Canada’s nine largest financial services companies have reached an agreement to give shareholders a vote next year on the same resolution approving the firms’ compensation policies for top executives.
The rare show of co-operation among the largest banks and insurers comes as they are preparing to give shareholders their first vote on executive compensation, a practice known as “say on pay.”
“We thought it was best for all our shareholders if we had a common approach, so that everyone would be on a level playing field,” said Deborah Alexander, general counsel at Bank of Nova Scotia.
“And I think we achieved something in this country that hasn’t been achieved anywhere else, in terms of a common approach that everyone feels is appropriate.”
While U.S. lawmakers are expected to pass legislation this year making say on pay mandatory for U.S. firms, Canada’s largest companies are championing a voluntary approach to compensation reform and are working together to ensure a standardized process for the first votes next year.
The proposed proxy resolution will ask shareholders to approve “on an advisory basis and not to diminish the role and responsibilities of the board of directors, the approach to executive compensation disclosed in the company’s information circular.”
Ms. Alexander said representatives from Canada’s seven largest banks as well as insurers Manulife Financial Corp. and Sun Life Financial Inc. have met and have all expressed their willingness to use the same resolution in an effort to simplify the voting process for shareholders.
However, officials from some of the banks and insurers said last week they have still not yet confirmed the wording for their proxy circulars, which are still several months away from being issued.
“Obviously the decision to use the … resolution for our say-on-pay vote will ultimately be up to the board, but we fully expect to recommend that approach,” said Toronto-Dominion Bank spokesman Mohammed Nakhooda.
“We have time still before our annual meeting and before we have to draw up our circular,” said John LeBoutillier, chairman of Industrial Alliance Insurance and Financial Services Inc., which is also reviewing the proposal and has promised a say-on-pay vote next year.
The effort to standardize the proxy resolutions is being championed by the powerful Canadian Coalition for Good Governance, a shareholder group representing most of Canada’s largest institutional investors.
It is part of a broader effort by the coalition to urge companies to adopt new practices to consult with their shareholders on the development of compensation schemes.
CCGG executive director Stephen Griggs says the coalition wants to influence companies as they are considering the wider issues about say on pay, including how to solicit views of shareholders before a vote and what to do with the voting results afterward.
“As shareholders, we have an obligation to give boards some guidance about what we think they should be doing, rather than just being complainers,” Mr. Griggs said.
CCGG has worked with other shareholder groups to create a draft say-on-pay policy they want companies to adopt.
The policy would see boards pledge to consult with shareholders about compensation throughout the year. Companies losing a pay vote would also pledge to publish a summary of shareholders’ concerns as well as the company’s planned response.
Mr. Griggs said the coalition has talked to all 13 companies in Canada planning a say-on-pay vote next year to pitch the draft policy. The companies include the banks and insurers, as well as BCE Inc., TMX Group Inc. and Potash Corp. of Saskatchewan.
Most of the companies involved would not comment on the issue last week. Potash Corp. spokesman Bill Johnson said his company “is highly supportive of everything” the CCGG is doing, but said he could not discuss the company’s plans for its say-on-pay policy.
Meanwhile, Canadian shareholder groups are also lobbying dozens of other companies to also adopt say on pay next year, hoping to spread the practice voluntarily as U.S. legislators move closer to making say on pay mandatory for American public companies.
Laura O’Neill, director of law and policy at Vancouver-based shareholder rights group SHARE, said her group has been contacting the 60 largest public companies in Canada to urge them to also adopt say-on-pay votes next year.
She said SHARE still wants Canadian lawmakers to also make say on pay mandatory in this country, but said it is gratifying that some companies appear willing to move voluntarily.
But Mr. LeBoutillier from Industrial Alliance said he doesn’t want to see the policy forced on all companies. He said it may not be necessary or appropriate for all firms.
“If you do that across the board, I’m not sure that’s the best approach,” he said. “One size fits all? In matters of governance, I’m not sure about that.”
Source: www.theglobeandmail.com.
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