Shareholder Perspectives: 2017 Proxy Season and Emerging Trends

As part of Hugessen’s ongoing commitment to engaging with the shareholder community, we initiated conversations with select Canadian and U.S. institutional shareholders to discuss key topics coming out of the 2017 proxy season. Our engagement included discussions with shareholder representatives from both asset managers and pension funds with assets under management aggregating CAD$3.7T. To guide the discussions, Hugessen asked shareholders their thoughts on the following topics:
1) Key areas of focus in 2017
2) One-time awards
3) Boards oversight on environmental, social and governance (“ESG”) factors
4) Long-term incentive design and linkage to share ownership guidelines (“SOG”)

Backstage with Institutional Shareholders: The Latest Views on Executive Compensation

With the evolving regulatory landscape and more clients holding their asset managers accountable for their voting records on governance, compensation and environmental, social and governance (ESG) matters, major institutional shareholders have stepped forward to play a significant leadership role in shaping the discussion on corporate governance and executive compensation matters. To get the latest perspectives on executive compensation and governance matters, Michelle Tan, Joseph Sorrentino and Steve Chan spoke with governance leaders at two major institutional shareholders: Yumi Narita, BlackRock, and Anne Sheehan and Aeisha Mastagni at CalSTRS.

Hugessen Event: Executive Pay Trends and Issues

Hugessen  | June 2017
On June 15 and 20, 2017, Hugessen hosted breakfast events in Toronto and Calgary to review executive pay trends and issues from this past proxy season. The events featured notable research findings from an analysis of the information circulars of the TSX 60 and a panel discussion to share insights and experiences from corporate directors and governance experts.

Highlights from the 2017 Proxy Season – TSX 60: CEO Pay Bucks the Market Trend

John Skinner, Reanna Dorscher  | June 2017
Amid a market rebound, median CEO total direct compensation ("TDC") levels among the TSX 60 decreased modestly by 2.0% year-over-year (y-o-y) to $7.4M. The decrease was slightly less when measuring the same incumbents (excludes four CEO turnovers), down 0.9%. Meanwhile, TDC growth within commodity sectors (oil & gas and mining) turned positive, after a steep decline in 2015. Interestingly, the overall pay level trend within the TSX 60 has been relatively flat over the past five years, rising less than 1% annually even when measuring the same incumbents in the role over the period.

After the AGM: a compensation committee reset?

Ken Hugessen, Erin Poeta  | May 2017
With the heavy lifting over for another year, the next few months serve as an opportune time to review mandates and renew committee relationships

Is Corporate Culture on Your Agenda?

Steve Chan, Camille Jovanovic  | May 2017
With no shortage of corporate crises in the headlines, now more than ever boards need to recognize that they play a key role in overseeing the cultural tone

Shareholder Perspectives: Board Process for Setting and Evaluating Pay

In light of recent public scandals tied to executive compensation, Hugessen reached out to the shareholder community to discuss their expectations of directors when setting and evaluating performance-based pay decisions. Hugessen initiated conversations with select Canadian and U.S. institutional shareholders, including both pension funds and asset managers with assets under management aggregating CAD$4T.

To guide the discussions, Hugessen asked shareholders what questions directors should ask themselves when:
1) Determining performance metrics, and
2) Adjudicating performance outcomes for determining pay decisions in respect of the prior year.

All of the shareholders we reached out to are engaging with boards on these (and other) matters.

Fall 2016 Director Opinion Survey: Taking the Pulse of Canadian Directors

John Skinner, Erin Poeta  | December 2016
As boards face increasing scrutiny from investors, regulators and other stakeholders, director priorities and board practices are forced to adapt accordingly. Tracking prevailing views on boardroom issues provides valuable insights going into year-end decision-making. For example, directors recognize that issues like IT risk mitigation and talent management require increased focus. Meanwhile, executive compensation and shareholder engagement continue to play a fundamental role in how companies execute and communicate their strategies. In an effort to keep an ear to the ground in the director community, we created a survey to gauge directors’ opinions on hotbutton issues and their companies’ practices over the past year.

ISS & Glass Lewis Release 2017 Proxy Guideline Updates (CND & US)

Michelle Tan, Erin Poeta  | December 2016
Institutional Shareholders Services (“ISS”) and Glass Lewis (“GL”) recently released updates to their 2017 voting guidelines for Canada and the U.S. The updated guidelines from ISS will apply to shareholder meetings for publicly-traded companies on or after February 1, 2017, while the ones from Glass Lewis will apply to meetings held on or after January 1, 2017. This memo provides a summary of policy updates on compensation-related and board-related topics in each of the two countries.

Defusing Share Buyback Anxiety

Ken Hugessen, Michelle Tan, John Skinner  | October 2016
The significant increase in share buyback activity in the U.S. (US$166 billion in the first quarter of 2016 alone), and well-publicized debates on their utility, has put capital allocation programs and their relationship with compensation program into the spotlight. When buyback programs are contemplated, there are ways to ensure
that shareholders understand the board’s process and perspective.