A fund manager focused on socially responsible investing has been encouraged by steps that some of Canada’s biggest banks have taken to rein in executive compensation.

But Michelle de Cordova, director of corporate engagement for NEI Investments, says there is still more work to be done to ensure that executive pay practices are fair.

In its latest report published earlier this month, NEI Investments – which runs a mutual fund family called Ethical Funds – says it has seen signs of progress following its efforts to lobby banks to consider different compensation metrics.

Typically, the banks have used what are called “horizontal comparisons” to set pay, looking at what similarly high-ranking executives at other institutions rake in.

However, NEI says “vertical comparisons” – which measure executive pay against pay to other company employees or against income levels in society as a whole – would lead to fairer compensation practices.

Executive pay has been a hot topic in Canada since shareholders at both CIBC and Barrick Gold (TSX:ABX) voted against the companies’ compensation practices in non-binding say-on-pay votes this past spring.

At CIBC, shareholders took issue with a pair of payouts made to the bank’s former CEO and its former chief operating officer – which came to $25 million in total – in order to accelerate the pair’s retirement.

De Cordova says outcry over the payouts overshadowed some of the positive progress at the banks, including the fact that all of Canada’s six biggest lenders – Royal Bank (TSX:RY), TD Bank (TSX:TD), Bank of Montreal (TSX:BMO), CIBC (TSX:CM), Scotiabank (TSX:BNS) and National Bank (TSX:NA) – indicated in their proxy circulars this year that they have begun providing vertical comparison data to their compensation committees.

She is also encouraged by the fact that the new CEOs who have taken the helm at four of the largest banks have seen their compensation – including salaries, stock options and pension caps – reduced.

“It seems like the banks have taken the opportunity presented by succession to ratchet down some aspects of the compensation compared to predecessors,” she said.

Although some of the salaries are likely to rise over time, de Cordova says the reduction in final pension caps is significant because the companies are defining up front what the pensions are going to be once the new crop of CEOs retires.

According to the report, the cap on Royal Bank CEO David McKay’s final pension is nearly 38% lower than what his predecessor Gordon Nixon was eligible to receive.

TD Bank’s Bharat Masrani will see his pension capped at a rate that is 46% lower than Ed Clark’s pension cap, while Scotiabank CEO Brian Porter’s final pension cap is 25% lower than his predecessor’s.

At CIBC, the CEO pension cap was reduced by 56% when Victor Dodig was appointed.

“It seems to us a statement by the compensation committees that those benefits had been too high before,” de Cordova said.

However, de Cordova is looking for more. For one thing, NEI plans to pressure the banks to disclose more details to shareholders about what kinds of vertical comparisons are being provided to compensation committees.

Some metrics – for example, the pace at which executive compensation is growing relative to the pace that average wages in the company are growing – are more helpful than other comparisons, de Cordova said.

As well, she adds that it’s “about time” for Canada to make say-on-pay votes mandatory for all publicly traded companies.