Thought Capital

How are Canadian boards evolving to meet increasing pressures from investors, regulators, and the public? This article explores the latest trends in board effectiveness practices and disclosures within the TSX Composite.

Institutional Shareholders Services (“ISS”) and Glass Lewis have updated their voting guidelines for 2025. The updated guidelines from ISS will apply to shareholder meetings for publicly traded companies on or after February 1, 2025, while those from Glass Lewis apply to meetings held on or after January 1, 2025. This briefing provides a summary of updates on compensation-related and select governance-related topics for Canadian issuers.

Hugessen Consulting is pleased to announce the appointment of Bridget McKellar as Partner, effective November 1^st, strengthening our leadership team in Toronto. Since our founding in 2006, Hugessen has built a reputation for delivering industry-leading expertise and cultivating deep, trusted partnerships with our clients. Bridget’s appointment reflects our dedication to upholding this legacy while expanding our capabilities to meet the evolving needs of our clients.

Based on the Say-on-Pay results as of October 20, 2024, we observe a slight increase in support levels relative to 2023, with Canadian issuers recording an average voting result of 92.4% (compared to 91% in 2023). TSX60 issuers more specifically have experienced a similar increase relative to 2023 with average voting results of 91.7%, compared to 89.8% in 2023. Four Canadian companies (one TSX60 issuer) failed their Say-on-Pay in 2024, three of which also failed in 2023 (OpenText Corporation, Aimia Inc., and First Majestic Silver Corp.).

Privately-owned companies in Canada benefit from less regulatory scrutiny and favorable taxation of stock options compared to public companies, especially for Canadian-controlled private companies (CCPCs). However, recent changes to capital gains tax rates and previous adjustments to stock option taxation have affected larger non-CCPCs. While private companies face challenges in structuring and administering equity compensation due to the absence of public market valuations, public companies continue to set competitive standards with long-term equity awards. Companies with cross-border operations must carefully design LTIPs to comply with both Canadian and U.S.

As of October 20, 2024, 82 shareholder proposals have been voted on at Canadian issuers in 2024, 55 of which have been at TSX60 issuers. Of these 82 proposals, 38% were Environmental, 33% Governance, 20% Social, and 9% Compensation-related. There was only one Operational proposal regarding anticompetitive practices, which garnered 13% support (Metro Inc.).

Recent changes to the Competition Act may have implications for companies using environment-related metrics in their incentive plans.

Hugessen is pleased to announce a strategic partnership with MM&K, a prominent London, UK-based executive remuneration consultancy. This collaboration extends Hugessen Consulting’s reach and expertise into Europe and the UK, enabling us to better support clients with international operations by providing seamless, integrated executive remuneration and governance advisory services across multiple regions.

A short-term incentive plan (“STIP”), or sometimes referred to as an annual bonus program, is a common tool used to reward employees for their individual performance and to incentivize the achievement of annual business objectives. When properly structured, STIPs can support the alignment of pay with performance, and motivate the desired behaviours and outcomes in an organization. This article provides an overview of common principles and design choices for STIPs, with a focus on its application in executive compensation.

Hugessen has completed its annual review of the 2024 TSX60 proxy circulars, and we are pleased to share key findings on executive pay levels, incentive design, Say-on-Pay results, and other governance topics.

This webinar addresses how Boards are navigating modern issues and trends tied to executive compensation, governance, ESG, and Board effectiveness.

Please click above for the webinar recording, download the TSX60 slides here and the briefing document here.