Shareholders play a key role in the selection of directors. They do this by voting on the nominees put forward by management at the company’s Annual General Meeting (AGM).
Under the Canada Business Corporations Act (CBCA), shareholders have the right to nominate their own candidates for election to the board of directors. However, this right is rarely exercised, as most companies have policies that require shareholders to give notice of their nomination well in advance of the AGM. This makes it difficult for shareholders to put forward their own candidates, especially if they are not actively involved in the company.
As a result, management typically controls the nomination process. They put forward a slate of nominees, which shareholders then vote on at the AGM. Shareholders can vote for all of the nominees on the slate, or they can vote for only some of them, or they can vote against all of them.
If a shareholder votes against a nominee, or if they vote for fewer nominees than there are positions on the board, then their votes are considered to be “withheld.” If a nominee receives more withheld votes than affirmative votes, then they are not elected to the board.
In recent years, there has been a growing movement to give shareholders more say in the selection of directors. This movement has led to a number of changes in corporate governance practices, including the introduction of majority voting requirements.
Majority voting requires shareholders to vote for or against each nominee on a separate ballot. This means that shareholders can vote against a nominee without having to vote for all of the other nominees on the slate.
Majority voting has been adopted by several Canadian public companies, including the Toronto Stock Exchange (TSX). The TSX requires all of its listed companies to adopt majority voting by 2023.
The introduction of majority voting has given shareholders more power to hold management accountable for the quality of its board nominees. It has also made it more difficult for management to put forward nominees who are not independent or who do not have the skills and experience that shareholders are looking for.
Conclusion
Shareholders play a key role in the selection of directors in Canada. They can vote for or against nominees at the company’s annual general meeting. In recent years, there has been a growing movement to give shareholders more say in the selection of directors, including the introduction of majority voting requirements.
By understanding their role in the selection of directors, shareholders can play a more active role in corporate governance and help to ensure that their interests are represented on the board.
This article is for informational purposes only and is not legal advice. Contact us today to discuss your specific situation.