A review of executive compensation disclosure by the Canadian Securities Administrators has found that most firms are generally complying with new disclosure rules, but that deficiencies were also widespread.

According to a staff notice from the CSA, in the spring of this year, staff of the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission and the Autorité des marchés financiers launched targeted reviews of executive compensation disclosure to assess compliance with the new disclosure requirements.

They reviewed a total of 70 reporting issuers, finding that 62 of them filed disclosure that generally met the requirements. “Nevertheless, we asked most of these companies to improve their disclosure in future filings,” they said.

The other eight companies provided disclosure that did not meet minimum acceptable standards, the CSA said, and they instructed these firms to file supplemental disclosure.

“While only eight of the 70 companies we reviewed were instructed to file supplemental disclosure to cure deficiencies in their executive compensation disclosure, our overall observation is that there remains room for improvement,” the CSA concludes.

Among the deficiencies they found, the CSA reports that a number of companies did not sufficiently explain in the Compensation Discussion and Analysis how each element of compensation is tied to each named executive officer’s performance. “We frequently found that the CD&A did not fully or accurately describe the process of making executive compensation decisions. We were often unable to tie the discussion in the CD&A to the rest of the company’s executive compensation disclosure,” it said.

Also, they report that: a number of companies did not provide complete disclosure regarding the use of benchmarks and the determination of performance goals; a significant number of companies did not fully discuss how the trend shown in the performance graph compared to the trend in the compensation of executive officers; a number of companies did not satisfy specific disclosure requirements in the summary table; and they “found significant issues” in connection with the disclosure of pension plan benefits and termination and change of control benefits. In addition, there were a variety of other, smaller issues uncovered in the reviews.

The CSA says that it will continue to review executive compensation disclosure as part of the continuous disclosure review programs, focusing in particular on: CD&A disclosure, compensation table disclosure, and termination and change in control benefits disclosure.

IE