Ministry of Finance
New government restraints for executive compensation
VICTORIA – For the fifth consecutive year, government has released detailed information on total compensation for senior public sector executives in B.C.
The Province has also established new policy on executive compensation in Crown corporations, aiming to attract and retain skilled leadership, but at an affordable cost to taxpayers and ratepayers.
Total public sector executive compensation disclosed in 2011-12 was 5.4 per cent lower than in 2010-11. Average compensation per executive was flat. The total amount paid in bonuses dropped 13 per cent, and both the number of executives receiving bonuses and the average amount earned fell. About 35 per cent of senior Crown corporation executives are eligible for bonuses, primarily in the larger commercial corporations, down from 37 per cent in 2009-10. B.C. provides the most comprehensive executive compensation disclosure in Canada.
A review of Crown corporation management staffing (FTEs) and compensation found that between 2009 and 2011, management staffing in government fell by seven per cent and compensation costs fell by one per cent, while management staffing in Crown corporations increased by seven per cent and compensation costs increased 16 per cent.
The review determined that while executive compensation in most Crown corporations is appropriate or already being reformed, new measures can be established, particularly for the larger commercial Crown corporations, to restrain and further reduce overall executive compensation and better align with the restraint already in place in government.
The policy established today includes:
· Immediately freezing compensation of all current Crown corporation executives.
· Bonuses will be phased out and replaced with a non-pensionable holdback of up to 20 per cent tied to financial and business results. This change applies immediately to new or newly promoted staff. Criteria for earning holdbacks will reflect the priorities set out in the shareholder’s letter of expectation.
· New senior executives will be recruited at a salary 10 per cent less than the incumbent.
· Executives should earn no more than 85 per cent of the CEO salary.
· Incentive pay will be phased out for new non-executive staff, except where established through collective bargaining.
· Crown executives are restricted to the same travel expense reimbursement policy as government executives.
· A vehicle allowance where required for business will be the only permissible perquisite. Any other perquisites now in place will be phased out.
Together, these measures will reduce overall compensation, deliver savings, and set an increased tone of restraint. Many Crown corporations already meet some or most of these policies. Where they do not, boards must provide plans by Jan. 1, 2013, showing how they will align. Rare exceptions for unique business reasons would require government approval.
Government announced a review of all Crown corporations in the speech from the throne and, with Budget 2012, that Crown executive compensation and incentive pay would be reviewed. With the individual reviews of Crown corporations ongoing, government is standardizing Crown executive compensation to bring it more in line with government and taxpayer values.
As the reviews complete, boards may take further steps within the framework to align executive compensation with expectations of government, clients, ratepayers and taxpayers.
Annual disclosure of public sector executive compensation in B.C. is the best in Canada. The disclosure applies to chief executive officers and the next four highest ranking/paid executives for positions with an annual base salary of $125,000 or more. In disclosure statements, each organization also provides an explanation of its compensation philosophy, the objectives of the compensation plan, what bonuses, incentives or holdbacks are paid, and how they relate to the organization’s overall performance targets.
Each public sector employer must disclose executive compensation on its website to meet the requirements under the Public Sector Employers Act. The information is also available at: www.fin.gov.bc.ca/psec/disclosure/disclosure11-12.htm
This year government has also released data on the DataBC website: www.fin.gov.bc.ca/psec/opendata/exec_comp_opendata_2012.csv
Related information and documents:
· 2002 — set limits to maximum executive severance payments: maximum 18 months.
· 2006-07 — introduced a five per cent holdback for deputy ministers.
· Since 2007 — government set maximum compensation levels for CEOs.
· 2007-08 — government began releasing detailed information on compensation for public sector executives, setting a new standard of disclosure among Canadian governments.
· 2008 — holdback for deputy ministers increased to 10 per cent, expanded to include assistant deputy ministers.
· 2011-12 — disclosure guidelines expanded to include details about benefits and other employer-paid allowances or perquisites in a compensation plan in addition to base pay, pension contributions and any bonuses, incentives or holdbacks executives may receive.
· January 2012 — government directed boards that performance pay is expected to be strongly tied to financial results, and established a working group to review executive compensation.
Ministry of Finance
Connect with the Province of B.C. at: www.gov.bc.ca/connect