Guideline
We will generally not support shareholder proposals seeking to implement an advisory vote on compensation. Where we are required to vote with respect to management compensation proposals in an advisory or legally binding capacity, as is the case in certain jurisdictions, we will review compensation to ensure that it meets our criteria as set out in these guidelines.

Advisory votes on compensation are a reality in North America, particularly in the United States. Countries in Europe and elsewhere also have advisory or legally binding votes on management compensation in place.

We understand that non-binding advisory votes have facilitated compensation-related dialogue between directors and shareholders. While there is value to this practice, we believe the preferred method to bring about such dialogue is to allow shareholders to approach directors directly with their issues. Ultimately, shareholders can exercise their right to vote against directors and particularly those on compensation committees if their concerns are not dealt with satisfactorily.

We believe that a properly constituted board should address compensation issues in the normal course of fulfilling its responsibilities, and that a board generally requires the freedom and flexibility to develop and establish a compensation system in the manner that is best for the individual company.

“Say-on-pay” is new to many companies. We do not wish to unfairly burden companies that are making efforts to involve shareholders in compensation matters by voting against management advisory compensation proposals. Consequently, we have developed a three-year approach to “say-on-pay” resolutions. The first year a resolution is presented, we will assess compensation plans based on Guideline 2.3 and notify companies in writing whose compensation practices do not meet our guidelines. We expect that the chairs of compensation committees will respond by either addressing our concerns and resolving the issues, or explaining why the current practices are appropriate. If we believe the actions or explanations are insufficient, we will vote against the “say-on-pay” proposals in the subsequent year. Should the issues continue unaddressed, we will vote against members of the board’s compensation committee in the following year.

When required to cast a vote on the frequency of “say-on-pay” votes, we will generally support a vote once every three years. We believe a more frequent vote could focus the board on short-term objectives rather than on more stable, long-term objectives, or lead to inconsistencies in the compensation program due to a lack of long-term focus. A vote once every three years should remove these biases and better facilitate the development of a compensation program focused on promoting the long-term success of the organization.