公司管理方法和执行委员报偿

CorporateGovernanceandExecutiveCompensationCurrentCompensationCommitteeandExecutiveCompensationIssuesMarch20,2003PeterSaulnierExecutiveCompensationisinaStateofFlux…InstitutionalInvestorActivismNYSE&NASDAQListingRequirementsStockOptionAccountingNewU.S.GovernanceLegislationLossofInvestorConfidenceUncertainEconomyExecutiveCompensation2SomeoftheGovernanceConcernsthathavebeenExpressed:ExecutivePay:NotlinkedtoperformanceEscalatingratioofexecutivecompensationtothepayofothermanagers,workersWhatisaCEOworth?ExecutiveloansStockOptions:AbsenceofaccountingchargehasfacilitatedexcessuseofoptionsEquivalentcashvalueofastockoptiontoanexecutiveislessthanitseconomiccosttothecompanyArisingtidefloatsallboats3GovernanceConcerns(Cont’d)IntheBoardroom:ThecultureofmostBoardroomsmakesiteasiertogoalongwithManagement’srequeststhantorejectorreducethemCompensationconsultantsareusuallynotindependentofmanagementImproperuse/overuseofcompensationsurveyscausea“ratcheting”effectinexecutivecompensationManycompensationcommitteeslacktheexperiencenecessarytoanalyzecomplexproposalsandtodevelopinformedopinions,proorcon4Meanwhile,CompanyCEOsalsoHaveConcernsImpactofnewlegislationandstandardsongovernanceandday-to-dayoperationsArticulatingcorporatestrategyinshareholderterms,withmoreBoardinvolvementAchievementoffinancialresultsinanuncertainenvironmentShortenedcareers—produceorelseAttraction,motivationandretentionofkeyexecutivetalentCashcompensationvs.equityincentivesOtherissues:succession,etc.5ShareholderObjectivesfor

ExecutiveCompensationBuildreallong-termgrowthinshareholdervalueCompetitive,performance-alignedcompensationAvoidcorporatefuturefinancialhardshipasaresultofspecialcompensationarrangementsPricingrelativetothemarket—properuseofcompensationinstrumentsTrulyindependentCompensationCommitteesFull,truthfulandstraightforwarddisclosureofTheprinciplesandstructuresofexecutivecompensationsystems(i.e.,no“boilerplate”)Decision-makingprocessforcurrentyearawards6ExamplesofShareholderResistanceCoolBrands:21%dropinstockpricefollowingrequestformoreoptionsCHCHelicopters:“No”to11%optiondilutionproposalATITechnologies:Only54%shareholderapprovalfornewoptionsFairvest/InstitutionalShareholderServices:useoftheISSoptionvaluationmodelleadstomore“No”recommendationsTeachersPensionPlan:optiongrantsshouldbeproportionaltoexecutiveownershipAngiotechPharmaceutical:“evergreen”stockoptionreplenishmentrescindedduetoinstitutionalshareholderconcernsandnegativepress7TheCanadianCoalitionfor

GoodGovernanceisGainingCloutLaunchedlastyearBrainchildofSteveJarislowskyandClaudeLamoureuxConsistsofCanada’slargestpensionfunds,mutualfundsandmoneymanagersPurposeistoshareinformationandtaketheinitiativetoholdmanagementaccountableforgrowinglong-termshareholdervalueTheCoalitionwillsupportcompensationschemesthatrewardemployeesforsustainedperformancesSuccessfullyattackedAngiotechproposal8NewLegislationandStandardsareAffectingExecutiveCompensationU.S.Sarbanes-OxleyActProposedChangestoNYSEandNASDAQListingRulesCanadianSecuritiesAdministrators’DisclosureConcernsInternationalStockOptionExpensingProposalsRepapCourtCase9ShareholderDisclosureConcernsCanadianSecuritiesAdministratorsNov.5,2002pressrelease:Sampleof76publicly-tradedcompanies95%had“inadequate”disclosureWatsonWyattProxyCircularReview272TSXcompaniesin200248%hadnodisclosureannualincentivedetermination10StockOptionAccountingStandardsStockoptionexpensingisjustaroundthecorner!InternationalBoardisgoingtomandateinternationalstockoptionexpensingstandardsthisyearCanadianBoardhasannouncedintentiontorequirestockoptionexpensingbeforetheU.S.actsU.S.AccountingBoardisconsideringmandatoryadoptionManylargeNorthAmericancorporations(over150)havealreadydecidedtoexpenseoptions:Boeing(first)Coca-ColaCanadianBanksAFordGEIncoGMWal-MartSunLifeBCE11MeetingShareholderConcernswithOptions:ProsandConsIndexedoptionsPremium-priceoptionsPerformance-vestedoptionsGreaterstockownershipRestrictedstockunitsCashlongtermincentiveplans12MeanwhileintheCourts:TheRepapCaseNewChairmanwasaretiredU.S.lawyer;noexperienceinRepap’sindustrySummaryofhiscontract:Amulti-milliondollar“marketcapitalizationbonus”notlinkedtofinancialperformanceSharesandoptionsamountingto13.4%ofthecompany’sstockImmediatepensioncreditsof8yearsA“singletrigger”change-of-controlseverancepackageworthabout$27millionOntarioTrialCourtJudgesetasideChairman’scompensationagreementbecausethedirectorshadnotspentsufficienttimeanalyzinganddiscussingthecontractIndoingso,shesetasidethe““businessjudgmentrule”thatnormallyprotectsdirectorsfrombeingsecondguessed13YES,Executivepayisunderthemicroscope,BUT...CanadianandU.S.WatsonWyattstudies*showthat:HigherCEOcompensationopportunityiscorrelatedwithhigherTotalShareholderReturns(TSR)HigherCEOandExecutivestockownershipiscorrelatedwithhigherTSR,EPS,ROE,ROAHigherstockoptionopportunityisalsopositivelycorrelatedwithhigherTSR,EPS,butThereisanoptimallevelofstockoption“overhang”aboveorbelowwhichshareholdervalueiseroded* “CorporateGovernanceInCrisis;ExecutivePay/StockOptionOverhang2003”and“MonitoringCanadianCEOPayandPerformance,2002”.14EntertheCompensationCommittee...1515PurposeoftheCompensationCommitteeTheprimarypurposeoftheCompensationCommitteeoftheBoardistodetermineandoverseethecompensationpoliciesoftheorganizationDutiesinclude:DevelopingandsettingcompensationphilosophyandpoliciesDecidinguponcompensationlevelsandincentiveopportunitylevelsforofficersReviewingperformancelevelsofcompanyandcompensationmechanismsandlevelsCEOperformanceevaluationManagementdevelopmentandsuccessionplanningCommunicationtothefullBoardCompensationoftheBoard16StrategicExecutiveCompensationFrameworkCriticalFactorsSpecificExecutiveCompensationPhilosophyStrategicImplicationsonPrograms,Policies,PracticesStrategies/PlansManagementPhilosophyOrganizationalDesignOwnershipStructureMarketplaceDynamicsCompanywideLinkageObjectivesforPayCompensationElementsCompetitivePositioningCommitmenttoCommunicationBaseSalaryShort-TermIncentivesBenefits/PerquisitesLong-TermIncentives17StrategicExecutiveCompensationFrameworkSpecificExecutiveCompensationPhilosophySupportiveofCompany’smissionandvaluesConsistentwithTotalCompensationPhilosophyFlexibletoadapttouniqueorganizationalandindividualcircumstancesCompanywideLinkageObjectivesforPayDifferentiatefromcompetitorsFocusoncompanygoalsAlignwithorganizationalsuccessAttractnewtalentMotivateandrewardimprovedperformanceRetainhighperformersandkeycontributorsProvidesecurityandwealth-buildingopportunitiesEnsureexecutivesunderstandandappreciatecompensationandbenefitprogramsCompetitivePositioningEstablishrelevantpeergroup(s)andreferencepointsAppropriatepositioningrelativetoreferencepointsMethodologiesandsourcesofmarketdataCompensationElementsDesiredpaymix(fixedvs.variable,shortvs.long-term)RoleofbasesalaryObjectivesforshort-andlong-termincentivesSelectionofincentiveplanperformancemeasuresandgoalsCompetitivebenefitsandperquisitesCommitmenttoCommunicationCompany’sphilosophyonexecutivecompensationLinkagebetweencorporatestrategiesandrewardsObjectivesforprogramelementsProcessesformanagingpayPerformancemeasuresthataffectcompensationTotalcompensationpersonalizedcommunications18StrategicImplicationsonPrograms,Policies,PracticesStrategicExecutiveCompensationFrameworkBestunderstoodelementofpayRepresentsasignificantportionofcompensationopportunityServesasanindexforincentiveandbenefitvaluesAffectedby:PhilosophyExternalcompetitivenessInternalconsiderationsIncumbentexperienceandperformanceBaseSalaryShort-TermIncentivesObjectivesEligibilityAwardpotentialsPerformancemeasuresandgoalsAwarddeterminationForm/timingofpaymentAffectedby:CompanystrategiesCompensationphilosophyMarketvaluesMeasurementtoolsLong-TermIncentivesObjectivesEligibilityAwardpotentialsProgramvehicle(s)Performanceperiods,measures,andgoalsRetentionelementsAffectedby:CompanystrategiesCompensationphilosophyMarketcompetitivenessAvailabilityofstockorequitysubstituteBenefits/PerquisitesObjectivesforHealthcareRetirementincomeSurvivorincomeDisabilityincomeDeferredcompensationAffectedby:CompanystrategiesCompensationphilosophyStatutoryconsiderationsPerceivedvalue19WatsonWyatt’’sViewInthefinalanalysis,executivecompensationarrangementsmustreflectgoodgovernanceprinciplesStrengthandindependenceoftheBoardiskeyCredibleandconsistentcompensationdataandadviceiscrucialAccountabilitytoownersandtransparencyismoreimportantthansophisticationofdesignandtaxadvantagesOptionswillcontinuetobeused,butmoreprudently20PracticalTh