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This column is part of Globe Careers' Leadership Lab series, where executives and experts share their views and advice about leadership and management. Follow us at @Globe_Careers. Find all Leadership Lab stories at tgam.ca/leadershiplab.

2017 marks a milestone year in terms of Say on Pay in the United States, as the first six-year "say on frequency" vote goes to shareholders. This means that on top of a Say on Pay vote, U.S. companies will also be holding a Say on Frequency vote, providing shareholders with a chance to determine whether they want an annual, biennial or triennial Say on Pay vote on executive compensation.

Adding complexity to the governance landscape in the United States is the future of Dodd Frank, as President Donald Trump has alluded to many potential changes that may remove certain regulations Dodd Frank took so long to put in place.

While Say on Pay is voluntary in Canada, the outcome of the United States vote on Canadian companies and Canadian regulators should be taken seriously, since its influence will undoubtedly be felt here resulting in a need to re-examine governance best practices, including shareholder engagement.

What this means for Canada

2016 saw many prominent companies fail their Say on Pay votes with more than 50 per cent of votes cast against their company's executive compensation practices, largely due to a perceived lack of alignment between executive pay and company performance. This is a sign of discontent, which should act as a catalyst for companies to seek out the opinions of their shareholders to make appropriate changes to their compensation programs. After speaking with many of Canada's top directors this past year, our firm sees that some boards are already undertaking this initiative, while others are waiting until shareholder engagement is necessary. Most importantly, we found that the majority of boards are nervous about their Say on Pay vote and are confused on how best to deal with it since they find it hard to influence and communicate effectively with all shareholders on compensation matters.

As an optional exercise, Say on Pay has stalled in terms of adoption here in Canada. Institutional investors and other advocacy groups, however, continue to put pressure on Canadian companies who have not yet implemented a Say on Pay vote to do so. Shareholders are expressing their concerns in other ways with directors sitting on the Compensation Committee of the companies receiving less "For" votes at AGMs, or through lower support of equity compensation plans up for renewal.

If the Say on Frequency vote in the United States results in a vast majority voting for an annual exercise, it will strike a chord with the Canadian regulator, further making the case to add it as a mandatory advancement in Canadian governance.

Better Shareholder Engagement Means Better Outcomes

Shareholders are increasingly flexing their muscles to demand change. Putting in place a proactive engagement strategy will assist companies in avoiding costly or embarrassing Say on Pay vote results in 2017. Yet shareholders represent many different viewpoints making it difficult to truly understand the reasons behind a negative vote.

The "traditional" way of monitoring the shareholder roster, using various spreadsheets located in decentralized locations, doesn't cut it today. Companies need tools that allow them to proactively identify and engage with their shareholders, while providing predictive analytics to determine the potential outcome of board decisions. Responsible and progressive boards and corporate governance professionals must reexamine best practices related to communication and transparency between boards and shareholders, including the use of innovative technology, to truly understand these differing viewpoints, while better explaining the rationale behind compensation decisions. It's one of the reason why Global Governance launched Global Governance Software and its SaaS Stakeholder Capital Management Platform (SCMP) – to help today's boards and corporate governance professionals better engage shareholders to take a proactive approach to shareholder engagement and prevent issues like time consuming and costly proxy contests.

Shareholder activism in recent years has grown and is not expected to slow down. Recent studies have shown that the number of shareholder activism cases is greater than the media illustrates as less than a third of campaigns even become public knowledge. Instead of companies taking a reactive approach to addressing shareholder concerns, a proactive approach has proven to be beneficial to all parties. Effective shareholder engagement helps increase transparency, creates more frequent communication between companies and their shareholders and provides more opportunities for investors to express their concerns.

Leading into the next round of AGM's set for the spring of 2017, the Say on Frequency and Say on Pay votes will require that companies rely on pro-active shareholder engagement now more than ever. No one wants a surprise at the AGM, but the only way to mitigate a potential surprise, is to be actively speaking with the investor community.

Paul Gryglewicz is a senior partner in the Toronto office at Global Governance Advisors