On November 20, 2009, the Canadian Securities Administrators (“CSA”) published the CSA Staff Notice 51-331, in the wake of their review of executive compensation disclosure as part of their continuous disclosure review programs. The goal of the review was to monitor whether the 70 selected companies were disclosing sufficient information, in compliance with Form 51-102F6.

From their review, the CSA concluded that there is room for improvement. Indeed, most of the 70 companies investigated were asked to make more or less significant amendments to the information they will provide in future filings; eight of those companies were asked to file supplemental disclosure to cure deficiencies.

This bulletin’s goal is to identify, under five themes, the main areas in which the CSA observed disclosure issues, in order to help reporting issuers to better prepare their continuous disclosure documents.

A. Performance Goals or Similar Conditions (45 companies presented significant disclosure issues)

Tie between goals and compensation

Issuers must tie the discussion on performance goals with the disclosure on executive compensation. The CSA noticed the inadequacy of the explanations which permit the reader to establish a link between performance goals and compensation. Issuers must declare the bonuses granted based on the achievement of goals disclosed in the compensation discussion and analysis and, conversely, explain the goals achieved for which a bonus was disclosed in the summary compensation table in a more transparent manner.

Relative importance of goals versus performance

The CSA noted that many issuers did not fully and accurately describe the relative importance between the company’s performance goals and executive officers’ individual performance. Issuers should therefore specify, in their compensation discussion and analysis, the relative importance attributed to the achievement of corporate-level goals versus executive officers’ individual performance.

Quantification of objective measures

A number of issuers did not quantify performance goals that were based on objective measures, such as earnings per share, EBITDA, growth in net sales, and operational targets. The CSA reminded reporting issuers that they must quantify their objective measures, regardless of whether they are general guidelines or specific targets.

“Seriously prejudice” exemption

Some reporting issuers improperly attempted to rely on the exemption from the obligation to disclose performance objectives, on the basis that disclosure of such information would seriously prejudice the interests of the company. However, according to the CSA, this exemption cannot be relied on to omit disclosure of performance goals based on the company’s general financial performance measures, such as earnings per share, revenue growth and EBITDA, since these measures are generally publicly available in other disclosure documents. The CSA reminded issuers relying on this exemption that they must be ready to provide the reasons for which they believe that the disclosure of these goals would seriously prejudice the company’s interest. The CSA also noted companies which do not disclose performance goals must still state what percentage of total compensation relates to the undisclosed information and how difficult it would be, or how likely it would be, to achieve the undisclosed performance goals.

B. Benchmarking (42 companies presented significant disclosure issues)

Benchmark group

The compensation discussion and analysis must indicate any benchmarking reference established and explain the composition of the benchmark group, essentially by providing a complete list of companies included therein, regardless of their number.


According to the CSA, it is not sufficient to make a general declaration of having reviewed the compensation practices of a peer group and listed the components of that group. Indeed, the CSA believes that issuers must describe how they used that information in decisions about compensation. For example, an issuer must indicate how it uses different benchmark groups or subgroups for various named executives officers or for different elements of its compensation.

C. Performance Graph (16 companies presented significant disclosure issues)

Performance graph

Companies are required to describe and discuss how the trend shown in the graph illustrating shareholder return for the last five financial years compares to the trend in the company’s compensation to executive officers over the same period (and not only for the last three financial years as it is required in the summary compensation table). The CSA appreciated that some issuers provided an additional line in the performance graph showing the trend of the named executive officers’ total compensation as it relates to shareholder performance.

D. Summary Compensation Table (15 companies presented issues)

Grant date fair value of multi-year awards

Companies are required to disclose the grant date fair value of share-based awards and option-based awards in the summary compensation table. The values of such grants must be reported in the year of the grant and may not be deferred to a future financial period.

Reconciliation to “accounting fair value”

Companies are required to reconcile any difference between the grant date fair value reported in the summary compensation table and the accounting fair value of share-based and option-based awards. Companies must then explain the difference between the fair value of the grant and their accounting fair value in the form of a footnote to the table, and include a description of the calculation methodology used for each calculation, a description of the key assumptions used for each calculation and the reasons why the company chose that methodology.  

E. Termination and Change in Control Benefits (13 companies presented issues)


According to the CSA, it is not sufficient to describe in narrative format the payments and the rights of the executive officers that are triggered by a termination, resignation, change in responsibilities, or a change in control. Issuers must also quantify the amounts of those payments they may have to disburse under such circumstances. , The CSA did appreciate such information being presented in tabular form, even if this is not required pursuant to Form 51-102F6.

The CSA also identified in CSA Staff Notice 51-331 many other areas in which issuers should improve disclosure. We suggest that issuers read Notice 51-331 alongside the information provided in Regulation 51-102 respecting Continuous Disclosure Obligation: indeed, the CSA did state in its report that it intends to review executive compensation disclosure as part of its continuous disclosure review programs and to focus on the elements identified as problematic in its last targeted compliance review.