A recent Ontario Court of Appeal decision serves as an important
reminder that when the board of directors makes decisions on
executive compensation matters, their conclusions must be
evidence-based and properly documented in order to discharge their
fiduciary duties.
In Unique Broadband Systems, Inc. (Re), 2014 ONCA 538, the Court
of Appeal affirmed the nature of directors' and officers'
fiduciary duties and clarified the application of the business
judgment rule in the context of a dispute regarding executive
compensation. The case is significant from a corporate governance
perspective for several reasons, including because of the following
findings:
1. Expert evidence and market data can support a board's
decision. The Court of Appeal specifically noted that "The UBS
Board did not seek or receive any expert advice on an appropriate
bonus structure. Nor did they have any comparable or other data
regarding executive compensation in the marketplace."
