公司管理方法和執(zhí)行委員報(bào)償

CorporateGovernance

andExecutiveCompensationCurrentCompensationCommitteeandExecutiveCompensation

IssuesMarch

20,

2003Peter

SaulnierExecutive

Compensation

is

in

aState

of

Flux…InstitutionalInvestorActivismNYSE

&NASDAQListingRequirementsStockOptionAccountingNew

U.S.GovernanceLegislationLoss

ofInvestorConfidenceUncertainEconomyExecutiveCompensation2Some

of

the

Governance

Concerns3that

have

been

Expressed:Executive

Pay:Not

linked

to

performanceEscalating

ratio

of

executive

compensation

to

the

pay

ofother

managers,

workersWhat

is

a

CEOworth?Executive

loansStock

Options:Absence

of

accounting

charge

has

facilitated

excessuse

ofoptionsEquivalent

cash

value

of

a

stock

option

to

an

executiveis

less

than

its

economic

cost

to

the

companyA

rising

tide

floats

all

boatsGovernance

Concerns

(Cont’d)4In

theBoardroom:The

culture

of

mostBoardrooms

makes

it

easier

to

goalong

with

Management’s

requests

than

to

reject

orreduce

themCompensation

consultants

are

usually

not

independentofmanagementImproper

use/overuse

of

compensation

surveys

cause

a“ratcheting”

effect

in

executive

compensationMany

compensation

committees

lack

the

experiencenecessary

to

analyze

complex

proposals

and

to

developinformed

opinions,

pro

orconMeanwhile,

Company

CEOs

also5Have

ConcernsImpact

of

new

legislation

and

standards

on

governanceandday-to-day

operationsArticulating

corporate

strategy

in

shareholder

terms,withmore

Board

involvementAchievement

of

financial

results

in

an

uncertainenvironmentShortened

careers—produce

orelseAttraction,

motivation

and

retention

of

key

executive

talentCash

compensation

vs.

equity

incentivesOther

issues:

succession,etc.Shareholder

Objectives

for6Executive

CompensationBuild

real

long-term

growth

inshareholdervalueCompetitive,

performance-aligned

compensationAvoid

corporate

future

financial

hardship

as

a

result

ofspecial

compensationarrangementsPricing

relative

to

the

market—proper

use

ofcompensationinstrumentsTruly

independent

Compensation

CommitteesFull,

truthful

and

straightforward

disclosure

ofThe

principles

and

structures

of

executive

compensationsystems

(i.e.,

no

“boilerplate”)Decision-making

process

for

current

year

awardsExamples

of

Shareholder7ResistanceCoolBrands:

21%

drop

in

stock

price

following

request

formoreoptionsCHC

Helicopters:

“No”

to

11%

option

dilution

proposalATI

Technologies:

Only

54%

shareholder

approval

for

new

optionsFairvest/Institutional

Shareholder

Services:

use

of

the

ISS

optionvaluation

model

leads

to

more

“No”recommendationsTeachers

Pension

Plan:

option

grants

should

be

proportionaltoexecutive

ownershipAngiotech

Pharmaceutical:

“evergreen”

stock

optionreplenishment

rescinded

due

to

institutional

shareholder

concernsand

negative

pressThe

Canadian

Coalitionfor8Good

Governance

is

Gaining

CloutLaunched

last

yearBrainchild

of

Steve

Jarislowsky

and

Claude

LamoureuxConsists

of

Canada’s

largest

pension

funds,

mutual

fundsand

moneymanagersPurpose

is

to

share

information

and

take

the

initiative

tohold

management

accountable

for

growing

long-termshareholder

valueThe

Coalition

will

support

compensation

schemes

thatreward

employees

for

sustained

performancesSuccessfully

attacked

Angiotech

proposalNew

Legislation

and

Standardsare9Affecting

Executive

CompensationU.S.

Sarbanes-Oxley

ActProposed

Changes

to

NYSE

and

NASDAQListing

RulesCanadian

Securities

Administrators’

DisclosureConcernsInternational

Stock

Option

Expensing

ProposalsRepap

Court

CaseShareholder

Disclosure

Concerns10Canadian

Securities

Administrators

Nov.

5,

2002

pressrelease:Sample

of

76

publicly-tradedcompanies95%

had

“inadequate”

disclosureWatson

Wyatt

Proxy

Circular

Review272

TSX

companies

in

200248%

had

no

disclosure

annual

incentive

determinationStockOptionAccountingStandardsStock

optionexpensingisjustaroundthecorner!InternationalBoardisgoingtomandateinternationalstockoptionexpensingstandardsthisyearCanadianBoardhasannouncedAccountingBoardisconsideringmandatoryadoptioni?ntBeoneitnigo(nfirtsot)requ?ireAmsatozocnk.comCanadian

?

GEU.BSa.nksIncoGMo?

pCtoiocan-Ceoxlapensin?gbFoerfdoretheU.S?

.Waacl-tMsartSun

LifeBCE11Meeting

ShareholderConcerns

with12Options:

Pros

andConsIndexed

optionsPremium-price

optionsPerformance-vested

optionsGreater

stock

ownershipRestrictedstock

unitsCashlongtermincentiveplansMeanwhilein

the

Courts:The13RepapCaseNew

Chairman

was

a

retired

U.S.

lawyer;no

experienceinRepap’sindustrySummary

ofhiscontract:A

multi-milliondollar

“marketcapitalizationbonus”

not

linked

tofinancial

performanceShares

andoptions

amounting

to

13.4%

ofthecompany’sstockImmediatepension

creditsof

8yearsA“singletrigger”change-of-controlseverancepackageworthabout

$27millionOntario

Trial

CourtJudgesetasideChairman’scompensationagreementbecause

the

directorshadnotspentsufficient

time

analyzing

anddiscussing

thecontractIn

doing

so,

shesetasideth“eb“usinessjudgmentrule”thatnormallyprotects

directors

frombeingsecond

guessedYES,Executivepay

is

under

themicroscope,

BUT...,butCanadian

and

U.S.Watson

Wyatt

studies*show

that:HigherCEO

compensation

opportunityiscorrelated

withhigherTotalShareholderReturns(TSR)HigherCEO

and

Executive

stockownershipis

correlatedwithhigherTSR,EPS,ROE,ROAHigher

stock

optionopportunityis

also* “CorporpateoGosvietrnivanecelInyCrisis;

Executive

Pay/Stock

Option

Overhang2003”ancd

o“MrornietorliangtCeandadwianiCtEhOhPaigy

ahndePrerTforSmaRnce,,E200P2”S.14EntertheCompensationCommittee...1515Purpose

oftheCompensationCommitteeThe

primary

purposeof

theCompensationCommitteeof

the

Board

istodetermine

and

overseethecompensation

policiesofthe

organizationDuties

include:Developingandsettingcompensationphilosophy

andpoliciesDeciding

upon

compensation

levelsandincentive

opportunitylevels

forofficersReviewingperformance

levels

of

companyandcompensation

mechanisms

andlevelsCEO

performanceevaluation–

Managementdevelopment

and

succession16StrategicExecutiveCompensation17FrameworkCritical

FactorsSpecificExecutiveCompensationPhilosophyStrategicImplicationsonPrograms,Policies,PracticesStrategies/PlansManagementPhilosophyOrganizationalDesignOwnershipStructureMarketplaceDynamicsCompanywideLinkageObjectivesforPayCompensationElementsCompetitivePositioningCommitmenttoCommunicationBaseSalaryShort-TermIncentivesBenefits/PerquisitesLong-TermIncentivesStrategicExecutiveCompensationFrameworkSpecificExecutiveCompensationPhilosophySupportiveofCompany’smissionandvaluesConsistentwithTotalCompensationPhilosophyFlexibletoadapttouniqueorganizationalandindividualcircumstancesCompanywideLinkageObjectivesforPayDifferentiatefromcompetitorsFocusoncompanygoalsAlignwithorganizationalsuccessAttractnewtalentMotivateandrewardimprovedperformanceRetainhighperformersandkeycontributorsProvidesecurityandwealth-buildingopportunitiesEnsureexecutivesunderstandandappreciatecompensationandbenefitprogramsCompetitivePositioningEstablishrelevantpeergroup(s)andreferencepointsAppropriatepositioningrelativetoreferencepointsMethodologiesandsourcesofmarketdataCompensationElementsDesiredpaymix(fixedvs.variable,shortvs.long-term)RoleofbasesalaryObjectivesforshort-andlong-termincentivesSelectionofincentiveplanperformancemeasuresandgoalsCompetitivebenefitsandperquisitesCommitmenttoCommunication18Company’sphilosophyonexecutivecompensationLinkagebetweencorporatestrategiesandrewardsObjectives

for

programelementsProcesses

formanaging

payPerformancemeasuresthat

affectcompensationTotal

compensationpersonalizedcommunicationsStrategic

ExecutiveCompensationFrameworkStrategic

Implications

on

Programs,Policies,BestunderstoodelementofpayRepresentsasignificantportionofcompensationopportunityServes

as

anindexforincentiveandbenefitvaluesAffectedby:PhilosophyExternalcompetitivenessInternalconsiderationsIncumbentexperienceandperformanceBaseSalaryIncentivesObjectivesEligibilityAward

potentialsPerformancemeasuresandgoalsAward

determinationForm/timingof

paymentAffectedby:CompanystrategiesCompensationphilosophyMarket

valuesMeasurementtoolsShort-TerPm

racticesLong-TermIncentivesObjectivesEligibilityAward

potentialsProgramvehicle(s)Performanceperiods,measures,

and

goalsRetention

elementsAffectedby:CompanystrategiesCompensationphilosophyMarketcompetitivenessAvailabilityofstockorequitysubstituteBenefits/Perquisites19Objectives

forHealth

careRetirement

incomeSurvivorincomeDisability

incomeDeferredcompensationAffectedby:CompanystrategiesCompensationphilosophyStatutoryconsiderationsPerceived

valueWatson

Wyat