Skip to main content

Toronto-Dominion Bank (TD) logos are seen outside of a branch in Ottawa, Ontario, Canada, May 26, 2016.

Shareholders of Toronto-Dominion Bank have struck a symbolic blow in favour of a broader push to give large institutional investors more sway in naming company directors.

A shareholder proposal urging the bank to adopt a proxy-access bylaw narrowly passed at TD's annual meeting on Thursday, with 52.2 per cent support. It was the first proxy-access proposal put forward at any Canadian company, according to shareholder services firm Kingsdale Advisors.

The vote is not legally binding, and Canada's two largest banks by assets – TD and Royal Bank of Canada – have pushed a decision farther down the road by promising to consult on proxy access and report back at next year's annual meetings. But similar provisions have spread like wildfire at U.S. companies over the past three years, with more than half of S&P 500 firms adopting proxy access in some form.

And some believe that once large banks move in that direction, it is only a matter of time before smaller Canadian companies follow suit.

"I think that means we'll see proxy access coming to Canada very soon, very fast," Victor Li, executive vice-president of governance advisory at Kingsdale, said in an interview. If big banks agree to the new measures, the move to proxy access will be "a non-stop train."

The proposal passed by TD shareholders would allow investors that have owned at least 3 per cent of the bank's shares for three years or more to nominate up to a quarter of the board candidates in proxy materials. That's still a high bar – it would take $3.7-billion in TD stock to wield proxy-access rights. But if the same terms trickle down to smaller companies, "that will have real teeth," Mr. Li said.

Shareholders at RBC will vote on an identical proposal at the company's annual meeting next week, and could be emboldened by the TD result.

In opposing the proposal, TD had argued that Canada's Bank Act already allows shareholder proposals to nominate directors under some conditions, and the suggested proxy access "is non-compliant" with the act. But Mr. Li called that "a lame argument," arguing that the banks are fully capable of giving shareholders more rights.

In a statement, TD has said that even before the proxy-access proposal surfaced, the bank held discussions with the Canadian Coalition for Good Governance, a prominent advocate on governance issues that called for greater proxy access last year, "about evolving the current Canadian regime."

Want to interact with other informed Canadians and Globe journalists? Join our exclusive Globe and Mail subscribers Facebook group

Globe political columnist gives his take on the new Liberal budget, describing it as a plan mired in debt that will hinder the Trudeau government's agenda.

Report an error

Editorial code of conduct

Tickers mentioned in this story