The Honourable Vic Toews, P.C., Q.C., M.P.
President of the Treasury Board
House of Commons
Ottawa, ON K1A 0A6

Dear Minister Toews:

In our Tenth Report of April 2008, we recommended changes to the compensation structure for Chief Executive Officers (CEOs) of Crown corporations.  These changes have been implemented, and we believe that it is now important to address the issue of compensation for two other distinct groups: the Governor in Council (GIC) appointees of boards of directors of Crown corporations; and the GIC appointees of agencies, boards, and commissions.  Neither group has had a remuneration update since 2000.  Given the clear need for strong corporate governance, the Government must offer reasonable compensation to attract qualified candidates to serve on the boards of these federal entities.

We recommend that the remuneration framework be amended as follows:

  • for chairs and directors of Crown corporation boards of directors:
    • introduce a compensation framework that is benchmarked against the Canadian public sector market;
    • reduce board compensation categories from ten to four and place the boards in the new categories based on groupings of organizations by industry type and size;
    • replace the current annual retainer ranges with single retainer rates per level;
    • replace per diem ranges with meeting fees consisting of a single rate payable for attendance at meetings. Any additional services would be compensated through the annual retainer; and
    • introduce a retainer premium for directors who are designated as committee chairs.

Boards of directors of federal Crown corporations should be grouped into four broad categories based on the type of corporation, size, complexity of operation, strategic importance to the country, and the degree of knowledge and specialized skills required. Fewer and broader categories recognize that all chairpersons and directors have the same basic skills sets, while acknowledging that those in larger Crowns assume greater risk in relation to today's high standard of corporate governance and oversight.  The result is a compensation structure that offers a logical, transparent grouping of organizations into categories which have meaningful monetary distinctions between them.

  • for chairs and members of agencies, boards and commissions, we recommend maintaining the current four-level structure, and:
    • replace per diem ranges with single rates in the existing remuneration structure; and
    • update the rates consistent with the proposed compensation for boards of directors.

The current and recommended remuneration is shown in Appendices Four and Five.

Since these rates have not been adjusted for eight years and have fallen well behind the comparator group, we would recommend immediate implementation.  If this is not possible due to the Expenditure Restraint Act, we recommend implementation immediately after the constraint is lifted on April 1, 2011, or on the earliest possible date following the conclusion of the Expenditure Restraint Act, should the Act be extended.  

While compensation is a key consideration in attracting and retaining qualified board members, ensuring that the individuals have the required training is also important.  We recognize that the Government has expanded its efforts in this area and would encourage continued attention to this work.

In our Eleventh Report, we recommended salary range increases for senior levels in 2009-2010 that took into account the state of the economy.  What follows are our recommendations for the subsequent year, 2010-2011.  Consistent with the intent of the Expenditure Restraint Act, we recommend: 

  • effective April 1, 2010, a 1.5 per cent salary range increase for members of the EX and DM groups;
  • effective April 1, 2010, a 1.5 per cent salary range increase for members of the GC and GC-Q groups; and
  • effective at the beginning of each Crown corporation's fiscal year in 2010, a 1.5 per cent salary range increase for the CEOs of Crown corporations.

We further recommend that no change be made to pay at risk in 2010-2011.

The current and recommended salary ranges and applicable performance awards are shown in Appendix Six for the EX and DM groups; in Appendix Seven for the GC and GC-Q groups; and in Appendix Eight for the CEOs of Crown corporations.

I would be pleased to have the opportunity to discuss the Committee's views and recommendations with you.
Sincerely,

Carol Stephenson

Appendix One:  Mandate of the Advisory Committee on Senior Level Retention and Compensation

To provide independent advice and recommendations to the President of the Treasury Board concerning executives, deputy ministers and other Governor in Council appointees of the federal Public Service and public sector on:

  • developing a long-term strategy for the senior levels of the Public Service that will support the human resource management needs of the next decade,
  • compensation strategies and principles, and
  • overall management matters comprising among other things human resource policies and programs, terms and conditions of employment, classification and compensation issues including rates of pay, rewards and recognition.

To present recommendations in a report to the President of the Treasury Board. The report will be made public by the President of the Treasury Board.

Appendix Two:  Members of the Advisory Committee on Senior Level Retention and Compensation

Carol M. Stephenson, B.A., (Committee Chair)
Dean, Richard Ivey School of Business, Ms. Stephenson, a widely respected CEO in the Canadian telecom industry, was appointed Dean of the Richard Ivey School of Business in July 2003. In 1999 she was appointed Chief Executive Officer of Lucent Technologies Canada. Prior to that, she was President and Chief Executive Officer of Stentor Resource Centre Inc., and Vice-President of Bell Canada.

Gaétan Lussier, O.C., B.Sc. (Agr.), M.Sc., Ph.D.
President, Gaétan Lussier and Associates, Mr. Lussier is a past Assistant Deputy Minister and Deputy Minister at the Quebec Ministry of Agriculture; and, federally, a past Deputy Minister of Agriculture Canada and past Deputy Minister and Chairman, Employment and Immigration Canada. Mr. Lussier was also President of the External Advisory Committee on Smart Regulation and is the founder of the Canadian Agri-Food Policy Institute (2004).  Moreover, he was President of Boulangeries Weston Québec Ltd. and past President and Chief Executive Officer of Culinar Inc.

Patrick O'Callaghan, B.A., M.B.A.
President, Patrick O'Callaghan & Associates, Mr. O'Callaghan specializes in Board effectiveness and director recruitment in the public, private and not-for-profit sectors. Since 1992, Patrick O'Callaghan & Associates has provided Board governance advice to organizations in a wide range of industries throughout Canada, including assignments with federal and provincial crown corporations. Mr. O'Callaghan is a frequent speaker and seminar leader on corporate governance issues. He has first-hand experience as a director of public and private Canadian corporations and several not-for-profit organizations. Currently, Mr. O'Callaghan is a director of Women on BoardTM and a member of the Directors Advisory Group of the Canadian Institute of Chartered Accountants.

Sarah E. Raiss, B.Sc., M.B.A.
Executive Vice President, Corporate Services of TransCanada Corporation, Ms. Raiss is responsible for human resources, information systems, aviation, real estate and corporate services at TransCanada Corporation. Prior to holding this position, she was President of S. E. Raiss Group, Inc.; Vice President of Customer Service, Training and IT Support at Ameritech; Senior Consultant at Metzler and Associates; as well as holding various positions in engineering and operations with Michigan Bell.

Raymond Royer, L.L.B., M.A.
Director and retired President and CEO, Domtar Inc., Before his appointment at Domtar, Mr. Royer was President and Chief Operating Officer at Bombardier. He is noted for his outstanding financial management and his ability to integrate acquired businesses through a management system that engages employees.

Appendix Three:  Summary of Twelfth Report Recommendations

  • for chairs and directors of Crown corporation boards of directors:
    • introduce a compensation framework that is benchmarked against the Canadian public sector market;
    • reduce board compensation categories from ten to four and place the boards into the new categories based on groupings of organizations by industry type and size;
    • replace the annual retainer ranges with single rates per level;
    • replace per diem ranges with meeting fees consisting of a single rate payable for attendance at meetings.  Any additional services would be compensated through the annual retainer; and
    • introduce a retainer premium for directors who are designated as committee chairs.
  • for chairs and members of agencies, board and commissions, maintain the current four-level structure, and:
    • replace per diem ranges with single rates in the existing remuneration structure; and
    • update the rates consistent with the proposed compensation for boards of directors.
  • for senior levels:
    • effective April 1, 2010, a 1.5 per cent salary range increase for members of the EX and DM groups;
    • effective April 1, 2010, a 1.5 per cent salary range increase for members of the GC and GC-Q groups;
    • effective at the beginning of each Crown corporation's fiscal year in 2010, a 1.5 per cent salary range increase for CEOs of Crown corporations; and
    • no change to pay at risk in 2010-2011.

Appendix Four: Current and Recommended Remuneration for Chairs and Directors of Crown Corporation Boards of Directors

A) Current:

Group Per Diem Ranges Annual Retainer Ranges
  Chairs & Directors Chairs Directors
1 $160 - $250 $5,100 - $6,000 $2,600 - $3,000
2 $220 - $260 $5,700 - $6,700 $2,900 - $3,400
3 $200 - $300 $6,400 - $7,500 $3,200 - $3,800
4 $275 - $325 $7,100 - $8,400 $3,600 - $4,200
5 $310 - $375 $8,000 - $9,400 $4,000 - $4,700
6 $360 - $420 $9,200 - $10,800 $4,600 - $5,400
7 $410 - $485 $10,500 - $12,400 $5,300 - $6,200
8 $470 - $555 $12,200 - $14,300 $6,100 - $7,200
9 $565 - $665 $14,500 - $17,100 $7,300 - $8,600
10 $680 - $800 $17,400 - $20,500 $8,800 - $10,300

B) Recommended:

Effective April 1, 2011*
Level Chairperson Retainer Director Retainer Committee Chair Premium Meeting Fee
Level 1 $14,000 $7,000 $2,400 $500
Level 2 $20,000 $10,000 $3,400 $750
Level 3 $27,000 $13,500 $4,500 $750
Level 4 $35,000 $17,500 $5,900 $1,000

*Or effective on the earliest possible date following the conclusion of the Expenditure Restraint Act

Appendix Five:  Current and Recommended Remuneration for Chairs and Members of Agencies, Boards and Commissions

A) Current:

Category Executive Advisory
  Chair Member Chair Member
I $675 - $800 $475 - $550 $550 - $650 $375 - $450
II $475 - $550 $350 - $400 $375 - $450 $275 - $325
III $350 - $425 $250 - $300 $300 - $350 $200 - $250
IV $300 - $350 $200 - $250 -- --

B) Recommended:

Effective April 1, 2011*
  Executive Advisory
Level Chairperson
Per Diem
Member
Per Diem
Chairperson
Per Diem
Member
Per Diem
Level 1 $1,000 $700 $850 $600
Level 2 $700 $500 $600 $400
Level 3 $550 $400 $450 $300
Level 4 $450 $300 -- --

*Or effective on the earliest possible date following the conclusion of the Expenditure Restraint Act

Appendix Six:  Current and Recommended Cash Compensation for the EX and DM Groups

Current and Recommended Cash Compensation for the EX and DM Groups
Level Current 2008-2009 Recommended 2009-2010 Recommended 2010-2011
Salary Range Max. Max. At Risk Pay Max. Bonus Salary Range Max. Max. At Risk Pay Max. Bonus Salary Range Max. Max. At Risk Pay Max. Bonus
EX-1 $115,400 12.0% 3.0 % $117,200 12.0% 3.0 % $119,000 12.0% 3.0%
EX-2 $129,400 12.0% 3.0 % $131,400 12.0% 3.0 % $133,400 12.0% 3.0%
EX-3 $144,800 12.0% 3.0 % $147,000 12.0% 3.0 % $149,300 12.0% 3.0%
EX-4 $166,200 20.0% 6.0 % $168,700 20.0% 6.0 % $171,300 20.0% 6.0%
EX-5 $186,200 20.0% 6.0 % $189,000 20.0% 6.0 % $191,900 20.0% 6.0%
DM-1 $208,300 20.0% 6.0 % $211,500 20.0% 6.0 % $214,700 20.0% 6.0%
DM-2 $239,600 25.0% 8.0 % $243,200 25.0% 8.0 % $246,900 25.0% 8.0%
DM-3 $268,300 25.0% 8.0 % $272,400 25.0% 8.0 % $276,500 25.0% 8.0%
DM-4 $300,400 30.0% 9.0 % $305,000 30.0% 9.0 % $309,600 30.0% 9.0%

Appendix Seven: Current and Recommended Cash Compensation for the GC Group

Current and Recommended Cash Compensation for the GC Group
Level Current 2008-2009 Recommended 2009-2010 Recommended 2010-2011
Salary Range Max. Max. At Risk Pay Max. Bonus Salary Range Max. Max. At Risk Pay Max. Bonus Salary Range Max. Max. At Risk Pay Max. Bonus
Level 1 $79,900 10.6% 3.0 % $81,100 10.6% 3.0 % $82,400 10.6% 3.0 %
Level 2 $91,800 10.6% 3.0 % $93,200 10.6% 3.0 % $94,600 10.6% 3.0 %
Level 3 $105,900 10.6% 3.0 % $107,500 10.6% 3.0 % $109,200 10.6% 3.0 %
Level 4 $121,700 10.6% 3.0 % $123,600 10.6% 3.0 % $125,500 10.6% 3.0 %
Level 5 $140,000 10.6% 3.0 % $142,100 10.6% 3.0 % $144,300 10.6% 3.0 %
Level 6 $160,900 17.4% 6.0 % $163,400 17.4% 6.0 % $165,900 17.4% 6.0 %
Level 7 $185,100 17.4% 6.0 % $187,900 17.4% 6.0 % $190,800 17.4% 6.0 %
Level 8 $212,700 17.4% 6.0 % $215,900 17.4% 6.0 % $219,200 17.4% 6.0 %
Level 9 $244,600 17.4% 6.0 % $248,300 17.4% 6.0 % $252,100 17.4% 6.0 %
Level 10 $281,300 20.4% 8.0% $285,600 20.4% 8.0% $289,900 20.4% 8.0%

Appendix Seven (cont'd): Current and Recommended Cash Compensation for the GC-Q Group

Current and Recommended Cash Compensation for the GC-Q Group
Level Current 2008-2009 Recommended 2009-2010 Recommended 2010-2011
Level 1 $88,100 $89,500 $90,900
Level 2 $101,200 $102,800 $104,400
Level 3 $116,800 $118,600 $120,400
Level 4 $134,200 $136,300 $138,400
Level 5 $154,400 $156,800 $159,200
Level 6 $188,900 $191,800 $194,700
Level 7 $217,300 $220,600 $224,000
Level 8 $249,700 $253,500 $257,400
Level 9 $287,200 $291,600 $296,000
Level 10 $338,700 $343,800 $349,000

Appendix Eight: Current and Recommended Cash Compensation for CEOs of Crown Corporations

Current Cash Compensation for CEOs of Crown Corporations 2008
Level Job Rates Maximum Performance Award
Group 1 $134,700 15.0 %
Group 2 $161,600 15.0 %
Group 3 $193,900 15.0 %
Group 4 $232,700 26.0 %
Group 5 $279,200 26.0 %
Group 6 $335,000 28.0 %
Group 7 $402,000 28.0 %
Group 8 $482,400 33.0 %

Recommended Cash Compensation for CEOs of Crown Corporations 2009
Level Job Rates Maximum Performance Award
Group 1 $136,800 15.0 %
Group 2 $164,100 15.0 %
Group 3 $196,900 15.0 %
Group 4 $236,200 26.0 %
Group 5 $283,400 26.0 %
Group 6 $340,100 28.0 %
Group 7 $408,100 28.0 %
Group 8 $489,700 33.0 %

Appendix Eight (cont'd): Current and Recommended Cash Compensation for CEOs of Crown Corporations

Recommended Cash Compensation for CEOs of Crown Corporations 2010
Level Job Rates Maximum Performance Award
Group 1 $138,900 15.0 %
Group 2 $166,600 15.0 %
Group 3 $199,900 15.0 %
Group 4 $239,800 26.0 %
Group 5 $287,700 26.0 %
Group 6 $345,300 28.0 %
Group 7 $414,300 28.0 %
Group 8 $497,100 33.0 %
Date modified: