Corporate Canada is scoring some good marks for its levels of compensation disclosure for boards and CEOs, but many companies still have work to do. This is the conclusion of the Canadian Coalition for Good Governance’s (CCGG) first ever scorecard for compensation disclosure by Canadian public companies.

“This score card is not about levels of compensation, but about disclosing the process of how compensation is determined. Transparency is essential when it comes to communicating the compensation of senior executives to investors,” said Doug Pearce, chairman of the CCGG’s board of directors.

Undertaken by the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management, the study looked at the executive compensation disclosure of 208 companies, representing all the corporations in the TSX Index. Using a scoring system based upon the Coalition’s “Guidelines for Principled Executive Compensation,” the study scored companies on compensation committee membership disclosure, consultant disclosure, compensation plan disclosure, pay for performance disclosure, and long term retirement cost disclosure.

The results show that 23 companies had solid scores, meaning that their disclosure on matters of compensation were thorough and complete.

On the other end of the scale 133 companies had work to do.

“Our members are extremely concerned about the pay practices in Canada and are most anxious to help compensation committees do a better job in disclosing how they go about establishing and refining compensation packages,” said Pearce.

According to the Coalition there are four areas where companies can immediately improve their performance:

  1. Ensuring that compensation consultants are hired by the board and that any other work they do for the corporation is approved by the board and disclosed along with the pay for both types of services.
  2. Providing the “one figure” number summarizing the CEO pay as required by the new SEC regulations.
      Abandoning options that vest over time with no performance hurdles.

    Explaining more clearly how compensation packages are linked to performance.

      To help with better disclosure and better practices the CCGG will be publishing a “Best Practices” document within the next month. This publication will complement the “Best Practices on Director Disclosure” found at: www.ccgg.ca/best-practices/director-disclosure/

      The CCGG is made up of 50 of Canada’s leading institutional investors with representing more than $1 trillion in assets under management.