Dexter is an Executive Vice President of D.F. King, an AST Company. With more than 20 years of experience in capital markets, Dexter has extensive knowledge of corporate law and a thorough understanding of financial markets. From his work at a major Canadian law firm as a Securities Associate to his tenure at the Investment Dealers Association, Ontario Securities Commission and the Toronto Stock Exchange, Dexter has a strong public equities market background as well as significant regulatory experience.
Prior to joining D.F. King, Dexter held the Executive Vice President & General Counsel position at a national competitor. Having worked on a number of Canada’s largest M&A transactions as well as proxy fights, Dexter has deep expertise in corporate governance.
Dexter holds the ICD.D designation and is currently a director of Prosper Gold Corp. and Augustine Ventures Inc. and recently was Chairman of the Board and a board member of Partners Real Estate Investment Trust.
Christopher P. Skroupa: To what extent is board diversity a topic for engagement with institutional shareholders?
Dexter John: Institutional shareholders usually have their own guidelines and policies with respect to board diversity and will rely on their own internal policies instead of the policies of the TSX. However, over the last few years, we have noticed that diversity is an important factor that institutional shareholders utilize when deciding whether to support various committee members or the Chairman of the Board. Institutional shareholders will engage with issuers to discuss the direction and progress of the issuer and during those conversations/meetings, if diversity is a topic for concern, it will be brought up and the issuer will have to either follow the TSX guidelines of “comply or explain” or create their own guidelines that they will disclose publicly.
Skroupa: What do you believe are the major obstacles to board diversity?
John: The issue that we are seeing with the so-called “obstacle” of addressing board diversity is that we still have a number of boards that are “too male, too pale and too stale.” Despite the movement to be more inclusive and diverse, these board still are unable to look beyond their tight-knit circles. We constantly hear the same names of potential female directors being thrown around and it is not possible for the same 8-10 women to be on all boards. We also hear the excuse that the candidates outside of those 8-10 women are not qualified. The point we make to these boards is that people need to be given a chance and, at some point, they themselves were not qualified but someone took a chance on them. We really see this issue at the mid-cap and small-cap space, and in particular in the mining and energy industries.
Skroupa: Are there any trends that you have been seeing this proxy season?
John: One thing we have noticed during proxy season to date is that ISS Social Advisory Services (“SAS”) group has been withholding AGAINST nominating committees where the board lacks at last one female director and one racially diverse director, and it is not at least 30% diverse. A number of our clients were quite surprised when we had informed them of this trend. Now, the SAS report is provided to institutional subscribers that are focused on ethical investments. This, of course, brought about a number of questions from our clients such as: how do we disclose racial diversity and what constitutes a racially diverse individual?
We reached out to SAS to find out how they classify racially diverse and were told that the categories emanated from the U.S. Office of Management and Budget’s definition of racial and ethnic categories, and they will determine a director’s race and ethnicity based on issuer filings and all publicly available sources. An additional concern among our clients is whether the SAS requirement would make it to the ISS’ primary report (which would have broader implications). To this question, ISS stated that the requirement to have a racially diverse board member will not be factored in to the primary report in the near future.
Skroupa: The number of proxy fights in Canada has diminished; is there a reason for this?
John: Yes, what you are seeing now is the maturation of the proxy fight cycle. In Canada, we’re seeing a number of settlements between the issuer and the activist. A lot of negotiations are happening behind the scenes, and only when those fail will the activist go public and the fight go to a vote.
The reason there are so many settlements is that activists and issuers recognize the enormous costs of having a fight and how much the fight distracts the issuer from focusing on the business at hand: increasing shareholder value. Boards are recognizing that most activists have good intentions, many have value to add and it may make sense to offer them a board seat, entertain their thesis or even appoint a nominee if it means that you can get a Standstill Agreement, diffusing a proxy war.