Air Canada has given chief executive officer Calin Rovinescu an enhanced pension that will almost double his retirement pay to $791,300 a year by age 65 if he remains at the airline for three more years.
Under a new employment agreement negotiated in November, Air Canada also guaranteed that Mr. Rovinescu, 59, will receive at least $9.31 a share for up to one-third of his Air Canada shares when he retires from the company, putting a floor price under his shares that protects their value if the price dives in the future.
The company said Mr. Rovinescu has helped shareholders by moving Air Canada "toward the goal of sustainable, long-term profitability. "For this reason, the board wanted to ensure that Mr. Rovinescu's overall employment and pension arrangements are market competitive and that he continues to remain on as CEO for three more years," spokesman Peter Fitzpatrick said.
Both of the new provisions are not covered under restrictions the federal government imposed on Air Canada in 2013, when it granted funding relief to give the airline more time to repay a $4.2-billion deficit in its pension plans. At that time, the government insisted Air Canada tie the level of bonuses and equity pay for executives to the level of pension plan repayments the company makes, saying it would ensure that executives were "part of the solution" at the airline.
There's "no question" that the changes to Mr. Rovinescu's compensation are designed to skirt the federal restrictions, said Jerry Dias, president of Unifor, the union that represents customer service agents and other Air Canada employees.
Mr. Dias said employees "gave up a ton" at Air Canada when the company filed for bankruptcy protection a decade ago and and on two other occasions when it sought to restructure.
"We've got some customer service agents that make slightly over minimum wage; it takes more than 10 years to get to the top rate and not everybody gets to the top rate," said Mr. Dias, whose union is in negotiations now with Air Canada on a new contract.
"When I start to see the CEOs taking care of themselves very well as it relates to their pension plans, then it's about time the workers get back some of the stuff that they had to give up."
The company's annual shareholder proxy circular says Mr. Rovinescu will have a pension of $791,300 a year at age 65, a 91-per-cent increase from $414,400 reported previously. Air Canada said the accrued liability for his pension was $7.3-million as of Dec. 31, up from $4.9-million at the end of 2013.
Mr. Fitzpatrick said Mr. Rovinescu's pension would only be $294,400 a year if he left immediately, which is "still substantially below the market median of annual pensions received by CEOs of comparable companies."
Air Canada agreed to combine Mr. Rovinescu's current service under the pension plan with service he earned when he previously worked for Air Canada between 2000 and 2004, and calculate his pension for the entire period based on his current $1.4-million base salary level.
Mr. Rovinescu worked for Air Canada from 2000 to 2004, leaving to co-found brokerage firm Genuity Capital Markets. During his first employment term, he negotiated extra pension credit for his years of service and had credit for almost 17 years of service when he returned in 2009.
Although he now has approximately 10 years of service at Air Canada in both employment periods combined, the airline's pension disclosure shows Mr. Rovinescu had 22.6 years of credited service in the pension plan as of Dec. 31.
Concordia University business professor Michel Magnan, who specializes in executive compensation issues, said the pension enhancement and the guaranteed floor price for his shares provide Mr. Rovinescu "with a sizable safety cushion.
"It would seem to me that such changes are not consistent with the stated purposes and objectives of compensation policy that emphasize performance and value creation," Mr. Magnan said.
Air Canada said it will "underwrite" the sale of one-third of Mr. Rovinescu's "equity securities" in Air Canada at $9.31 a share after his retirement, as long as he stays until the end of 2017. His shares and options were worth $62-million as of March 30.
Air Canada's shares traded between $8.90 and $11.18 in November when the deal was negotiated, and closed at $12.09 on Tuesday, which means he currently doesn't benefit from the base floor guarantee.
When he returned to the company in 2009, he signed an employment deal in which Air Canada agreed to grant him stock options to ensure his ownership of the company's shares would stay at 1 per cent even if the number of outstanding shares increased. The company said Mr. Rovinescu has agreed to cancel that ownership guarantee in exchange for the new sale-price floor for his shares.
The company has also cancelled another program that gave Mr. Rovinescu 25,000 restricted share units for each $1 increment increase in Air Canada's share price between $4 a share and $10 a share. The company's share price has climbed well above $10, and Mr. Rovinescu has been paid out all the shares he was owed.
The program was renewable, but Mr. Rovinescu has agreed not to have it renewed above the $10 level, Air Canada said.