Shipments of crude and fuel oil by rail tumbled nearly 11 per cent in July, to 11,920 cars from 13,339 in June.DARRYL DYCK/The Globe and Mail
Most of Canada's largest companies involved in shipping oil by rail have linked CEO pay in some way to safety metrics, but many disclose little specific information to their shareholders about how the link works.
The Shareholder Association for Research and Education (SHARE), a Vancouver-based shareholder advocacy group, issued a report Thursday examining corporate governance oversight of rail safety in light of the fatal Lac-Mégantic train derailment, saying it was disappointed that many companies are not addressing the risks more powerfully at the board level.
It looked at 15 companies in the S&P/TSX 60 index that are involved in shipping oil – including Canada's two largest railroad companies and 13 energy companies that ship products by rail – and said only 46 per cent of energy firms specifically identified rail transportation as a possible material risk facing the company as part of its reporting to shareholders.
"One year after the tragedy, we would have expected to see universal acknowledgment amongst the companies shipping potentially volatile products by rail that there are risks that need to be managed for the health of those communities and company itself," SHARE said in its report.
SHARE said a key way for companies to provide incentives for senior executives to operate more safely is to include safety measures as a factor in setting their pay.
The review says the good news is that 80 per cent of the companies include safety records as one of the factors they use to evaluate the CEO's annual performance.
However, SHARE said only 40 per cent of companies publicly disclose which specific safety metrics they look at, and no company discloses the actual safety targets CEOs are expected to meet to earn their bonuses.
SHARE said 47 per cent of the companies include some information about how much weight is given to safety factors in setting bonuses.
"There is still room for improvement," the report concludes. "For shareholders to know what risks are being prioritized and how strong the incentives are for management to address them, more extensive disclosure of compensation practices is in order."
Janet McFarland