Tips for top circular disclosure in 2024

The Canadian Coalition for Good Governance (CCGG) has published its annual review of public company information circular disclosure, describing what it considers to be best practices for corporate governance and executive compensation disclosure and providing examples from issuers across Canada.

While the publication remains relatively consistent with the one published in 2022, updates have been made on the topics of board skills matrices, director continuing education, human capital management and succession planning, board and management diversity and executive share ownership requirements.

• Board skills matrix: CCGG has enhanced its discussion on the use of skills matrices to set out the areas of expertise held by each director, noting that since such matrices are typically populated based on each director’s self-assessment, the completed matrix should be reviewed for consistency to ensure that what constitutes expertise in each area is consistently applied as between directors.
• Director continuing education: CCGG continues to emphasize the importance of director continuing education on topics that relate to environmental and social factors, this year drawing attention to examples of training related to carbon emission reductions and cybersecurity risk management.
• Human capital management and succession planning: The section of the Best Practices publication on executive succession has been renamed to include reference to human capital management. CCGG has highlighted in this section examples of disclosure that include commentary on how the company’s talent development activities feed into broader human capital management objectives and strategies, including diversity.
• Board and management diversity: CCGG has combined its commentary on board and management diversity into one section, stating it supports a broad view of diversity beyond gender that is conceived in the context of the company’s business, strategy, employees, customers, communities and suppliers. In the view of CCGG, diversity on the board and management helps to mitigate the risk of groupthink and leads to better oversight and decision-making.
• Executive share ownership requirements: Following the publication of its position paper on effective equity ownership policies in January 2023, CCGG has updated its best practices guidelines to provide that companies should adopt requirements that encourage executive officers to build meaningful shareholdings over the course of their tenures. CCGG has also added to the list of information that it expects companies to provide for their executive share ownership requirements. In addition to information about each executive officer’s shareholdings and whether unvested grants count towards minimum ownership requirements, CCGG requests companies to disclose whether the value of the securities is determined using market value or acquisition price. CCGG is opposed to the common practice of valuing ownership at the higher of market value or acquisition price since it gives credit for upside while preserving a floor value if share prices fall.
  
  Also new in this year’s publication, CCGG has highlighted a share ownership policy where the requirements are expressed as a multiple of an executive officer’s long-term incentive plan (LTIP) target, as opposed to the common practice of using base salary. CCGG has stated that benchmarking ownership relative to total direct compensation or the annual LTIP target may be more meaningful than base salary if base salary is the smallest component of total direct compensation.

The 2023 Best Practices for Proxy Circular Disclosure publication is available here.