A handful of Canadian companies are set to propose “say on pay” resolutions in their upcoming proxy circulars, says consulting firm Risk Metrics.

The firm says that “nine of the 13 companies that will give shareholders their first vote on executive compensation have agreed in principle on a draft resolution that will appear on proxy ballots in 2010”, based on a draft “say on pay” policy crafted by the Canadian Coalition for Good Governance.

The CCGG, which is encouraging companies to standardize these policies, released its draft policy in late October and is seeking comments on it by November 25. It notes that it regards shareholder advisory votes “as an important part of this ongoing integrated engagement process between shareholders and boards, giving shareholders an opportunity to express their satisfaction with the board’s approach to executive compensation.”

It recommends that the proxy circular ask shareholders to consider “an annual non-binding advisory resolution in the following form: Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders accept the approach to executive compensation disclosed in the company’s information circular delivered in advance of the annual meeting of shareholders.”

The draft policy calls on boards to “take the results of the vote into account, as appropriate, when considering future compensation policies, procedures and decisions and in determining whether there is a need to significantly increase their engagement with shareholders on compensation and related matters.”

“In the event that a significant number of shareholders oppose the resolution, the board will consult with its shareholders (particularly those who are known to have voted against it) to fully understand their concerns and will review the company’s approach to compensation in the context of those concerns. Shareholders who have voted against the resolution will be encouraged to contact the board to discuss their specific concerns,” it suggests.

And it recommends that the board disclose to shareholders, ideally within six months, and no later than in the following year’s proxy circular, a summary of the comments received from shareholders in the engagement process and the changes to the compensation plans made or to be made by the board (or why no changes will be made).

It also notes that CCGG has not reviewed director compensation, and, as a result, has not included it in this policy, but may do so in the future.

IE