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Legal & Regulatory Changes
Canada
January 15 2008
Executive Compensation a Growing Concern
The Shareholders Association for Research and Education (SHARE) today released its 2007 Key Proxy Vote Survey. The national survey shows growing support among investment management firms for selected shareholder proposals that address excessive executive compensation.
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December 7, 2007
Canada Tightens Rules Applying To Foreign Investment for State-Owned Enterprises
In a change to the Investment Canada Act (ICA), the federal government will now review certain transactions to determine if, foreign investment by state-owned enterprises will, on balance, provide a “net benefit” to Canada.
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October 12, 2007
TSX Considers Change to Takeover Rules for Acquisitions of Public Companies
Responding to investor concerns, the TSX has issued a request for comment on proposed rule changes that would require issuers to obtain security holder approval for share exchange acquisitions of other public entities. Under consideration is the creation of a stock dilution threshold. Both the NYSE and NASDAQ, for example, require shareholder approval for acquisitions that would result in the issuance of 20% or more of the existing share capital of the acquirer.
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August 1, 2007
Amendments to Ontario’s Business Corporations Act Gives Shareholders More Say
Significant amendments to the OBCA took effect August 1, 2007. Among the changes are those that meaningfully extend shareholder rights. For example, the amendments make it easier for dissidents to solicit proxies by relaxing the need for dissidents to prepare a circular, where there are fewer than 16 parties solicited, or where solicitation is done by public broadcast, speech or publication (s. 112(1.1) and (1.2)). Another change allows beneficial owners to make shareholder proposals and to discuss them at company meetings. (s. 99(1)).
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March 29, 2007
Canadian Securities Regulators Propose Detailed Reporting on Executive Compensation
In March, 2007, Canadian Securities Administrators (CSA) released proposals for requiring more detailed and complete disclosure from public companies on compensation arrangements made with top executives. The proposed rules would bring Canada in line with recent SEC rules (applied in August 2006).
Changes include the requirement for a Total Compensation column, a new Compensation, Discussion & Analysis section, a Director Compensation Table, the pricing of stock awards, and enhanced disclosure of potential severance and termination entitlements and pension benefits. The new rules are expected to take effect June 30, 2008.
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United States
November 28, 2007
SEC Denies Extension of Proxy Access Rights to Shareholders
In late November, the SEC reinforced the right of corporations to bar director candidates nominated by shareholders from proxy ballots (Rule 14a-8, SEA, 1934). This followed nearly a year of debate between business groups and union and pension funds. Despite the fact that the SEC had always given corporations this right, it was called into question by a Federal Court decision granting shareholders certain rights to nominate directors. The SEC said its decision was a stop-gap measure and that the issue would be revisited in 2008.
An alternate proxy access rule change the SEC was considering (and presumably will reconsider) involved granting formal access to those shareholders who held a 5% or greater ownership position.
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On July 26, 2007
SEC Releases Final Rule Mandating Electronic Availability of Proxy Materials
With an amendment to the Securities and Exchange Act of 1934, the SEC will require, beginning January 1, 2008, that issuers and other persons soliciting proxies make a full set of proxy materials available on a publicly-accessible website. The final rules provide for two options for furnishing proxy materials.
Under the Notice Only Model registrants are required to (a) send a notice of internet availability of proxy materials to shareholders at least 40 days in advance of the shareholder meeting date, (b) post its proxy materials on its website, and (c) send proxy materials to shareholders upon request.
Under the Full Set Delivery Model, registrant may rely on the traditional means of proxy delivery and avoid the 40 day advance notice requirement. However, it still requires that the proxy materials be posted on the registrant’s website and the notice of internet availability of proxy materials be sent.
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