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doesn't believe Canada should merely follow the crowd. "Where say on pay has been imple- mented, it's been implemented as a legis- lative response by politicians to a public outcry. It's not been done as a result of a deliberate reflection of what is the right model from a governance perspective. We need to look at this from the Canadian market," MacDougall says. Investors here, Shakeel says, also have greater powers to make their voices heard during proxy season than their American counterparts. In Canada, shareholders can issue their own proxy circular con- taining the names of their own director nominees, or, if they hold more than five per cent of shares, they can ask the management to include the alternative proposal alongside its own materials. "If you already have the ability through other means to make the same point, why do you need another tool to send the same kind of message?" he says. Pinder says investors shouldn't be shy r When it Appeals Opinions and Risk Management Mergers & Acquisitions Claims against Professionals and Fiduciaries Directors' and Officers' Duties and Liabilities Class Actions eally matters. of taking the ultimate step of removing a director if they think they've got the com- pensation wrong, comparing the situa- tion to an MP's relationship with his or her constituents. "When an issue comes up in Parliament, you don't go back to the people and ask them what to do. You're elected to do a job, and if they don't like it, they'll vote you out," he says. "If you're really not happy with the compensation, never mind say on pay, just recommend voting against [the chairman] and the members of the compensation commit- tee. That'll get their attention real fast." But according to the CCGG sub- mission to the OSC, in practice, such drastic measures are "difficult and pro- hibitively expensive." It estimates the cost of preparing, mailing, and promot- ing an alternative slate of directors at a minimum of $500,000. Pinder fears a say-on-pay vote could undermine the role of directors, who are already bound by a responsibility to act in the best interests of the company. "As a director, compensation is about building trust with management that you're going to be fair. If, at the same time, you have investors saying we don't trust the direc- tors, because we're going to vote on what you do, it doesn't work. If investors don't trust us, how do you expect manage- ment to trust us?" He sees say on pay as a measure that should be targeted at companies who are suspected of transgressing on com- pensation, rather than tarring all firms with the same brush. Shakeel says he's uncomfortable with Toronto: 416 867 3076 London: 519 672 4510 www.lerners.ca the notion that directors, with an inti- mate knowledge of the myriad complex factors that affect compensation and profitability, could be second-guessed by shareholders whose understanding may be lacking. "There's a lot that goes into the structuring of a compensation system. Lerners-1/2_IH_Aug_11.indd 1 22 • OCTOBER 2011 INHOUSE 8/16/11 8:42:12 AM