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The Manulife building in downtown Vancouver.JONATHAN HAYWARD/The Canadian Press

Looking at say-on-pay votes in recent years, companies could have concluded that the formula for winning shareholder support boiled down to avoiding big one-time bonus or severance payouts that create an easy target for controversy.

But the early voting results from annual meetings this year make it clear that shareholders are growing far more sophisticated in their analysis of compensation programs, and are more willing to vote "no" over concerns about fundamental pay design issues, even when there is no overwhelming controversy about a single major payment.

Manulife Financial Corp. is the latest blue-chip giant to find tepid support for its compensation practices this year, recording 77-per-cent support in its say-on-pay vote at its annual meeting on Thursday. While the result is still a strong majority, it is well below the median 94-per-cent support recorded so far by companies in the benchmark S&P/TSX 60 index.

Proxy firm Glass Lewis & Co., which advises institutional shareholders on how to vote their shares, recommended against Manulife's compensation plan due to a list of concerns about the structure of the program, arguing, for example, that executives can get long-term incentive payouts even if the company performs below the 50th percentile of Manulife's peer group, and complaining that long-term payouts are largely based on one-year performance periods, which are too short a time frame.

Rival proxy firm Institutional Shareholders Services Inc. (ISS) came to a different conclusion, recommending shareholders vote in favour of Manulife's compensation plan. The divided opinion undoubtedly accounted for the weak but not fatal final voting result, with Manulife winning support from investors such as the Canada Pension Plan Investment Board and the Ontario Teachers' Pension Plan while receiving "no" votes from British Columbia Investment Management Corp. and the California Public Employees Retirement System, which is the largest U.S. pension fund.

Canadian Pacific Railway Ltd. became the first major company to lose its say-on-pay vote in 2016 after shareholders voted 50.1 per cent against the company's approach to executive compensation at its annual meeting in April, a sharp drop from CP's 97-per-cent pay support last year.

In the case of CP, both ISS and Glass Lewis gave the pay structure a thumb's down because of concerns about the package paid to chief executive officer Hunter Harrison. ISS, for example, concluded that the performance targets set for Mr. Harrison's annual bonus were "non-rigorous" and payouts were awarded at the maximum level even though performance compared to targets was "mixed."

Three major companies – Canadian Imperial Bank of Commerce, Barrick Gold Corp. and Yamana Gold Inc. – lost their pay votes last year, so shareholder anger over compensation is not a new phenomenon. But many of the controversies in recent years – including anger about payouts at Quebecor Inc. as well as CIBC and Yamana –centred on concerns about single large payments, often related to severance deals or, in the case of Yamana, to a large bonus paid to CEO Peter Marrone for concluding a money-losing takeover deal.

This year's weak votes, however, hinge on issues related to the fundamental structure of compensation programs as shareholders probe more deeply into the complex mechanics that determine how bonuses and equity grants are calculated.

Glass Lewis, for example, offered a detailed analysis of CP's decision to pay Mr. Harrison a base salary of $2.2-million (U.S.) last year, which was well above the norm for his peers.

CP said Mr. Harrison's salary, which he receives in U.S. dollars, would normally be $700,000, but is supplemented by an additional $1.5-million a year to compensate him for the loss of pension benefits he gave up when he joined CP in 2012.

But Glass Lewis noted that Mr. Harrison can earn annual bonus and equity grants of up to 300 per cent of his base salary, which means the higher base salary has a multiplier effect. Glass Lewis said that if Mr. Harrison had been paid his bonus and equity grants based on a $700,000 base salary without the extra pension top-up, his total bonus and equity grants would have totalled $3.6-million in 2015 rather than the $12.5-million he actually received. The $8.9-million difference exceeds his forgone pension payment by six times in just 2015 alone, Glass Lewis said.

"In the case of Mr. Harrison, we believe his inflated base salary, which is out of step with peers, has allowed for short– and long-term compensation awards that similarly exceed those awarded to his peers," Glass Lewis said. "Shareholders should also be skeptical of this oversized salary as it may serve as a crutch when performance fails."

Shareholders have said for years that they want compensation programs that clearly link pay to superior long-term performance, so it's a logical next step for investors to move beyond simply reacting to one-off scandals to more intensively examine the features of pay design. Such scrutiny has the potential to greatly accelerate reform across Corporate Canada as companies watch the voting trends.