Governance Insights 2024
With the adoption of the August 2022 amendments to the Canada Business Corporations Act (CBCA) to introduce true majority voting for directors, a “vote-no” campaign can now yield concrete results whereby a director candidate receiving a majority of “no” votes will fail in his or her election. While we are aware of only one vote-no campaign against a CBCA company in 2023, future campaigns may be on the horizon. For example, recommendations from proxy advisory firms to vote against certain directors owing to alleged governance shortcomings could have greater impact, especially if used by key shareholders to catalyze a larger vote-no campaign. Pursuing a vote-no campaign can be relatively cost-effective and result in a course change at a target even if the campaign does not succeed in dislodging an incumbent director. In that regard, directors whose votes fall dangerously close to negative territory may feel pressure to address shareholder criticisms. As shareholders of CBCA companies now have greater influence at the ballot box, attention has turned to how incumbent directors may best protect themselves. In our view, a target’s best defence is to ensure a robust and ongoing campaign of shareholder engagement and appropriate responsiveness to shareholder feedback. 2 | “Vote-No” Campaigns May Gain Prominence as an Activist Tool
3 | Mandatory Climate Disclosure: Here to Stay (Eventually)
As reported in the 2022 edition of Davies’ Governance Insights , in October 2021, the Canadian Securities Administrators (CSA) released for public comment proposed National Instrument 51-107— Disclosure of Climate-related Matters (CSA Proposal), which was aimed at improving the consistency and comparability of climate disclosure and aligning Canadian disclosure standards with the expectations of international investors and, more generally, assisting investors in making informed investment decisions. Currently, Canadian securities law requires issuers to disclose any material information, including material climate-related information. The CSA Proposal imposes a more stringent disclosure requirement, calling for the disclosure of specified climate-related information even if, in some cases, this information is not considered material. Despite the targeted effective date of December 31, 2022, the implementation of the CSA Proposal has been put on hold while the CSA studies the proposal of the U.S. Securities and Exchange Commission (SEC) for The Enhancement and Standardization of Climate Related Disclosures for Investors (SEC Proposal) published in March 2022, as well as the International Sustainability Standards Board’s IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) (ISSB Standards) issued in June 2023. Although neither the CSA Proposal nor the SEC Proposal has yet been adopted, we expect that the ISSB Standards and recent developments in the proxy sphere will inform Canadian issuers’ climate-related disclosure for 2024 and going forward. For example, The Globe and Mail ’s “Board Games” introduced three new criteria in 2023 aimed at evaluating board oversight for the environment, and the climate expertise and
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Davies | dwpv.com
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