As the turbulent economic climate influenced boards to implement efficiencies and cost cutting, the value of compensation packages granted to CEOs in Canada has declined by an average of 14%.

However, the level of shareholder backing for “say on pay” plans at Canada-based companies has remained relatively steady with 90.7% average support secured in the first half of this year, compared to 91.3% in both 2021 and 2022, according to Insightia data.

Granted CEO pay in Canada fell by 13.8% in 2022 to CA$6.6 million, while their realized pay saw a 2.7% decline from CA$7.5 million to CA$7.3 million, according to Insightia’s Compensation module.

One of the largest cuts in the region was endured by Philip Fayer, CEO of electronic payment processing company Nuvei Corp., who saw his total granted compensation decline by almost 85% in 2022 to CA$21.9 million.

GFL Environmental, a waste management company that operates in both Canada and the U.S., saw Patrick Dovigi, its founder, president, CEO, and board chairman, take an over 61% cut to his granted compensation from 2021 to 2022.

CEO turnover

Outside of challenging market conditions which triggered cost cutting, Laurel Hill Advisory Group’s President David Salmon and its senior manager Peter Papolis told Insightia that the high turnover of CEOs that occurred in recent years was also a major contributing factor to declining average CEO pay.

According to Insightia data, newly appointed CEOs earned an average of CA$3.8 million in 2022, compared to an average of over CA$7 million in 2021. Newly hired CEOs also earned 45% less on average than retained CEOs in 2022.

This was evidenced at Teck Resources where CEO Jonathan Price was appointed to head the natural resources company in September last year, with granted pay of CA$1.5 million. This package represented 11.5% of that of Teck’s former CEO Donald Lindsey’s in 2021.

Finning International CEO Kevin Parkes also took on a leadership role at the industrial equipment manufacturer last September with a total pay packet of CA$322,000. Parkes’ granted compensation was less than 5% of that granted to his predecessor Scott Thompson in 2021.

Opposition

Remuneration proposals at Canada-based companies faced 9.3% average opposition in the first six months of this year, the highest level recorded in the first half of the year since 2019, when remuneration proposals faced 9.4% average opposition.

Just five Canada-based companies faced majority opposition to their “say on pay” proposals in the first six months of 2023, two of which were companies in the basic materials sector, alongside companies in the industrials and healthcare sectors.

Kelly Gorman, executive vice-president of Governance Advisory at Kingsdale Advisors, told Insightia that poor performances in votes of this kind sets an expectation between the company and its shareholders that their feedback will be taken seriously, by incorporating it both into future communications on remuneration, and into the company’s overall governance practices.

Agnico Eagle, a senior Canadian gold mining company with operations also in Australia, Finland, and Mexico, faced one of the highest levels of opposition in the period, with its “say on pay” plan meeting 74.8% pushback at its April 28 annual meeting.

Multiple shareholders described the company’s pay practices as “concerning,” taking issue with severance packages that they felt exceeded the norm and were unjustified. Bonus payouts were also questioned, with Calvert Research and Management, abrdn and Legal & General Investment Management all citing payments which appeared to have been made in cash, rather than having any vesting conditions relating to the company’s long-term performance.

Entertainment technology company IMAX faced 52.8% opposition to its executive pay proposal at its June 8 annual meeting, with proxy advisor Glass Lewis recommending a vote against. Calvert acknowledged that the company had, “on balance,” made positive changes to the pay program following its failed “say on pay” vote the year prior. However, the investor group cited the CEO’s amended employment agreement, which included single-trigger transition payments upon a change in control, as “problematic.” IMAX’s pay plan has encountered five such majority revolts in the last 10 years and has failed to secure more than 70% support in that period.

Enhanced transparency

With shareholder engagement cited by industry sources as a key factor in securing support for executive pay, Papolis told Insightia that the Canadian market could also benefit from enhanced disclosure surrounding realized compensation . This, he said, would provide shareholders with a greater understanding of the compensation executives are receiving as take home, rather than the figure they are initially granted that often fails to account for other considerations such as vested awards and stock options.

BlackBerry’s John Chen, Colliers International Group’s Jay Hennick, Kinaxis’ John Sicard, and WSP Global’s Alexandre L’Heureux had some of the largest declines in realized compensation in the region between 2021 and 2022. Each saw their realized compensation fall by between 60% and 85% in the period.

David Salmon added that another helpful type of disclosure – that is becoming more common amongst larger companies involves the rationale that compensation committees use to make decisions on increases to base salary, one-time adjustments, inducement or retention bonuses or larger changes to the structure of the pay program.

“We see that shareholders are more likely to support management when there is more transparency,” he said.