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In documents sent to shareholders before its annual meeting, Air Canada said that, as of May 4, the 2019 pay package for CEO Calin Rovinescu, seen here in Toronto on Oct. 17, 2017, was worth just $5.8-million.

The Canadian Press

Air Canada had a very good year in 2019, and CEO Calin Rovinescu was well-paid as a result. The company gave Mr. Rovinescu total compensation of almost $13-million during the year, the bulk of which came in grants of Air Canada’s high-flying stock.

It now seems like ancient history. Air Canada has seen its revenue crushed by the COVID-19 pandemic and its share price fall by two-thirds in 2020. In documents sent to shareholders before its annual meeting, the company said that, as of May 4, Mr. Rovinescu’s 2019 pay package was worth just $5.8-million instead.

He is not alone. Despite recent market rebounds, the shares of a majority of large Canadian companies have declined in 2020, some by as much as two-thirds. And the leaders of these companies – who have increasingly been paid in company stock, not cash, in recent years – have seen their wealth fall precipitously.

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This sets up a dilemma for companies that believed that rich pay packages – made all the richer when the company’s stock climbed – are necessary to retain and motivate leaders. But when millions of dollars of compensation vanish within weeks, and carefully crafted bonus plans have unattainable targets, what happens next?

Specialists who watch Canadian executive compensation are optimistic that companies will “read the room,” and wait until later this year to make modest adjustments – if any – to compensation plans. Wholesale repricing and reissuing of stock awards is likely off the table because of concerns of how institutional shareholders would react. Some companies, however, may tweak bonus plans to pay executives a portion of their annual incentives for hitting second-half targets.

And most of the dynamics that have led to ever-higher pay packages over the years still exist. “We’ve been through this before, in 2008,” says Catherine McCall, head of the Canadian Coalition for Good Governance, a group of institutional investors who engage with companies on governance practices. After that financial crisis, “there was a really quick recovery in executive compensation.”

The Globe and Mail partners with consulting firm Global Governance Advisors to review CEO compensation at 100 large Toronto Stock Exchange-listed Canadian companies, the most valuable by market capitalization at the end of 2019. Median total compensation for CEOs was $7.64-million in 2019 – the end of a long bull market and economic expansion – compared with $6.77-million in 2018. Stock compensation – stock options and share awards – amounted to 60 per cent of total pay, on average.

2019 IN REVIEW

THE TOP 10 IN TOTAL COMPENSATION

$27,486,136

José Cil

Restaurant Brands Int’l

$24,160,818

Donald Walker

Magna International

$23,049,705

Mark Bristow

Barrick Gold

$22,748,336

Joseph Papa

Bausch Health Companies

$19,759,124

Geoffrey Martin

CCL Industries

$19,007,773

James Smith

Thomson Reuters

$17,993,384

Al Monaco

Enbridge

$17,343,087

Sachin Shah

Brookfield Renewable Ptrs.

$16,681,918

Doug Suttles

Ovintiv

Nutrien

$16,411,042

Chuck Magro

TAKING STOCK

CEOs with share and option awards totalling $15-million or more

Restaurant Brands Int’l

$24,864,508

José Cil

Sachin Shah

Brookfield Renewable Ptrs.

$16,402,895

Joseph Papa

Bausch Health Cos.

$16,305,344

Geoffrey Martin

CCL Industries

$16,281,597

Magna International

$15,792,252

Donald Walker

THE GOLDEN YEARS

CEOs who are owed a total pension of $25-million or more

$118,470,000

Bradley Shaw

Shaw Communications

Power Financial

R. Jeffrey Orr

$40,308,000

Power Corp. of Canada

André Desmarais

$33,912,000

Great-West Lifeco

Paul Mahon

$32,255,316

Power Corp. of Canada

Paul Desmarais, Jr.

$32,055,000

Enbridge

$26,182,000

Al Monaco

LOTS OF OPTIONS

CEOs with at least $50-million in potential option profits at the end

of the fiscal year

Shopify

$282,120,536

Tobias Lütke

Thomson Reuters

$133,440,190

James Smith

Onex

$126,820,027

Gerald Schwartz

Canadian Pacific Railway

$64,019,035

Keith Creel

CGI

$62,925,815

George Schindler

Air Canada

$62,229,065

Calin Rovinescu

National Bank of Canada

$59,863,553

Louis Vachon

Alimentation Couche-Tard

$52,666,165

Brian Hannasch

2019 IN REVIEW

THE TOP 10 IN TOTAL COMPENSATION

$27,486,136

José Cil

Restaurant Brands International

$24,160,818

Donald Walker

Magna International

$23,049,705

Mark Bristow

Barrick Gold

$22,748,336

Joseph Papa

Bausch Health Companies

$19,759,124

Geoffrey Martin

CCL Industries

$19,007,773

James Smith

Thomson Reuters

$17,993,384

Al Monaco

Enbridge

$17,343,087

Sachin Shah

Brookfield Renewable Partners

$16,681,918

Doug Suttles

Ovintiv

Nutrien

$16,411,042

Chuck Magro

TAKING STOCK

CEOs with share and option awards totalling $15-million or more

Restaurant Brands International

$24,864,508

José Cil

Sachin Shah

Brookfield Renewable Partners

$16,402,895

Joseph Papa

Bausch Health Cos.

$16,305,344

Geoffrey Martin

CCL Industries

$16,281,597

Magna International

$15,792,252

Donald Walker

THE GOLDEN YEARS

CEOs who are owed a total pension of $25-million or more

Bradley Shaw

Shaw Communications

$118,470,000

Power Financial

R. Jeffrey Orr

$40,308,000

Power Corp. of Canada

André Desmarais

$33,912,000

Great-West Lifeco

Paul Mahon

$32,255,316

Power Corp. of Canada

Paul Desmarais, Jr.

$32,055,000

Enbridge

$26,182,000

Al Monaco

LOTS OF OPTIONS

CEOs with at least $50-million in potential option profits at the end

of the fiscal year

Shopify

$282,120,536

Tobias Lütke

Thomson Reuters

$133,440,190

James Smith

Onex

$126,820,027

Gerald Schwartz

Canadian Pacific Railway

$64,019,035

Keith Creel

CGI

$62,925,815

George Schindler

Air Canada

$62,229,065

Calin Rovinescu

National Bank of Canada

$59,863,553

Louis Vachon

Alimentation Couche-Tard

$52,666,165

Brian Hannasch

2019 IN REVIEW

THE TOP 10 IN TOTAL COMPENSATION

$27,486,136

José Cil

Restaurant Brands International

$24,160,818

Donald Walker

Magna International

$23,049,705

Mark Bristow

Barrick Gold

$22,748,336

Joseph Papa

Bausch Health Companies

$19,759,124

Geoffrey Martin

CCL Industries

$19,007,773

James Smith

Thomson Reuters

$17,993,384

Al Monaco

Enbridge

$17,343,087

Sachin Shah

Brookfield Renewable Partners

$16,681,918

Doug Suttles

Ovintiv

$16,411,042

Chuck Magro

Nutrien

TAKING STOCK

CEOs with share and option awards totalling $15-million or more

José Cil

Restaurant Brands International

$24,864,508

Sachin Shah

Brookfield Renewable Partners

$16,402,895

Joseph Papa

Bausch Health Cos.

$16,305,344

Geoffrey Martin

CCL Industries

$16,281,597

Donald Walker

Magna International

$15,792,252

THE GOLDEN YEARS

CEOs who are owed a total pension of $25-million or more

Bradley Shaw

Shaw Communications

$118,470,000

Many CEOs lost tens of millions of dollars—even hundreds of millions—in the value of their company stock in the first five months of 2020 as COVID-19 wrecked the economy and financial markets. Some are company founders and others are professional executives. Here’s a selection of CEOs who suffered a sharp decline in the value of their shares:

Many CEOs lost tens of millions of dollars—even hundreds of millions—in the value of their company stock in the first five months of 2020 as COVID-19 wrecked the economy and financial markets. Some are company founders and others are professional executives. Here’s a selection of CEOs who suffered a sharp decline in the value of their shares:

R. Jeffrey Orr

Power Financial

$40,308,000

André Desmarais

Power Corp. of Canada

$33,912,000

Paul Mahon

Great-West Lifeco

$32,255,316

Paul Desmarais, Jr.

Power Corp. of Canada

$32,055,000

Al Monaco

Enbridge

$26,182,000

LOTS OF OPTIONS

CEOs with at least $50-million in potential option profits at the end of the fiscal year

Tobias Lütke

Shopify

$282,120,536

James Smith

Thomson Reuters

$133,440,190

Gerald Schwartz

Onex

$126,820,027

Keith Creel

Canadian Pacific Railway

$64,019,035

George Schindler

CGI

$62,925,815

Calin Rovinescu

Air Canada

$62,229,065

Louis Vachon

National Bank of Canada

$59,863,553

Brian Hannasch

Alimentation Couche-Tard

$52,666,165

Those numbers, however, are largely based on stock prices from early 2019. A lot has changed. Markets climbed until February this year, but then plunged. The S&P/TSX Composite Index lost 35 per cent in about one month. That has left many companies underwater – their market share price below the exercise price of stock options awarded to executives – even after the market rebound in recent weeks.

Of the 100 companies in the Globe’s pay survey, 73 have seen their share prices fall since the end of their fiscal year. The average decline is nearly 13 per cent.

To track what this means for individual CEOs, Global Governance Advisors took shares held by them as of the most recent proxy circular disclosure and calculated the change in the value to May 29. (For most companies, the period was five months, but fiscal years vary, and the gaps ranged from two months to 14.)

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For founder- or family-CEOs, the numbers are startling. Bruce Flatt, CEO of Brookfield Asset Management Inc., and Prem Watsa of Fairfax Financial Holdings Ltd., saw their equity holdings decline by more than $400-million each. Gerald Schwartz of Onex Corp., Pierre Karl Péladeau of Quebecor Inc., and André Desmarais and Paul Desmarais Jr. of Power Corp. of Canada saw the value of their equity fall between $150-million and $210-million.

CEO WEALTH CRASH

Many CEOs lost tens of millions of dollars—even

hundreds of millions—in the value of their company

stock in the first five months of 2020 as COVID-19

wrecked the economy and financial markets. Some

are company founders and others are professional

executives. Here’s a selection of CEOs who exper-

ienced a sharp decline in the value of their shares:

$2.76B

Bruce Flatt

Brookfield Asset

Management Inc.

Prem Watsa

Fairfax Financial

Holdings Ltd.

$2.14B

Gerald Schwartz

Onex Corp.

Pierre Karl

Péladeau

Quebecor Inc.

Glenn Chamandy

Gildan Activewear

Inc.

Philip Pascall

First Quantum

Minerals Ltd.

$769M

$711M

Donald Walker

Magna

International Inc.

Calin Rovinescu

Air Canada

$108M

$61M

$47M

$11M

EST. VALUE

OF EQUITY

AS OF MAY

29, 2020

$25M

$23M

$29M

$63M

$194M

$209M

EQUITY

DECLINE

$423M

$433M

CEO’s equity is shares, including vested stock awards, held by the CEO as per

the company’s most recent proxy circular disclosure

The decline in equity value is measured from Dec. 31 to May 29 except for

Gildan (Dec. 29 to May 29)

CEO WEALTH CRASH

Many CEOs lost tens of millions of dollars—even hundreds

of millions—in the value of their company stock in the first

five months of 2020 as COVID-19 wrecked the economy and

financial markets. Some are company founders and others are

professional executives. Here’s a selection of CEOs who ex-

perienced a sharp decline in the value of their shares:

$2.76B

Bruce Flatt

Brookfield Asset

Management Inc.

Prem Watsa

Fairfax Financial

Holdings Ltd.

$2.14B

Gerald Schwartz

Onex Corp.

Pierre Karl

Péladeau

Quebecor Inc.

Glenn Chamandy

Gildan Activewear

Inc.

Philip Pascall

First Quantum

Minerals Ltd.

$769M

$711M

Donald Walker

Magna

International Inc.

Calin Rovinescu

Air Canada

$108M

$61M

$47M

$11M

EST. VALUE

OF EQUITY

AS OF MAY

29, 2020

$25M

$23M

$29M

$63M

$194M

$209M

EQUITY

DECLINE

$423M

$433M

CEO’s equity is shares, including vested stock awards, held by the CEO as per

the company’s most recent proxy circular disclosure

The decline in equity value is measured from Dec. 31 to May 29 except for

Gildan (Dec. 29 to May 29)

$2.76B

CEO WEALTH CRASH

Many CEOs lost tens of millions of dollars –even

hundreds of millions – in the value of their company

stock in the first five months of 2020 as COVID-19

wrecked the economy and financial markets. Some

are company founders and others are professional

executives. Here’s a selection of CEOs who experienced

a sharp decline in the value of their shares:

Bruce Flatt

Brookfield Asset

Management Inc.

Prem Watsa

Fairfax Financial

Holdings Ltd.

$2.14B

Gerald Schwartz

Onex Corp.

Pierre Karl

Péladeau

Quebecor Inc.

Glenn Chamandy

Gildan Activewear

Inc.

Philip Pascall

First Quantum

Minerals Ltd.

$769M

$711M

Donald Walker

Magna

International Inc.

Calin Rovinescu

Air Canada

$108M

$61M

$47M

$11M

ESTIMATED

VALUE OF

EQUITY AS

OF MAY 29,

2020

$25M

$23M

$29M

$63M

$194M

$209M

EQUITY

DECLINE

$423M

$433M

CEO’s equity is shares, including vested stock awards, held by the CEO as per the company’s

most recent proxy circular disclosure

The decline in equity value is measured from Dec. 31 to May 29 except for Gildan (Dec. 29 to May 29)

CEOs who are employees have experienced wealth declines that may be smaller in absolute size, but similar – or worse – in magnitude. Eight non-founder CEOs have seen the value of their shares fall by between $10-million and $30-million. For some, a reduction of “only” $5-million or so in their holdings is a decline of 50 per cent or more.

These numbers also do not include the effect on stock options, which give executives the right to purchase company shares at a set exercise price for an extended period. But options are only usable if the market price is above the exercise price. Of the 72 companies in the survey that awarded stock options in 2019, the share prices of 42 were underwater on May 29.

The situation was worse in March, as equity prices tumbled. Compensation consultants say directors of many companies at least started to have conversations about stock awards that no longer offered much incentive. The key question: Should the boards grant new awards? The the bulk of Canadian companies said ‘no.’

“The topic was broached, but just for discussion,” says Christopher Chen, managing director at Toronto’s Compensation Governance Partners. “Everyone around the table was really cagey. It was more, ‘Look, you know, this is something that we may choose to go to eventually. Let’s at least have an initial discussion about it.’ And the consensus was ‘it’s March and April. Let’s wait a bit to see what we have to do.‘”

The strong rebound in stock markets – the S&P/TSX Composite closed Friday up 35 per cent from its March 23 low – helped quell that talk, says Mr. Chen.

Story continues below advertisement

Long-term incentive plans that use shares typically have three-year to five-year measurement periods, and stock options typically have terms from seven to 10 years – plenty of time for shares to recover.

“The value of a stock option that was granted this year is not what the executive ultimately is going to realize in the future,” says Anand Parsan, national leader of the Compensation Consulting Practice at Morneau Shepell Ltd. “So looking at a little window in terms of what happened in the share price right now is not an indication of what ultimately is going to happen.”

Then again, not all companies have this problem. Shares of miners have risen as the price of gold increased due to long-term inflation fears, and e-commerce companies have flourished. David Harquail of Franco-Nevada Corp. and Mark Bristow of Barrick Gold Corp. have both seen their shareholdings increase this year by more than $50-million as of May 29 – to more than $200 million apiece. Tobias Lutke, CEO of the remarkable Shopify, saw the value of his stock increase by more than $3-billion, to $7.3-billion.

The tumult extends to annual cash incentive plans, which are based on a single year’s results. Targets set in early 2020 are likely unachievable for companies damaged by COVID-19, but could be easily surpassed by companies that have benefitted. “We advised, ‘do not act immediately,’” said Ken Hugessen, an executive compensation consultant with an eponymous firm. “The line of sight to the rest of the year will get better. It may never get any good, but it will be better than it was in March and April. And indeed it has.”

Mr. Hugessen says many boards will discuss the issue in July or August, with one option being setting targets based simply on second-half results. But a board that sets hurdles too low may find itself in the crosshairs of institutional shareholders.

Ms. McCall of the Canadian Coalition for Good Governance says companies that revise goals downward “will want to be cognizant of the fact that workforces suffered dreadfully: huge layoffs, cuts in pay. So you cannot make the executive compensation decision without a recognition of what’s going on more broadly, with employees, customers, and the community where you get your employees and customers from.”

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