A key feature of the new system is a recommendation to notify all shareholders who are affected by an error in the vote counting system.
Canada's securities regulators want industry players involved in counting shareholder votes to agree to notify investors whenever they reject or prorate their votes because of problems in the voting process.
The Canadian Securities Administrators, an umbrella group for Canada's provincial securities commissions, released a notice on Thursday laying out a new regime aimed at eliminating many of the problems that have plagued shareholder vote counts in Canada.
A key feature of the new system is a recommendation to notify all shareholders who are affected by an error in the vote counting system, notably those whose votes are rejected for technical reasons or are prorated because excess numbers of votes have been cast improperly. An agreement to notify shareholders of such errors could prove burdensome but would create an incentive for players in the system to investigate problems and ensure vote results are accurate.
Naizam Kanji, director of mergers and acquisitions at the Ontario Securities Commission who has worked on the voting project, said the expectation is that new processes will fix many problems that have plagued the voting system, making issues such as over-voting – in which more votes are cast than are eligible to be voted – a rare occurrence.
"The goal is to take this fragmented and opaque system and really stitch it together through these protocols," he said.
The new regime comes after years of complaints by shareholders and companies about inaccurate voting results. Companies have complained about frequent instances where more votes are cast at a meeting than the number of shares eligible to be voted, or where major shareholders' votes are missed or rejected without their knowledge.
Securities regulators undertook a detailed review of voting at six companies' uncontested meetings in 2013 to understand the voting process. The results, published in early 2015, dramatically confirmed concerns about the system, finding over-reporting and over-voting of shares at every meeting studied.
The response, published Thursday by regulators, will create dozens of new protocols for all players in the system – including intermediaries such as brokerage firms that manage votes for their clients, as well as tabulators who count votes and others in the system – to improve vote counting. Regulators expect the system to be operating for the 2017 proxy voting season.
Mr. Kanji said the new process relies entirely on voluntary co-operation by participants because the fastest way to have an immediate impact is by publishing the protocols as staff "guidance" rather than creating new rules. But he said the results will be watched closely, and mandatory guidelines could still be developed to address remaining problems.
"We believe the parties that are part of the system are really motivated to work with us in implementing these protocols," he said. "In fact, our anticipation is they will start doing so on a voluntary basis even before these protocols are finalized."
The guidelines will require companies working in the voting system to bear the cost of making improvements. But Mr. Kanji said the guidelines will not require brand new systems and should not be expensive. He said to the extent there is "some incremental cost" of improving the process, "I personally think it is worth it."
Some major institutional shareholders have asked for end-to-end voting confirmations, ensuring they can check whether their votes have been received and how they were recorded. The guidelines do not mandate such reporting but say companies providing voting services "are encouraged to work together" to develop an end-to-end vote confirmation system.
Mr. Kanji said end-to-end vote confirmations are a long-term goal, and the new protocols create a "baseline" that could be expanded later.
"That's a good goal for the future, but considering where we are now and the kinds of issues we have identified, that is a next-level issue," he said.
The new protocols have been published for public comment until July 15. Regulators also plan to hold industry roundtables in the fall to discuss the proposals.
Janet McFarland