Targeted increases amid an economic downturn 

Coming out of the pandemic, Canadian companies and their chief executive officers (CEOs) continued to face persistent inflation and higher interest rates in 2023. In this latest trends report, Mercer is pleased to provide our initial executive compensation trends within the TSX60 Index, relative to 2022.

Key findings in our analysis to date include:

• Increases in annual CEO compensation amid an economic downturn
• Notable increase in long-term incentives with a continued emphasis on performance share units (PSUs)
• Stable overall say-on-pay (SOP) results, with a few notable outliers
• Continued increases in the prevalence of environmental, social and governance (ESG) metrics

We’ve seen a slight decrease in actual short-term incentive (STI) payouts, which coincides with a decrease in the year-over-year EBITDA growth of these companies in 2023 relative to 2022.

However, these STI decreases were offset by increases in long-term incentives. As a result, while CEOs have seen a modest change to total cash compensation (salary + STI), their total direct compensation (or TDC; salary + STI + LTI) increased due to the continued emphasis on long-term incentives in their pay mix. 

In a tough economic environment, SOP support remains strong, with 82% of companies receiving >90% support from shareholders on executive compensation. We did not observe significant changes in the overall level of support, with the exception of a few notable changes.

The importance of shareholder outreach becomes more evident in the notable increases and decreases seen YoY.

Agnico Eagle rebounded significantly from low SOP support in the previous year, making substantial changes to its compensation program after two consecutive votes with support of less than 50% (its 2022 results were the lowest say-on-pay vote result in Canada).

Following engagement with shareholders throughout 2023 and disclosing their Board’s responsiveness to stakeholder feedback in their latest proxy circular, Manulife now sits higher than its 91.7% support from 2022.

On the opposite end of the spectrum, Gildan (whose CEO resigned and was later reinstated) and First Quantum (whose share prices dropped 62% in 2023) saw significant decreases in shareholder approval.

It is becoming more common among TSX60 companies to include ESG as part of their short-term incentive plan – both prevalence and weighting continue to increase YoY.