Thought Capital

On December 20, 2017, Congress passed the final version of the Tax Cuts and Jobs Act

In November 2017, Hugessen Consulting hosted a dinner in New York City with investors and directors in our network to discuss and exchange perspectives on the ever-expanding role of investors in the governance of publicly-traded companies. Dinner was attended by a mix of experienced US and Canadian corporate directors and shareholder representatives across a spectrum of investing models: private equity, hedge fund, and active managers. We were also joined by members of our NYC-based partner, Steven Hall & Partners.

Director pay levels are rising, and shareholders and proxy advisers are taking note. But along with a few modest changes in oversight, basic good governance should be enough to keep excesses in check.

Institutional Shareholders Services (“ISS”) and Glass Lewis (“GL”) recently released updates to their 2018 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, 2018, while those from Glass Lewis will apply to meetings held on or after January 1, 2018. This memo provides a summary of policy updates on compensation-related and board-related topics in both jurisdictions. Overall, the 2018 updates were less extensive than in previous years, with the Canadian updates focusing more so on board governance practices (e.g. board gender diversity, director overboarding), than compensation-related guidelines.

The shareholder community has turned its attention to environmental and social concerns – commonly referred to as “E&S”, or more broadly “sustainability” – so it’s little wonder the topic has made its way into boardroom discussions on a regular basis. Conversations between Hugessen and the institutional shareholder community across North America reveal a growing recognition that E&S factors represent a risk that should be managed like any other risk within a company.

On October 19, 2017, the TSX announced (relatively minor) amendments to Parts IV and VI of the TSX Company Manual

In Fall 2016, we published a review of CEO LTIP practices (reviewing 2015 pay data) among small- and mid-cap issuers on the TSX, which indicated, among other things, that stock options were the most prevalent instrument, although PSUs were increasing in prevalence. Our analysis this fall, of 2016 pay data, indicates that PSUs have now surpassed options in becoming the most prevalent LTIP instrument within the data sample. This “update” briefing provides a summary of these developments.

The need for international directors has never been greater. But to attract the best candidates—and keep the entire board happy when you do—director compensation needs to effectively address foreign exchange concerns.

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”)

There are times when paying severance to a retiring senior executive is warranted. But as a standard practice it raises questions and scrutiny. The good news: boards have options to help avoid the problem