One of the biggest changes to hit the boardroom in the past year is the practice of allowing shareholders to vote against individual directors. The policy began in the United States and has spread quickly to Canada, thanks in part to a huge lobbying effort by the Canadian Coalition for Good Governance.
Thirty of the 272 members of the S&P TSX index now promise to ask for the resignation of any director who fails to gain the votes of at least 50 per cent of investors. That's a huge number given that the first changes began last year. Traditionally, shareholders could only register their displeasure with a director by withholding their vote, a system that technically lets board members be elected if a single ballot is cast in their favour.
Some corporate leaders believe the change is just common sense. "This is just the right thing to do. Everybody stands on their own credibility and their own merits," says Sam Kolias, chief executive officer of Boardwalk Real Estate Investment Trust, one of only four income trusts on the index that have adopted the practice.
Others who say they are considering adopting the policy also worry it could potentially undo years of effort to get the right mix of qualifications among directors. "We haven't adopted majority voting because we feel it would really be unfair to have one of our directors voted off the board after we've worked hard to build the skills and experience set we have," says Frank Proto, chairman of Agrium Inc.
Mr. Proto said boards need to manage director performance and should all be held accountable for making sure directors who do not make the grade are asked to leave. That said, Agrium will examine making the change again next year.
About 40 per cent of all corporations on the index still only allow investors to vote for a single slate of candidates. Slate voting remains even more widespread among income trusts, where close to 80 per cent of companies ask investors to vote for trustees as a group.
