Canadian Compensation Peers: Competing With the U.S. for Talent or Escalating Executive Pay?

Selecting appropriate peers for benchmarking executive pay is often a challenge for publicly traded corporations. Shareholder concerns over ratcheting up pay compete against the need to attract and retain top executive talent. Achieving an appropriate balance between these competing factors should be reflected in a corporation’s executive pay benchmarking peer group. Currently accepted best practice is for corporations to choose peer companies that are similar in terms of industry and size, including factors such as market capitalization and revenue. This is intended to reduce the use of higher paying “aspirational peers” that a company normally wouldn’t normally compete with for executive talent.

For Canadian corporations, achieving this balance can be particularly challenging because the competition for executive talent largely involves a mix of Canadian and U.S. corporations. Additionally, institutional investors have raised concerns that the use of U.S. corporations as compensation peers in Canada could result in the ratcheting up of executive pay in Canada.