Canada: Proposed Amendments to Executive Compensation Disclosure Rules

The Canadian Securities Administrators ("CSA") recently published for public comment proposed amendments to Form 51-102F6 - Statement of Executive Compensation and consequential amendments to Form 58-101F1 - Corporate Governance Disclosure and Form 58-101F2 - Corporate Governance Disclosure (Venture Issuers) (collectively the "Proposed Amendments"). The release of the Proposed Amendments follows the CSA's compliance review of executive compensation disclosure and publication of their findings in CSA Staff Notice 51-331 - Report on Staff's Review of Executive Compensation Disclosure (the "CSA Disclosure Review").

In developing the Proposed Amendments, the CSA also considered recent U.S. developments in executive compensation disclosure. The purpose of the Proposed Amendments is to improve disclosure to the market about compensation practices, valuation of equity-based awards and arrangements between issuers and their compensation advisors. Comments on the Proposed Amendments must be received by February 17, 2011.

Compensation Disclosure and Analysis Requirements

The Proposed Amendments include the following new disclosure requirements which must be included in an issuer's Compensation Discussion and Analysis ("CD&A"):

  1. Serious Prejudice Exemption. The current disclosure rules require an issuer to identify in its CD&A any target levels for quantitative or qualitative performance-related factors in compensation arrangements. The rules provide an exemption from this requirement if the disclosure would "seriously prejudice the issuer's interests." The CSA Disclosure Review revealed that it was often difficult for an investor to recognize whether an issuer was relying on this exemption. Therefore, the Proposed Amendments require an issuer to explicitly state when it is relying on the exemption and to explain why disclosing the relevant performance goal or similar condition would seriously prejudice its interests.
  2. Risk Management and Compensation. Recent amendments to U.S. executive compensation disclosure require enhanced disclosure about the issuer's compensation policies and practices for all employees if these arrangements create risks that are reasonably likely to have a material adverse effect on the issuer. Following this example, the Proposed Amendments introduce the following disclosure requirements:

    1. an issuer must disclose whether the board of directors considered the risk implications of its compensation policies and practices;
    2. if this exercise has been undertaken by the board, the issuer must disclose:

      1. the extent and nature of the board's role in the risk oversight of the issuer's compensation policies and practices;
      2. any practices the issuer uses to identify and mitigate its compensation policies and practices that could potentially motivate an executive officer or individual at a principal business unit to take inappropriate or excessive risks; and
      3. the risks arising from compensation policies and practices that are reasonably likely to have a material adverse effect on the issuer.

  3. Examples of compensation practices and policies the CSA cites as potentially encouraging officers to take inappropriate risks include arrangements at a principal business unit or for certain executive officers that differ from the rest of the compensation arrangements within the issuer, policies where the compensation paid to executive officers is a significant percentage of the issuer's revenues, and those performance goal or conditional compensation arrangements that are heavily weighted to short-term objectives.
  4. Disclosure of Fees Paid to Compensation Advisors. The Proposed Amendments introduce a requirement to disclose which compensation advisors have been retained by the issuer and a description of their mandate and any other work they have performed for the issuer (including a breakdown of fees paid to the compensation advisor for each service provided). The CSA is specifically seeking public comment on whether such disclosure should have a materiality threshold.
  5. Hedging by Named Executive Officer and Directors. The Proposed Amendments require disclosure of whether any named executive officer or director is permitted to purchase financial instruments whose purpose is to hedge the risk of a decrease in value of any equity securities held by him or her.

Summary Compensation Table

The following amendments have been made to the disclosure requirements for an issuer's summary compensation table ("SCT"):

  1. Format of the SCT. While the current form permits an issuer to add tables, comments and provide other information in its SCT, the CSA Disclosure Review revealed that certain issuers were relying on this requirement to present the SCT in a different format than that mandated by the form. The Proposed Amendments state that an issuer must make disclosure in accordance with the form and must not alter the presentation of the SCT by adding columns or other information. Additional disclosure may be made by the addition of another table and other information provided it does not affect the format and information presented in the SCT.
  2. Reconciliation of Grant Date Fair Value and Accounting Fair Value for Share-Based and Option-Based Awards. Currently an issuer is required to reconcile any difference between the grant date fair value ("GDFV") set out in its SCT and the accounting fair value of its share-based and option-based awards. Issuers must provide an explanation of the difference between the values, a description of the methodology used to calculate GDFV and the key assumptions and estimates used in the calculations, together with an explanation of why a particular methodology was chosen. The Proposed Amendments extend this requirement and will require all issuers to provide this disclosure in respect of the GDFV of all equity-based awards, whether or not there is any difference between the GDFV and the accounting fair value of an award.

Pension Plans

The CSA is seeking comment on whether the requirement to disclose non-compensatory amounts for defined contribution plans should be retained.

Additional Information

The above is a general overview of the Proposed Amendments. The CSA intends to put the amendments in place for the 2012 proxy season and issuers will be required to comply with the rules in respect of financial years ending on or after October 31, 2011. We will be pleased to provide further information or detailed advice on the amendments.

About Ogilvy Renault

Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, Calgary and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at www.ogilvyrenault.com.

Ogilvy Renault joins Norton Rose Group on June 1, 2011.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Davies Ward Phillips & Vineberg
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Davies Ward Phillips & Vineberg
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions