Two major shareholder-advisory companies are advising unitholders of Chartwell Retirement Residences to re-elect former Ontario premier Mike Harris as the company’s chairman, but one has criticized some of the company’s compensation decisions.
The recommendations come after the Shareholder Association for Research and Education (SHARE), which advocates for socially responsible corporate policies, recommended Chartwell unitholders not vote for Mr. Harris owing to the company’s performance during the COVID-19 pandemic, when it, along with other retirement home companies, came under fire for resident deaths and employment practices.
SHARE also placed a proposal on the company’s proxy circular calling for Chartwell to produce a “human-capital report” on the company’s overall approach and board-level oversight of its work force.
The company’s annual meeting is Thursday.
Institutional Shareholder Services (ISS), the largest of the companies advising institutional investors on proxy voting, produced a clean sweep for Chartwell, recommending voting for all the company’s directors, approving the company’s approach to executive compensation in its say-on-pay vote and rejecting SHARE’s proposal.
Glass Lewis & Co., a smaller but still influential voting adviser, is mixed in its assessment. It recommends voting for all directors except Huw Thomas, the chairman of the board’s compensation committee, and voting against the say-on-pay measure.
Glass Lewis takes issue with how Chartwell assessed its pandemic performance when paying out annual bonuses. Glass Lewis also advocates voting for SHARE’s proposal on the need for a human-capital report, saying shareholders would benefit from additional disclosure on how Chartwell is managing human-capital related risks.
Chartwell is Canada’s largest operator of retirement homes, but long-term care was only about 25 per cent of revenue and 9 per cent of profits for the company in 2020, while private-pay retirement-living centres accounted for the rest.
Mr. Harris, the 76-year-old who oversaw the deregulation of Ontario’s long-term care industry during his time as premier, plans on leaving the board in 2022, Chartwell said in its proxy circular to shareholders filed last month. He has served as the company’s board chairman since 2003 and made $223,000 in director’s fees in 2020. Two other directors will leave in 2022 and 2023 as part of Chartwell’s board-renewal plans, the company said.
ISS said it had no issues with Chartwell’s compensation and agreed with the company’s argument that it had “substantially addressed” SHARE’s concerns with increased human-capital disclosure in the the current proxy circular. ISS also said it believed that Chartwell’s mortality statistics during the pandemic did not merit a “yes” vote on the SHARE proposal.
Glass Lewis, however, said it was “skeptical” about the adjustments Chartwell’s board made when it arrived at bonus payouts.
Chartwell explained in its proxy circular to unitholders that its board decided to divide the year by what occurred up to March 15, and what happened after, awarding 100-per-cent bonuses for beating cash-flow targets through March 15. For the pandemic portion of the year, it shifted emphasis in the bonus plan away from the cash-flow goals and added weight to its employee engagement and “customer satisfaction and reputation” goals. The board awarded executives a 100-per-cent performance score for those goals.
“We believe the performance and payout outcomes of this target at 100 per cent – perfect, in other words – raise questions over the committee’s qualitative decision-making … we believe it is a stretch to conclude that the company’s media profile and reputation with the public in 2020 constitute maximum performance,” Glass Lewis said.
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