In documents sent to shareholders before its annual meeting, Air Canada said that, as of May 4, the 2019 pay package for CEO Calin Rovinescu, seen here in Toronto on Oct. 17, 2017, was worth just $5.8-million.The Canadian Press
Air Canada had a very good year in 2019, and CEO Calin Rovinescu was well-paid as a result. The company gave Mr. Rovinescu total compensation of almost $13-million during the year, the bulk of which came in grants of Air Canada’s high-flying stock.
It now seems like ancient history. Air Canada has seen its revenue crushed by the COVID-19 pandemic and its share price fall by two-thirds in 2020. In documents sent to shareholders before its annual meeting, the company said that, as of May 4, Mr. Rovinescu’s 2019 pay package was worth just $5.8-million instead.
He is not alone. Despite recent market rebounds, the shares of a majority of large Canadian companies have declined in 2020, some by as much as two-thirds. And the leaders of these companies – who have increasingly been paid in company stock, not cash, in recent years – have seen their wealth fall precipitously.
This sets up a dilemma for companies that believed that rich pay packages – made all the richer when the company’s stock climbed – are necessary to retain and motivate leaders. But when millions of dollars of compensation vanish within weeks, and carefully crafted bonus plans have unattainable targets, what happens next?
Specialists who watch Canadian executive compensation are optimistic that companies will “read the room,” and wait until later this year to make modest adjustments – if any – to compensation plans. Wholesale repricing and reissuing of stock awards is likely off the table because of concerns of how institutional shareholders would react. Some companies, however, may tweak bonus plans to pay executives a portion of their annual incentives for hitting second-half targets.
And most of the dynamics that have led to ever-higher pay packages over the years still exist. “We’ve been through this before, in 2008,” says Catherine McCall, head of the Canadian Coalition for Good Governance, a group of institutional investors who engage with companies on governance practices. After that financial crisis, “there was a really quick recovery in executive compensation.”
How much are Canada’s top CEOs paid? Here’s the full breakdown
Postpandemic decisions on executive compensation will shape companies’ futures
The Globe and Mail partners with consulting firm Global Governance Advisors to review CEO compensation at 100 large Toronto Stock Exchange-listed Canadian companies, the most valuable by market capitalization at the end of 2019. Median total compensation for CEOs was $7.64-million in 2019 – the end of a long bull market and economic expansion – compared with $6.77-million in 2018. Stock compensation – stock options and share awards – amounted to 60 per cent of total pay, on average.
2019 IN REVIEW
THE TOP 10 IN TOTAL COMPENSATION
$27,486,136
José Cil
‹
Restaurant Brands Int’l
$24,160,818
Donald Walker
Magna International
$23,049,705
Mark Bristow
Barrick Gold
$22,748,336
Joseph Papa
Bausch Health Companies
$19,759,124
Geoffrey Martin
CCL Industries
$19,007,773
James Smith
Thomson Reuters
$17,993,384
Al Monaco
Enbridge
$17,343,087
Sachin Shah
Brookfield Renewable Ptrs.
$16,681,918
Doug Suttles
Ovintiv
Nutrien
$16,411,042
Chuck Magro
TAKING STOCK
CEOs with share and option awards totalling $15-million or more
Restaurant Brands Int’l
$24,864,508
José Cil
‹
Sachin Shah
Brookfield Renewable Ptrs.
$16,402,895
Joseph Papa
Bausch Health Cos.
$16,305,344
Geoffrey Martin
CCL Industries
$16,281,597
Magna International
$15,792,252
Donald Walker
THE GOLDEN YEARS
CEOs who are owed a total pension of $25-million or more
$118,470,000
Bradley Shaw
Shaw Communications
‹
Power Financial
R. Jeffrey Orr
$40,308,000
Power Corp. of Canada
André Desmarais
$33,912,000
Great-West Lifeco
Paul Mahon
$32,255,316
Power Corp. of Canada
Paul Desmarais, Jr.
$32,055,000
Enbridge
$26,182,000
Al Monaco
LOTS OF OPTIONS
CEOs with at least $50-million in potential option profits at the end
of the fiscal year
Shopify
$282,120,536
Tobias Lütke
‹
Thomson Reuters
$133,440,190
James Smith
Onex
$126,820,027
Gerald Schwartz
Canadian Pacific Railway
$64,019,035
Keith Creel
CGI
$62,925,815
George Schindler
Air Canada
$62,229,065
Calin Rovinescu
National Bank of Canada
$59,863,553
Louis Vachon
Alimentation Couche-Tard
$52,666,165
Brian Hannasch
2019 IN REVIEW
THE TOP 10 IN TOTAL COMPENSATION
$27,486,136
José Cil
‹
Restaurant Brands International
$24,160,818
Donald Walker
Magna International
$23,049,705
Mark Bristow
Barrick Gold
$22,748,336
Joseph Papa
Bausch Health Companies
$19,759,124
Geoffrey Martin
CCL Industries
$19,007,773
James Smith
Thomson Reuters
$17,993,384
Al Monaco
Enbridge
$17,343,087
Sachin Shah
Brookfield Renewable Partners
$16,681,918
Doug Suttles
Ovintiv
Nutrien
$16,411,042
Chuck Magro
TAKING STOCK
CEOs with share and option awards totalling $15-million or more
Restaurant Brands International
$24,864,508
José Cil
‹
Sachin Shah
Brookfield Renewable Partners
$16,402,895
Joseph Papa
Bausch Health Cos.
$16,305,344
Geoffrey Martin
CCL Industries
$16,281,597
Magna International
$15,792,252
Donald Walker
THE GOLDEN YEARS
CEOs who are owed a total pension of $25-million or more
Bradley Shaw
Shaw Communications
$118,470,000
‹
Power Financial
R. Jeffrey Orr
$40,308,000
Power Corp. of Canada
André Desmarais
$33,912,000
Great-West Lifeco
Paul Mahon
$32,255,316
Power Corp. of Canada
Paul Desmarais, Jr.
$32,055,000
Enbridge
$26,182,000
Al Monaco
LOTS OF OPTIONS
CEOs with at least $50-million in potential option profits at the end
of the fiscal year
Shopify
$282,120,536
Tobias Lütke
‹
Thomson Reuters
$133,440,190
James Smith
Onex
$126,820,027
Gerald Schwartz
Canadian Pacific Railway
$64,019,035
Keith Creel
CGI
$62,925,815
George Schindler
Air Canada
$62,229,065
Calin Rovinescu
National Bank of Canada
$59,863,553
Louis Vachon
Alimentation Couche-Tard
$52,666,165
Brian Hannasch
2019 IN REVIEW
THE TOP 10 IN TOTAL COMPENSATION
$27,486,136
José Cil
Restaurant Brands International
‹
$24,160,818
Donald Walker
Magna International
$23,049,705
Mark Bristow
Barrick Gold
$22,748,336
Joseph Papa
Bausch Health Companies
$19,759,124
Geoffrey Martin
CCL Industries
$19,007,773
James Smith
Thomson Reuters
$17,993,384
Al Monaco
Enbridge
$17,343,087
Sachin Shah
Brookfield Renewable Partners
$16,681,918
Doug Suttles
Ovintiv
$16,411,042
Chuck Magro
Nutrien
TAKING STOCK
CEOs with share and option awards totalling $15-million or more
José Cil
Restaurant Brands International
$24,864,508
‹
Sachin Shah
Brookfield Renewable Partners
$16,402,895
Joseph Papa
Bausch Health Cos.
$16,305,344
Geoffrey Martin
CCL Industries
$16,281,597
Donald Walker
Magna International
$15,792,252
THE GOLDEN YEARS
CEOs who are owed a total pension of $25-million or more
Bradley Shaw
Shaw Communications
‹
$118,470,000
Many CEOs lost tens of millions of dollars—even hundreds of millions—in the value of their company stock in the first five months of 2020 as COVID-19 wrecked the economy and financial markets. Some are company founders and others are professional executives. Here’s a selection of CEOs who suffered a sharp decline in the value of their shares:
Many CEOs lost tens of millions of dollars—even hundreds of millions—in the value of their company stock in the first five months of 2020 as COVID-19 wrecked the economy and financial markets. Some are company founders and others are professional executives. Here’s a selection of CEOs who suffered a sharp decline in the value of their shares:
R. Jeffrey Orr
Power Financial
$40,308,000
André Desmarais
Power Corp. of Canada
$33,912,000
Paul Mahon
Great-West Lifeco
$32,255,316
Paul Desmarais, Jr.
Power Corp. of Canada
$32,055,000
Al Monaco
Enbridge
$26,182,000
LOTS OF OPTIONS
CEOs with at least $50-million in potential option profits at the end of the fiscal year
Tobias Lütke
Shopify
‹
$282,120,536
James Smith
Thomson Reuters
$133,440,190
Gerald Schwartz
Onex
$126,820,027
Keith Creel
Canadian Pacific Railway
$64,019,035
George Schindler
CGI
$62,925,815
Calin Rovinescu
Air Canada
$62,229,065
Louis Vachon
National Bank of Canada
$59,863,553
Brian Hannasch
Alimentation Couche-Tard
$52,666,165
Those numbers, however, are largely based on stock prices from early 2019. A lot has changed. Markets climbed until February this year, but then plunged. The S&P/TSX Composite Index lost 35 per cent in about one month. That has left many companies underwater – their market share price below the exercise price of stock options awarded to executives – even after the market rebound in recent weeks.
Of the 100 companies in the Globe’s pay survey, 73 have seen their share prices fall since the end of their fiscal year. The average decline is nearly 13 per cent.
To track what this means for individual CEOs, Global Governance Advisors took shares held by them as of the most recent proxy circular disclosure and calculated the change in the value to May 29. (For most companies, the period was five months, but fiscal years vary, and the gaps ranged from two months to 14.)
For founder- or family-CEOs, the numbers are startling. Bruce Flatt, CEO of Brookfield Asset Management Inc., and Prem Watsa of Fairfax Financial Holdings Ltd., saw their equity holdings decline by more than $400-million each. Gerald Schwartz of Onex Corp., Pierre Karl Péladeau of Quebecor Inc., and André Desmarais and Paul Desmarais Jr. of Power Corp. of Canada saw the value of their equity fall between $150-million and $210-million.
CEO WEALTH CRASH
Many CEOs lost tens of millions of dollars—even
hundreds of millions—in the value of their company
stock in the first five months of 2020 as COVID-19
wrecked the economy and financial markets. Some
are company founders and others are professional
executives. Here’s a selection of CEOs who exper-
ienced a sharp decline in the value of their shares:
$2.76B
Bruce Flatt
Brookfield Asset
Management Inc.
Prem Watsa
Fairfax Financial
Holdings Ltd.
$2.14B
Gerald Schwartz
Onex Corp.
Pierre Karl
Péladeau
Quebecor Inc.
Glenn Chamandy
Gildan Activewear
Inc.
Philip Pascall
First Quantum
Minerals Ltd.
$769M
$711M
Donald Walker
Magna
International Inc.
Calin Rovinescu
Air Canada
$108M
$61M
$47M
$11M
EST. VALUE
OF EQUITY
AS OF MAY
29, 2020
$25M
$23M
$29M
$63M
$194M
$209M
EQUITY
DECLINE
$423M
$433M
CEO’s equity is shares, including vested stock awards, held by the CEO as per
the company’s most recent proxy circular disclosure
The decline in equity value is measured from Dec. 31 to May 29 except for
Gildan (Dec. 29 to May 29)
CEO WEALTH CRASH
Many CEOs lost tens of millions of dollars—even hundreds
of millions—in the value of their company stock in the first
five months of 2020 as COVID-19 wrecked the economy and
financial markets. Some are company founders and others are
professional executives. Here’s a selection of CEOs who ex-
perienced a sharp decline in the value of their shares:
$2.76B
Bruce Flatt
Brookfield Asset
Management Inc.
Prem Watsa
Fairfax Financial
Holdings Ltd.
$2.14B
Gerald Schwartz
Onex Corp.
Pierre Karl
Péladeau
Quebecor Inc.
Glenn Chamandy
Gildan Activewear
Inc.
Philip Pascall
First Quantum
Minerals Ltd.
$769M
$711M
Donald Walker
Magna
International Inc.
Calin Rovinescu
Air Canada
$108M
$61M
$47M
$11M
EST. VALUE
OF EQUITY
AS OF MAY
29, 2020
$25M
$23M
$29M
$63M
$194M
$209M
EQUITY
DECLINE
$423M
$433M
CEO’s equity is shares, including vested stock awards, held by the CEO as per
the company’s most recent proxy circular disclosure
The decline in equity value is measured from Dec. 31 to May 29 except for
Gildan (Dec. 29 to May 29)
$2.76B
CEO WEALTH CRASH
Many CEOs lost tens of millions of dollars –even
hundreds of millions – in the value of their company
stock in the first five months of 2020 as COVID-19
wrecked the economy and financial markets. Some
are company founders and others are professional
executives. Here’s a selection of CEOs who experienced
a sharp decline in the value of their shares:
Bruce Flatt
Brookfield Asset
Management Inc.
Prem Watsa
Fairfax Financial
Holdings Ltd.
$2.14B
Gerald Schwartz
Onex Corp.
Pierre Karl
Péladeau
Quebecor Inc.
Glenn Chamandy
Gildan Activewear
Inc.
Philip Pascall
First Quantum
Minerals Ltd.
$769M
$711M
Donald Walker
Magna
International Inc.
Calin Rovinescu
Air Canada
$108M
$61M
$47M
$11M
ESTIMATED
VALUE OF
EQUITY AS
OF MAY 29,
2020
$25M
$23M
$29M
$63M
$194M
$209M
EQUITY
DECLINE
$423M
$433M
CEO’s equity is shares, including vested stock awards, held by the CEO as per the company’s
most recent proxy circular disclosure
The decline in equity value is measured from Dec. 31 to May 29 except for Gildan (Dec. 29 to May 29)
CEOs who are employees have experienced wealth declines that may be smaller in absolute size, but similar – or worse – in magnitude. Eight non-founder CEOs have seen the value of their shares fall by between $10-million and $30-million. For some, a reduction of “only” $5-million or so in their holdings is a decline of 50 per cent or more.
These numbers also do not include the effect on stock options, which give executives the right to purchase company shares at a set exercise price for an extended period. But options are only usable if the market price is above the exercise price. Of the 72 companies in the survey that awarded stock options in 2019, the share prices of 42 were underwater on May 29.
The situation was worse in March, as equity prices tumbled. Compensation consultants say directors of many companies at least started to have conversations about stock awards that no longer offered much incentive. The key question: Should the boards grant new awards? The the bulk of Canadian companies said ‘no.’
“The topic was broached, but just for discussion,” says Christopher Chen, managing director at Toronto’s Compensation Governance Partners. “Everyone around the table was really cagey. It was more, ‘Look, you know, this is something that we may choose to go to eventually. Let’s at least have an initial discussion about it.’ And the consensus was ‘it’s March and April. Let’s wait a bit to see what we have to do.‘”
The strong rebound in stock markets – the S&P/TSX Composite closed Friday up 35 per cent from its March 23 low – helped quell that talk, says Mr. Chen.
Long-term incentive plans that use shares typically have three-year to five-year measurement periods, and stock options typically have terms from seven to 10 years – plenty of time for shares to recover.
“The value of a stock option that was granted this year is not what the executive ultimately is going to realize in the future,” says Anand Parsan, national leader of the Compensation Consulting Practice at Morneau Shepell Ltd. “So looking at a little window in terms of what happened in the share price right now is not an indication of what ultimately is going to happen.”
Then again, not all companies have this problem. Shares of miners have risen as the price of gold increased due to long-term inflation fears, and e-commerce companies have flourished. David Harquail of Franco-Nevada Corp. and Mark Bristow of Barrick Gold Corp. have both seen their shareholdings increase this year by more than $50-million as of May 29 – to more than $200 million apiece. Tobias Lutke, CEO of the remarkable Shopify, saw the value of his stock increase by more than $3-billion, to $7.3-billion.
The tumult extends to annual cash incentive plans, which are based on a single year’s results. Targets set in early 2020 are likely unachievable for companies damaged by COVID-19, but could be easily surpassed by companies that have benefitted. “We advised, ‘do not act immediately,’” said Ken Hugessen, an executive compensation consultant with an eponymous firm. “The line of sight to the rest of the year will get better. It may never get any good, but it will be better than it was in March and April. And indeed it has.”
Mr. Hugessen says many boards will discuss the issue in July or August, with one option being setting targets based simply on second-half results. But a board that sets hurdles too low may find itself in the crosshairs of institutional shareholders.
Ms. McCall of the Canadian Coalition for Good Governance says companies that revise goals downward “will want to be cognizant of the fact that workforces suffered dreadfully: huge layoffs, cuts in pay. So you cannot make the executive compensation decision without a recognition of what’s going on more broadly, with employees, customers, and the community where you get your employees and customers from.”
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David Milstead