Shareholders happy with executive compensation: Report

Say-on-pay votes have increased shareholder engagement, improved disclosure
||Last Updated: 09/14/2011

Canadian shareholders are happy with the level of compensation executives are receiving, according to recent say-on-pay votes.

Seventy-one companies held a say-on-pay vote in 2011, making it the first year that a significant number of management advisory votes on executive compensation were submitted to shareholders in Canada.

The average level of support for executive compensation offerings was 94 per cent, according to a report by Hugessen Consulting in Toronto. Only 11 out of the 71 companies received support below 90 per cent, and of those, only two were below 80 per cent. And no companies failed to receive majority support.

The lowest levels of support were 64 per cent at Thompson Creek Metals and 75 per cent at Pan American Silver, found the report.

Out of 2,220 companies in the United States, the average level of support was 91 per cent and less than two per cent failed to receive majority support.

Say-on-pay has increased shareholder engagement and improved disclosure in the United States and Canada, said Hugessen Consulting.

In the U.S., say-on-pay has also given rise to a new phenomenon: companies responding publicly to negative voting recommendations from proxy advisors ISS and Glass Lewis, perhaps most notably GE.

Over 100 companies either filed additional proxy materials or issued press releases rebutting the claims or analysis of the proxy advisors. While there has been no sign of this yet in Canada, it may only be a matter of time until the practice migrates north, said the report.

ISS issued a negative recommendation on say-on-pay for only two Canadian companies this year (about three per cent of the 71 companies covered), one of which was Thompson Creek and the other company's name is not public.

Glass Lewis issued a negative recommendation on Pan American Silver’s advisory vote and it also issued eight negative recommendations on say-on-pay this year out of 56 companies covered (or 14 per cent).

To help ensure say-on-pay runs smoothly, boards and compensation committees may want to:

•stay informed of the latest developments on the executive compensation and governance front

•periodically assess their issuer’s plans and practices against guidelines set out by institutional shareholders and shareholder advisors

•ask “how will this be disclosed” when making any executive pay decision

•engage with shareholders when there may be a contentious matter and prepare contingencies, including a potential public defense of the board’s position.

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