After nearly a year and a half of radio silence on the topic of majority voting, the Toronto Stock Exchange (“TSX”) announced on February 13th that it would proceed with amendments to the TSX Company Manual mandating that TSX issuers adopt majority voting.
The amendments, which were given the go-ahead by the Ontario Securities Commission, require that issuers, other than majority-controlled companies, be elected by a majority of the votes cast with respect to their election other than at contested meetings. This new mandate will apply to companies with fiscal year ends from June 30, 2014 on, and as such, will likely have little impact on the 2014 proxy season, particularly since roughly 80% of TSX issuers had already adopted a majority voting policy by their 2013 annual meetings.
Nonetheless, the new requirement puts Canada one step ahead of the United States, where plurality voting remains permissible and relatively common. The move represents a significant milestone for the Canadian Coalition of Good Governance (“CCGG”), which has been pushing for mandatory majority voting for over six years and provided some of the language for revised TSX Company Manual. The CCGG has made clear that its majority voting rally isn’t over yet, as it continues to lobby the TSX Venture Exchange for the same corporate governance enhancement.
The new mandate certainly represents a step forward, but still falls somewhat short of the “true majority” voting policy that Glass Lewis prefers, as, pursuant to the new TSX policy, directors that fail to receive majority support from shareholders are not required to step down unless the other board members accept their resignation. However, thanks to the aforementioned language provided by the CCGG, where a director fails to receive majority support “the board shall accept the resignation absent exceptional circumstances,” and, “if the board determines not to accept a resignation, the news release must fully state the reasons for that decision.” These detailed requirements will certainly force the board to take the resignation decision seriously, as boards will be more directly accountable in cases of continued board membership despite majority opposition.