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Ontario Auditor-General Bonnie Lysyk prepares to deliver the 2013 annual report on Dec. 10, 2013. Ontario Power Generation’s director says the report’s findings were like a ‘bucket of cold water.’Chris Young/The Canadian Press

The provincial Auditor-General's report on lavish compensation at Ontario's Crown-owned electricity generator is a wake-up call for those long-time employees with a sense of "entitlement," the head of the corporation's human resources committee says.

"It's kind of a bucket of cold water," Peggy Mulligan, a director of Ontario Power Generation and chair of its four-member compensation and human resources committee, said of the auditor-general's report.

OPG is in the throes of a cultural shift, Ms. Mulligan said in an interview on Friday. But transforming it into a lean and efficient operation is not easy, especially when many long-time employees have not experienced a different work environment.

OPG announced just hours after the auditor-general's report was tabled on Tuesday that it had fired its chief financial officer and two vice-presidents. Ms. Mulligan declined to comment on why these executives took the fall for compensation practices that are the responsibility of the board.

"It was not a decision taken lightly," she said. "They were all highly ethical individuals."

The corporation's 15-member board of directors, many of whom have been there a decade, is also responsible for overseeing a business transformation project launched in 2010. And Ms. Mulligan said directors have grappled with what they might have done better since September, when they received a draft of the auditor's findings, revealing that OPG had hired more executives and paid them fat bonuses when it was supposed to be downsizing.

"Could we have pushed harder sooner?" she said. "We actually think the answer is probably no."

If the board introduced changes too quickly, she said, it could have alienated employees and triggered an exodus of highly skilled workers from key projects, including refurbishing reactors at the Darlington nuclear station in Clarington, east of Toronto.

OPG announced in 2010 that it plans to shed 2,000 jobs by 2015. But Auditor-General Bonnie Lysyk's report said the ranks of OPG executives and senior managers increased by more than 50 per cent between 2005 and 2012, even as the organization shed 1,200 jobs.

OPG said it has reduced senior management by 6 per cent since the end of 2012. It also said new senior executives receive lower compensation than their predecessors.

Those initiatives do not go far enough for Premier Kathleen Wynne. Her government plans to introduce legislation next year to give itself the power to set compensation at OPG.

"I think there is a culture that needs to shift and that the government needs to have more direct control, so that's what we're going to put in place," Ms. Wynne said in an interview.

Ms. Mulligan said the legislation could be a catalyst for change at OPG. But for change to be sustainable, she said, it must be "nurtured" from within.

Where OPG does welcome the government's intervention is on pensions. The government announced this week that it has appointed expert Jim Leech to figure out how to make electricity-sector pensions less expensive for the public purse. He will recommend changes at all the successor companies to the old Ontario Hydro – OPG, Hydro One, the Independent Electricity System Operator and the Electrical Safety Authority.

Ms. Mulligan said it was difficult for OPG to tackle the rich payouts for retirees on its own because the pension plans, which originated with Ontario Hydro, are shared by all of its successor companies.

With a report from Adrian Morrow