The Canadian Securities Administrators (CSA) are currently reviewing new boss compensation disclosure rules that have just been revealed in the United States before deciding how the law might be changed on this side of the border.
Posted at 6:00 a.m.
The Securities and Exchange Commission (SEC) announced on August 25 that it had adopted new rules which will come into force in December. The disclosure of executive compensation is therefore called upon to change to be presented in a more nuanced way in order to reflect reality more faithfully.
The US stock market watchdog will require companies to present a new table each year showing the “real” compensation of executives by excluding certain elements, in particular the allocation of securities not yet acquired (shares and options).
CSA members analyze this final publication with interest [de la SEC] and assess next steps, if any.
Iana Kelemen, CSA Spokesperson
It is to be expected that Canada will follow suit in the coming months, as investor expectations are the same on both sides of the border, said the CEO of the Institute on Governance, François Dauphin.
PHOTO DAVID BOILY, LA PRESSE ARCHIVES
François Dauphin, CEO of the Institute for the governance of private or public organizations
Many companies in Quebec and elsewhere in the country are required to publish their financial statements in the United States since their shares are listed on a dual listing, that is to say in Toronto, but also on NASDAQ or New York stock market.
These issuers will be tempted to quickly amend their tables and their presentations, emphasizes François Dauphin. “That should speed things up a bit,” he adds.
“Consistent, useful and comparable” information
Securities and Exchange Commission chief Gary Gensler says the new rules will “make it easier” for investors to assess decision-making around compensation policies.
According to him, the new rules will allow investors to obtain the “consistent, useful and comparable” information they need to evaluate policies.
Measures of the company’s financial performance will also have to be included in the new table required by the SEC, such as the total shareholder return as well as that of a group of comparable companies determined by the company.
Under the new rules, the SEC also requires companies to provide a “clear” description of the relationship between financial performance and executive compensation.
François Dauphin welcomes all these changes. “We are sometimes scandalized by seeing amounts, when in reality, these sums will never materialize. »
In 2015, the Laval pharmaceutical company Valeant (now Bausch Health) announced compensation of 123 million US dollars for its five main executives, up 100 million over one year in connection with the award of securities. “But the action had collapsed that year and the titles were worth zero, finally”, affirms François Dauphin.
He also highlights the case of Nuvei where executive compensation seemed “staggering” for the first year on the stock market of the Montreal provider of electronic payment solutions. Comprised mostly of stock bonuses and options, the value of Nuvei founder and CEO Philip Fayer’s compensation topped $140 million last year.