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CIBCMichelle Siu/The Globe and Mail

Three prominent directors at Canadian Imperial Bank of Commerce faced a high level of shareholder protest when the bank held its latest board election, and a big reason why was a recommendation from an influential proxy advisory firm that investors withhold their support.

Shareholder advisory firm Glass, Lewis & Co. recommended that shareholders not back the directors – Leslie Rahl, John Manley and Ronald Tysoe. Glass Lewis said that Ms. Rahl had showed a "significant lack of oversight" in a previous board role at Fannie Mae, and Mr. Tysoe and Mr. Manley have too many commitments to provide adequate attention to their roles on CIBC's board.

Ms. Rahl this year received a "withheld" vote on almost one-fifth of ballots cast. Mr. Tysoe received a "withheld" on 14.4 per cent of ballots, and Mr. Manley on 14.5 per cent. The result was that CIBC had easily the least well-supported board of all the big banks this election cycle.

Here is the rationale, as put forward by Glass, Lewis in its recommendation to its subscriber base of institutional investors:


"We recommend withholding votes from the following nominees up for election this year based on the following issues:

Nominee Rahl served on the board of Fannie Mae from 2004 to 2008, including on its compliance, executive and housing and community finance committees. The housing and community finance committee was responsible for overseeing Fannie Mae's single-family mortgage, capital markets and housing and community development divisions, as well as its contribution to affordable housing and community development. While this committee may have been responsible for lowering lending standards at Fannie Mae in fulfilling its role to contribute to "affordable housing and community development," it remains unclear what duties it had in overseeing Fannie Mae's role in buying mortgages from unsuitable borrowers, which contributed to both the collapse of Fannie Mae and contributed to the sub-prime mortgage crisis.

Moreover, in her service of Fannie Mae, Ms. Rahl chaired the risk policy and capital committee, which was responsible for "capital management and risk management, including overseeing the management of credit risk, market risk, liquidity risk, and operational risk." Currently, she serves on the Company's risk management committee. Given the significant lack of oversight provided by Ms. Rahl during her tenure at Fannie Mae, particularly in the area of risk management, we question her continued service on the Company's company board, especially in light of her position on the risk management committee and the industry in which the Company operates.

Nominees Tysoe and Manley serve as chairman and member of the audit committee, respectively, while both serve on more than three public company audit committees. Given Mr. Tysoe's service as audit committee chairman of one of Canada's largest banks, and in light of Mr. Manley's service on the audit committee of four large Canadian companies, three of which are members of the S&P/TSX-60 index, we believe that the time commitment required by service on this many audit committees may preclude these directors from dedicating the time and attention required to fulfill important duties to this Company's shareholders."


According to Bloomberg, Mr. Tysoe sits on five boards. In addition to CIBC, they include Cintas Corp., Scripps Networks Interactive Inc., Pzena Investment Management Inc. and Taubman Centers Inc. He chairs the audit committees of CIBC, Scripps and Cintas. He is a member of the audit committees of the remaining two boards.

Mr. Manley sits on four public company boards - CIBC, Telus Corp., Canadian Pacific Railway Co. and CAE Inc.

He is on the audit committees of all four boards.

This is not the first show of displeasure from shareholders of CIBC. Glass, Lewis noted that last year Ms. Rahl and Mr. Tysoe "received withhold votes from approximately 16.5 per cent and 12.6 per cent of shareholders, respectively.

(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)

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