The Canadian Securities Administrators (CSA), a forum for the 13 securities regulators of Canada's provinces and territories, is considering new executive compensation disclosure rules, similar to those instituted by the U.S. Securities and Exchange Commission earlier this year.

"The desired outcome is to develop new compensation rules for Canada that are not 400 pages long, recognize we are principles-based not rules-based, and provide complete and useful disclosure of the value of executive compensation," Bill Mackenzie, a member of the Ontario Securities Commission's (OSC) Continuous Disclosure Advisory Committee (CDAC), told Governance Weekly. Mackenzie also is president of ISS Canada.

Among the CSA proposals will be a new requirement for companies to tally the total value of all compensation--including the cash value of all stock options and share units granted to executives in the prior year, as well as the value of their pension gains--in a chart. Pay for directors would also have to be tallied in a similar chart.

The CDAC committee convinced the CSA to drop plans to include requirements for compensation disclosure in the management section of the annual report. The CDAC argued to include such narrative compensation information in the proxy circular.

Other changes under consideration by the CSA are a new requirement to disclose executive perks and a stock-option valuation methodology that is the same as that used in financial reporting. The vast majority of Canadian issuers have used the Black-Scholes valuation method when reporting options.

"The priority is quite high for this initiative, and many issuers have already bitten the bullet, giving it a high chance of becoming law," Mackenzie said. "That said, it will likely be effective no sooner than the 2008 proxy season."

Canada has no national securities commission, so regulators in the 13 provinces and territories would oversee the new disclosure standards once they are finalized by the CSA and approved by provincial lawmakers, Mackenzie said. The CSA plans to publish a draft of the proposed rules and a request for comment in early 2007, according to OSC legal counsel Elizabeth Topp.

OSC Chairman David Wilson said it has been 12 years since compensation disclosure has been reformed, and that it is time to modernize practices. "The disclosure regime is kind of long in the tooth ...The world has evolved," he noted in comments to The Globe and Mail.

Some major firms, such as Canadian National Railway, Canadian Imperial Bank of Commerce, and Sun Life Financial, have voluntarily adopted many of the proposed standards. The Canadian Coalition for Good Governance (CCGG), an association of 50 institutional investors with more than $1 trillion under management, has actively lobbied for disclosure reforms.

On Nov. 7, the CCGG released a study by the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management that looked at compensation disclosure by the 208 companies in the Toronto Stock Exchange index (excluding income trusts and funds).

The study concluded that just 23 companies had thorough and complete disclosure. Thirty-eight firms had disclosure that was within an "acceptable" range. Conversely, there were 147 companies that had work to do, the study said.

"This scorecard is not about levels of compensation, but about disclosing the process of how compensation is determined. Transparency is essential when it comes to communicating the compensation of senior executives to investors," Doug Pearce, CCGG's board chairman, said in a recent statement.