Executive Share Ownership Guidelines in Canada
Executive Compensation Trends in the TSX Mid-Cap
Compensation Governance Partners aims to provide you with up-to-date executive compensation information and trends, via our proprietary compensation database (composed of fully evaluated and sized named executives from publicly-traded organizations).
In this series of articles, we will cover executive compensation practices and trends from the 2019 proxy season for the top 5 paid executives from each company in the TSX 100-200*. We will also highlight year-over-year changes in both compensation and policy compared to the 2018 proxy season.
Executive share ownership guidelines require executives to own an equity stake in their organization, with the intention of promoting an alignment of interests between the company’s executives and directors, and shareholders. Establishing share ownership guidelines is not a requirement for Canadian organizations, but it is typically seen as an indicator of good corporate governance.
Share ownership guidelines are commonly defined as a percentage of annual salary, occasionally with specifications such as a post-employment holding period or a mandatory time limit (typically between 3 and 5 years after being appointed) to reach minimum ownership targets. It is also very common for organizations to allow their executives to fulfill their ownership requirements with equity received from their long-term incentive programs.
“Share ownership guidelines are more common for Board members, with 91 percent of organizations mandating minimum share ownership requirements for directors or trustees.”
WHAT ARE TYPICAL EXECUTIVE SHARE OWNERSHIP GUIDELINES IN CANADA’S MID-MARKET?
Figure 1 shows the percentage of organizations which have established share ownership guidelines, based on data from the top 5 paid executives of each of the TSX mid-cap organizations analyzed.
Figure 1: Share ownership guidelines within the Canadian mid-market
Share ownership guidelines are prevalent at the majority of organizations in the Canadian mid-market, with most CEOs having share ownership guidelines of at least 3 times their annual salary and the other named executives having share ownership guidelines between 1 times to 3 times of annual salary. The typical guidelines remain fairly stable year-over-year. We note that there is a slight increase in the number of organizations that choose to disclose their guidelines.
DO DIRECTOR or TRUSTEE SHARE OWNERSHIP GUIDELINES EXIST IN CANADA’S MID-MARKET?
Share ownership guidelines are more common for Board members, with 91 percent of organizations mandating minimum share ownership requirements for directors or trustees.
The typical share ownership guideline is 3 times the annual retainer, and like executives, directors and trustees are usually given up to 5 years to meet the requirement. Like executive share ownership guidelines, director or trustee guidelines remain fairly stable year-over-year, with a similar increase observed in the number of organizations that choose to disclose these guidelines.
*Note: CGP has collected qualitative information and key statistics regarding executive compensation practices in the 2019 proxy season, from approximately 115 publicly-traded mid-market Canadian organizations listed on the TSX. This analysis covers all 100 companies analyzed last year, less any companies that were delisted, with the addition of 20 companies which now fall within the TSX 100-200. The 24 companies from last year which have moved above or below the TSX 100-200 remain in the analysis for comparative purposes. 93 of the 115 companies in the 2019 analysis were included in the 2018 analysis.
… Other articles in this series:
Canadian Mid-Market: Executive Compensation Trends for the 2019 Proxy Season
AUTHORS
Matthew Tripp, Senior Consultant
→ mtripp@compgovpartners.com
Marlene Georges, Principal
→ mgeorges@compgovpartners.com