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Buildings in the financial district in Toronto on Sept. 28, 2020.Mark Blinch/The Globe and Mail

Most of Canada’s top CEOs saw their pay climb in 2020, even as the COVID-19 pandemic shocked the economy and the federal government responded with billions of dollars in support for workers and companies.

The median CEO pay package at 100 of the largest Toronto Stock Exchange-listed Canadian companies, reviewed by The Globe and Mail and consulting company Global Governance Advisors, was $7.65-million, up 1.38 per cent from what those companies paid in 2019. One-third of the CEOs made at least $10-million, and six made $20-million or more – both higher proportions than in 2019.

After negotiating a $5-billion support package from the federal government, Air Canada sparked outrage when it revealed it had previously paid a total of $10-million in bonuses in early 2021. The blowback was such that a handful of the airline’s best-paid executives gave their cash back.

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

Opinion: On executive compensation, CEOs’ pandemic sacrifices cost them very little

Pandemic takes a cut of bank CEOs’ pay increases

But CEO cash bonuses were commonplace in Corporate Canada in 2020, including other companies that received government subsidies from pandemic programs. Suncor Energy Inc. and Canadian Natural Resources Ltd., which between them got $550-million from the Canada Emergency Wage Subsidy program, paid their CEO bonuses of $575,000 and $982,686, respectively.

Of the 100 companies in the review, just 10 paid no CEO bonus last year, including several that have a practice of never paying a cash bonus, regardless of company performance. The median annual cash bonus was $1.41-million, down just 5.8 per cent from 2019, despite the damage to the economy from the pandemic.

Many companies also made up for lower bonuses with a big increase in share-based awards: The median amount of stock compensation for CEOs last year, excluding options, was $2.89-million, up 21 per cent from 2019. Many of those stock awards had no performance conditions attached, reflecting companies’ struggle to figure out where their businesses were going in 2020 and beyond.

For compensation experts and major institutional investors, the numbers appear to show companies exercised relative restraint. But to the millions of citizens who live their workday lives far from the executive suite, 2020 CEO pay may look quite different.

“I think if we think back to where we were at the beginning of the pandemic in March of 2020, all of us were having a conversation about the idea that ‘we’re all in this together,’ ” said Anthony Schein, the director of shareholder advocacy for Canada’s Shareholder Association for Research and Education.

“The expectations that many ordinary people – and a lot of investors as well – had around executive compensation probably look a little bit different from what’s played out over this period.”

The modern CEO typically makes a salary of $1-million or more, but it has become a smaller and smaller part of overall pay. Annual cash bonuses are typically bigger than annual salary and can be two to three times those yearly CEO salary figures. Many executives also have lucrative pension plans, unavailable to ordinary workers, that pay hundreds of thousands of dollars or more in retirement.

The biggest portion of executive pay – easily more than half for most CEOs – comes from stock awards. Some awards are shares that vest, or become sellable, over time, based either on company performance criteria or simply staying in the job. Other companies give out stock options, which allow executives to profit over as many as 10 years if the company’s share price rises. Many companies use both kinds of stock awards as part of their compensation plans.

The combination of annual cash bonuses and stock awards allows companies to say the bulk of CEO compensation is “variable pay.” Just more than a year ago, it seemed pay would vary downward in 2020, because of the uncertainty relating to COVID-19 and its long-term economic effects. The S&P/TSX Composite Index plummeted by more than 30 per cent from a late-February high to late March, and stock prices remained underwater for much of the spring.

Many CEOs in The Globe’s review saw a decline of tens of millions of dollars in company stock they held, typically accumulated over the years through annual share and option awards given as compensation. Some founders or long-time CEOs saw a decline of $100-million or more.

At the same time, it was unclear what companies would do about incentive plans, both short and long term, they had put in place prior to a once-in-a-century pandemic that caused all business forecasts to be tossed out the window. What good was a profit target that was based on a COVID-free world?

“Most boards that we saw took a wait-and-see approach, as opposed to try to adjust midyear because things were just still fluid,” said Paul Gryglewicz of Global Governance Advisors. “As we know, some organizations were taking off, and were two or three years ahead of budget, and others were being harmed.”

If a company used its discretion to move the incentive pay above and beyond the targets it set for a normal 2020, despite posting subpar results, it was in for extra scrutiny. And if the board used discretion, institutional investors expected robust disclosure of exactly why, said Peter Landers of Global Governance Advisors.

Catherine McCall, head of the Canadian Coalition for Good Governance, said most major companies in Canada decided rather than lower the bar and reduce financial targets set in a pre-COVID world, they would simply move away from them and use discretion in awarding bonuses.

Most companies explained what they were doing, and why – leaving her group, which represents major institutional investors, with relatively little to complain about in 2020. “I think investors were totally fine with that exercise of discretion, as long as it was disclosed and it was reasonable.”

Restaurant Brands International Inc., owner of the Tim Hortons chain, was one of the most aggressive in modifying its pay plans, changing the terms in April, and then again in August. Yet shareholders appeared to approve. In the annual advisory “say-on-pay” vote June 16, Restaurant Brands received 98.5 per cent of votes cast in favour of their compensation philosophy.

The company has long been known for its outsized pay – former CEO Daniel Schwartz received stock awards that generated $250-million over nine years, and his successor, Jose Cil, has been the No. 1 or No. 2 best-paid CEO in The Globe’s review for the past two years. In 2020, Restaurant Brands gave Mr. Cil $26.9-million, good for the No. 2 spot.

With thousands of restaurants closed completely, and others limited to drive-through service, the company realized quickly the COVID-19 pandemic would cause it to miss profit and sales-growth targets that were a key part of its annual cash-bonus and long-term stock programs.

So it first changed the bonus formula away from the original financial metrics and toward other performance measures related to safety, cash flow and the company’s financial position. It later lowered the profit bar to a “more realistic” level for the profit goal that remained.

It also modified the goals for millions of dollars of performance-based share awards given out in 2019 and early 2020 that risked not paying out because they were based on annual profit growth. To offset the benefits it gave its executives by softening the targets, it reduced the potential payout levels.

Restaurant Brands said in its proxy circular to shareholders it was concerned that sticking with the original formulas might provide its executives with inadequate motivation or even prompt them to leave.

It also said it consulted with its major shareholders, who “recognized [the] unprecedented nature of [the] full-year impact of COVID” and told Restaurant Brands they had “seen many companies modify annual incentive programs to reset more appropriate goals.”

Mr. Cil received a bonus of US$1.69-million in 2020, up from US$1.14-million in 2019. The company estimated the modifications it made to his stock awards cut their value from US$17.72-million to US$15.46-million.

Many other companies made tweaks. Shaw Communications Inc. removed revenue as a basis of calculating the bonuses for some of its executives, instead using cash flow and profit, which were buoyed by thousands of layoffs. CEO Brad Shaw received a bonus of $5.27-million, down slightly from a $5.47-million bonus in the previous year.

Chartwell Retirement Residences divided the year at March 15. For the first period, it used its previously established financial targets. Once COVID-19 hit, it used a different set of goals, with added weight to its employee engagement and “customer satisfaction and reputation.” (Chartwell, which was not one of the 100 most valuable Canadian companies at year-end, was not included in this year’s study.)

Other companies stuck with their formulas, but used the discretionary elements of their bonus plans to soften the blow from missed financial targets. Royal Bank of Canada CEO Dave McKay received none of his $1.35-million potential bonus based on RBC’s profits. But the RBC board gave him $1.4-million in bonuses based on customer satisfaction and “risk and strategic objectives” – an amount that was $500,000 more than the targets for those measures.

Kenneth Yung, a partner at Mercer Canada who serves as its Executive Rewards leader, says his advice to clients was “usually, if you do apply discretion, then you want to make sure that not a whole lot would get paid out because again, the goal is not to make up for the entire loss.” (Mr. Yung was speaking generally and not responding to questions about specific companies.)

Other companies that did well in the pandemic blew through their goals and paid accordingly.

Metro Inc., which easily exceeded profit targets, paid out maximum bonuses, and Canadian Tire Ltd. paid out the maximum possible under the portion of the bonus based on sales targets.

A small number put on the brakes. Loblaw Cos. Ltd. said its board’s governance committee looked at the company’s COVID-influenced 2020 results and decided the company’s short-term bonus plan should pay out at no more than 150 per cent of its target for any goal, rather than the 200-per-cent maximum the plan allows for.

“We know of two privately held organizations, significant companies in Canada, that are massive family owned businesses where they made a decision to actually dial it back and didn’t pay out what the formula said,” said Christopher Chen, managing director at Toronto’s Compensation Governance Partners.

“Their view was, look, this is a windfall, let’s be quite honest about it. It’s not through the work of the executive team that you were able to achieve all of these numbers. It’s interesting that that would happen at these two huge privately held family owned businesses, but you didn’t see as much of that with publicly traded companies.”

What all that meant in practice was very few executives saw dramatic decreases in pay.

All told, while 37 of the 78 CEOs who appear in both the 2020 and 2019 pay study saw year-over-year bonuses decline, there were 25 who saw increases of 20 per cent or more.

Forty-three of the 78 saw an increase in total pay in 2020 from 2019, with 22 seeing an increase of 20 per cent or more. Just 14 saw declines of 10 per cent or more.

As for those executives who saw massive drops in the values of their company stock holdings a year ago, the remarkable rebound of the markets has solved that problem – and then some.

The median value of company stock holdings for the 100 CEOs in The Globe study was $18.4-million in company stock at year end, a level 30 per cent higher than the 2019 median figure of $14.2-million.

Brookfield Asset Management Inc. CEO Bruce Flatt, whose company stock had fallen by $433-milion at the time of The Globe’s compensation study last year, made it all back and gained an additional $1-billion as the year continued, bringing his accumulated shareholdings to just less than $4.3-billion.

Fairfax Financial CEO Prem Watsa, whose wealth initially fell by more than $400-million, to more than $700-million, topped $1-billion. Onex Corp. CEO Gerry Schwartz, who saw a $200-million initial decline in his shares by the spring of 2020, made it all back plus roughly $200-million, and held more than $1.1-billion in company stock. (Wealth numbers were based on the company’s fiscal year-end and the values have changed since.)

Rocketing stocks are also providing a windfall for executives who received stock-based compensation in early 2020, making the values reported in proxy circulars already obsolete.

GFL Environmental Inc. gave CEO Patrick Dovigi a massive grant of nearly 17.7 million stock options in March, 2020, that it valued at $26.57-million, contributing to his placement at the top of the best-paid CEO list for 2020, with total compensation of $37.31-million. The five blocks of options have increasingly higher exercise prices and were designed to be a multiyear incentive, the company says.

Yet at the stock’s 52-week high of $45.91 in April of this year – nearly 90 per cent above where GFL traded when the grant was made – the options had an in-the-money value of $195.6-million, a little more than a year after Mr. Dovigi received them. (He cannot use all of them yet – 7.4 million have vested, while 10.3 million have not.)

Ballard Power Systems gave CEO Randy MacEwen options and performance shares on March 5, 2020, that vest from March of this year to March, 2023. When the company made the award, Ballard stock traded at $14.22, about 25 per cent less than it had 10 days earlier, and the company valued the awards at just more than $1-million.

By February, 2021 – less than a year later – the shares were up nearly 280 per cent, and the stock was worth more than $4.5-million. (The shares have since fallen by more than half, returning the awards closer to the original value.)

At Kinaxis Inc., a seller of supply-chain-management software, CEO John Sicard received a package of options and share awards in February, 2020, scheduled to vest over the next three to four years. The company valued them at $4.34-million when the shares traded in the $100 to $112 range at the time.

By early August, however, the stock had doubled – and the unrealized value of Mr. Sicard’s awards was $12.5-million. (The stock has fallen by one-third from that high.)

“Through time, it’s pretty clear the impact of COVID was not as severe as people thought it might have been back in March and April [of 2020],” said compensation consultant Ken Hugessen, speaking generally.

“We were all scared we were going to go into a complete crash in real estate and this, that and the other thing. By the early fall, [a large] proportion of the economy was either essential, or skillful in figuring out alternative delivery mechanisms. And for the stock market, [COVID] almost became a yawn.”

Who earned the most? Canada’s top paid CEOs

Top-paid CEOs in 2020, total compensation (millions of dollars)

Patrick Dovigi, GFL Environmental Inc. $37.31

Jose Cil, Restaurant Brands International Inc. $26.89

Mark Bristow, Barrick Gold Corp. $24.31

Glenn Chamandy, Gildan Activewear Inc. $22.23

Donald Walker, Magna International Inc. $22.10

Tobias Lutke, Shopify Inc. $20.25

Joseph Papa, Bausch Health Companies Inc. $18.93

Al Monaco, Enbridge Inc. $17.05

Keith Creel, Canadian Pacific Railway Ltd. $16.82

Chuck Magro, Nutrien Ltd. $16.37

Biggest bonuses (millions of dollars)

Mark Bristow, Barrick Gold Corp. $6.95

Gerald Schwartz, Onex Corp. $6.70

Donald Walker, Magna International Inc. $5.53

Patrick Dovigi, GFL Environmental Inc. $5.43

Bradley Shaw, Shaw Communications Inc. $5.27

Most valuable grants of stock awards (millions of dollars)

Patrick Dovigi, GFL Environmental Inc. $26.57

Jose Cil, Restaurant Brands International Inc. $23.75

Tobias Lutke, Shopify Inc. $20.11

Glenn Chamandy, Gildan Activewear Inc. $18.11

Donald Walker, Magna International Inc. $15.95

(includes options and share awards)

Biggest CEO ownership stakes (millions of dollars)

Tobias Lutke, Shopify Inc. $15,677.2

Galen Weston, George Weston Ltd. $6,969.5

Bruce Flatt, Brookfield Asset Management Inc. $4,264.9

Philip Fayer, Nuvei Corp. $2,356.9

Pierre Karl Péladeau, Québecor Inc. $2,319.0

Gerald Schwartz, Onex Corp. $1,166.6

Prem Watsa, Fairfax Financial Holdings Ltd. $1,016.2

Neil Rossy, Dollarama Inc. $765.4

Mark Leonard, Constellation Software Inc. $711.6

(Valued as of the end of the company’s fiscal year)

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