Nadine has gained significant expertise in executive compensation legal matters and has published the only comprehensive book in Canada on executive compensation titled “Executive Compensation: A Director’s Guide”. Nadine has in-depth knowledge and experience on the following executive compensation matters.
Executive employment agreements
Executive employment agreements often include many terms not generally included in non-executive level agreements. Executives often have higher levels of responsibilities that require different protections and enhanced compensation. An understanding of market trends and compensation governance practices is important to properly design and draft an executive employment agreement.
Executive severance agreements
Executive severance agreements often address a host of factors that are necessary because of the executive’s senior level position within the organization. Typically, it is important to understand how the severance terms in an executive’s employment agreement are related to the terms in the compensation plans and the director and officer indemnity provisions.
Change of control agreements
Change of control agreements can benefit companies and executives if they are properly implemented. They can help companies attract, motivate and retain executives, particularly during periods of transition, whether the transition is imminent or a mere possibility. In the event of a corporate take-over bid, change of control agreements can give executives the security to focus on the merits of the bid, rather than their personal positions. Properly drafting change of control agreements is critical to ensure that they have their desired effect.
Stock options are a form of long-term executive compensation for which the value is generally tied to gains in the price of a company’s stock. Stock options can be tax effective to executives if properly implemented. Stock option plans may be implemented with or without share appreciation rights. To learn more about the implications for stock options in the 2010 federal budget proposal, see Stock Options: Impact of the 2010 Budget in A Director’s Guide to Executive Compensation Vol. 5, No. 3 | September 2010.
Share Appreciation Rights (SARs)
SARs are a form of executive compensation for which the value is generally tied to gains in the price of a company’s stock. Share appreciation rights can be tax effective for executives, depending on how they are implemented by the company. SARs can be implemented as stand-alone compensation or as part of a stock option plan. To learn more about the implications for stock options and SARs in the 2010 federal budget proposal see Stock Options: Impact of the 2010 Budget in A Director’s Guide to Executive Compensation Vol. 5, No. 3 | September 2010.
Restricted Share Units (RSUs) & Performance Share Units (PSUs)
RSUs and PSUs are forms of mid-term executive compensation. The value of RSUs is generally tied to the value of a company’s stock over time and, in the case of PSUs, other performance metrics as well. RSUs and PSUs are forms of deferred compensation that must meet the strict income tax requirements.
Deferred Share Units (DSUs)
DSUs are generally implemented as compensation deferral arrangements. When drafting and implementing a DSU, it is important to understand the strict requirements of the income tax rules affecting them.
Employee share purchase plans (ESPPs)
ESPPs enable employees to acquire shares in their employer and often provide incentives to do so. If properly implemented, ESPPs can be greatly valued by employees and provide a terrific way of motivating employees to act like owners, rather than strictly employees.
Statement of Executive Compensation - Proxy circular disclosure (NI 51-102F6)
Public companies disclose the compensation of their named executive officers annually in their proxy circular in accordance with National Instrument 51-102F6 – Statement of Executive Compensation. Determining what must be included in NI 51-102F6 and how it must be included often requires careful analysis and a thorough understanding of a company’s compensation plans and market practices. Legal advice is often required to ensure the best approach for the particular company is adopted and to minimize the risk of liability exposure. To learn more about the changes recently implemented to NI 51-102F6, see Executive Compensation Updates in A Director’s Guide to Executive Compensation Vol. 5, No. 4 | January 2011.
Compensation Committee Charter
The governance and disclosure requirements for a company’s Compensation Committee are set out in the National Instruments pursuant to securities laws. It is important that Compensation Committees meet these obligations and that their Charters accurately reflect their duties. Improperly drafted Compensation Committee Charters that are not in-line with the actual duties of Compensation Committees can cause confusion and create liability exposure.
Compensation Governance & Say-on-Pay
Directors and officers have a duty of care to act in the best interest of the company. This duty applies in the context of compensation governance. In determining compensation governance practices, it is important that directors and officers understand the level of care imposed on them by case law and the best practices articulated by various shareholder advisory groups and other stakeholders, such as the Canadian Coalition for Good Governance and Risk Metrics Group. This applies in particular to organizations with shareholder say-on-pay advisory votes. To learn more, see Good Pay Practices: Interested Stakeholders Weigh-In in A Director’s Guide to Executive Compensation Vol. 4, No. 4 | December 2009; and Say-on-Pay: Will Your Pay Practices Survive the Scrutiny? in A Director’s Guide to Executive Compensation Vol. 4, No. 2 | May 2009.
The role and responsibilities of directors has evolved and expanded in recent years. The compensation provided to directors has also changed over time. In determining the appropriate forms of director compensation, it is important to understand the roles and responsibilities of each member and committee of the board of directors.
Short-term incentive plans (STIPs) & long-term incentive plans (LTIPs)
Many organizations offer employees the opportunity to participate in STIPs and LTIPs, in addition to their base salary. These can take various forms, such as annual cash bonus plans and multi-year performance based cash bonus plans. In designing and drafting these plans, it is important to have a good understanding of the income tax rules affecting them.
Retention incentives & transaction incentives
Retention incentives and transaction incentives can benefit companies and executives if they are properly implemented. Transaction incentives can be used to motivate employees to work diligently to complete the transaction and to obtain the best possible value for the company in connection with the transaction. Retention incentives can be used to retain employees and can be particularly beneficial during periods of crisis or transition for a company. It is important that these incentives be properly designed and implemented to motivate the desired behaviours. To learn more about retention incentives, see Retention Bonuses: Are They Necessary These Days? in A Director’s Guide to Executive Compensation Vol. 4, No. 3 | September 2009.