The say on pay resolutions at Canada's banks have garnered surprising levels of shareholder backing, with one coming close to majority support.

One of the proposals, which was put forward to the CIBC annual meeting Feb.28, received 45 per cent support.

"I did not expect that high a vote," Gary Hawton, chief executive of Meritas Mutual Funds, which filed the resolution at the banks was quoted as saying in the Financial Post.  "This sends a huge message."  Meritas worked in conjunction with the Shareholder Association for Research and Education (SHARE), which acted as its advisor on the issue.

Typically, shareholder resolutions on environmental, social and governance issues receive single-digit support when first filed.

In response, CIBC chairman Bill Etherington said the bank would continue a "very proactive dialogue with our shareholders and the governance community to move forward on this matter."  However, he did not commit to implementing a say-on-pay mechanism.

Votes at the other banks have also been surprisingly high, although not as high as at CIBC.

Similar resolutions received 42 per cent support at the Royal Bank, 39 per cent at Bank of Nova Scotia and 35 per cent at Bank of Montreal.  A similar proposal at Toronto-Dominion Bank will be heard April 3.

The Meritas proposal calls on the boards of the banks to adopt a policy giving shareholders the opportunity to vote on an advisory-or non-binding- resolution to ratify the compensation of the Chief Executive Officer.

Meritas and SHARE argued that, given the concerns about compensation and corporate performance, that an advisory vote will provide shareholders with an opportunity to register their views on all elements of executive compensation.

The relatively high levels of support are an indication that some large institutional investors also supported the proposals in addition to Meritas and other SRI investors.  However, it will be a few months before some of the pension disclosures are available, and it won't be known until September how mutual funds voted, when they are required to disclose their proxy record for 2007-08.

There was also significant opposition to the proposals, as voiced by the Canadian Coalition for Good Governance (CCGG), which advised its members to vote against say-on-pay proposals in 2008.  In a position paper released in December, the CCGG argued that Canadian companies are making progress on compensation issues, and say on pay resolutions are not necessary.

In a report on its proxy voting guidelines released Feb.5, the Canada Pension Plan investment Board took a similar position to the CCGG, saying it would oppose say on pay proposals in Canada in 2008, although it would assess such proposals in the US on a case-by-case basis.

For more information, visit www.meritas.ca

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