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Governance Data, Analytics, and News from Institutional Shareholder Services

August 29, 2019


Meetings to Watch

Upcoming ISS Speaking Events

Interesting Meeting Calendar

News Roundup

ISS Updates & Links

Editor's Note: Governance Insights will take a publishing break next week. The publication will resume during the week of September 9, 2019.

2019 Canada Proxy Season Review

Editor's Note: In this week's issue, we feature excerpts from our recent publication 2019 Canada Proxy Season Review. To access the full report, click here (requires login to Governance Analytics; first log in to Governance Analytics, and then click on Governance Exchange to enable the link).

Key Takeaways

  • Board gender diversity increases: The number of companies with three or more female directors increased during the 2019 proxy season.

  • Voluntary say-on-pay proposals increase: First-time adopters of voluntary advisory resolutions on executive compensation continued to increase, and at a faster rate than in 2018.

  • Shareholder activists target larger companies: Shareholder opposition to announced deals and contested board elections occurred at significantly larger TSX companies than in 2018.

  • Corporate governance best practices elude cannabis companies: A proliferation of reverse takeovers in the cannabis sector is resulting in an increase in listings on the Canadian Securities Exchange, where listing rules are more lenient than those for the TSX.

  • Increased relevance of climate change: More shareholder proposals went beyond just asking for disclosure related to climate change risks and asked companies to adopt targets in line with the Paris Agreement. Some proposals asked companies to adopt environmental and social metrics for executive compensation.

Board Gender Diversity

For S&P/TSX Composite companies, the level of female board representation has increased significantly since the adoption of gender diversity disclosure regulation at the end of 2014. Specifically, the number of all-male boards decreased from 32 percent in 2014 to just about 2 percent in June 2019, for S&P/TSX Composite Index companies.

The trends in board composition show gradual evolution toward more diverse boards in the Canadian market in the timeframe under review. The percentage of S&P/TSX Composite boards with no women decreased to only 2 percent in 2019, and the proportion of boards with three and four or more women has increased significantly in the past five years. The number of boards with only one woman director decreased substantially in 2019, as companies appear to move beyond this minimum level of board gender diversity, and the percentage of boards with two women has increased from 23 percent in 2014 to 30 percent in 2019. These findings suggest an increased and sustained commitment by Composite Index boards to increase gender diversity.

Image 1

For non-S&P/TSX Composite companies (“TSX” in the graph below), the proportion of boards with one female director has decreased from 39 percent in 2018 to 38 percent in 2019 to date. Although the proportion of boards with two or more female directors is lower than that for the Composite Index companies, increases are observed for boards with two, three, four, or more women from 2018 to 2019 to date. We note that non-Composite Index boards are often smaller in size compared to Composite Index boards and hence the comparison of gender change dynamics between the two sets of boards might be limited.

Image 2

For TSX-listed companies overall, gender representation at the company level shows similar upward trends, with additions of female directors to boards exceeding their removals for both TSX and S&P/TSX Composite Index companies during 2019. Moreover, a larger number of female directors were in the nomination pool during 2019 as compared to 2018. More than 29 percent of TSX Composite companies and approximately 15 percent of companies in the rest of the TSX added at least one woman to their boards in 2019, while less than 5 percent of companies from both segments removed women from their boards.

Say-on-Pay Proposals

Vote results. Between July 1, 2018 and June 30, 2019, a total of 200 companies put forth voluntary advisory say-on-pay ("SOP") resolutions, an increase of approximately 9 percent compared to the same period in the previous year (July 1, 2017 to June 30, 2018). A further increase in say-on-pay resolutions is anticipated due to the amendment to the Canada Business Corporations Act (CBCA) proposed in the federal government’s new budget implementation bill, introduced on April 8, 2018, which requires corporations incorporated under the CBCA to provide an annual advisory say-on-pay vote.

In 2019, there were 22 first-time adopters, including 18 TSX Composite Index companies. Only one company received support of less than 70 percent of votes cast on its first say-on-pay vote this year. In terms of support levels, the percentage of resolutions receiving support of less than 80 percent of votes cast has increased in 2019, reaching a record high of 11 percent of companies receiving significant opposition to their say-on-pay proposals in the first six months of the year.

Image 3

In the first half of 2019, eight companies received support of less than 70 percent of votes cast on their say-on-pay proposals. Two companies, namely Copper Mountain Mining Corporation and Cardinal Energy Ltd., received support of less than 50 percent of votes cast, resulting in failed resolutions. Both companies have experienced a declining trend in their say-on-pay support levels in the last three years.

Quantum and components of pay. In fiscal year 2018, the median CEO compensation of Composite Index companies was valued at CAD4 million, a 3-percent increase from fiscal 2017. Twenty-seven companies granted compensation of more than CAD10 million to their CEOs (approximately the same number of companies as in the previous year). In terms of components of pay, the median values of annual base salary, annual bonus, and share-based awards increased by 2 percent, 8 percent, and 7 percent, respectively. After the significant increase of 17 percent in median value of stock options in fiscal 2017, this year, stock option grants saw a decrease in median value by 2 percent for fiscal 2018. The percentage of companies granting stock options remained consistent at 60 percent in both the years.

Wave of CEO transitions. More than 10 percent of Composite Index companies witnessed a CEO transition between fiscal years 2017 and 2018. This trend triggered many special one-time payments including inducement awards, promotional grants, sign-on bonuses, make-whole payments, and multimillion severance allowances. There were various reasons for these transitions including, but not limited to, retirements and resignations. However, some companies did not provide detailed disclosure for shareholders to assess whether any severance payments were appropriate or not. A few companies paid generous cash severance to former executives who appeared to have voluntarily retired or resigned from their positions.

Proxy Contests and Contentious M&A

The level of shareholder activism via proxy contests so far this year is generally comparable with that during the same period in 2018 and remains relatively low: ISS has reviewed four proxy contests through July 2019, compared to five contests reviewed during the same period last year.

Negotiated settlements. Several contentious situations were settled prior to coming to a shareholder vote. One example is the negotiated settlement at Methanex Corporation involving the company's largest shareholder, U.K.-based M&G Investments. On April 12, 2019, the company announced it settled a proxy contest with M&G, whereby the dissident gained a seat on the board, and it was announced that the company's longest serving independent director would advance his planned retirement by a year.

Contested mergers in gold industry. Significant M&A activity took place in the gold sector. The intent of these transactions appears to be different than in previous years. In the past, transactions aimed to potentially increase gold production or diversification. More recently, companies engage in transactions to ensure long-term resource replenishment, increase capital efficiency and to smooth out volatility.

Proxy contests in gold industry. The gold industry has come under increased scrutiny due to its relatively poor performance compared to the broader market. When comparing the S&P/TSX Global Gold Index (SPTSGD Index) to the broader S&P/TSX Index, the industry has remained at discounted levels since 2013. Specifically, the SPTSGD Index has lost more than 60 percent of its value since 2011. As a result, more investors appear to be willing to spend the time, effort, and money to unlock value in what they see as underperforming companies.

Contested mergers in gold industry. Significant M&A activity took place in the gold sector. The intent of these transactions appears to be different than in previous years. In the past, transactions aimed to potentially increase gold production or diversification. More recently, companies engage in transactions to ensure long-term resource replenishment, increase capital efficiency and to smooth out volatility.

-- Shehrbano Khan, Rishima Kathuria, Michael Malanda, Nicholas Stiege, John Vizikas, Anna Wong, and Chintan Zala, ISS Canada Research

To access the full report 2019 Canada Proxy Season Review, click here (requires login to Governance Analytics; first log in to Governance Analytics, and then click on Governance Exchange to enable the link).

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Special Situations Research

Log into Governance Analytics and click on Special Situations Research to enable these links:

Sothebys (BID) Merger with BidFair | Analysis | Upcoming Meeting on September 6, 2019


2019 US Midyear Activism Review | Note | Published on August 6, 2019


2019 European and Asian Mid Year Activism Review | Note | Published on August 2, 2019


Contentious Pipeline - July 2019 | Pipeline | Published on August 12, 2019


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Upcoming ISS Speaking Events

These are upcoming events where ISS staff will be speaking or in attendance. ISS does not necessarily endorse any of these groups.

September 4-5, Washington, DC
Eversheds Sutherland 2019 BDC Roundtable
(Cristiano Guerra, Special Situations Research)

September 5, New York
Columbia University - Center of Global Energy Policy - Women in Energy Panel
(Ariane de Vienne, ISS ESG)

September 6, Paris
French Society of Financial Analysts Seminar
(Catherine Salmon, ISS Research)

September 6, Stockholm
Seminar on Economic Crimes and Money Laundering
(Anna Warberg, ISS ESG)

September 9, Paris
Panel Hosted by AllianzGI at PRI in Person
(Maximilian Horster, ISS ESG)

September 10, London
Morgan Stanley Sustainable Investing Conference
(Reinhilde Weidacher, ISS ESG)

September 11, Dortmund
Working Group of Church Investors Conference
(Julia Wissmeyer, ISS ESG)

September 12, Stockholm
Klimatkommunerna Event
(Reinhilde Weidacher, ISS ESG)

September 12, New York
Evolve 2019 Investment Summit - Panel on ESG Integration
(Hernando Cortina, ISS ESG)

September 16-18, Minneapolis
CII Fall 2019 Conference
(Nathan Worthington, Brian Walker, Lorraine Kelly, ISS; Cristiano Guerra, Special Situations Research)

September 16-19
27th Annual NASPP Conference
(Eric Schwarte, Roy Saliba, and Leah Dela Cruz, ISS Corporate Solutions; David Kokell, ISS Research)

September 17, Frankfurt
Deutsches Aktieninstitut (DAI), Annual Conference
(Thomas von Oehsen, ISS Research)

September 17, Madrid
Spanish Corporate Directors Association (IC-A)
(Stephen James, ISS Corporate Solutions)

September 19, Nashville, TN
Davis Polk Forum on Executive Compensation
(John Roe, ISS Analytics)

September 19, London
BlackRock and Goldman Sach Factor Symposium 2019
(Hernando Cortina, ISS ESG)

September 23, Austin, TX
2019 REIT finance and tax leadership conference: Panel on ESG
(Nicole Bouquet, ISS ESG)

September 25, San Francisco
NICSA Event: ESG Essentials for Asset Managers and Advisors
(Ariane de Vienne, ISS ESG)

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Interesting Meeting Calendar

This supplemental list highlights upcoming meetings with notable ballot items; these may include companies with interesting or novel shareholder proposals, proxy contests, non-standard management proposals, and more. Appearance on this list does not denote any particular ISS vote recommendation.

Company Ticker Country Meeting Type Date
Oil & Natural Gas Corp. Ltd. 500312 India Annual 30-Aug-19
Vertical Capital Income Fund VCIF USA Proxy Contest 30-Aug-19
Bharat Petroleum Corporation Limited 500547 India Annual 30-Aug-19
PT Bank Negara Indonesia (Persero) Tbk BBNI Indonesia Special 30-Aug-19
Hindalco Industries Limited 500440 India Annual 30-Aug-19
Gazprom Neft PJSC SIBN Russia Special 2-Sep-19
PT Bank Rakyat Indonesia (Persero) Tbk BBRI Indonesia Special 2-Sep-19
Vitasoy International Holdings Limited 345 Hong Kong Annual 4-Sep-19
Powszechny Zaklad Ubezpieczen SA PZU Poland Special 6-Sep-19
Berkeley Group Holdings Plc BKG United Kingdom Annual 6-Sep-19
Bank of Jiangsu Co., Ltd. 600919 China Special 6-Sep-19
SDIC Power Holdings Co., Ltd. 600886 China Special 6-Sep-19
Empire Company Limited EMP.A Canada Annual 12-Sep-19
The Kraft Heinz Company KHC USA Annual 12-Sep-19
Powszechna Kasa Oszczednosci Bank Polski SA PKO Poland Special 17-Sep-19

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News Roundup

Japan Inc wakes up to investor activism in its own backyard

A spate of hostile takeover battles has raised hope among investors that corporate Japan is finally embracing shareholder activism.

But for companies that were spooked by foreign buyout groups, dubbed hagetaka (vulture) funds by the domestic media in the early part of the past decade, recent deals show they are facing a new opponent: the once-friendly Japanese corporate owners who have turned belligerent in their pursuit of higher returns and growth.

Last week, travel agency HIS abandoned a hostile takeover of hotel chain operator Unizo Holdings following a white knight counter-offer from SoftBank-owned Fortress. A month before, SoftBank-backed Yahoo Japan ousted the chief executive and three independent directors of stationery supplier Askul, saying it was unhappy with the company’s financial performance. In March, Itochu amassed a 40 per cent stake in Descente through a hostile bid, giving the trading house more say in the management of the sportswear group.

Financial Times | August 27, 2019

Illinois companies now must report on board diversity

SPRINGFIELD — Public companies with headquarters in Illinois will soon have to file public disclosures about the racial, ethnic and gender diversity of their boards of directors.

Gov. J.B. Pritzker on Tuesday signed House Bill 3394 into law, saying it will eventually lead to better business performance in the state.

“Better diversity among leadership leads to reduced turnover, increased growth and improved market share,” Pritzker said at a bill-signing ceremony in Chicago. “That’s good business, and it advances my vision of an Illinois where both businesses and working families thrive.”

The bill was sponsored by Rep. Emanuel “Chris” Welch, D-Hillside, and it originally contained much stronger language, requiring every company headquartered in the state to have at least one African American person and one woman on its board of directors.

The bill was based on a 2018 California law that requires companies have at least one woman director.

Chicago Sun Times | August 27, 2019

Purdue Pharma in talks over multibillion-dollar deal to settle more than 2,000 opioid lawsuits

Drugmaker Purdue Pharma is negotiating a multibillion-dollar settlement with lawyers for local and state governments that would resolve about 2,000 lawsuits against the company, which would declare bankruptcy as part of the deal.

The Sackler family, which owns the company, would relinquish control and contribute at least $3 billion in personal funds to the settlement, which could total as much as $12 billion, according to three people familiar with the talks, who spoke on the condition of anonymity because they were not authorized to discuss the negotiations.

Leaders of the 2,000 plaintiffs in a consolidated lawsuit pending in federal court are seriously considering the offer, according to one person with knowledge of the negotiations. Another person familiar with the discussions said: “I think this is a last effort. If they don’t take this deal, [Purdue is] going to bankruptcy very quickly.”

The Washington Post | August 27, 2019

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ISS Updates & Links

Links in these sections are available to subscribers through our on-line platform. 

To access these documents, first log into Governance Analytics and then click on Governance Exchange (or Special Situations Research for those noted items) to enable these links:

2019 ISS Publications

Building a Climate Change Voting Policy (available on ISS website)

Director Overboarding: Global Trends, Definitions, and Impact (available on ISS website)

An Overview of Vote Requirements at U.S. General Meetings (available on ISS website)

Dual-Class Shares: Governance Risk and Company Performance (available on ISS website)

Early Review of 2019 US Proxy Season Vote Results (available on ISS website)

2019 U.S. Board Diversity Trends (available on ISS website)

Seven Venial Sins of Executive Compensation (available on ISS website)

CEO Ownership, Corporate Governance, and Company Performance (available on ISS website)

Snapshot: Update on U.S. Director Pay (available on ISS website)

Realizable Pay: Insights into Performance Alignment (available on ISS website)

2019 U.S. Executive Compensation Trends (available on ICS website)

2019 Compensation Insights: An Interview with the ISS U.S. Compensation Team (available on ICS website)

Insights into Value Creation: Using EVA to Measure Performance (available on ICS website)

Corporate Governance in Emerging Markets (available on ISS website)

The Long View: The Role of Shareholder Proposals in Shaping US Corporate Governance (2000-2018) (available on ISS website)

The Long View: US Proxy Voting Trends on E&S Issues from 2000 to 2018 (available on ISS website)

The Corporate Governance World in 2019 (available on ISS website)

Top 10 Corporate Governance Topics to Watch in 2019 (available on ISS website)

2019 Season Reviews

2019 Canada Proxy Season Review

2019 US Director Elections and Governance Shareholder Proposals Proxy Season Review

2019 US Compensation Proxy Season Review

2019 Latin America Proxy Season Review

2019 South Korea Proxy Season Review

2019 Season Previews

2019 Japan Proxy Season Preview

2019 Taiwan Proxy Season Preview

2019 China Proxy Season Preview

2019 Singapore Proxy Season Preview

2019 Hong Kong Proxy Season Preview

2019 US Environmental and Social Issues Proxy Season Preview

2019 Canada Proxy Season Preview

2019 United Kingdom Proxy Season Preview

2019 Continental Europe Proxy Season Preview

2019 Market IQs

2019 China Market IQ

2019 Taiwan Market IQ

2019 Greece Market IQ

2019 Italy Market IQ

2018 Market IQs

2018 Portugal Market IQ

2018 Israel Market IQ

2018 Singapore Market IQ

2018 Hong Kong Market IQ

2018 China Market IQ

2018 France Market IQ

2018 Japan Market IQ

2018 Netherlands Market IQ

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For questions, comments or suggestions, email contactus@isscorporatesolutions.com.


Drawing on ISS' Data Desk, Governance Insights delivers news and analysis of corporate governance developments, including insights and reporting found in no other media, on a periodic basis. While we exercise due care in compiling this newsletter, we assume no liability with respect to the consequences of relying on this information for investment or other purposes.


Founded in 1985 as Institutional Shareholder Services Inc., ISS is the world’s leading provider of corporate governance and responsible investment (RI) solutions for asset owners, asset managers, hedge funds, and asset service providers. ISS’ solutions include: objective governance research and recommendations; RI data, analytics, advisory and research; end-to-end proxy voting and distribution solutions; turnkey securities class-action claims management (provided by Securities Class Action Services, LLC); and reliable global governance data and modeling tools. Clients rely on ISS' expertise to help them make informed corporate governance and responsible investment decisions. For more information, please visit www.issgovernance.com.

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ICS is a wholly owned subsidiary of Institutional Shareholder Services Inc. (ISS). ICS provides advisory services, analytical tools and publications to companies to enable them to improve shareholder value and reduce risk through the adoption of improved corporate governance practices. The ISS Global Research Department, which is separate from ICS, will not give preferential treatment to, and is under no obligation to support, any proxy proposal of a corporate issuer (whether or not that corporate issuer has purchased products or services from ICS).  Similarly, ISS’ responsible investment research and analytics teams will not provide preferential treatment to, and is under no obligation to provide a favorable rating, assessment and/or any other favorable result to, any corporate issuer (whether or not that corporate issuer has purchased products or services from ICS).  No statement from an employee of ICS should be construed as a guarantee that ISS will (a) recommend that its clients vote in favor of any particular proxy proposal nor (b) provide a favorable rating or other assessment of any corporate issuer.

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