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CN’s shareholder proxy circular said the railway boosted bonuses because it exceeded its financial goals by large margins.Andrew Vaughan/The Associated Press

Canadian National Railway Co. CNR-T paid top executives, including outgoing CEO Jean-Jacques Ruest, sizable bonuses last year for the first time since 2018.

Mr. Ruest received a bonus of $2.32-million in 2021 as part of a total compensation package of $13.55-million. In 2020, Mr. Ruest’s bonus was $313,334, and the company paid no bonuses to top executives for 2019 performance.

The increase in annual incentive pay was the key driver in a 25-per-cent increase in total compensation for Mr. Ruest, who made $10.81-million in 2020. In 2021, CN gave Mr. Ruest share and option awards valued at $9.10-million, up about $250,000 from the prior year. He made a salary of $1.09-million, down slightly from 2020.

CN, Canada’s largest railway, announced Mr. Ruest’s retirement in October toward the end of a tumultuous year.

In the spring, CN tried to block rival Canadian Pacific Railway Ltd.’s CP-T takeover of Kansas City Southern Co. with a US$29.9-billion offer. The winner of the fight would add a coveted network that ran through Mexico’s auto manufacturing region and to both Mexican coasts.

CN went on to lose the takeover battle to CP, which made a lower offer but had a clearer path to approval with the U.S. regulator. CN then faced a possible proxy battle from its second-biggest investor, Christopher Hohn, who was unhappy with CN’s failed takeover bid and poor financial results. Mr. Hohn called for the ouster of Mr. Ruest and then-chairman Robert Pace.

Rival CP paid chief executive officer Keith Creel $26.7-million last year, including a cash bonus of $2.34-million, and share and option awards worth more than $22-million. That included a special retention stock-option award worth $10.53-million. The CP board cited its successful bid for Kansas City Southern as a significant reason for Mr. Creel’s pay.

CN’s shareholder proxy circular said the railway boosted bonuses because it exceeded its financial goals – some set lower than the prior year – by large margins.

CN uses three financial metrics – revenue, operating income and free cash flow – to determine 70 per cent of annual bonuses. It said it modestly exceeded its revenue target, but its performance for the latter two metrics was so good as to generate a payout of 200 per cent of the target.

CN’s operating income target was about 1 per cent below 2020′s actual result, and its free cash flow goal was about 5.5 per cent below the 2020 number.

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The railway paid zero for the 5-per-cent portion of its bonus linked to its accident rate, which was well worse than its target. But it paid out double for the 5 per cent linked to injury frequency rate, which came out better than target.

Two other CN executives – chief financial officer Ghislain Houle and chief operating officer Robert Reilly – received bonuses topping $1-million as part of compensation packages worth $3.5-million and $4.54-million, respectively.

Spokesman Jonathan Abecassis said Wednesday the 2020 targets were determined “without any consideration for the upcoming pandemic, leading in overvalued objectives for that year.” Then the board based the 2021 targets on the outlook in January of that year, “which was still impacted by the unprecedented events of the pandemic.”

CN’s profit rose by 12 per cent to $4.9-billion in 2021 from 2020 while sales increased by almost 5 per cent to $14.48-billion. CN’s share price rose by nearly 13 per cent, compared with nearly 4 per cent for CP and about 20 per cent on the broader S&P/TSX Composite Index.

CN also said new CEO Tracy Robinson, who assumed the role on Feb. 28 after a career at CP and TC Energy, received an annual compensation package targeted at US$9.2-million, “the same level as Mr. Ruest’s target compensation for 2021.” It includes a salary of US$900,000, with a target annual bonus of US$1.26-million, and a share and option grant valued at US$7,040,000.

CN also gave her a “special make-whole award” of $1,675,000 in cash and stock in consideration of compensation she forfeited by leaving TC Energy.

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