New guidelines for corporate boards aim to prevent shareholder confrontations, proxy battles

A blue-chip roster of Canadian corporate directors and investors has crafted a roadmap laying out how boards should build relationships their investors before unhappiness with the way a clients are being run leads to confrontation.

Against a backdrop of rising investor activism and proxy battles, the Institute of Corporate Directors is presenting six key recommendations Tuesday in a paper compiled by an ICD advisory committee.

“We feel that both shareholders and boards and their companies may benefit from a regular dialogue, thus short-circuiting the need for a confrontational situation that results from shareholders feeling that they’re not heard,” said Eileen Mercier, an old chair of the Ontario Teachers’ Type of pension Board who sits around the ICD committee.

Any discontent that might result in a public showdown, for example unhappiness over executive compensation or even the re-election of the certain director, could be defused by ongoing engagement between directors and key investors, Mercier said.

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The committee’s fellow members include corporate directors Ian Bourne, as well as David Denison, former chief executive from the Canada Type of pension Investment Board, and West Face Capital CEO Greg Boland.

Rather than ignore the trend of shareholder activism, or leave meetings with key shareholders to management, the paper encourages directors to actively build relationships shareholders to foster a better knowledge of their perspective.

Directors helps it to be their business to understand who their most critical investors are, and just what their stake within the company is, the new ICD paper advises.



They also needs to make sure that they get decision-makers in the room once they meet, and that they set specific topics to become discussed. Directors will also be urged to become well briefed on which to speak about and just what can be disclosed, and to review and consider information gained from the engagement with shareholders.

The ICD advisory committee’s members are very well conscious of the problems involved in shareholder engagement, and what can happen when it doesn’t happen.

As head of non-public equity firm West Face, Boland has jousted with the boards of firms including Agrium Inc., Maple Leaf Foods Inc., Talisman Energy and SNC Lavalin Group.

Fellow committee member Michael Wilson is the former president and chief executive of Agrium, while Bourne, now chair from the board of Ballard Power Systems Inc. and a director at the CPPIB, Wajax Corp., and Hydro One, was chair of SNC Lavalin from 2013 to 2015.

Canadian firms have drawn interest from activist investors both at home and from the United States, partly since the regulatory regime is viewed as more hospitable to shareholders seeking to influence a business and it is board of directors.

It is easier, for example, for stockholders to a shareholders’ meeting prior to the traditional annual gathering, to access shareholder lists, and also to present ideas for change without rigorous regulatory scrutiny.

Another key distinction between the countries is the fact that U.S. directors have a court-recognized duty to act within the interests of shareholders, while boards in Canada have a fiduciary duty to act within the needs from the company and not solely of shareholders.

The ICD’s new roadmap for Canadian company engagement investors is built to accommodate variations in america while complementing protocols established in the United States.

“We possess the ideal setup here as the majority of the large public companies come with an independent chair, which isn’t true in the U.S.,” Mercier said, noting that firms that already meet with shareholders often use the chair as a main point of contact.

“The main objective is to help boards that don’t regularly engage with their shareholders to determine the way the establishment of a dialogue might be beneficial.”

bshecter@nationalpost.com

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