CANADA: Stock options find less favour with Canadian companies - 17 Sep 2009

Stock options find less favour with Canadian companies

John Morrissy,
Financial Post 


Published: Thursday, September 17, 2009

OTTAWA -- Canadian companies are moving away from using stock
options in executive compensation plans following intense criticism of
the practice during the financial crisis, a study released Thursday
says.

"The survey shows that many companies are revisiting
their long-term incentive (LTI) vehicles. Of those companies that have
an LTI plan, 28% are changing their pay mix -- mostly to put more
emphasis on bonuses and performance shares, with less focus on stock
options," said Bob Levasseur, a senior consultant on executive
compensation for consulting firm Watson Wyatt.

The use of
options, which allow holders to buy stock in a company at a specified
price, was widely criticized during the financial crisis when U.S.
banking and other executives reaped tens of millions of dollars in
bonuses despite what was quite often a dismal performance on the part
of their companies and the value of its shares.

"The
employee stock-option plan will remain a staple in Canadian executive
pay plans because it is the only long-term incentive vehicle that
offers a tax advantage to plan participants," Mr. Levasseur said.
"However, as organizations regroup, it is not surprising to see a shift
toward annual cash base incentives."

The subject remains a
matter of intense international debate with the European Union pushing
for more stringent use of stock options at the G20 summit next week in
Pittsburgh.

While the most extreme cases occurred in the
U.S., the backlash has spread to Canada, said Mr.Levasseur, even though
almost 90% of respondents did not feel their executive compensation
programs led to excessive risk taking, a

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