Salaries of top executives to become public knowledge

Major changes in Ontario securities regulations will require companies to disclose, individually and by name, the compensation paid to each of their top executives.

“These changes put Ontario in the forefront of corporate openness and accountability to shareholders,” Ontario Finance Minister Floyd Laughren said in announcing the changes.

The regulations, to be administered by the Ontario Securities Commission, will require that companies whose shares trade publicly in Ontario provide details of salaries, bonuses, stock options and other compensation paid to the chief executive officer (CEO) and each of the four highest-paid executives. The material must appear in prospectuses, information circulars sent to shareholders, and annual filings.

“By making these changes, we are responding to investors who have urged that Ontario set the highest standards of disclosure,” Laughren said. “These changes give shareholders the information they need in order to compare a company’s performance with the way it rewards its top people.” Until 1991, many Ontario-based companies had to disclose individual executive salaries because their shares traded publicly in the U.S. and they were bound by the regulations of the U.S. Securities and Exchange Commission (SEC). That year, the SEC gave Canadian companies the choice of following its regulations or those of their home jurisdictions. Many Ontario-based companies chose to follow the Ontario rules, which required less-detailed disclosure. The new rules also require companies to provide:

* compensation information for any executive who left during the fiscal year but would otherwise have been in the highest-paid group;

* a 5-year performance chart, comparing the stock’s total return to that of a broad market index (the issuer may also show a peer-group comparison); * information on benefits that add significantly to compensation; * details of “non-routine” loans made or guaranteed by a company to individuals such as executives, directors or senior officers; * information on any contract that would result in an executive receiving more than $100,000 as a result of being dismissed or having to change duties; * details on directors’ compensation;

* a report from the company’s compensation committee, explaining how committee members decided on compensation and providing indications of members’ independence.

There are some exemptions. Small businesses won’t have to provide a stock performance chart, pension plan table or compensation committee report, because the costs of doing so would be prohibitive. Executives, apart from CEOs, who earn less than $100,000 a year in salary and bonuses, are exempt from disclosure. Issuers which meet U.S. rules are exempt from the Ontario requirements. Other foreign issuers may seek exemption on a case-by-case basis.

Most of the changes will become effective Oct. 31 (for small companies, May 1, 1994). The exceptions are prospectuses filed before Jan. 1, 1994, and information circulars and annual filings of companies whose fiscal year ended before Oct. 31.