BANC - Standing Committee

Banking, Commerce and the Economy

Past Session: Past Session:
36-1 36th Parliament, 1st Session (September 22, 1997 - September 18, 1999)
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NOTES

  1. Organisation for Economic Co-operation and Development, Basic Characteristics and Information on Institutional Investors in OECD Countries, 24 February 1997, p. 4.
  2. Ibid., p. 12.
  3. Ibid., p. 12-13.
  4. Standing Senate Committee on Banking, Trade and Commerce, Evidence (hereafter referred to as "Evidence"), 19 November 1997, 5:40 (Mr. Donald Walcot).
  5. Remarks of Glorianne Stromberg to the Standing Senate Committee on Banking, Trade and Commerce, 14 May 1998, p. 2.
  6. Evidence, 18 November 1997, 5:11 (Dr. John Por).
  7. Ibid., 5:32.
  8. Evidence, 18 June 1998, 23:29 (Mr. John Palmer).
  9. Ibid., 18 November 1997, 5:15 (Mr. Keith Ambachtsheer).
  10. Ibid., 5 May 1998, 17:5 (Mr. Malcolm Hamilton).
  11. Ibid., 18 November 1997, 5:26 (Dr. John Por).
  12. Ibid., 5:20 (Mr. Jeffrey MacIntosh).
  13. Ibid., 19 November 1997, 5:57 (Mr. Russell Hiscock).
  14. Ibid., 6 May 1998, 17:68,69 (Mr. Michael Beswick).
  15. Ibid., 18 November 1997, 5:12 (Mr. Keith Ambachtsheer).
  16. Ibid., 18 November 1997, 5:13.
  17. Ibid.,18 June 1998, 23:42 (Mr. John Palmer).
  18. Ibid., 18 November 1997, 5:13 (Mr. Keith Ambachtsheer).
  19. William G. Bowen, Inside the Boardroom, Governance by Directors and Trustees, John Wiley and Sons, Inc., New York, 1994, pp. 18-20.
  20. Evidence, 18 November 1997, 5:11 (Dr. John Por).
  21. Ibid., 17 May 1998, 18:42 (Mr. Claude Lamoureux).
  22. Ibid., 5 May 1998, 17:41 (Mr. Roger Richard).
  23. Ibid., 6 May 1998, 17:51 (Mr. William Dimma).
  24. Ibid, 6 May 1998, 17:52.
  25. Ibid., 19 November 1997, 5:71 (Ms. Gretchen Van Riesen).
  26. Ibid., 18 November 1997, 5:21 (Mr. Keith Ambachtsheer).
  27. Ibid., 18 November 1997, 5:23 (Dr. John Por).
  28. Ibid., 5 May 1998, 17:9 (Mr. Malcolm Hamilton).
  29. Ibid., 19 November 1997, 5:61 (Mr. Donald Walcot).
  30. Ibid., 5 May 1998, 17:43 (Mr. G. Tom Gunn).
  31. Ibid., 18 November 1997, 5:24 (Mr. Keith Ambaschtsheer).
  32. Ibid., 19 November 1997, 5:71 (Mr. Russell Hiscock).
  33. Ibid., 19 November 1997, 5:41 (Mr. Donald Walcot).
  34. Ibid., 5:45
  35. Ibid., 19 November 1997, 5:51 (Mr. Russell Hiscock).
  36. Ibid., 18 November 1997, 5:37 (Mr. Keith Ambachtsheer).
  37. Ibid., 6 May 1998, 17:72 (Mr. Michael Beswick).
  38. Ibid., 17:66.
  39. Ibid., 18 June 1998, 23:32 (Mr. John Palmer).
  40. Glorianne Stromberg, Regulatory Strategies for the Mid-90s – Recommendations for Regulating Investment Funds in Canada, (Stromberg Report), Ontario Securities Commission, January 1995.
  41. Glorianne Stromberg, Regulation and Supervision of Investment Funds in the New Financial Landscape - A Canadian Perspective, 1997, p. 9. (This paper outlines the major recommendations of the Stromberg Report.)
  42. Evidence, 14 May 1998, 19:69 (Mr. Douglas Grant).
  43. Ibid., 19 November 1997, 5:82 (Mr. Jonathan Wellum).
  44. Lawrence P. Schwartz, The Canadian Approach to Mutual Fund Governance, Submission to the Standing Senate Committee on Banking, Trade and Commerce, May 1998, p. 15.
  45. Evidence, 28 May 1998, 20:58 (Mr. Lawrence Schwartz).
  46. Evidence, 14 May 1998, 19:43 (Ms. Glorianne Stromberg).
  47. Ibid., 19:49.
  48. Ontario Teachers’ Pension Plan Board (OTPPB), Briefing Book prepared for the Standing Senate Committee on Banking, Trade and Commerce, 7 May 1998, p.1.
  49. Ibid. and data provided to the Committee by SEI Financial Services Ltd., 19 September 1997.
  50. Evidence, 20 November 1997, 5:95 (Mr. Murray Davidson).
  51. Ibid., 20 November 1997, 5:110.
  52. Jeffrey G. MacIntosh and Lawrence P. Schwartz, "Do Institutional and Controlling Shareholders Increase Corporate Value?", in Corporate Decision-Making in Canada, Industry Canada Research Series, Ministry of Supply and Services Canada, 1995, p. 311.
  53. Jeffrey G. MacIntosh, "Institutional Shareholders and Corporate Governance in Canada", The Canadian Business Law Journal, Vol. 26, 1996, 145 at p. 158-171.
  54. A poison pill is a shareholders rights agreement that when triggered by an event such as a hostile takeover offer provides the shareholders of the target company with rights to purchase additional shares or to sell shares at favourable prices.
  55. Evidence, 20 November 1997, 5:108 (Mr. Murray Davidson).
  56. Ibid., 5:127 (Mr. William Riedl).
  57. Canadian Pacific Limited, The Governance of Institutional Investors, Brief to the Standing Senate Committee on Banking, Trade and Commerce, 13 May 1998, p. 6.
  58. Ibid., p. 6-7.
  59. Ibid., p. 7.
  60. Evidence, 14 May 1998, 19:63-64 (Mr. Douglas Grant).
  61. Ontario Municipal Employees Retirement System (OMERS), The Role of the Public Pension Fund in the Canadian Economy, Presentation to the Standing Senate Committee on Banking, Trade and Commerce, 5 May 1998, p. 14.
  62. Ibid., p. 13.
  63. Ibid., p. 14.
  64. OTPPB (1998), p. 2.
  65. Roger Barton, How Institutional Investors See Themselves, Presentation by the General Counsel of the Ontario Teachers’ Pension Plan Board to the Canadian Bar Association, Corporate Governance: A National Perspective, April, 1997, p. 8.
  66. Evidence, 6 May 1998, 17:53-54 (Mr. William Dimma).
  67. Ibid., 17:61.
  68. The Conference Board, Company Relations With Institutional Investors, 1994, p. 21.
  69. Evidence, 13 May 1998, 19:31 (Mr. Michael Grandin).
  70. Ibid., 7 May 1998, 18:17 (Mr. Tom Ulrich).
  71. Ibid., 2 June 1998, 21:28 (Mr. Purdy Crawford).
  72. Ibid., 6 May 1998, 17:61 (Mr. William Dimma).
  73. Barton (1997), p. 9.
  74. Evidence, 7 May 1998, 18:49 (Mr. Claude Lamoureux).
  75. Ibid., 18:16 (Mr. Tom Ulrich).
  76. Kathryn E. Montgomery, "Market Shift – The Role of Institutional Investors in Corporate Governance", The Canadian Business Law Journal, Vol. 26, 1996, 189 at p. 190.
  77. Ibid., p. 190-191.
  78. Ibid., p. 191-192.
  79. Indexing is a practice of tying a stock portfolio to the performance of the market either by purchasing index funds or by buying shares in order to mimic the performance of stock price index such as the TSE 300.
  80. Pension Investment Association of Canada, Submission to the Standing Senate Committee on Banking, Trade and Commerce, November 1997, p. 4.
  81. Evidence, 19 November 1997, 5:41 (Mr. Donald Walcot).
  82. OMERS (1998), p. 13.
  83. Jeffrey G. MacIntosh, Explanatory Paper, prepared for Standing Senate Committee on Banking, Trade and Commerce, December 1996, p. 5.
  84. Ibid., p. 6.
  85. PIAC (1997), p. 7.
  86. Ibid.
  87. Evidence, 6 May 1998, 17:69 (Mr. Michael Beswick).
  88. Association of Canadian Pension Management, Membership Survey on Pension Plan Governance/Investment Practices, May 1998, p. 10.
  89. MacIntosh, Explanatory Paper (1996), p. 4.
  90. Evidence, 6 May 1998, 17:49 (Mr. William Dimma).
  91. Golden parachutes are severance payments to top corporate executives who are terminated or demoted.
  92. A "crown jewel defence" is an anti-takeover tactic. A company will sell its most valuable assets to a friendly third party (OMERS Proxy Voting Guidelines).
  93. Blank cheque preferred shares have a fixed dividend that is better secured by company assets than common stock. The board of directors usually has discretion to establish voting, dividend, conversion and other rights (OMERS Proxy Voting Guidelines).
  94. Greenmail is a payment of a premium over market value of shares to a raider who has accumulated a large block of shares in order to end a takeover bid (OMERS Proxy Voting Guidelines).
  95. PIAC (1997), p. 6-7.
  96. Corporate Governance Standards of the Pension Investment Association of Canada, 1993. In the area of obligations of the board of directors, PIAC calls for a majority of board members to be independent, separation of the positions of CEO and chair of the board, boards of not more than 15 members, the establishment of committees of the board and annual reporting to shareholders about a corporation’s corporate governance standards and practices as well as an evaluation of those practices. The PIAC standards state that the design of an executive compensation plan is more important than the size of the total remuneration. Shareholders have six main objectives in relation to such plans: compensation plans should induce management to become owners of enough stock for their interests to coincide with those of the shareholders; compensation should be high enough to attract qualified management but not structured to reward failure; compensation should motivate management to achieve long-term shareholder value; loans to purchase stock or options that obligate executives beyond their ability to pay should be avoided; unrestricted stock options, options priced below current market value or low interest loans should not be permitted; directors sitting on the Compensation Committee should be independent from management; and there should be an annual reporting to shareholders of the principles and structure of a company’s executive compensation program.

    In the area of takeover protection, PIAC favours: boards of directors that submit major corporate changes to a committee of independent directors and to a vote of shareholders not controlled by management; giving shareholders enough time for review and enough information to make informed judgments and not allowing management to short track a takeover bid by using a company’s retained earnings or borrowing power to buy large blocks of stock or seek a friendly third party to buy large blocks of stock without extending the offer to other shareholders.

    In the area of shareholders’ rights, the PIAC standards state that the proxy voting system must ensure that neither management nor shareholders are able to dominate the system or exercise undue influence. All shareholders should be treated equally with the same rights per share except where the stock is part of a senior class with separate, explicit defined rights.

  1. PIAC (1997), p. 4.
  2. Evidence, 19 November 1997, 5:59 (Mr. Donald Walcot).
  3. OTPPB (1998), p. 14.
  4. OMERS (1998), p. 12.
  5. Evidence, 19 November 1997, 5:90 (Mr. Jonathan Wellum).
  6. United Kingdom, Final Report of the Hampel Committee on Corporate Governance, January 1998, as quoted in Corporate Governance, A Report to the OECD by the Business Sector Advisory Group on Corporate Governance, April 1998, p. 45.
  7. Barclays Global Investors Canada, Role of Institutional Investors, Presentation to Standing Senate Committee on Banking, Trade and Commerce, 13 May 1998, p. 5.
  8. OPSEU Pension Trust, Submission to the Standing Senate Committee on Banking, Trade and Commerce, 4 June 1998, p. 13-14.
  9. OTPPB (1998), p. 17-18.
  10. Ibid., p. 18.
  11. OMERS (1998), p. 12. Fairvest Securities Corporation has a proxy review service in which it analyzes and make recommendations on issues to be voted on at annual and special meetings of various companies. PIAC operates an overnight Proxy Calendar service by fax to members. The Proxy Calendar identifies forthcoming corporate meetings, their agendas and non-routine issues.
  12. PIAC (1997), p. 7. The 71% figure includes members of PIAC who provide general instructions to external managers on proxy issues or those who ask to be consulted only on significant issues.
  13. Ibid., p. 6.
  14. Ibid.
  15. OMERS, Proxy Voting Guidelines, March 1998, p. 4.
  16. Stromberg (1998), p. 5.
  17. Evidence, 18 November 1997, 5:7-8 (Mr. Jeffrey MacIntosh).
  18. Ibid., 2 June 1998, 21:20 (Mr. Purdy Crawford).
  19. Ibid., 18 November 1997, 5:15-16 (Mr. Jeffrey MacIntosh).
  20. Ibid., 6 May 1998, 17:50 (Mr. William Dimma).
  21. Canadian Pacific Limited, (1998), p. 6.
  22. Evidence, 5 May 1998, 17:14 (Mr. William Hamilton).
  23. OMERS (1998), p. 15.
  24. Evidence, 19 November 1997, 5:60 (Mr. Russell Hiscock).
  25. Bernard S.Black, "Does Shareholder Activism Improve Company Performance?", The Corporate Board, March/April 1998, p. 1.
  26. Ibid.
  27. Rowland Fleming, "Shareholder Activism: the Swinging Pendulum", Canadian Speeches: Issues of the Day, April 1998, p. 35.
  28. Evidence, 4 June 1998, 22:14 (Mr. Brian Levitt).
  29. Ibid., 14 May 1998, 19:64 (Mr. Douglas Grant).
  30. OMERS (1998), p. 9.
  31. Ibid., p. 10.
  32. The Toronto Stock Exchange, Interim Report of the Committee on Corporate Disclosure, Toward Improved Disclosure, December 1995.
  33. Ibid., p. 85.
  34. Ibid., p. 85-86.
  35. Ibid., p. 86.
  36. Ibid.
  37. Ibid., p. 88-89
  38. Evidence, 14 May 1998, 19:58 (Ms. Glorianne Stromberg).
  39. Ibid., 18 November 1997, 5:8 (Mr. Jeffrey MacIntosh).
  40. OTPPB, Statement of Guidelines and Procedures on Proxy Voting, 1995, p.8.
  41. OMERS, Proxy Voting Guidelines, March 1998, p. 9.
  42. Standing Senate Committee on Banking, Trade and Commerce, Corporate Governance, August 1996.
  43. Ibid., p. 67.
  44. Ibid., p. 70.
  45. Canadian Council of Financial Analysts, Inc., Submission to the Standing Senate Committee on Banking, Trade and Commerce, May 1998, p. 9.
  46. Corporate Governance (1996), p. 62.
  47. Ibid., p. 91.
  48. The Investment Funds Institute of Canada (IFIC), Presentation to the Standing Senate Committee on Banking, Trade and Commerce, 19 November 1997, p. 6
  49. Evidence, 19 November 1997, 5:74 (Mr. Thomas Hockin).
  50. IFIC (1997), p. 5.
  51. Ibid., p. 3.
  52. Ibid., p. 5-6.
  53. Evidence, 19 November 1997, 5:47-48 (Mr. Donald Walcot).
  54. Ibid., 18 November 1997, 5:28 (Mr. Keith Ambachtsheer).
  55. Ibid., 5 May 1998, 17:36-37 (Mr. G. Tom Gunn).
  56. How derivatives work to circumvent the FPR is explained in Appendix 2.
  57. IIbid., 7 May 1998, 18:47 (Mr. Claude Lamoureux).
  58. Ibid., 14 May, 1998, 19:62 (Mr. Douglas Grant).