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Canadian shareholders are happier with executive compensation plans than their U.S. counterparts, giving a thumbs up to every company that held a "say on pay" vote in Canada this year.
A review of Canada's early experience with say-on-pay votes this year shows they passed at all 71 major public companies that offered shareholders an opportunity to weigh in on executive compensation schemes.
The companies recorded an average 94 per cent support for their pay policies, and only 11 companies received votes below the 90-per-cent support level, according to a report by Toronto executive compensation advisory firm Hugessen Consulting Inc.
While many companies pledged last year to adopt say-on-pay votes, most held their first votes in Canada this spring, giving investors an opportunity to express non-binding views on their executive pay practices. The results suggest most shareholders are content with pay systems in place at most companies, Hugessen Consulting founder Ken Hugessen said Wednesday.
"There wasn't drama," he said. "There were a lot of ne'er-do-wells saying all kinds of awful things were going to happen and [that]we were going to have shareholder rebellions, but none of that happened."
In the United States, however, where the advisory votes by shareholders became mandatory for public companies this year, a review of 2,220 companies that have held votes so far showed 40 failed to receive majority support, which means shareholders overwhelmingly rejected their compensation practices. They include giant Hewlett-Packard Co., as well as Freeport-McMoRan Copper & Gold Inc. and Cogent Communications Group Inc.
U.S. companies recorded an average 91-per-cent support for compensation plans, but with far greater variation within the voting results. Mr. Hugessen said the results are not surprising, given the typically higher pay levels in the U.S. and the scandals about pay levels rising while corporate performance sinks.
"If you're looking for examples of egregious excessive compensation and terrible governance, it's still pretty easy fishing in the U.S.," Mr. Hugessen noted.
He said most of the 40 U.S. companies that lost votes this year have seen their performance lag compared with their peers, increasing investors' impatience with high pay levels.
"I can't think of one of those companies that is a high performer," he said, noting investors are especially bothered by "ongoing weak performance and what they'd see as stubbornly high compensation that just doesn't seem to slow down."
The review shows U.S. companies have also begun publicly pushing back against negative voting recommendations from proxy advisory firms like Institutional Shareholder Services.
More than 100 U.S. companies either filed additional proxy materials or issued press releases to rebut the claims or analysis by proxy firms, which offer guidance to institutional investors on how to vote their shares, the Hugessen report said.
Mr. Hugessen said public confrontations with ISS or rival firm Glass Lewis have not emerged in Canada yet, which could be due to the fact very few Canadian companies appear to have received a negative voting recommendation this year on their say-on-pay votes.
Canada also has a tradition of less-confrontational business relationships, Mr. Hugessen said, so it would be more unusual for companies to get into public scraps.
In Canada, the two lowest say-on-pay vote tallies were recorded by Thompson Creek Metals Company Inc. at 64 per cent, and Pan American Silver Corp. at 76 per cent. ISS recommended voting against Thompson Creek's pay scheme, while Glass Lewis issued a negative recommendation on Pan American Silver.
Janet McFarland