The Canadian Securities Administrators (CSA) have finalized
changes to the executive compensation disclosure requirements and
these changes will apply to reporting issuers with respect to
financial years ending on or after October 31, 2011. These
amended requirements will therefore be in place for the 2012 proxy
The final changes announced by the CSA are generally consistent
with the original CSA proposals that were published in November,
2010 and reflect changes put forward by the U.S. Securities and
Exchange Commission for reporting companies in the United
States. They also reflect the CSA's targeted
compliance reviews of executive compensation disclosure.
The new substantive changes to the existing Canadian executive
compensation disclosure requirements include the following:
Compensation Committee Disclosure - Companies
will be required to provide more detailed disclosure
concerning the issuer's compensation committee, if it
has one. The names of each committee member, whether or not
the member is independent and their experience relevant to their
committee responsibilities must be disclosed. Disclosure will
also be required regarding the responsibilities, powers and
operation of the committee and its skills and experience that
enable it to determine the suitability of the issuer's
compensation policies and practices.
Risk Disclosure Associated withCompensation - Companies must disclose whether the
board or the compensation committee has considered the risks
associated with the issuer's compensation policies and
practices. If those issues have been considered, disclosure
is required regarding the board or committee's role in risk
oversight of the compensation policies and practices, any practices
that the issuer uses to identify and mitigate the risk that a named
executive officer (NEO) or individual at a principal business unit
or division might take any inappropriate or excessive risks, and
any identified risks that are reasonably likely to have a material
adverse effect on the company.
Restrictions on Omitting Disclosure of Performance
Goals Due to Serious Prejudice - Companies must now
specifically state that they are relying on the exemption from
disclosing performance goals on the basis that this disclosure
would be seriously prejudicial to the company and also describe why
this disclosure would be seriously prejudicial. There is
commentary from the CSA with these changes stating that a company
will not be considered to be seriously prejudiced if the
performance goals are based on various broad corporate-level
financial performance indicators.
Compensation Advisors and Consultants -
Companies will be required to disclose the name of any compensation
consultant or advisor that is retained and their mandate.
Disclosure will also be required of, among other items, a breakdown
of all fees paid to the consultant for the services provided and a
description of the work performed.
Ability to Hedge - Issuers will be required to
disclose whether any NEO or director is permitted to purchase
financial instruments that are designed to hedge against declines
in the market value of equity securities granted as compensation
to, or that are held directly or indirectly by, the NEO or
SignificantChanges to Compensation
Policies - If an issuer has determined that it will make
any significant changes to its compensation policies or practices
in the next financial year, it will likely need to disclose those
Value of Vested Share-Based Awards -
Disclosure will now be required of the aggregate value of any
share-based awards that have vested but which have not yet been
Prohibition on Additional Columns in Summary
Compensation Table - Issuers will be prohibited from
adding any columns to the mandated contents of the Summary
Board Discretion Regarding Awards or Payouts -
There will now likely be required disclosure as to whether the
board can exercise discretion to award compensation (even where the
relevant performance goals were not attained) or increase or reduce
payouts or awards with respect to performance-based
These amendments to the executive compensation disclosure rules
and the resulting consequential amendments to the applicable
disclosure forms for executive compensation and corporate
governance disclosure will result in most reporting issuers having
to carefully review and update their disclosure in order to ensure
compliance with the new requirements.
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.
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