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Share Ownership Encourages Alignment

Direct ownership of common shares is the simplest way to get long-term close alignment with shareholders, says Bruce Cooper, chair of the Canadian Coalition for Good Governance (CCGG) board and CEO of TD Asset Management Inc. He was participating in its ‘Is all Equity Created Equal? Strengthening the Management-Shareholder Alignment through Effective Ownership Policies’ session with Maxime Ménard, a CCGG board member and president and CEO of Jarislowsky Fraser Limited. Menard said their preference has always been alignment between the CEO and common shareholders as there is a direct link between common share ownership and the performance of the company. When a CEO has a large proportion of company shares, the company tends to outperform. Ali Abid, a principal, research and engagement, at CCGG, said its research shows almost 90 per cent of index constituents have a formal share ownership policy for their senior management with 75 per cent owning shares that meet company requirements. Cooper said holding common shares is the “simplest way to get long term, close alignment” with shareholders. While RSUs, and DSUs, and options could play a role in retention, that's different from alignment with shareholders. Menard said there is also a push on common share ownership for members of company boards. However, he cautioned that if the share requirement is too high, it may reduce the pool of candidates. While those that have “significant skin in the game or ownership tend to be more interested in the business, you can’t push too hard because you want to have people interested in sitting on a board.”

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