Directors of leading Canadian Companies hold over $650,000 in equity, exceeding minimum requirements by three times, new study finds.



    TORONTO, Feb. 13 /CNW/ - An annual governance practices study of 100
leading Canadian companies by Spencer Stuart Canada shows that a typical
independent director (i.e., one with 5 years of tenure) holds $650,567 worth
of equity (common and deferred shares) in companies they govern.
    This significantly exceeds the usual minimum shareholding requirements
established by boards of the 100 companies that comprise the Canadian Spencer
Stuart Board Index.
    "This is the first time we've analyzed the dollar value of equity
holdings of Canadian directors," says Andrew MacDougall, who leads Spencer
Stuart's Board Services Practice in Canada. "What's quite clear is that board
members are thinking like shareholders and putting their own compensation into
play."
    The analysis also found that, when given the choice, over 70% of
directors opted to receive equity in lieu of cash remuneration, with the
majority choosing to take all of their compensation (e.g. applicable retainers
and meeting fees) in equity.
    The 12th annual Canadian Spencer Stuart Board Index (CSSBI), published by
the global executive recruiting firm Spencer Stuart, studies director
compensation, governance practices and trends for 100 of the largest publicly
traded Canadian companies (annual revenues exceeding $1 billion) and includes
comparisons with comparable U.S. firms.

    Key findings Include:

    Director Compensation

    -   Steady increase in director total compensation. Median total
    compensation for a non-executive director of a CSSBI 100 board is
    $91,612, a 7% increase over 2006 (median total director compensation
    increased 10% between 2005 and 2006). Median total compensation at
    the larger CSSBI companies (revenue exceeding $5billion) is
    $125,463, or almost three-quarters more than that of the smaller
    CSSBI (revenues between $1-5billion).

    -   Flat fees for directors making inroads in Canada: Seventeen CSSBI 100
    boards (nearly one in five) give a flat, all-inclusive fee to their
    directors, up from twelve in 2006, whereas nearly half of the
    comparable U.S. firms do so. Including equity, the median flat fee is
    $120,000, or 36% higher than the non-flat fee group.

    -   The great divide with the U.S. is narrowing for the larger CSSBI.
    Including equity, total CSSBI 100, median director compensation is
    38% less than at comparable U.S. firms. Cash components are very
    similar, but the equity value is much higher in the U.S. Although the
    larger CSSBI companies offer directors 18% less than their U.S.
    counterparts, the gap narrowed as Canadian increases outpaced those
    in the U.S. Median total compensation grew by 11% for the larger
    CSSBI companies since last year, compared to only 5% for the
    comparable U.S.

    -   Audit chair retainers are at par with U.S. The median audit chair
    retainer at CSSBI 100 boards is $15,000, on par with levels of
    comparable U.S. firms. Interestingly, among the larger CSSBI
    companies, audit committee chair retainers exceed those offered at
    comparable U.S. firms by 27%.

    -   Higher retainers for HRCC chairs: CSSBI 100 boards are beginning to
    offer retainers to their HRCC chairs that are similar to those
    received by audit committee chairs. This is a reflection of
    increasing complexity and scrutiny associated with CEO and executive
    pay. Seven CSSBI 100 HRCC chairs (up from 4 in 2006) receive higher
    retainers compared to other committee chairs (other than audit), with
    a median value of $15,000, or the same as audit chairs. By
    comparison, 19% of the comparable U.S. firms (about 20% give their
    HRCC chair a higher retainer.

    Board Composition

    -   Rate of women directors not increasing: Women currently occupy 13% of
    all board seats within the CSSBI 100, a level that has not increased
    meaningfully since 2003. Over the past decade, the rate of growth has
    been slow for female directors joining both CSSBI 100 and comparable
    U.S. firms, with Canadian companies lagging by 2 percentage points.
    Women are slightly better represented on the larger CSSBI companies,
    to the smaller ones. A similar situation exists between comparable
    larger and smaller U.S. firms.

    -   Among surveyed companies, individuals with relevant industry and
    international experience remain the most sought-after directors.
    Demand for specific functional expertise jumped 76% over last year,
    particularly for directors with experience in compensation and human
    resources, as boards deal with the heightened scrutiny over executive
    pay.

    Governance Practices

    -   New disclosure sheds more light on the use of external compensation
    consultants: While a new guideline, a significant majority (81%) of
    CSSBI 100 companies disclose the name of the consulting firm retained
    by management (e.g. for benefits and pensions) and by the board/HRCC
    committee (e.g. for CEO and senior executive compensation) and 55%
    voluntarily disclose the fees paid to the various consultants. Median
    consulting fees paid by management for these services are more than
    three times those paid for compensation services to the board. Based
    on proxy disclosure, just over half (51%) of those disclosing have
    a separate compensation consulting firm retained exclusively by the
    board/committee to provide compensation consulting.

    -   More evaluations of Board Chairs: The proportion of CSSBI 100 boards
    that evaluate the chair increased to 87% from 73% last year.

    -   Director Evaluation methods: Peer evaluation is the most common
    method of assessing director performance, with over half of CSSBI 100
    companies using this method. 51% of the peer, self and survey based
    evaluations are supplemented by a one-on-one with the board chair.

    The 12th annual Canadian Spencer Stuart Board Index is available on 
Spencer Stuart's web
site(http://www.spencerstuart.com/research/articles/1236/).

    About Spencer Stuart

    Spencer Stuart is one of the world's leading executive search consulting
firms. Privately held since 1956, Spencer Stuart applies its extensive
knowledge of industries, functions and talent to advise select clients,
ranging from major multinationals to emerging companies to nonprofit
organizations, and address their leadership requirements. Through 50 offices
in more than 25 countries and a broad range of practice groups, Spencer Stuart
consultants focus on senior-level executive search, board director
appointments, succession planning, and in-depth senior executive management
assessments.

    The premier firm for board counsel and recruitment, Spencer Stuart 
conducts over half of all director assignments handled through executive
search. Spencer Stuart was the first global executive search firm to enter
Canada, helping clients across the country achieve outstanding leadership
solutions for their organizations from offices in Toronto (established in
1978) and Montréal (established in 1982). For more than 20 years, the Firm's
Board Services Practice has helped boards around the world identify and
recruit outside directors, as well as provide advice to chairs, CEOs and
nominating committees on important governance issues. For more information on
Spencer Stuart, please visit www.spencerstuart.com.





For further information:

For further information: Mark Limonchik, (416) 203-5593,
mlimonchik@spencerstuart.com

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SPENCER STUART AND ASSOCIATES CANADA

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