Canada: Say-On-Pay Shareholder Voting

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Securities Regulation, June 2009

The push for a shareholder Say-on-Pay vote on the compensation practices of public companies has made in-roads in Canada and is likely to gain further momentum in 2010.

Say-on-Pay shareholder proposals were submitted for consideration at the most recent annual meetings of the major Canadian banks and as a result, in early 2009, Royal Bank of Canada, Bank of Montreal, Scotiabank, Canadian Imperial Bank of Commerce and The Toronto-Dominion Bank announced that they will give shareholders a Say-on-Pay vote in 2010.

To date, 11 large reporting issuers in Canada, including these banks, have announced that they will have a Say-on-Pay advisory vote in 2010.

Although a non-binding advisory vote – whereby shareholders approve the compensation, compensation policies or compensation disclosure of the company for the prior fiscal year – appears to be the predominant form of implementation of Say on-Pay votes in North America, there are other forms which the vote can take.


Say-on-Pay voting has already been implemented through legislation in the United Kingdom, Australia, the Netherlands, Sweden and Norway. The form in which a Say-on-Pay vote is implemented is dependent upon the answers to the following two questions:

  • Is the vote to be non-binding/advisory or binding?
  • What will shareholders vote on?

Advisory Vote on Compensation Disclosure

The legislation in the United Kingdom and Australia became effective in 2003 and 2005, respectively, and requires an annual non-binding advisory vote by shareholders. In both countries, the shareholders vote upon a remuneration report containing prescribed disclosure regarding the compensation of executives for the prior fiscal year.

Binding Vote on Future Compensation Policies

The Netherlands, Sweden and Norway introduced legislation effective in 2004, 2006 and 2007, respectively. The legislation in these countries requires a binding vote whereby shareholders approve the compensation policies or guidelines of the company and any changes thereto. The vote is on future policies rather than a retroactive look at policies implemented in the prior year. If shareholders vote against a new policy or changes to a previously implemented policy, the company can only rely upon past practices.


Voluntary Advisory Vote on Past Policies and Disclosure

In the United States, Say-on-Pay voting has been implemented voluntarily and by way of an advisory, non-binding vote. In 2008, Aflac Incorporated (Aflac) became the first company in the United States to adopt a Say-on-Pay vote. Aflac introduced a resolution which asked shareholders to approve:

  1. the overall executive compensation policies and procedures employed by the company, as described in the Compensation Discussion and Analysis of its Proxy Statement; and
  2. the tabular disclosure regarding named executive officer compensation in its Proxy Statement.

Aflac also indicated that its compensation committee would consider the outcome of the Say-on-Pay vote when determining future compensation arrangements. A similar approach to Say-on-Pay has also been adopted by, among others, Motorola Inc. and Verizon Communications Inc.


  • Eleven large reporting issuers in Canada have announced they will have a Say-on-Pay advisory vote in 2010
  • There are currently no Canadian legislation or securities commission proposals in respect of Say-on-Pay voting and, in the absence of any regulatory requirement, to the extent Say-on-Pay voting is implemented in Canada, it will continue to be either voluntary or in response to non-binding votes on shareholder proposals
  • Say-on-Pay voting has been voluntarily implemented in the United States by some public companies and is a requirement for recipients of the Troubled Asset Relief Program

Voluntary Advisory Vote on Past Compensation

MBIA Inc. in the United States also voluntarily implemented a Say-on-Pay vote but took a different approach and put forth two separate resolutions to shareholders. The first resolution asked shareholders to support the compensation awarded to the Chief Executive Officer and the second resolution asked shareholders to support the compensation awarded to other named executive officers as a whole.

Compulsory Advisory Vote

Following these voluntary adoptions of Say-on-Pay in the United States, legislation may not be far behind. In fact, as a senator in April 2008, Barrack Obama pressed the United States Congress to pass legislation that would require companies to have a non-binding shareholder vote on executive compensation. In February 2009, the Troubled Asset Relief Program (TARP) terms were amended to require a Say-on-Pay vote for any recipient of TARP funds during the period for which any obligation arising from such financial assistance remains outstanding. The TARP terms require that shareholders be given a non-binding vote on executive compensation, as disclosed pursuant to the compensation disclosure rules of the United States Securities and Exchange Commission.


There are currently no Canadian legislation or securities commissions proposals in respect of Say-on-Pay voting. In the absence of regulatory requirements, to the extent Say-on-Pay voting is implemented in Canada, it will continue to be either wholly voluntary by issuers or in response to non-binding votes on shareholder proposals.

To date, Canada has yet to see an actual Say-on-Pay vote, as reporting issuers have only addressed proposals to implement such a vote. The first actual votes will not occur until 2010.

Canadian shareholder proposals have frequently taken the form of an advisory Say-on-Pay vote to ratify the report of the compensation committee. However, that report is no longer required as a result of recent amendments to Form 51-102F6 – Statement of Executive Compensation of National Instrument 51-102 – Continuous Disclosure Obligations. Nor does the new Form 51-102F6 require a description of future plans for compensation. As a result, for reporting issuers who have indicated they will have a Say-on-Pay vote in 2010, it is unclear what shareholders will be asked to vote on and it is possible there may be a significant amount of variation amongst issuers in this regard.

In an April 2009 release, the Canadian Coalition for Good Governance (CCGG) recommended that all boards adopt a Say-on-Pay vote as a best practice. The CCGG advised that such vote should be an advisory shareholder resolution on (i) the report of the human resources or similar committee; (ii) the compensation plan; and (iii) the prior year's compensation awards. The CCGG has also indicated that it intends to produce a model form of Say-on-Pay policy and shareholder resolution. As noted above, under Form 51-102F6 there is neither a human resources committee report nor a compensation plan. Thus, to adopt the current CCGG proposal, issuers would be required to prepare both a compensation report and a compensation plan they otherwise are not required to prepare or disclose to shareholders, in addition to complying with the new Form 51-102F6.

RiskMetrics Group (RMG) (formerly ISS Shareholder Services), is a service organization which provides voting recommendations to its clients, predominantly institutional investors. If Say-on-Pay becomes more prevalent in Canada, RMG could become a dominant player in significantly influencing the compensation policies and practices of issuers, since observers estimate that its recommendations carry anywhere from 20% to 60% of the shareholder vote of companies whose proxy circulars they review. In its Canadian Corporate Governance Policy – 2009 Updates, dated November 25, 2008, RMG changed its "case-by-case" approach to shareholder proposals for an advisory Say-on-Pay vote and stated that it will generally recommend a vote in favour of such proposals. RMG also indicated that it will recommend against shareholder proposals for a binding vote on compensation.

As well, RMG published five "guiding global principles" that it will use in assessing compensation plans for its recommendations to its clients for a Say-on-Pay vote:

  1. Maintain appropriate pay-for-performance alignment with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract, retain and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration, among other factors: the linkage between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based plan costs.
  2. Avoid arrangements that risk "pay for failure": This principle addresses the use and appropriateness of long or indefinite contracts, excessive severance packages and guaranteed compensation.
  3. Maintain an independent and effective compensation committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience and a sound process for compensation decision-making (e.g., including access to independent expertise and advice when needed).
  4. Provide shareholders with clear, comprehensive compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to evaluate executive pay practices fully and fairly.
  5. Avoid inappropriate pay to non-executive directors: This principle recognizes the interests of shareholders in ensuring that compensation to outside directors does not compromise their independence and ability to make appropriate judgments in overseeing managers' pay and performance. At the market level, it may incorporate a variety of generally accepted best practices.

The question remains as to what effect, if any, a Say-on-Pay vote will have on compensation practices. It has been reported that, since implementation of advisory votes in the United Kingdom, only approximately eight remuneration reports have been rejected in the past six years. It has also been reported that in the Netherlands, where the vote is binding, most compensation policies get approximately 90% shareholder support. Not surprisingly, therefore, many observers are arguing that Say-on-Pay votes, whether advisory or binding, have little to no effect on compensation policies.

It is interesting to note, as a legal matter, that unlike directors, who are legally required to act with a view to the best interests of the company, and with due care and skill, shareholders as a matter of law are generally free to act completely with regard to their self-interest, including decisions as to how they vote their shares. Accordingly, in terms of their legal relationship to the company and other shareholders, a shareholder may vote in respect of a Say-on-Pay vote in any manner, for any reason, it wishes. It is not clear at this stage if or how shareholders will undertake the work to properly evaluate compensation disclosure or policies of all the issuers who adopt Say-on-Pay advisory votes. Large institutional shareholders may choose to either outsource this function (to service providers such as RMG) or do it internally, in either case increasing their costs, or they may choose to perform no analysis at all.

In deciding whether or not to implement a Say-on-Pay vote, companies will need to consider a number of different factors, including, among other things, the views of their shareholders, the presence or absence of a shareholder proposal and its level of support, industry practice, their purpose for implementing such a vote, their shareholder relations and the precise matters in respect of which the vote would be taken.

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 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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions