Mercer Canada says TSX60 execs increasing judged on ESG performance
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Pay rises among the top executives at Canada’s biggest publicly listed companies was flat between 2017 and 2018.
A new analysis from Mercer Canada shows that the CEOs of the TSX60 companies saw little change in median compensation including base pay and stock options year-over-year; incumbent CEOs saw an average 6% increase in total direct compensation with long-term incentives up 5%, short-term incentives unchanged, and base salaries up 2%.
However, there were differences across sector groups with CEOs in the materials sector gaining 8% and energy bosses seeing a 7% increase in their total compensation.
Meanwhile, those in the financial sector saw their compensation drop by 5%.
“No matter what sector your company is in, getting executive compensation right is critical to ensuring the person in the driver’s seat is performing at their best,” said Luc Lapalme, Principal with Mercer.
ESG matters
In line with the growing expectation of investors, Canada’s top companies are increasingly measuring and rewarding the performance of their CEOs against Environmental, Social and Governance (ESG) metrics.
Profitability remains the main measure of performance but a Mercer spot survey in May found that one third of North American companies used ESG metrics, with Canadian organizations twice as likely to use them as American organizations.
Half of the TSX60 use three or more metrics when determining bonus payouts under their Short-Term Incentive Plan (STIP), with one third having made recent changes to that plan to better measure performance in today’s business landscape.
Most TSX60 companies still use a combination of two vehicles – typically Stock Options and Performance Share Units – with an increase in the weighting of Performance Share Units.
Mercer notes that the Department of Finance intends to introduce new rules on stock options from January 1, 2020, which will limit the current preferential tax treatment, which the department says “disproportionately accrue to a very small number of high-income individuals”.
The consultation period for this proposed change continues until September 16, 2019.
On June 17, the Department of Finance released proposed changes to the tax treatment of employee stock options. Here’s what employers need to know: https://t.co/HIJq3W9q0S #wealth #investment pic.twitter.com/vZvvOwyeev
— MercerCanada (@MercerCanada) July 24, 2019
