TSX Issuers Asked to Review Majority Voting Policies After Spot-Check Finds Flaws

March 17, 2017

Majority voting policies of Toronto Stock Exchange (TSX) listed issuers are under the spotlight following a TSX review of 200 randomly selected policies. In a Staff Notice published on March 9, 2017, the TSX pinpointed a number of issues that TSX considers are deficiencies in the reviewed policies, including:

  • The identification of factors as “exceptional circumstances” in a manner inconsistent with TSX’s stated policy objectives of majority voting;
  • A failure to require immediate director resignation and/or to establish a time frame within which resignation must be accepted; and
  • The inclusion of additional language that serves to circumvent the policy objectives of majority voting.

In response to these deficiencies, the Staff Notice outlines the TSX’s expectations as to how listed issuers are to comply with the majority voting requirement:

  • Issuers are expected to ensure that majority voting policies have the effect of requiring a director to tender his or her resignation immediately if he or she is not elected by a majority of votes cast.
  • Majority voting policies must state that the issuer’s board will accept the resignation within 90 days, absent exceptional circumstances (and only reference to “exceptional circumstances” is acceptable by the TSX).
  • “Exceptional circumstances” are not reoccurring events and do not include a director’s length of service, qualifications, attendance at meetings, experience or contributions to the issuer.
  • Where the TSX Company Manual requires that a director who has tendered his or her resignation abstain from participation in any meeting of the board where that resignation is considered, the director should not be in attendance at such meeting (except where necessary to satisfy quorum requirements).

As previously discussed, the TSX adopted amendments to the TSX Company Manual in 2014 that require TSX-listed issuers to adopt majority voting policies requiring that each director be elected by a majority of votes cast with respect to his or her election, other than at a contested meeting. The Staff Notice suggests that TSX-listed issuers assess their existing majority voting policies against the Company Manual requirements and rectify any non-compliance as soon as practicable and sufficiently in advance of their next shareholder meetings at which directors are to be elected.

For further information about the Staff Notice, please see TSX Staff Notice 2017-0001 (March 9, 2017).

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