By John Mackie
Aug. 16 (Business Law Currents) With the recent announcement by the Canadian Securities Administrators (CSA) that changes in executive disclosure requirements will apply for financial years ending on or after October 31, Canadian issuers may want to do some advance planning in order to avoid last minute scrambling in the New Year.
The proposed amendments to Form 51-102F6 – Statement of Executive Compensation range from simple drafting changes and clarifications to new substantive requirements, and reflect both the proposal issued last November and the comments received in response.
Perhaps the biggest changes contemplated by the new form are the obligation to disclose an issuer’s risk management practices vis-à-vis compensation policies and practices, and the emphasis placed on discussions of performance targets. For issuers, the former may require stepping onto unfamiliar ground, and the latter may test their willingness to share financial planning data with the street at large.
As regards risk management practices, the new form will require each issuer to disclose whether or not its board of directors, or a committee of the board, considered the risks associated with the company’s compensation policies and practices. If so, the issuer is required to provide additional disclosures regarding mitigation practices and risks considered “reasonably likely to have a material adverse effect on the company.”
The current practice on disclosing risk management practices in this area is mixed, with many issuers providing no information, or little information – quite possibly because many boards may not have formally turned their minds to the matter. Many companies continue to focus on the central purpose of compensation plans – to attract and retain qualified individuals at a competitive cost, and to ensure that they are motivated to create shareholder value. Other issuers, such as Toronto’s Just Energy, which sells natural gas and electricity to residential and commercial customers, have at least begun the process of assessing compensation-related risk.