Closing Remarks by Maureen Jensen
Chair and Chief Executive Officer, Ontario Securities Commission
Shareholder Rights Conference
University of Toronto
October 28, 2016
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Thank you for the lively and interesting discussions on the important topic of this conference – “Are shareholder rights relevant in today’s capital markets?”
I want to thank the organizers of the conference – the Faculty of Law at the University of Toronto, FAIR and CCGG – for bringing together the three perspectives that they represent.
And I want to thank the moderators and panel members for taking on some of the most difficult issues in the debate over shareholder rights. It is really a delight to hear such eminent individuals discussing issues that we securities regulators often debate!
In particular, I am very pleased that the discussions included the perspective of retail investors.
Public companies have the privilege of raising capital from both individual and institutional investors.
We estimate that the holdings of retail and institutional investors are about even in terms of TSX market capitalization. For example, retail investors represent 49% of TSX market capitalization and 52% of the S&P/TSX Composite.
All shareholders should have a say in how public companies are governed and on critical decisions involving these companies, such as changes of control and material related party transactions.
Key themes from today’s discussion
Today, we heard several key themes that we all need to consider going forward.
First, institutional investors need to use their influence to improve long-term returns to their beneficiaries and the shareholders of the companies they invest in.
We estimate that institutions hold 33% of all outstanding TSX shares and hold a majority stake in 16% of TSX issuers. With such significant ownership comes significant influence and responsibility.
Institutional investors have the opportunity to increase their engagement with the directors of some of Canada’s largest companies. This engagement should be used to increase long-term value for the benefit of all stakeholders.
Institutional investors must also use their voting rights and influence to demand structural changes to board governance by advocating for greater diversity on boards and a focus on long-term issues such as climate change.
Second, shareholder rights relating to board governance, director elections and executive compensation should be adopted and evaluated on how likely they are to align the interests of boards and long-term shareholders.
Third, shareholder rights must be used to protect and enhance the interests of retail investors. These investors must have confidence that their voices and votes count.
Fourth, corporate and securities law must work in a complementary fashion to improve the governance of our public companies. I am very pleased that recent amendments to the CBCA will mandate majority voting and enhance board diversity, and we look forward to seeing how it will be implemented.
Role of the regulator
Securities regulators must act where there are gaps in corporate law or market failures that impact our mandate to protect investors and foster market efficiency.
The OSC is committed to strengthening shareholder rights for the benefit of all investors:
- We will support shareholder rights that give shareholders a meaningful voice in the election of directors and enhance shareholder engagement on important issues such as executive compensation and women on boards.
- We will promote a level playing field with predictable, transparent and fair rules for control contests such as take-over bids and proxy contests. Minority shareholders must be able to make their own decisions without improper tactics and interference by either side.
- We will protect the interests of minority shareholders in material conflict of interest transactions where vulnerable minority shareholders could see value being inappropriately transferred to company insiders.
- Our Staff are monitoring these transactions and will not hesitate to intervene if the board process or disclosure falls below the standards we expect.
Shareholder rights speak directly to the core principles of fairness and equal opportunity.
They are really about good corporate governance.
By engaging in a healthy dialogue, we can all work to ensure that our public companies have the world-class governance that our investors deserve.