With current economic conditions and reports of executive
compensation in the media, measures addressing executive
compensation issues are drawing increasing attention. Several of
these issues are discussed in
another article. One measure that has received considerable
press in Canada and the United States and is being implemented by
some companies is 'say on pay,' an annual shareholder
advisory vote on a company's compensation practices.
'Say on Pay' in Canada
Under Canadian corporate law, how much a company pays its
executives is within the exclusive authority of its board of
directors. Canadian securities laws require extensive disclosure of
how much has been paid to a public company's top executives,
and the basis upon which that compensation has been calculated.
Shareholders do not have any direct input into the process, nor do
they have any right to approve or disapprove. As with other
decisions that may be taken by a board, shareholders who object to
a company's executive compensation practices may seek to change
the directors, make a shareholder proposal to express their views,
or assert a breach of the directors' fiduciary duties.
Over the past few years, various shareholder proposals have been
made to seek a shareholder vote on executive compensation, with the
result that as of the end of April 2009, 12 of Canada's largest
companies have agreed to give their shareholders a non-binding vote
on executive compensation.
'Say on Pay' Outside of Canada
Since 2003, shareholder advisory 'say-on-pay' votes have
been mandatory in the United Kingdom. Australia and some European
countries have also had legislation in place requiring shareholder
votes on executive compensation for a number of years.
Starting in 2007, the United States has seen a steady increase
in support for 'say-on-pay' votes. This has been reflected
in the press, in the United States Congress, and in the number of
shareholder proposals being made. Indeed, in a significant number
of recent shareholder meetings, non-binding 'say-on-pay'
proposals have received substantial support and have been approved
in many instances. In February of this year, in response to public
pressure, issuers receiving financial assistance from the Troubled
Asset Relief Program (TARP) were required to put their executive
compensation to an advisory shareholder vote.
Is 'Say on Pay' a Reality for Canadian Companies?
While a dozen large Canadian public companies have agreed to
give their shareholders a 'say on pay,' the concept has not
yet been more widely adopted in Canada.
This difference reflects the realities of the Canadian capital
markets. These markets are characterized by a number of companies
with significant or controlling shareholders, a relatively small
number of widely held larger issuers, and a significant number of
venture and smaller issuers. These factors make Canada's public
company landscape different from those in the United Kingdom and
the United States, and therefore the inevitability of Canadian
public companies universally adopting 'say-on-pay' votes in
the absence of mandatory legislation is not clear. At present
Canadian public companies generally fall into one of three
categories with respect to their consideration of 'say on
larger issuers that have already adopted' say on
issuers that have not adopted 'say on pay,' but are
debating whether to do so; and
issuers that have not implemented 'say on pay,' and
will likely not do so.
While 'say on pay' is clearly becoming part of the
Canadian public company landscape, many companies will still need
to consider whether this vote is appropriate for them and their
shareholders. There are serious issues to be considered by many
Canadian public companies before they join the list of those whose
shareholder meetings will include a 'say on pay.' For a
detailed consideration of these issues, please see our May 2009
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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