Two more banks agree to allow shareholders “say on pay”

Following the lead of RBC and CIBC, the Bank of Nova Scotia and the Bank of Montreal have agreed to implement a shareholder resolution on executive compensation.

The resolution — which allows shareholders to provide an annual advisory vote to the banks’ boards of directors on executive compensation — received 51.6% support at Scotiabank and 53.6% at BMO at annual general meetings held on Tuesday.

The two banks indicated they would respect the vote and work with shareholders to implement the resolution. "I’d like to announce that the bank will provide shareholders with a non-binding vote on executive compensation at the next shareholders meeting," said BMO chair David Galloway.

The resolution was filed with all of Canada’s big banks by Meritas Mutual Funds with support from SHARE (Shareholder Association for Research and Education). At RBC and CIBC’s annual meetings, the ‘say on pay’ proposals garnered the support of 54.4% and 51.9% of shareholders, respectively. TD Bank, whose AGM is scheduled for next month, is also expected to support the resolution.

Meritas brought the issue of advisory votes on executive compensation to the Canadian investment community in 2007 through dialogue with Canada's largest banks and followed up with shareholder proposals asking for a vote. "We asked that this vote be advisory, so that it would not ultimately determine executive pay, but would provide clear and consistent shareholder feedback on the decisions that bank boards make about compensation", said Meritas CEO Gary Hawton.

Last year, support at the big banks averaged 40.5%. Hawton says he was surprised by the increased level of support this year, adding that he is hopeful regulators will consider rules requiring companies to hold votes on executive compensation.