Canadian Insights

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…

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).…

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…

Compensation Challenges of a Falling Canadian Dollar

With uncertainty in the worldwide economy and commodity prices, the Canadian dollar has fallen to a six-year low versus the U.S. dollar, affecting compensation programs for a large number of Canadian companies.

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After a long period of relative stability and near parity, the Canadian dollar has fallen to about 80 cents U.S. – a six-year low. The outlook for further movement up or down, is unclear and is tied both to the…

Thinking Like an Activist—The Benefits of Looking at Executive Compensation Programs through a Critical Lens

Looking at your executive compensation program from an activist perspective will help you assess how likely it is your company will have to deal with activist investors.

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The significant increase in shareholder activism has many companies and compensation committees playing defense. While the specter of activist interest is generally viewed with concern, looking at your executive compensation programs from the perspective of an activist investor can focus…

Modest Rise in Director Pay Continues at Canada’s Largest Companies

Annual analysis of outside director compensation among S&P/TSX 60 index companies found that average total compensation for directors increased by +2.1% last year.

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Meridian Compensation Partners’ annual analysis of outside director compensation among S&P/TSX 60 index companies found that average total compensation for directors increased by +2.1% last year. The proportion of total compensation delivered in equity has increased to 47%, up from…

Engaging Shareholders

Why, When and How to Talk to Shareholders about Executive Compensation

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Shareholder engagement is on the rise in Canada due in large part to: The steadily increasing voluntary adoption of say on pay in Canada—in 2013 80% of the S&P/TSX 60 companies and 130 Canadian companies had say on pay advisory…

Satisfying Your Shareholders

Understanding How Institutional Shareholder Services (ISS) Evaluates Pay for Performance

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For TSX Composite Index companies, ISS will recommend voting “against” say on pay, “withhold” on directors, and/or “against” an equity plan proposal if: There is significant misalignment between CEO pay and company performance, The company has problematic pay practices, or…

Holiday Highlights

10 Of the Biggest Executive Compensation Stories From 2013

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2013 was a busy year for executive compensation in Canada. Here are 10 highlights from this year: 1. Pay for Performance Continues to be a Primary Focus of Compensation Committees Committees are becoming more engaged in aligning pay for performance…

Review of Horizontal Benchmarking and Its Impact on CEO Compensation and Pay Disparity

Meridian’s Analysts Share Their Findings After Surveying Academic Studies And Compensation Trends And What They Have To Say About Horizontal Benchmarking And CEO Pay

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Executive Summary Introduction Meridian was asked by a group of six Canadian banks (“the Banks”) to review horizontal benchmarking and its potential impact on CEO Compensation and pay disparity to assist with their consideration of concerns raised in shareholder proposals.…

Stress-Testing: So Many Questions to Answer

How To Stress-Test And What It Will Tell You About Your Compensation Packages

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More than just a popular governance buzz word, “stress-testing” incentive compensation designs provides valuable information for compensation committees and management alike. Stress testing incentive compensation helps organizations understand the relationship between the compensable performance range and business results and identify…

Annual Incentive Targets

How to Set Incentive Targets to Increase Alignment with Performance

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Each year, most companies establish incentive compensation performance expectations for the coming year. While the approach varies from company to company, the intended result is to align annual incentives with expected business results. How companies get there ranges from direct…