TORONTO, Jan. 8 /CNW/ - The Ontario Teachers' Pension Plan (Teachers') is
urging boards and compensation committees not to change stock option plans and
other forms of equity-based compensation in response to slumping markets.
"Executives should be rewarded for long-term sustainable returns," said
Wayne Kozun, Teachers' Senior Vice-President, Public Equities, expressing
concern that boards might make exceptions to re-pricing rules or other
executive compensation practices in a period of lower markets.
"We believe it is important to protect shareholder value by clearly
stating we are opposed to re-pricings, including accelerated grants, option
exchange programs or resetting of performance targets," Mr. Kozun added.
Re-pricing options would allow management and employees of public companies to
exercise previously-awarded stock option grants at a lower price than
originally set in performance targets.
"Shareholders can't re-trade the shares they bought for a lower purchase
price. Preserving the terms of previously granted options means the rules are
the same for shareholders and option holders, and ensures both groups are
aligned to benefit proportionally when markets rebound in the future," said
Mr. Kozun. Consistent with previous years, Mr. Kozun said Teachers' will
carefully evaluate compensation programs approved by boards during the
upcoming proxy season.
Teachers' sent its updated corporate governance policies and proxy voting
guidelines to the boards of large Canadian companies, as well as to the boards
of large international companies in which it invests, in December. The updated
policies released in December also stress the importance of board
"We're looking to boards for consistency during this compensation season.
Compensation programs should be structured to last through business cycles and
reward executives for good performance in their sector, not short-term market
movements," Mr. Kozun said. He noted that Teachers' supports compensation
models that focus on long-term results, risk awareness and value creation for
Teachers' recently appointed Executive Vice-President and Chief
Investment Officer, Neil Petroff, said that good corporate governance is good
business during all economic cycles. "Good governance and executive
compensation practices cannot be cast aside due to market conditions," said
Mr. Petroff. "Teachers' long-term investment objectives make corporate
governance, and particularly compensation programs, an important ongoing
consideration," he said.
Teachers' is a founding member of the Canadian Coalition for Good
Governance (CCGG), whose over 40 members are institutional investors managing
approximately $1.4 trillion of assets on behalf of Canadian investors.
CCGG has developed principles of executive compensation for public
companies and will be monitoring 2009 proxy compensation disclosure by
Canada's major public companies on behalf of its members.
"We hope to see a closer alignment of compensation practices with the
long-term interests of shareholders, and the recognition of the important link
between executive compensation plans and the risks assumed by companies," said
Stephen Griggs, Executive Director of CCGG. "Boards need to recognize that
good governance - and well designed compensation plans - contribute to the
creation of shareholder value and that good governance can make a significant
difference to shareholder returns, particularly in these challenging economic
Teachers' updated guidelines are available at www.otpp.com/gov.
The Ontario Teachers' Pension Plan is the largest single-profession
pension plan in Canada. An independent corporation, it invests the pension
fund's assets and administers the pensions of 278,000 active and retired
teachers in Ontario. Please visit www.otpp.com.
Representing the interests of institutional shareholders, CCGG promotes
good governance practices in Canadian public companies and the improvement of
the regulatory environment to best align the interests of boards and
management with those of their shareholders, and to promote the efficiency and
effectiveness of the Canadian capital markets. Please see www.ccgg.ca.
For further information:
For further information: Deborah Allan, Director, Communications and
Media Relations, Ontario Teachers' Pension Plan, (416) 730-5347,
firstname.lastname@example.org; Stephen Griggs, Executive Director, Canadian Coalition
for Good Governance, (416) 868-3585, email@example.com