I sent this thread with some quotes to some contacts on my hotmail list, this is a response from Bill Mackenzie of ISSProxy:
"I have watched stock options mushroom in popularity during the 1990s.
During this period, the yield on the S&P 500 index stocks sank to its lowest watermark in decades. The popularity of stock options has peaked in the US, albeit at a much loftier (read expensive) peak than we have ever seen in Canada, at least so far.
I see a stock option problem surfacing in Canada. Resource companies, buoyed by high resource prices, are stock option gold mines not only for
management, but also directors. It seems that some directors of some of the smaller resource companies have seen fit to grant themselves ever larger option packages. Although non-executive director compensation has topped the $100,000 mark at some of Canada's largest companies, we are seeing some packages top $500,000 and even $1 million at some smaller ones. For example, non-executive directors of Yamana Gold believed they were worthy of a grant of 1.5 million Yamana options in 2006. Averaging 300,000 options per non-executive director, with an exercise price of just under $10, these options had a Black-Scholes value in excess of $1,000,000 per director at the time of grant. By the time we obtained the proxy circular, they had an
intrinsic value of nearly $1 million per director. There was nothing in the
proxy circular to support such an exceptionally large compensation package, which had mushroomed from the previous year's. Unfortunately, there are others like Yamana.
What this means is that the concept of accountability needs to be reinforced with many boards. The language of proxy circulars with regard to director options invariably reads "the company granted options to directors..." as if there were some superior being "the company" that was there to deal at arms length and look after shareholder interests. Is this what "independence" has come to mean? How independent are directors that pay themselves such fees?
Does casting a withhold vote punish these mega-grant directors? With our plurality system, they get elected. Usually even vote results posted on SEDAR disclose that directors were elected "by show of hands" at the
meeting, so even the embarrassment of a high withhold vote by proxy is
unlikely to be felt outside the boardroom. Fortunately, we have the press, who are merciless on perceived abuses. Yet the press will not win the battle if shareholders are standing silently on the sideline.
Hot off the press:
Wednesday, May 31, 2006
TORONTO — CEO compensation isn't closely linked to a company's stock market performance, a study by the Ontario Teachers' Pension Plan suggests.
"The results of this study raise serious questions about the alignment between CEO compensation and the market performance of their companies,” said Brian Gibson, senior vice-president of public equities for the pension plan.
The study examined a sample of 65 TSX-listed companies that had share price data dating back to Jan. 1, 1995. The companies were among the largest 100 companies at that time and are active today.
The comparison was based on company results from 2001 to 2003 and compensation for the years 2002 to 2004, to look at CEO pay.
"In recent years, many boards have tried to improve the link between executive pay and company performance,” Mr. Gibson said. ”While a few individual companies may have made good progress, in general there is no empirical evidence that compensation has become better linked to performance.”
Gibson urged active and retired teachers who are shareholders in Canadian companies to ask boards to find ways to improve the link between pay and performance.
http://www.globeinvestor.com/servlet/st ... 1/GIStory/