In recognition of the fact that executive compensation practices and regulatory reporting requirements have evolved with time, the Canadian Coalition for Good Governance (CCGG) yesterday released an updated version of its Executive Compensation Principles for 2013. The CCGG indicates that the focus of the Principles is on “’pay for performance’ and the integration of risk management functions into the executive compensation philosophy and structure”.
The CCGG issued its initial Executive Compensation Principles in 2009, which were intended to provide guidance to boards and to promote compensation decisions that were aligned with long-term company and shareholder success.
Specifically, the CCGG articulates its executive compensation principles as follows:
CCGG Executive Compensation Principles
- A significant component of executive compensation should be “at risk” and based on performance.
- Performance should be based on key business metrics that are aligned with corporate strategy and the period during which risks are being assumed.
- Executives should build equity in the company to align their interests with those of shareholders.
- A company may choose to offer pensions, benefits and severance and change-of-control entitlements. When such perquisites are offered, the company should ensure that the benefit entitlements are not excessive.
- Compensation structure should be simple and easily understood by management, the board and shareholders.
- Boards and shareholders should actively engage with each other and consider each other’s perspective on executive compensation matters.
See the full text of the 2013 Principles for further details regarding each of the above.