In a major victory for the "say on pay" campaign, two of Canada's big banks have agreed to implement a shareholder resolution on executive compensation.
At its annual general meeting today, RBC shareholders voted 54.4% in favour of a resolution filed by Meritas Mutual Funds and 56.9% in favour of a similar resolution filed by Medac (Le Mouvement d'education et de defense des actionnaires).
CIBC has not yet released detailed numbers, but the same resolution at its AGM also received majority support.
The resolution - filed at all of Canada's big banks - allows shareholders to provide an annual advisory vote to the banks' boards of directors on executive compensation. The votes are non-binding - boards will still retain ultimate jurisdiction on compensation - but advocates say today's move gives shareholders a voice on a critical corporate governance issue.
"Now we have two of Canada's big banks respecting the wishes of the majority of their shareholders by allowing them to provide the board of directors with feedback on executive compensation," said Meritas president Gary Hawton in an interview shortly after the results were announced. "Our view is that if the directors do not hear from the shareholders they represent on executive pay, they will not be able to take these views into account in their decisions."
Hawton says he's optimistic that today's votes will set a precedent: similar resolutions have been filed at the Bank of Montreal and Bank of Nova Scotia, whose AGMs are scheduled for next week. Hawton hopes BMO and BNS will follow the lead of RBC and CIBC and if that happens, TD Bank could simply scrap its vote and agree to the proposal, since its AGM won't be held until April 2.
National Bank made just such a pre-emptive move today, announcing before its AGM that shareholders would be given an advisory vote on executive compensation starting next year. "In so doing, the bank is acknowledging the developments of the past few weeks relating to this matter and fulfilling a wish expressed by many of its shareholders," National said in a statement.
This could mean a clean sweep for the resolution at the banks, a major achievement considering the same resolution received an average of 40.5% support last year. Similar resolutions have been filed this year by Meritas with Sun Life Financial, the TMX Group, Nortel Networks and Potash Corporation.
"We're hopeful that today's results will lead to other corporations accepting this model," Hawton added, noting that the issue could ultimately end up in the hands of the regulators.
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