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NATL61_053 03/08/2007 09:55 AM Page 53 Talking ’bout my Corporate Law compensation New U.S. executive compensation disclosure rules are likely to affect Canadian companies. xecutive compensation is becoming Total aggregate compensation less than C$50,000 and 10% of combined Etougher for investors to understand. The most notable change to the salary and bonus and, if the threshold is Because of the increasing complexity of Summary Compensation Table is a new met, to identify and quantify each compensation practices and shareholders’ column tallying total aggregate compen- perquisite representing at least 25 percent difficulty with comparing such practices sation. This includes the compensation of the aggregate value of a NEO’s total among companies,the Canadian Securities cost of all stock options and share units perquisites.The new U.S. rules reduce the Administrators (CSA) — an umbrella that became vested for each NEO in the threshold for reportable perquisites from group that represents the securities regula- prior year, as well as the value of pension US$50,000 to US$10,000. Once this tors of Canada’s provinces and territories gains and amounts earned under non- threshold is crossed, all perquisites must — likely will propose new rules in 2007. equity incentive plans, even if such be disclosed. In addition, the value of a The new Canadian rules are expected amounts are payable at a later date. The particular perquisite must also be dis- largely to follow new rules recently new Canadian rules likely will also closed to the extent that such value is enacted in the United States by the require issuers to include disclosure of an at least the greater of US$25,000 or Securities and Exchange Commission amount representing total compensation. 10% of the aggregate value of a NEO’s (SEC). In crafting their disclosure rules, total perquisites. Canadian regulators will have the advan- Compensation discussion and analysis tage of first observing U.S. issuers’ Both the SEC and the CSA require Severance benefits attempts to comply with their new dis- issuers to include a report describing the Under the new rules, U.S. issuers are closure obligations during the 2007 compensation committee’s policies in required to quantify any payment that proxy season. determining the compensation of execu- would be made to a NEO in connection Key provisions under the new SEC tive officers.To avoid meaningless boiler- with the officer’s future termination of disclosure rules, as compared with their plate disclosure, the new SEC rules employment, a change in responsibilities, current Canadian counterparts, include require a more detailed report, referred to or a change in control of the issuer.The the following. as the “Compensation Discussion and disclosure must be made on the basis that Analysis” (CD&A). the triggering event took place on the last Determination of named More importantly, this CD&A will be day of the issuer’s prior fiscal year, and executive officers considered “filed” with the SEC (rather must include any other assumptions used Under both the new SEC rules and the than simply “furnished,” as is the case with in arriving at such estimate. current Canadian rules, issuers must the current Compensation Committee disclose generally the compensation of Report) and therefore will be required to be Sandra Cohen is a partner in Osler Hoskin their CEO,CFO and the next three high- incorporated, by reference, in a short form & Harcourt LLP’s New York office,practising est-paid executive officers (the “named prospectus.The CD&A also will be subject in the Pensions and Benefits Department; executive officers” or “NEOs”). Under to a stricter standard of liability under U.S. she is the U.S. compensation and benefits the prior U.S. rule and the current securities laws. It is expected that a CD&A practice leader. Aileen Brill is an associate in Canadian rule, this determination is based also will become a component of the Osler’s New York office, where her practice is on total salary and bonus. Recognizing Canadian disclosure requirements. focused on U.S. employee benefits and execu- that modern compensation is determined tive compensation. Andrew MacDougall is more creatively, the new SEC determina- Perquisites a partner in Osler’s Toronto Business Law tion is based on total compensation. A In Canada, the reporting of perquisites Department and regularly advises clients on corresponding change to the Canadian follows the old SEC rule: reporting is not corporate and securities law matters relating to rules seems likely. required if the aggregate amount is both executive compensation. MARS 2007 CCCA Canadian Corporate Counsel Association 53