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	<title>IGOPPExecutive compensation &#8211; IGOPP</title>
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		<title>« Why Canadian CEO pay has soared over the past decade »</title>
		<link>https://igopp.org/why-canadian-ceo-pay-has-soared-over-the-past-decade/</link>
		<comments>https://igopp.org/why-canadian-ceo-pay-has-soared-over-the-past-decade/#respond</comments>
		<pubDate>Thu, 21 Jun 2018 17:58:37 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP dans les médias]]></category>
		<category><![CDATA[L’IGOPP dans les médias]]></category>
		<category><![CDATA[Agences de conseil en vote]]></category>
		<category><![CDATA[Chef de la direction]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Rémunération des dirigeants]]></category>
		<category><![CDATA[Vote consultatif sur la rémunération]]></category>

		<guid isPermaLink="false">https://igopp.org/why-canadian-ceo-pay-has-soared-over-the-past-decade/</guid>
		<description><![CDATA[« When shareholders of Canada’s big banks opened their proxy voting forms in early 2008, they found a striking new proposal on the ballot. Submitted by a small ethical mutual fund company, the resolution called on banks to give investors an annual vote on how executive pay was designed. Bank boards initially opposed the motion [&#8230;]]]></description>
		<content><![CDATA[« When shareholders of Canada’s big banks opened their proxy voting forms in early 2008, they found a striking new proposal on the ballot. Submitted by a small ethical mutual fund company, the resolution called on banks to give investors an annual vote on how executive pay was designed.

Bank boards initially opposed the motion as an intrusion into boards’ powers to set executive level pay. But within a year, a wave of companies bowed to pressure and agreed to introduce the votes, ushering in a decade of change in executive compensation design in Canada.

Since the financial crisis, measures have been introduced to increase transparency, better align executive returns with those enjoyed by shareholders and curb the worst excesses in chief executive pay.

[ ... ]

SHIFTING PERFORMANCE GOALS

The shift into share units over the past decade also means that compensation rewards shorter-term performance, despite frequent discussion about the importance of focusing management on longer-term, sustainable growth. Stock options are typically exercisable over 10 years, creating a long time lag between granting and cashing out, while share units typically pay out in cash at the end of three years.

Whether an unintended consequence, or simply an unavoidable trade-off, the shift into share units has reduced the definition of “long-term” compensation.

Yvan Allaire, chair of the Institute for Governance of Private and Public Organizations who wrote a recent paper on pay trends, believes share units provide a medium-term incentive at best, and a muddled short-term incentive at worst.

With most CEOs getting share unit grants each year, a portion is also vesting each year, so executives never have a single discrete three-year performance cycle. Instead, the performance goals are constantly shifting as a new target comes to fruition each year.

His proposed solution is to offer one grant of units every three years, allowing the performance goals to play out before a new incentive is added.

[ ... ]

While many shareholders urge companies to tailor compensation programs to their own unique strategies and time horizons, boards complain it is risky to deviate from the pay models favoured by the proxy advisers.

“The incredible convergence in compensation systems across companies is absolutely mind-boggling,” said Mr. Allaire.

“You read them, and it’s almost the same text from one to the other. … We’ve converged on a process which has received the blessing of proxy advisers and large investors, and boards feel safe when they apply that particular process.” »

Lire la suite [1]

[1] https://www.theglobeandmail.com/business/careers/management/executive-compensation/article-canadian-ceo-pay-an-inside-look-at-soaring-compensation/]]></content>
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		</item>
		<item>
		<title>« Executive pay: time for change ? »</title>
		<link>https://igopp.org/executive-pay-time-for-change/</link>
		<comments>https://igopp.org/executive-pay-time-for-change/#respond</comments>
		<pubDate>Thu, 05 Apr 2018 13:38:01 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[Articles d’actualités]]></category>
		<category><![CDATA[Agences de conseil en vote]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Rémunération des dirigeants]]></category>
		<category><![CDATA[Vote consultatif sur la rémunération]]></category>

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		<description><![CDATA[« A highly standardized process leads to yearly executive pay packages which combine salary, bonuses, stock options, restricted stock grants, performance share units, retirement benefits. The full assemblage will also include formal contracts covering change-of-control situations, termination conditions, etc.  Only the quanta of the compensation package vary from firm to firm. Whenever “long-term” performance objectives [&#8230;]]]></description>
		<content><![CDATA[« A highly standardized process leads to yearly executive pay packages which combine salary, bonuses, stock options, restricted stock grants, performance share units, retirement benefits. The full assemblage will also include formal contracts covering change-of-control situations, termination conditions, etc.  Only the quanta of the compensation package vary from firm to firm. Whenever “long-term” performance objectives are set to earn the variable compensation, “total shareholder return” (TSR) is the metric of choice (for 70% of TSX 60 companies in 2015).

It now takes some 34 pages on average to explain executive compensation. In 2000, it took all of 6 pages to describe executive compensation!

How much is our CEO worth? Well, let’s see what other CEOs of “comparable” companies are paid. Reasonable approach? Actually, no. Assembling a large number of companies from different industries, some US, some Canadian, and setting a particular CEO’s compensation at the median or the 75th percentile of these “comparable” companies’ CEOs is a recipe for ever-rising compensation. The unstated assumption, a dubious one, is that any of these “comparable” companies would recruit the CEO if he/she were not paid adequately.

Then this “competitively” set compensation is largely “at risk” so as to motivate the achievement of high performances. Right. Not really. Performance measures are set by management (or largely influenced by them) and include a broad interval giving access, commonly, to 75% to 150% of the bonus or performance shares (never or rarely 0%). Furthermore, shares have now largely replaced stock options. These shares have value even if the stock price goes down (which is not the case for stock options). Stock prices depend on many uncontrollable factors, which mean luck, good or bad, will play a significant role; actually, good luck pushes up the value of the package; bad luck pushes stock price down but the practice of yearly grant of stock options and shares will average out the effect of “bad luck”.

The compensation package, thus set, does not really please investors but they do not know what else could be done. Proxy advisory agencies, actually the fomenters of this standardized approach, will be favorable to the compensation levels if set according to their diktats. Say-on-pay voting will overwhelmingly support the pay package and the manner of its setting. (In 2016, only four companies of the TSX 60 received 20% or more of negative votes)

The ritualized process described here is indeed reassuring by virtue of the large number of firms abiding by it, but it fails to take into account the very particular character of each corporation, the specific nature of its industry, the time horizon of its strategy implementation, the drivers of its value-creation. It is prudent for a board to comply with the approach described above; any deviation risks incurring disfavor with proxy advisors, an influential lot in this matter.

Boards of directors of large publicly listed corporations are keenly aware of the limitations of the current standardized methods of setting executive pay. But it is very difficult and hazardous for any particular board to deviate from the standard approach. Board chairs of the TSX 60 companies should get together and agree on a different way of setting compensation. A common approach adopted by a large number of TSX 60 companies would be very effective in standing up to proxy advisors and moving forward on this seemingly intractable issue. Otherwise, this festering compensation sore will continue to erode their legitimacy and credibility with investors and the general population.

From an IGOPP policy paper Executive Compensation: Cutting the Gordian Knot published in November 2017. Available at www.igopp.org [1]. »

[1] https://igopp.org/en/executive-compensation-cutting-the-gordian-knot/]]></content>
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		<item>
		<title>« Barrick Gold unveils new pay scheme, may add directors »</title>
		<link>https://igopp.org/barrick-gold-unveils-new-pay-scheme-may-add-directors/</link>
		<comments>https://igopp.org/barrick-gold-unveils-new-pay-scheme-may-add-directors/#respond</comments>
		<pubDate>Mon, 31 Mar 2014 20:23:04 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[IGOPP dans les médias]]></category>
		<category><![CDATA[L’IGOPP dans les médias]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Président du conseil]]></category>
		<category><![CDATA[Rémunération des dirigeants]]></category>
		<category><![CDATA[Vote consultatif sur la rémunération]]></category>

		<guid isPermaLink="false">https://igopp.org/barrick-gold-unveils-new-pay-scheme-may-add-directors/</guid>
		<description><![CDATA[[&#8230;] &#171;&#160;Yvan Allaire, executive chairman of the board of the Institute for Governance of Private and Public Organizations, was positive about the plan overall &#171;&#160;It&#8217;s a giant step in the right direction,&#160;&#187; said Allaire, praising the move towards share awards over stock options. Options have fallen out of favor in recent years in part because [&#8230;]]]></description>
		<content><![CDATA[[...] "Yvan Allaire, executive chairman of the board of the Institute for Governance of Private and Public Organizations, was positive about the plan overall

"It's a giant step in the right direction," said Allaire, praising the move towards share awards over stock options.

Options have fallen out of favor in recent years in part because of concerns they encourage short-term thinking, and offer executives gains if their company's stock rises without downside risk if it falls.

But Allaire also said the plan could cause retention issues.

In an emailed statement, Harvey said the system is meant to create a management team "personally vested" in Barrick's success.

"In developing our new system, we looked at other companies who use a similar approach and they have found that it is actually a motivating factor in the retention of key executives," he said.

"WE HEARD THE SHAREHOLDERS"

Thornton's total compensation was $9.5 million in 2013, including a $5 million cash award that he has committed to use to buy and hold Barrick shares. Last year, he bought shares with his controversial $11.9 million signing bonus.

Barrick said all shares awarded under the long-term compensation plan will be bought on the open market to avoid dilution. It also laid out new minimum ownership requirements, which among other things will require the chief executive to own shares worth 10 times base salary by 2020.

Last year, proxy advisory firm Glass Lewis had recommended that its clients withhold votes from three Barrick directors at the annual meeting, criticizing Thornton's signing bonus and the severance paid to outgoing Chief Executive Aaron Regent, among other things.

"In terms of large, discretionary packages, I think we heard the shareholders on that," Harvey said. "I think we'll be very hesitant to do that kind of thing." (Editing by Jeffrey Hodgson, Andre Grenon, Peter Galloway and Lisa Shumaker)."

Lire la suite [1]

[1] http://finance.yahoo.com/news/barrick-announces-pay-scheme-may-185629425.html]]></content>
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