Binding annual vote on adequacy of compensation offered to leadership with predetermined consequences for low results
RESOLVED that the Company will seek a unitholder vote on the compensation offered to its leadership (‘Comp’) at each annual general meeting of unitholders (‘AGM’). If less than two-thirds of votes cast approve the Comp, the members of the Governance and Human Resources committee (‘GHR’) shall be replaced immediately. If less than one-third of votes cast approve the Comp, all GHR members shall be dismissed immediately from the Company’s board of trustees, with the forfeiture of all unvested compensation.
Rationale:
This proposal is commonly referred to as ‘Say-on-Pay’. Its value is widely acknowledged, and it was in fact mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (‘Dodd-Frank’) in the USA.
Dodd-Frank was enacted to address some of the weaknesses in the USA’s regulatory framework that contributed to the financial crisis of 2008-2009. Section 951 of Dodd-Frank directly addresses Say-on-Pay. In Canada, security commissions have also identified the topic as an issue requiring regulatory intervention, e.g. OSC Staff Notice 54-701.
The Company currently does not offer its unitholders the opportunity to indicate their support for the Comp and as a result dissatisfied unitholders have limited avenues to express their standpoint: their only real alternative besides selling their units outright is to vote against the re-election of BTB trustees, thereby potentially penalizing the recorded support for trustees with no input in the Comp.
In order to foster strong focus on this matter considering BTB’s past track record, it is imperative that GHR trustees presenting Comp which is ultimately rejected by unitholders, be held accountable for inadequate judgement in order to save the resources of all involved.
As shown in Appendix E (available here - https://tinyurl.com/3famnjhk), a Say-on-Pay is already provided by many of the peers identified as relevant enough by GHR for leadership compensation benchmarking purposes, including SmartCentres REIT (‘SRU’).
SRU has offered its unitholders a Say-on-Pay for at least the past three years, as Sylvie Lachance sat on both SRU and BTB’s boards of trustees. GHR should have therefore had access to all the experience and knowledge required to implement this policy long ago.
Some of the peers with a Say-on-Pay - that GHR looks up to - have received underwhelming results on their relevant votes, and this therefore also begs the question: why would GHR use approaches already deemed flawed to mold its own policies?