Thought Capital

Hugessen Consulting recently conducted a Summer 2020 COVID-19 Director Pulse Survey to gather director views and corporate actions related to executive incentives amidst the COVID-19 pandemic.

Please click here to view the results.  

Companies spend a considerable amount of time making sure target bonuses are competitive. However, there are situations where incentive plan participants are rewarded competitive pay, but for uncompetitive performance. This briefing highlights how boards and management teams can consider taking the same approach as private equity firms to close performance gaps

The shareholder community has turned its attention to “ESG” (Environment, Social and Governance).  While the Governance component has been effectively addressed by Canadian boards, the topic of “E&S” or more broadly “Sustainability” is growing in importance within boardrooms. Read our latest article which aims to provide directors with a practical guide to developing and enhancing a more robust approach for integrating E&S considerations into company strategy, board structure and oversight, and executive compensation programs.

Hugessen has completed its annual review of the 2020 TSX60 proxy circulars, and we are pleased to share key findings on pay levels, pay design, regulatory updates, Say-on-Pay results and trends in the shareholder community. This year’s review has provided specific thoughts and considerations as companies and boards navigate the uncertainty of a pandemic environment. Please click here for the recording or download the TSX60 briefing/slides.

The recent downward trend in equity values is presenting challenges for boards from both a talent retention and an equity usage perspective. This briefing discusses the concept of a “value-for-value” stock option exchange as a potential response, including practical considerations around applicability and various legal, tax, and accounting implications.

We are living in challenging and unprecedented times. As circumstances continue to evolve, we encourage caution against making any significant changes to compensation approaches or decisions at this time. This briefing provides the implications, as we see them, on executive compensation, and practical approaches for compensation committees.

BlackRock CEO Larry Fink’s 2020 letter to CEOs makes it clear that climate change and sustainability issues will continue to be a hot topic for investors in 2020. In this annual letter, Fink asserts his view that climate change risk is investment risk; as such, he predicts investors will begin to allocate their capital towards sustainable investing, rely more heavily on disclosure to determine the degree to which companies are addressing climate risk, and exercise their voting rights accordingly. Here, we detail our key takeaways from his letter, and implications for directors serving on public company boards.

Institutional Shareholders Services (“ISS”) and Glass Lewis (“GL”) have updated their 2020 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, 2020, while those from Glass Lewis will apply to meetings held on or after January 1, 2020. This memo provides a summary of policy updates on compensation-related and select board-related topics for the Canadian market.

It is not uncommon for boards to appoint a special committee to address unique situations facing the company such as a strategic review or possible M&A transaction. Due to the workload and time commitment associated with serving on a special committee, directors typically receive supplemental compensation for this work. In our experience, boards can struggle with determining the appropriate quantum and structure of pay for special committee members. This article provides general guidelines to assist boards in making decisions pertaining to special committee compensation.

By way of enhanced disclosure, interested stakeholders can now analyze board-determined corporate performance scores, as disclosed in a company’s Management Information Circular. Corporate performance scores shed light as to how boards are thinking about corporate performance assessment and how it is actually being measured. This article presents key findings from a recent analysis conducted by Hugessen which considers annual short-term incentive plan corporate performance scores for constituents of the S&P/TSX 60 for the years 2012 to 2017. The analysis has implications for Boards as they consider performance standards, performance assessment, disclosure, as well as pay benchmarking and incentive design, and may be used by stakeholders in discussions about executive pay, and its alignment with performance.