Canadian HR Reporter

CANADIAN HR REPORTER March 6, 2017 10 NEWS demonstrate the lack of compa- rable positions in Canada's public sector, along with the inability to attract talent from, or the loss of talent to, markets outside of the Canadian public sector. e important question to ask, from a comparative perspective, is where are you losing talent to, and where are you attracting it from? said Christopher Chen, senior client partner and Canada practice leader, executive pay and governance, at the Korn Ferry Hay Group in Toronto. "I'm not saying it's a black and white issue, there's some nuances to it, but that's the basic funda- mental question. And I think the organizations that can per- suasively support the argument that they have a draw or a loss to another sector, whether it's the Canadian private sector or the United States, I think they have a legitimate argument," he said. "And if there's a track record that you've been recruiting out of the private sector or losing to the private sector, there's a com- pelling argument there that that's part of your comparator group at an initial starting point, which should then inform who you're trying to benchmark compensa- tion against." It's not necessarily true that public sector organizations have more difficulty finding compara- bles than the private sector, said Bertrand Malsch, associate pro- fessor and distinguished faculty fellow in accounting at the Smith School of Business at Queen's University in Kingston, Ont. "It should be possible and, in the end, it's really a question of rea- sonability. And it's really a ques- tion of what do you start with? Do you start with what the market tells you or do you start with what you need? And once you get the mind(set) of what you need, and what you're willing to pay in the first place, without thinking too much of the market, then you try to see if this person exists." But if an organization knows it's at the top of the list and, depend- ing on how it chooses its compar- ators, the median is going to result in it being significantly above that, then it only has three years before it is going to have to reduce the salary, said Sinal, citing section 9.2 of the Broader Public Sector Executive Compensation Act. "e legislation provides that where you have existing employ- ees in there and they're above the mandate required by the com- pensation framework, they can continue receiving (that)... But then there's a hard limit of three years after the compensation plan gets in where you can't be over," he said. "So, to me, the plain inter- pretation of that is you have three years to sort it out." Competitive numbers What's been published so far by employers under the new Ontario framework is the maximum pos- sible amount that could be paid to executives, which is what's re- quested, said Chen. "ey're asking the organiza- tion to figure out what the maxi- mum amount is, the range, so to speak, the top of the range," he said. "at's easy to misconstrue. If organizations were to actually come out and say, 'is is what we're actually paying, this is our actual increase,' that's a different story." A lot of the organizations know the Sunshine List is going to ex- pose the numbers next year any- way, said Chen. "It didn't go away — you still have to disclose all the compen- sation you make in a year," he said. "It's a bit of a tempest in a teapot potentially because eventually ev- eryone's going to have to disclose. Everyone." And there's actually a freeze built into the framework, said Chen. "e way we understand the framework to be written, once you make your adjustments to compensation based on the new comparator group and the mar- ket, you are only allowed to move your executives at the same pace as the rest of the management team, so if it's one per cent, two per cent, three per cent, that's as fast as you're moving… so this is not 'e bank vault is open' — not even close." at may also be why employ- ers are starting with such high amounts. "eoretically, I can see that, because this is it. e legislation is actually written where you will not move at a faster percentage than the rest of the management team outside the executive team, so there's limiter in there already," he said. But Malsch still has questions about those high numbers. Look- ing at the situation with Ontario's OPG and Hydro One, he com- pared their numbers to those of Hydro-Québec and Électricité de France (EDF) in 2015. Looking at revenues, EDF was at about $105 billion, Hydro-Québec at $40 bil- lion, Hydro One at $6.5 billion and OPG was at $5.5 billion. For em- ployee counts, EDF had 160,000, Hydro-Québec 20,000, OPG 10,000 and Hydro One 5,600. But when it comes to executive renumeration, the numbers tell a different story. At EDF, it was $630,000 and at Hydro-Québec it's $493,000. But at Hydro One the number was $4 million and at OPG, it's targeted at $3.8 million. "e raw fact is that EDF, which is the number one energy sector organization in the world, almost 20 times bigger than OPG… pays $630,000," he said. "ere is tension here between the extreme complexity of finding appropriate comparables, and the bottom line of looking at two or three numbers and you see if it makes sense or not." e role of boards, consultants However, when employers try thinking outside of the market, it can be very disruptive, said Malsch. "I can imagine the board meet- ing: 'Let's stop having this mar- ket reasoning, just let's decide what we think would be a decent amount of money and then let's look for the people.' But I have the impression that usually this is the other way around — people start with the market and then look for people, so it's a market-driven process." But consultants can help, he said. "One of their main value- added is they come with compa- rables because they have access to information… they run the data." Advisors are definitely a help in making sense of the numbers and finding appropriate benchmarks, but they don't have final say, said Chen. "The way the framework is written, the buck stops with the board — they're the ones mak- ing the final call on everything, they're the ones who have to sign off, they're the ones who have to sign off on the final posting, the public posting that's going to be up for 30 days. ey're the ones who have to sign off on the busi- ness case, if they have to make it; they're the ones who have to go to the minister — all the responsibil- ity is back on the board, so anyone who's consulting or advising in the broader public sector is now in the same role they would be in the private sector, where you give advice. But, at the end of all this, it's the board who has to make the final call." Boards even more crucial "At the end of all this, it's the board who has to make the final call." history, the tribunal found that "the medical literature consis- tently implicates asbestos as an important cause of lung cancer." It also noted the worker had pul- monary fibrosis, another condi- tion caused by occupational ex- posure to asbestos. e tribunal found the work- er's exposure history to asbestos included six years in the electri- cal motor shop — where at least some level of exposure couldn't be ruled out due to the presence of asbestos in that workplace — and seven years in the brake assembly plant before asbestos was phased out in 1991. is totalled 13 years of pos- sible exposure — especially dur- ing the worker's 10-month as- signment on the brake assembly line — that surpassed the 10-year exposure requirement for work- ers' compensation benefits. In addition, the worker began exhibiting symptoms in 1995 and was diagnosed with lung cancer in 2010, well past the 10-year time period required from first exposure. e worker was first indirectly exposed to asbestos in 1976 and then again in 1984. The tribunal noted that the worker's years of smoking likely contributed to his lung cancer and combined with the asbestos exposure likely multiplied the risk of developing it. However, the smoking wasn't necessarily the only cause of his cancer, and it didn't eliminate the likelihood the occupational exposure to asbestos contributed to the worker's lung cancer, making him eligible for benefits. e tribunal also sought the opinion of the WSIB's indepen- dent medical assessor, who agreed the worker's occupational expo- sure to asbestos increased the risk of developing lung cancer. "I accept the reporting of the tribunal-appointed medical as- sessor… who concluded that the worker's smoking and the work- er's asbestos exposures were both likely causal factors in the devel- opment of the lung cancer; and who concluded that the smoking and the asbestos exposures likely had a multiplicative effect as caus- al factors," said the tribunal. The tribunal overturned the earlier decisions of the WSIB and the appeals resolution office, awarding the worker's estate en- titlement to benefits for the work- er's lung cancer. For more information see: •Decision No. 1328/14, 2016 Car- swellOnt 18399 (Ont. Workplace Safety & Insurance Appeals Trib.). Increased risk with exposure SMOKER < pg. 6 Jean-Bernard Levy, CEO of France's state-owned electricity company EDF, in Paris on Feb. 14. Levy makes considerably less than the suggested CEO salary for Ontario Power Generation, despite his company having much larger revenues and much more employees, according to Bertrand Malsch, associate professor and distinguished faculty fellow in accounting at the Smith School of Business at Queen's University in Kingston, Ont. Credit: Charles Platiau (Reuters) COMPARATORS < pg. 3

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