The comment period for all stakeholders is open until February 17, 2011

The Canadian Securities Administrators (CSA) published for comment proposed amendments to Form 51-102F6, Statement of Executive Compensation designed to improve the disclosure investors receive regarding 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.

In developing the proposals, the CSA considered the findings of a 2009 CSA targeted compliance review of executive compensation disclosure by a sample of public companies. The focus of the review was to assess compliance with Form 51-102F6, educate companies about the requirements of the Form, and identify any requirements that needed clarification. The findings were reported in CSA Staff Notice 51-331 Report on Staff’s Review of Executive Compensation Disclosure.

The CSA also considered a number of recent international developments in executive compensation disclosure, including new compensation and corporate governance disclosure requirements adopted by the U.S. Securities and Exchange Commission for the 2010 proxy season.

Main proposed amendments:

  • The CSA propose to require a company to explicitly state that it is relying on the serious prejudice exemption in relation to the disclosure of performance goals or similar conditions and explain why disclosing the relevant performance goals or similar conditions would seriously prejudice the company’s interests.
  • The CSA propose to require companies to disclose whether the board of directors considered the implications of the risks associated with their compensation policies and practices.  More specifically, a company would be required to disclose:
  1. the nature and extent of the board’s role in the risk oversight of compensation policies and practices;
  2. any practices used to identify and mitigate compensation policies and practices that could potentially encourage a named executive officer (NEO) or individual at a principal business unit or division to take inappropriate or excessive risks; and
  3. the identified risks arising from the policies and practices that are reasonably likely to have a material adverse effect on the company.
  • The CSA propose to require companies to disclose whether any NEO or director is permitted to purchase financial instruments (such as prepaid variable forward contracts, equity swaps, collars, or units of exchange funds) that are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director.
  • The CSA propose to require companies to disclose information about compensation advisors retained by the company, including a description of the advisor’s mandate and any other work performed for the company, by including a requirement to provide a breakdown of all fees paid to compensation advisors for each service provided.
  • The CSA propose to clarify that a company may not alter the presentation of the Summary Compensation Table by adding columns or other information.
  • The CSA propose to require all companies to disclose the methodology used to calculate grant date fair value of all equity-based awards, including key assumptions and estimates used for each calculation and why the company chose that methodology, regardless of whether there are any differences with the accounting fair value.
  • The CSA propose to clarify that any company contribution made on behalf of the NEO that is not reported in the defined contribution plan table should be reported as part of all other compensation of the Summary Compensation Table.
  • The CSA propose to remove the requirement to disclose non-compensatory amounts for defined contribution plans.

The CSA intend the Proposed Amendments to be in effect for the 2012 proxy season and will require companies to comply with the Proposed Amendments for financial years ending on or after October 31, 2011.

Review the Proposed Amendments to Form 51-102F6 Statement of Executive Compensation and Consequential Amendments 

Review the SEC’s Proxy Disclosure Enhancements 

About Deloitte
Deloitte, one of Canada’s leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,700 people in 58 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.