‘There is a really strong current to match up with what the Americans are doing’
HR and total rewards professionals overseeing executive compensation and proxy disclosure should take note: a U.S. Securities and Exchange Commission (SEC) proposal to exempt most public companies from key pay-disclosure rules is fuelling a parallel debate in Canada over whether to loosen its own requirements.
The SEC has proposed exempting most public companies from key executive pay-disclosure rules, a change now fuelling a parallel debate in Canada over whether to loosen its own requirements.
Any shift in Canadian rules could affect what organizations must report on say-on-pay votes, pay ratios and executive compensation committees.
SEC proposal narrows filer categories
The SEC's proposed rule – titled Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies – would collapse the current filer system into two tiers: large accelerated filers and non-accelerated filers.
According to the SEC's own text, the proposal would extend scaled disclosure eligibility "from approximately 44% of registrants to approximately 81%" of reporting companies. Newly classified non-accelerated filers could reduce the number of named executive officers whose pay must be disclosed from five to three, and could stop reporting pension benefit tables and golden parachute arrangements.
The SEC filing also proposes raising the threshold for "large accelerated filer" status to a public float of US$2-billion, up from US$700-million, with a five-year seasoning period instead of one year — an increase the SEC estimates would still capture roughly 93.5% of total market float.
Canada’s top corporate executives earned record-breaking pay in 2024, widening the gap between CEO and worker compensation to its highest level on record, according to a previous report.
Say-on-pay votes among items exempted
Companies moving into the expanded non-accelerated filer category would be permitted to omit shareholder advisory votes on executive compensation, known as say-on-pay, along with CEO pay ratio disclosure and the pay-versus-performance table, according to the SEC filing.
Richard Leblanc, a professor of governance, law and ethics at York University, told The Globe and Mail the changes are sweeping.
"This is very significant, they are scaling back completely," he said, adding that companies argued to the Trump administration that the rules carry "a huge compliance cost."
Leblanc said Canadian regulators should "definitely not" follow suit, since proxy advisers such as Institutional Shareholder Services and Glass Lewis rely on the disclosures now under threat, even as he acknowledged "there is a really strong current to match up with what the Americans are doing," according to the report.
Canada weighing similar changes
The Canadian Securities Administrators (CSA) – the umbrella group for provincial and territorial regulators – published a consultation paper last week on modernizing public company regulation, which raises the possibility of reduced executive compensation disclosure for Canadian issuers.
Kai Li, a finance professor at the University of British Columbia's Sauder School of Business, told The Globe and Mail the SEC proposal and CSA consultation both aim to make going public more attractive. "It is a tradeoff," she said. "More transparency is better but it is a balancing act... shareholders can sometimes be nitpicky."
Kathleen Ritchie, a partner at law firm Gowling WLG, offered a more measured assessment, telling The Globe and Mail that "the existing burden in the U.S. is more significant than in Canada" and that regulators are "trying to strike the right balance." No timeline has been set for when the CSA consultation might result in formal rule changes.
Here’s a comprehensive guide on how to structure executive pay packages.
