Laurel Hill (Canada) Releases 8th Annual Trends in Corporate Governance Report

• "ESG activism" is definitively here in Canada.
• The global say-on-climate initiative may be stalling.
• Issuers must navigate "greenwashing" concerns and other E&S skepticism and challenges.
• Board and transactional activism levels this year are moderately lower than in 2021, yet increasingly, larger companies and larger transactions are being targeted.
• The new CBCA majority voting rules will expose non-TSX CBCA issuers to increased board activism going forward.
• There is continued progress in gender diversity and developing expectations related to diversity beyond gender.
• There was moderate improvement in support for say-on-pay advisory votes this year.
• Institutional shareholders are placing more scrutiny on auditor tenure.
• Issuers must carefully consider a range of costs, benefits, and risks associated with virtual meetings going forward.

NEW YORK and TORONTO, Nov. 7, 2022 /PRNewswire/ - Laurel Hill Advisory Group is pleased to share Laurel Hill's 8th annual Trends in Corporate Governance Report, Canada's most comprehensive and longest-running annual guide to the trends, risks, and challenges affecting the Canadian corporate governance landscape. The report focuses on shareholder activism, shareholder proposals, environmental, social and governance (ESG), executive compensation, diversity, and several other related areas. Click here to download the report. As always, Laurel Hill strives to provide boards and management teams with thoughtful guidance and insights to prepare them for navigating the best path forward. 

David Salmon, President of Laurel Hill (Canada), notes: "As we progress into a post-pandemic environment, the corporate world continues to adapt to understand stakeholder views and expectations and then translate them into meaningful sector- and business-specific actions and disclosures. We continue to see environmental and social (E&S) considerations dominate the shareholder and other stakeholder agenda. Issuers that fail to keep pace with the demands of this new landscape risk access to capital, risk greater opposition to what were once "routine" annual meeting business items, and risk shareholder activism campaigns for board and management change."  

Highlights of our 2022 report include:       

• "ESG activism" is definitively here in Canada. Building on last year's ESG activism at Exxon Mobil Corporation, E&S concerns have factored into the Canadian activism landscape this year, namely at Suncor Energy Inc. and Enthusiast Gaming Holdings Inc. The predominance of ESG activism is also evident in this year's shareholder proposals: A noteworthy 88% of all shareholder proposals in 2022 concerned E&S matters, up from an already strong 62% in 2021.
• Notwithstanding the above, the global say-on-climate initiative may be stalling. While the management of climate-related risks and opportunities is of clear importance to investors, our review of the global record on "say-on-climate" votes to date suggests that the initiative may be stalling. There remains considerable skepticism about the value of say-on-climate and the potential for unintended consequences.
• While stakeholders are demanding greater E&S action and accountability, issuers must be mindful of concerns related to "greenwashing" – disclosures that overstate or misrepresent a company's commitments, actions, or progress on E&S matters. We also continue to see debate over who is best positioned to oversee these matters – business or government – and frustration around the broad variance in E&S scoring metrics.
• While the number of public board activism campaigns in 2022 is on pace to fall short of 2021 levels, i) increasingly larger companies have been targeted, ii) most situations involved proxy fights, demonstrating that activists have had strong conviction in their cases for change, and iii) virtually every proxy fight resulted in a partial or complete dissident win. Like board activism, transactional activism is also moderately lower this year as compared to 2021 but we have also seen increasingly larger companies and larger transactions targeted.
• We anticipate that the new Canadian Business Corporations Act majority voting rules will expose non-TSX CBCA issuers to increased board activism going forward.
• There continues to be progress in gender diversity at the board and senior management levels, while there are developing expectations related to diversity beyond gender.
• There was moderate improvement this year in shareholder support for say-on-pay advisory votes as compared to a very challenging 2021, yet boards must continue to make executive compensation decisions that demonstrate pay-for-performance alignment.
• There is heightened institutional shareholder scrutiny of long-tenured auditors, with shareholder support levels for this historically high-support "routine" resolution trending downward.
• Issuers must carefully weigh all the costs, benefits, and risks related to the shareholder meeting format – virtual-only, hybrid, or in-person only – in 2023 and beyond.

2023 will mark Laurel Hill's 16th year of business. Laurel Hill is proud of our deep, stable, and seasoned team of capital markets professionals and our reputation as a trusted advisor. We take great pride in our culture that is rooted in acting with integrity, in an unwavering focus on our clients, and in a commitment to providing unequalled strategic solutions, shareholder results, and client satisfaction. This culture drives our team and is the foundation for our track record of results.

Please enjoy our report. We welcome your feedback and look forward to speaking with you as you prepare for 2023.

Laurel Hill Advisory Group is North America's leading independent, cross-border shareholder communications and advisory firm. We provide industry-leading governance advisory, compensation advisory, strategic advisory, proxy solicitation, information agent, depositary, escrow, and asset recovery services. Our customized solutions, delivered by the industry's most experienced, multidisciplinary, and collaborative team, help our clients develop and maintain market-leading governance, shareholder engagement, and activism preparedness. We are regularly engaged on the most high-profile, complex, and contentious governance, M&A, and activism situations. Our cross-border operations allow us to effectively reach shareholders regardless of their location – Canada, U.S. and globally. We deliver results.

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SOURCE Laurel Hill Advisory Group

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