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Mandatory “Say-on-Pay” May Be on the Way in Canada

October 7, 2019

A Canadian legal requirement to present an advisory “Say-on-Pay” shareholder vote—a shareholder vote approving a company’s approach to executive compensation—is potentially on the horizon for certain Canadian public companies.

As a result, Canadian public companies that have not yet done so—particularly those that are federally incorporated—may be considering whether to voluntarily adopt a Say-on-Pay vote for the upcoming proxy season. For more information on some of the considerations relating to the adoption of a Say-on-Pay advisory vote, including the rationale for adopting such a shareholder vote and some of the concerns associated with doing so, see our September 2011 Blakes Bulletin: Say-On-Pay – What’s Next?


Shareholder Say-on-Pay advisory votes on the compensation practices of public companies in Canada started in 2010 when the major Canadian banks gave their shareholders an advisory Say-on-Pay vote. By 2011, 71 reporting issuers in Canada had adopted Say-on-Pay advisory votes, representing approximately seven per cent of Canadian listed issuers by number, excluding structured-product issuers and non-listed issuers.

That number has steadily grown each year, such that a total of 220 companies in Canada have now adopted an annual Say-on-Pay advisory vote, including more than 71 per cent of companies in the TSX Composite Index and 52 of the TSX60 Index companies. The adoption of this practice has been completely voluntary thus far, in many cases in response to pressure from institutional investor groups, such as the Canadian Coalition for Good Governance (CCGG), or non-binding votes on shareholder proposals.

Securities Regulatory Developments

In January 2011, the Ontario Securities Commission (OSC) issued OSC Staff Notice 54-701 Regulatory Developments Regarding Shareholder Democracy Issues (Notice 54-701), which identified an advisory Say-on-Pay vote as one of the “shareholder democracy” issues requiring additional review and potential development of regulatory proposals, and requested comments as to whether staff should develop a proposal in this area.

Over 60 submissions were received by the OSC in response to Notice 54-701. These indicated there was little consensus on adopting Say-on-Pay at Canadian public companies.

Predictably, most institutional shareholders and their organizations favoured a mandatory advisory Say-on-Pay vote. For instance, CCGG urged the OSC to make annual advisory Say-on-Pay votes mandatory for all Canadian issuers. ISS asserted that advisory votes on executive compensation improve disclosure and corporate governance and support “increased investor responsibility.”

On the other hand, the Institute of Corporate Directors (ICD), and most issuers that commented, opposed a mandatory Say-on-Pay vote, even with the results being advisory. ICD indicated that it did not believe in the “one size fits all” approach and urged the exercise of caution before promoting universal standards or prescriptive rules. ICD stated it did not “support practices which effectively undermine or diminish the board of directors’ responsibility on compensation matters.”

Since Notice 54-701 was issued, there have been neither securities regulatory proposals arising from it, nor an update on the status of regulatory consideration of Say-on-Pay. The Notice of Statement of Priorities issued by the OSC for each financial year since Notice 54-701 was issued has not addressed Say-on-Pay as a priority. Each year, however, a number of commenters have recommended adding shareholder democracy issues, such as Say-on-Pay, as a priority. The OSC’s response to such comments is that they continue to monitor shareholder democracy activities and issues to determine whether there is a need for further action in these areas.

Imposing substantive governance rules such as a Say-on-Pay vote goes beyond the usual historical role of securities commissions, which has been to prescribe disclosure and related obligations for issuers. The more logical place to make changes to require Say-on-Pay is in the corporate statutes governing corporate law for the jurisdiction in which the company is incorporated, as reflected in recent amendments to the Canada Business Corporations Act (CBCA).

Corporate Law Developments – CBCA Amendments

Significant amendments to the CBCA were proposed in the federal government’s 2019 omnibus budget implementation bill (Bill C-97), including requiring CBCA corporations to develop and annually disclose their approach with respect to remuneration of their directors and members of senior management, and “to place before the shareholders, at every annual meeting, the approach with respect to remuneration” for a non-binding vote. While the results of the shareholder vote are not binding on the corporation, the corporation must disclose the results to shareholders.

The corporations affected will be prescribed by regulations, and are not yet known, although they will likely be distributing (i.e., public) corporations.

Bill C-97 received royal assent on June 21, 2019. However, a date has not yet been set for the coming into force of the amendments. It is unknown whether the results of the upcoming federal election could impact the coming into force of the amendments.

If and when the amendments come into effect, and if the regulations provide that all distributing corporations are subject to the requirement to hold Say-on-Pay votes, a very large number of Canadian public companies, including many junior issuers and controlled public companies—many of which do not currently hold such votes as the results are preordained—will be required to hold Say-on-Pay votes annually. As an increasing number of large Canadian public companies have voluntarily adopted the practice of annually holding Say-on-Pay votes in recent years, the amendments will disproportionately affect smaller and start-up issuers.

It remains to be seen whether other provincial governments will follow suit in amending their corporate statutes to provide for Say-on-Pay votes for corporations incorporated thereunder. Currently, there are no such proposed amendments.

Market Practice Developments

As stated above, the major Canadian banks were the first to give their shareholders an advisory Say-on-Pay vote, starting in 2010. Since that time, nearly all issuers have used a similar form of shareholders’ resolution developed by CCGG for their Say-on-Pay vote, as follows:

RESOLVED, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders accept the approach to executive compensation disclosed in the management proxy circular delivered in advance of the annual meeting of shareholders.

In its 2019 management proxy circular, Canadian Imperial Bank of Commerce simplified its form of resolution to remove the lead-in language regarding the vote being “on an advisory basis and not to diminish the role and responsibilities of the Board of Directors.” A small number of other issuers have also adopted this form, which would comply with the CBCA amendments. However, despite the change in text, the vote remains advisory in nature.


Shareholder support for Say-on-Pay votes has remained relatively stable in recent years. During the most recent proxy season, say-on-pay remained strong with an average support level of 92 per cent for TSX60 Index companies.

Beyond the TSX60 Index companies, one company did not receive majority support and two companies received shareholder support in the 50 per cent to 70 per cent range. For all three of those companies, proxy advisory firms cited a pay and performance disconnect as their key issue.

One of the apparent trends that is discernable from these three votes, and failed Say-on-Pay votes over the years, is that shareholders appear to vote against a Say-on-Pay resolution when there appears to be a disconnect between high executive pay and weakening performance. In other words, shareholders may be using their Say-on-Pay votes to indicate dissatisfaction with companies’ weaker results, rather than commenting on specific compensation concerns.

Companies that saw material improvements in shareholder support of their Say-on-Pay resolutions this year following underwhelming prior year results, achieved those gains largely through engagement with shareholders, adjustments to incentive plans and enhanced voluntary disclosure relating to executive compensation.


The lack of Say-on-Pay regulation in Canada sets Canadian capital markets apart from the United States and other international markets, such as Australia, Denmark, the Netherlands, Norway, Switzerland, and the United Kingdom. For more information on the different forms of Say-on-Pay that have been implemented in international markets, see our March 2014 Blakes Bulletin: Say on Pay: Is the Canadian Future Voluntary? In fact, Canada is the only G7 country where a Say-on-Pay vote—advisory or binding—is not yet a regulatory requirement.

The U.S. Securities and Exchange Commission issued rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act on January 25, 2011, pursuant to which public companies are required to conduct three different types of shareholder votes:

  • An advisory vote on the company’s executive compensation at least once every three years (equivalent of Say-on-Pay)
  • An advisory vote at least once every six years to determine the frequency of Say-on-Pay votes: once every one, two, or three years (say on frequency)
  • An advisory vote on certain golden parachute arrangements for meetings at which shareholders are to approve a merger or similar transaction (say on golden parachutes)

Of the 2,151 Russell 3000 companies that held Say-on-Pay votes in 2019, the average vote was just over 90 per cent in favour, effectively flat with 2018 results. 91 per cent, or 1,957 of these 2,151 companies, received a vote of over 70 per cent approving the Say-on-Pay vote, and just three per cent, or 63 companies, received below 70 per cent support.

One of the key trends identified in the U.S. 2019 Say-on-Pay results is that, while the percent of shareholder support and the number of failed Say-on-Pay proposals remained effectively flat with prior year results, Russell 3000 companies saw a decline in the number of negative voting recommendations from Institutional Shareholders Services (ISS). This suggests that investors may be becoming less reliant on the voting recommendations of proxy advisory firms and performing their own due diligence and research on executive pay matters.


Mandatory Say-on-Pay votes are on the horizon for certain federally incorporated companies in Canada as a result of the amendments to the CBCA. While a significant number of the companies that make up the S&P/TSX Composite Index have already adopted Say-on-Pay on a voluntary basis, such votes remain rare among smaller issuers. If and when amendments become law, and if the regulations provide that all distributing corporations are subject to the requirement to hold Say-on-Pay votes, a large number of Canadian public companies—including many junior issuers and controlled public companies—that have not yet adopted the practice will be required to hold Say-on-Pay votes annually.

Based on U.S. and Canadian voting results, issuers who determine to, or are required to, adopt a Say-on-Pay vote will be well-advised to focus on enhancing their compensation decision-making, their shareholder engagement and their executive compensation disclosure.

For further information, please contact:

John Tuzyk                  416-863-2918

Jill Davis                      416-863-3076

or any other member of our Capital Markets group.