I see a stock option problem surfacing in Canada. Resource companies, buoyed by high resource prices, are stock option gold mines not only for management, but also directors. It seems that some directors at some of the smaller resource companies have seen fit to grant themselves ever larger option packages. Although non-executive director compensation has topped the $100,000 mark at some of Canada's largest companies, we are seeing some packages, driven by stock options, top $500,000 and even $1 million at some smaller ones.

For example, non-executive directors of Yamana Gold received a grant of 1.5 million Yamana options in 2006. Averaging 300,000 options per non-executive director, with an exercise price of just under $10, these options had a Black-Scholes value in excess of $1,000,000 per director at the time of grant. By the time we obtained the proxy circular, they had an intrinsic value of nearly $1 million per director. There was nothing in the proxy circular to support unusual board activity that would merit such an exceptionally large compensation package, which had mushroomed from that of the previous year. Unfortunately, there are others like Yamana.

What this means is that the concept of accountability needs to be reinforced with many boards. The language of Canadian proxy circulars with regard to directors' stock option compensation invariably reads "the company granted options to directors..." as if there were some superior being "the company" that was there to deal at arms length and look after shareholder interests. Is this what "independence" has come to mean? How independent are directors that pay themselves such fees?

Does casting a withhold vote punish these mega-grant directors? With our plurality system, they get elected. Usually even publicly filed vote results disclose that directors were elected "by show of hands" at the meeting, so even the embarrassment of a high withhold vote by proxy is unlikely to be felt outside the boardroom. Fortunately, we have the press, who are merciless on perceived abuses. Yet the press will not win the battle if shareholders are standing silently on the sideline.