February 7, 2011
Canada: Proposes Changes to Executive Compensation Disclosure
– Broc Romanek, CompensationStandards.com
Recently, the CSA (Canadian securities administrators) proposed changes to executive compensation disclosure that would not take effect until the 2012 proxy season. Check out this Torys’ memo for more.
In addition, here is something from ISS’s Debra Sisti about how Ontario regulators are seeking input on “say-on-pay” and majority voting:
In keeping with its 2010-2011 Statement of Priorities, the Ontario Securities Commission recently issued a notice, in which the OSC indicated that it was considering future regulations on slate voting and majority voting in uncontested director elections, as well as “say on pay” advisory votes on executive compensation.
Following a comprehensive look at proxy voting mechanics in Canada, the law firm of Davies Ward Phillips and Vineberg released a paper by senior partner Carol Hansell, entitled, “The Quality of the Shareholder Vote in Canada,” which makes a number of recommendations for improvement beginning with a regulatory review of the proxy voting system. The OSC has included a review of the effectiveness of the proxy voting system in Canada as the third item on its “shareholder democracy” agenda for this year. Institutional investors in Canada have pushed back on slate voting, which provides a bundled director ballot and prohibits shareholders from registering individual votes for director nominees. From 2009 to 2010, the percentage of TSX companies with slate director elections fell from 46 percent to 28 percent, and declined from 28 percent to 17 percent at S&P/TSX Composite Index companies, according to ISS data.
Majority voting in the form of a director resignation policy had been voluntarily adopted by 146 companies by end of the 2010 proxy season; 130 of those are Composite Index companies and accounted for 53 percent of the index as of Dec. 31. As a result of shareholder engagement and letter-writing campaigns, a handful of other companies have publicly committed to adopt majority voting in the coming year.
Much like majority voting, “say on pay” has been voluntarily adopted by some of Canada’s largest companies in response to shareholder engagement and shareholder proposals. As of June 30, 2010, ISS had identified 28 issuers with management “say on pay” resolutions on their proxy ballots. And another 10 companies have announced they will follow suit this year.
While the tenor of shareholder engagement in Canada to date has been quietly conservative and has garnered substantial results, there has been some indication from larger shareholder coalitions that if engagement activity is not sufficient to make further gains on these issues, they will file shareholder proposals to prod unresponsive boards. The results of these efforts and the investor support for these proposals will be closely watched by regulators in contemplation of future regulation. In the interim, the OSC is asking stakeholders to submit their comments on the appropriateness of such regulation by March 31.