2020 PROXY SEASON REVIEW & OTHER TOPICS - Hugessen TSX60 Webinar
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2020 PROXY SEASON REVIEW & OTHER TOPICS Hugessen TSX60 Webinar
Speakers – Toronto Agenda
Camille Jovanovic Brian Lees
Manager Manager
Hugessen – Toronto Hugessen – Calgary 1 Welcome
2 Highlights from 2020 Proxy Season
Peter Stephenson Michelle Tan
Partner Principal 3 Emerging Topics and Trends
Hugessen – Toronto Hugessen – Toronto
4 Q&A
Kathryn Neel
5 Closing Remarks
Managing Director
Semler Brossy - NYC
If you have any questions, please submit them on Zoom.
Questions will be addressed at the end of this presentation
2
Speakers – Calgary Agenda
Reanna Dorscher Brian Lees
Principal Manager
Hugessen – Calgary Hugessen – Calgary 1 Welcome
2 Highlights from 2020 Proxy Season
Peter Stephenson Scott Munn
Partner Partner 3 Emerging Topics and Trends
Hugessen – Toronto Hugessen – Calgary
4 Q&A
Stephen Charlebois
5 Closing Remarks
Principal
Semler Brossy – L.A.
If you have any questions, please submit them on Zoom.
Questions will be addressed at the end of this presentation
3
Speakers – Montreal Agenda
Mario Brin
Principal
Hugessen – Montreal 1 Welcome
2 Highlights from 2020 Proxy Season
Jean-Francois Malo
Manager 3 Emerging Topics and Trends
Hugessen – Toronto
4 Q&A
Georges Soaré
5 Closing Remarks
Partner
Hugessen – Toronto
If you have any questions, please submit them on Zoom.
Questions will be addressed at the end of this presentation
4EXECUTIVE COMPENSATION
PERFORMANCE AND PAY
Scope of Study:
• Companies in the TSX60 Index
• 2020 Proxies commenting on Fiscal 2019 (n=59)2019 & YTD 2020 Sector Performance
Strong 2019 performance across most sectors, new reality in 2020
60% End of 2019
S&P/TSX Capped
Materials Index
40%
20% S&P/TSX 60 Index
0%
S&P/TSX Composite Index
-20%
-40%
S&P/TSX Capped
Financials Index
-60%
S&P/TSX Capped Energy
-80% Index
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
62018 – 2019 TSR
A greater proportion of TSX60 constituents had positive TSRs in 2019 compared to 2018
TSX60 Index Constituents - 2019 Total Shareholder Return
450%
375% -23%
300%
40%
225%
150%
75%
0%
Resource
-75%
Non-Resource
TSX60 Index Constituents - 2018 Total Shareholder Return
450%
375% -19%
300%
-11%
225%
150%
75%
0%
-75%
72019 YoY Median CEO TDC by Industry
Compensation in the majority of sectors saw YoY increases in median and average (excluding TSX:BB) TDC
Year-Over-Year Change in Median & Average TSX60 CEO TDC
40%
Median
30% 27% 22% Average (with TSX:BB)
Average (excluding TSX:BB)
20%
12%
10%
10%
0%
-10% -1%
-20%
-30%
-40%
Energy (n=10) Materials (n=9) All TSX60 (n=59) Other (n=30) Financials (n=10)
8Median CEO Pay YoY
Median TSX60 compensation has seen a relatively stable increase over the last five years
5 Year Trend in Median TSX 60 CEO TDC
$12,000
Thousands
$11,000 4% 4-yr CAGR 4% 4-yr CAGR 3% 4-yr CAGR
$10,000
3% YoY
$9,000
12% YoY 6% YoY
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
All TSX60 (n=59) Same Constituent (n=52) Same Incumbent (n=37)
2015 2016 2017 2018 2019
9Actual vs. Target Pay: Entire TSX60
Contrary to 2018, above target LTIP awards drive increase in median CEO pay
2018 vs. 2019 Change in Actual and Target Compensation
TCC
TDC
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000
Compensation (CAD '000s)
2018 - Target 2019 - Target 2018 - Actual 2019 - Actual
10Compensation Levels: Top 5 Pay
Total top 5 pay increased year over year, CEO share of total remains stable
Aggregate Top 5 Pay
$35,000 CEO Pay as a
Legend
Multiple of NEO Pay
$30,000 P75
2018 2019
P50/ Median
$25,000
P25 CFO 3.07x 2.88x
$20,000 Average
$15,000 NEO3 2.10x 2.28x
$10,000
NEO4 2.78x 3.09x
$5,000
NEO5 3.83x 3.68x
$0
2018 2019
11EXECUTIVE COMPENSATION
PAY MIX AND PLAN DESIGN
Scope of Study:
• Companies in the TSX60 Index
• 2020 Proxies commenting on Fiscal 2019 (n=59)Short Term Incentive Design: No Significant Change
STIP design remains relatively stable year-over-year, ESG metrics may be focus in future.
2018 Corporate STIP Mix 2019 Corporate STIP Mix
Other ESG Other
ESG 3% 4%
6%
6% Strategic
Strategic
8%
7%
Operational Operational
16% Financial 13%
67% Financial
69%
2018 STIP Metrics 2019
5.4 Number of metrics used, on average 5.3
60% Scorecards with an individual component 63%
16% Board exercised discretion 17%
13Long Term Incentive Design: No Significant Change
PSUs continued to increase in LTIP mix, with more performance metrics being added.
2018 Average Target LTIP Mix 2019 Average Target LTIP Mix
DSUs DSUs
1% 1%
Options Options
28% 30%
PSUs PSUs
49% 52%
RSUs RSUs
22% 18%
2018 LTIP Metrics 2019
2.1 Average number of metrics used in PSUs 2.4
65% Relative TSR metric used 63%
32% Return metric used (e.g. ROE) 32%
16% Operational metric used (e.g. safety) 19%
142020 SAY ON PAY RESULTS Scope of Study: • Say on Pay results among the TSX Composite Index as of June 10, 2020 (n = 137)
Canadian Say on Pay Results
The proportion of companies scoring below 90% decreased from 28% in 2019 to 20% in 2020
Canada Say-on-Pay Voting Results 2020 vs. 2019
100%
2019
90%
80%
2020
70%
60%
50%
40%
30%
20%
10%
0%
>90% 80-90% 70-80% 50-70% Less than 50%
Say-on-Pay Approval Rating
16Canadian Say on Pay Results by Industry
Say on Pay results increased across all sectors in 2020 compared to mixed results in 2019
Industry Say-on-Pay Voting Results 2018 to 2020
95% 94.7%
94% 93.7%
Average Say-on-Pay Voting Result
93.0%
93%
92% 91.3% 91.4%
91.0%
91% 90.6%
89.8%
90%
88.8%
89%
88%
87%
86%
85%
Materials Energy Financials
2018 2019 2020
17Companies Responding to Low Say on Pay in 2020
Incentive design changes, shareholder engagement drive improved results
Company Key Issue in 2019 Response 2020 SoP Result
• Shareholder outreach
Pay and performance
disconnect
• Suspension of cash 58% → 92%
transaction bonuses
Pay and performance • Shareholder outreach
disconnect • Changes to STIP program 72% → 95%
Pay and performance • Shareholder outreach
disconnect • Changes to LTIP program 77% → 96%
18EMERGING TOPICS AND TRENDS
Emerging Topics & Trends
Two important topics related to the COVID-19 crisis, and how they impact compensation:
Performance Management and Potential Use of
Discretion on Incentive Programs
▪ Impacts of COVID-19 on 2020 compensation programs and how to think about the use
of discretion
▪ Assessing organization and key executive performance in light of a challenging year
▪ Spotlight on Board effectiveness
Environmental, Social & Governance (“ESG”)
▪ Prevalence of ESG metrics in incentive programs
▪ COVID-19 has put significant focus on the social aspects of businesses, including human
capital management of the broader workforce
▪ Pay equity implicationsTSX60 Proxy Webinar
and Discussion
June 2020
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