Ontario Considers Say-On-Pay Requirement For Executive Compensation

The Ontario Securities Commission (OSC) has decided to seek comment from the public regarding the role shareholders play when determining executive compensation and how corporate board members are elected.

According to the OSC, one of the hot topics on its agenda in relation to shareholder democracy is say-on-pay. If all goes to plan, this reform could make the province the first jurisdiction in Canada to require companies to give shareholders an annual say-on-pay on executive compensation.

‘Shareholder democracy has attracted considerable public attention in Canada and other countries, and OSC staff is reviewing our regime to identify the need for reform in this area,’ says Leslie Byberg, the OSC’s director of corporate finance. ‘I look forward to consulting with our stakeholders and hearing their comments about potential regulatory proposals.’

Shareholder groups such as the Canadian Coalition for Good Governance (CCGG), which represents a majority of the country’s largest institutional investors, have been working feverishly in advocating for these reforms since 2009. The coalition has been paying particular attention to the director voting issue. In the past, CCGG has lobbied the OSC on introducing regulations on shareholder democracy issues.    

‘CCGG applauds the OSC for moving forward on this important initiative,’ says Judy Cotte, general counsel at CCGG. ‘Directors are the cornerstone of good governance [and] in order for directors to be truly accountable to shareholders, [they] must have meaningful ways to remove them from the board.’

She explains that under the current system, shareholders of public companies in Canada lack the power to vote by proxy ‘for’ or ‘against’ directors. Their only right is to vote ‘for’ them, or ‘withhold’ their vote and a ‘withhold’ carries no practical effect.

‘As a result, directors in a public company can be elected if they receive only one vote – and if they are a shareholder, that vote can be their own,’ Cotte says. ‘Therefore, a director can lose an election by any normal measure – receiving less than 50 per cent of the votes or even receiving just one vote – and not have to vacate their seat on the board.’

On the commission’s side, they are currently ‘assessing whether reforms to securities law are appropriate,’ to facilitate individual director voting and majority voting for director elections.


Until then, it will be accepting comments from interested parties until March 31, and anticipates further engagement with regulators and the public.

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