How we voted: recapping the 2023 proxy season

Ajit Singh, MBA

ESG & Proxy Voting Analyst

2023 proxy voting season¹ highlights

Global

55,132

Items voted

17.5%

Votes against Management

USA

18,000

items voted

18%

Votes against Management

67%

ESG Shareholder Proposals supported and abstained

Canada

6,253

items voted

19%

Votes against Management

52%

ESG Shareholder Proposals supported and abstained

A season of highs and lows

The 2023 proxy voting season was one of opposites. This year continued the trend we witnessed in 2022: while there was a continued rise of ESG shareholder proposals on the ballot at Canadian and US companies, this was also paired with lower average support for such proposals². Proposals that called to restrict or reverse ESG practices were also at an all-time high, however support for those proposals was on average even lower than 2022³. Despite the lower support for ESG shareholder proposals, more institutional investors now have guidelines in place that allows them to vote directly against board directors to hold them accountable for problematic practices, including ESG concerns.

2023 voting approach

At BMO GAM, proxy voting is an important element of our responsible investment approach. We vote our internally managed mutual fund and ETF proxies in accordance with our Corporate Governance Guidelines⁴ which set out our expectations of good governance. Updates this year for the Canadian market included expanding our 30% board gender diversity expectation to all TSX-listed companies, adjusting our expectations on board tenure by assessing how aligned or not aligned a board’s average tenure is with market practice, encouraging auditor refreshment if they have been in place for more than 20 years, and moving to a scorecard-based approach to evaluating compensation concerns.

Figure 1: Meetings voted across markets. Source: BMO Global Asset Management, as of June 30^th, 2023

BMO GAM’s RI team actively votes proxies in the Canadian market as well as high-profile meetings in the US such as priority companies and new or contentious ESG shareholder proposals. We inform proxy voting decisions through consultations with our investment teams and through engagements with issuers during and in the lead up to proxy season. Our voting partner reo© instructs meetings on our behalf in international markets, which ensures there is human oversight of a very large volume of voting items (mainly attributed to our index-based ETFs). BMO GAM monitors and retains the ability to instruct and override reo© instructions for meetings across all markets. For the purpose of this review, we mainly focus on proxy season in Canada and the US.

2023 Overview

This season, we voted a total of 4,953 meetings globally. Just over 72% of meetings had at least 1 item voted against, withheld, or abstained. The overall votes against management percentage dropped slightly from 21% to 17.5% due to updates to voting guidelines in different markets.

In Canada we voted against management 19% of items, which is consistent with our approach in 2022. Our votes against management affected 518 meetings, representing 78% of all meetings voted in the Canadian market. Figure 2 shows an overview of our number of votes with and against management per meeting items, by geography. We further discuss our votes on management items and shareholder proposals including interesting case studies, below.

Figure 2: Global volume of votes for and against management (VAM) by item. Source: BMO Global Asset Management, as of June 30^th, 2023

Voting on Management Proposals

Key themes and concerns that led to votes against

The main management proposals that shareholders typically get to vote on are director elections, auditor ratification, executive compensation (in some markets like Canada, offering shareholders a “say-on-pay” is voluntary), mergers and acquisitions (M&A’s), transactions and restructuring, bylaw changes and routine items such as changing a company’s name.

Figure 3 shows how our votes against management were distributed across ballot items and geographies. Given that the majority of items we typically get to vote on are directors, it is not surprising that director election items also constitute the majority of our votes against management.

In Canada, 63% of the 19% votes against management were director elections related: we withheld from the re-election of 763 director positions (note that some of these might be the same directors, serving at multiple different boards) at 409 company boards, representing 17% of all director elections we voted on. The main reasons for our concerns included a lack of board diversity, board independence concerns, excessive average board tenure and director over-boarding (serving on too many boards at the same time) concerns.

17% of our votes against management in Canada were related to executive compensation concerns. Relatively, our votes against executive compensation were highest in the US at 28%, where executive pay packages tend to be more egregious. We have included a Canadian and a US compensation-related case study example below.

Figure 3: Items where we voted against management in Canada, USA and globally. Source: BMO Global Asset Management, as of June 30^th, 2023

Voting against directors for climate, deforestation, and human rights concerns

Where we have significant concerns about companies’ environmental or social practices, especially when they operate in high-risk sectors or countries, we have the ability to vote against directors on the board responsible for ESG risk management. Our voting partner reo© annually compiles lists of companies lagging on climate change, biodiversity, forced labour and human rights, using ESG data providers as well as publicly available benchmarking data from sources such as the Carbon Disclosure Project (CDP).

During the 2023 season, we withheld support from 65 directors globally at companies that did not have proper policies in place to prevent forced labour or human rights concerns, companies operating in sectors with significant biodiversity impacts that failed to respond to the CDP Water or Forest questionnaire, and companies lagging on climate change indicators. The majority of these companies were based in the U.S. and Asia.

Continued progress on board diversity in Canada

In 2022 we raised our expectations on board diversity in Canada by increasing our minimum level of female representation on S&P/TSX boards from 25% to 30%, consistent with our commitment to the 30% Club Investor Group Canada. Additionally, we implemented a new voting guideline to withhold support from chairs of nominating committees in the absence of any racial diversity — unless the board conveyed meaningful plans, targets, and timelines to address the matter. This is consistent with our support of the Canadian Investor Statement on Diversity & Inclusion. Read more about our voting in 2022 here.

While we recognize sensitivities around assessing individual director identities, we encourage boards to report aggregated data on the number or percentage of racial and other types of diversity and underrepresented groups, based on voluntary self-disclosure. We have been advocating with Canadian regulators to put in place mandatory disclosure requirements on diversity beyond gender based on relevant categories consistent with human rights law and which would allow for comparability across peers, as already mandated by the Canadian Business Corporations Act (CBCA).

In 2023, we further enhanced our board diversity approach by requiring all Canadian TSX-listed companies to have at least 30% women on the board, beyond just the S&P/TSX. Because of this guideline change, our votes against nominating committee chairs more than doubled.

Figure 4: Votes against and in support of Canadian nominating committee chairs because of board diversity. Source: BMO Global Asset Management, as of June 30^th, 2023

During the 2023 proxy voting season we withheld support from 239 chairs of nominating committees at Canadian company boards for lack of diversity concerns, compared to 108 in 2022. However, we were also able to support 33 of the 108 nominating committee chairs we voted against last year, due to progress their boards have since made on increasing diversity – 3 more than the 30 directors we supported due to progress made in 2022. To assess progress on board diversity we look for positive momentum, including the addition of a diverse candidate in the year under review, or meeting our expectation of 30% gender diversity and 1 racially diverse nominee. We’ve included a case study example below.

We are pleased to report that, while progress is still slow, overall, we have seen a marked uptick in both female and racially diverse director nominees this season.

Case studies

Board diversity at Stantec Inc. In 2022 we withheld support from the chair of the nominating committee at Stantec because of the absence of racial board diversity. While the company did have 33% female representation on the board and made significant progress on executive diversity, there was no robust target and timeframe to address progress on diversity beyond gender. We were pleased when in 2023 the company added two new female and racially diverse nominees to the board, bringing gender diversity to 50% and racial diversity to 20%. As such we were able to support the chair of the nominating committee in 2023.

Say-on-pay at Agnico Eagle We voted against the advisory vote on executive compensation (Say on Pay) at Agnico Eagle Mines due to problematic pay practices, including one-off high quantum cash bonuses awarded to the CEO and executive chair without pre-determined metrics and vesting conditions, and a 60% increase in total compensation cost for all Named Executive Officers. The former and now executive chair’s total compensation amounted to over CAD $20 million which far exceeded other metals and mining peer compensation. Although the company cited a successful merger with Kirkland Lake Gold as the reason for the payouts and committed to no longer award one-off bonuses in the future, the say-on-pay resolution failed for the second year in a row, with close to 75% of shareholders voting against. As the compensation committee chair’s nomination was removed from the ballot shortly before the AGM, vote results for this nominee are not known. This is only the second time in Canadian history that a company has lost two consecutive say-on-pay votes in a row.

Coal spin-off at Teck Resources Teck Resources asked for shareholder approval to separate the company into two independent entities: a producer of energy transition metals (“EVR”) and a steelmaking coal producer. We evaluated the spin-off of Teck’s coal producing business on 1) its ability to unlock value for shareholders and 2) what overall benefit it would bring to real-world climate outcomes. We considered several possible outcomes for and against the transaction and concluded that spin-off of the metallurgical coal assets would indeed unlock value and contribute to positive climate outcomes by enabling Teck to invest in and grow its copper business – a crucial resource for a successful energy transition. We did not find concerns related to potential privatization of the metallurgical (steelmaking) coal assets, given that several large public issuers showed interest in Teck’s assets. Unlike thermal coal production which should be phased out to meet Paris Agreement climate goals, there are not yet viable alternatives for steelmaking other than through metallurgical coal. Additionally, the transaction would have provided shareholders the ability to hold or sell EVR as a standalone entity. However, on the day of the AGM Teck withdrew the separation proposal citing that while “separation remains the best path to maximize value, [the company] will pursue a simpler and more direct separation approach.”⁵

Failed say-on-pay at Netflix 2023 marked the second year running of a failed Say on Pay resolution at Netflix, with only 28.8% of shareholders voting in favour of the company’s executive compensation plan,⁶ compared to 27% support in 2022. Interestingly, Netflix is part of a group of 12 Russel 1000 companies with less than 50% support for Say on Pay resolutions in 2023.⁷ In its 2023 proxy statement Netflix did disclose efforts made to engage shareholders after its first failed say-on-pay vote.⁸ This led to the company making some improvements, such as ensuring that base salaries for co-CEOs remain at a reasonable level. However, persistent concerns including a lack of pre-set performance vesting criteria for equity awards to executives, resulted in our vote against the resolution yet again. BMO GAM has voted against the Say on Pay resolution at Netflix since 2019.

Voting on (ESG) Shareholder Proposals

Trends of the 2023 season

During the 2023 season most of ESG shareholder proposals were related to environmental risks such as climate change and biodiversity. About 25% were related to corporate governance issues including executive compensation and political influence.⁹ In Canada, we voted on proposals related to director language skills, artificial intelligence, employee health and wellbeing, adoption of science-based greenhouse gas emissions reduction targets, racial disparities, and equity issues, and more.¹⁰

Deciding our vote on ESG shareholder proposals

We will generally support E&S proposals that call on companies to improve their business strategy and public disclosures on managing material environmental and social risks in line with recognized international standards and frameworks. New and emerging proposals are assessed on a case-by-case basis. Elements we consider in our assessment:

Does the shareholder proposal’s ask address a material or salient ESG issue for the company or a systemic risk for its industry?
How does the shareholder proposal align with BMO GAM’s priority areas on Climate Action, Social Equality, and overall good governance?
How is the company performing against peers?
What is our precedence in supporting similar proposals in other or the same markets or sectors?
Can the shareholder request be reasonably implemented?

What does abstain mean? In certain cases, we opt to vote “Abstain” on shareholder proposals where we agreed with the proponent’s intention but find the actual request overly prescriptive or not reasonably implementable. The decision to abstain relates to us abstaining on the topic, not on the vote itself (it still makes our vote count). Our vote rationale text explains why we chose to abstain. This is our attempt of bringing nuance into the generally binary nature of voting.

All ESG shareholder proposals received less support in 2023 than in the previous year. Average support for E&S proposals has fallen from 25% in 2022 to 19% this year, and for Corporate Governance related proposals from 35% to 28%. Average support for proposals calling for a reversal of ESG practices has fallen from around 2% to just above 1%¹¹. Reasons for lower vote counts include a general increase in number of resolutions filed in 2023, proposals that are overly prescriptive which usually garner lower support, an influx of new or emerging requests which generally take some time to gather investor understanding and support, or cases where a company already implemented the requested changes.

In the U.S., a total of seven shareholder resolutions passed in 2023 (one climate related and six social proposals), compared to 38 in 2022. In Canada, one shareholder resolution passed on climate-related lobbying, which we discuss below and in the case study section.

Our voting on ESG Shareholder Proposals in Canada and the U.S.

In 2023, we voted 50 ESG shareholder proposals in the Canadian market, increased from 32 in 2022.¹² Overall, we voted in favour of 32% of the ESG shareholder proposals that we voted in Canada and abstained from 22%. These “abstain” votes represent cases where we agreed with the intent of the proposal, but not with the solution proposed. Of the 16 resolutions we supported, eight were climate-related while five were related to diversity, equity & inclusion (DE&I) and human and labour rights.

The U.S. is a much bigger market where filing shareholder proposals is considered more of a norm rather than a last-resort escalation mechanism (which is how Canadian institutional investors have traditionally approached the filing of shareholder proposals). In 2023 we voted on a total of 520 ESG shareholder proposals in the U.S. market. Overall, we supported 65% of shareholder proposals voted in the U.S. market, abstained from 2.3% and voted against 32.7% of proposals.

Figure 5 & 6: Percentage of ESG shareholder proposals voted For, Against and Abstain in Canada and the U.S., respectively. Source: BMO Global Asset Management, as of June 30^th, 2023

Climate change was the dominant theme this year in both Canada and the U.S. In Canada, we voted 25 climate-related proposals, a 66% increase from 2022, on varied sub-themes such as disclosure of greenhouse gas emissions, climate-related lobbying, restricting fossil-fuel financing and adoption of advisory votes on environmental policy (say-on-climate). Only one climate-related proposal passed with majority support: a resolution asking Cenovus Energy Inc. to align its lobbying activities and associations with its climate commitments, which was supported by management. This is discussed as a case-study below.

In the U.S., 14% of ESG shareholder proposals we voted on were climate related. Most of these proposals asked companies to adopt “Paris-compliant” net-zero GHG transition plans and accounting. There was also an increase in proposals on climate finance, asking several large banks to adopt 2030 GHG emissions targets for high-emitting sectors. Only one Environment-related shareholder proposal, requesting a report on the reliability of methane emissions disclosures at Coterra Energy Inc., garnered majority support with 74.4% votes in favour of the proposal¹³.

Other significant categories in both markets were DE&I and human and worker rights related proposals. In Canada these included requests asking companies to conduct racial equity audits, to assess and report human rights’ risks from their operations, and indigenous relations and adoption of requirements related to Free, Prior and Informed Consent (FPIC). In the U.S. these included requests related to workplace diversity including racial equity audits, working conditions, the right to freedom of association and, for the first time, reproductive rights.¹⁴ In light of the June 2022 U.S. Supreme Court decision that struck down nearly 50 years of abortion rights, more than 20 proposals related to reproductive rights were on the ballot this year.¹⁵ One such proposal filed by Arjuna Capital at Meta is discussed below in the case study section.

The “other” resolution types included improved executive compensation practices such as claw-back provisions of incentive payments, shareholder rights such as proxy access and one-vote per share, as well as animal welfare, plastics and recycling and data security, internet, and privacy issues. This category represents the majority of the ESG shareholder proposal topics we voted on in the U.S., but we decided not to further break this down into subcategories to maintain comparability with the Canadian market.

Figure 7 & 8: ESG shareholder proposals voted by topic voted in Canada and the U.S., respectively. Source: BMO Global Asset Management, as of June 30^th, 2023

For a number of years there have also been an increasing number of shareholder proposals in the U.S. where the proponent does not agree that companies or their investors should improve environmental, social or governance matters. Typically, such shareholder proposals aim to prevent a company from acting or reporting on ESG factors, including social factors such as DE&I. The resolution language often mirrors proposals from proponents who typically do support shareholder proposals on standard ESG topics. In 2023 the number of these proposals was at a record high in 2023, perhaps not surprising at a time when certain US state-level laws and bills aimed to restrict “ESG investing”. However, average support for them fell from 9% to 6%.

The 2023 season was also the first time that such a shareholder proposal, asking several of the banks to restrict spending on climate-change related analysis or actions and continue to invest and finance the Canadian oil and gas sector, made an appearance in the Canadian market.

At BMO GAM we voted on 41 of such shareholder proposals, 38 in the U.S. and 3 in Canada, voting against all. 9 of the 38 such proposals in the U.S. were related to climate, and 28 related to DE&I and civil rights (for example – asking company to curtail racial equity and non-discrimination efforts and report on cost/benefit analysis of DEI&I programs). Climate-related proposals consisted sub-themes questioning the fiduciary relevance of the company’s decarbonization goal and asks to report on the risks of decarbonization. One shareholder proposal asked the company (Eli Lilly and Company) to avoid support of abortion-related activities. This proposal is discussed in the case studies section below.

Case studies

Approve Recapitalization Plan for all Stock to Have One-vote per Share. We supported a shareholder proposal filed at Alphabet Inc. requesting the company’s board to take steps to adopt a recapitalization plan for all outstanding stock to have one vote per share, and to do so within a timeframe justified by the board. Because of its multi-class voting structure, over 50% of the company’s outstanding voting powers have consistently been held by the company’s two co-founders while they owned 12% of the stock. This has raised concerns that interests of “public shareholders” may be subordinate to those of the company co-founders which could have an adverse impact on unaffiliated shareholders. The fact that similar proposals requesting phase-out of the multi-class voting structure have been filed at Alphabet every year since 2012 is testament to shareholder concerns on the subject. This year, the proposal received just over 30% shareholder support, consistent with outcomes in recent years and up from 17.7% since a similar proposal was first filed at the company in 2012. One vote, one share is a fundamental element of good corporate governance and as also stated in our Corporate Governance Guidelines, we favour a share structure that gives all shares equal voting rights and encourage companies to take steps to eliminate differential voting structures over time.

Access to reproductive rights and maternal healthcare: Meta Platforms, Inc. and Eli Lilly and Co. In June 2022 the U.S. Supreme Court struck down nearly 50 years of abortion rights. The after-effects of this verdict spilled over into the shareholder activism space with proponents filing over 20 shareholder proposals seeking protection of right of access to abortion and maternal healthcare. We voted in favour of one such proposal at Meta Platforms Inc. asking the company to assess and report the feasibility of expanding consumer privacy protections and controls over sensitive personal Meta user data in order to diminish the targeting of abortion-related law enforcement requests. In 2022 Meta satisfied a Nebraska police warrant demanding access to Facebook messages from a mother facing felony charges for allegedly helping her daughter terminate a pregnancy. Whilst Meta has a legal obligation to comply with lawful data requests, it can do more to protect individual user privacy and protection. The proposal secured 10% of the preliminary vote. On the other hand, a shareholder proposal at Eli Lilly and Company asked the company to report on the risks of its opposition to regulation restricting abortion, and how it plans to mitigate these risks. The proponent cited instances where Lilly opposed an Indiana law which restricted abortion access and that in response the company expanded its employee health plan to include coverage for travel for abortion. We voted against this proposal which received 1.8% shareholder votes in favour.

Change-in-control severance agreements. We supported 31 shareholder proposals at U.S. companies asking for the board to implement stronger change-in-control severance agreements. These are agreements that set out in advance the maximum amount of severance payout executives would receive if they were forced out by a merger or another reason without cause for dismissal. From our perspective, such payments should not exceed two years pay and any larger severance packages should be subject to separate shareholder approval to ensure it is in line with shareholder interests. Change-in-control severance agreements are part of our analysis of executive compensation structures and can contribute to us voting against a say-on-pay vote if not in line with our expectations. A subset of the proposals we supported at Health Care companies specifically, cited concern over increasing CEO compensation during a time where opioid-related litigation and settlements turned a financial loss in 2020 into an adjusted profit yielding CEO payouts they would otherwise not have qualified for. Given both the broader societal impacts of the opioid crisis in North America as well as the principle that executives should be awarded compensation based on actual performance, we did not deem this to be prudent compensation design.

Climate lobbying at Cenovus We supported a shareholder proposal at Canadian company Cenovus Energy Inc. asking whether and how it is aligning its direct and indirect lobbying and public policy advocacy with its net zero goal. Cenovus’ climate commitments include a Net Zero Emissions by 2050¹⁶ ambition and support for Canada’s Paris Agreement commitments.¹⁷ The proponent referenced third party climate lobbying benchmarks where the company scored an average of 29%¹⁸ and D+¹⁹ on a range of indicators including transparency and alignment on climate. The Cenovus board recommended that shareholders support the shareholder proposal, which has only happened a few times in Canadian proxy voting history. As a result, it received 99% votes in favour. In addition to viewing management’s endorsement positively, we viewed the proposal’s asks as in line with our expectations that a company’s political advocacy be aligned with its sustainability strategy. We had previously engaged the Pathways Alliance initiative of which Cenovus is part, to encourage member company transparency on climate-related lobbying.

Human rights impact assessment of targeted advertising at Alphabet BMO GAM supported a shareholder proposal at Alphabet directing the board to publish an independent third-party Human Rights Impact Assessment (HRIA) examining the actual and potential human rights impacts of the company’s targeted advertising policies and practices throughout its business operations. The company has previously published a summary of a third-party HRIA of a celebrity facial recognition algorithm²⁰, and the proponent argues that the company’s targeted ad systems merit at least the same level of due diligence and public disclosure. With Google advertising accounting for approximately 80% of Alphabet’s revenue in 2021²¹ and as the company and its peers develop new approaches to targeted advertising, we believe that possible adverse human rights impacts are a material risk to the company. Also given recent increase in legislative efforts to hold companies accountable for negative social impacts from targeted advertisements and related public scrutiny²², an independent assessment would help shareholders better evaluate the related risks and company’s management of these risks. Unfortunately, the proposal received only 17.78% shareholder support.

Indigenous Rights and Free, Prior and Informed Consent (FPIC) We supported a shareholder proposal at Royal Bank of Canada asking that the bank revise its Human Rights Position Statement to include that the bank will inform itself whether and how its clients have operationalized Free, Prior and Informed Consent (FPIC) where business relationships affect indigenous peoples. The proposal received close to 27% shareholder support. We believe that enhancing human rights policies to clarify and direct the operationalization of FPIC in line with the Truth & Reconciliation Committee’s Call to Action #92 (which calls upon the Canadian corporate sector to adopt and implement FPIC), would ensure appropriate risk management and processes, in addition to contributing to Indigenous reconciliation efforts. The United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) sets out that FPIC must be adhered to before implementing measures affecting Indigenous peoples²³. In 2021, Bill C-15 passed in the Canadian parliament, committing the government to make Canadian federal law consistent with UNDRIP over several years.²⁴ With our support for the proposal we also indicated support for the bank’s current efforts to review and update its Human Rights Statement as informed by engagement with diverse Indigenous experts on FPIC. Indigenous reconciliation is one key element of our Social Equality responsible investment theme.

Reducing plastics at Restaurant Brands International We supported a shareholder proposal filed at Restaurant Brands International (RBI) asking the company to report on how it could reduce its plastics use. The proposal noted the potential financial risk if governments require companies to cover waste management costs of packaging they produce, given that an increasingly adopted policy²⁵ with new laws to this effect passed in four U.S. states²⁶. We noted that RBI lags peers such as McDonald’s and YUM! Brands in elimination or reduction of virgin plastics and that it can be better prepared given the global, legally binding treaty on plastics pollution that is expected to come into force by 2024.^{27 28 29} The proposal received 35.91% independent investor support, which is significant given that approximately 30% of total voting power in the company is held by its holding company 3G Capital.³⁰ We believe an analysis of how the company can reduce its plastics use could provide shareholders with a better understanding of how the company is managing regulatory and reputational risks associated with not having a more comprehensive strategy for transitioning away from virgin plastic use.

Freedom of association at Starbucks BMO GAM supported a shareholder proposal at Starbucks asking the company to commission a third-party assessment of its adherence to workers’ rights to freedom of association and collective bargaining. The proposal passed with just 52% shareholder support: a good example of how even as a minority shareholder, your vote can make a deciding difference. Starbucks, in its Global Human Right Statement, has made a global commitment to provide workers’ rights that are modeled on the International Labour Organization’s (ILO) Core Labor Standards. Starbucks has been under workers’ allegations that it has interfered with these rights³¹ with coercion, including but not limited to illegally excluding unionized employees from wage and benefit increases.³² Respecting rights of freedom of association and collective bargaining are components of BMO GAM’s RI expectations for social practices. Further, the apparent misalignment between Starbucks’ public commitments and its reported conduct represents material reputations, legal, and operational risks and may impact long term value.

Looking ahead

We expect the 2023 trend of an increasing amount of environmental and social-related shareholder proposals paired with a lower average support in the US to continue, given the stance of certain U.S. states on ESG, as well as the increasing number of civil society organizations utilizing the shareholder proposal filing process to bring emerging environmental and social issues to the attention of companies and their shareholders. Such emerging topics usually take a few years to garner more investor understanding and support. In Canada, we expect a continued rise in ESG shareholder proposals and a continued rise in average support levels. As we get nearer to 2030 – considered a milestone year for climate action to get to net zero by 2050 – we predict that support for climate-related shareholder proposals will climb back up and more investors will use votes against the board of directors as an escalation mechanism at companies that are lagging on their climate commitments and actions.

As members of the Climate Engagement Canada (CEC) initiative — where we also serve on the Steering Committee — we will incorporate future CEC benchmarking research and engagement outcomes into our assessment of Canadian companies’ progress towards net-zero commitments. Ultimately, this will inform our voting approach. We will also continue to consider how we can better incorporate social equality topics into our voting approach, including on topics such as human rights and income inequality.

As we look ahead, we will continue to raise our expectations on how companies manage material ESG risks. We will also continue to engage with our portfolio companies to gain feedback and align expectations to form a mutual understanding of good governance practices.

¹ We define the 2023 proxy voting season as the period from January 1^st – June 30^th, 2023

²
https://corpgov.law.harvard.edu/2023/06/28/2023-agm-early-season-review/#:~:text=Director%20elections%3A%20Director%20election%20support,continued%20confidence%20in%20nominated%20directors.

³ Ibidem

⁴ Our Corporate Governance Guidelines can be found here: https://www.bmogam.com/uploads/2023/05/f4507ac8981ea83707d9c4d5e63cf2c3/corporate_governance_guidelines_en.pdf

⁵ https://www.globenewswire.com/news-release/2023/04/26/2655183/0/en/Teck-Withdraws-Separation-Proposal.html

⁶ https://www.kiplinger.com/investing/netflix-shareholders-reject-proposed-executive-pay-package

⁷ https://www.nasdaq.com/articles/proxy-season-update-for-2023%3A-what-shareholders-are-saying

⁸ 2023 Proxy Statement, Netflix, Inc.

⁹ https://corpgov.law.harvard.edu/2023/06/01/2023-proxy-season-more-proposals-lower-support/

¹⁰ ISS, 2023 Canada Proxy Season Preview, April 2023

¹¹ https://www.nasdaq.com/articles/proxy-season-update-for-2023%3A-what-shareholders-are-saying

¹² https://www.bmogam.com/ca-en/advisors/insights/a-recap-of-our-2022-proxy-voting-in-canada/#:~:text=This%20proxy%20season%2C%20we%20supported,and%20diversity%20in%20the%20workforce

¹³ https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-proxy-season-saw-more-esg-proposals-but-little-success

¹⁴ https://www.proxypreview.org/2023/report

¹⁵ISS, 2023 Canada Proxy Season Preview, April 2023

¹⁶ https://www.cenovus.com/Sustainability/Environment/Climate-and-GHG-emissions

¹⁷ https://www.cenovus.com/News-and-Stories/News-releases/2021/2244215

¹⁸ https://share.ca/wp-content/uploads/2022/09/SHARE_Pulling-back-the-curtain-2022-EN.pdf

¹⁹ https://lobbymap.org/company/Cenovus-Energy

²⁰ https://services.google.com/fh/files/blogs/bsr-google-cr-api-hria-executive-summary.pdf

²¹ https://abc.xyz/investor/static/pdf/2021_alphabet_annual_report.pdf?cache=3a96f54

²² https://ec.europa.eu/commission/presscorner/detail/en/ip_22_6423; https://www.europarl.europa.eu/news/en/press-room/20220412IPR27111/digital-services-act-agreement-for-a-transparent-and-safe-online-environment

²³ https://documents-dds-ny.un.org/doc/UNDOC/GEN/N06/512/07/PDF/N0651207.pdf?OpenElement

²⁴ https://www.canlii.org/en/ca/laws/stat/sc-2021-c-14/latest/sc-2021-c-14.html

²⁵ https://www.pewtrusts.org/-/media/assets/2020/07/breakingtheplasticwave_report.pdf

²⁶ https://www.packworld.com/news/sustainability/article/22419036/four-states-enact-packaging-epr-laws

²⁷ https://corporate.mcdonalds.com/corpmcd/our-purpose-and-impact/our-planet/packaging-toys-and-waste.html

²⁸ https://www.yum.com/wps/portal/yumbrands/Yumbrands/citizenship-and-sustainability/planet/sustainable-packaging-and- waste-reduction

²⁹ https://www.unep.org/about-un-environment/inc-plastic-pollution

³⁰ Proxy circular, Restaurant Brands International, Inc., 2023

³¹ https://www.theguardian.com/business/2022/jul/04/new-york-starbucks-closed-union-drive

³² https://www.nytimes.com/2022/08/25/business/economy/starbucks-union-howard-schultz-nlrb.html

Disclaimers:

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements.

These are not recommendations to buy or sell any particular security.

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate. Certain of the products and services offered under the brand name, BMO Global Asset Management, are designed specifically for various categories of investors in Canada and may not be available to all investors. Products and services are only offered to investors in Canada in accordance with applicable laws and regulatory requirements.

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2023 proxy voting season¹ highlights

Global

55,132

17.5%

USA

18,000

18%

67%

Canada

6,253

19%

52%