‘IF YOU PAY THEM WELL, THEY DO A MUCH BETTER JOB, MAKE YOU MUCH MORE PRODUCTIVE AND MUCH MORE PROFITABLE.’ —ROGER MARTIN, PROFESSOR EMERITUS OF STRATEGIC MANAGEMENT AT THE ROTMAN SCHOOL OF MANAGEMENT Moreover, she said, “the boards themselves are often not reflec- third-party ESG ratings systems that enable tive of the communities that these organizations serve because of managers of funds to say ‘We’re only going lack of diversity, so that also becomes part of the problem.” to invest in companies that have this rating Although the disclosure rules in Canada have not been updated or above,’” he said. “I like pressure from in a long time, proxy advisers are busy assessing compensation dis- investors. I like pressure from consum- closure for executives on both a qualitative and quantitative basis, ers. I think it’s great when consumers say said Lisa Colnett, chair of the human resources and compensation ‘You’ve got to assure me that you’re being committees at Parex Resources Inc. and Northland Power Inc. sustainable, and you’ve got to subscribe to Directors must, therefore, go “above and beyond the minimum science-based targets’ or whatever specifics when it comes to compensation disclosure and analysis. We have to they wish.” provide relevant information, so that shareholders and other stake- Smart and responsible directors will holders can assess how we approach executive pay,” she said. try to get their company to act early on A company cannot succeed if it fails to earn the confidence or such matters. “They see where the puck is support of its stakeholders, including its investors, customers, pol- going. They should be saying to manage- icy makers and the local community, Colnett said. ment ‘What issues are really relevant to us “We’ve seen a broadening, beyond financial returns, of what is [where we can move to] the front of the now important in the eyes of the board of directors. This assess- queue?’” Martin said. ment now includes ESG issues, and taking care in the communities Directors should be getting their compa- where they operate,” she said. ny to commit to paying a living wage, what- ever that amount is for the region in which Equitable and fair it operates, and to be on top of work-life ESG also gives directors the opportunity to add incentive-related balance issues, such as providing sufficient performance measurements around both executive and employ- advance notice for shift work so that peo- ee pay, and to ensure that such incentives are consistently applied ple’s lives are not disrupted, he added. across the whole organization. “Executive pay targets need to vary As more jurisdictions put legislation in and include ESG metrics that are relevant in a meaningful way,” place for pay equity, “it’s going to become Colnett added. very hard for companies to explain away an Directors have a responsibility “to ensure that equitable and fair enormous multiplier for executive compen- pay practices are being applied by management across the whole sation compared to regular employees, and company in the communities where we operate,” she said. “We also its impact on the bottom line,” Venditti said. have to consider the compensation structure necessary to attract, “There has to be a tie-in as to how we value support and retain key talent.” different members of our organization, and a Board compensation committees can break the wage-gap cycle realization that the CEO and executive team by carefully comparing their organization’s pay structure to peer are also just members of the organization.” DJ companies, as well as to the jurisdiction at large in which it oper- ates, Colnett said. JEFF BUCKSTEIN is an Ottawa-based There is a long way to go before pay inequity is effectively ad- freelance business writer with a CPA, CGA dressed, but the growing scrutiny of ESG practices is a helpful de- designation. He writes about personal velopment, says Rotman’s Roger Martin. finance, accounting and other business- “I’m all for investors asking for more disclosure. I like the related issues and current events.