Canada: Executive Compensation Disclosure Update

Last Updated: July 26 2007
Article by Dolores Di Felice

The Canadian Securities Administrators published a request for comments on a proposed replacement for Form 51-102F6 Statement of Executive Compensation (the Proposed Form). The Proposed Form would expand disclosure of executive compensation in key areas. The stated purpose of the changes is to improve the quality and transparency of executive compensation disclosure, and to present executive compensation information in a more meaningful way. The current Form 51-102F6 has been in place in substantially the same form since 1994. In the fall of 2006, the U.S. Securities and Exchange Commission adopted new rules for executive compensation disclosure, and the Proposed Form largely follows the SEC rules, although there are notable differences. The following will discuss some of the more significant changes being proposed.

General Provisions

The Proposed Form includes some changes to definitions and general provisions. The definition of "incentive plan" will be revised to include any plan that provides compensation intended to serve as an incentive for performance over a specified period. As a result, some items, such as bonuses based on pre-determined criteria, that previously would have been included in the bonus column will now belong in the non-equity incentive plan column. Items included in the bonus column will be limited to discretionary items that do not involve any predetermined performance criteria.

The definition of "NEO" or "named executive officer" will essentially remain the same, and will include the chief executive officer, chief financial officer and up to three other executive officers whose total compensation is greater than $150,000 per annum. Note, however, that this measurement will now be determined based on total compensation, rather than on salary and bonus alone.

Compensation Discussion And Analysis (CD&A)

One of the key changes in the Proposed Form is the introduction of a compensation discussion and analysis section, or CD&A, which will disclose the rationale for specific compensation programs for executives. The CD&A requires a discussion and analysis of executive compensation provided to NEOs in the most recently completed financial year. The Proposed Form lists six key principles that companies must discuss and also includes examples of the types of issues that companies should consider addressing. The intention is that the CD&A will provide meaningful analysis of factors relevant to actual compensation decisions, and therefore boilerplate language is to be avoided.

A performance graph is to be included in the CD&A for non-venture issuers . The performance graph requirement is similar to the current requirement for performance graphs and must show cumulative total shareholder return over the last five fiscal years compared to cumulative total return of at least one broad equity market index. However, the Proposed Form requires an additional level of analysis to explain how the trend shown in the graph compares to the trend in the company’s compensation of executives over the same period.

Companies will also be required to disclose specific quantitative and qualitative performance- related factors or targets for NEOs, unless this would result in competitive harm to the company. The example provided is that a target based on an objective measure such as stock price should be disclosed, but if the target is more subjective, then the company can provide a narrative description of the target rather than a specific figure.

The CD&A must also disclose practices related to the granting of options and whether executives are involved in determining who is awarded options.

Summary Compensation Table

There are a number of key changes in the summary compensation table which must now include all equity compensation on the basis of compensation costs of the awards as reflected in the company’s financial statements.

The summary compensation table includes compensation of NEOs for the last three completed fiscal years. It is to be accompanied by a narrative description of any material factors necessary to understand the information in the table. In addition to columns for salary and bonus, the table will include columns for stock awards, option awards and non-equity incentive plan compensation. These columns relate to equity and other plan-based awards, and capture the dollar value of each award recognized for financial statement reporting purposes on the date earned, instead of the number of securities granted as currently required. The stock awards column includes instruments such as restricted stock, restricted stock units, phantom stock or units and similar stock-related awards that derive their value from equity securities or are settled by the issuance of equity securities. The option awards column includes options, stock appreciation rights and equity-based compensation instruments that have option-like features. The value disclosed is the compensation cost of option awards as they vest over the requisite service period.

The next column in the summary compensation table is for non-equity incentive plans, which will provide disclosure of the dollar value of all other amounts earned through non-equity incentive plans.

Another new column proposed for the summary compensation table is for changes in pension values. Companies will be required to disclose the increase in the actuarial present value of the NEO’s accumulated benefit under all defined benefit and actuarial pension plans, including supplemental plans. Amounts in this column are included in the total compensation number, but are excluded from the calculation of total compensation for purposes of determining the company’s highest paid executive officers.

The "all other compensation" column discloses perquisites and other personal benefits and all items that do not fit under any other column, including amounts paid to a NEO at or following termination. The threshold for disclosure of these items has not changed: disclosure is required unless the aggregate of all perks and personal benefits is less than $50,000 and 10% of total annual salary and bonus, and each perk or personal benefit exceeding 25% of the total must be identified. Note that this is an area where the Proposed Form differs from the SEC approach, as the SEC lowered its disclosure threshold for perquisites to $10,000.

Another significant change to the summary compensation table is the inclusion of a total compensation column. This column discloses the aggregate of the total dollar value of each item quantified in the other columns. Companies will be required to determine the fair value of all non-cash forms of compensation in order to complete the column.

Immediately following the summary compensation table, companies will be required to disclose the value of all stock and options awarded to each NEO during the last fiscal year. The value to be disclosed is the dollar value of each award on the date of grant.

Equity And Non-Equity Awards

The Proposed Form introduces two new tables. The first table deals with equity awards and provides information on outstanding options, the value of unexercised inthe- money options and information on outstanding stock awards. The second new table will show any amounts a NEO realized during the year from exercising options and from the vesting of stock and similar awards. The approach differs from the SEC approach, in that the SEC tables require the inclusion of greater detail.

Plan-Based Awards

Companies will be required to explain, in narrative form, the material terms of all awards, both equity and non-equity. Information about terms of options and awards will be disclosed in the tables. In addition, companies must also disclose information about non-equity incentive plan awards, including information on estimated future payouts under equity awards. This approach again differs from the SEC approach, which requires the inclusion of greater detail.

Defined Benefit Retirement Plans

The Proposed Form will also require the disclosure of details of all defined benefit retirement plans, including the present value of accumulated benefits. The SEC requires new disclosure of deferred compensation and defined contribution plans in a table. The Proposed Form does not contemplate requiring disclosure in a table form, but companies will be required to describe the material terms of these plans in narrative form.

Termination And Change Of Control Benefits

Companies will be required to provide detailed disclosure of payments made to NEOs that are related to their termination or a change of control of the company. The company is to provide estimated annual payments and benefits that NEOs would receive under various termination scenarios. These estimates are to be based on assumptions that the triggering event took place on the last business day of the company’s last completed financial year, and that the price per share was the closing market price on that day.

Director Compensation

Another significant addition is the requirement for companies to prepare a table for director compensation disclosure, similar to the summary compensation table for executives. The same disclosure concerning equity-based and plan-based awards as required for NEOs will be required for directors.


The Proposed Form provides that SEC companies will be permitted to satisfy the requirements of the SEC form. Venture issuers will generally be subject to the same requirements as non-venture issuers, other than with respect to the performance graph.

The intention is that the Proposed Form will be in effect for financial years ending on or after December 31, 2007.

About BLG

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
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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