In reviewing how well publicly traded companies comply with executive compensation disclosure requirements, the Canadian Securities Administrators
found that 95% of companies studied tended to discuss executive compensation in very general terms, without explaining specifically how compensation was determined or how it related to the companies1 performance.

“The compensation committee reports need improvement by the vast majority of companies we examined,” says Doug Hyndman, chair of the CSA. “We issued comment letters to these companies and received commitments from them to improve their disclosure, including explaining clearly their reasons for the salaries and bonuses paid, the options granted and the other compensation awarded to their executive officers. I trust that all issuers will note our findings and raise the bar on their compensation disclosures.”

Other deficiencies noted in the study concerned the following areas:
– 7% were required to correct the summary compensation table;
– 5% were required to correct the information on options or stock appreciation
rights;
– 5% required to correct the pension plan information; and missing disclosure of details of employment contracts or termination agreements, using an incorrect measurement point in the presentation of multi-year performance data, or missing cross-references to information presented elsewhere in the reports.

“Recent scandals in the United States have given prominence to the gap between the level of information companies provide on executive compensation and the level that investors require,” says Hyndman. “Our coast-to-coast review of executive compensation disclosure revealed areas where Canadian companies can improve their disclosure practices. We will monitor compensation disclosures to ensure they meet the requirements.”