An advisory shareholder vote on executive compensation (“Say on Pay”) is a corporate governance best practice for public issuers. In Canada, a majority of companies in the S&P/TSX 60 Index hold Say on Pay votes. In the United States and the United Kingdom, Say on Pay is mandatory for publicly-traded companies.
Executive compensation disclosure has allowed shareholders to become better informed in respect to amounts paid or payable to named executive officers, the circumstances under which payments will be made, and the reasons for specific compensation structure decisions. However, disclosure falls short of a vote as it does not allow shareholders to provide their views on compensation decisions.
Shareholders are seeking assurance that directors are making serious efforts to link executive compensation to corporate performance. Say on Pay provides shareholders with an opportunity to register their approval or disapproval on executive compensation. Additionally, Say on Pay has been found to improve communication between shareholders and issuers on executive compensation.
Even where a company has strong investor relations programs to solicit the views of major shareholders, Say on Pay votes provide valuable and reliable information to the board on the views of all shareholders, including minority shareholders.
The philosophy underpinning Say on Pay acknowledges that directors are charged with making decisions regarding executive compensation while allowing shareholders to provide their views of those decisions.
In the absence of a Say on Pay vote at Linamar Corporation shareholders who do not support some or all aspects of the company’s executive compensation practices can only register this view indirectly, by withholding their votes to re-elect directors on the compensation committee. Say on Pay will allow shareholders to clearly and unambiguously express their views of executive compensation by voting on the matter directly.
Shareholders request that the Board of Directors adopt a policy that Linamar Corporation shareholders be permitted to vote, on an annual and advisory basis, on a management resolution to ratify the compensation of Named Executive Officers set forth in the proxy statement.