The Canadian Securities Administrators (CSA) recently proposed changes to the disclosure requirements pertaining to executive compensation and Compensation Committees. Under the proposals, companies would have to disclose, among other things,
- risks arising from compensation policies and practices that are likely to have a material adverse effect on the company,
- whether directors and officers are permitted to hedge the value of their holdings of the company’s equity securities,
- the level of compensation expertise of Compensation Committee members, and
- fees paid to compensation consultants for executive compensation and other work.
The CSA’s executive compensation proposals are open for comment until February 17, 2011, and are expected to be implemented for the 2012 proxy season. For additional details and steps that companies can take to begin preparing for these changes, see the article Changes to Executive Compensation Disclosure in Canada. In 2011, we expect Canadian securities regulators to continue to focus on the quality of executive compensation disclosure.
The CSA’s proposals are similar to new rules that the SEC must implement under the Dodd-Frank Act. In addition, under Dodd-Frank, all Compensation Committee members of U.S. companies will have to be independent; enhanced disclosure will be required of the relationship between executive compensation and issuers’ financial performance; and the compensation of individual officers may be clawed back if financial results are restated (even if the officer engaged in no wrongdoing).