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Why Should You Comply with Form 51-102F6?
The new executive compensation disclosure requirements will dramatically increase demand for your internal resources. The new requirements significantly increase the volume and complexity of work over what Canadian issuers have grown accustomed to in their compensation disclosure efforts.
Compensation Committees and boards are currently setting 2008 executive compensation, often without consideration of these new disclosure obligations. If your company has not begun planning for this silent burden, then now is the time to start planning for disclosure.
Transparency and Fiduciary Responsibility
These new requirements were demanded by the securities regulators, shareholders and the investment community at large to replace the 1994 rules that are currently in place in order to increase transparency surrounding compensation, incentives and pay-for-performance.
Complying with this regulation ensures shareholders that the board and compensation committee act in a fiduciarily responsible manner. The Canadian Securities Administrators state clearly what the objective of this legislation is:
"The objective of this disclosure is to communicate what the board of directors intended to pay or award certain executive officers and directors for the financial year. This disclosure will provide insight into a key aspect of a company’s overall stewardship and governance and will help investors understand how decisions about executive compensation are made."
Key Financial Reporting Exercise
Form 51-102F6 elevates executive compensation disclosure from an issue of legal compliance to a central financial reporting exercise. Properly disclosing compensation information in a timely manner is now part of your core financial reporting regime.
Liability and Reputation
The disclosure will fall under the scope of civil liability for continuous disclosure and is expected to be enforced more actively than in the past, similar to the experience in the United States. More than the monetary penalty along, companies that are not actively complying to this regulation place themselves in severe reputational risk.
Pseudo Certification
The CSA has commented that the certifications signed under 52-109 also cover the area of executive compensation disclosure. This increases company and personal risk by assigning the CEO and CFO's name assuring that executive compensation controls are sound.
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