Dominic D'Alessandro has decided to forgo most of his 2009 compensation unless Manulife Financial Corp.'s stock price rebounds.
The outgoing chief executive officer, who is less than three weeks from retirement, said in an interview Friday that he was caught off guard by the reaction to the $12.5-million (U.S.) pay package he was awarded for the 18 weeks that he will work in 2009.
"I'm doing this because the money is worth much less to me than the taste that's being left in people's mouths," he said.
His package included $2.5-million in cash and $10-million in restricted share units that would not pay out until the end of 2011.
"I thought that the gesture I made to defer 80 per cent of it would be seen as a vote of confidence in the company, and my making common cause with the shareholders," Mr. D'Alessandro said. "But it wasn't."
As a result, he said he plans to tell the company's board of directors that he will accept the $10-million only if Manulife's stock reaches $36 (Canadian) a share by the end of 2011.
If it reaches $30, he will take half. If it remains below that level, he will not take any of the restricted share units. The shares closed at $20.81 Friday.
"I haven't notified the board of this. I decided to take control of the situation myself, because it's my reputation that's at issue here, nobody else's," he said in the late morning interview.
A day earlier, Manulife announced that it is giving shareholders a so-called "say on pay" vote on executive compensation, enabling them to voice their opinions on the company's top pay packages through a non-binding vote at the annual meeting. The insurer was the last major Canadian financial institution to make the move, and Mr. D'Alessandro said he thinks the delay was a mistake.
"I think that was a miscue on our part," he said.
The "say on pay" move and Mr. D'Alessandro's decision come as regulators, governments and shareholders globally are stepping up their scrutiny of compensation at financial institutions in the wake of the credit crisis.
Oversized or poorly designed pay packages have been pointed to as one of the causes of the crisis, and banks and insurers are working to reform their pay schemes as a number of executives have been told to hand their bonuses back.
In Canada, some bank CEOs chose to forego parts of their 2008 compensation to head off potential criticism. Mr. D'Alessandro said he did not receive criticism from Ottawa or regulators about his pay.
Prior to making his decision, Mr. D'Alessandro spoke to a number of Manulife's major shareholders. Shareholders "could care less" if the CEO gets paid as long as they are also making money, he said.
Mr. D'Alessandro said the compensation package had been a "well-motivated gesture" on the board's part, to recognize his role in building the company and give him an incentive to stay on past his chosen retirement date of last December.
"I sourced the Hancock transaction myself, we didn't even pay a banker for that," he said of the $15-billion merger with U.S. life insurer John Hancock Financial Services Inc. in 2004. "I led the negotiations in China, Japan, Vietnam. So, they felt that they wanted to be generous to me I guess," he said. "I wasn't in the room, I didn't ask them for the money."
Manulife's share price fell by half in 2008, and the firm reported its first loss as a public company in the fourth quarter. The insurer was hurt by the massive exposure to stock markets it had built up as a result of its variable annuities business.