Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50885
opportunity for the board to reflect on the reasons underlying the majority withhold vote and then make a decision that's in the best interests of the corporation." In any case, MacDougall says major- ity voting is useless in controlled compa- nies where a majority shareholder is able to appoint the whole board alone. The CCGG's Cotte calls the failed democracy must take into account the interests of both majority and minority shareholders," she says. A number of countries around the world have answered the call for share- holder democracy with an advisory vote on executive compensation and "golden parachute" payments that give share- holders a "say on pay," and the OSC has Where say on pay has been implemented, it's been implemented as a legislative response by politicians to a public outcry. It's not been done as a result of a deliberate reflection of what is the right model from a governance perspective. We need to look at this from the Canadian market. ANDREW MACDOUGALL, Osler Hoskin & Harcourt LLP election argument a "bit of a red her- ring" because there are procedures already laid out in the CBCA for the appointment of replacement directors or a special meeting to elect new ones, while Anand suggests that if directors are unable to convince a majority of their shareholders to back them for any reason, then they "should be replaced by others who can." Anand acknowledges that majority voting is of little assistance to minority investors in controlled companies, urg- ing the OSC to look into how they can be protected. "A principle of shareholder also vowed to review the issue with a view to developing regulatory proposals. Legislation in the U.K. and European countries requires companies to give shareholders the vote. In the U.S., the Dodd-Frank Act requires every pub- lic company to hold a say-on-pay vote at least every three years. In Australia, legislators gave the vote some teeth by forcing a resolution to remove the entire board when the "no" vote on executive compensation exceeds 25 per cent for two years running. In the Netherlands, the vote is actually binding, but few in Canada are prepared to go that far. Anand's panel envisions an advisory vote that enables shareholders to "reg- ister their views" on compensation, and open a dialogue with the corporation's senior management and board that will "likely lead to better and more fruitful exchanges." Cotte sees it as a way for investors to let off steam that could actually benefit directors, especially those on compen- sation committees. "From the corpo- rate perspective, they should embrace this. Say on pay gives shareholders an opportunity to express their view, short of voting against the directors. They can send a signal that the approach to compensation may be off, without actu- ally withholding their vote," she says. At Magna, Shakeel's not buying it. "If the ultimate goal is engagement, why do you need this, just engage. Engage in discussions with the board, or the chair of the board, whatever it might be," he says. According to MacDougall, Canadi- an corporations have a strong history of communication and consultation with shareholders, and he says the binary nature of the vote means it adds little to the discussion. "There's no useful information that gets conveyed through say on pay other than a bunch of shareholders aren't happy with the compensation decisions for that year," he says. "It doesn't con- vey what it is that was wrong with the compensation, and it doesn't do it in a longer-term basis." He says political and financial crises and scandals have been the spark for say-on-pay votes in other jurisdictions, especially the U.S., and ... to help you navigate legal obstacles, outside your window and around the world... Untitled-1 1 INHOUSE OCTOBER 2011 • 6/27/11 9:10:19 AM 21