Crescent Point Energy Corp. is promising to overhaul its executive compensation after a rare and decisive loss on a say-on-pay vote among shareholders.
Investors owning about two-thirds of the oil company's shares, including some of the largest retirement funds, voted against the board and management in a nonbinding vote on the issue at the annual meeting on Friday.
Canadian companies rarely lose such proposals, especially by such a wide margin, but Crescent Point's shares have been hit hard due to the collapse in crude prices, which reduced cash flow by 20 per cent last year and prompted a cut in its dividend.
"We take this very seriously," chief executive officer Scott Saxberg said after the meeting. "We've already engaged shareholders and are talking to them, and looking at where we can make the changes correctly. We're not arguing about it."
In the past, investor unrest has flared up after large one-time payments or severance packages. But voting results from Crescent Point's annual meeting and others across the country this year have shown shareholders are scrutinizing compensation programs much more closely, and are more willing to vote "no" over concerns about fundamental pay design issues.
Canadian Pacific Railway Ltd. became the first major company to lose its say-on-pay vote in 2016 after shareholders voted 50.1 per cent against the company's approach to executive compensation at its annual meeting in April, a sharp drop from CP's 97-per-cent pay support last year.
In the oil patch, the fall in crude prices has hammered the stock of companies across the sector for a year and a half, but investors are frustrated that compensation has not been hit anywhere near the same degree. Crescent Point shares are down 28 per cent over the past 12 months, but since the start of the year, they have climbed by about a third.
At Crescent Point's meeting on Friday, one retail investor stood up to suggest that salaries be cut in line with the dividend reductions.
The rejection of the current pay structure follows a report from Institutional Shareholder Services Inc., which criticized a "misalignment" between CEO pay and shareholder returns over the past three years.
ISS said that there has been a disconnect between pay and performance and that the cliff grant was overly complex and difficult for shareholders to track value.
"The result may serve somewhat of a retention purpose but also may lead to payment of excessive compensation value that is not performance-based and not easily tracked," it said.
Among shareholders voting against the current compensation plan were Canada Pension Plan Investment Board, British Columbia Investment Management Corp. and California Public Employees' Retirement System, according to their websites.
The company's operational performance has been good on all fronts, despite the downturn that has taken its toll on financial results over the past year, Mr. Saxberg said. He pointed out that results are improving as oil prices recover from the winter's lows, and that the company's extensive commodity hedging will protect finances.
He earned $8.8-million in 2015, including $1.1-million in salary, $6.7-million in share-based awards and $950,000 in an annual incentive. Overall pay was just under $9-million the year before.
Interestingly, the same compensation structure won 97-per-cent approval at Crescent Point's annual meeting in 2015. It had been restructured the year before.
"With that old plan, I would have received way less comp. The new plan was after discussions with our shareholders at that time, and they wanted us to make those changes. We made them to fit in line with all the other companies. So now they voted 'no,'" Mr. Saxberg said. "From our perspective, we're listening to them and we're going to make the corrections."
The company is now trying to determine how to avoid making major changes each year, he said.
With files from Janet McFarland in Toronto