Tips for top circular disclosure in 2025

The Canadian Coalition for Good Governance (CCGG) has published its annual Best Practices guide, which includes examples of what it considers to be excellent proxy circular disclosure by Canadian reporting issuers. The examples and accompanying annotations highlight both fundamental and evolving best practices in corporate governance and executive compensation.

On the topic of corporate governance practices, the 2024 Best Practices publication includes discussion and examples of disclosure related to majority voting, director independence, board composition, education and assessments, director compensation and share ownership, and strategic planning and risk management oversight. In terms of executive compensation, the guide looks at disclosure linking executive compensation with the corporation’s strategy, objectives and risk management, as well as more specific compensation issues such as the use of non-GAAP measures, executive share ownership requirements, termination and change of control benefits, retirement benefits and perquisites, say on pay and more.

While the topics included in the Best Practices guide remain relatively consistent from those of prior years, updates have been made in the following areas:

• Board, director and committee assessments: CCGG’s commentary this year reflects not only the importance of providing disclosure on the major themes that emerged during the board, director and committee assessments, but also any objectives that were identified for the following year in order that the assessments may be a tool for continuous improvement. In addition, CCGG has highlighted the practice of using an external service provider to facilitate the process and provide additional insights to the board.
• Succession planning and diversity: This section of the Best Practices publication that had been renamed in 2023 to include reference to human capital management has reverted to its original focus on management succession planning. Last year’s suggestion that companies include disclosure on how their talent development activities feed into broader human capital management objectives and strategies, including diversity, has been removed. The section of the publication related to board and management diversity disclosure has similarly been curtailed.
• Executive compensation and risk management: CCGG continues to believe that anti-hedging policies are important for risk mitigation, this year stating they are an “extremely important” tool to discourage management teams from hedging or monetizing their economic interests.
• Say on pay: CCGG continues to believe that offering shareholders an advisory vote on executive compensation is a meaningful tool for boards to assess shareholders’ acceptance of their approach. The 2024 Best Practices publication notes that approximately 80% of issuers in the S&P/TSX composite index now offer their shareholders a say-on-pay vote.

The 2024 Best Practices for Proxy Circular Disclosure publication is available here. Information for the prior year’s publication is available here.