Views on improving the integrity of global capital markets
26 February 2014

Corp Gov Roundup: Majority Voting Rules, Investor Stewardship Codes, “Say on Pay”

It’s time to span the corporate governance globe to review important developments from the month of February. Topics include shareowner rights recommendations in Brazil, the adoption of majority voting rules in Canada, the development of the investor stewardship code in Japan, and more.


There is a great new comprehensive corporate governance resource out there in the universe, and we expect every corporate governance geek to read it. The OECD Corporate Governance Factbook offers a great level of detail about corporate governance standards and practices in more than 40 world markets, both developed and developing. The report focuses on a number of topics including board practices, the role of institutional investors in governance, related-party transactions, minority shareowner rights, and risk management. The OECD plans periodic updates as well as future coverage of other markets.


The Comissão de Valores Mobiliários (CVM, also known as the Securities and Exchange Commission of Brazil) recently published a series of recommendations (currently in Portuguese only) through its Superintendência de Relações com Empresas (SEP, or Office of the Superintendent of Companies) that change the landscape of shareowner rights in Brazil.

The recommendations call for companies to publish independent candidacies to the corporate bodies of publicly-held companies that are filed by non-controlling stakeholders, including to company boards.

Through this recommendation, the CVM has interpreted its own rules, stating that “all relevant information to exercise voting rights” needs to be officially disclosed. The CVM has confirmed that independent nominations by non-controlling shareholders are “relevant information.” The official publication of nominations will allow them to be captured by custodians, and thus make their way into proxy cards.

Previously, investors could always nominate candidates at the meeting. But that information was never relayed to investors who vote by proxy. Subsequently, names of nominated candidates often never got into the proxy cards. In many cases, foreign investors who wanted to support independent candidates had to go through a lengthy process including a great deal of paperwork just to send their own lawyers to the meeting to vote for the candidates they favored.

Look for shareholder activity around board nominations in Brazil to increase in the coming years.


The Toronto Stock Exchange adopted a new listing standard that requires boards to accept resignations of directors who receive less than a majority of votes cast in uncontested elections, unless the director serves at a majority controlled company.  The former standard was a non-binding comply-or-explain model. The rule adopts best practices put forth by the Canadian Coalition for Good Governance.

Expect shareowner rights advocates in other markets that don’t currently have majority voting rules — we’re looking at you, United States — to seek similar listing standards in their own markets.


Indian issuers will be required to hold separate meetings of independent directors and to have at least one female board member according to new amendments to listing requirements adopted by the Securities and Exchange Board of India (SEBI). Changes bring standards in line with the 2013 Companies Act. The SEBI dropped its biggest proposed change, which would have required the separation of chair and CEO positions at publicly-listed companies. The new requirements take effect 1 October.


We’ve reported over the past few months about Japan’s proposed stewardship code for investors. Recently we posted the English version of Japan’s draft stewardship code, published in January by the Financial Services Agency expert group. Comments on the code were due by 9 February. The code plans to adopt a comply-or-explain model asking institutional investors to have a clear policy detailing how they fulfill their stewardship responsibilities and how they handle conflicts of interests.

Some of the more critical commentary came from the governance consultancy Sodali, which stated that Japan needs a complementary corporate governance code for Japanese issuers in order for an investor stewardship code to be of much use.


Switzerland is one of the few countries that have adopted a binding say on executive pay.

As a result, there is great interest in the Roche annual meeting on 4 March, which will be the first annual meeting with a mandatory say-on-pay vote.

Roche is offering binding votes on future pay and on bonuses to be paid out for the prior year. Swiss regulation allows companies to offer pay votes for either prospective or retrospective pay. Roche has chosen the latter, which pleases some governance experts as it hews more closely to a true pay for performance model.  The model of the pay vote is more important than the actual outcome at Roche, however, as the vote is a foregone conclusion given that the company’s founding family and Novartis control more than 80% of voting rights. It will be interesting to see whether other Swiss companies plan their votes like Roche has and opt for retrospective pay votes.

United Kingdom

Another month, another paper about an investor stewardship code.  This most recent entry comes from the Tomorrow’s Company. The report recommends that institutional investors develop a common template for stewardship reports that show how they promote firms’ long-term success. The paper also suggests that asset owners and managers develop stewardship accreditation for retail investment funds.

United States

Productive issuer/shareowner engagement got a welcome helping hand in February with the release of the Shareholder-Director Exchange Protocol (SDX Protocol). The SDX Protocol is a 10-point guide for public company boards and shareholders to use in determining when engagement is appropriate and when it is best to engage in a manner that is fruitful for both parties. The distinguished panel that put together the protocol includes governance experts as well as investor and company representatives.

The 10 points of the SDX Protocol are:

  1. Scope of the SDX Protocol
  2. Adopting a clear policy for engagement
  3. Identifying engagement topics
  4. Requesting engagement
  5. Selecting participants
  6. Determining how to engage
  7. Preparing for the engagement
  8. Participating in the engagement
  9. Reviewing and revising approaches to engagement
  10. Customizing the SDX Protocol

Photo credit: iStockphoto/YinYang

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

2 thoughts on “Corp Gov Roundup: Majority Voting Rules, Investor Stewardship Codes, “Say on Pay””

  1. Amy Borrus says:

    great global wrap-up! well-written

  2. Alexis Cheang says:

    Very helpful Cg round-up Matt. Thanks!

Leave a Reply to Alexis Cheang Cancel reply

Your email address will not be published.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.