CIRI is calling on the Canadian Securities Administrators (CSA) to regulate the country’s proxy voting process in a bid to improve transparency.
The current Canadian proxy voting infrastructure is ‘too complex, involving multiple stakeholders using different systems and databases,’ argues CIRI, adding that ‘this complexity, coupled with the tight time frames surrounding annual meetings, makes the proxy vote susceptible to errors.’
Regulating the system would provide a more ‘transparent, reliable and efficient’ proxy voting process, in turn leading to greater ‘confidence and integrity’ in the Canadian capital markets, adds the institute.
‘Given the importance of the shareholder vote, it is imperative the vote reconciliation process work efficiently and accurately and that end-to-end vote confirmation be implemented,’ says Yvette Lokker, CIRI president and CEO, in a press statement. ‘We feel this requires regulatory oversight given that there are so many stakeholders and systems involved.
‘The complexity is compounded by the recent upsurge in stock-lending activities by market participants and inconsistent practices around who holds the right to vote those loaned shares. We believe the investor with the economic interest in the shares should be the one voting those shares.’
Recommendations made by CIRI to the CSA include:
- The CSA should implement appropriate regulation of the proxy voting infrastructure processes, including vote reconciliation and ‘end-to-end vote confirmation’
- In cases of share lending, the CSA should ensure the voting power remains with the shareholder that has the economic interest in those shares
- The regulator should examine the impact beneficial owners – where companies mainly communicate with shareholders through a broker or bank intermediary – have on the transparency and integrity of the proxy voting infrastructure. Consideration should be given to making non-objecting beneficial owners – who do not object to their identity being disclosed, or to being contacted directly by the company – the default option when establishing brokerage customer accounts. Objecting beneficial owners – those who object to being identified or contacted by the company – should be subject to an additional fee.
