How Boards Score Annual Corporate Performance

Scott Munn, Michael Ray  | November 2019
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.

Proposed Draft Legislation on Taxing Stock Options

Hugessen  | July 2019
The Federal Government has progressed its intention to make changes to stock option taxation in Canada. This is consistent with the 2019 Federal Budget, which indicates that for “large, long-established mature firms,” the ability for the recipient to access a “capital gains” type deduction will be limited to $200,000 worth of optioned shares per year.

Highlights from the 2019 Proxy Season

Hugessen  | June 2019
Hugessen has completed its annual review of the 2019 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.

Some highlights include:
- Median CEO pay decreased by 4% year-over-year to ~$8.1mm, following a substantial increase of 13% the year prior
- Say-on-pay support through the 2018 proxy season remains strong with an average support level of 92%
- Median director compensation increased by 10% in 2018 to ~$215k
- The need for effective shareholder engagement continues to expand as public companies are continuously held to increasing scrutiny regarding matters of value creation, governance and environmental & social impact

Slow, But Steady Progress: TSX60 Boards & Gender Diversity

The topic of ‘diversity,’ writ large, is top of mind for the boards of Canadian companies of all sizes and across all industries. Studies have demonstrated time and again the benefits of a diverse board of directors, from increased diversity of thought to improved corporate financial performance. With the rise of #MeToo, and numerous other social and political movements currently shining a spotlight on gender equality (or lack thereof) within society more broadly, the leaders of major Canadian companies are rightly continuing to take a closer look at gender diversity and equality within their own organizations. Of particular focus is the representation of women at the highest levels of the corporate world – i.e. boards of directors and executive teams. In anticipation of the 2019 proxy season, we follow up on our June 2017 article “TSX60 & Board Gender Diversity” with a look at 2018 TSX60 proxies and board diversity practices.

ISS and Glass Lewis Update Guidelines for 2019 (Canada & U.S.)

Michelle Tan  | December 2018
Institutional Shareholders Services (“ISS”) and Glass Lewis (“GL”) have updated their 2019 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, 2019, while those from Glass Lewis will apply to meetings held on or after January 1, 2019. This memo provides a summary of policy updates on compensation-related and select board-related topics in both the Canadian and U.S. market.

2018 Director Opinion Survey: Reflections & Resolutions

John Skinner, Emily Parsons  | December 2018
In an environment where investors, public and private, big and small, are placing mounting pressure and expectations on Canadian companies, corporate directors are on the frontlines. Topics such as sustainability and social issues are slowly making their way into the boardroom, and to some extent into incentive plans, while IT risk mitigation and cybersecurity remain top-of-mind across industries as companies adapt to digital forces.
This survey draws out prevailing topics and analyzes the results to understand how industry, company size, and even director tenure, are driving perspectives and practices.

The Intersection of Canada’s Cannabis Experiment & Corporate Governance

Camille Jovanovic  | December 2018
On October 16, 2018, the day before recreational cannabis was legalized in Canada, the combined market values of Canada’s seven major licensed producers (“LPs”) was $41B, reflecting an average market capitalization to revenue ratio of ~200x . In aggregate, this group of companies experienced a 675% increase in their market values over the one-year period leading up to legalization day.
However, two weeks after legalization, the combined market value for this set of cannabis companies had fallen over 30%.

News Flash: Royal Dutch Shell to Introduce Carbon Reduction Metrics in its Executive Compensation Program

Hugessen  | December 2018
As an indication of the increasing focus on environmental, social, and governance or “ESG” matters, one of the world’s largest oil & gas companies announced this week that it would incorporate Net Carbon Footprint targets in its executive compensation program.

Returns vs Growth in Compensation Design

Scott Munn, Brian Lees  | July 2018
Shareholders are becoming increasingly vocal on the relationship between shareholder interests and management behaviour, particularly in extractive industries. Ontario Teachers’ Pension Plan (OTPP) recently released an article entitled, “Is Management Compensation Rewarding the Right Behaviour?” where they outlined four considerations for E&P Boards in the face of heightened shareholder scrutiny. This article outlines Hugessen’s view of OTPP’s four recommendations and provides practical considerations for Boards as they contemplate how to address potential changes in incentive design. We note that while the article comments mainly on extractive companies, we believe the concepts to be applicable to Boards across all industries.

Highlights from the 2018 Proxy Season

Brian Lees  | June 2018
Hugessen has completed its annual review of the 2018 TSX 60 proxy circulars and we are pleased to share the highlights with you, including our summary of pay levels for TSX 60 CEOs, commentary on executive pay design and director compensation trends, results of this year's Say-on-Pay votes, and other governance trends.

Some highlights include:
- Median TSX 60 CEO pay increased by 13.0% year-over-year to $8.4M, led largely by the Financials and Materials sectors
- The sharp increase in 2017 CEO compensation bucks the overall pay level trend within the TSX 60 over the previous 5 years, which has been relatively flat
- Say-on-pay support this proxy season remains strong among TSX 60 issuers (92% average support), with a few notable exceptions
- Shareholder engagement activity continues to expand, as does its disclosure