Canada: Trick Or Treat? Changes To Canadian Executive Compensation Disclosure Rules Come Into Effect October 31, 2011

The Canadian Securities Administrators (CSA) has tightened its executive compensation disclosure requirements and is requiring additional disclosure regarding the qualifications of the compensation committee, the consideration of risks associated with the company's compensation practices and fees paid to compensation consultants. Canadian banks will be among the first to contend with the new changes as the amendments apply to companies with a fiscal year ending on or after October 31, 2011.

The final amendments are generally consistent with the changes proposed by the CSA in November, 2010 and reflect not only some of the rules adopted by the U.S. Securities and Exchange Commission in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act, but also concerns raised over the last two years respecting compliance with the spirit and intent of the Canadian executive compensation disclosure rules. The specific changes from existing Canadian executive compensation disclosure requirements are:

New disclosure requirements

Qualifications of compensation committee – Companies must identify each committee member, state whether each member is or is not independent and describe the experience of each member relevant to his or her responsibilities on the committee. In addition, companies must describe the skills and experience of the committee that enable it to make decisions on the suitability of the company's compensation policies and practices.

Risks associated with compensation – Companies must state that the board or its compensation committee considered the implications of the risks associated with the company's compensation policies and practices and describe the nature and extent of the role of the board or committee in the oversight of such risks, any practices used to identify and mitigate the risk that an NEO or individual at a principal business unit or division might take excessive risks, and any identified risks that are reasonably likely to have a material adverse effect on the company. (As an alternative, a company can simply state that neither the board nor any committee considered such risks, but a company would not be well-advised to do so.) The CSA has provided a non-exhaustive list of situations that could potentially encourage excessive risk-taking.

Board's compensation consultant – If a compensation consultant was retained to assist the board or compensation committee in determining compensation for executives or directors, the company must disclose the consultant's name and the date originally retained and summarize the consultant's mandate. If the consultant has also provided services to the company, its affiliates or any of the company's directors or members of management, the company must say so, describe the nature of such work and disclose whether board or compensation committee pre-approval is required before the consultant or its affiliates may provide services to the company at management's request. (Although the form states that disclosure is required only for compensation consultants retained subsequent to the most recently completed financial year, we understand this is a drafting error and that the intent was to require disclosure for compensation consultants retained since the beginning of the most recently completed financial year.) In addition, for each compensation consultant retained over the last two completed financial years, the company must separately disclose the aggregate fees billed by the consultant and its affiliates for services relating to determining the compensation of the directors and executive officers and the aggregate fees billed for all other services provided by the consultant and its affiliates, together with a description of the nature of such other services. These disclosure requirements are in addition to the requirements under Form 58-101F1 to identify all compensation consultants retained by the company to assist in determining compensation of executives and directors and to describe their mandates.

Other new disclosure requirements:

  • Disclose significant changes to compensation policies which the company has committed to make in the next financial year.
  • Disclose whether or not an executive officer or director is permitted to hedge against declines in the market value of equity securities received as compensation.
  • Disclose the aggregate value of vested share-based awards which have not yet been paid out.

Narrowing and clarifying existing requirements

Restrictions on the ability to omit disclosure of performance goals due to "serious prejudice" – Companies must now explicitly state when they are relying on the exemption from disclosing performance goals on the basis that disclosure would be seriously prejudicial and explain why disclosure would be seriously prejudicial. Moreover, a company is not considered to be seriously prejudiced if the performance goals to be disclosed are based on broad corporate-level financial performance metrics, such as earnings per share, revenue growth and earnings before interest, taxes, depreciation and amortization.

Companies are now prohibited from adding columns to the Summary Compensation Table.

Ability to exercise discretion – There is now an explicit requirement to disclose whether the board can exercise discretion to reduce or increase payouts with respect to performance-based compensation.

Other clarifications and changes:

  • Companies must provide clear and concise disclosure that provides a reasonable understanding about how compensation decisions are made and how specific named executive officer and director compensation relates to the governance of the company. This is a challenge given the prescriptive nature of the rules.
  • Existing requirements to disclose the process used to grant option-based awards and to disclose whether prior grants of option–based awards were considered when making new grants now also apply to share-based awards.
  • The CSA reconfirmed that the full fair value of share-based awards and option-based awards is to be disclosed in the Summary Compensation Table in the year the award was granted, even if it is multi-year award.
  • The methodology and assumptions used to calculate share-based and option-based awards must be disclosed in a footnote to the Summary Compensation Table even if they are identical to those set out in the company's financial statements. The company may not incorporate by reference disclosure included in the company's financial statements.
  • Although amounts must be reported in the prescribed tables using the same currency that the company uses for its financial statements, this currency restriction does not apply to other compensation disclosure.
  • The CSA provides guidance on the calculation of the annual lifetime pension benefit payable at the end of the most recently completed financial year.
  • Companies no longer need disclose non-compensatory defined contribution pension amounts.
  • If, instead of participating in a pension plan, executives receive company contributions to a personal retirement savings plan, the company contributions need only be included in "All other compensation" in the Summary Compensation Table.

No obligation to disclose gains realized on exercise of options

As the focus of executive compensation disclosure is the board's compensation decisions and not the investment decisions of executive officers, the CSA did not amend the executive compensation disclosure rules to require companies to disclose amounts actually realized by named executive officers from the exercise of options during the year, even though institutional shareholders urged them to do so.

Andrew J. MacDougall is a partner at Osler, Hoskin & Harcourt LLP and practices corporate and securities law, with a particular focus on mergers and acquisitions and corporate governance. Elizabeth Walker practises corporate and securities law with an emphasis on private and public corporate finance matters, mergers and acquisitions and corporate governance.

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

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

In association with
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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