2019 Canadian Proxy Season Review

The 2019 proxy season: Compensation and diversity led discussions, shareholder proposals doubled, and while board and transactional activism remained robust, the number of actual proxy fights was lower than last year. Laurel Hill Advisory Group has summarized the key trends, developments and takeaways from Canadian shareholder meetings this year to help you to prepare for next year.


The number of Canadian issuers holding advisory say-on-pay votes has risen in recent years, driven by increasing adoption by U.S. companies, institutional investor demands and developing industry best practices. Certain prominent pension funds have undertaken letter writing campaigns to “laggard” members of the S&P/TSX Composite Index requesting the adoption of a vote. Moreover, leading corporate governance organizations, including the Canadian Coalition for Good Governance, recommend that issuers hold annual say-on-pay votes and that investors carefully consider their votes and discuss concerns in advance of the meeting.

This season, 196 issuers held a say-on-pay vote, a 9.5% increase over 2018 when 179 issuers held one.

Institutional investors, often influenced by voting recommendations of the two leading proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis (GL), have continued to take a very critical view of compensation and have voted against or withheld where there was misalignment between pay and performance or simply where the quantum of pay was deemed excessive. As a result, we have seen some downward pressure on say-on-pay vote approval levels this season, with the average support decreasing from 91.9% in 2018 to 90.7% in 2019, and votes with support below 90% increasing from 23.6% in 2018 to 28.8% in 2019.

We see two key reasons behind negative votes on say-on-pay: pay relative to total shareholder return (TSR) and pay relative to the size and stage of the company. Generally, proxy advisors issue negative recommendations when, over the preceding three years, a company’s TSR has lagged comparable peers and CEO/NEO pay has at the same time increased, giving the appearance that the compensation committee is approving CEO/NEO pay without considering long-term value for shareholders. Institutional investors have also cast negative votes when they believe executives have been excessively compensated compared to the company’s size or business stage.

On June 21, 2019, Canada Business Corporations Act (CBCA) amendments received Royal Assent and include requirements for an annual say-on-pay vote as well as annual disclosure on diversity for “prescribed corporations”. The scope of “prescribed corporations” and the “members of senior management” to which these proposed amendments will apply will be set out in the future. The federal government will undertake public consultations in connection with the proposed amendments before adopting the more detailed regulations.