Canada: Say On Pay Votes Come Back In A Big Way: Three Failed Votes In One Week

Within a week, three failed say on pay votes have put compensation practices back in the spotlight and demonstrably shown that investors still use say on pay advisory votes to voice dissatisfaction with company compensation practices.

In 2014, the level of support on Canadian say on pay votes was increasing and there were no failed votes. That trend clearly reversed last week, with failed votes at Barrick Gold Corporation (73.4% against), Yamana Gold Inc. (62.73% against) and Canadian Imperial Bank of Commerce (56.84% against). This is the second time Barrick has failed its say on pay vote, and it has the dubious distinction of having received both the lowest level of shareholder support on a say on pay vote in Canada (14.8% in 2013) as well as the second lowest level (26.6% in 2015).

Compensation practices continue to be subject to close scrutiny, so employers determining compensation levels and creating disclosure must vigilantly consider a broad range of stakeholder interests and potential reactions.

Why Were Shareholders Upset?

The circumstances triggering the say on pay vote results vary.

Barrick Gold Corporation

Barrick Gold took a number of actions in response to its failed 2013 say on pay vote, including extensive shareholder engagement and appointing six new directors to the board in 2014. In addition, salaries were frozen and bonus amounts were reduced pending the adoption of new practices, including performance scorecards for grading executive compensation, the use of share units with three-year vesting and mandatory share ownership requirements. Although these actions did not satisfy all institution shareholders, they were enough to reverse the vote in 2014, where Barrick received 80.3% approval of its say on pay vote.

The 2015 vote result appears to reflect dissatisfaction with the size of cash incentive compensation paid to Barrick executives, especially the Executive Chairman, in a year where shareholders continued to experience a decline in share price, both in absolute terms and relative to gold indices. Notwithstanding the use of annual performance incentive scorecards for determining executive compensation, investors continued to perceive compensation decisions as being made largely on a discretionary basis. In addition, while entitlements for most executives were capped at a percentage of base salary and resulted in payouts of up to 286% of base salary, no caps on incentive awards were applied to the Executive Chairman, who received incentive awards totalling 380% of base salary.

Yamana Gold Inc.

Investors criticized Yamana Gold not only for awarding incentive compensation on a largely discretionary basis, but also for not properly disclosing compensation received. Yamana completed a major transaction in 2014, being its joint acquisition with Agnico-Eagle Mines Limited of Osisko Mining Corporation. Certain of the senior executives involved in the acquisition were awarded large cash bonuses and were granted share-based incentive awards tied to the performance of the Osisko assets. These amounts were disclosed as a supplemental bonus and were not included in the summary compensation table in Yamana Gold's information circular for its 2015 annual meeting of shareholders. Little explanation was given regarding the amount of such awards. Further, investors concluded other short-term incentive amounts were determined largely on a discretionary basis as the company's proxy disclosure did not disclose a clear link between performance and incentive pay. Investors also criticized the company for "long-term" incentive awards which fully vest in only two years, with one third vesting on grant.

Canadian Imperial Bank of Commerce

Shareholders were surprised by the generous retirement compensation arrangements granted to the company's former CEO and COO, when they were disclosed in the proxy circular for the 2015 annual meeting.1

The former CEO was a party to an employment agreement with the bank signed on August 1, 2005, amended on November 2009 and renewed on May 2013. Less than one year after the renewal, on April 24, 2014 the bank held its 2014 annual meeting of shareholders and revealed that its CEO intended to retire effective April 30, 2016 – with the actual date to be finalized upon completion of a succession process. Then on July 31, 2014 the bank announced the appointment of its new CEO effective September 15, 2014. The new CEO was the existing Group Head of the bank's Wealth Management group and, in view of his deep knowledge of the bank and the board of directors' confidence in his leadership, the board decided to accelerate the retirement of the bank's former CEO. In addition, the planned retirement of the COO was announced on March 27, 2014, to be effective on October 31, 2015. However, on September 15, 2014, the bank announced that it had reached an arrangement with the COO to accelerate his retirement to that day.

CIBC's proxy circular for its 2014 annual meeting was dated and filed prior to the announcements on March 27, 2014 and April 24, 2014 of the planned retirements of the former COO and CEO, respectively, and so it reflected their arrangements before they were revised. In reviewing the proxy disclosure for the 2015 annual meeting, shareholders were surprised to discover that the revised arrangements had resulted in the two former executives receiving over $25 million in incremental compensation.2

Investors also expressed concerns regarding the bank's succession-planning process. In 2014, the bank stated that the management resources and compensation committee and board of directors annually review succession plans, including for the CEO. The board concluded at the end of April 2014 that it was desirable to enter into a two-year contract with the former CEO, only to conclude three months later that the former CEO's continued service was no longer necessary.

Consequences of a Failed Say on Pay Vote

Results are non-binding – In Canada, say on pay votes are provided on a voluntary basis and are advisory and not binding. While every Canadian company that provides a say on pay vote states that its board of directors and compensation committee considers the outcome of the vote as part of its review of executive compensation, the company is under no legal obligation to take any steps in response to the failed vote.

Withhold votes on election of compensation committee chair – A significant number of shareholders of each company also express their dissatisfaction by withholding their votes from the election of certain directors. In Barrick's case, 25.9% of the votes were withheld on the election of its compensation committee chair. In Yamana Gold's case, 23.22% of votes were withheld from voting of its compensation committee chair. In the case of CIBC, 14.98% of the votes were withheld from voting on the chair of the management resources and compensation committee, even though she became chair only after the compensation decisions respecting the former CEO and COO had been made.

Implications for future say on pay and director election votes – Although not legally required to take any action in response to the failed say on pay vote, there are several reasons why it would be prudent for a company to consult with its shareholders and consider whether changes to its compensation practices are warranted, including the fact that if proxy advisory firms are dissatisfied with the company's response as disclosed in the next annual meeting circular, they will recommend withhold votes on the election of directors who are members of the compensation committee. MDC Partners Inc., for example, received less than 70% approval on its say on pay resolution in 2013. Dissatisfied with the company's response to that vote result, in 2014 proxy advisory firms Institutional Shareholder Services and Glass Lewis not only recommended against MDC Partners' say on pay vote in 2014, but also recommended that shareholders withhold from voting for directors on the compensation committee. In the case of Barrick, as 2015 was the second time Barrick had failed a say on pay vote, a significant percentage of votes were withheld on the election of each of the members of the compensation committee, ranging from 24% to 25.9%.

Shareholder litigation – Failed say on pay votes in the United States prompted multiple shareholder lawsuits, seeking compensation from executives and boards for breach of fiduciary duties and from executives for unjust enrichment, as well as from the compensation consultants who advised the directors. Most have ultimately proven unsuccessful, although a few have settled, resulting in payment of the plaintiffs' legal fees. In 2012, Citibank became the first U.S. bank to fail a say on pay vote, with 65% of votes cast against the say on pay resolution. Citibank and its board were promptly sued by multiple shareholder groups seeking damages, alleging, among other things, that the board had breached its fiduciary duties of candor, good faith and loyalty by awarding excessive and unwarranted compensation. Two of the Citibank executives whose compensation sparked the vote result resigned within six months of the vote. The shareholder actions were ultimately unsuccessful as the plaintiffs voluntarily dismissed their action in 2013 and a subsequent action to recover US$6 million in attorney fees was also dismissed. Plaintiffs' lawyers are likely to be discouraged by the relatively poor success rate of such claims, although the possibility of litigation remains. Two Ontario cases have found that directors breached their fiduciary duty in awarding excessive compensation.3

Regulatory scrutiny – Compensation practices are also subject to scrutiny by regulators. Criticism of Yamana Gold's compensation disclosure could prompt further inquiry from securities regulators. Financial institutions are required by the Office of the Superintendent of Financial Institutions (OSFI) to align their compensation arrangements with the Financial Stability Board's Principles for Sound Compensation Practices, which seek to align compensation with prudent risk taking. For example, CIBC would need to be ready to respond should it receive an inquiry as to how the arrangements for the former CEO and CFO align with such principles.


Executive compensation disclosure these days is subject to close examination by shareholders and regulators, and attracts substantial media interest. Criticism of a company's pay practices in the media can affect employee morale, customer perceptions and corporate reputation. In today's environment, disclosure implications must be carefully considered when making compensation decisions, and the rationale for decisions should be disclosed on a transparent basis, especially when making decisions that may be unpopular, to avoid surprising stakeholders.


1  "'This can raise outrage': CIBC's CEO retirement pay surprises many," Tim Kaldaze, The Globe and Mail, April 1, 2015.

2  The former CEO is entitled to an additional $16,666,646 payable over time in respect of continued salary and bonus from September 15, 2014 to April 30, 2016 plus the increased compensatory value of his pension. The former COO is entitled to an additional $8,527.469 payable over time in respect of continued salary and bonus from September 15, 2014 to October 31, 2015 plus the increased compensatory value of his pension.

3  Unique Broadband Systems, Inc. (Re), 2013 ONSC 2953 rev'd 2014 ONCA 538; UPM-Kymmene Corp. v UPM-Kymmene Miramichi Inc. (2002), 214 DLR (4th) 496 (SCJ), aff'd (2004), 183 OAC 310 (CA). 

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.

Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Related Articles
Related Video
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
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 (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

To Use 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.


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.


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