CHAPTER 06 Executive Decisions: Compensation Trends In and Outside of Times of Crisis
Spotlight: Canadian Big Banks’ Diverging Approaches to Voluntary Pay Ratio Disclosure
Despite calls for voluntary pay ratio disclosure, each of Canada’s big six banks has opposed such disclosure, citing concerns over the variance in methodology that would ultimately render the ratios meaningless for shareholders. In 2020, voluntary pay ratio disclosure proposals were rejected by shareholders at each of the following major Canadian banks: – Scotiabank: 92.98% of shareholders voted against. – TD: 93.7% of shareholders voted against. – CIBC: 92.06% of shareholders voted against. – NBC: 91.53% of shareholders voted against. – Laurentian: 89.44% of shareholders voted against. And while neither BMO nor RBC faced pay ratio disclosure proposals in 2020, similar proposals put forward to those banks in 2019 were rejected by 93.61% and 94.59% of their shareholders voting at their 2019 meetings, respectively. In recommending against pay ratio disclosure at TD, its board stated that ratio results can vary significantly according to the business mix, employee base and geographies of operations of a
particular organization; therefore, the ratio was not a meaningful tool that could contribute to decision-making or shareholders’ ability to assess the bank’s approach to compensation. 131 CIBC’s board provided similar reasons in its April 2020 management information circular. 132 However, CIBC noted that vertical pay ratios were already internally disclosed to the board for review and consideration. In a stark departure from the rest of the major Canadian banks, Desjardins Group, Canada’s seventh largest financial institution, has been voluntarily disclosing pay ratios since 2012. Desjardins is joined in this approach by Vancouver City Savings Credit Union, which publishes compensation ratios, including CEO compensation compared with that for the lowest-paid entry level employee and CEO compensation compared with the median annual compensation for all employees. 133 In contrast with the calls to the largest banks, we have not witnessed significant external pressure for pay ratio disclosure by smaller Canadian lenders or other financial institutions, and most do not disclose pay ratios.
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