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Canadian securities regulators look for improved disclosure of executive compensation


November 22, 2010   by Canadian Underwriter


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Canadian securities regulators are seeking public comment on proposed rule changes that would enhance the quality of disclosure of executive compensation.
“The proposals clarify existing requirements and introduce new substantive requirements to enhance the quality of information disclosed by public companies about key risks, governance and compensation matters,” a Canadian Securities Administrators (CSA) press release says.
The amendments would apply to Form 51-102F6 Statement of Executive Compensation. The deadline for public comment is Feb. 17, 2011.  
One of many proposals contained in the request for comment deals with “risk management in relation to the company’s compensation policies and practices.” Specifically, the document notes concerns that, “at some companies, compensation policies have become disconnected from long-term company performance and create incentives that influence behaviour inconsistent with the overall interests of the company.”
One proposal includes a new provision requiring companies “to disclose whether the board of directors considered the implications of the risks associated with the company’s compensation policies and practices.”
Such a risk review would include disclosure of:

  • the board’s role in the risk oversight of compensation policies and practices;
  • any practices used to identify and mitigate compensation practices that might potentially lead to inappropriate or excessive risk-taking; and
  • risks arising from policies and practices that “are reasonably likely to have a material adverse effect on the company.”

The disclosure would vary depending on the company and its particular policies and practices, the CSA said.