The Canadian Coalition for Good Governance ("CCGG")
recently released its 2013 Executive Compensation Principles (the
"2013 Principles"), replacing the previous version
originally published in 2009. The original principles were designed
to provide enhanced guidance to boards and to promote compensation
decisions aligned with long-term company and shareholder success.
According to the CCGG, the 2013 Principles offer an updated take on
the principles set forth in the original report to reflect the
continued evolution of both compensation practices and regulatory
According to the CCGG, the 2013 Principles focus on the concept
of "pay for performance" and "the integration of
risk management functions into executive compensation philosophy
and structure". The 2013 Principles are organized around six
1) A significant component of executive compensation should be
"at risk" and based on performance.
2) "Performance" should be based on key business
metrics that are aligned with corporate strategy.
3) Executives should build equity in the company to align their
interests with those of shareholders.
4) A company may choose to offer pensions, benefits and
severance and change-of control entitlements. When such perquisites
are offered, the company should ensure that the benefit
entitlements are not excessive.
5) Compensation structure should be simple and easily understood
by management, the board and shareholders.
6) Boards and shareholders should actively engage with each
other and consider each other's perspective on executive
The CCGG notes that while Canadian disclosure obligations
regarding executive compensation are limited to the "top
five" executives at a company, boards should ensure that the
above principles are used in determining company-wide compensation
philosophy and structure.
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