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David Ossip, CEO of Ceridian, in the company's Toronto office, Sept. 5, 2017.Galit Rodan/Globe and Mail

Ceridian HCM Holding Inc. gave its CEO, Canadian tech entrepreneur David Ossip, a US$22.4-million option grant in 2020 as a retention and incentive award – despite the fact he was already holding US$365-million in shares and options at the time.

The company acknowledges in its new proxy statement that it has been hearing from unhappy investors about its pay practices. They’ll get a chance to weigh in formally in Ceridian’s coming say-on-pay vote – an election the company very nearly lost a year ago.

The numbers underscore the wild success of Ceridian, which was a fading, privately held software company when it bought Mr. Ossip’s three-year-old Dayforce Corp. in 2012. Ceridian appointed Mr. Ossip chief executive officer in 2013 and went public in May, 2018, taking advantage of investor desire for cloud-computing business-software companies with increasing revenue.

The company, headquartered in Minnesota, is largely run from Toronto by Mr. Ossip, who had previous renown for founding Workbrain Corp., and his fellow executives. Ceridian trades on the New York and Toronto stock exchanges.

By the time of its record high in December, 2020, Ceridian stock had quintupled. And in a space of 15 months over 2019 and 2020, Mr. Ossip made US$135-million in profits by exercising stock options Ceridian had awarded him in its pre-IPO years, including a gain of US$100-million in 2020.

Ceridian paid Mr. Ossip US$32,998,933 in 2020 (including a salary of $700,000 and cash bonus of $560,000) and $92,565,225 in total over the four years from 2017 to 2020. The biggest part of those numbers are the company’s estimates of the value of his annual stock option grants. That number, however, may underestimate the rewards Mr. Ossip may ultimately reap. For example, an award in April, 2018, that the company initially estimated was worth US$10.1-million when it was granted to him was worth US$122-million by last December.

The Globe and Mail has calculated Mr. Ossip’s current stock and option ownership is worth just more than US$444-million based on Thursday’s closing price of US$82.71 a share on the New York Stock Exchange. That does not include the US$135-million he has already realized in option profits.

In its proxy statement, Ceridian said management or board members spoke to shareholders that owned 69 per cent of the company’s shares as part of a shareholder outreach campaign last year, and were told it had been giving Mr. Ossip too many stock options. Shareholders said the company needed to better link pay to performance. Some of those meetings occurred before it made the special 2020 option award.

In the proxy circular, the company acknowledged the 2020 grant was “significant in size,” but Ceridian said grant was intended to cover multiple years and was designed “as a bridge to transition” to more typical annual compensation grants beginning in 2021.

Trading records show Ceridian gave Mr. Ossip 226,931 stock options and 32,736 performance shares on March 8 of this year. The document does not place a value on them, but they will appear in compensation disclosures next year.

Ceridian also said “many” of its stockholders said the stock option grants “are in fact performance based” since they deliver value only when Ceridian’s stock price increases. In response to “some stockholder comments,” however, it incorporated a performance component into the special 2020 award.

According to the proxy, Ceridian stock must increase from the $65.26 exercise price to $110.94 for the first 750,000 options to vest, or become usable, and the remaining 750,000 options vest if Ceridian hits $130.52. (Ceridian shares must close at those levels or higher for 10 consecutive trading days.) The company says the stock must hit those targets by May, 2025, or the award is forfeited, and he cannot use the options before May, 2023, even if the targets are met earlier.

In 2020, two major proxy advisory companies, Institutional Shareholder Services and Glass Lewis & Co., both advised shareholders to vote “no” in Ceridian’s measure to approve its approach to executive compensation in 2019. Just 56 per cent of shareholders voted “yes,” compared with many votes at other companies where say-on-pay measures typically receive approval from 90 per cent or more of shares cast.

ISS gave Ceridian its lowest possible score for its 2019 compensation practices and recommended a “no” vote, saying “limited rationale was provided for the significant increase in the size of the CEO’s equity awards,” and Mr. Ossip’s pay was “significantly higher” than at peers. In 2019, Ceridian gave Mr. Ossip 1.76 million options it valued at US$28.6-million – although ISS, using different assumptions, valued it at US$50.3-million.

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