CHAPTER 06 Executive Decisions: Compensation Trends In and Outside of Times of Crisis
SAY-ON-PAY IN 2020 AND BEYOND The COVID-19 pandemic and resulting heightened scrutiny of executive compensation does not seem to have had any significant impact on say-on- pay votes in Canada in 2020. This year’s say-on-pay vote results are largely in keeping with those in previous years. We note a slight decrease in the percentage of Composite Index and SmallCap Index issuers that had a say- on-pay shareholder approval level greater than 85% (from 91% in 2019 to 86% in 2020) but, on the other hand, a marked increase in the percentage that received approval levels greater than 95% (from 38% in 2019 to 60% in 2020). Among the 186 Composite Index and SmallCap Index issuers that put forward say-on-pay resolutions in the 2020 proxy season, the average shareholder support was 93%, and there were no failed say-on-pay proposals. Nevertheless, as discussed above, as the economy recovers, issuers can expect an even higher level of scrutiny than usual for compensation proposals. Calls for Pay Ratio Disclosure in Canada In 2019, median CEO total direct compensation increased by 12% among TSX 60 issuers. 125 In 2020, the COVID-19 crisis arrived and created or exacerbated economic hardship across the country for many Canadians, with two million fewer jobs in Canada in July 2020 than at the start of the pandemic. 126 Layoffs and pay cuts have revived demands for wage transparency, including some calls for mandatory disclosure of the ratio of CEO compensation to that of a median employee (pay ratio or vertical compensation ratio). Elevated pay ratios have been a source of criticism in Canada for some time. In a 2017 policy paper, the Institute for Governance of Private and Public Organizations (IGOPP) drew attention to the increase in compensation of executives compared with that of the average Canadian private sector worker at the time. IGOPP’s paper noted that the ratio between the median compensation of a Canadian CEO and the average salary of employees had grown from 62:1 in 1998 to 140.1:1 in 2016. 127 The ratios in Canada’s banking industry are even higher, at 184:1 in 2016.
The COVID-19 pandemic and resulting heightened scrutiny of executive compensation does not seem to have had any significant
impact on say- on-pay votes in Canada in 2020.
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