Information on legal and business topics from Canadian business lawyer Shane McLean

CSA Report on Review of Executive Compensation Disclosure

Posted by Shane McLean on November 30, 2009

On November 20, 2009 the Canadian Securities Administrators (the “CSA”) released their report on their recent review of executive compensation disclosure.  The review conducted by the CSA follows the adoption of a new form for executive compensation disclosure by Canadian public companies which came into effect on December 31, 2008.  The new form requirements added additional areas of disclosure and more detail in some of the areas previously covered.

The CSA began their review in spring of 2009 in order to assess the implementation of the new disclosure requirements.  70 public companies were reviewed and of that number, the CSA reports that 62 “generally met the [new] requirements”.  However, “most” of the issuers reviewed were asked to improve their disclosure in future filings and 8 of the companies reviewed were required to file supplemental materials because their disclosure did not meet minimum acceptable standards.

The two key areas where most issuers failed to meet the standards expected by the CSA were the discussion and analysis of (i) performance goals and (i) benchmarking.  The CSA believes that companies should be more specific and detailed with respect to the performance goals that are tied to executive compensation.  In addition, the CSA felt that companies that use benchmarking to assess executive compensation as against companies in their peer group did not, among other things, clearly explain the methodologies and many did not disclose the peer group against which executive compensation was benchmarked.

Issuers and their advisors should take note not just of the findings of the CSA review but also of the areas on which the review concentrated in an effort to ensure that future executive compensation disclosure is carefully crafted so as to  avoid the shortcomings described in the report.   In this era of closer scrutiny on executive compensation levels, transparency and attention to detail are crucial.


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