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Philip Fayer, CEO of Montreal payments-processing company Nuvei Corp.Handout/Handout

There is one group of Canadian workers who have received pay gains that definitely beat raging inflation: CEOs.

The median pay package for chief executive officers at 100 of the largest Canadian companies listed on the Toronto Stock Exchange, reviewed by The Globe and Mail and consulting company Global Governance Advisors, was $9.13-million in 2021, up just over 23 per cent from what those companies paid their CEOs in 2020.

By contrast, the median CEO pay package rose just 1.4 per cent in 2020, the first year of the COVID-19 pandemic, compared to 2019.

The 100 executives made $1.16-billion, combined, in 2021 – up 32 per cent from $877.1-million in 2020. Seven CEOs were paid at least $25-million, led by Philip Fayer, founder and CEO of payment processor Nuvei Corp. NVEI-T, whose stock-heavy pay package last year was valued by the company at $140.8-million.

Of the 85 CEOs who served for the entirety of the past two fiscal years, pay declined for only 17. There were 55 who had double-digit increases.

How much are Canada’s top CEOs paid? Here’s the full breakdown

The 2021 pay bonanza – based largely on a corporate rebound from the worst of the COVID-19 economic slowdown – may intensify the debate about the fairness of CEO compensation. Many front-line employees have coped for more than two years with a pandemic that could kill them simply for coming to work. Today, many Canadians struggle with rising prices for gasoline, food and shelter.

However, shareholders who benefited from rising share prices for most companies last year have shown little concern. Citing data from Refinitiv, Global Governance Advisors says the median stock-price increase for the companies in the study was 30 per cent in their past fiscal year – a bigger gain than the eye-popping raises.

Given the opportunity to push back, shareholders have instead stood up and cheered: The average vote in say-on-pay measures, which let shareholders express their views on executive compensation approaches, is about 90 per cent in support this year, similar to 2020. Just four Canadian companies have failed say-on-pay votes based on last year’s pay practices, versus six the prior year.

The situation sets up a major disconnect between everyday Canadians and the CEO class.

“I think we’re in a dangerous position right now with the economy going into a very fragile state,” says Paul Gryglewicz of Global Governance Advisors, who wonders if the climate that led companies to pay up for executive talent is sustainable.

“My fear is that if we do head into a recession, the newer employees who haven’t built up goodwill or tenure in a company ... are also going to potentially be the most fragile in terms of retaining employment through a recessionary environment.”

Christopher Chen, a managing director at consultant Compensation Governance Partners, said that with inflation hitting the average Canadian, “when they see these numbers come out, there’s probably going to be a visceral reaction. I’m not sure if the institutional shareholders are feeling that, because they’re just looking at the numbers at how the company performed and saying, okay, you did what you said you’re going to do plus more. We’re happy with it.”

The typical CEO pay package consists of a salary of about $1-million (the median figure in the study was $1.11-million), an annual bonus opportunity that can be a multiple of that salary, and a package of long-term share awards that often make up more than half the value of the total package. The median stock award in 2021 was worth $4.77-million, up nearly 9 per cent from 2020.

CEOs also receive special supplementary pensions, plus perquisites that at some companies include cars, plane flights, club memberships and complimentary financial planning, which can add tens or hundreds of thousands more.

The key driver of the pay gains in 2021 was a sharp increase in annual cash bonuses. The median bonus was $1.95-million, up nearly 38 per cent from 2020. The typical CEO in the study received a bonus that was equal to 170 per cent of salary.

Most annual incentive plans have several steps. First, the company sets a target bonus amount. Then, it sets corporate and individual performance goals. When the books close, the company measures actual performance versus goals and calculates the payout. The compensation committee of the board of directors approves the decisions.

Companies set their corporate performance goals for 2021 late in 2020 or very early in 2021, when uncertainty was still great about COVID, the economy, and how any business could be expected to perform. Compensation consultants who advised boards and watched the discussions said that uncertainty led to conservative bonus goals. Yet when companies blew through the targets, boards typically didn’t scale back the payouts.

“It’s a mathematical fact those targets, in retrospect, were conservative to what was actually achieved,” says consultant Ken Hugessen. “I don’t think even the most proud CEO would tell you that it was 100 per cent good management that got them 20 per cent above target. It was [that] they set reasonable targets in the context of what they knew at the time and they turned out to have been relatively not all that [difficult], given how the world unfolded.”

Mr. Chen said “perhaps the reason you didn’t see a lot of the scaling back at the end of the day was because, in theory, management executed and they’ve ultimately done what the shareholders wanted them to do.”

Canadian Tire CTC-T, for one, set modest financial targets for 2021 after big pandemic-related sales in 2020. For pay purposes in 2021, it set an earnings target that was 11.7 per cent below the earnings of the prior year and a sales-growth goal that was more than eight full percentage points below the 2020 number.

The actual results for 2021 far surpassed the maximum thresholds, resulting in the largest possible annual cash bonuses for the executive team. CEO Greg Hicks’ bonus of $2.64-million was nearly triple that of the year before.

Canadian Tire spokeswoman Joscelyn Dosanjh told The Globe the 2021 targets were set when vaccines were not widely available “and there was no clear view as to when we would emerge from the pandemic, and how consumers would behave once we did.”

Global Governance Advisors said that of the 83 companies that disclosed their targets for short-term incentive bonuses, 65 paid above the target, with an average of 148 per cent of the target.

Manulife Financial Corp. MFC-T paid 192 per cent of target, which gave CEO Roy Gori a bonus of $5.84-million; Gildan Activewear GIL-T paid 200 per cent of target, which gave CEO Glenn Chamandy a $4.67-million bonus; and Loblaw Cos. L-T paid 198 per cent of target, which gave CEO Galen G. Weston a bonus of $3.18-million.

“I know that several of the banks and some other companies did across-the-board wage increases for lower- and middle-income employees, but it remains to be seen whether that’s going to in any way make up for the increasing levels on the upper end that keep going up and up and up,” said Catherine McCall, executive director of the Canadian Coalition for Good Governance, a group of institutional investors. “Income inequality is a concern for some of our members already as a systemic risk, and it is something that is continuing to grow.”

The elements of a company’s executive compensation are awarded at different times of the year. While the bonus typically reflects the year just completed, the long-term stock awards that are part of the total are usually given out at the beginning of the previous fiscal year.

That means the pay totals reported in companies’ proxy circulars, while representing what a board intended to award a CEO, may not reflect current reality if the stock price has changed considerably.

Nuvei, for example, gave Mr. Fayer share and option awards valued at $138.6-million on Oct. 6, when the company’s shares traded on the New York Stock Exchange at US$123.14. More than six months later, when the company issued its proxy circular, the shares traded at less than half that amount.

Both the share and option awards required share prices to climb 50 per cent to 200 per cent from the US$123.14 level before they could be used. Nuvei told shareholders “caution should be exercised” when looking at the numbers in the executive compensation disclosures because of the share-price decline.

Nuvei’s governance, human resources and compensation committee, in a letter to shareholders in the proxy circular, said the company had an “exceptional” year in 2021, that its results “are a testament to the unparalleled talent and leadership of our executive team,” and that its pay decisions were designed to “motivate our executives” and “also allow us to attract and retain top talent in an extremely competitive labour market.”

Kelly Gorman of Kingsdale Advisors said the desire to lure and retain executives drove companies to raise pay in 2021. “What we’re seeing is that boards this year are really focused around the retention of key staff. They were focused on making sure that they were retaining their CEOs and their key officers. And so I’m not surprised that we’re seeing the compensation go up.”

The compensation totals reported in proxies may also understate, rather than overstate, their current value.

Share prices of many energy companies, for example, rose by 50 per cent or more during their 2021 fiscal year. The median value of share and stock-option awards given to CEOs in 2021 by the oil, gas and consumable fuels companies among the 100 studied was $4.67-million, a figure nearly 12 per cent below 2020 levels. But most of the awards were made in March and April last year, when the stock price was much lower than today.

“The biggest piece of the pie is the stock award that CEOs get,” said Kenneth Yung, the practice leader for executive rewards at Mercer (Canada) Ltd. While CEO median pay went up by 20 to 25 per cent at many companies, he said, “I believe that the actual pay that they have received went up by way more than 20 to 25 per cent.”

The rising tide for nearly all boats in 2021 also increased the accumulated wealth of CEOs, who typically hold on to their share awards and stock options for a number of years to maximize their value.

The median value of company stock ownership for the 100 CEOs in the study is just over $21-million, up from $18.4-million the year before. (The wealth numbers are based on the last day of the companies’ fiscal year – in many cases, Dec. 31.)

Median figures exclude the wealthy outliers, several of which are among Canada’s CEO-founders or members of founding families. There were 10 CEOs who had accumulated at least $1-billion in company stock at the end of their most recent fiscal years, with G Lütke of Shopify Inc. SHOP-T and Mr. Weston above $10-billion. All told, the 100 CEOs owned $46.4-billion in stock in their companies, up more than $6-billion from the prior year.

When companies’ proxy statements come out in the spring of 2023, most will feature stock awards given in early 2022 at higher valuations than they are currently. Some companies will still pay robust bonuses if their profits remain high in an inflationary environment.

It all adds up to possible sizeable gains in 2022 compensation, even as stock markets and the broader economy decline. And that may make shareholders push back on pay packages next year in ways they didn’t this spring.

“I think it will be interesting to look again this time next year,” Mercer’s Mr. Yung said. “We’ll see where the stock market goes the balance of the year, but it could be quite different.”

Top-paid CEOs, total compensation (millions of dollars)

Philip Fayer, Nuvei Corp., $140.78

Patrick Dovigi, GFL Environmental Inc., $43.44

Joseph Papa, Bausch Health Companies Inc., $28.69

Joe Natale, Rogers Communications Inc., $27.38

Keith Creel, Canadian Pacific Railway Ltd., $26.73

Mark Barrenechea, Open Text Corp., $26.28

Tobias Lütke, Shopify Inc., $25.07

Darren Entwistle, Telus Corp., $19.82

Charles Brindamour, Intact Financial Corp., $19.71

Al Monaco, Enbridge Inc., $19.04

Largest bonuses

Jay Hennick, Colliers International Group Inc., $16.77

Gerald Schwartz, Onex Corp., $6.27

Bradley Shaw, Shaw Communications Inc., $6.12

Patrick Dovigi, GFL Environmental Inc., $6.02

Roy Gori, Manulife Financial Corp., $5.84

Mark Bristow, Barrick Gold Corp., $5.82

Alain Bédard, TFI International Inc., $5.26

Largest total stock and options awards in 2021

Philip Fayer, Nuvei Corp., $138.39

Patrick Dovigi, GFL Environmental Inc., $31.52

Tobias Lütke, Shopify Inc., $25.07

Joseph Papa, Bausch Health Companies Inc., $23.58

Mark Barrenechea, Open Text Corp., $23.04

Keith Creel, Canadian Pacific Railway Ltd., $22.05

Charles Brindamour, Intact Financial Corp., $15.60

Largest CEO stock ownership stakes

Tobias Lütke, Shopify Inc., $13,754.3

Galen G. Weston, George Weston Ltd., $11,535.2

Bruce Flatt, Brookfield Asset Management Inc., $4,928.9

Philip Fayer, Nuvei Corp., $2,284.3

Pierre Karl Péladeau, Quebecor Inc., $2,018.6

Brian Hill, Aritzia Inc., $1,307.6

Jay Hennick, Colliers International Group Inc., $1,117.3

Dax Dasilva, Lightspeed Commerce Inc., $1,100.8

Gerald Schwartz, Onex Corp., $1,089.1

Mark Leonard, Constellation Software Inc., $1,010

Largest accrued pension values

Bradley Shaw, Shaw Communications Inc., $134.75

Jeffrey Orr, Power Corp. of Canada, $41.11

Nancy Southern, Canadian Utilities Ltd., $33.45

Paul Mahon, Great-West Lifeco Inc., $30.31

Al Monaco, Enbridge Inc., $28.80

Denis Ricard, iA Financial Corporation Inc., $23.62

Louis Vachon, National Bank of Canada, $23.56

Bharat Masrani, Toronto-Dominion Bank, $22.92

Mark Little, Suncor Energy Inc., $22.90

Sean Boyd, Agnico Eagle Mines Ltd., $21.80

Brian Porter, Bank of Nova Scotia, $21.72

David McKay, Royal Bank of Canada, $20.09

Most valuable unexercised stock options

Gerald Schwartz, Onex Corp., $207.1

Patrick Dovigi, GFL Environmental Inc., $150.5

Alain Bédard, TFI International Inc., $132.1

Keith Creel, Canadian Pacific Railway Ltd., $122.8

Louis Vachon, National Bank of Canada, $115.1

Editor’s note: Editor's note: A previous version of this article incorrectly named Kingsdale Advisors.

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