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CCCA_V3No3_Closing-FIN.qxd:CCCA_V1No2_BackPg-V1.qxd 9/16/09 9:56 PM Page 50 Closing The Deal Bring in the regulators It’s time for a real dialogue within corporate Canada on say on pay. ne of the most challenging corporate in-house counsel’s main recourse is to look to oversee the strategic orientation of the Ogovernance issues for in-house coun- at market practice.The problem is that the company and the performance of its senior sel in Canadian public companies today is interpretation and implementation of say on management. As such, boards need to be definitely “say on pay.” pay in Canada is not by any means uniform. able to be effective, to have the ability to Shareholders, especially in the United It’s driven by each company’s own corpo- make decisions and then oversee those States, dissatisfied with public company rate agenda;companies may take very differ- decisions as they are implemented. results in today’s challenging economy, or ent positions on say on pay which leaves in- Could voluntary shareholder votes on disgruntled with what they perceive as house counsel in the unenviable position of remuneration have a negative effect on inordinately high executive compensation, trying to advise senior executives on an companies seeking high-calibre senior are increasingly demanding a say on senior ongoing and highly public issue for which managers in the corporate war for talent? executives’ remuneration. In some parts of there are no made-in-Canada rules. In the face of these questions, senior the world,this advocacy for input on remu- For example: what exactly does the con- executives are again turning to in-house neration has gained real momentum and sultative vote refer to vis-à-vis each indi- counsel to help demystify and clarify the has become law. vidual company? Does say on pay refer to issues.And again,the answers are not clear. For example, since 2003, say on pay — the remuneration of the CEO? To the which consists of an annual shareholder compensation of the five top officers? An issue that won’t go away advisory vote on a company’s compensation Could the entire remuneration policy as The lack of clarity surrounding say on pay regime as set forth in the company’s proxy approved by the board of directors be has the potential to create uncertainty in circular — has been mandatory in Britain. potentially subject to a voluntary say-on- the market.And today, uncertainty is clear- Other countries, including Australia, the pay vote by shareholders? ly not desirable. Netherlands,Norway and Sweden,have put Taken even further, how far could the Say on pay is not an issue to be taken rules in place requiring companies to seek a reach of shareholder consultative voting lightly. It is neither feasible nor desirable for shareholder vote on compensation policies extend?To what other aspects of the busi- every company. And I don’t believe that it is for high-level executives. ness or operations of a company? Poten- a “trendy” issue that is likely to go away. As Canada has not been immune to the tially,could this expression by shareholders the Mercer report suggests: “This trend of issue. According to a June 2009 Mercer extend even to the overall company increased engagement with shareholders is report,“Is ‘Say on Pay’ Here to Stay? What growth strategies as laid out by senior expected to continue to gain momentum in to do now,” the authors assert that “say-on- management and the board of directors? Canada,with say on pay as the driving force.” pay policies are quickly catching on in And when it comes to the actual result of To my way of thinking, it’s time for Canada, and many companies are trying to any consultative vote,the questions again are Canadian regulators to step into the dis- determine whether to adopt such a policy.” numerous: Is a 60 per cent affirmative result cussion. It’s time for regulators to open Canada’s top banks have agreed to share- of the consultative vote by shareholders on dialogue within corporate Canada and to holder demands for a consultative say on executive compensation a high enough support serious analysis on this topic in pay vote,as have other public companies in number? Or should it be 80 per cent? At order to properly frame a public debate on response to shareholder proposals. what level should the benchmark be? say on pay. Still, in Canada, say on pay is truly a By doing so, Canadian in-house counsel challenging situation for in-house counsel. Role of the board of directors will be able to draw on resources to best That’s because in this country, there are no The uncertainty surrounding consultative advise their companies on what is most ben- laws governing say on pay, and no public voting by shareholders — its role and sub- eficial for them in the rapidly emerging and consultations or input into the issue. sequent effect on the actions taken by pub- somewhat contentious issue of say on pay. lic companies — is also opening a corre- Consultative voting on what? sponding debate about the role of the board Daniel Desjardins is Senior Vice-President PIERRE CHARBONEAU In light of the absence of any rules govern- of directors. and General Counsel at Bombardier Inc. ing say on pay in this country, Canadian Clearly, the board’s rationale for being is (danield@bombardier.com) 50 CCCA Canadian Corporate Counsel Association FALL 2009