March 04, 2010

Teachers' issued a letter (89 KB PDF)  to more than 1,500 Canadian and international public issuers in February explaining how we will handle advisory votes on executive compensation (‘say on pay') during the 2010 proxy season.

Advisory votes on executive compensation can occur in two ways: as shareholder proposals requesting a ‘say on pay', or as management proposals in jurisdictions where such votes are required or where the company has taken a decision to put compensation to an advisory vote.

We will generally not support shareholder proposals for say on pay advisory votes, as outlined in section 2.2 of our proxy voting guidelines. Our decision is consistent with how we consider and vote on other shareholder proposals that seek to place constraints on the behaviour or composition of boards, management teams and companies.

When management compensation proposals are included in a company's proxy materials, we are required to vote on them. In these cases, we will vote these proposals according to the compensation criteria outlined under Management Compensation (section 2.3) in our guidelines.

"The ultimate goal is getting compensation right," said Wayne Kozun, Senior Vice-President of Public Equities. "We fully support boards' efforts to do that, and encourage them to reach out to shareholders for input when appropriate. However, we don't believe shareholder advisory votes are the best approach."

There are several reasons why we choose to be consistent with our proxy voting guidelines on shareholder proposals for ‘say on pay':

  1. Compensation is the responsibility of the board. Advisory votes are non-binding and do not diminish the board's accountability for executive pay.
  2. Compensation structures are complex. Directors have more information than shareholders on compensation issues, and are better positioned to make informed decisions.
  3. A more effective way for shareholders to influence compensation is by electing directors who properly represent their interests.

We believe boards that include qualified, independent members and are built on strong governance principles should consider compensation matters in the normal course of fulfilling their responsibilities. Consequently, we focus our corporate governance efforts on getting board structure right, advocating good governance standards such as separation of chair and CEO positions, majority voting and annual voting for all board members.


Paul Schneider
Senior Investment Associate, Corporate Governance
Ontario Teachers' Pension Plan
(416) 730-5307 or

Deborah Allan
Director, Communications and Media Relations
Ontario Teachers' Pension Plan
(416) 730-5347

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