessive employment or severance agreements, performance goals are changed when employees fail to meet them, or excessive employee perquisites and benefits are allowed.

Full Value Awards

For 2017, Glass Lewis has clarified its approach to equity compensation plans that provide “full value” awards (i.e., restricted stock units or performance shares). Generally, Glass Lewis will not support the adoption or amendment of full value award plans with a rolling maximum share limit set above five per cent of the issuer’s share capital (2016: threshold was, ambiguously, “significantly lower” than 10 per cent). While Glass Lewis may accept issuers having stock option plans with a 10 per cent rolling maximum share limit, they note that full value award grants have a substantially greater cost.


  • ISS has clarified that when assessing the impact of transactional, professional, financial and charitable relationships on a director’s independence, its definitional criteria will be triggered by any such relationship within the most recently completed fiscal year and/or having been identified at any time up to, and including, the annual shareholders’ meeting.
  • ISS has added guidelines concerning when it will support the adoption of management deferred share unit plans and non-employee director deferred share unit plans.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blake, Cassels & Graydon LLP | Attorney Advertising

Written by:

Blake, Cassels & Graydon LLP

Blake, Cassels & Graydon LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.