Canadian HR Reporter - Ontario

CANADIAN HR REPORTER NOVEMBER 2018 24 FEATURES © 2018 Thomson Reuters Canada Limited 00249LA-93793-NP Get practical and expert guidance on implementing mentoring programs in your organization Order # L7798-8637-65203 $87 October 2018 softcover approx. 300 pages 978-0-7798-8637-1 Shipping and handling are extra. Price(s) subject to change without notice and subject to applicable taxes. Find tips, strategies, helpful hints, and best practices to help you implement a successful mentoring program in your workplace. The ongoing competition in talent and the lack of bench strength in many organizations in Canada is helping to make mentoring extremely popular. Human Resources Guide to Mentoring Programs presents the rationale and benefits of mentoring, along with several different models relating to mentoring programs and a practical, step-by-step approach that human resources practitioners can adopt to set up, implement, and evaluate these programs. Various real-world approaches to mentoring are presented with a discussion on their pros and cons. AVAILABLE RISK-FREE FOR 30 DAYS Online: store.thomsonreuters.ca Call Toll-Free: 1-800-387-5164 | In Toronto: 416-609-3800 New Human Resources Guide to Mentoring Programs Dr. Bobby Siu EXECUTIVE COMPENSATION 5 trends for executive compensation USMCA, cannabis, energy sector, government, say on pay all have an impact By Paul Gryglewicz and Peter Landers S everal developments over the last year will have an impact on trends in ex- ecutive compensation for 2019, including the North American Free Trade Agreement (NAF- TA) revamp — upgraded to the United States-Mexico-Canada Agreement (USMCA) — in- creased scrutiny of cannabis companies, "say-on-pay" adop- tion, and a downturn in the en- ergy sector. High-sector growth will also drive additional upward pressure on talent and compensation into 2019, which will have a retention impact on the pharmaceutical, fast-moving consumer goods and tech sectors. Tariffs and USMCA While the full effect of U.S.-im- posed tariffs on aluminum and steel and the new USMCA remain unclear, they could have an impact on how executive compensation is structured for 2019. In late 2018 and early 2019, compensation committees will be working with their advisers and CEO to determine key per- formance objectives for 2019 for the C-suite. is will include discussions around performance expecta- tions for 2019 to achieve "target," "threshold" and "superior" perfor- mance as part of finalizing the an- nual performance scorecard used to determine 2019 short-term in- centive payouts. With U.S. tariffs and the new trade deal threatening certain Canadian companies, committees are expected to take this threat into account and set performance expectations accordingly. An emphasis on measures such as earnings or revenue may be lowered, with more put on main- taining market share, develop- ing new markets for products or cost-cutting measures to deal with trade concerns. Cannabis sector 2018 has seen the continued rise in share prices of cannabis compa- nies, leading up to the legalization of recreational cannabis use as of Oct. 17. Many of these employers have witnessed such rapid growth that their compensation programs have been unable to keep up. ey have been playing catch-up by trying to implement more for- malized compensation structures for executives and staff. is has forced companies to review the dilution of current equity incentive plans (for many companies, stock options only) which have been highly diluted by equity grants made to attract key executives and staff at much lower share prices. This means current equity pools have little room left to make future grants for new hires head- ing into 2019. Companies are forced to re- view who has and has not re- ceived equity grants in the past year, and also the share price these grants were made at, to de- termine who is in most need of a grant to keep them engaged, as well as allow for the equity pool to eventually be replenished and provide the right pay-for-perfor- mance balance. Aside from the cannabis sector, it's expected companies across Canada (especially small- to mid-cap companies) will review the dilution level in current eq- uity plans when developing 2019 recommendations. For companies looking for shareholder approval of equity plans at the annual general meet- ing in 2019, conducting this re- view against Institutional Share- holder Services (ISS) and Glass Lewis guidelines will be impera- tive to ensure they receive positive vote recommendations and have their plans approved. In addition to equity plans, more structure is expected through the development of bal- anced scorecards identifying five to seven key corporate and indi- vidual performance measures for 2019 to be put in place for canna- bis companies to measure 2019 performance and determine 2019 short-term incentive payouts at the end of the year. is trend is expected to grow in prevalence across Canada for all industries as ISS, Glass Lewis and shareholders demand more rigour and structure be put in place to align executive pay with performance — both on an annual and long-term basis. Downturn in energy sector e Canadian energy sector has witnessed another downturn in share prices, especially in the energy equipment and services industry. In 2019, energy companies are expected to review executive compensation levels and deter- mine whether downward ad- justments (similar to earlier this decade) are required to send a message to shareholders that ex- ecutives are feeling the pain, too. Companies are expected to re- view whether short-term incen- tives should be paid for 2018 at all, or whether deferral into a long- term incentive grant to preserve liquidity for the business and tie executives more to the company's long-term performance makes more sense. Employers will also face dilu- tion concerns due to lower share prices, so they need to be diligent in ensuring they do not overly di- lute their equity pools and restrict their ability to make grants in fu- ture years. Focus on the retention of critical talent and high-poten- tials will be imperative in 2019. Government intervention Government scrutiny of execu- tive compensation has received much attention in recent years. During 2018, the Doug Ford government in Ontario rallied against executive compensation at Hydro One which led to the removal of many executives and board members. In Alberta, the NDP govern- ment has also shown a willingness to intervene to control executive compensation at universities, colleges, agencies, boards and commissions. With less than one year before an election, will the NDP govern- ment implement more rules on executive compensation in Al- berta? And will Ford look to inter- vene in other quasi-public sector organizations? Only time will tell. Say-on-pay adoption Say-on-pay failures continued in 2018 with Crescent Point Energy, IMAX and Maxar Technologies each receiving less than 50 per cent approval. While say-on-pay adoption has stagnated of late, the recent announcement by Alimentation Couche-Tard that a say-on-pay vote will be held at its 2019 annual meeting sparked hope that other companies will follow. In looking at Canada's top 100 companies, close to 30 have yet to adopt such a vote, according to Global Governance Advisors, including corporate titans such as Power Corporation of Canada, Rogers Communications, Cana- dian Tire and Loblaw. Will Alimentation Couche- Tard's decision influence these companies or will these compa- nies continue to lag behind other large companies in Canada? With all these developments, companies are rethinking the structure of their executive com- pensation programs in terms of the type of compensation offered and metrics used to measure performance. And with the changing eco- nomic outlook, they are also de- termining how to best attract and retain the key talent needed to successfully handle the new reality. Paul Gryglewicz is a senior partner and Peter Landers is a partner at Glob- al Governance Advisors in Toronto, a human capital management firm providing boards of directors and se- nior management teams with advisory and technology solutions. For more in- formation, visit www.ggainc.com.

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