Financial Services Organisation

Client Situation

One of Canada’s largest pension funds believed that it had an important role to play in actively working to improve leading governance and compensation practices. It understood that banks are considered leaders in governance practices and others look to them in preparing their disclosures. Therefore, the pension fund felt it needed to focus on some mid-level objectives or themes that would be applicable to all banks.
It was obvious that the banking community was a logical first group to work with because:

• Banks and banking executives have a significant impact on the Canadian economy and are seen as leaders in governance and management trends.
• The banking community tends to work closely with one another and therefore it is assumed that best practices will be easier to transfer / adopt throughout the group. 
• As leaders, others look to them when preparing their own disclosure statements, therefore best practices will preferably have a trickledown affect throughout the Canadian economy.

Global Governance Advisors’ Approach

Global Governance Advisors provided our client with governance assessment tools, as well as relative market evaluations of its investee banks’ executive pay relative to realized performance

• GGA developed a best practices checklist that the organisation could use to confidently assess the governance and compensation disclosure practices of its investee banks as well as any other future investee organisation they wished to evaluate; and
• Using a proprietary methodology, GGA plotted CEO pay and performance, taking into account:
• Total Executive incentives (as a % of base salary)
• Annual short-term bonus
• Expected value of long-term incentive grants (stock options, share units)
• Performance Metrics
• Total Shareholder Return (“TSR”) for one year
• Return on Equity (“ROE”) for one year
• Earnings per Share Growth (“EPSG”) for one year
• Corporate governance ratings – Corporate Governance Quotient  (“CGQ”) ratings
• Using an additional proprietary methodology, GGA assessed the total wealth accumulated by each of the bank CEO’s and charted it relative to the total shareholder wealth accumulated over the same time period.

Outcome

Our client used the assessments and assessment tools as discussion items during proactive meetings that took place with each of bank CEOs. The outcome was that it was able to proactively work with its investee banks to achieve the four key objectives previously mentioned.

Financial Services Organisation

Client Situation

A large international banking institution was concerned about the growing pressures surrounding executive compensation and wished to raise its board members’ level of understanding and expertise.

Global Governance Advisors’ Approach

In conjunction with the bank’s Governance Committee, Global Governance Advisors developed a half-day development session which covered the following topics:

• Current Executive Compensation Environment
• The US Securities Exchange Commission and Canadian Securities Association Regulations
• New Trends in Compensation Governance
• Detailed Analysis of Bank Compensation Governance Practices
• Shareholder Value Creation and Executive Wealth Accumulation vs. Shareholder Wealth Accumulation
• Bank Pay for Performance Analysis
• Bank Analysis Summary Recommendations
• Current CEO Pay Levels
• Supplementary Executive Retirement Plans (“SERPs”)
• Strong Examples of Disclosure - Leading CD&As
• Future of Pay
  

Outcome

The development session delivered by GGA consultants was the highest attended board session in the history of the bank, and board members became more knowledgeable in how to effectively design and govern pay-for-performance compensation plans.