Proposed Director Election Policy Change

In a recent open letter to all companies listed on the Toronto Stock Exchange ("TSX"), RiskMetrics Group announced a proposed change to its policy with respect to director elections.

Pursuant to the proposed policy change, beginning in 2010, where director nominees of TSX-listed issuers are presented to shareholders for election as a slate, rather than individually, RiskMetrics, on that basis alone, may issue a recommendation to withhold votes from the entire slate of directors. The proposed change is based on RiskMetrics' view that slate director elections, though permitted by corporate laws, are "unacceptable from a corporate governance perspective" because they tend to insulate individual directors from shareholder disapproval and work against director accountability.

It should be noted that individual director voting policies are usually accompanied by a director resignation policy, pursuant to which any director who, in an uncontested election, has more votes "withheld" than "for" him or her, is required to tender his or her resignation. Although the adoption of a director resignation policy was identified only as a best practice in the open letter, we expect that it will be a part of RiskMetrics' policy change when fully developed.

At this time, it appears that the proposed policy change will not apply to venture issuers. However, if it becomes RiskMetrics' policy, it may have a significant effect on those non-venture issuers who continue with slate voting and have institutional or other shareholders who, for policy or other reasons, follow RiskMetrics' recommendations. For those issuers that adopt individual director voting and resignation policies, individual directors should take care to ensure that they do not inadvertently fall off-side of RiskMetrics' other policies that could result in a "withhold" or "no" recommendation (such as non-attendance at board and committee meetings).