Institutional Shareholder Services Inc. (ISS) advises its institutional investor clients on how to vote at public company AGMs and therefore has significant influence over the election of directors. ISS has now confirmed that if:
- a Toronto Stock Exchange (TSX) listed company has not adopted a satisfactory formal written gender diversity policy; and
- has no female directors serve on the board;
then ISS will generally recommend withhold votes for the election of the chair of the nominating committee, or the chair of the board if no nominating committee has been identified. Note that, pursuant to the foregoing, the “withhold” recommendation is subject to a “double-trigger” (i.e. the company must fail both tests).
With respect to the written gender diversity policy, ISS has stated:
- The policy should include a clear commitment to increase board gender diversity. Legal boilerplate or contradictory language may result in withhold votes for directors; and
- The policy should include measurable goals and/or targets denoting a firm commitment to increasing board gender diversity within a reasonable period of time.
If the policy is not adequate, that could lead to withhold recommendations.
This policy is effective for the 2018 proxy season for all S&P/TSX Composite companies. The policy will not apply to non-index companies until the 2019 proxy season. Going forward, newly listed or graduated companies will be afforded a one-year transition period before becoming subject to the policy.
Invitation for Discussion:
Corporate governance is an increasingly important topic for boards to consider. If you would like to discuss this proposed new ISS policy, or any other Canadian securities law matter, please do not hesitate to contact one of the lawyers in the business law group at Linmac LLP.
Disclaimer:
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.