Shareholder activism growing among institutional investors

A survey conducted by the Shareholder Association for Research and Education (SHARE) reveals a growing intolerance among institutional investors for poor corporate governance practices. Those same investors are also more willing to publicly reveal how they casts their votes at annual general meetings.

Over the last five years, the survey notes that the proportion of survey respondents publicly disclosing their voting record has grown to 42% in 2010 from just 11% in 2005.

“We hear a lot of talk about increasing shareholder activism in Canada,” says SHARE’s Director of Law and Policy Laura O’Neill, “and this survey delivers solid evidence that leading investment managers are using their voting power to push back against poor governance and undue deference to management.”

The survey lists a number of “bellwether” votes including:

-- The election of the slate of directors at Linamar Corporation where 54% of shareholders withheld their votes;
-- The election of Brett Godfrey to the Board of WestJet Airlines Ltd where 41% of shareholders withheld their votes;
-- Approval of amendments to the options plan at TransAlta Corporation, opposed by 48% of shareholders;
-- An NEI Investments proposal requesting a climate change report at agricultural firm Viterra supported by 23% of shareholders; and
-- A Meritas Funds proposal calling for a shareholder advisory vote on executive compensation at Methanex Corporation supported by 64% of shareholders.

However, there are still hurdles to overcome. A lack of disclosure by many issuers continues to prevent shareholders from knowing the margin of approval or defeat on the matters they vote. No numeric vote results were released by companies in almost one-third of the votes in this year’s survey.

“The failure of so many public companies to provide any information about vote outcomes beyond ‘pass’ or ‘fail’ is permitted by regulations in Canada, but it is poor practice and suggests a lack of attention to shareholder views,” said O’Neill.

“Two investment managers stand out for their commitment to transparency,” according to Charley Beresford, Executive Director of the Columbia Institute, a survey sponsor. “Leith Wheeler Investment Counsel and Greystone Managed Investments are the only Canadian pension fund managers that have responded to the survey every year for ten years and we want to acknowledge this outstanding record.”

The Canadian Key Proxy Vote Survey is a project of the Columbia Institute, Fonds de solidarité (FTQ) and the Shareholder Association for Research and Education.