Initial talks about the development of a broad-based plan to address a multitude of problems with the Canadian proxy system are under way, and there is hope that some workable solutions will be hammered out for implementation later this year.
David Masse, chairman of the Canadian Society of Corporate Secretaries (CSCS), says the initial meeting he organized in July, which included 16 major industry players and regulators, sought to lay the groundwork for progress on a number of vexing issues.
‘What I am trying to do is launch a formal five-year program to solve the proxy voting plumbing problem here in Canada,’ says Masse. ‘And what that involves is a fundamental and complete shift to eliminate all paper from the system – not as an opt-in, but as a must-have.’
Masse, who has been a leading advocate for shareholder democracy in Canada for years, says he wants to eliminate manual processes that are prone to human error and paper processes that are slow and inefficient. He has so far convinced 16 entities to participate in developing the plan, including two of Canada’s largest banks, the Toronto Stock Exchange, the Canadian Depository for Securities, the Canadian Coalition for Good Governance, the Ontario Teachers’ Pension Plan, the British Columbian Investment Management Corporation and the Share Transfer Association of Canada and its participating transfer agents. He said the initial meeting could encourage other interested parties to join additional discussions over the summer.
Under ideal circumstances, Masse would like to see the following changes included in a five-year proposal:
• Widespread implementation of XBRL tagging so that businesses’ financial and accounting data can be electronically searched, extracted or downloaded
• The elimination of the objecting beneficial owner/non-objecting beneficial owner (OBO/NOBO) distinction
• New rules that would allow shareholders to hold their shares through anonymous nominees
• New rules on how shares of portfolios that are loaned can be voted, with the possibility that the shares could be loaned ex-vote
• A revamping of the system that establishes record dates; this would include the corporation statute being amended to reduce to five days the time needed to establish a record date prior to a company meeting.
Masse says the five-year program would actually start with a two-year period of data mapping exercises to precisely determine all the information flows among all intermediaries in the Canadian capital markets. This period would also include an in-depth analysis of the merits of eliminating the OBO/NOBO system and what the proposed alternatives might be.
In addition, regulators would begin mapping out the statutory reforms that need to take place, in both the securities law and corporate law sectors, to make many of the proposed reforms work. Masse says the five-year plan would have definite milestones, timelines and quarterly reporting mandates.
Masse concedes that the ambitious plan will only work if all key stakeholders compromise and come together to create ‘an auditable, end-to-end, reliable system that is entirely machine-based’.
