Several years ago the
Canadian Coalition for Good Governance published
Good Governance Guidelines for Principled Executive Compensation. Building on this work, it last week published a
document containing further guidance based on six "pay for performance" principles. These are:
- "Pay for performance" should be a large component of executive compensation.
- “Performance” should be based on measurable risk adjusted criteria, matched to the time horizon needed to ensure the criteria have been met.
- Compensation should be simplified to focus on key measures of corporate performance.
- Executives should build equity in their company to align their interests with shareholders.
- Companies should limit pensions, benefits, and severance and change of control entitlements.
- Effective succession planning reduces paying for retention.
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