Canadian HR Reporter

CANADIAN HR REPORTER March 6, 2017 NEWS 3 Comparators in spotlight with Executive Compensation Framework Ontario's new rules have public sector working hard to justify C-suite numbers BY SARAH DOBSON WHEN the Ontario government announced a new Executive Compensation Frameork last fall, broader public sector employers knew they'd be in the hot seat when it came to justifying their numbers. And it didn't take too long — after employers such as Ontario Power Generation started post- ing proposals earlier this year, the government asked them to try again after concerns were raised about the salary comparators they were using. Executive compensation in the public sector has been restrained under the Broader Public Sector Accountability Act, 2010, since 2012. All elements of compensa- tion were frozen, including base salaries, and the freeze is in effect until employers post final execu- tive compensation programs on their public websites. e newer framework is meant to enhance the transparency of executive compensation deci- sions. It includes caps on salary and performance-related pay- ments for hospitals, universities, colleges, school boards and gov- ernment agencies. "is balanced approach will ensure that broader public sec- tor organizations are accountable for compensation decisions and are able to attract and retain the necessary talent to deliver high- quality public services while man- aging public dollars responsibly," said Liz Sandals, president of the Treasury Board. While publicly traded private employers are accustomed to this kind of transparency and attention — in part because of the growing say-on-pay move- ment from shareholders — the broader public sector is still new to the concept of explaining remuneration. Focus on comparators The Executive Compensation Framework caps salary and per- formance-related payments for designated executives at no more than the 50th percentile of appro- priate comparators. It also pro- hibits signing bonuses, retention bonuses, cash housing allowances and pay in lieu of perquisites. All designated employers must have a written executive compen- sation program posted by Sept. 5, 2017, that includes the com- pensation philosophy, salary and performance-related pay caps and comparative analysis details. When it comes to the latter, comparable positions must be selected for analysis from at least eight different organizations. These must be similar to the employer with respect to several factors, including: the scope of responsibilities of the executives; the type of operation; industries within which the organization competes; and the size and loca- tion of the organization. And it's not surprising the government is asking some em- ployers for re-evaluations if they sense there could have been bet- ter comparators out there, said Christopher Sinal, a lawyer in the labour and employment group at Siskinds in London, Ont. Ideally, the government is try- ing to balance the public interest of making sure salaries are rea- sonable with these organizations' ability to recruit competitively both from within the system and outside the system. But the factors for comparison, such as "scope of responsibility," are all pretty broad, he said. "Even though it looks like the regulations are very specific for how we're going to determine these comparators, there is still a wide degree of latitude that's in there." And with the "Sunshine List" — listing the salaries of public sector employees who make $100,000 or more — people already know where a lot of the designated ex- ecutives are sitting anyway, said Sinal. "(But) when you start engag- ing in the private analysis, and if you're given permission, by the government to do that, then there may be some difficulties in finding that out, if the organization isn't required to disclose salaries." If an employer feels there is a need to use comparator organiza- tions from outside the Canadian public sector or broader public sector, it must seek approval from the Treasury Board using a busi- ness case. is should identify the posi- tions or classes of positions that require comparison to private or international comparators, and BOARDS > pg. 10

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