Highlights from the CSCS Conference
The conference offered more sessions than ever before, featuring representatives from shareholder groups, issuers, service providers, regulators, voting agents and educators.
The opening keynote address really set the tone for the conference as Richard Leblanc, associate professor at the Faculty of Liberal Arts and Professional Studies at York University, provided a corporate governance update entitled ‘50 nuggets in 60 minutes.’ Among the issues Leblanc said the governance community needs to focus on are:
Board diversity:Leblanc argued that the business case for having women on boards hasn’t been made conclusively, but he did say there was evidence that there are other positive things women contribute to boards that make them valuable. He also said organizations were redefining diversity inappropriately: ‘Sometimes it gets defined away so that you think you are a diverse board, and you really are not.’
Director independence: According to Leblanc, organizations need to make sure directors are truly independent and adequately skilled to do their jobs. Conflicts of interest that show up later could be costly.
Regulation: Leblanc stated that Dodd-Frank’s whistleblower provisions and the UK Bribery Act will dominate the regulatory landscape for most corporations. He also predicted that listed companies will be pressured to adopt ‘pay for performance’ metrics when calculating executive pay.
Finally, Leblanc said that more clarity is need from regulators on which laws companies are mandated to comply with and which offer the opportunity for companies to explain why they should receive an exemption. ‘There needs to be leadership from regulators to tell companies what constitutes complying and what constitutes explaining,’ he explained.
Proxy governance was discussed at the conference, including a great session on the proxy voting process. Jill Aebker, deputy general counsel and secretary for Tim Hortons, stressed that the practice of borrowing and selling shares for the purpose of voting was being abused and could hurt companies if they aren’t prepared. ‘Issuers want to make sure that their votes are aligned with the long-term best interests of their company,’ she said.
Tom Enright, president and CEO of the Canadian Investor Relations Institute (CIRI), made a case for greater disclosure around the voting process. He suggested that proxy advisory firms should have to show that they’ve conducted actual analysis in order to arrive at their recommendations for a particular vote. He also said institutional investors ‘need to disclose to what degree they rely on the information they receive from the proxy advisory firms.’
Riyaz Lalani, chief operating officer of Kingsdale Shareholder Services, gave a detailed presentation on shareholder engagement in Canada. When it comes to the board’s communication with shareholders, he said, perhaps the best way to show you are serious is to have ‘a rock-star board’. He used the example of Apple stacking its board with several former CEOs and former vice president Al
Gore as a way to make sure directors perform at a high level, but also pointed out that regular consultation with major shareholders was no longer a ‘best practice’ but a requirement to keep activist investors at bay.
Lalani also warned issuers to keep an eye on how the recommendations of the leading proxy advisory firms are influencing major shareholders. He noted that ISS Canada is placing a special emphasis on practices that increase the power of shareholders to judge and direct the activity of corporate boards. The actions of directors are under higher scrutiny than ever before.