Wednesday, March 18, 2009

TD Bank gets on “say on pay” bandwagon

TD Bank agreed Wednesday to allow its shareholders an advisory vote on executive compensation, starting next year.

The votes, which are non-binding, have already been accepted by the rest of Canada’s big banks, including RBC, CIBC, Scotiabank and BMO.

The resolution, brought forward by Meritas Mutual Funds and Mouvement d'éducation et de défense des actionnaires (MEDAC) was to be voted on at TD’s annual meeting on April 2, however in a pre-emptive move, the bank decided to accept the proposal and the resolution will now be withdrawn.

"TD promotes open and proactive dialogue with shareholders, ensuring their feedback on compensation and other important issues is heard and carefully considered by the board," TD chairman John Thompson said in a release Wednesday.

"It's now clear from the votes held this year at the other major Canadian banks' meetings that the opinion of the investment community, while still divided, has moved in favour of an advisory vote, and so we've acted accordingly."

Last week, TMX Group, parent of the Toronto Stock Exchange, and Sun Life Financial both said they will voluntarily offer shareholders a non-binding advisory vote on executive pay starting at their annual meeting next year. As a result, Meritas withdrew its proposal at both companies.

Just a few weeks ago, Canadian banks were carefully counting proxy votes before making the decision to adopt a non-binding pay vote, the Shareholder Association for Research and Education (SHARE, which assisted Meritas on the resolutions) noted on its website. “Now, companies are implementing a shareholder 'say on pay' well ahead of their shareholder meetings.”

Laura O’Neill, director of law and policy at SHARE, says she’s pleased with TD’s decision, but adds that “given the lockstep in which our big banks move on governance, we certainly didn’t think that TD had much choice. But we’re happy to see the announcement a full two weeks before their AGM.”

O’Neill notes that Sun Life and TMX’s acceptances of the resolution are perhaps even more significant, providing a toehold into the world of issuers who are not banks, “because that’s clearly where we want to go.”

There are still a couple of outstanding executive compensation resolutions: Potash Corporation meets May 7 and a proposal was also filed at Nortel Networks, which filed for protection from creditors in January. “I doubt very much we’ll ever see this proposal on a Nortel ballot,” O’Neill concedes.

Considering the momentum the executive compensation has generated during this proxy voting season, O’Neill says she’s very interested to see what will happen next. “We’d like to see movement by the Canadian Securities Administrators to put this in place across the board. It would be a quick, clean way to get this done.”

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