Governance Insights 2020 (10th edition)

CHAPTER 01 Special Committees: Governance Safeguards for Conflict of Interest Transactions and High-Stakes Situations

SPECIAL COMMITTEE TRENDS IN CANADA: OUR FINDINGS

Fee Components Our research on special committee compensation is based on a sampling of fees paid by Canadian public companies, as publicly disclosed in their proxy circulars, to special committee members in connection with transactions during the period from 2016 to mid-2020 (2020 H1). 7 Our research reveals that this compensation most typically includes three components: (1) a lump-sum retainer for the non-chair committee members (either on a monthly basis or fixed for the entire mandate); (2) an additional fee per meeting attended by the members (and, in some cases, an incremental fee that applies only after a certain number of meetings have been attended); and (3) a separate, and typically higher, lump-sum retainer for the committee chair. In several cases, issuers provide either a retainer fee or a per meeting fee (but not both), and may not provide any greater compensation to the committee chair than that provided to the other members.

TABLE 1-1: Canadian Public Company Special Committee Fees (2016–2020 H1) ‡

Fee

High

Low

Median ‡

Average ‡

Retainer fee

$50,000

$20,000

$25,426

Meeting fee

$38,000

$1,400

$3,069

Chair retainer fee

$100,000

$25,750

$32,833

‡ Note: For purposes of these calculations, fees payable in U.S. dollars were converted to Canadian dollars and fees payable on a “per month” basis were multiplied by 12 months to calculate an annual equivalent. In addition, in each instance, if no retainer, meeting and/or chair retainer fee was paid, the nil instances were removed from the data sample for purposes of calculating the median and average figures above.

Increasing Prevalence of Special Committees

FIGURE 1-1: Special Committees Disclosed by Canadian Public Issuers (2016–2020 H1)

The prevalence of special committees is partly driven by the relative robustness of M&A activity, shareholder activism and other drivers of situations that typically promote the use of special committees. Our research indicates that the incidence of special committees disclosed by Canadian issuers in our study universe has increased over the five-year period from 2016 to the mid-point of 2020. For example, 17 special committees have been disclosed in the first six months of 2020 (2020 H1), holding between 1 and 39 meetings per committee. In all of 2019, 23 special committees were disclosed, holding between 1 and 16 meetings per committee. In contrast, in 2018, 2017 and 2016, our study universe disclosed a total of 14, 15 and 9 special committees, respectively.

As of June 2020

2016 2017 2018 2019 2020

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