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CORPORATE GOVERNANCE

Board Games 2012: Methodology Add to ...

24. b) Does the company calculate and display the prior year’s grant rate for option grants as a percentage of shares outstanding? One mark if yes, zero if no.

25. Does the company award stock options to directors? One mark if no, zero if yes.

26. Are there non-voting or subordinate voting shares? Ten marks if there are no dual-class shares. Marks are reduced depending on the gap between the percentage of votes controlled by the superior voting shares and the percentage of the company’s equity they represent, using the following guidelines: Four marks if the ratio is less than 3:1. Three marks if the ratio is between 3:1 and 4:1. Two marks if the ratio is between 4:1 and 5:1. Zero marks if the ratio is 5:1 or worse.

If the company has no dual-class shares, BUT has other unequal voting rights, use the following two-part marking scheme instead of the above:

Can shareholders elect the whole board, or are some directors appointed (by a shareholder or manager, for example) so that their names don’t appear on the proxy ballot? Five marks if all are elected, three marks if one director is appointed and not elected, two marks if more than one is appointed if not a majority, zero marks if a majority are appointed and not elected.

Does any party – an administrator, manager or shareholder, for example – have rights unequal to ownership? Can any party nominate directors out of proportion to ownership? Can anyone veto key issues – such as changes to senior management, or assets sales and purchases – without owning a majority of the shares? Five marks if all rights are equal, three marks if a party has disproportionate rights compared with ownership stake, zero marks if a party has rights that have little or no relationship to ownership stake.

Disclosure: worth 12 marks out of 100

27. Does the company provide a full explanation of which directors are related and unrelated and why? One mark if full disclosure, and if the disclosure is included in the part of the proxy circular where companies disclose which directors on the board are related or unrelated. Zero marks if company does not disclose a director’s relationship in the proxy circular.

28. a) Does the company disclose detailed biographies to explain directors’ qualifications to represent shareholders? Does the biography demonstrate why this director is a good candidate for election? Relevant information might include educational background, non-profit affiliations, industry experience, career highlights or special achievements. One mark if yes, zero marks if not.

28. b) Does the proxy circular specify the skills or areas of expertise of each director in the form of a “skills matrix” or in another format? The details must be explicitly laid out – it is not adequate to assume they can be inferred by reading a basic biography. One mark if yes, zero if no.

29. Did directors attend all meetings, and does the company remove directors with poor attendance? Two marks if all board and committee meeting attendance is disclosed and board members attended at least three-quarters of board and committee meetings. One mark if any board member has missed more than one-quarter of meetings and is not put up for re-election. Zero marks if committee attendance is not disclosed, or if a board member or a committee member missed more than one-quarter of meetings and is put up for re-election.

30. a) Does the company disclose the total accumulated value (a dollar amount, not just number of units held) of directors’ equity holdings, including shares and share units? Two marks if yes, zero if no.

30. b) Does the company explain how each director’s share ownership meets (or fails to meet) the required share ownership guideline? For example, does the equity ownership chart include a column showing how the ownership compares to the requirement as a percentage, multiple or dollar value compared to the requirement? One mark if yes, zero if no. Zero if there is no ownership requirement.

31. a) Does the company disclose the dollar value of fees paid to an outside compensation consultant? One mark if yes or if no consultant was used, zero if no.

31. b) Does the company disclose whether the compensation consultant provided any other services in the prior year, and, if so, how much money was paid for the other services? One mark if yes or if no consultant was used, zero marks if no.

32. a) Does the company disclose directors’ ages? One mark if yes, zero marks if no.

32. b) Does the company disclose whether or not it has a retirement policy for directors, and what the details of the policy are? One mark if yes, or if company states it has no retirement policy for its directors. Zero marks if no disclosure.

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