Shareholders group raises red flags about Yukon corporate rules
'We would be very upset' if the new rules attract corporations to Yukon
A large shareholders' rights group in Canada is taking issue with new corporate governance rules in Yukon.
The Yukon Government has said the new rules, which took effect on May 1, 2015, were meant to modernize outdated laws.
But Stephen Erlichman, the executive director of the Toronto based Canadian Coalition for Good Governance, says several of the provisions are troublesome, and carry the potential for conflict of interest among corporate directors.
The Coalition's website says its members manage more than $2.5 trillion dollars in assets on behalf of pension funds, mutual fund unit holders, and other institutional and individual investors.
Erlichman says Yukon is now the only place in Canada where one corporate director can give a proxy to another director to vote on his or her behalf.
"A director should not be giving his vote away to another director, we want each director to give thought to every matter that's brought forward at a board meeting," says Erlichman.'
He says shareholders choose directors for a reason.
'Hundreds of years' of tradition wiped from Yukon laws
Erlichman cites other problems with the new law, such as letting directors take personal advantage of business opportunities in some situations.
He says going back hundreds of years. first in the United Kingdom, and then in Canada, it's been unacceptable for directors to take up business opportunities that have been declined by the boards they sit on.
Erlichman says Yukon is now the only jurisdiction in Canada to allow it.
There's a potential risk of sweetheart deals among company directors according to Erlichman.
He says another issue is allowing the directors to sell company assets without first getting a vote of approval from shareholders. He says shareholders should have a vote.
'We would be very upset' if rules attract corporations
Erlichman says it remains to be seen whether Canadian companies will continue, in effect re-incorporate, into the Yukon or new corporations incorporate there.
"We would be very upset if Canadian public companies started continuing into the Yukon in order to take advantage of these handful of provisions which we think are poor corporate governance and if we see that happening we'll have to decide what to do next," says Erlichman.
There were no Yukon government officials available to comment to CBC on this story.
But Fred Pretorius, the Yukon's director of corporate affairs, told CBC News about two months ago that the new laws were primarily done to modernize rules drafted in the 1980s.
"The old way of scheduling meetings, the old way of doing business, some of those would be seen as causing unnecessary and undue administrative red tape," he said.
Pretorius said at the time shareholders would be protected.