August 22, 2011
Canadian companies operating in the United States should be aware of a series of regulatory developments in the United States and Canada relating to executive compensation and compensation committees.
According to Leslie McCallum, there are several key developments: say-on-pay is now mandatory for U.S. issuers, while in Canada the Ontario Securities Commission is considering doing the same; U.S. regulators have proposed rules governing incentive-based compensation arrangements in U.S.-regulated financial institutions with more than US$1 billion in assets; the Dodd-Frank Wall Street Reform and Consumer Protection Act requires U.S.-listed issuers to claw back executive compensation in the event of financial result restatement within three years as a consequence of material non-compliance with financial reporting requirements; and Canadian regulators are proposing mandatory disclosure about the link between compensation practices and risk management, including whether directors and officers are allowed to hedge their holdings of issuers' securities. The U.S. Securities and Exchange Commission and the Dodd-Frank Act already require such disclosures.
"Canadian regulators will likely do their own thing on these issues, but the outstanding proposals in Canada are very much related to the US proposals," Leslie says. "These developments will promote further changes in the compensation advisory industry, similar to changes already experienced by accountants involving the separation of audit and consulting services."
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