Although say-on-pay (SOP) is not required in Canada, it is still possible to see trends and potential long-term ramifications among voluntary adopters and to extrapolate from the experience in the U.S., says a ‘Mercer Executive Compensation Perspective.’ There is clearly greater accountability for pay and governance decisions and incremental changes in pay practices resulting from SOP. But some changes may have unintended effects that could ultimately have negative consequences if companies simply fall into line with proxy advisor policies without tailoring their pay and governance practices to their own needs and circumstances. For example, companies are eliminating problematic pay practices, such as tax gross-ups and excessive perquisites, to respond to shareholder and proxy advisor concerns. However, in some cases, companies may be replacing these takeaways with higher salary or larger bonuses, potentially leading to higher pay. As well, companies may be adopting clawback and hedging policies, stock ownership guidelines, and other shareholder-friendly policies without fully understanding how they will be implemented. Concerns about pay levels and pay and governance practices will likely be raised again in 2014 and leading this push are institutional investors and proxy advisors whose influence is apt to increase as more companies adopt SOP.
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