Views on improving the integrity of global capital markets
15 November 2016

CorpGov Roundup: Zombie Directors Out in Canada and UK FCA Seeks Input on Its Mission

A recent report out of Australia assesses the current state of shareholder activism in the country and finds that a majority is domestic. Canada takes steps to get rid of “zombie” directors.  CFA Institute has released a report about corporate governance policies in the European Union and how the current silo approach is affecting the creation of a unified capital market. The UK Financial Conduct Authority (FCA) is seeking feedback on its mission in order to focus its resources on the strategies the market needs most. Finally, the US SEC is seeking comment on proposed proxy rule amendments.


Activist Insight and the law firm Arnold Bloch Leibler recently published an interesting report that details the current state of shareholder activism in Australia. The following are some of the findings:

  • Over the past three years, nearly all activism in Australia was domestic; only 14% of activism by investors targeting public Australian companies came from investors outside the country.
  • Activism is highly targeted at board-related issues (not merger and acquisition or business strategy issues); 86% of recent activism focused on board issues.
  • Activism tends to focus on micro-cap and nano-cap companies, with only 4% of activism targeting large-cap Australian companies from 2013 to 2016.
  • The main investor power in Australia of superannuation funds have only recently been warming to using activism as a strategy.


A bill recently introduced in the Canadian Parliament would prohibit directors from remaining on corporate boards if they do not receive majority support in director elections. The bill would require public companies governed by the Canada Business Corporations Act to have majority voting for directors, which gives the option to vote for or against a director, rather than the current standard under which votes are either made in favor of a director or withheld.

Under the current Canadian system, a director in an uncontested election simply needs one vote in favor to be elected; these are labeled “zombie” directors in the domestic press. The amendments to the Act would also require all federally registered public companies to disclose the gender composition of their boards and senior management along with their diversity policies.


A new report by CFA Institute, Corporate Governance Policy in the European Union: Through an Investor’s Lens, finds that a siloed approach to corporate governance policy is endangering the creation of a unified EU capital market. The report suggests that a joined-up approach to governance policy, encompassing the Capital Markets Union initiative, is necessary to achieve meaningful reforms.

Although corporate governance reform over the past 15 years has been positive, important issues remain unresolved, including fixing the “plumbing” of cross-border proxy voting, protecting the rights of minority shareholders, and strengthening the accountability of boards, among others.

CFA Institute engaged with more than 30 investment practitioners, governance experts, and other stakeholders from across Europe to inform the report. The findings reveal that there is much to be done to simplify mechanisms to enhance corporate accountability and realize maximum value from reforms that have already been undertaken. Investors are open to many stakeholder issues, such as promoting board diversity and paying greater attention to environmental, social, and governance factors. But importantly, investors are concerned that there is still inadequate protection against abuse by controlling shareholders, where the principle of one share one vote is essential for the exercise of good governance.

United Kingdom

The Financial Conduct Authority in the United Kingdom recently launched a consultation on its mission, designed to provide a guiding set of principles around the strategic choices the FCA makes.

Key themes that the FCA will be consulting on include the following:

  • Protecting consumers: In an environment where consumers are increasingly expected to take responsibility for their own financial decisions, what is the right level of consumer protection; and how does the FCA balance the responsibilities of firms and consumers?
  • Vulnerable consumers: Should the FCA prioritize the protection of vulnerable consumers, and if so, how?
  • Delivering consumer redress: What should the role of the FCA be in redress schemes — for example, in dealing with activity outside the FCA’s remit?
  • When the FCA intervenes: How does the FCA identify harm and how does it decide which approach to take to address it; and how can the FCA be clearer for firms, consumers, and stakeholders on what it is doing and why?
  • The scope of regulation: Explain the remit the FCA has for taking action and the circumstances in which the FCA may intervene with regard to unregulated activities.
  • The interaction between regulation and public policy: Explain this interaction by using examples, including access to financial services and price discrimination.
  • Competition, supervision, and enforcement: Provide clarity and seek feedback on the FCA’s current approach to using its different regulatory powers and tools.
  • FCA Handbook: Seek suggestions on a proposed review of the FCA Handbook, which sets out the rules for firms.

The FCA asks for comments by 26 January 2017.

United States

The SEC recently proposed amendments to its proxy rules to require parties in a contested election to use universal proxy cards that include the names of all board nominees. The proposal gives shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.

The proposed rules would require proxy contestants to provide shareholders with a proxy card that includes the names of both management and dissident director nominees. The rules would apply to all nonexempt solicitations for contested elections other than those involving registered investment companies and business development companies. In addition, the proposed rules would require management and dissidents to provide each other with notice of the names of their nominees, establish a filing deadline and a minimum solicitation requirement for dissidents, and prescribe presentation and formatting requirements for universal proxy cards.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register. Read about our views on the issue of the universal proxy ballot in our blog on the topic from March 2015.

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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.

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