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Board roomOleg Prikhodko

Canadian shareholders want new powers to propose director nominees for boards, arguing the current process is so cumbersome and expensive that alternative nominees are rarely put forward.

The Canadian Coalition for Good Governance (CCGG), which represents many of the country's largest institutional investors with cumulative assets of $1.5-trillion, is urging the Ontario Securities Commission to adopt a host of reforms to improve shareholder democracy.

The CCGG document is in response to a call by the OSC for comments on proposals to improve the proxy-voting system in Canada. These include requiring annual "say-on-pay" votes and requiring companies to implement "majority voting" policies that would see directors having to resign if they don't get a majority of votes in annual board elections.

But the CCGG's response goes beyond the voting reforms proposed by the commission, calling for deeper reforms in a broader array of areas, including mandatory separation of the roles of chairman and CEO, and mandatory reporting of detailed voting results in annual elections.

CCGG executive director Stephen Griggs said there have been few formal opportunities in recent years to propose shareholder reforms, so the coalition wanted to table a full collection. "We felt it was appropriate that regulators not just zero in on a few narrow issues," Mr. Griggs said.

For example, the CCGG wants the OSC to emulate reforms in the United States which allow shareholders to propose directors for election if they own 3 per cent of a company's shares for a three-year period. Mr. Griggs said that the CCGG supports a similar initiative, but that the U.S. threshold is high; his group would prefer 2-per-cent ownership for one year.

The CCGG argues that Canadian shareholders do not have a meaningful way to propose new nominees for boards because existing options, like mailing proxy circulars or filing proxy resolutions, are prohibitively expensive or so cumbersome they are likely to fail.

The CCGG support for mandatory say-on-pay votes is in sharp contrast to a submission earlier this week from the Institute of Corporate Directors, which has 4,500 members across Canada. The ICD opposed mandating say on pay, saying directors have the responsibility to determine pay levels and shareholders do not have the information or expertise to vote knowledgably on the issue.

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