The pay for Manulife’s CEO is head and shoulders above peers

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It may surprise you to learn the best-paid chief executive officer in Canada’s financial-services industry is not the leader of one of our behemoth banks, but instead Rocco (Roy) Gori of Manulife Financial Corp MFC-T.

It may really surprise you to learn just how big a lead he’s taken in this particular compensation competition – particularly given how Manulife stock has performed over his tenure.

Manulife paid Mr. Gori $19.38-million in 2023. The package included a salary of $1.73-million, an annual bonus of $5.15-million, stock awards Manulife valued at $11.55-million, and other benefits.

It’s a 13-per-cent increase from the prior year, when he made $17.08-million. The incumbent bank CEOs could only dream of such a raise in 2023; only Canadian Imperial Bank of Commerce’s CM-T Victor Dodig received more pay in 2023 than the year before, and that was a 2-per-cent increase.

Mr. Gori’s 2023 pay package is also much bigger than insurance-industry peers. Charles Brindamour made $15.21-million at Intact Financial Corp. IFC-T, Jeffrey Orr made $14.07-million at Power Corp. of Canada POW-T and Kevin Strain made $10.65-million in his second full year at Sun Life Financial Inc. SLF-T (All packages were a mix of cash, stock and benefits.)

Mr. Gori’s pay had been roughly 50-per-cent more than previous Sun Life CEO Dean Connor, and is now 80-per-cent more than Mr. Strain’s.

Perhaps we can justify this by noting that Manulife is the biggest insurer in Canada by market value, at least 25-per-cent larger than any other.

But the banks? Manulife isn’t bigger than any of the Big Five Canadian banks – Royal Bank of Canada RY-T, the Toronto-Dominion Bank TD-T, Bank of Montreal BMO-T, Bank of Nova Scotia BNS-T and Canadian Imperial Bank of Commerce. It’s less than half the value of TD and less than a third of the value of RBC.

Mr. Gori’s first full year of pay, in 2018, was in line with Canada’s big bankers, even if Manulife’s market capitalization lagged the Big Five. At $12.99-million, he made less than RBC’s Dave McKay’s $14.49-million. By my calculations, he made about 3-per-cent more than the average CEO pay at the five big banks.

Now, Mr. Gori made 55 per cent more than the big-bank average in 2023. That number is inflated by a few percentage points because Scotia’s Scott Thomson made $9.38-million in 2023 in his 11 months on the job, a number slightly less than his target compensation for 2024. But it’s the expansion of a trend: Mr. Gori has made 20- to 29-per-cent more than the big-bank CEO average since 2019, I calculate.

More strikingly, Mr. Gori made 20-per-cent more than Mr. McKay, who received $16.13-million last year from RBC. Mr. Gori’s total pay compared with Mr. McKay ranged from 1 per cent to 9 per cent more in the past four years.

I asked Manulife to comment on Mr. Gori’s paycheque, relative to Mr. McKay’s. Spokesperson Luke Shane said Manulife won’t comment “on the comparison of our executives’ compensation to that of other specific companies,” but he sent a lengthy statement about the company’s pay philosophy and its recent results.

Manulife tops profit estimates on strong performance at Canadian and Asia units, boosts dividend

He called Manulife “a pay for performance culture that rewards global executives” for contributing to long-term growth, executing strategy and delivering “significant value for our shareholders and customers.” He also said 78 per cent of Manulife’s earnings come from outside Canada, so Manulife “competes for talent” globally.

He said since 2018, “when we started our journey to transform Manulife, we have radically reshaped the company,” citing more than $10-billion of additional capital, improvements in profitability and “a historic reinsurance transaction” that transferred the risk on $6-billion of insurance reserves. (There was a lot more on his list, so this was a selection. By me.)

And he notes Manulife was the top performer in its compensation peer group in 2023. And its five-year total shareholder return of 95.7 per cent is in the first quartile versus its compensation peer group, Mr. Shane says.

I had a slightly different idea of the time period to examine. I picked Oct. 1, 2017, the day Manulife promoted Mr. Gori to the CEO job, to start, and I picked Dec. 31, 2023, the last day of the year where Mr. Gori received his industry-topping compensation.

For comparison, I used two of Manulife’s own comparator groups from 2017. One Manulife used for setting compensation – and yes, it includes RBC, TD, BMO and Scotia. Another is a “performance” group made up solely of global insurers, chosen by Manulife for purposes of awarding long-term pay.

Using S&P Global Market Intelligence, I figure Manulife’s total return, including dividends, at 56.5 per cent. That’s nearly double the performance of the S&P/TSX Composite Index. But there were plenty of outperformers in financial services, so Manulife was a couple slots below the median of the combined groups: or 11th out of 17. TD is just ahead of it, and BMO and RBC returned 80.8 per cent and 77.7 per cent, respectively. Among just the insurers in the “performance” group, it’s eighth of 13.

To be fair, Manulife awarded the stock that makes up the bulk of Mr. Gori’s compensation on March 7, 2023, so the board had no way of knowing how the rest of the year would turn out. Then again, Manulife’s relative stock performance is even worse if we close the measurement period on Feb. 28, 2023.

So, I’m at a bit of a loss here as to what Manulife’s board of directors is thinking. Manulife is neither bigger than the banks, nor consistently outperforming them. But Mr. Gori’s compensation is bigger, and growing faster, than pay for the banks’ CEOs. Manulife may or may not have “radically reshaped” itself as a company, but in the last five years, it’s certainly radically reshaped Mr. Gori’s paycheque.