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Directors' Average Pay Nearly CDN$120,000

January 24 2007 - The 2006 Spencer Stuart Board Index reports on trends in compensation and governance for 100 of the largest publicly traded Canadian companies with annual revenues exceeding CDN$1 billion (the "CSSBI 100") and makes comparisons with similar US firms. It also includes a feature report: CEO Route to the Top: A Statistical Snapshot of CEOs of Leading Canadian Companies.

Average director compensation for the companies surveyed was CDN$118 026 in 2006 - an increase of 15 per cent. Equity accounted for 87 per cent of that growth. Firms granting equity paid more than twice those providing cash-based remuneration only (CDN$144 747 compared to CDN$70 910). Firms with more than CDN$5 billion in revenues rewarded directors an average of CDN$143 808; 48 per cent more than firms with revenues between CDN$1 - 5 billion.

Andrew MacDougall, head of board services practice at Spencer Stuart said:

"Investors can be encouraged that leading Canadian companies have increasingly taken positive steps to align shareholder and director interests as part of their governance reforms. The potential risk of an over-reliance on equity in director compensation will be an issue boards will face going forward."

The survey found that total average director compensation (including equity) for CSSBI 100 companies was 64 per cent of that paid by comparable US firms; average retainers for Canadian board members were only half those paid by US companies.

Over three-quarters of Canadian boards (80 per cent) have minimum equity ownership requirements for directors, compared to 62 per cent for US boards. The survey also identified a continuing decline in use of stock options.

Andrew MacDougall added:

"While about a fifth of the firms in our analysis allow options, we found that only eight Canadian firms actually grant them. We're seeing a similar trend in the

US, where more than half of comparable companies still have option plans, but only 5 per cent exercise them. Most boards now opt for less controversial forms of equity compensation."

The survey identified an increase of 96 per cent in audit chair retainers between 2002 and 2006, reflecting increased responsibilities resulting from new regulations governing audit committees. Audit committee chairs at CSSBI 100 companies received, on average, CDN$18 921 in retainers, compared to CDN$19 858 for US firms. However, among larger CSSBI, audit chair retainers exceeded comparable US firms by 13 per cent.

The survey found that while women are increasingly represented on Canadian boards, they continue to lag behind their American counterparts. Women occupied 13 per cent of board seats in companies surveyed, a 5 per cent increase over the previous year. Of 59 companies that added new directors, more than a quarter recruited women. The 2006 survey found that 51 per cent of Canadian boards have more than one female director (compared with 46 per cent in 2005), while only 9.5 per cent have none (compared with 14 per cent in 2005).

Individuals with relevant industry experience topped the preferred list for new directors in 2006. There was a small increase (1 per cent) in the number of international directors - an average of two per board. By contrast, comparable US firms have an average of only one international director per board.

Four out of five firms in the CSSBI 100 separate the functions of chair and CEO, in contrast to a third of comparable US firms. This practice has increased by 64 per cent in Canada and 38 per cent in the US since 2002. Just over half of chairs in the CSSBI 100 are also independent directors, five times higher than comparable US firms. Formal evaluation procedures for committee chairs rose by 26 per cent in 2006, while individual director evaluations rose by 12 per cent. Virtually all firms provide ongoing education for directors on sector-specific issues and governance practices.

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