Testing The Waters: The Litigation Risk Implications Of Failed Say On Pay Votes For Canadian Companies

The recent proliferation of Canadian companies adopting shareholder votes on executive compensation (so called "say on pay" votes) has the potential to dramatically alter Canadian corporate governance policies. It also creates potential litigation risk against Canadian companies by enterprising shareholders, law firms, or both. This bulletin discusses the potential litigation implications of say on pay votes. We focus on the experience in the United States with say on pay litigation, the potential application to Canadian companies, and what Canadian companies can do to minimize litigation risk.

What is Say on Pay?

Say on pay is a non-binding, advisory vote by shareholders expressing their approval or disapproval for a company's executive compensation policies. Unlike other countries such as the United States,¹ say on pay advisory votes are not mandatory in Canada, and there is no indication that this will change soon.² Nevertheless, it is increasingly