At Rogers Sugar, a raise for any others would smell as sweet

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Public companies and labour strife don’t mix well. At some point in a dispute with workers, the company will need to release a proxy circular with disclosure of top executives’ compensation – revealing just how much the big dogs make.

It’s even worse if the big dogs got big, big raises.

Such is the case at Rogers Sugar Inc. RSI-T, whose Vancouver workers have been on strike since September – just as the company closed out a fiscal year in which its five best-paid executives saw their total compensation rise by anywhere from 15 per cent to 33 per cent. The annual bonuses for the five rose anywhere from 50 per cent to more than 100 per cent.

Chief executive officer Michael Walton saw his total pay increase by 24 per cent, to $2.03-million. That includes a salary that rose 14 per cent to $585,200. His bonus more than doubled, to $869,194. Stock awards made up the bulk of the remainder.

It’s not excessive pay in the grand scheme of things. The median 2023 pay package for CEOs of 100 large Canadian companies – all much larger than Rogers Sugar – was $8.9-million.

The optics are not good, however.

The main issue for the employees, without a contact since February, is work rules. Rogers wants to bring a continuous operation program, already in use at Quebec and Alberta plants, to British Columbia. It means the refinery, which produced about 17 per cent of the company’s refined sugar in the past fiscal year, would operate 24 hours a day, seven days a week.

And as part of the plan, Rogers wants to change the workers eight-hour shifts to 12 hours and make weekend shifts part of some workers’ regular schedule.

Adrian Soldera, president of Public and Private Workers of Canada Local 8, which represents the workers, says they object to the extended hours because many workers already have lengthy commutes into expensive Vancouver from far-away suburbs, and they’re opposed to being forced to give up weekend time with their families. He says Vancouver-area fast-food wages, which are traditionally much lower than that of skilled factory workers, are creeping up toward the bottom end of the Rogers Sugar pay scale.

Company spokesman Boyd Erman said in a statement that Rogers Sugar is “committed to arriving at an agreement … that provides fair wages, benefits and working conditions.”

With the strike, the plant has been operating at approximately a third of its capacity, the company said in its recent annual report. Neither Mr. Soldera nor Mr. Erman will say what the financial terms are on the table, but Mr. Soldera characterized the extra pay for the weekend shifts as a “slight increase.”

“Slight” is not the word for the pay increase the Rogers Sugar executives saw in 2023. Why such generous boosts in pay packages? Well, the company’s disclosure isn’t terribly revealing, particularly for the big bonuses.

The payouts from what’s called a “short-term incentive plan” are based on three criteria. Fully half of it is a profit measure, called adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA. Individual and group objectives make up 45 per cent for the CEO and 40 per cent for other executives. Safety results make up 5 per cent for the CEO and 10 per cent for other executives. (Note: More bad optics when safety is a smaller part of the bonus for the CEO than the others.)

What were the goals, and how did Rogers Sugar do? Were the goals reasonable, compared with last year? In which areas did Rogers Sugar do better than others? What was the biggest performance driver of the large increases?

All of this detailed disclosure, alas, is missing from the proxy circular, filed Dec. 20.

One clue that be gleaned from this year’s proxy, plus some language in the prior year’s document, is that the board made changes its compensation formula in fiscal 2022. Because it believed its executives were underpaid.

It crafted a new peer group of small Canadian companies, all selling consumer products. Rogers Sugar was generally in the middle of the group in terms of market capitalization and annual sales. But apparently it wasn’t in the middle in pay, as “certain adjustments were required when taking into account the median of the market,” the company said in its 2023 proxy circular.

Among the adjustments: Rogers Sugar increased base salaries by a range of 4.5 per cent to 19 per cent, and it increased the bonus opportunities, expressed as a percentage of salary, by 25 per cent. (For example: In 2022, Mr. Walton had been eligible for a bonus that ranged from 60 per cent of his salary to 120 per cent of his salary. In 2023, the possible bonus ranged from 75 per cent to 150 per cent.)

In a statement, Dallas Ross, the chairman of the Rogers Sugar board, said the company has “a pay-for-performance compensation system that incorporates recommendations from a recent benchmarking study assisted by third-party experts, and that’s been strongly supported by our shareholders in our most recent say-on-pay vote. Our management team is delivering performance, including a second straight year of record adjusted EBITDA, and the compensation reflects that.”

According to Rogers Sugar’s year-end press release, its adjusted EBITDA figure increased by 8.5 per cent. That was actually significantly worse than the prior year, when adjusted EBITDA increased by 12.2 per cent. And the stock fell more than 7 per cent in the most recent fiscal year, ended Sept. 30.

The case for the executives’ pay increases is unclear, to be generous. As a small company, Rogers Sugar isn’t used to the eagle eyes that investors train on much bigger corporations, so perhaps they think this disclosure, and these pay practices, will suffice.

But when the company’s asking its hourly workers to make sacrifices for the sake of the company’s success, the rank-and-file deserve some of the sweet stuff getting spread around at the top.