Nominating Directors. The board should be responsible for nominating candidates for election by the shareholders. It should consider the recommendations of a nominating committee composed entirely of independent directors. In making its recommendations, the nominating committee should consider the competencies and skills required and those currently in place, as well as those that any new nominee would bring to the board. The nominating committee should have a written charter that includes specified provisions. Executive Compensation. The board should establish a compensation committee composed entirely of independent directors with a written charter and specified responsibilities. The compensation committee should be responsible for reviewing executive compensation disclosure before it is publicly disclosed and for making recommendations to the board with respect to CEO compensation (based on established corporate goals and objectives), non-CEO compensation, incentive-based compensation plans and equity-based compensation plans. Trends and Developments Many current trends in Canadian corporate governance have already been touched on in the discussion above, so the following overview discusses in detail only topics that have not been covered. SHAREHOLDER ENGAGEMENT Many of the most significant changes in Canadian corporate governance standards have come about as a result of investor pressure, as well as increased scrutiny of issuers’ practices by shareholder advisory firms such as Institutional Shareholder Services (ISS) and Glass Lewis & Co., and by corporate governance watchdogs such as the Canadian Coalition for Good Governance (CCGG). In addition to scrutiny of “say-on-pay”
resolutions and director elections, public companies across a wide range of industries are facing shareholder proposals on policy- and governance-related topics, including gender diversity, climate change and executive compensation; such proposals are enjoying increasingly higher levels of support. Establishing mechanisms to facilitate direct engagement between an issuer’s significant investors and non- executive members of its board is now widely considered to be a key component of good corporate governance. By engaging with shareholders, a board can proactively address shareholders’ concerns that might otherwise manifest themselves as very public shareholder proposals or proxy contests. Public companies across a wide range of industries are facing shareholder proposals on policy- and governance-related topics, including gender diversity, climate change and executive compensation; such proposals are enjoying increasingly higher levels of support.
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Doing Business in Canada
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