TSX Gets Back Into Governance Regulation

On September 9, 2011, the TSX issued for comment proposed amendments to its listing requirements which would require listed issuers to:

  1. have annual elections for all directors;
  2. provide for proxy voting for directors on an individual basis;
  3. disclose in their proxy materials whether the issuer has adopted a majority voting policy for directors and, if not, explain why not; and
  4. notify the TSX if a director of a listed issuer which does not have a majority voting policy receives a majority of “withhold” votes.

Most TSX listed issuers already provide for individual voting for directors and annual director terms; these two proposals will likely be non-controversial for issuers whose listed securities carry a right to vote for the election of directors.  It is also not onerous to require such issuers to disclose whether they have adopted a majority voting policy or explain why not.  Indeed, the TSX states that, according to the Canadian Coalition for Good Governance, 57% of the issuers listed in the S&P/TSX Composite Index have already adopted such a policy.  However, the proposal that a listed issuer which does not have a majority voting policy should notify the TSX if one of its directors receives a majority of "withhold" votes so that the TSX may then follow up with the issuer and the director is somewhat surprising.

This is the TSX’s first foray into the regulation of corporate governance practices since the TSX’s rules were supplanted by instruments issued by the Canadian Securities Administrators (CSA) six years ago.  Although the first three proposals are worthy initiatives, the TSX may not be the best positioned to implement regulatory changes in these areas given its limited range of enforcement tools and the fact that proxy circular disclosure requirements have otherwise been consolidated into a CSA instrument.  The TSX has requested that comments on these initiatives, including whether they should be pursued by other organizations, be delivered by October 11, 2011.