The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Last week, the Canadian Coalition for Good Governance (CCGG) updated its Executive Compensation Principles, whose 46 members manage nearly $2 trillion in assets on behalf of Canadian investors, to focus on approaches to aligning pay with performance as well as integrating “risk management functions into the executive compensation philosophy and structure.” The principles were last updated in ’09. Broadly, the document comprises six principles covering the following:

– A significant component of executive compensation should be “at risk” and based on performance;
– “Performance” should be based on key business metrics that are aligned with corporate strategy and the period during which risks are being assumed;
– Executives should build equity in the company to align their interests with those of shareholders;
– A company may choose to offer pensions, benefits and severance and change-of-control entitlements. When such perquisites are offered, the company should ensure that the benefit entitlements are not excessive;
– Compensation structure should be simple and easily understood by management, the board and shareholders; and
– Boards and shareholders should actively engage with each other and consider each other’s perspective on executive compensation matters.