Insights

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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:…

EVA for E&P Companies: A Challenging Measure

In 2019, ISS introduced Economic Value Added (EVA) analysis as additional context in its evaluation of executive pay and performance prior to issuing a “say on pay” (SOP) vote recommendation.

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While initially the EVA material will be provided purely for information, it seems inevitable that ISS will continue to push to include EVA as a formal part of its pay for performance analysis. There are general concerns about ISS using…

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…

Looking Ahead to 2017 – Webinar

Meridian examines executive compensation under a new administration.

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Get insights into how executive compensation will be affected by a Trump or Clinton presidency by watching this webinar presentation from Partners Bob Romanchek and Christina Medland, titled “Looking Ahead to 2017: Executive Compensation Under a New Administration.” Watch the…

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…

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…

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…

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…

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…

Setting Annual Incentive Targets When Commodity Price Drops

One of the hardest challenges for a Compensation Committee is to set annual incentive performance targets at levels that are lower than the prior year’s actual performance.

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One of the hardest challenges for a Compensation Committee is to set annual incentive performance targets at levels that are lower than the prior year’s actual performance. It is difficult to explain to shareholders when share price is dropping, how…

Term Limits and Board Diversity: Developing Policies that Work

In January, 2014, the Ontario Securities Commission proposed disclosure rules that will require TSX-listed issuers in Ontario to annually disclose the combination of term limits and gender diversity

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In January, 2014, the Ontario Securities Commission (OSC) published proposed disclosure rules that will require TSX-listed issuers in Ontario to annually disclose: Any policies they have regarding the representation of women on the board (and other details respecting women on…

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…

Commodity Price Impact on Evaluating Performance

How to Manage Pay for Performance Measures in a Volatile Commodity Market

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Commodity prices can have a significant effect on share price and also on financial performance measures used by energy companies. This makes paying for performance at energy companies challenging because commodity price volatility can create misalignment between management efforts, management…

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…