The Canadian Coalition for Good Governance (CCGG) says it will not support any regulatory changes or recommend universal backing for resolutions that will introduce mandatory advisory shareholder votes on executive compensation this year.

In its position paper on the issue of “Say on Pay”, CCGG stated that Canadian companies are already making strides to improve executive compensation practices, address disclosure issues and improve shareholder involvement, and that regulations of this kind are not the answer at this time.

“It is the role of the board, and in particular the compensation committee, to establish appropriate executive compensation plans that clearly align the interests of shareholders and management,” says David Beatty, managing director, CCGG. “By working constructively with corporate Canada, organizations like ours can provide perspective on the difficult balance between market forces and shareholder interests in the arena of executive pay but it is not our role to find that balance.”

“Say on Pay” resolutions refer to an advisory (non-binding) shareholder vote to allow shareholders to comment on executive compensation.

In its paper, the CCGG outlined their reasons not to support these types of resolutions at this time, including:

  • the continued adoption of majority voting for director elections, allowing shareholders to express their concerns over issues such as executive compensation by withholding votes;
  • the introduction of new CSA requirements for compensation disclosure that will have an impact on linking pay to performance;
  • an overall improvement in compensation disclosure practices since last proxy season; and
  • the increasing role of independent executive compensation advisors in the compensation process.

“We will look to corporate Canada to continue to improve the executive compensation process. Moving forward, if we feel progress on this issue has stalled, we may support resolutions such as “Say on Pay” to ensure the voice of the shareholder is heard,” says Beatty.

CCGG is made up of 49 of Canada’s leading institutional investors with over $1 trillion of combined assets under management. Its mission is to represent Canadian institutional shareholders through the promotion of best corporate governance practices and to align the interests of boards and management with those of the shareholder.

For more information on CCGG’s “Say on Pay” paper, go to www.ccgg.ca.