The Canadian Securities Administrators are proposing reforms to executive compensation disclosure requirements that aim to improve the quality of that disclosure.

Regulators are proposing the adoption of a new form for executive compensation disclosure, which will require companies to clearly define their compensation policies and objectives, and will provide the total compensation, in tabular form, for each named executive officer and director. In addition, it will require disclosure of key aspects of executive compensation such as salary, bonus, stock and option awards, payments upon termination or change in control, and pension entitlements.

“Greater transparency will allow users to assess the process by which compensation decisions are made at a company. It will also provide insight into a key aspect of a company’s overall stewardship and governance,” the CSA explains.

“Our intention in revising the form is to create a document that will present executive compensation information in a meaningful way, and that will continue to provide a framework for disclosure as compensation practices change over time,” it adds.

The CSA notes that its requirements for executive compensation disclosure have not significantly changed since they were introduced in 1994. However, in that time, compensation practices have evolved and become increasingly complex. “Under the existing requirements, investors are provided with fragmented compensation information, which makes it difficult for them to asses the total compensation paid to executive officers,” it says.

Additionally, last August, the U.S. Securities and Exchange Commission introduced new rules for executive compensation disclosure, which aims to provide clearer, more comprehensive disclosure. The CSA says that it has carefully considered the SEC rule, but it does not propose to follow every aspect of the SEC’s approach. “In many areas, we have attempted to articulate our requirements in a less prescriptive manner,” it says. “We have also considered factors specific to Canada where relevant. In some cases, this means we are proposing different disclosure than the SEC rule.”

The proposed executive compensation form will expand disclosure in key areas. The most significant changes are: introducing, in the summary compensation table, a column showing the total compensation provided to each named executive officer; a new compensation discussion and analysis section; that all equity compensation in the table be disclosed on the basis of the cost of these awards over the requisite service period, as reflected in a company’s financial statements; more specific disclosure of potential payments to NEOs upon termination of their position at the company, including more detail on retirement benefits; and, expanded disclosure of director compensation, including a summary table and equity disclosure similar to what is required for NEOs.

The CSA intends the proposed executive compensation form to be in effect at the end of 2007 and will require companies to comply with the new form for financial years ending on or after December 31, 2007.

“These amendments will provide investors with improved clarity and context regarding corporate compensation practices,” said Jean St-Gelais, chair of the CSA and president & CEO of the Autorité des marchés financiers. “Enhanced disclosure is vital to investors understanding how executives are compensated.”

Other amendments that the CSA is publishing for comment would: amend the definition of venture issuer to remove large debt-only issuers from the definition; and, reduce the requirement for directors, executive officers and significant shareholders to disclose cease trade and similar orders issued against other companies they were involved with.

The comment period is open until June 30.