Securities regulators to examine executive compensation disclosure

Securities regulators across the country plan to examine how Canadian public companies disclose what they pay to their top executives. The Canadian Securities Administrators said they are looking for areas where disclosure can be improved.

The CSA the umbrella organization representing the 13 provincial and territorial securities commissions said it plans to start its review by examining how 75 Canadian firms comply in their information circulars with reporting requirements. Any company whose disclosure diverges from the requirements will be asked for an explanation.

"Investors are entitled to detailed information telling them how executive compensation is linked to corporate performance," Doug Hyndman, chair of the CSA, said in a release.

"We are measuring how well that information is revealed. We hope that our findings will result in meaningful guidance for people who disclose information on behalf of companies," Hyndman said.

Firms must currently disclose the relationship between corporate performance and executive compensation. If an executive is rewarded under a performance-based plan despite failing to meet the stated performance criteria, the reasons for any adjustment to the compensation formula must be made public.

The quality of executive compensation reports varies among companies, John Hughes, the chair of the CSA's continuous disclosure committee, said.

"Most companies provide the basic numeric data required, but we are concerned with the narrative discussion of their approach to executive compensation," Hughes said.

In the second part of the CSA's review, regulators will examine whether companies are following the recommendations of the new accounting standard on stock-based compensation and other stock-based payments.