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Brian Porter, president and CEO of Scotiabank, addresses the company's annual meeting in Calgary, April 12, 2016.

Jeff McIntosh/The Canadian Press

Bank of Nova Scotia chief executive officer Brian Porter saw his pay fall slightly in the last fiscal year after the bank missed all of its major financial targets by wide margins.

Mr. Porter’s total compensation was $12.22-million, down from $12.63-million in the previous fiscal year, the bank reported in its annual proxy statement to shareholders. His cash bonus of $2.14-million was below the $2.33-million he received in the previous year, and the value of his stock and option awards was $6.43-million, down from $6.98-million the year before.

The bank fell short on all three financial metrics it uses for incentive pay. Its earnings per share of $5.36 missed the target of $7.07, while return on equity of 10.4 per cent was below the target of 13.3 per cent.

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Operating leverage - defined by Scotia as revenue growth minus growth in costs - was negative-0.6 per cent, meaning costs grew faster than revenue. The goal had been for a net revenue gain of 0.5 percentage points.

The bank said it outperformed its goals for customer satisfaction.

According to the bank’s proxy, the Scotia board’s compensation committee arrived at a “business performance factor” of 91 - representing a 9-per-cent decrease in Mr. Porter’s potential inventive compensation. The committee “applied judgment” by considering the bank’s provisions for credit losses - which reduced measures of profitability - “and the significant pandemic-related employee and customer costs.”

The committee then reduced the performance factor by three more percentage points by comparing Scotia’s performance with its peers, the proxy said.

Mr. Porter’s compensation follows the pattern at other big banks, which set their CEOs’ “target compensation” higher at the beginning of the year, but looked back at the final results and awarded less than the target.

Scotia said Mr. Porter’s “total direct compensation” was $9.87-million, down from $10.61-million in fiscal 2019 and below the $11.2-million target compensation the board set for him for 2020.

Scotia, like other banks, does not consider pension compensation part of “direct” pay. The pension amount Scotia and other companies report in the disclosure required by regulators isn’t cash placed in an account. It’s an estimate of how much executives’ pensions have grown – or, in rare cases, shrunk – based on their earnings in the past year.

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Scotia’s estimate of the change in the value of Mr. Porter’s pension was $2.35-million in the past year, up from $2.02-million the year before. The amount, Scotia explained in a footnote, “fluctuates from year to year, even in cases where an executive accrues a flat pension amount, due to changes in market conditions. The decline in corporate bond yields, the discount rate used to measure the compensatory change, was [one percentage point] lower in fiscal 2020 than the prior year, leading to higher compensatory change amounts this year.”

Mr. Porter’s previous retirement arrangement was frozen when he became CEO in October, 2013, and his pension accrues at a flat rate of $125,000 for each year in the top job. His total annual pension from all bank sources is capped at $1.5-million.

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