Understand your rights as a shareholder: experts

The Canadian Press
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It’s the season for company shareholder meetings, the annual chance for shareholders to quiz Canada’s top executives about their investments.

Depending on the company, the annual meetings can range from raucous confrontation to tedious affairs, but the responsibilities for shareholders remain the same — understanding the company’s annual reports and exercising their rights as an owner.

Richard Gilhooley, a spokesman for the B.C. Securities Commission, said it is important for shareholders to fully understand where they are investing their money and read carefully all the documents sent by the companies.

“If there are things about the process that you don’t understand, it would be useful to go and speak with your investment adviser or the person that you’re dealing with

in that particular investment,” he said.

“We want people to make informed investment decisions and that includes whether you stay with an investment that you already have.”

Documents sent to shareholders ahead of the meeting can include the management proxy circular, annual information form and the company’s annual report.

The information form and annual report give the financial statements and an update by management on the business and the direction for the company — both key documents for shareholders.

The proxy circular includes information related to the annual meeting, including the nominees for the board of directors and the appointment of the auditors.

It can also include shareholder proposals or major changes at the company that require shareholder approval.

Eleanor Farrell, director of the Office of the Investor at the Ontario Securities Commission, says shareholders have the right to vote on matters that affect the company, including the election of the board of directors.

“That is a very important governance piece for the company,” Farrell says.

“The board is the one that approves the strategic plan. It sets the direction of the company. They appoint the CEO, they evaluate the CEO and they also approve the compensation plan.”

Farrell says if shareholders don’t approve of a nominated director they can withhold their vote and, at most large companies, if a majority of the votes cast withhold a vote for a particular director, that director would be forced to step aside.

“Shareholders in the last few years have certainly become and gotten a lot more powerful and a lot more powers, I would say,” Farrell said.

“Corporate governance has been a very big concern for institutional investors, certainly, and companies are much more concerned about corporate governance.”

The information circulars also include detailed descriptions about how much the company’s directors receive in compensation and what the senior executives are paid in salary, shares or options, as well as the size of their bonuses and the value of any other perks.

The circular will also include how the board arrived at that compensation as well as comparisons with previous years. Certain provisions, such as how much a chief executive will receive if the company is taken over or if they are let go, are also often included.

Farrell said there has been a lot of focus in recent years on executive pay.

“I would suspect that a lot of people go to that section and see how much the CEO is getting paid, just out of curiosity,” she said.

If a shareholder wants to raise an issue at an annual meeting, companies provide an opportunity to question its executives. However, if they want to put forth proposals to be voted on, they must be made ahead of specific deadlines set by the company.

A growing trend for companies has also been a so-called “say-on-pay” motion in which shareholders are asked to approve the board’s approach to executive compensation.

These motions are normally non-binding, but seek to give shareholders a voice on how the senior executives of the company are paid.

And while non-binding, a no vote on a “say-on-pay” motion can still effect change.

Last year, shareholders voted down an advisory motion on compensation at Barrick Gold, prompting the company to conduct a wide-ranging review on how it pays its executives.

The company will take its new plan to shareholders later this month for another vote.

Organizations: B.C. Securities Commission, Office of the Investor, Ontario Securities Commission Barrick Gold

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