Kaylie Folias
Meridian’s 2025 Canadian Corporate Governance and Incentive Design Survey offers comprehensive insights into key executive compensation program design and related corporate governance topics to provide additional context for boardroom discussions on these important matters.
Meridian reviewed the corporate governance and incentive design practices at the S&P/TSX60 (the largest publicly traded companies in Canada by market cap, reflecting sector weight) with median revenues of $16.1B and median market capitalizations of $36.9B.
Overall, S&P/TSX60 companies continue to enhance governance transparency and maintain a strong focus on profitability-driven, performance-based incentive design.
Highlights of the 2025 Canadian Corporate Governance & Incentive Design Survey¹
Governance Practices and Company Policies
Board diversity disclosures are more common than executive diversity disclosures – 77% of the S&P/TSX60 disclose gender and/or ethnic diversity targets for the Board, while 40% disclose diversity targets for management. Board gender diversity targets are more common, but for Management, 63% of companies that disclose targets include both gender and ethnic diversity targets.
60% of companies disclose mandatory director retirement age policies or mandatory term limits – 45% disclose a mandatory term limit, with 12 years being the most common and 37% disclose a mandatory retirement age, with the most common age being 72 or 75. 22% disclose both a mandatory term limit and a mandatory retirement age.
Independent Board Chair is the most prevalent leadership structure – 80% of the S&P/TSX60 have separate Board Chair and CEO roles, and approximately one-third of the S&P/TSX60 have a Lead Director (alongside either an Executive or a non-independent Non-Executive Chair).
Nearly all companies have clawback policies and a majority have a standalone misconduct provision – 98% of the S&P/TSX60 disclose a clawback policy for executive officers (current and former). 85% of companies have a financial restatement trigger and 58% have a standalone misconduct trigger, 47% of companies have both triggers. The prevalence of standalone misconduct triggers increased by 5 points year over year.
Proxy Disclosures
Over half of the S&P/TSX60 include voluntary realized or realizable pay disclosure – Consistent with last year’s results, a majority of companies disclose both realized and realizable pay analysis, most often comparing pay to Summary Compensation Table values. This provides companies with the opportunity to address any perceived pay and performance disconnect. Historically, we have seen investors and proxy advisors respond positively to this voluntary disclosure.
Almost half of the S&P/TSX60 disclose a cost of management ratio – With an increase of 5 points over last year, 45% of companies disclose a cost of management ratio, most commonly compared to net income (44%) and revenue (22%). Once primarily a “bank practice”, this form of disclosure is now prevalent outside financial services.
Annual Incentive Plan Design Practices
Earnings-based financial metrics drive annual incentives – When included in an annual incentive plan, the average weighting is 48% to Net Income/EPS, 45% to Operating Income/EBIT/EBITDA, and 30% to Revenue.
Operating and Earnings metrics remain core to annual incentive design– Operating Income/EBIT/EBITDA remain the most prevalent annual incentive metric, used by about half of S&P/TSX60 companies, followed by Net Income/EPS (34%). “Other Financial” metrics remain common but represent a mixed group of secondary measures with slightly lower weightings year over year. Overall, companies continue to emphasize income statement-based profitability metrics over financial return- or TSR-based measures.
Non-financial measures are also common; types of measures vary widely – Similar to last year, 75% of companies include non-financial measures in the annual incentive plan. Of the companies that use non-financial measures, 70% include environmental, social or governance metrics, and 55% include other operational or strategic corporate goals.
Less than ½ of companies have a CEO individual performance metric – 48% of companies do not include an individual performance metric for the CEO.
Long-Term Incentive Plan Design Practices
Performance awards are the main LTI vehicle – 90% of S&P/TSX60 companies include performance-based vehicles (typically performance share units—PSUs) in the long-term incentive plan. On average, performance awards represent 57% of CEOs’ annual target LTI value. However, for companies that do not include stock options in their LTI mix, the weighting to PSUs has increased to 72% of total LTI.
Standard performance period: 3 years – Similar to last year, the vast majority (87%) of S&P/TSX60 companies assess performance over a three-year measurement period. Typically, goals are set over a three-year cumulative period, rather than as annual goals.
Relative TSR remains the predominant metric – 75% of companies include a relative TSR measure in performance awards, on average, accounting for 60% of the overall plan weighting. Similar to last year, most companies (85%) incorporate relative TSR as a weighted measure, rather than a modifier, and 82% pair TSR with at least one other performance measure.
¹Prevalence statistics may not add to 100% due to rounding.
Full survey results can be downloaded by clicking the “Download as PDF” button above, by contacting Kaylie Folias at kfolias@meridiancp.com or your consulting partner at Meridian.
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This Client Alert prepared by Meridian Compensation Partners provides general information for reference purposes only and should not be construed as legal or accounting advice or a legal or accounting opinion on any specific fact or circumstances. The information provided herein should be reviewed with appropriate advisors concerning your own situation and issues.