In accordance with the U.S. Dodd-Frank Act, the Securities and Exchange
Commission introduced proposed rules in September 2013 to provide for
new "pay ratio disclosure" obligations. According to the
proposal, every public company would be required to disclose the
ratio of the compensation of its principal executive officer (PEO)
to the median compensation of its employees in any filings that
mandate executive compensation disclosure, such as annual reports,
registration statements, and proxy and information
statements. Companies would be able to disclose the
information either as a ratio or expressed narratively by referring
to the multiple that the PEO total compensation amount bears to the
median of the annual total compensation amount.
The proposed rule covers "all employees of the
registrant", which means any full-time, part-time, seasonal or
temporary worker employed by the registrant or any of its
subsidiaries. It does not, however, specify any required
calculation methodologies for identifying the median employee in
terms of total compensation. Thus, companies would be allowed to
select a methodology appropriate to their size and structure as
well as their employee compensation practices. In this respect, the
SEC proposal indicates that companies could use statistical
sampling or other reasonable methods to identify the median
compensation. In any case, companies would have to disclose the
methodology used to identify the median employee, as well as any
material assumptions, adjustments or estimates used to identify the
median employee or to determine total compensation.
The final pay ratio rule is expected to be adopted in 2014. If
this is indeed the case, companies will provide the pay ratio
disclosure for the 2015 fiscal year in disclosure documents filed
Canadian companies that are foreign private issuers or MJDS
filers in the U.S. are exempted from the pay ratio rule. Still, the
developments surrounding the adoption and implementation of the pay
ratio rule should be closely monitored in Canada. Experience shows
that initiatives seeking to reign-in compensation have influenced
Canadian regulators and institutional investors, and pay ratio
disclosure has already been the subject of shareholder proposals
tabled in Canada in previous years.
This is the second in a series of five posts intended to
consider securities regulatory developments to watch in 2014.
Watch for the remaining posts over the course of the next week.
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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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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