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The Courts and Corporate Executive Compensation in Canada

  • Sean McGinty EMAIL logo
Published/Copyright: June 14, 2021

Abstract

Corporate executive compensation in Canada, as in many developed economies, has risen significantly since the 1980s relative to that of the average worker. This has posed an issue for corporate governance due to concerns that the trend may not be serving the corporation and its stakeholders well, and also an issue for society as a whole due to its impact on income inequality more generally. This has raised interest in the role played by institutions in shaping executive pay decisions and also in what role they might play in resolving these issues. This paper looks at the role played by one such institution, the courts, with two ends in mind. The first is to gain an empirical understanding of what the courts actually do with respect to executive pay disputes. It does so by examining a set of decisions by Canadian courts between 1876 and 2018 collected by the author in which the claim of a corporate executive to their pay was at issue in order to get a better picture of how the courts are accessed, who relies on them, what rules they use, how the courts respond and how trends in these have evolved over time. It finds that the litigation of executive pay disputes has varied widely over time with a variety of stakeholders using a variety of legal areas – corporate law, contract law and bankruptcy/arrangement law in particular – to dispute the entitlement of executives to their pay. In recent years however litigation has come to be dominated by oppression remedy applications, with plaintiffs being successful in challenging pay in a majority of decisions. This paints a significantly different picture of the role of the courts than that developed in the American literature which focuses almost exclusively on shareholder use of derivative actions to monitor pay decisions. The second is to examine how better use might be made of the courts in order to remedy the broader problems for corporate stakeholders and society as a whole that corporate executive pay practice presents. It suggests that an expanded role for the oppression remedy by corporate employees should be considered as a policy option which would better reflect a stakeholder model of governance and address broader inequality concerns at the same time.


Corresponding author: Sean McGinty, Graduate School of Law, Nagoya University Graduate School of Law, Furo Cho, Chikusa Ku, Nagoya, Japan, E-mail:

Funding source: Japan Society for the Promotion of Sciences

Award Identifier / Grant number: 19K01367

Appendix

Table of Cases (alphabetical)

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Brainhunter Inc. (Re) 2009 CanLII 67659 (ON SC)
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Nortel Networks Corporation (Re) 2009 CanLII 10679 (ON SC)
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PCAS Patient Care Automation Services Inc. (Re) 2012 ONSC 2423
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Schitthelm v. Kelemen 2017 ABQB 546 (CanLII)
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SkyLink Aviation Inc. (Re) 2013 ONSC 1500
Southern Pacific Resources Corp. v. Gulka 2012 ABQB 676
Target Canada Co. (Re) 2015 ONSC 303
Textron Financial Canada Limited v. Beta Limited 36 CBR (5th) 296
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Timminco Limited (Re) 2012 ONSC 506
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Unique Broadband Systems, Inc. (Re) 2013 ONSC 5121
UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc., 2002 Canlii 49507
Urton v. SRI Homes Inc., 2007 BCCA 372
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Victorian Order of Nurses for Canada (Re) 2015 ONSC 7371
Waddell v. Ontario Canning Co. [1889] O.J. No. 63
Walter Energy Canada Holdings, Inc. (Re) 2016 BCSC 107
Warehouse Drug Store Ltd., Re 24 CBR (5th) 275
Warren v. Superior Engravers Ltd. [1940] O.J. No. 217
Weedon v. Sherritt Inc. 2002 ABQB 217 (CanLII)
Wigen v. Wynndel Logging Co. Ltd., 2018 BCSC 881
Wilson v. Wollatt [1928] 4 D.L.R. 403
Winkler v. High-Test Electrical Manufacturing Ltd. [1964] O.J. No. 849, [1965] 1 O.R. 386, 48 D.L.R. (2d) 136
Wonsch (Litigation Guardian of) v. Wonsch 76 O.R. (3d) 198, [2005] O.J. No. 3187
Wright v. Donald S. Montgomery Holdings Ltd., 39 BLR (2d) 266
Wright v. Rider Resources Ltd. [1994] A.J. No. 533, 21 Alta. L.R. (3d) 149, 159 A.R. 321

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Published Online: 2021-06-14
Published in Print: 2021-06-25

© 2021 Walter de Gruyter GmbH, Berlin/Boston

Articles in the same Issue

  1. Frontmatter
  2. Introduction
  3. Introduction: Law and Development in High-Income Countries
  4. Role of State, Law, Institutions for Economic Development
  5. Law and Development in the United States
  6. The Rule of Law and Its Social Reception as Determinants of Economic Development: A Comparative Analysis of Germany and Poland
  7. Are OECD Countries in a Rule of Law Recession?
  8. International Financial Centers as a Model: Facilitating Growth and Development by Connecting to International Legal Frameworks
  9. Migration, Poverty, the Role of State, (International) Law and Development in the Industrialised Countries of Europe
  10. Poverty and Inequality in High Income Countries and the Role of Law
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  12. International Cooperation Without Just Distributions? Beginning to Map the Role of Rising Economic Inequality in the Formation and Evolution of and Adherence to International Law
  13. Justice, Corruption, and Social Responsibility
  14. Toward Aligning with International Gender Goals? Analysis of the Gender Equality Landscape in Japan under the Laws on Women’s Economic and Political Participation and Leadership
  15. APUNCAC: An International Convention to Fight Corruption, Money Laundering, and Terrorist Financing
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  17. International Trade Law, WTO, and Rising Issues
  18. Can a Complicated “Consensus” Survive a Dose of Populist Poison? Exploring the Potential Impact of Brexit and Trumpism on the Developed Country Approach to Trade Law and Policy
  19. Universities as Engines of Development
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