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Is 'say on pay' the solution?

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Stephen Jarislowsky believes executive compensation has gone "out of sight" and hasn't contributed anything to performance.

The Canadian financier and chairman of one of the nation's largest investment management firms, Jarislowsky Fraser Ltd., tells BNN "I don't believe there's such a thing as a star CEO, really."

He advocates for the elimination of stock options and for the simplification of remuneration items. In the last ten years, he says, executive compensation has gotten "worse." The three top earning CEOs in Canada all earn $15 million or more.

With the introduction of "say on pay" two years ago, shareholders have been slowly saying "no" to higher executive pay. Last week, 58 percent of QLT Inc.'s shareholders became the first to vote against an executive compensation package.

Participation in "say on pay" is not mandatory, so it's the private sector that's taking the lead, Ermanno Pascutto, executive director, FAIR Canada, tells BNN. One hundred companies have voluntarily taken part in the initiative.

"At some stage, I think the regulators will come in, and probably at one stage it will become mandatory to have say on pay," he says.

Globe and Mail reporter Janet McFarland, who coordinates the paper's extensive executive compensation report, tells BNN it's time for the government to step in and make it a mandatory part of corporate governance.

"The companies that have the most controversial packages, the most controversial compensation policies, I go to look at their say-on-pay votes because I'm curious, and they haven't put it to a vote," she says.

But the structure of "say on pay" appears "odd" to Arthur Kohn, who helps companies set up their pay packages in the U.S. The partner at Cleary Gottlieb Steen & Hamilton LLP tells BNN he criticizes it as a "blunt instrument," as it's difficult to interpret what the vote means. Some shareholders may be voting on single items, while others' votes may be based on the entire package.

"I don't think it has zero value. But I don't think it has the benefits that its proponents think it does."

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