3 Create and refresh your evergreen lists. The grace period for holdover directors to continue in office is limited to a maximum of 90 days. For many Canadian boards, identifying and recruiting a qualified candidate in such a short period will prove challenging. For that reason, we recommend that boards carefully consider formalizing evergreen lists and director identification, selection and nomination policies to ensure they can act swiftly and consistently if one or more directors fail to receive majority shareholder approval for their election. The board should carefully consider the role unelected directors play on the board during their holdover period. A holdover director may prove a valuable resource in transitioning files to the successor director, but in many cases an unelected director’s participation in the deliberations and operations of the board should be reduced or eliminated. 4 Assess board and shareholder engagement practices. A board should not take the outcome of an uncontested election for granted (if it ever did). We recommend that boards carefully consider their practices relating to board and committee meeting attendance, director skill and assessment, overboarding and director–shareholder engagement. These practices will be critical to maximize shareholder support for incumbent nominees to avoid situations in which directors fail to receive sufficient votes for re-election, including in the face of against campaigns. Indeed, boards should consider engaging with shareholders well in advance of annual general meetings to solicit their views on the board’s composition and its members’ relative strengths, skills and abilities. A well-considered engagement policy will continue to be a necessary and effective governance tool. Issuers may also look to routinely engaging proxy solicitation agents to assist in generating support for their nominees. 5 Update disclosure. For the 2023 proxy season, CBCA public corporations will need to update their circular disclosure to account for the new regime. For TSX-listed issuers, hopefully aided by further guidance from the TSX, this will mean updating existing TSX majority voting disclosure with details on the new regime. CBCA issuers listed on other exchanges will need to turn their disclosure pens to majority voting for the first time. Where appropriate, CBCA public corporations may also want to include disclosure on the new risks to board stability created by true majority voting.
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Governance Insights 2022
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