Thought Capital

Hugessen has completed its annual review of the 2021 TSX60 proxy circulars, and we are pleased to share key findings on pay levels, pay design, regulatory updates and Say-on-Pay results. This year’s review has provided specific thoughts and considerations around COVID-19 actions on executive pay in Canada and other emerging trends this proxy season. Please click above for the webinar recording, download the TSX60 slides here and the full briefing here.

Hugessen’s June 29th webinar focused on emerging trends in the intersection between executive compensation and environmental, social and governance factors. Our session covered what we are seeing with respect to environmental factors in compensation programs and shareholder activism; the emergence of diversity, equity & inclusion within compensation programs, the ongoing evolution of board and management diversity policies, and how shareholders are addressing these issues; and how ESG trends are evolving in the US market. Please click above for the video and download the slides here.

Deloitte and Hugessen have teamed up to present two webinars on the new stock option taxation rules. The first webinar is high level and is a good general information session and the second webinar is more technical in nature.

This briefing is Part two of our thought capital series on the changes to Canadian stock option taxation – please see Part One for a detailed overview of the upcoming changes. Our next article will focus on alternative equity compensation approaches and is expected to be published in Q2 2021.

The long-anticipated changes to Canadian stock option taxation are set to be effective July 1, 2021. The federal government, in the draft legislation released on November 30, 2020, provided details regarding the new limit on the eligibility of employee stock options to receive preferential “capital gains-like” treatment. For many companies, the impending changes mark an opportune time to review the LTIP design. This briefing is focused on the new stock option taxation rules; a follow-up briefing will cover revamping the LTIP strategy and design.

The past few years have been increasingly challenging for some Canadian sectors where companies have struggled with rapid share price decline and pending debt renegotiations. There are many cases where the company’s going-concern status is at risk and debt restructuring under the Canadian Business Corporation Act (“CBCA”) or the Companies’ Creditors Arrangement Act (“CCAA”) is on the horizon. These pressures have accelerated with the impact of COVID-19 on public and private companies, particularly in industries that have been most impacted or faced additional pressures (energy sector, retail, tourism, etc.). While the ultimate impact of the crises of recent months is still to be determined, Boards and management teams have been forced to consider the impact of these challenging business conditions on their employees.

This briefing provides insight on the use of a key employee retention program (“KERP”) in preparation for situations where a CCAA/CBCA filing is expected and provides insight on the Board’s role in KERP implementation.

Larry Fink’s annual Letter to CEOs has become known for its emphasis on stakeholder capitalism, climate change, and sustainability. The 2021 edition of this highly influential letter builds on these themes, which have become even more significant considering the global pandemic, the increasing physical toll of climate change, and political turmoil in the US.

Consistent with prior years, the themes and issues highlighted indirectly have implications on executive pay as they provide insight on the priorities and expectations of the institutional shareholder community which may influence executive pay considerations (e.g. incorporating climate change in performance metrics). This summary provides our key takeaways from his 2021 letter, and potential implications for executive pay.

Hugessen Consulting recently conducted a Fall 2020 COVID-19 Director Pulse Survey to gather director views and corporate actions related to year-end incentive decision-making amidst the COVID-19 pandemic.

Institutional Shareholders Services and Glass Lewis have updated their 2021 voting guidelines for Canadian and US  issuers. The updated guidelines from ISS will apply to shareholder meetings for publicly-traded companies on or after February 1, 2021, while those from Glass Lewis will apply to meetings held on or after January 1, 2021. This briefing provides a summary of updates on compensation-related and select governance-related topics for the Canadian market.

Below, we define a number of key terms relevant to compensation discussions.