Proxy Access in Canada

Lisa Fairfax:

Canadian shareholders have proxy access. As we know, US shareholders have sought proxy access for years. And while the SEC has proposed such access, it has been met with serious opposition, and as one Canadian commentator noted, the US opposition seems to suggest that they sky would fall if proxy access is granted. Obviously that has not occurred in Canada. So what has occurred? In essence, nothing. That is, apparently shareholder activists do not use make use of the corporation's proxy materials when seeking to unseat directors or otherwise elect their own slate of directors. One Canadian lawyer (admitting that his views were anecdotal) suggested that the reason for the lack of use relates primarily to the feeling that proxy access would put shareholder activists at a tactical disadvantage. This is because if such activists rely on proxy access, it generally means that they cannot engage in their own separate proxy solicitation without incurring the very costs that proxy access sought to avoid. In other words, by relying on proxy access, shareholder activists also would have to rely on the corporation's proxy machinery as the sole means for seeking to persuade shareholders to displace current management. In the Canadian lawyer’s view, shareholder activists see the inability to engage in their own separate proxy solicitation, and thereby control the solicitation process, as a non-starter. As a result, they believe the tactical advantages they gain by waging their own proxy contests outweigh any cost-savings inherent in proxy access.

To be sure, there are differences between the two countries, their markets, and their shareholder class that may make any comparisons difficult. Then too, perhaps there are shareholders for whom cost savings would be more important than tactical advantage. Moreover, it could be that there are indirect benefits to proxy access even if shareholders do not directly use such a mechanism. However, the Canadian experience with proxy access at least raises the specter that the proxy access right may not be as beneficial as US shareholders believe. And instead, like e-proxy, proxy access may generate consequences that may undermine its effectiveness in enhancing shareholders' voice.

As someone who opposes proxy access but sees its inevitability given the current lineup at the SEC, I can but hope that Fairfax is right. But suppose the SEC's version of proxy access allows proponents to conduct a proxy solicitation in support of their nominee. After all, shareholders who wish to conduct a proxy solicitation in support of a Rule 14a-8 proposal are free to do so.