#executives#Recession#compensation packages#economic trends#policy issues#salary

Executive compensation forecast: Fair weather ahead

|Apr 11|magazine12 min read
Although salary increases have been tempered during the recession, compensation packages for executives at many of Canada’s top companies continue to rise. While those packages vary from industry to industry and from province to province, the general picture in 2010 is positive.
 
Businessweek
recently reviewed the 2009 pay for the chief executive officers at a handful of Canada’s largest banks, including Bank of Nova Scotia, Bank of Montreal and Royal Bank of Canada. They found that the CEOs received an average increase of 10 percent last year, with some going as high as 29 percent. And, they discovered the trend was continuing in 2010.
 
On the other hand, the Vancouver Sun’s Top 100 Executive Pay list for publicly traded companies in British Columbia in 2007 was dominated by the executives of mining companies. However, the Sun also found that CEO’s in other industries were beginning to claim more spots in the top 100.
 
THE SURVEY SAYS
Perhaps the most compelling evidence that fair weather is ahead for Canada’s executives comes from the Conference Board of Canada, a non-profit, applied research organization specializing in economic trends, organizational performance and public policy issues.
 
To compile its Compensation Planning Outlook 2010, subtitled “Cautious Optimism on the Road to Recovery,” the CBC sent out 2,028 surveys to businesses in Canada, of which 435 were returned. Respondents, from a wide variety of industries and from both private and public entities, projected modest wage increases across the board ranging from 1.8 to 4 percent.
 
The increases are projected to vary not just among industries but also among the provinces, and between union and non-union workers. The survey found that wages should increase 3.4 percent in government and 3.2 percent in the construction, high technology, chemical and pharmaceutical industries. Companies in Saskatchewan predict an average increase of 4 percent while those in B.C., Quebec and Ontario are expecting boosts ranging from 2.4 to 2.6 percent.
 
And, according to the CBC report, the big picture is trending accordingly, with real gross domestic product projected to be up 2.9 percent this year; corporate profitability is predicted to grow 23 percent in 2010.
 
The report breaks down 2009 actual and 2010 projected increases by employee group. Senior executives who received an increase in 2009 saw a boost in compensation of 4.3 percent on average and are expected to see increases in the area of 3 percent this year. Executives received an average increase of 3.9 percent last year and are projected to receive an average increase around 3 percent in 2010.
 
VARIABLE PAY PLANS
As can be expected compensation packages are rarely just salary based. The Conference Board found that the majority of respondents had at least one “variable pay” plan in effect: 79 percent offered cash bonuses or incentives; 12 percent offered profit sharing; and there were other forms of compensation reported, such as team-based incentives and “gainsharing.”
 
Variable pay plans were most frequently offered to senior executives and executives, the CBC found, as compared to other employee groups; 75 percent of senior executives and 71 percent of executives were receiving packages that included more than one type of compensation. In addition, the report breaks down the prevalence of long-term incentive plans, the most common being traditional stock options.
 
Another research institute, the Canadian Centre for Policy Alternatives, offers details on executive compensation packages in its list of Top 100 CEOs. The list, compiled from publicly reported figures, shows that with few exceptions CEOs receive more than one type of compensation. In many cases, the base salary is a small piece of the overall package.
 
The CCPA reports the top total package as $36,595,233 (Thomas Glocer at Thomson Reuters Corp.) and the lowest of the 100 as $3,213,781 (Rupert Duchesne of Groupe Aeroplan Inc.). For each CEO, the package is broken down into base salary, bonus, shares, options, pension and other, and every package is unique.
 
The bulk of Glocer’s package, for instance, is shares, $28,169,591 worth. Bank of Nova Scotia, on the other hand, comes in at #20 on the list with a package worth $9,191,705 (Richard Waugh), but the total is spread more evenly across all five forms of compensation: $1,000,000 base salary, $500,000 bonus, $3,010,000 shares, $3,010,000 options, $514,000 pension and $1,157,705 other.
 
Each of the reports mentioned here approaches executive compensation from a slightly different perspective and in more detail than could be included in this story, but all point in the same direction – executive compensation packages are still trending upward, despite the recession. Although some executives can expect only modest increases, as an employee group they should fare well going forward.