Discussion + Information on Governance in Canada
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MAJORITY VOTING – LETTER TO TSX SUPPORTING MAJORITY VOTING DISCLOSURES

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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MAPLE LEAF FOODS INC. – DIRECTOR “INDEPENDENCE” AND DISCLOSURE

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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LEGAL ETHICS: CONFLICTING INTERESTS IN RELATED PARTY TRANSACTIONS

A lawyer who has a solicitor-client relationship with a controlling person and the controlled public corporation may be asked to be retained by the corporation on a related party transaction in which the controlling person may participate with interests that are not aligned with those of the corporation. In such a transaction, the lawyer has conflicting interests and cannot fulfill his or her fiduciary duty of loyalty owed to each client nor zealously represent various adverse interests of multiple clients on potentially contentious issues impartially with candid advice.

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SHAREHOLDER DEMOCRACY – “SAY ON PAY” – MAJORITY VOTING

Emerson Advisory comment letter to the Ontario Securities Commission in response to request for comments on the shareholder democracy issues that were identified in OSC Staff Notice 54-701 “Regulatory Developments Regarding Shareholder Democracy Issues”. The letter provides comments on the mandatory adoption of “Say on Pay” and the election of directors by “Majority Voting”.

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STATEMENT OF EXECUTIVE COMPENSATION

Letter to the Canadian Securities Administrators in response to request for comments on proposed amendments to Form 51-102F6 “Statement of Executive Compensation”, including recommendations for disclosure concerning executive compensation clawbacks, discretionary compensation awards by boards, compensation governance, compensation committee members’ relationships and compensation advisor services.

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