TD Bank Financial Group has become the latest bank to announce that it will allow its shareholders to have a voice on executive compensation.

The bank announced on Wednesday that for the first time, shareholders will have the opportunity to vote on an advisory resolution on executive compensation, also known as ‘say on pay’, at TD’s annual meeting in 2010.

Meritas Financial Inc. and Mouvement d’éducation et de défense des actionnaires (MEDAC) — organizations whose goals are to mobilize shareholders and improve corporate governance — initially proposed establishing such a shareholder vote on executive compensation at TD. The organizations have been active participants in the bank’s ongoing evaluation of the possibility of making the change.

The proposals for establishing the non-binding vote were outlined in TD’s 2009 proxy circular.

“Shareholders are seeking assurance that directors are making serious efforts to ensure that executive compensation is linked to corporate performance,” said Meritas Financial in the proposal. “An advisory vote will allow shareholders to clearly express their views of executive compensation by voting on the matter directly.”

In the proxy, the board of directors urged shareholders to vote against the proposal, arguing that the bank has recently adopted new Canadian Securities Administrators rules on executive compensation, which should help address the concerns in the proposal. In addition, the board said the compensation strategy involves “thoughtful deliberation over time,” and does not lend itself to a “for” or “against” vote.

The board changed its stance after similar voting rights on executive compensation were granted to shareholders at other banks, including Canadian Imperial Bank of Commerce, Royal Bank of Canada and National Bank of Canada.

“It’s now clear from the votes held this year at the other major Canadian banks’ meetings that the opinion of the investment community, while still divided, has moved in favour of an advisory vote, and so we’ve acted accordingly,” said John Thompson, chairman of the board of TD and member of the management resources committee.

“TD promotes open and proactive dialogue with shareholders, ensuring their feedback on compensation and other important issues is heard and carefully considered by the board,” Thompson added.

IE