TORONTO, Sept. 7, 2011 /CNW/ - The Canadian Investor Relations Institute
(CIRI), after significant review and deliberation, today published its
comments on the discussion paper entitled 'The Quality of the
Shareholder Vote in Canada' that was released earlier by Davies Ward
Phillips & Vineberg LLP (the Davies Paper).
CIRI strongly commends the initiative represented by the wide ranging
discussion in the Davies Paper and has determined that there are
several issues of specific concern to the investor relations community.
In general, CIRI agrees that the proxy voting system in place today is
too complex, particularly for the limited size and scope of the
Canadian capital markets compared to other jurisdictions and that this
complexity contributes to market inefficiency.
"Complexity is not an excuse for ignoring the current poor state of the
proxy voting process in Canada, especially given significant
opportunities to benefit from advances in technology and governance
practices. However, there is a need for continued leadership on this
issue," says Tom Enright, CIRI President and CEO.
CIRI is also concerned about the general lack of transparency and
disclosure throughout the proxy voting system, especially when compared
to the significant degree of disclosure demanded of its issuer members
by both regulators and institutional investors.
Transparency of share ownership is negatively impacted by an increasing
proportion of OBO (Objecting Beneficial Owner) investors electing to
shield their ownership positions from the very companies from whom they
demand more information, in the name of transparency.
"It seems counter-productive to continue to improve the disclosure and
governance aspects of the capital markets only to have these
improvements potentially lost through an inadequate proxy voting
process," says Enright.
"It is important for organizations such as CIRI to voice their views and
concerns with the proxy voting process," noted Carol Hansell Senior
Partner, Davies Ward Phillips & Vineberg LLP.
In summary, CIRI supports the recommendation in the Davies Paper that a
task force be struck to consider the key issues raised in the paper and
to seek means of addressing those issues. CIRI also strongly recommends
that the following points be included in the issues to be considered:
OBO/NOBO Concept: The entire NOBO (Non-Objecting Beneficial Owner) and OBO (Objecting
Beneficial Owner) practice should be reviewed. If continued, the NOBO
status should be the default option when establishing brokerage
customer accounts and a fee should be applied against those shareowners
seeking OBO status.
Proxy Advisory Firms: Under a fair disclosure environment, any report/recommendation of a
proxy advisory firm should be provided to the subject issuer prior to
the report being issued to the proxy advisory firm's institutional
clients, in a manner to provide sufficient time to provide a real and
meaningful opportunity for issuers to correct factual research errors
or engage in a dialogue with advisory firms if contentious issues
Investor Responsibility to Vote: Those who borrow shares and do not have an economic interest in the
long-term welfare of the issuer, should be prohibited from voting the
borrowed shares; the responsibility to vote should remain with the
lending shareholder, despite shares being temporarily in the hands of
the borrower. In addition, votes on securities of specific issuer
companies should have some mandated input from the portfolio managers
or traders directly responsible for the decision to purchase and own
Replacing the Paper-Based System: Electronic delivery should be the default option, although
shareholders can elect to receive paper copies when they open a
brokerage account. Electronic voting should be implemented across the
board. Regulations should be drafted to encourage an orderly but
time-limited transition from hard-copy paper delivery of proxy
materials to electronic delivery.
A complete copy of the CIRI comment paper is available at www.ciri.org.
CIRI is a professional, not-for-profit association of executives
responsible for communication between public corporations, investors
and the financial
community. CIRI contributes to the transparency and integrity of the
Canadian capital market by advancing the practice of investor
relations, the professional competency of its members and the stature
of the profession. With more than 600 members and four chapters across
the country, CIRI is the voice of IR in Canada. For further
information, please visit www.ciri.org.
SOURCE Canadian Investor Relations Institute
For further information:
President and Chief Executive Officer, CIRI