Several of Canada’s banks have indicated their intention to provide investors with an advisory vote on executive compensation, Meritas Mutual Funds announced Thursday.

Such votes have become known as “Say on Pay”.

Investors at CIBC and Royal Bank of Canada passed motions Thursday demanding the companies give them a voice on executive pay through non-binding shareholder votes — and the banks acquiesced. National Bank of Canada faces a similar motion Friday.

Meritas Mutual Funds, in conjunction with SHARE, first brought the issue of advisory votes on executive compensation to the Canadian investment community in 2007 through dialogues with Canada’s largest banks and followed by shareholder proposals asking for a vote.

“At the time, we asked that this vote be advisory, so that it would not ultimately determine executive pay, but would provide clear and consistent shareholder feedback on the decisions that bank boards make about compensation”, says Gary Hawton, CEO of Meritas Mutual Funds, “Our view is that if the directors do not hear from the shareholders they represent on executive pay, they will not be able to take these views into account in their decisions.”

According to Meritas, evidence from jurisdictions that have mandated the advisory vote — the UK, Australia and New Zealand require that it be on the ballot — suggests that boards in those jurisdictions are making ever greater efforts to align compensation with performance, to provide clearer disclosure of pay to shareholders and to be open with shareholders who ask questions about compensation.

“We are pleased to have been at the forefront of this issue in Canada and to have received such strong support from others in the investment community through their votes in favour of the Meritas proposal,” said Hawton.

“The moves today by these companies have provided their respective shareholders with a greater opportunity for dialogue on executive pay,” adds Hawton.

IE