A blue-chip roster of Canadian corporate directors and investors has crafted a roadmap laying out how boards should engage with their investors before unhappiness with the way a clients are being run results in confrontation.
Against a backdrop of rising investor activism and proxy battles, the Institute of Corporate Directors is presenting six key recommendations Tuesday inside a paper written by an ICD advisory committee.
“We believe that both shareholders and boards as well as their companies will benefit from the regular dialogue, thus short-circuiting the need for a confrontational situation that is a result of shareholders feeling that they’re not heard,” said Eileen Mercier, an old chair of the Ontario Teachers’ Pension Plan Board who sits on the ICD committee.
Any discontent that may lead to a public showdown, such as unhappiness over executive compensation or 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, in addition to David Denison, former leader from the Canada Pension Plan Investment Board, and West Face Capital CEO Greg Boland.
Rather than disregard 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 understanding of their perspective.
Directors helps it to be their business to know who their most critical investors are, and what their stake within the company is, the brand new ICD paper advises.
They should also make sure that they get decision-makers within the room once they meet, and they set specific topics to be discussed. Directors are also urged to be well briefed on what to talk about and just what could be disclosed, and also to review and consider information gained from the engagement with shareholders.
The ICD advisory committee’s members are very well aware of the issues involved in shareholder engagement, and just what can occur if this does not occur.
As head of private 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 may be the former president and chief executive of Agrium, while Bourne, now chair from the board of Ballard Power Systems Inc. and a director in the CPPIB, Wajax Corp., and Hydro One, was chair of SNC Lavalin from 2013 to 2015.
Canadian firms have drawn interest from activist investors fitness center from the United States, partly since the regulatory regime is seen as more hospitable to shareholders seeking to influence a company and it is board of directors.
It is simpler, for instance, for stockholders to call 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 that U.S. directors have a court-recognized duty to do something in the interests of shareholders, while boards in Canada have a fiduciary duty to do something within the needs of the company and not solely of shareholders.
The ICD’s new roadmap for Canadian company engagement investors is built to accommodate variations in this country while complementing protocols established in the United States.
“We have the ideal set up because the majority of the large public companies have an independent chair, which is not true in the U.S.,” Mercier said, noting that companies that already meet with shareholders often make use of the chair like a main point of contact.
“The main objective would be to help boards that do not regularly engage with their shareholders to determine the way the establishment of a dialogue may be beneficial.”
bshecter@nationalpost.com
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