With the annual shareholder meetings of Canada’s five largest banks set to place over the next six weeks, Meritas Mutual Funds is proposing that banks allow shareholders to vote on the appropriateness of the compensation paid to their top executives.

Meritas, one of Canada’s leading providers of socially responsible investments (SRI), announced today that it has filed a proposal that shareholders can vote on, in person or by proxy, at each of bank’s annual meetings.

“We ask that this vote be advisory, so that it will not ultimately determine executive pay, but will provide clear and consistent shareholder feedback on the decisions that bank boards make about compensation,” says Gary Hawton, CEO of Meritas.

“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.”

Meritas says the advisory vote is in essence the “missing link” between the disclosure of pay programs shareholders receive and the binding votes they have on compensation in specific situations such as the approval of stock option plans.

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 — is 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 ask that other investment counselors and mutual fund managers give careful consideration to Meritas’ proposal,” says Hawton. “I would hope that other fiduciaries are in favour of greater shareholder rights in this regard. We are also asking that mutual fund investors call and ask how their mutual funds are going to vote on this proposal,” adds Hawton.