10. Does the company disclose the process the board uses to manage succession planning for the CEO’s job? Disclosure must go beyond simply noting that the board or one of its committees is responsible for managing succession planning. There must be evidence a formal process is in place, and some detail of how the board approaches the task must be given. Two marks if yes, zero if no.
11. Does the company provide information about its director education processes for the year, and is there evidence that a formal process is in place? This could include information about educational events offered to the entire board during the year, site visits to company facilities by directors, or specifics about special briefings, courses or training offered to some or all directors. If the company fully describes education processes, lists training sessions held in the prior year and identifies which directors attended, two marks. If the company gives a full description of education processes but leaves out some details about events and who attended, one mark.
Shareholding and compensation: worth 26 marks out of 100
12. a) Are directors required to own shares or share units? (Stock options don’t count.) Four marks if the requirement is equal to at least three times the retainer paid to directors – including the value of grants of shares or share units. Two marks if there is a requirement, but it is lower than three times the value of the retainer and share units. Zero marks if there is no requirement.
12. b) How many shares do directors own? Four marks maximum, but minus one mark for each director who owns less than three times the annual retainer plus the value of grants of shares, share units or options. If a director has been on the board less than one year, the ownership requirement does not apply. If a director has been on the board one to two years, the required ownership level is reduced to one times the retainer and share units.
13. a) Is the CEO required to own shares? (Stock options don’t count.) Two marks if there is a requirement to own at least three times the base salary, or if the CEO is the company’s controlling shareholder. One mark if there is a requirement to own one to two times the base salary. Zero marks if there is no requirement or if the requirement is less than one times the base salary.
13. b) Does the CEO own shares? Three marks if the CEO owns shares worth at least triple his or her base salary. Two marks if the CEO owns shares worth at least double his or her base salary. One mark if the CEO owns one to two times his or her base salary. Zero marks if the CEO owns shares worth less than one times his or her base salary. No ownership rule for CEOs on the job for less than one year.
14. a) How well does the company disclose the compensation policies it applies when deciding CEO bonuses? Does it provide a percentage weighting of the factors that are considered in determining the CEO’s bonus? One mark if yes, zero if no.
14. b) Does the company provide details of the specific target amounts that have to be achieved in each area? Two marks if all target specifics are given, one mark if targets are given but all specifics are not provided. Zero if no target details are provided.
14. c) Does the company explain the outcome of what actually happened with the performance goals and how the outcome affected the CEO’s bonus? One mark if yes, zero if no.
15. a) Does the company disclose whether or not cash bonus or performance share unit plan payouts are based on performance relative to a peer group of similar companies? This means compensation is affected by a company’s comparative performance and not just improvements in absolute terms, addressing concerns that executives can underperform their peers but be paid a bonus for better results that are due to external economic factors. If the company ONLY uses a peer group for benchmarking general pay levels and not performance-based pay levels, no points will be given. One mark if yes, zero if no.
15. b) Does the company disclose the composition of the peer group it uses for performance benchmarking? If the company ONLY uses a peer group for benchmarking general pay levels and not performance-based pay levels, no points will be given. One mark if yes, zero if no or if no peer group is used.
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