Listed companies | The disclosure of bosses’ pay rates is set to change

Executive compensation rankings are expected to change. New rules approved by the Securities and Exchange Commission (SEC) on Thursday will allow companies to present this information with more nuance to better reflect reality.

Posted at 6:00 am

Richard Dufour

Richard Dufour
The press

Beginning in December, the US Securities and Exchange Commission will require companies to submit a new table each year that represents “true” executive compensation excluding certain items, most notably the attribution of unacquired securities (stocks and options).

“There will be a much more realistic approach to compensation,” comments François Dauphin, CEO of the Institute on Governance.

“We wanted to establish a real connection between the actual compensation paid and the company’s performance, which was not possible with the currently planned disclosure. A chart will now give us this much more relevant information for investors. »

Securities and Exchange Commission chief Gary Gensler says the organization he heads has long recognized the value of disclosing executive compensation.

He says the new rules will “make it easier” for investors to assess decision-making related to remuneration policies.

“It will allow investors to have the consistent, useful and comparable information they need to evaluate policies,” he said in a statement.

Company performance measures must appear in the new SEC-required table, such as total shareholder return and those for a group of comparable companies.

Under the new rules, the SEC will also require companies to clearly describe the relationship between financial performance and executive compensation.

Soon in Canada?

If such rules are passed in the United States, François Dauphin says Canada can be expected to follow suit in the coming months as investor expectations on both sides of the border are the same.

Apparently he welcomes the upcoming changes.

We are sometimes outraged when we see amounts when in reality these amounts will never materialize.

Francois Dauphin, CEO of the Institute on Governance

In 2015, Laval-based pharmaceutical company Valeant (now known as Bausch Health) announced $123 million in compensation for its top five executives, a $100 million increase from the previous year, primarily due to equity awards . “But the campaign collapsed this year and the titles ended up being worth nothing,” says François Dauphin.

He also highlights the case of Nuvei, where executive compensation appeared “staggering” in the first year on the Montreal exchange for electronic payment solutions. The reported value of Nuvei founder and CEO Philip Fayer’s compensation, which consists primarily of stock bonuses and options, was over $140 million last year.

The Coveo case

The case of Quebec company Coveo is another example where disclosure of executive compensation has raised eyebrows lately.


The bulk of Coveo’s big boss Louis Têtu’s total compensation is tied to the value of his stock options, which he cannot exercise until the value of the company’s stock triples from its current value.

“In a situation like ours, compensation leads to a rough outcome,” comments Coveo’s Director of Legal and Corporate Affairs, Jérémie Ste-Marie.

It refers to the total compensation of 12.9 million for the fiscal year 2022 of Coveo’s big boss, which was presented this month in the management circular of the Quebec company, which specializes in artificial intelligence in e-commerce.


Louis Têtu, Chairman and Chief Executive Officer of Coveo

Of the $12.9 million in total compensation granted to Louis Têtu, $12 million comes from calculating the value of his stock options, which he cannot exercise until Coveo’s title triples compared to its current value.

Jérémie Ste-Marie reiterates that there are rarely options such as those granted to Louis Têtu, ie “performance options”.

There is an exercise price and a deadline to be met prior to exercise. It differs from a traditional option in that it adds a business performance criterion.

“It’s essentially tied to shareholder returns relative to the IPO price,” says Jérémie Ste-Marie. Louis Têtu will not receive a dime from his options until shareholders realize at least a 30% return over the initial price of the stock at the IPO.

And even then, according to Mr. Ste-Marie, he would receive one-fifth of the value shown in the documents because the options were divided into five equal tranches.

For Louis Têtu to option his last millions, shareholders who bought shares at the initial price of $15 — set at the time of the IPO — would need to have earned a 300% return on their investment.

The stock should have hit $45 back then, while it’s worth around $6 today. And if the action ever reaches $45, Louis Têtu’s options will have netted him $41.8 million.

Coveo stock, which started trading at $15 on the Toronto Stock Exchange last November, has fallen sharply since then, reflecting the widespread devaluation of stocks in the technology sector in recent months.

This decline came despite the positively received release of quarterly performance from analysts since the company’s IPO nine months ago.

For the first quarter of fiscal 2023, which ended June 30, the company’s revenue increased 45% compared to the same period last year to $26.5 million. The company expects fiscal 2023 revenue of approximately $110 million compared to $86.4 million in 2022, an increase of more than 27%.

Coveo’s operating deficit of $57 million at the end of fiscal 2022, compared to $18 million a year earlier, is primarily explained by the expansion of its activities, particularly in marketing and research and development. The company now has more than 725 employees, 40% of whom work in research and development.

It also includes an amount of approximately $11 million related to the company’s commitment to supporting foundations to give back to the community. Coveo is particularly committed to the Pledge 1% program.

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