CIBC Executive Pay In Shareholders' Sights

CP  |  By Posted: 04/26/2012 4:41 pm Updated: 04/27/2012 9:04 am

CIBC has become the second large Canadian bank in a month to face shareholder frustration over the level of compensation paid to senior executives.

Shareholder rights group Medac and a vocal critic of Canadian banks both unsuccessfully urged shareholders at the annual meeting Thursday to approve motions to change the way compensation is doled out.


Louis Gagnon of the Quebec-based Mouvement d’education et de defense des actionnaires proposed three motions about stock options and performance-based compensation.

He said stock options are awarded even though a study of Canada's five big banks found that their stock price was mainly the result of low interest rates and a favourable economic environment.

"So it is therefore far from appropriate to link the exercise of stock options to stock price fluctuations," he said in the meeting webcast from Halifax.

He suggested the options only be exercisable after a waiting period if "measurable and quantifiable objectives" such as growth in income per share and return on shareholders' equity are achieved.

Variable compensation accounts for the largest part of a senior executives' total remuneration. To ensure that compensation is justified, Gagnon wanted the bank to compare itself with peers on both compensation of the top five executives along with financial performance.

Earlier this month, shareholders from Medac spent much of National Bank of Canada's three-hour meeting in Montreal criticizing executive compensation, including $8.4 million in salary and bonuses paid to CEO Louis Vachon last year.

Lowell Weir, who was removed by security guards from the National Bank (TSX:NA) meeting last year, also proposed eight motions at Thursday's CIBC meeting.

Ultimately, shareholders massively rejected all of these shareholder proposals with a majority of about 98 per cent.

Weir complained that few, if any, shareholder proposals ever pass.

"The reality is that every proposal is automatically rejected and it's not right," he said.

The Canadian Imperial Bank of Commerce didn't specifically respond to the proposals beyond what was written in its proxy circular.

The document confirmed that CIBC president and chief executive Gerry McCaughey earned $10 million in 2011, up from $9.3 million in 2010.

In the United States, Citigroup last week became the first Wall Street bank to get a thumbs-down from shareholders over outsized executive pay.

At its annual meeting, 55 per cent of the bank's shareholders voted against the pay packages that have been granted to Citigroup's top executives, including CEO Vikram Pandit's $15 million for last year and $10 million retention pay.

Although speakers at CIBC's meeting were critical of the bank's compensation policies, the tone of the meeting was less combative than Citigroup or the three-hour National Bank session.

Still, Weir also complained that Nova Scotia doesn't realize sufficient jobs provided from the bank's operations in the province.

"We buy bank products here, we invest with the CIBC but we don't see anything coming the other way."

But McCaughey said the CIBC operates 28 branches, employs 375 people and contributes several millions of dollars to the community.

"We intend to continue to be a supporter of the community and to invest in our branches as well as our other facilities that we have here."

Meanwhile, CIBC chairman Charles Sirois confirmed that he has no plans to run as a candidate for the new Coalition for the Future of Quebec in the next provincial election.

"The opinions that I may express on political issues in Quebec are strictly personal opinions, they have nothing to do with the bank," he said.


Loading Slideshow...
  • What Canada's Bank CEOs Earned Last Year

  • 6. Louis Vachon, National - $7.5 Mln

    <strong>Profit per dollar earned by the CEO: $162.27</strong> National Bank's Louis Vachon took home $7.5 million, the lowest total of any of the six major banks, but the most in terms of the bank's net income.

  • 5. Gerry McCaughey, CIBC - $9.5 Million

    <strong>Profit per dollar earned by the CEO: $326.32</strong> Gerry McCaughey's total compensation grew 12 per cent, to $9.5 million, in 2011. Source: <a href="" target="_hplink">CIBC Management Proxy Circular</a>

  • 4. Bill Downe, BMO - $9.9 Million

    <strong>Profit per dollar earned by the CEO: $330.81</strong> Bill Downe's total compensation for 2011 was up 4.2 per cent from his 2010 pay of $9.5 million. Source: <a href="" target="_hplink">Reuters</a>

  • 3. Gordon Nixon, RBC - $10.1 Million

    <strong>Profit per dollar earned by the CEO: $480.40</strong> Gordon Nixon's total compensation fell 8 per cent in 2011, to $11 million. Source: <a href="" target="_hplink">RBC Management Proxy Circular</a>

  • 2. Rick Waugh, Scotiabank - $10.6 Mln

    <strong>Profit per dollar earned by the CEO: $501.71</strong> Waugh's total earnings for 2011, at $10.6 million, were down slightly from the $10.66 million he earned in 2010. Source: <a href="" target="_hplink">Toronto Star</a>

  • 1. Ed Clark, TD Bank - $11.3 Million

    <strong>Profit per dollar earned by the CEO: $517.45</strong> Ed Clark's total compensation for 2011 was meant to be around $12 million, but the bank's board scaled it back to $11.3 million -- roughly the same as in 2010. Source: <a href="" target="_hplink">Toronto Star</a>


Filed by Daniel Tencer  |