ISS Proxy Voting Guidelines Updates: What Does that Mean for Canada?

Global Governance Advisors
Last week, ISS released the 2018 Americas Proxy Voting Guidelines Updates, detailing policy changes for U.S, Canada and Brazil.
The biggest changes for Canada include:
  • Pay for Performance Evaluation – Relative Quantitative Screening
    • Now incorporates the ranking of total pay for CEO and financial performance of a company within a peer group, each measured over a three-year period within the Relative Pay & Performance test under Quantitative considerations. A detailed white paper will be provided at a later date.
  • Director Overboarding Policy (effective for meetings on or after February 1, 2019 for TSX-listed companies only. Does not apply to TSX Venture)
    • Withhold votes for individual director nominees including:
      • Non-CEO directors serving on more than five public company boards; or
      • CEOs of public companies serving on the board of more than two public companies besides their own, i.e., votes to be withheld only at their outside boards.
  • Gender Diversity Policy (effective for TSX Composite Index companies starting 2018. Applies to all TSX-listed companies starting February 2019)
    • Withhold votes for the Chair of the Nominating Committee where:
      • The company has not disclosed a formal written gender diversity policy; and
      • There are zero female directors on the board.
  • Board Structure & Independence (TSX only)
    • New language has been added relating to votes withheld for any Executive Director or Non-Independent, Non-Executive Director where the board:
      • Is less than majority independent; or
      • Lacks a separate compensation or nominating committee.
  • Non-Independent Directors on Key Committees for TSX-listed companies
    • Withhold votes for members of the audit, compensation, or nominating committees who:
      • Are Executive Directors;
      • Are Controlling Shareholders; or
      • Is a Non-employee officer of the company or its affiliates and among the five most highly compensated.
  • Non-Independent Directors on Key Committees for TSX Venture companies
    • Withhold votes for Executive Directors, Controlling Shareholders or a Non-employee officer of the company or its affiliates who is among the five most highly compensated, on condition that they:
      • Are members of the audit committee;
      • Are members of the compensation committee or the nominating committee and the committee is not majority independent; or
      • Are board members where the entire board fulfills the role of a compensation committee or a nominating committee and the board is not majority independent.
ISS also made certain modifications to their policy on defining Director Independence, i.e. re-classification of certain situations under different categories, Majority-Owned Company policies and Advance Notice requirements.
For more information, please refer to the link above.