March 7, 2016

ICD Guidance for Director-Shareholder Engagement

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In October 2015, the ICD convened an Advisory Committee of experienced corporate directors, executives, institutional and active investors, including Greg Boland, Ian Bourne, David Denison, Peter Dey, Eileen Mercier and Michael Wilson to help develop shareholder engagement guidance for Canadian boards.
The Advisory Committee was asked to reflect on a need for enhanced board-shareholder dialogue, identified by Canada’s director community at the 2015 ICD National Conference, Short-termism: a problem or not?

Shareholders are seeking greater input into the governance of, and certain key decisions made by, the companies in which they invest. This is true of long-term institutional investors looking to provide insights and feedback on corporate affairs and is especially evident in the rise of shareholder activism and in the influence of third party intermediaries such as proxy advisory firms threatening withhold votes against directors unless certain governance reforms are implemented.

In addition to shareholders, legislators, regulators, the media and other stakeholders also offer opinions on what boards and directors should do – both generally and specifically. Invariably, such commentators express views - often conflicting - reflective of the interest of their individual constituencies. The board of directors, however, is the only body of this group with the legal duty to consider the interests of all stakeholders, including shareholders, and to reconcile competing interests as it deems appropriate in order to further the long-term best interests of companies.

This dynamic has led to distractions and tensions in our capital markets, sometimes at the expense of broad, informed discussion about how boards can better oversee strong, innovative and growing companies that allocate capital wisely and create long-term value.

Boards have a responsibility to take a leadership position in this discussion that recognizes their central role as stewards of their companies. The ICD believes there is a real opportunity for directors to engage shareholders in meaningful dialogue to enhance mutual understanding and obtain valuable input on the governance of the organizations in which they have an interest.

Read the full guidance paper
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