Dix (10) raisons de l’inefficacité de la gouvernance de la rémunération | Richard Leblanc

Vous êtes intéressés par la problématique de la rémunération des hauts dirigeants, et préoccupés par les effets pervers de celle-ci, l’article de Richard Leblanc dans le HuffPost explique clairement et succinctement pourquoi la gouvernance de la rémunération dans les organisations ne fonctionne pas …

Vous trouverez-ci dessous le lien vers son récent article ainsi qu’une énumération des 10 raisons évoquées pour expliquer les défaillances de la gouvernance. Bonne lecture !

Ten Reasons Why Pay Governance is Not Working

Executive pay is always in the news. Just last week an executive of Yahoo walked away with what was said to be a 100M parachute. I was interviewed by CBC radio on upcoming sunshine laws that are going to be enacted in Alberta. Last month, Ontario Power Generation fired three executives after an auditor general’s report on excessive compensation. The Premier of Ontario has vowed to crack down on excessive public sector executive compensation.


Do politicians have a track record of properly addressing compensation? I don’t believe so.

Voici dix (10) raisons qui montrent que le système de gouvernance de la rémunération est déficient :

1. Politicians

2. Pay consultants

3. Lack of professional standards

4. Unnecessary complexity

5. Captured pay-settors

6. Short termism

7. Heads I win, tails you lose, or no downside for risky behaviour

8. Undue influence of Management

9. Directors not listening to Shareholders

10. Lack of oversight and accountability


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Politiques de gouvernance des sociétés canadiennes | Mise à jour 2014 de ISS

À chaque année, la firme Institutional Shareholder Services (ISS) revoit son processus d’établissement des recommandations qui guide les actionnaires dans leurs votes aux assemblées annuelles.

On entend souvent parler des politiques de ISS concernant la gouvernance des sociétés mais on ne saisit pas toujours la méthodologie derrière les recommandations aux actionnaires.

Le document ci-dessous présente les mises à jour des recommandations qui s’adressent aux entreprises canadiennes cotées en bourse. Je crois que c’est un document de référence majeur pour les actionnaires qui doivent se doter d’un conseil d’administration exemplaire et de règles de gouvernance en relation avec les intérêts des actionnaires. Bonne lecture !

Canadian Corporate Governance Policy | 2014 Updates of ISS

Ci-dessous, vous trouverez le sommaire du processus de formulation des politiques de ISS, suivi des éléments constituant la table des matières.

Each year, ISS’ Global Policy Board conducts a robust, inclusive, and transparent global policy formulation process that produces the benchmark proxy voting guidelines that will be used during the upcoming year.

Toronto Stock Exchange

The policy review and update process begins with an internal review of emerging issues and notable trends across global markets. Based on data gathered throughout the year (particularly from client and issuer feedback), ISS forms policy committees by governance topics and markets. As part of this process, the policy team examines academic literature, other empirical research, and relevant commentary. ISS also conducts surveys, convenes roundtable discussions, and posts draft policies for review and comment. Based on this broad input, ISS’ Global Policy Board reviews and approves final drafts and policy updates for the following proxy year. Annual updated policies are announced in November and apply to meetings held on and after February 1 of the following year.

Also, as part of the process, ISS collaborates with clients with customized approaches to proxy voting. ISS helps these clients develop and implement policies based on their organizations’ specific mandates and requirements. In addition to the ISS regional benchmark (standard research) policies, ISS’ research analysts apply more than 400 specific policies, including specialty policies for Socially Responsible Investors, Taft-Hartley funds and managers, and Public Employee Pension Funds, as well as hundreds of fully customized policies that reflect clients’ unique corporate governance philosophies. The vote recommendations issued under these policies often differ from those issued under the ISS benchmark policies. ISS estimates that the majority of shares that are voted by ISS’ clients fall under ISS’ custom or specialty recommendations.

This document presents the changes being made to ISS’ Benchmark Canadian Corporate Governance Policies. The full text of the updates, detailed results from the Policy Survey, and comments received during the open comment period, are all available on ISS’ Web site under the Policy Gateway.

Table des matières du document de mise à jour


Voting on Director Nominees in Uncontested Elections

Definition of Independence – TSX and TSXV

2014 ISS Canadian Definition of Independence

Persistent Problematic Audit Related Practices – TSX

Voting on Directors for Egregious Actions – TSX and TSXV

Board Responsiveness – TSX and TSXV

Director Attendance & Overboarding – TSX


Advance Notice Requirement for Director Nominations – TSX and TSXV

Enhanced Shareholder Meeting Quorum for Contested Director Election – TSX and TSXV


Executive Pay Evaluation: Advisory Votes on Executive Compensation – Management Proposals – TSX

Pay for Performance Evaluation

Board Communications and Responsiveness

Equity Compensation Plans – TSX

Non-Employee Director Participation/Director Limit

Repricing Proposals – TSX and TSXV

ISS Releases Survey for 2014 Policy Updates (blogs.law.harvard.edu)

Institutional Shareholder Services Unveils 2014 Proxy Voting Policies (hispanicbusiness.com)

Conflicts of Interest and Competition in the Proxy Advisory Industry (clsbluesky.law.columbia.edu)

L’impact de la gouvernance sur les rémunérations des dirigeants

Vous trouverez, ci-dessous, une présentation Power Point que Richard Leblanc a livrée à la conférence annuelle de la Canadian Society of Corporate Secretaries, le 21 août 2013 à Halifax, NS.

Governance of Executive Compensation and Pay for performance

Cette présentation aborde tous les points chauds dans le domaine de la rémunération des hauts dirigeants. Richard a eu la générosité de mettre cette présentation en ligne via le groupe de discussion Boards & Advisors. Il s’agit d’une mine d’information pour toute personne intéressée par l’influence de la gouvernance sur les rémunérations des dirigeants.

President Barack Obama and Treasury Secretary ...
President Barack Obama and Treasury Secretary Timothy Geithner announce new limits on executive compensation. (Photo credit: Wikipedia)

Si vous êtes intéressés par certains aspects plus spécifiques de ces questions, je suis assuré qu’il se fera un plaisir de vous donner de plus amples informations. Voici un résumé des 10 thèmes abordés dans cette présentation. Bonne lecture.

1. Red flags and best practices;

2. Shareholder engagement and activism;

3. Changes to executive compensation;

4. Compensation of oversight functions (Canada, FSB);

5. Internal pay equity (coming in August);

6. Independent director compensation: Case;

7. Incorporating LT NF metrics into compensation: Case;

8. CEO / Board succession planning: Case;

9. Risk adjusted compensation;

10. Regulation of Proxy Advisors.

Un consultant de McKinsey responsable des rémunérations excessives des PCD (CEO) ! (jacquesgrisegouvernance.com)

How the fat cats first learned to get even fatter (standard.co.uk)

Some notes on executive compensation (yourbrainonecon.wordpress.com)

Pay (Not) For Performance – How Shareholders Loose and Executives Win (thecandidliberal.com)

Executive Compensation and the Impotency of Say on Pay (theracetothebottom.org)

Published / Preprint: Duration of Executive Compensation (moneyscience.com)

Companies Will Soon Publish The Ratio Of CEO Pay To Worker Pay (thinkprogress.org)

Un consultant de McKinsey responsable des rémunérations excessives des PCD (CEO) !

C’est le constat que fait Max Nisen dans Business Insider le 14 août 2013.

Je vous invite à lire l’article ci-dessous.

How One Employee And One Consulting Firm May Be Singlehandedly Responsible For The Staggering Gap Between CEO And Worker Pay

McKinsey is the world’s largest and most profitable management consulting firm,  as well one of the most difficult places to get hired. Over its 87-year existence it’s had a  massive impact on the U.S. economy according to « The Firm, » a forthcoming book by Duff McDonald.

mckinsey & company

In a New York Observer column, pointed out by Mike Dang at The Billfold, McDonald argues that the massive modern-day  gap between executive and worker pay has its origin with the consulting  firm.

It’s a fascinating story that all started  with General Motors commissioning a study on executive pay from McKinsey  consultant Arch Patton. He found that from 1939 to 1950, hourly employee pay  more than doubled, but top management pay went up only 35%.

The study, published in the Harvard Business Review, became a  series and turned national attention toward executive compensation,  promoting the idea that higher pay and bonuses were the lever to attract and  retain top executives.

Patton became a superstar,  hired by managers who were not surprisingly interested in hearing they were  underpaid. McKinsey’s CEO apparently thought this type of consulting was beneath  the firm, but wasn’t about to turn down the money.

« For several years, Mr. Patton personally  accounted for almost 10 percent of the firm’s billings, » McDonald writes. « At the end of the war, only 18 percent of  companies in the country had bonus plans. By 1960, about 60 percent of them  did. »

In 1961 came the books « Men, Money  and Motivation: Executive Compensation as an Instrument of  Leadership » and « What Is an  Executive Worth?« 

One McKinsey consultant told McDonald that Patton wrote « the same article  [26] times for the Harvard Business Review. »

Because of its popularity  and McKinsey’s influence, the idea became an entrenched philosophy, as did the  concept that as a company grows, so should CEO pay.

While Patton’s  compensation philosophy started with rigorous analysis of performance, soon it  took on a life of its own, with executive pay spiraling higher and higher, while  worker pay was left to languish.

Here’s where we are today, according to a  report by The State Of Working America,  a project of the Economic Policy Institute:

The AFL-CIO puts the number even higher, saying that the average Fortune 500  CEO makes 354 times the average wage of their employees. Some executives make 1,000 times more.

Of course, McKinsey and  Patton weren’t the only factor. Bull markets and economic expansion help push  pay upwards and encourage investors to look the other way — and once it moves  up, pay is slow to move back down. Meanwhile, slack labor markets and  weak growth prospects help to explain stagnant wages.

Regardless, McKinsey and Patton may have been a major driver in the  gap between CEO and employee wages exploding by a factor of 10 since the middle of the  century.

Read more:  http://www.businessinsider.com/mckinsey-and-the-ceo-pay-gap-2013-8#ixzz2c3CFCgwB

Is McKinsey to Blame for Skyrocketing CEO Pay? (ritholtz.com)

Jobs multiplier – The making of a boardroom hero | The Times (morethanaframework.wordpress.com)

Suggestions de réforme pour la rémunération des membres de C.A.

Voici un article de Richard Leblanc paru dans BoardExpert.com que vous apprécierez sûrement. Comme à son habitude, Richard utilise un style direct et simple pour aborder l’une des facettes les plus complexes de la gouvernance des organisations : la rémunération incitative reliée à la performance à long terme.

L’auteur discute plus particulièrement d’un objet novateur : la rémunération des administrateurs alignée sur les intérêts des actionnaires.

Voici un extrait de l’article ainsi qu’un aperçu de l’approche qu’il suggère. Qu’en pensez-vous ?

Reforms to director compensationneed to occur

« Most independent directors on public company boards are compensated in a blend of cash and company shares. The equity component is typically restricted or deferred until the director retires from the board, thus postponing taxes and enabling the director to amass a portion of equity in the company to align his or her interests with shareholders (it is believed). The equity can be a predetermined number of restricted shares, or a set monetary amount in the form of share “units.”

The problem with paying independent directors this way is that there is little incentive for personal performance or company performance. Directors get paid the cash and equity regardless. There is little if any downside, especially when directors can ride a stock market or Fed driven increase in overall share prices. Not surprisingly, the activists noted this lack of incentive pay.

Sometimes money is a powerful incentive.
Sometimes money is a powerful incentive. (Photo credit: wayneandwax)

It is hardly surprising that boards do not focus on value creation, strategic planning, or maximizing company performance, survey after survey, as much as they do on compliance. Their compensation structure does not incent them to. Compensation incentives drive behavior, both for management and for directors ».

Here is what is needed to align director pay with shareholder interests:

  1. Directors should be required to issue cheques from their personal savings accounts to purchase shares in the company. Bill Ackman of Pershing Square stated that if Canadian Pacific directors were required to cut cheques for $100,000 each, the CEO would have been fired prior to Pershing Square being involved. Mr. Ackman is right. “Skin in the game” for a director does not mean shares are given to a director in lieu of service. The motivational factor to be attuned to shareholders is greater if directors are actual investors in the company. In private equity companies, non-management directors are encouraged to “buy into” the company and invest on the same terms as other investors.
  2. For Directors’ equity to vest (the portion they did not purchase), hurdles would need to be achieved that reflect personal performance and long-term value creation of the company. Assuming you have the right directors, this sets up a situation in which Directors are forced to engage in value creation and be rewarded for doing so, similar to private equity directors. The hurdle rate provides the incentive. The vesting hurdle should be based on the underlying performance of the company, commensurate with its risk and product cycle, possibly peer based, and not simply on riding a bull market.
  3. The long-term performance metrics for value creation should also apply to senior management, and the board should lead by example. The vast majority of performance incentives are short-term, financial and quantitative. We know that the majority of company value however is now based on intangibles. Long-term leading indicators such as innovation, reputation, talent, resilience and sustainability are being completely overlooked in compensation design. You get what you pay for.

Management has proposed “passive” pay for directors and short-term pay for themselves. Boards have acquiesced.

Les rétributions excessives des hauts dirigeants | Les causes, les effets et les solutions

Voici un document phare sur l’étude des rémunérations jugées excessives dans les grandes sociétés publiques. Cette recherche, dirigée par Charles M. Elson et Craig K. Ferrere de l’Université du Delaware*, a été acceptée pour publication dans le Journal of Corporation Law.

Les auteurs présentent plusieurs arguments qui remettent en cause l’étalonnage compétitif (competitive benchmarking), une méthode d’établissement de la rémunération jugée inflationniste. Les auteurs font la démonstration que cette façon de faire n’est pas justifiée et que ses effets ont des répercussions pernicieuses sur toute la structure de rémunération. En fait, l’hypothèse selon laquelle il faut rémunérer « grassement » les hauts dirigeants afin de les retenir ne tient pas la route.

L’article recommande aux comités de rémunération de s’éloigner des méthodes traditionnelles de « benchmarking » et de développer des standards internes de rémunération basés sur les spécificités de l’entreprise, notamment son environnement compétitif unique. Les comités de rémunération aurait avantage à prendre connaissance de cette étude. Vous trouverez, ci-dessous, un résumé de l’article.

Executive Superstars, Peer Groups and Overcompensation: Cause, Effect and Solution

In setting the pay of their CEOs, boards invariably reference the pay of the executives at other enterprises in similar industries and of similar size and complexity. In what is described as « competitive benchmarking », compensation levels are generally targeted to either the 50th, 75th, or 90th percentile. This process is alleged to provide an effective gauge of « market wages » which are necessary for executive retention. As we will describe, this conception of such a market was created purely by happenstance and based upon flawed assumptions, particularly the easy transferability of executive talent. Because of its uniform application across companies, the effects of structural flaws in its design significantly affect the level of executive compensation.

President Barack Obama delivering remarks on n...
President Barack Obama delivering remarks on new executive compensation restrictions. (Photo credit: Wikipedia)

It has been observed in both the academic and professional communities that the practice of targeting the pay of executives to median or higher levels of the competitive benchmark will naturally create an upward bias and movement in total compensation amounts. Whether this escalation has been dramatic or merely incremental, the compounded effect has been to create a significant disparity between the pay of CEOs and what is appropriate to the companies they run. This is not surprising. By basing pay on primarily external comparisons, a separate regime which was untethered from the actual wage structures of the rest of the organization was established. Over time, these disconnected systems were bound to diverge.

The pay of a chief executive officer, however, has a profound effect on the incentive structure throughout the corporate hierarchy. Rising pay thus has costs far greater than the amount actually transferred to the CEOs themselves. To mitigate this, boards must set pay in a manner in which is more consistent with the internal corporate wage structures. An important step in that direction is to diminish the focus on external benchmarking.

We argue that: (I) theories of optimal market-based contracting are misguided in that they are predicated upon the chimerical notion of vigorous and competitive markets for transferable executive talent; (II) that even boards comprised of only the most faithful fiduciaries of shareholder interests will fail to reach an agreeable resolution to the compensation conundrum because of the unfounded reliance on the structurally malignant and unnecessary process of peer benchmarking; and, (III) that the solution lies in avoiding the mechanistic and arbitrary application of peer group data in arriving at executive compensation levels. Instead, independent and shareholder-conscious compensation committees must develop internally created standards of pay based on the individual nature of the organization concerned, its particular competitive environment and its internal dynamics.


*Cette recherche a été financée par (1) The Weinberg Center for Corporate Governance, (2) The Investor Responsibility Research Center Institute et (3) The Social Science Research Network.

Articles reliés au sujet de la rémunération :

Les actionnaires doivent-ils être consultés sur les rémunérations des hauts dirigeants ? (jacquesgrisegouvernance.com)

Executive Peer Groups – Your Virtual Board (peterdickinson.net)

Pay for Performance Disconnect Cited as Main Shareholder Concern in Say on Pay Vote Failures (sys-con.com)

Your benchmarking peer group says a lot about you (architects.dzone.com)

Perspectives relatives à la gouvernance et à la rémunération en 2013

Ce billet, paru dans le HLS Forum, présente le sommaire exécutif d’un rapport produit par la firme Equilar sur les perspectives relatives à la gouvernance et à la rémunération en 2013. La firme Equilar est l’une des plus importantes entreprises de recherche et de publication dans le domaine de la gouvernance. Le rapport complet que vous pourriez vous procurer en vous adressant directement à l’entreprise  se décline en trois catégories : (1) Conseil d’administration, (2) Rémunération de la direction et (3) Divulgation et gouvernance.

Vous trouverez, ci-dessous les principaux résultats de cette enquête (Key Findings). Bonne lecture.

2013 Compensation & Governance Outlook Report 

« Each year, Equilar looks to highlight critical areas that can potentially affect those dealing with compensation and governance issues in the upcoming year. The 2013 Compensation & Governance Outlook Report aims to cover a variety of emerging trends in the fields of executive and director pay, equity trends, and corporate governance, while also providing an array of disclosure examples to illustrate unique approaches to strategic matters. The majority of firms will not encounter all, or even most, of the trends in this report in the New Year; it is primarily intended as a starting point for discussions that will take place over the course of 2013.P1020267

… Discussions between companies and shareholders will continue to drive changes as firms ensure the story they want told is communicated through a variety of mediums and methods. Concerns surrounding fairness in a number of areas including stock structure and pay will cause struggles between conflicting parties as focus continues to shift towards the decisions in the boardroom. Topics including shareholder engagement, board dynamics, Say on Pay, and pay for performance dominate this year’s report.

As with other Equilar publications, this report relies on a variety of actual disclosure examples, chosen to highlight current trends. We organized each issue into one of three broader categories: Board of Directors, Executive Pay, and Disclosure & Governance. We organized the issues into sections to help the reader navigate the report. To avoid emphasizing any single issue, the issues in each category are organized in alphabetical order under each category ».

Key Findings

« Most companies no longer award meeting fees to directors: The prevalence of S&P 1550 companies that provide director’s regular board meeting fees decreased from 59.8 percent to 44.3 percent between 2007 and 2011. Fixed annual retainers increased from 94.6 percent to 99.7 percent over the same period.

Female representation on boards increasing: In 2011, 76 percent of companies in the S&P 1500 had one or more female board member. The percentage of boards with no female directors fell from 29 percent to 24 percent between 2009 and 2011.

Boards continue move toward single classes: 59 percent of S&P 1500 companies had declassified boards in 2011, up from 49 percent in 2007.

Equity vehicle mix shifts to include performance shares: The number of companies providing performance-based equity to chief executives increased from 42.2 percent to 54.5 percent between 2007 and 2011.

Future of multi-class share structures remains unclear: Several high-profile public offerings in 2012 brought renewed attention to multi-class share structures increased the number of companies in the S&P 1500 with multiple classes of stock to 82.

Alternative pay tables becoming more common: While not widespread, in order to better illustrate pay stories, a number of companies are providing alternative pay tables and graphs, including pay-for-performance alignment and target versus realized pay.

Compensation Discussion & Analysis length trending upward: The average CD&A word count for S&P 1500 companies increased nearly 14 percent to 7,340 words between 2009 and 2011. CD&A word length ranged from 519 (Berkshire Hathaway) to 20,022 words (Telephone & Data Systems).

Internal pay equity closer for small and mid-cap companies: CEOs make 2 times more than the next ranked NEO in small and mid-cap companies, and 2.3 times more in large cap companies.

Increase in disclosures of realized and realizable pay: Although methods of calculating realized and realizable pay are not yet consistent among public companies, many companies are employing the use of realized or realizable pay in order to better explain compensation figures.

Proxy advisors using new methods for peer group selection: Proxy advisors Institutional Shareholder Services and Glass Lewis will both use new methods for peer groupselection in 2013. While it is unclear how this will affect advisory votes on pay, it is still important for companies themselves to give clear disclosure surrounding the peer groups created.

Earnings and revenue continue to be most commonly used performance metrics: In 2011, earnings were used as a metric in 49.8 percent of all awards, while 36.5 percent of all awards used revenue.

Initially exempt companies to have first Say on Pay vote in 2013: Firms with public floats of less than $75 million will hold their first votes for Say on Pay in 2013. It remains to be seen whether the trends for larger firms, which included less than 2 percent of firms failing a Say on Pay vote, will extend down to the smaller firms.

Shareholder outreach and engagement growing: The number of companies within the S&P 500 filing amended proxies in response to negative recommendations increased from 29 in 2011 to 42 in 2012".

Pratiques exemplaires en matière de divulgation d’information concernant les administrateurs | CCGG (jacquesgrisegouvernance.com)

Rémunérations des administrateurs et pratiques de gouvernance | Survey du Conference Board 2013 (jacquesgrisegouvernance.com)

Swiss vote to limit executive pay (thelocal.ch)

Executive Pay Votes May Be Harming Shareholders (dealbook.nytimes.com)

Les facteurs-clés à prendre en considération par les administrateurs de sociétés en 2013

Voici un court article, publié dans Harvard law School Forum on Corporance Governance, qui présente les principaux thèmes d’intérêt en gouvernance à l’approche de l’année 2013. Ci-dessous un extrait des suggestions.Je vous encourage à lire l’article.

Key Issues for Directors in 2013

English: Risk management sub processes
English: Risk management sub processes (Photo credit: Wikipedia)

« For a number of years, as the new year approaches, I have prepared for boards of directors a one-page list of the key issues that are newly emerging or will be especially important in the coming year. Each year, the legal rules and aspirational best practices for corporate governance, as well as the demands of activist shareholders seeking to influence boards of directors, have increased. So too have the demands of the public with respect to health, safety, environmental and other socio-political issues. In The Spotlight on Boards, I have published a list of the roles and responsibilities that boards today are expected to fulfill. Looking forward to 2013, it is clear that in addition to satisfying these expectations, the key issues that boards will need to address include:

1. Working with management to encourage entrepreneurship, appropriate risk taking, and investment to promote the long-term success of the company

2. Working with management and advisors to review the company’s business and strategy …

3. Resisting the escalating demands of corporate governance activists …

4. Organizing the business, and maintaining the collegiality, of the board and its committees

5. Developing an understanding of shareholder perspectives …

6. Developing an understanding of how the company and the board will function in the event of a crisis …

7. Retaining and recruiting directors who meet the requirements for experience, expertise, diversity, independence, leadership ability and character … 

8. Working with management to cope with the proliferation of new regulations …

9. Dealing with populist demands, such as criticism of executive compensation and risk management … » 

Les actionnaires disent de plus en plus NON aux rémunérations excessives !

Encore un solide article, partagé par Richard Leblanc et publié dans Bloomberg.com, sur la propensité de plus en plus grande des actionnaires à dire NON à des « packages » de rémunération jugés excessifs. À lire.

More Shareholders Are Just Saying No on Executive Pay

« It is often said that social change can’t occur until what was seen as misfortune is seen as injustice. There is a corollary in the financial world. It says change can’t occur until what was seen as immaterial is seen as risky. That’s happening with executive compensation. Investors are recognizing that excessive pay for chief executive officers does more than shave a few cents off earnings; it also provides important clues about the alignment of executives’ and shareholders’ interests. Misalignment can be very expensive. More important, compensation provides crucial information about the effectiveness of a board’s independent oversight. If directors can’t say no to the CEO on pay, they probably can’t say no to poorly designed strategy or head off operational fiascos ».

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