Preparing for Proxy Season: Board Accountability and Environmental, Social and Governance Factors

February 12, 2020

Having completed our annual deep dive into the past year’s corporate governance developments and trends, we have developed a four-part series on what you need to know to prepare for the 2020 proxy season. In this first post of the series, we look at board accountability (including the increasingly important “ESG” factors: environmental, social and governance).

The Overview

Looking ahead, the remaining posts in the series will focus on the following issues:

  • board composition;
  • compensation matters; and
  • proxy developments and reporting updates.

Board Accountability


With rising pressure for broader corporate accountability in the areas of environmental, social and governance risk (commonly, referred to as ESG), these factors have become a growing area of focus this past year, with particular developments focused on the environment, partly due in Canada to publication of CSA Staff Notice 51-358 Reporting of Climate Change-related Risks (“CSA Notice 51-358”). While CSA Notice 51-358 does not create any new legal requirements, it does highlight the role of the board and management in assessing:

  • whether climate change-related risks and opportunities are integrated into the issuer’s strategic plan;
  • the effectiveness of the issuer’s risk management system, its methodology and underlying frameworks; and
  • the allocation among responsible business units for identifying, disclosing and managing climate-change related risks.

Our previous post summarizes the Canadian Securities Administrators’ prior guidance as published in CSA Notice 51-358 including key considerations and risk assessment guidance for boards and management.

While environmental considerations and impacts may not have been at the forefront for certain industries in the past, recent developments demonstrate the growing need for companies in all industries to consider environmental stewardship at some level. The Sustainability Accounting Standards Board (SASB) Framework, among other frameworks and reporting guides, is available for issuers to gain insight into their specific industry classification that may be affected in some way by climate-change related risk.[1]

While we stay attuned to national and global developments in this area, on an issuer level we expect the focus to shift to a review of existing practices for collection and communication of climate change related information as well as the applicable methodology, controls and procedures for assessment of materiality and corresponding disclosure of related risks, primarily for issuers’ annual information forms and MD&A.

Beyond Environment: Social & Governance Matters

Beyond environment, the “S” in ESG, refers to social matters such as workforce, local and indigenous communities, supplier relations, human rights, health and safety and working conditions; and the “G” refers to governance matters such as board composition and diversity, executive compensation, shareholder rights, ethics, systemic risk management, bribery and corruption. In May 2018, the Canadian Coalition for Good Governance (CCGG) published an E&S Guidebook intended to help boards evaluate and demonstrate whether their frameworks, practices and capabilities are appropriate for assessing material environmental and social (E&S) factors. Following interviews with directors of Canadian companies considered to be leaders in managing E&S oversight, the CCGG developed 29 principles-based recommendations under 8 governance topics intended to apply to boards of companies operating locally and globally.

Examples of these principles and their practical impact for three of the CCGG governance topics is below:

Where ESG factors may have been treated as somewhat ancillary to an issuer’s overall governance reporting, practical application of the principles identified by the CCGG can be used to assist boards both in their review of ESG issues and in their assessment of what disclosure updates may be appropriate.

The Takeaway

Beyond awareness, we encourage you to consider what these trends and developments mean for your organization, specifically how they impact your annual meeting preparation and on-going corporate governance matters. For many issuers, this means a strategic review of stakeholder-focused communication, including continuous disclosure materials as well as board and committee charters, company policies and underlying frameworks to consider whether updates are needed in areas such as the following:

  • Identifying gaps in current disclosure, policies and materials, and determining options for your organization to address;
  • Reviewing the frameworks and processes that support disclosure, charters and policies (especially as they relate to risk management);
  • Simplifying disclosure to focus on quality of disclosure specific to the organization, its business and its risks; and
  • Aligning policies and/or public filings with regulatory and best practice updates and changes made this year and in past years, while taking a fresh look to eliminate redundancies or inconsistencies.

Up Next

Stay tuned for our second update in the series focused on “Board Composition” including key topics of diversity extending beyond gender to “designated groups”, tenure and board refreshment, metrics and trends and what’s trending in director elections.

For more information on any of these updates, please contact your Stikeman Elliott representative or any member of our Securities and Capital Markets practice groups.

[1] SASB Framework (referenced in CSA Notice 51-358) found that 72/79 sustainable industry classifications are significantly affected in some way by climate change-related risk.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at

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