Jim Balsillie was the Chairman of the Board and Co-CEO when Research in Motion Limited (“RIM”) went public in 1997. Balsillie resigned as Chair in March 2007 with the release of the report on the improper option granting and backdating practices that RIM had been engaged in for 10 years from 1996 to 2006. On May 17, 2007, RIM announced that: “Consistent with current best practices in corporate governance, the roles of Chairman and CEO have been separated.” An independent director was appointed as Lead Director, but a new and independent Chair of the Board was not appointed and the position remained vacant, notwithstanding the election of four new independent directors in 2007. As part of the penalties and sanctions approved by the OSC in settling the improper option practices, which the OSC called a “fundamental failure of governance”, Balsillie was forced to resign as a director of RIM in February 2009. A report on RIM’s corporate governance by an independent consultant that was mandated by the OSC recommended the separation of the Chair and the CEO. The office of the Chairman of the Board of RIM, however, remained vacant as the RIM board responded in April 2010 that the absence of an independent Board Chair did not adversely affect RIM’s “highly independent board structure”. Balsillie was reappointed to the board in May 2010. Notwithstanding RIM’s earlier public representations that the roles of Chairman and CEO were separated, the independent directors agreed, “as an appropriate and effective leadership structure”, to the appointment of Balsillie and Mike Lazaridis as Co-Chairs of the Board and Co-CEOs of the company on December 16, 2010. Investors and shareholders strongly objected to this unusual governance structure of dual and joint appointments as Co-Chairs and Co-CEOs and actively pressured for the separation of the roles of Chair and CEO and the appointment of a non-management and independent Chair. On January 22, 2012, RIM announced that Balsillie and Lazaridis had resigned these combined offices and a new independent, non-management Chair of the Board and a new President and CEO of RIM were appointed.

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From December 1996 to July 2006, Jim Balsillie, Dennis Kavelman (then CFO), Mike Lazaridis and certain other RIM officers and directors engaged in improper stock option granting practices, including backdating and repricing of executive, director and employee stock option awards.  Following an internal investigation, in May 2007, RIM restated its historical financial statements with a cumulative, non-cash, stock-based compensation expense of U.S. $248.2 million.  In the February 2009 settlement of the Ontario Securities Commission’s enforcement action, Balsillie, Lazaridis and Kavelman agreed that they engaged in option backdating and repricing and that the total “in-the-money” undisclosed benefit from the incorrect option dating practices was approximately $66 million.  They confirmed that they returned the improper financial benefits they received from the incorrectly priced options and undertook to contribute, in aggregate, $83.1 million to RIM and to pay administrative penalties and OSC costs totalling $9 million.

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In a major related party transaction between Frank Stronach and Magna International Inc. in 2010, Stronach’s controlling class of multiple voting shares were cancelled with a payment to Stronach valued at approximately US$ 1 billion. The transaction was denounced and vigorously opposed by large Canadian pension and investment funds lead by Ontario Teachers’ Pension Plan and CPP Investment Board. The challengers brought unsuccessful legal proceedings before the Ontario Securities Commission and the Ontario Superior Court of Justice and filed a failed appeal to Ontario’s Divisional Court. Notwithstanding (i) the unprecedented purchase price paid to Stronach to eliminate his controlling Class B Shares, (ii) the lack of a favourable recommendation to shareholders from Magna’s Special Committee, Chaired by Mike Harris, or from Magna’s Board of Directors, (iii) the absence of any fairness opinion from the independent financial advisor retained by the Special Committee, and (iv) the strong public opposition to the transaction from certain large shareholders and others, the arrangement was approved by a 75% vote of holders of Magna’s unaffiliated Class A Shares, who bore the bulk of the price paid to eliminate Stronach’s control. Following the overwhelming approval of shareholders, the Ontario Superior Court of Justice sanctioned the transaction in a “fairness” hearing, and its judgment was unanimously upheld by the Divisional Court on appeal.

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The Toronto Stock Exchange (“TSX”) requested comments on proposed amendments requiring its listed companies to elect directors annually and individually (not by slate) and to disclose whether the issuer has adopted a majority voting policy for uncontested director elections.  Emerson Advisory endorsed the majority voting disclosure policy and other recommended proposals.  Emerson Advisory also commented that there should be additional disclosure of the principles and policies that the board of directors would apply in responding to a resignation of a director who received a majority of ‘withheld’ votes and that prompt disclosure should be required of why the board did not accept the resignation if it so decided.  The Emerson Advisory comment letter noted: “If the board of directors has an unlimited, overly broad or arbitrary discretion whether or not to accept the resignation of a director who fails to receive a majority of the votes cast in an uncontested election, the vote of the shareholders electing directors becomes merely advisory and the majority voting policy is ineffective and illusionary.”

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Dissatisfied with its partnership with the Wallace McCain family that had controlled Maple Leaf Foods Inc. since 1995, Ontario Teachers’ Pension Plan terminated the shareholders’ agreement and sold its 36% interest in Maple Leaf Foods in 2010. West Face Capital Inc., a hedge fund, acquired a 11.35% interest and publicly challenged the Wallace McCain family’s controlling influence over the Board of Directors. In the turmoil, it was disclosed for the first time that Purdy Crawford, the Lead Director, was also a director of McCain Capital Corporation, the private company owned by and through which the McCain family exercised its controlling influence over Maple Leaf Foods, and that Mr. Crawford had other relationships with the McCain family and Maple Leaf Foods. West Face Capital challenged the “independence” of Purdy Crawford as the Lead Director on the Board.

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