CHAPTER 03 Corporate Governance
Other Annual Disclosure Requirements In addition to financial statements and management discussion and analysis, a public company (other than a venture issuer) must publicly file an annual information form, which provides extensive disclosure about the company and its business. Investors in Canadian public companies are entitled to vote at shareholder meetings in person or by proxy. In order to allow investors to form reasoned decisions about the way in which they will cast their votes, management must send investors an information circular that contains detailed disclosure about the matters that will come before the meeting, including specific disclosure about director and executive compensation. Some public companies use a more streamlined process – known as “notice and access” – for providing shareholders with notice concerning annual shareholder meeting materials and facilitating web-based access to those materials; this process can, in some cases, significantly reduce the costs associated with mailing complete packages of meeting materials to shareholders. Most investors hold their interests indirectly, through the book-based system. Securities regulation and industry practice seek to put all investors in the same position regarding the receipt of the information circular and their ability to direct the way their shares will be voted. Efforts in this regard have, among other things, resulted in the issuance of non-binding protocols delineating the roles and responsibilities of the key entities involved in the voting reconciliation process in an effort to make the proxy voting system more accurate, reliable and accountable.
COVID-19 created difficulties for public companies in meeting their corporate and securities law obligations, such as holding shareholders’ meetings in the face of shelter-in-place and similar restrictions. Governments and Canadian securities regulators moved quickly to grant temporary relief, notably providing extended filing deadlines and facilitating virtual shareholders’ meetings. With COVID-19 restrictions having abated, virtual-only shareholder meetings have been criticized for having the potential to disenfranchise shareholders by limiting meaningful participation. While it is still open to public companies to hold virtual-only shareholders’ meetings, we expect that Canadian public companies will revert to in-person or hybrid shareholders’ meetings.
Comply-or-Explain Governance Model
Many areas of governance that are regulated in other jurisdictions fall within Canada’s “comply-or-explain” regime under National Instrument 58-101 (NI58-101). For example, the compositions and charters of the compensation committee and of the nominating and governance committee are not mandated, but rather are the subject of best practice guidelines and disclosure requirements. The Ontario Securities Commission (OSC) and most other Canadian securities regulators have enhanced the comply-or-explain regime in the past few years to promote increased gender diversity among the leadership of public companies. TSX-listed issuers and other non-venture reporting issuers are now required to disclose annually, among other things, the number and percentage of women represented on boards and in executive officer positions; whether the issuer has adopted a written policy on the representation of women on the board (and if not, why not); and whether any targets have been adopted regarding female representation on the board or in executive positions (and, again, if not, why not).
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