The Canadian Coalition for Good Governance yesterday released its 2010 Proxy Circular Disclosure Best Practices, a report that considers the specific matters that corporate disclosure should address and analyzes examples of actual company disclosure. While the report considers director-related disclosure, much of it focuses on executive compensation. On the latter topic, the CCGG states that compensation plans should be aligned with the Coalition's executive compensation principles, namely, that:
- "pay for performance" should be a large component of executive compensation;
- performance should be based on measurable, risk-adjusted criteria and evaluated over an appropriate time horizon, to ensure the criteria have been met;
- compensation should be simplified to focus on key measures of corporate performance;
- executives should build equity in the company, to align their interests with shareholders;
- companies should put appropriate limits on pensions, benefits, severance and change of control entitlements;
- effective succession planning helps to mitigate the need to pay for retention.
According to the CCGG, compensation plan disclosure should "clearly describe" how the plan is linked to the company's strategy, objectives and risk management, and describe (among other things) the board's role in designing and determining executive compensation and key factors considered by the board. Numerous examples of executive compensation disclosure are also provided.
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