Canadian Insights

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Meridian Webinar: COVID-19’s Impact on Incentive Plans

COVID-19 has altered fundamental priorities for the year and significantly affected many companies’ ability to achieve the annual incentive plan and/or performance-contingent long-term incentive plan goals that were set prior to current circumstances.

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Topics for the Briefing Market Practice Update ■ Reductions to executive salaries and director fees, and other compensation actions being taken (as well as actions not expected to be taken)■ Proxy advisor views on COVID-19 related pay actions 2020 Annual…

Impact of COVID-19 on 2020 Annual and In-Flight Long Term Incentives

COVID-19 has had a far-reaching impact on Canadian businesses.

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For many companies, incentive goals set before the pandemic have become unachievable. In the short term, companies prioritized emergency planning, safety, layoffs and communications to employees and other stakeholders. A small minority of companies that had clear line of sight…

COVID-19

The Meridian community recognizes the extraordinary challenges facing our clients, friends and others in these unprecedented times.

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First and foremost, we hope you, your families and your colleagues are staying safe and healthy during this global health crisis. We appreciate that normal business operations for many companies have been upended due to the COVID-19 pandemic, and that…

UPDATE: Draft Legislation Released Changing Tax Treatment of Stock Options Effective January 1, 2020

On June 17, the federal government released draft legislative language to implement the proposed changes to the taxation of stock options in Canada, as introduced in the 2019 Budget in March.

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The budget proposed to eliminate the preferential tax treatment of stock options, above an annual $200,000 face value, for large, long-established, mature firms. (See Meridian’s update here for details of the original proposal.) The highlights of the implementation language include:…

2019 Federal Budget: Changes to Tax Treatment of Stock Options

One of the proposed legislative changes in the Liberal government’s 2019 Federal Budget directly affects executive compensation.

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The government has proposed to limit the preferred tax treatment for stock options. Currently options are eligible for a deduction the effect of which is to tax them at one-half the ordinary income tax rate (similar to capital gains treatment).…

Relative TSR for Resource Companies: Does it Still Make Sense?

Similar to the U.S., Canadian institutional investors, such as the Ontario Teachers’ Pension Plan, with assets under management of ~$190 billion and an advocate for good compensation governance, have been pushing back on the use of relative TSR on the basis that this measure can reward management of “chronically underperforming” industries.

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Relative total shareholder return (relative TSR), the most commonly used performance share unit (PSU) measure, has recently been challenged by institutional investors. Earlier this year Ontario Teachers’ Pension Plan (OTPP) released an article entitled “Is Management Compensation Rewarding the Right…

10 Keys to Great Compensation Committee Processes

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Executive compensation is complex and institutional investors and proxy advisors are increasingly aggressive and prescriptive in their views of executive compensation. This makes the role of a public company compensation committee complex and demanding. It is now more important than…

Holding Steady with Say on Pay

While Say on Pay is voluntary in Canada, many S&P/TSX 60 companies held Say on Pay votes in 2016.

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In contrast to the mandatory (but non-binding) advisory votes on executive compensation (“Say on Pay” votes) in the U.S., Say on Pay remains voluntary in Canada. Close to 80% of the S&P/TSX 60 companies have a Say on Pay vote…

Treasury, Cash Settled and Market Purchase Share Unit Plans

Meridian explains alternatives for settling share unit plans, as well as proposed changes to the TSX Company Manual.

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The structure of a share unit plan and how a share unit is settled can have a significant impact on its taxation and accounting treatment. This update: Considers three alternative share unit plans that are generally used in Canada and…

Choosing the Right Performance Peer Group

Why companies are using PSU plans, and how to use them effectively.

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More and more public companies are adopting performance share unit (PSU) plans as a significant component of long-term (equity) compensation for executives.[1] The most common PSU performance metric is total shareholder return (TSR – i.e., stock price growth plus dividends)…

Updates to ISS & Glass Lewis Compensation & Related Policies

Policy changes have implications for both equity plan voting and director over-boarding.

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ISS has changed its methodology for assessing treasury-based incentive plans with effect in 2016. In addition, both ISS and Glass Lewis have changed their standards for director “over-boarding” with effect in 2017. Equity Plan Voting As expected, ISS is introducing…

Trends in Executive Compensation at the S&P/TSX 60

While actual senior executive pay has fallen in the past three years, actual and target pay have grown.

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This update reviews trends in executive pay at S&P/TSX 60 companies[1]. The general trend for the last three years has been for modest growth in actual and target pay, although actual senior executive pay fell slightly from 2013 to 2014.…

Modest Year over Year Increases in Canadian Director Pay

Even with this increase, Canadian directors are still paid less than their American counterparts on average.

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Director total compensation increased year over year, while equity held steady at just under one-half of director pay. This aligns with increases in director time commitments and expansion of the role of board members. Directors of Canadian companies continue to…

Horses for Courses

How compensation committees can choose the performance metrics that are right for their business.

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Incentive plans have two primary purposes: 1) To motivate behaviour and drive performance aligned with strategy and 2) To align rewards with shareholder interests. From these two simple purposes come the most difficult work of the compensation committee and an…

Canadian Companies Continue to Voluntarily Adopt Say on Pay

Canadian company participation in Say on Pay has increased almost 25 percent since 2013.

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Although Say on Pay remains voluntary in Canada, the number of companies with an advisory resolution on executive compensation continues to rise, with 162 companies holding Say on Pay votes in 2015 – up from 156 in 2014 and 133…

Poor Pay Practices in Good and Bad Times

Regardless of the state of the economy, there are always opportunities to improve pay practices.

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Most industries are confronted by a variety of compensation challenges, which can be exacerbated in good and bad economies. While many companies have eliminated problematic pay practices (tax gross-ups, stock option repricings, excessive perquisites, and aspirational peer groups) to respond…

Tracking Dodd-Frank

Meridian examines the progression of Dodd-Frank legislation from the Canadian perspective.

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Although the Dodd-Frank Act rules do not apply to most Canadian companies, we watch the slow progress of the regulations with interest as many Canadian companies follow these executive compensation rules as a matter of good compensation governance. Over the…