Ontario’s Liberal government took direct aim at Hydro One Ltd.’s “unjustifiably generous” compensation Monday, forcing the electrical transmission utility’s board to revisit pay packages for senior executives.
Hydro One paid chief executive officer Mayo Schmidt $6.2-million last year. The board learned on Sunday that the government – the largest shareholder in the partially privatized utility, with a 47-per-cent stake – planned to vote against its compensation plan at the utility’s May 15 annual meeting.
The shareholder vote is not binding, but on Monday, Hydro One chair David Denison said the utility is reviewing its pay scheme, including change of control and severance provisions that came to light in a Globe and Mail report in April.
Electricity prices are a hot-button political issue in Ontario ahead of the June 7 provincial election. Progressive Conservative Leader Doug Ford said two weeks ago that if elected premier, he would fire Hydro One’s board and replace Mr. Schmidt as part of a push to reduce rates.
As recently as last week, Ontario Energy Minister Glenn Thibeault defended the utility’s independence and said the government acts as “shareholders of Hydro One, not micromanagers of it.” Compensation experts pointed out that pay packages for Mr. Schmidt and Hydro One’s top executives, who earn approximately $2-million each, are in line with those at similar-sized North American utilities.
On Monday, Mr. Thibeault applauded the board’s decision to review executive pay and called severance packages and compensation plans that Hydro One detailed in late March “unjustifiably generous.” He then took aim at the PC leader.
“While Doug Ford would take an erratic and reckless approach and fire Hydro One’s Board – which would do absolutely nothing to reduce customer rates but would almost certainly risk the market value of Hydro One, upon which so many people rely – we believe in a stable solution that exercises our authority as the largest shareholder,” Mr. Thibeault said.
The Liberals also softened their stand on executive pay. Rather than voting against Hydro One pay packages at the May 15 meeting, as the government indicated on the weekend, Mr. Thibeault said the government planned to abstain from voting to give the board “the necessary time to re-examine the matter.”
Mr. Ford said late on Monday: “This is a weak response from Kathleen Wynne – and only coming now because she and her millionaires club have been exposed just before the election.
“If the government truly had any respect for taxpayers, Kathleen Wynne would fire the $6-million man and the entire board at Hydro One, just like she said she had the authority to do.”
Hydro One’s Mr. Denison said the 14-member board, none of whom are active politicians, will revisit executive pay through “supplementary shareholder engagement and obtaining additional independent advice.
“We have an obligation to engage and seek input from shareholders related to executive compensation,” he said. “We are at the beginning of this process and will provide an update when appropriate.”
Shareholder votes on executive compensation are known as “say-on-pay” initiatives. In a letter to shareholders sent in March in advance of the Hydro One annual meeting, the utility said: “Because your vote is advisory, it will not be binding upon the board. However, the board will take into account the results of the vote when considering future executive compensation arrangements.”
In last year’s say-on-pay vote, 99.7 per cent of Hydro One shareholders voted in favour of the company’s approach to executive compensation.
In recent years, shareholder advocates such as the Canadian Coalition for Good Governance have pushed boards to pay more attention to say-on-pay votes and other grassroots initiatives. Mr. Denison was among the coalition’s promoters prior to his retirement as the chief executive officer of the Canada Pension Plan Investment Board, the $337-billion fund that manages retirement savings for the majority of Canadians.