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When Matthew Barrett retired in early 1999, newspaper headlines trumpeted the big pay gains he reaped after 37 years at Bank of Montreal - the last 10 of them as CEO.

He collected $20-million in compensation that year, most of it from exercising all of his available stock options, which had soared in value as Bank of Montreal reported nine successive annual record profits during his tenure. He also owned common shares of the bank worth about $1.9-million.

Eight years later, his successor Tony Comper retired from Bank of Montreal with an ownership stake in the company almost four times larger than Mr. Barrett's holdings.

On top of $13.5-million he took home in 2006, Mr. Comper retired in 2007 with unexercised stock options worth $53.2-million (at last fiscal year-end) plus a further $25.4-million worth of shares, share units and incentive-plan gains for a total of $79-million.

Welcome to the world of wealth inflation where CEOs are increasingly cashing out large fortunes as they walk out the door.

For those ousted from their jobs, the packages climb further with additional "golden parachute" severance payments often worth three years of salary, bonuses, and even share units.

This year, The Globe and Mail's annual review of CEO compensation highlights the trend, with many of the top-paid executives for 2006 high on the list thanks to departure payouts or because they exercised many of their stock options in advance of leaving.

(The Globe's data come from annual shareholder proxy circulars, so doesn't include executives involved in takeovers where the company is no longer public and doesn't file a proxy circular at the end of the year.)

Some recent "big leavers" include former Shoppers Drug Mart Corp. CEO Glenn Murphy, who was second on the compensation list last year with $34.4-million. He left in 2007, after six years at the company, still holding another $50-million worth of Shoppers shares and stock options.

Also high on the list is former Loblaw Cos. Ltd. president John Lederer, who left the struggling grocery chain last fall with almost $22-million, including a $12-million payment under the terms of his employment contract.

In most cases, there is no mystery why people are leaving with more than in the past. Stock markets have soared for years and CEOs are increasingly being paid with compensation features tied to their companies' share prices - including options and share units, plus a variety of newly created midterm and long-term compensation plans based on various corporate performance measures.

The results have been broad pay increases whether executives depart or not - but the numbers look especially large when executives liquidate as they leave.

"With the big market runup we've had, the accelerated packages we've seen have looked pretty big," says Bill Mackenzie, director of special projects at the Canadian Coalition for Good Governance (CCGG), a powerful institutional shareholder lobby group.

For those CEOs ousted for poor performance or because their companies are targets of takeovers, golden parachutes are also getting bigger, and not only because they are based on multiples of ever-increasing base pay.

Their terms are also becoming more generous, says Jim Fisher, a director on several corporate boards, including Canadian Tire Corp.

Mr. Fisher, who teaches at the Rotman School of Management at the University of Toronto, said courts insist fired employees must be compensated for everything they would have earned. So packages include not only multiples of salary and annual bonuses, but some now also provide for share units and other equity compensation that can often make up at least half of a CEO's total pay.

While pricey, he says the deals provide companies with certainty about severance costs and guarantee that there will be no messy lawsuits.

"From a company's point of view, there's a lot of benefit to having certainty," Mr. Fisher says. "And you may be willing to do more to get certainty."

Larry Lowenstein, a lawyer at Osler Hoskin & Harcourt LLP in Toronto, says big golden parachutes have proved their worth in the latest round of takeovers. He says he no longer hears complaints from investors who believe managers are blocking good deals.

"The tendency to entrench and fight a takeover has given way to a much more compelling focus on shareholder value," he said.

In investor circles, complaints have most frequently focused not on the absolute size of the wealth cashed out by a departing CEO, but on whether shareholders have benefited to the same extent.

Scandals in the United States have sparked widespread complaints when executives leave with huge pay packages after years of delivering poor performance. At Home Depot Inc., former CEO Robert Nardelli was paid $225-million during his six-year tenure while the stock fell 7.9 per cent. He left with a $210-million separation package.

Mr. Mackenzie at the CCGG says at a minimum, big payouts should reward good performance: "It isn't right if you didn't deliver."

But beyond that, he argues companies - especially in cyclical commodity sectors - should have to outperform their peers before executives reap huge bonanzas.

Bill Dimma, chairman of Home Capital Group Inc., says it is difficult to manage compensation when a company is doing well and directors must decide what ratio of profits should be paid to a CEO.

"We all talk about pay for performance in a series of generalizations," Mr. Dimma said. "But defining what it really means is the crucial thing."

He said there are too many cases where almost any amount of CEO pay is defended as long as the company posted good performance during his tenure.

"You can still go overboard and pay ridiculous amounts when you don't need to, and the investor suffers in the process," he says.

Mr. Dimma says it is too late for investors to express concern about the number of stock options or shares granted to a CEO when he is leaving and cashing out. "The time to complain is when you grant them in the first place," he said.

New rules proposed by Canadian regulators to improve compensation disclosure may make those numbers clear much earlier in the process.

A key new feature will require companies to include a chart in their annual proxy circulars outlining all payments to top executives that would be triggered if they depart because of change-of-control, retirement, termination or resignation.

The rules follow on the heels of similar U.S. standards introduced last year. They were prompted by several scandals, including the case of General Electric Co., where investors were stunned to learn of the valuable package of perks granted to CEO Jack Welch when he retired.

"There have been a few cases where it has really hit home to people, 'How could we be on the hook for this payout and no one ever have known?' " says John Hughes, associate partner at Deloitte & Touche in Toronto.

He said compensation packages often look "innocuous enough" on a year-by-year basis, but grab attention when they are all added together.

"The disclosure is meant to capture that," he said. "There shouldn't be any surprise to anyone in terms of the pensions, the options that vest, all of that."

Although less than a year old, the new U.S. disclosure rules have already led to changes in generous packages, says Ruth Woods, a partner at Hugessen Consulting Inc. in Toronto, which specializes in executive pay.

She said at least 12 companies have reduced their severance packages for their CEOs since the U.S. rules were introduced. Pharmaceutical maker Wyeth, for example, recently said its CEO would get about one-third of his previous entitlement in the event of a change-of-control.

"The board felt that wouldn't affect the effectiveness of their program, so that's a good sign," she told a recent compensation conference.

jmcfarland@globeandmail.com

GLENN MURPHY, SHOPPERS DRUG MART CORP.

Age: Mid-forties

Received in 2006: $34.4-million

Still available: $54-million

Although Mr. Murphy resigned effective March 25, he cashed out many of his stock options in 2006 for a profit of $31.7-million. He still had about $32-million worth of Shoppers common shares at the end of the year, plus another $18-million of unexercised stock options. He also struck a deal with Shoppers last year, promising not to compete with the company for three years in exchange for 24 monthly payments totalling $4-million.

JOHN LEDERER, LOBLAW COS. LTD.

Age: 51

Received in 2006: $21.7-million

Still available: $500,000 annual pension

When Mr. Lederer stepped down "by mutual agreement" from the struggling grocery chain last September, he was paid $12.3-million under the termination terms of his employment contract, plus another $10-million owing to him from various share unit, stock option and bonus plans from Loblaw and parent company George Weston. He also has a pension worth $500,000 a year.

BRADLEY LANGILLE, GAMMON LAKE

RESOURCES INC.

Age: Unavailable

Received in 2006: $19.9-million

Still available: $49-million

The low-profile Halifax gold producer has produced high-profile gains for its former CEO, who resigned April 3. In addition to $19.3-million in option gains in 2006, Mr. Langille leaves with $49-million in unexercised options and a consulting contract. Also last year, Gammon Lake bought the remaining 77 per cent of Mexgold Resources. Mr. Langille, who was also Mexgold's president, got $3.4-million in Gammon Lake shares plus 799,000 stock options.

IAN TELFER, GOLDCORP INC.

Age: 61

Received in 2006: $17.2-million

Still available: $32.6-million

Mr. Telfer became CEO of the company in 2005 when it bought his Wheaton River Minerals Ltd., and resigned in November after Goldcorp merged with Glamis Gold. He remains chairman of the company. In addition to option gains of $14.9-million in 2006, he held unexercised options worth $32.6-million more at year-end. He also held shares worth about $3-million.

ALAN HORN, ROGERS COMMUNICATIONS INC.

Age: 55

Received in 2006: $15-million

Still available: $42-million

The former chief financial officer of Rogers stepped down last year to become chairman of the board, cashing out options worth $15-million in 2006 and holding a further $42-million worth of unexercised options at year-end. As of year-end, he owned one million Rogers shares worth about $35-million, and his pension was estimated at $209,800 annually.

WAYNE SALES, CANADIAN TIRE CORP.

Age: 57

Received in 2006: $13.9-million

Still available: Continuing as an executive

Mr. Sales retired as CEO of Canadian Tire last year, becoming vice-chairman of the company at the time. In addition to his salary, bonus and grant of new share units last year, he also made $5.6-million from a performance share unit payout and $9.5-million from exercising stock options. His contract grants him an annual salary of $990,000 as vice-chairman plus a minimum annual grant of $1.6-million under a long-term incentive plan.

TONY COMPER, BANK OF MONTREAL

Age: 62

Received in 2006: $13.5-million

Still available: $79-million

Mr. Comper retired as CEO of BMO at the end of February, leaving with a big payday in 2006 - worth a total of $13.5-million - and many more chips to be cashed out afterward. At the end of fiscal 2006, for example, Mr. Comper still had unexercised options worth $53.2-million, plus a further $25.4-million worth of shares, share units and incentive-plan gains. He also left the bank with an annual pension worth $1.9-million, which the bank estimates will cost $26.8-million to fund.

GWYNN MORGAN, ENCANA CORP.

Age: 61

Received in 2006: $9-million

Still available: $19.4-million

Mr. Morgan retired as CEO of EnCana at the end of 2005, but continued as vice-chairman until October last year. Over the two years combined, he took home a total of $27.2-million, including $19.4-million from exercising stock options. He left the company with a further $11.2-million worth of stock options at the end of last year, plus $8.2-million of performance share units. He also has a pension of $1.8-million a year that EnCana estimates will cost $26.5-million to fund.

Largest option gains

$54.1-million

James Balsillie,

Research In Motion Ltd.

$32.4-million

Michael Lazaridis,

Research In Motion Ltd.

$31.7-million

Glenn Murphy,

Shoppers Drug Mart Corp.

$21.4-million

Paul Desmarais Jr.,

Power Corp. of Canada

Paydays for non-CEOs

$31.4-million

Frank Stronach, chairman,

Magna International Inc.

$15.5-million

Alan Horn, former CFO,

Rogers Communications Inc.

$14.9-million

James Foote, executive VP,

Canadian National Railway Co.

$14.2-million

Wayne Brownlee, CFO,

Potash Corp. of Saskatchewan

$13.9-million

Wayne Sales, vice-chairman,

Canadian Tire Corp.

By the numbers

$1.48-million

Average CEO salary and bonus

in 2006

8.9%

Increase in salary and bonus

over 2005

$1.92-million

Average CEO option gains

in 2006

4%

Increase in option gains

over 2005

$11.7-million

Average value of CEO unexercised stock options in 2006

14.2%

Increase in value of unexercised options over 2005

Figures based on all CEOs in the S&P/TSX composite index

GLOBEANDMAIL.COM

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