Advisory Committee on Senior Level Retention and Compensation

Table of Contents

• Preface
• Progress in Implementing Recommendation in the First Report
• Compensation for Chief Executive Officers of Crown Corporations
• The New Millenium
• Summary
• Appendix A - Committee Members
• Appendix B - Committee Mandate
• Appendix C - Background on Crown Corporations
• Appendix D - Parent Crown Corporations Grouped by Ministerial Portforlio
• Appendix E - Base Salary Compensation - Hay versus Mercer
• Appendix F - Details of Human Resource Management Initiatives
• Appendix G - Glossary of Terms

Preface

This is the second report that the Advisory Committee on Senior Level Retention and Compensation has submitted to the President of the Treasury Board. Before broadly discussing its contents, I should like to comment on the acceptance of our first report. Submitted in February 1998, the report raised serious concerns about the federal Public Service of the future and made numerous proposals for dealing with what we judged to be the most pressing issues: the Public Service vision for the future, the need for cultural and human resource renewal, and compensation. The government's complete and speedy acceptance of our recommendations was unprecedented and sent a powerful and positive message to the leaders of the Public Service. So too did the dialogue that surrounded the report's publication. Largely supportive, the public debate reinforced the fact that a high-performance Public Service will not only serve all Canadians better, but also contribute to Canada's economic and social well-being and global competitiveness.

We have been pleased with the changes that have resulted from our recommendations.

In this, our second report, the Committee outlines progress in implementing our earlier recommendations; makes specific proposals, primarily regarding compensation for the Chief Executive Officers of Crown corporations; and, finally, revisits the key longer-term challenges of Public Service renewal. With respect to the ever-sensitive issue of compensation, we have again addressed principles, structure and implementation. And again, we have also tried to be fiscally responsible, equitable and conscious of the need to attract and retain the appropriate calibre of individual to lead the Crown corporations, particularly the larger, more commercial organizations.

Yours sincerely,

Lawrence F. Strong

Progress in Implementing Recommendations in the First Report

The Advisory Committee on Senior Level Retention and Compensation (see Appendix A for a list of members) was established in 1997 with a three-year mandate to provide the Treasury Board President with independent advice about senior-level human resource strategies and policies for the federal Public Service. Appendix B contains the Committee mandate in full. Our most critical objective was to ensure that the federal Public Service could continue to attract and retain the calibre of leadership essential to ensuring Canada's success into the next millennium. The Committee quickly concluded that, without immediate action, the government would face an inevitable loss of Public Service leadership over the next decade. While we identified compensation as the most pressing issue, we also identified as longer-term challenges the need to restore pride and the need to address the implications of the potential resource gap caused by demographics, workplace issues, and recruitment and retention pressures. Against this background, Chapter 1 reviews progress in implementing the Committee's recommendations regarding compensation and addresses some outstanding issues.

Deputy Minister (DM) and Executive (EX) Community Compensation

In its first report, the Committee stated that it would be logical to review compensation for the Deputy Minister and EX communities as a continuum. We then established the following five principles as the basis for their compensation:

• a total compensation package distinct from that for unionized employees;
• an internal structure that properly reflects differences in responsibility;
• total compensation set in relation to appropriate external benchmarks;
• cash compensation comprising a fixed component and a variable component tied to achieving annual objectives; and
• year-to-year administration of Public Service compensation removed from the political arena as much as possible by ensuring sound principles and practices, including regular external benchmarking.

The first report then recommended a new salary structure, a new scheme of variable compensation and an implementation plan. A detailed review of government actions follows, together with an analysis of outcomes, where appropriate.

Salaries

The new salary structure was adopted April 1, 1998. It aligned salary rates at the EX1 level with the broader public sector and the private sector, and improved relative competitiveness at the more senior levels. There are no new data to present but, as anticipated in the first report, the Treasury Board Secretariat is conducting another independent compensation survey among relevant comparison groups. These data should be available shortly for review by the Committee and will be the subject of our third report later this year.

The new structure has addressed the significant problem of inadequate differentials among job rates, especially at the most senior management levels. The first report also identified other internal inequities: failure to pay senior managers in relationship to their current performance; compression where salaries at different levels of responsibility are very close; and, finally, inequities in pay for individuals who assume temporary assignments at a higher level. We outline progress in each of these areas in the following section.

Salary Distribution by Level Compared to Job Rate

The following chart shows the March 1999 distribution of EX and DM salaries in relationship to job rate. Thus, just over 20% of EX1s have salaries which are 80-89.9% of job rate; just under 50% have salaries which fall in the 90-99.9% range and 30% are at job rate.

Fig. 1: Distribution of EX and DM Salaries in Relation to Job Rate

The Committee considers this distribution far more reasonable than that of 20 months ago, and there is clearly a much stronger relationship between performance and salary. Specific examples of success include the following:

• The proportion of managers at job rate has risen from 25 percent to 41 percent and also rises with EX level. This is to be expected with a mature, experienced management cadre.
• The incidence of managers receiving below 80 percent of job rate has virtually disappeared. This was a problem at the EX1 level.
• The problem of salary compression between management levels has been largely corrected, as the number of managers receiving 80 to 89.9 percent of job rate has dropped sharply. The only group where this proportion is still material, at 22.6 percent, is the EX1 group, and this fact reflects the impact of new recruitment.
• The salary relationship between EX1s and their unionized subordinates remains a challenge. Based on a sample of 11 departments, compression currently exists in 9 percent of EX1 positions: in other words, there is a less than a 10 percent spread between a manager's cash compensation and that of a direct report. There are also limited examples of inversion, where a direct report earns more than an executive does. These examples occur mostly where direct reports are lawyers, scientists or specialists, such as informatics experts.

The Committee will review this situation in its third report, by which time the results of the new cash compensation benchmarking study will be available and changes in the union salary structures may be known.

Acting Pay

Our recommendations on acting pay have been adopted, thereby eliminating this source of irritation. As a consequence, executives at the EX1 to EX3 levels who temporarily take on a more senior position automatically receive a higher rate of pay (a minimum 5 percent increase) once in the job for three months. Also, an acting assignment can be extended beyond 12 months only with the approval of Treasury Board Secretariat officials.

At-Risk Compensation and Performance Management

Our first report recommended a new scheme of variable at-risk compensation paid on the basis of performance against agreed objectives and the achievement of business plans. This replaced an existing performance pay regime, which had become totally discredited due to a checkered history of implementation. The Committee recommended that this new scheme:

• reflect the values of a Public Service focussed on the public interest;
• identify targets, which could be individual, team-related or corporate;
• be introduced in conjunction with a development effort focussed on target setting and performance assessment; and
• be an integral part of total compensation, paid each year on the basis of actual performance against agreed targets.

The Treasury Board acted on these recommendations and introduced the new Performance Management Programme on April 1, 1999. The Committee has reviewed the design features of this programme and endorses it. We are also encouraged that deputy ministers have embraced the programme and are committed to making it work. The process of cascading priorities, goals and commitments across the Public Service and down through departments is in progress. The Committee is pleased with the numerous steps being taken to introduce the programme.

That said, the first true test will occur when performance is evaluated and payouts are recommended. It is important to stress that we will all learn a great deal during this initial year and that, almost certainly, changes will be required next year. The Treasury Board Secretariat is committed to evaluating the experiences of this learning year. It will report to the Committee and share best practices among departments. It is nonetheless important to reiterate the Committee's belief that this programme will ensure that:

• clear objectives and priorities are agreed and communicated within and across departments, and that these achieve the right balance between flexibility for departments and the need for consistency and transparency across the Public Service;
• expectations are quantified, when feasible, and that they are clearly expressed when it is not practical to quantify them; and
• progress in meeting these objectives is periodically reviewed.

The Committee continues to believe that, with the continued commitment of the most senior officials as well as of the whole executive cadre, this programme will enhance the effectiveness of the Public Service. In our first report, the Committee recommended graduated at-risk maximums - up to 10 percent for EX1 to EX3 levels, up to 15 percent for EX4 to DM1 levels, and up to 20 percent for DM2 to DM3 levels - when the Performance Management Programme is fully implemented in 2000-2001. However, it also recommended access to only 50 percent of the maximum potential payout for two years, while the Programme was phased in. The Treasury Board Secretariat concluded that reducing potential individual awards for many executives would diminish the credibility of the new Performance Management Programme. Thus, individual potential maximum at-risk payments were set at up to 10 percent for all executives in fiscal 1998-99, subject to an overall budget limit of 4.4 percent. The Committee has requested further information to review the payouts for the 1999-2000 exercise and to assess the impact of the Programme.

Flexible Benefits

Our first report recommended that a study of flexible benefits for the senior management cadre be undertaken. Consistent with the view that the leadership community should be treated as distinct, this study was to review the feasibility of adopting a "cafeteria-style" approach that could offer greater value to the management cadre.

After evaluating proposals from three major consulting firms, the government hired Watson Wyatt Worldwide to conduct a survey to measure understanding of the current benefits, establish interest in flexible benefits in general and, in particular, identify areas of interest or concerns associated with such a programme. As a first step, Watson Wyatt conducted some research among a small nationwide sample of senior Public Service managers.

Although the findings were only qualitative, the feedback indicated that not all senior managers fully understand the current benefits package. Since such understanding is important to any discussion of change, we encouraged the Treasury Board Secretariat to educate executives about the current benefits before proceeding with the full survey. The Secretariat has done so by publishing an excellent information package and using an intranet site.

While it is important to reiterate the limitations of the research done to date, it does appear that senior managers see flexible benefits as a concept that offers value. The Committee will be interested in the results of the recently completed survey of all executives and further analysis stemming from them.

Job Evaluation

Some senior level job evaluations remain outstanding and the deadline for completion has been extended to April 2000. A very demanding human resource agenda, including the return to collective bargaining and the introduction of the Universal Classification Standard, made this delay necessary.

A job evaluation system that objectively measures the current relative responsibilities of all Public Service senior level jobs is a critical component of sound compensation policy. The Treasury Board is studying the effectiveness of the current executive classification system, as recommended by the Committee.

Deputy Ministers

In our first report, the Committee recommended that the Privy Council Office (PCO) evaluate deputy minister positions. At the time, the Committee believed that certain positions were substantially larger in scope than others and that, even at the DM3 level, several deputy ministers were being significantly undercompensated, in terms of both internal comparison and external benchmarking. The PCO has finished this evaluation, and its results confirm the Committee's earlier judgement.

The Committee proposes to finalize its views on the need for another DM level in its third report, when the results of the new Mercer cash compensation benchmarking study will be known. A final determination on the need for this additional level is important to ensure equity with the CEOs of some of the larger Crown corporations and to ensure the retention of critical expertise in the deputy minister community.

Pension Arrangements

In our first report, the Committee said it would determine whether the new at-risk compensation should be pensionable. Current legislation (the Public Service Superannuation Act) defines pensionable compensation as basic pay for performing regular duties during normal working hours. At-risk compensation qualifies under this definition, as did performance pay, which the new at-risk scheme is essentially replacing.

To be consistent with our established principles, the Committee asked William M. Mercer Limited to review practices in the private and other public sectors. More than half the organizations surveyed include variable compensation for pension purposes, and this proportion rises when variable pay represents an important part of total compensation.

We therefore recommend that at-risk payments continue to be pensionable. The incremental cost of this proposal is less than $250,000 annually.

We note that the government has passed pension amendments affecting the Public Service, including the cadre of senior managers covered by our mandate. These changes will be incorporated into the next survey of total compensation to be conducted in 2001.

Governor in Council Appointees

With the exception of deputy ministers, dealt with earlier in this Chapter, and of the Chief Executive Officers of Crown corporations, dealt with in Chapter 2, this Committee is unaware of any compensation or human resource issues relating to other Governor in Council appointees, other than the review that the PCO is conducting of the remuneration guidelines for part-time Governor in Council appointees.

Compensation for Chief Executive Officers of Crown Corporations

In our first report, the Committee noted that Chief Executive Officers (CEOs) of Crown corporations were in a very different position from other Governor in Council appointees. As a result, we recommended that the Privy Council Office (PCO) fully review CEO compensation structures and the way actual compensation is managed. We also proposed that the review consider the scope and responsibilities of the positions; the compensation policies within each Crown corporation; and the appropriate comparison groups, depending on the public/commercial balance of each corporation's mandate and the sector in which the corporation operates.

Pending the outcome of this review, the Committee made interim recommendations for salary and at-risk compensation reflecting levels in comparable EX and DM communities. However, in larger Crown corporations, where CEO positions were evaluated above the DM2 level, it was recognized that future upward adjustment would likely be required.

Background on the Crown Corporations

The following Crown corporations are included in this review:

• Atlantic Pilotage Authority
• Atomic energy of Canada Limited
• Bank of Canada
• Business Development Bank of Canada
• Canada Council
• Canada Deposit Insurance Corporation
• Canada Mortgage and Housing Corporation
• Canada Post Corporation
• Canadian Broadcasting Corporation
• Canadian Commercial Corporation
• Canadian Dairy Commission
• Canadian Film Development Corporation
• Canadian Museum of Civilization Corporation
• Canadian Museum of Nature
• Canadian Race Relations Foundation
• Cape Breton Development Corporation
• Defence Construction (1951) Limited
• Enterpirse Cape Breton Corporation
• Export Development Corporation
• Farm Credit Corporation
• Federal Bridge Corporation Limited
• Freshwater Fish Marketing Corporation
• Great Lakes Pilotage Authority
• International Development Research Centre
• Laurentian Pilotage Authority
• Marine Atlantic Incorporated
• National Arts Centre Corporation
• National Capital Commission
• National Gallery of Canada
• National Museum of Science & Technology Coporation
• Pacific Pilotage Authority
• Royal Canadian Mint
• Standards Council of Canada
• Via Rail Canada Incorporated

Background on each of these Crown corporations - mandate, employees, assets and revenues - appears in Appendix C.

Several Crown corporations, for various reasons, were not included in this review: the Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, since neither CEO is a Governor in Council appointee; the Canada Ports Corporation and the Queen's Quay West Land Corporation, since both are being wound up; Petro-Canada Limited, the former parent of the now-privatized Petro Canada Inc., since the CEO is part time; the Canada Development Investment Corporation, since the CEO position has been vacant for some time and will not be staffed in the foreseeable future; and Ridley Terminals Inc. and the Canadian Tourism Commission, which are being established as Crown corporations.

Most Crown corporations are established through legislation, which provides basic mandates. In a general sense, the concept of an arm's-length Crown corporation is an attempt to balance the need for a public policy initiative against the need for operational independence. However, the government is responsible for providing broad policy directions to Crown corporations, including strategies and priorities in interpreting their mandate. The CEO of each Crown corporation has full management responsibility for all day-to-day operations.

The arm's-length nature of the Crown corporations, coupled with their operational independence, has led the Committee to recommend that the CEO compensation structure for Crown corporations be separated from that of other Governor in Council appointees. Nevertheless, the federal Crown corporations listed above vary markedly in scale and scope. Some, for example, have a strong public policy mandate and depend on government funding; others operate in a private sector-like environment and return a dividend to the government; and most have a balance of public and commercial orientation. These factors, coupled with the need for equity with others in the public sector, make the task of developing compensation policies and broader human resource strategy particularly challenging.

Crown Corporations' Governance Structure and the Appointment and Compensation of the CEO

The governance structure for Crown corporations is very complex. In addition to the CEO, there is normally a board of directors including a chairperson of the board. However, the relationships, responsibilities and accountabilities of these people differ from those of their counterparts in the private sector. The boards do not have the same powers as those in the private sector. For example, the government normally appoints the chairperson, the CEO and the directors of the board. Final decisions on CEO compensation are not board decisions, but government decisions. There is always a responsible minister for each Crown corporation (see Appendix D). Finally, Crown corporations subject to Part X of the Financial Administration Act (FAA) must annually submit a five-year corporate plan for Governor in Council approval. For corporations not subject to Part X of the FAA, the reporting requirements vary by statute and individual circumstances. It is outside the purview of the Committee to comment on the merits of this structure beyond observing that, on the one hand, CEOs operate in a very complicated environment with multiple stakeholders, yet on the other hand, they do have broad autonomy.

So, in practice, the Governor in Council normally appoints the CEOs of the Crown corporations and sets their remuneration. Of considerable significance, these appointees quite frequently come from outside the Public Service and do not enjoy the job security of a Public Service employee, since they are usually appointed for a relatively short term.

Finally, as important background, each Crown corporation has its own compensation structure for executives below the CEO level. These structures are reviewed and approved by the independent boards mentioned earlier and are beyond the Committee's mandate. They have been set independent of one another to attract and retain the calibre of people required to manage each specific Crown corporation. Appropriately, they are competitive with the economic sector in which each Crown corporation operates. The Committee has had access to information about these structures, since our recommendations should be as internally consistent with them as possible. However, since the CEO compensation is set independently and since it is important to ensure equity across the Crown corporations and within the Public Service generally, our CEO compensation recommendations may not meet the level of competitiveness deemed appropriate by the individual Crown corporation boards.

The Principles for Establishing Compensation for CEOs of Crown Corporations

We have used the same principles outlined in our first report to study compensation for CEOs of Crown corporations. Thus, we have reviewed:

• the job evaluations of all Crown corporation CEOs to ensure that they reflect current responsibilities and that the relationship between Crown corporations properly reflects differences in responsibilities;
• relevant external comparisons against which to benchmark cash compensation policies;
• the appropriate mix of fixed and variable cash compensation;
• the internal consistency of CEO compensation with the balance of each Crown corporation's management compensation and with other Governor in Council appointees; and
• the best process for administering CEOs' compensation in the future.

Job Evaluations of Crown Corporation CEOs

As we noted in our first report, the mandates and scope of several Crown corporations have changed significantly since the CEO jobs were last evaluated. Hay Management Consultants has re-evaluated each CEO's job using three factors - know-how, problem solving and accountability. Using this information, we have grouped various Crown corporations together whose CEO job evaluations do not differ materially from each other. This resulted in ten groups (listed below) where there are significant differences between groups in terms of job scope. Thus, the CEOs in Group 1 have the least scope while the CEO in Group 10 has the greatest, as measured by Hay. As a consequence, the compensation for CEOs in Group 2 will be higher than those in Group 1, and so on.

Group 1
Atlantic Pilotage Authority
Great Lakes Pilotage Authority

Group 2
Canadian Race Relations Foundation
Enterprise Cape Breton Corporation
Laurentian Pilotage Authority
Pacific Pilotage Authority

Group 3
Defence Construction (1951) Limited
Federal Bridge Corporation Limited
Freshwater Fish Marketing Corporation
Standards Council of Canada

Group 4
Canadian Dairy Commission
Canadian Film Development Corporation
Canadian Museum of Nature
National Arts Centre Corporation
National Gallery of Canada
National Museum of Science and Technology Corporation

Group 5
Canada Council
Canada Lands Company Limited
Canadian Commercial Corporation
Canadian Museum of Civilization Corporation
Marine Atlantic Incorporated
National Capital Commission

Group 6
Canada Deposit Insurance Corporation
Cape Breton Development Corporation
Farm Credit Corporation
International Development Research Centre

Group 7
Business Development Bank of Canada
Export Development Corporation
Royal Canadian Mint
Via Rail Canada Incorporated

Group 8
Atomic Energy of Canada Limited
Canada Mortgage and Housing Corporation

Group 9
Bank of Canada
Canadian Broadcasting Corporation

Group 10
Canada Post Corporation

Benchmarking of Current Cash Compensation

External Benchmarking

In preparing our first report, the Committee asked William M. Mercer Limited to conduct a compensation survey among three groups: the provincial public services; a "third" sector comprising municipalities, utilities, hospitals, universities and other not-for-profit organizations; and the private sector. While this survey was an important source of benchmark data, it did not provide suitable comparisons for the larger, more commercial Crown corporations. Hence, we have chosen to use the Hay Management Consultants database, which incorporates a wide cross-section of industrial and financial organizations, including some in the public sector.

Before doing so, however, the Committee compared the median base salaries as measured by Hay with the Mercer survey results (see Appendix E). The results demonstrate a close fit for jobs equivalent to positions from EX3 to DM2. Thus, the Committee is satisfied that Hay is a reliable and consistent source of benchmark data for our current purposes.

The table below compares the current CEO structure for total cash compensation (salary job rate plus maximum at-risk compensation) to the median of equivalent positions in the Hay sample of more than 300 organizations. We found that:

• total cash compensation for all 10 groups is currently well below the median and compensation for eight of the 10 groups is, in fact, below even the first decile of the Hay sample; and
• the shortfalls, compared to the Hay median, increase markedly for the higher level positions (consistent with our first report).

Fig. 2: Current Total Cash Compensation Compared to Hay Median of Financial Industrial Sample

The significance of current variable compensation for Crown corporation CEOs also tends to be less compared to the Hay sample, especially as the scope of the position increases. Again, this is consistent with the findings in our first report.

Internal Benchmarking

The Committee has identified two issues with the existing structure:

• The evaluations of almost one third of the CEO positions have changed due to changes in the scope of the jobs. This number is high because evaluations were not done during the compensation freeze. Current structures do not reflect these changes.
• Because Crown corporations pursue independent compensation policies for managers below the CEO level, there are several examples of compression and even some inversion in cash compensation within some corporations. This is especially prevalent among the larger Crown corporations. This is not surprising, since it is within the larger Crowns that gaps between the public and the private sector tend to be the greatest.

Compensation Recommendations for CEOs of Crown Corporations

Principles

As stated earlier, we are recommending that compensation for CEOs of Crown corporations be treated quite separately from that for other Governor in Council appointees. Crown corporations are a distinct form of organization within the public sector, due to their arm's-length nature. Such a structure would recognize the independently established compensation structure for levels below the CEO and the varying mix of public policy and commercial objectives found in a Crown corporation.

Notwithstanding this, we are proposing a similar approach to establishing the compensation structure as that outlined in our first report: that is, setting a job rate for fully satisfactory performance and adjusting that rate at intervals using market comparisons with appropriate groups. CEOs would also be eligible to earn variable cash compensation annually; that compensation would be tied to corporate and individual achievements against targets.

Again, consistent with our first report, the Privy Council Office should periodically compare compensation for Crown corporation CEOs with a suitable comparison group in the public, broader public and private sectors.

In addition, a CEO's position must be re-evaluated by Hay when a Crown corporation's mandate changes significantly, and a periodic review of all positions is warranted from time to time.

We also propose adopting the same principles for setting cash compensation as we proposed in our first report: that is, setting Group 1 cash compensation in relation to suitable benchmarks and then reflecting the relationship between different levels of responsibility.

Structure

The proposed new structure is driven by the following concerns:

• the need to provide adequate compensation levels in order to recruit qualified CEOs - although we realize this level is unlikely to be fully competitive with the private sector, especially among the larger Crown corporations, due to the public policy component and the need for equity with the broader public service;
• the need to create internal equity, to the greatest extent feasible, within each Crown corporation;
• the need for equity across the federal Public Service, which is particularly relevant when comparing deputy ministers with the CEOs of medium or large Crown corporations; and
• the need for fiscal prudence.

The Committee has laboured long and hard to find a structure that meets all of these needs equally. We have not found one. Our recommendations do, however, significantly improve the integrity of the current structure and provide a framework that fits consistently within the broader Public Service.

Thus, the Committee has chosen a Group 1 salary job rate of $107,400 with at-risk pay to a maximum of 10 percent. This actually equates to the first quartile in the Hay data but, on judgement, is considered reasonable. The relationships between cash compensation of the various groups have then been addressed as follows:

• We have selected a differential between groups that starts at 12 percent and rises to 20 percent to recognize the marketplace practice of increasing differentials as responsibility rises.
• We have set at-risk compensation at up to 10 percent for CEOs in Groups 1 to 5; it rises progressively to a maximum of 25 percent for the single Group 10 corporation. Again, this recognizes progressive levels of responsibility.

The profile of this compensation structure is fully consistent with the proposals in our first report and generates the job rates listed in the following table. Salary range minima would be set at 85 percent of job rates.

Proposed Job Rates and At-Risk Pay

	Salary Job Rates $000	At-Risk Pay
Group 1	107.4	10%
Group 2	120.3	10%
Group 3	134.7	10%
Group 4	150.9	10%
Group 5	169.0	10%
Group 6	194.4	15%
Group 7	223.6	15%
Group 8	257.1	15%
Group 9	308.5	20%
Group 10	370.2	25%

The following graph compares the recommended total cash compensation - that is, the salary job rate plus the maximum at-risk compensation - to both the current structure and the Hay sample, and shows that these recommendations remain well below the median. In fact, three groups fall below the first decile and the remaining seven fall between the first decile and the first quartile, with the gap widening as job scope increases.

Fig. 3: Proposed Total Cash Compensation Compared to Current and Hay Median of Financial Industrial Sample

The Committee recommends that the government adopt this new structure and that the PCO exercise its judgement on the speed of implementing actual salary movement. This judgement will necessarily be based on each incumbent's actual salary and performance, as well as an array of other factors.

With respect to the Governor of the Bank of Canada (Group 9), the Committee recommends that a portion of the at-risk pay be added to the salary job rate, since variable cash compensation historically has been deemed inappropriate for this position.

Performance Management Process for CEOs of Crown Corporations

Once a year, the PCO asks the chairperson of each Crown corporation's board of directors to formally assess the CEO's performance over the previous fiscal year. Generally, the assessment is based on the achievement of specific objectives established at the beginning of the year by the board and the CEO. Chairpersons are encouraged to seek input from other sources, including the responsible minister, before making a final recommendation on the CEO's performance rating. In the past, chairpersons have also been asked to provide recommendations on performance pay to be provided to their CEO. These recommendations normally recognize the parameters established by the government. The PCO then reviews the proposed recommendations to ensure that they comply with policy and that ratings are substantiated. The PCO then advises the Governor in Council who, by law, is required to either adjust or approve remuneration for CEOs of Crown corporations.

This process should be formalized - and best practices should be established and communicated to all Crown corporations - so that the chairperson and the board have a clear responsibility for recommending salary increases and at-risk pay, as well as for agreeing on objectives for at-risk pay. Final approval will necessarily rest with the Governor in Council.

The New Millennium

In our first report, the Committee raised serious concerns about the federal Public Service of the future. We identified the need for cultural change and improved human resource management to make the Public Service an attractive career choice for young Canadians, to balance the demographic reality of an ageing work force. This chapter reviews initiatives and progress regarding these concerns.

Vision, Values and Culture

From the perspectives of both advising government and serving the public, the Public Service plays a critical role in supporting national prosperity, quality of life for Canadians, social cohesion and national unity. The most recent Speech from the Throne reiterated the government's commitment to the Public Service as a strong, representative, professional and non-partisan national institution that will "provide Canadians with the highest quality service into the 21st century."

The Committee's first report also emphasized the importance of expanding the existing dialogue about the role of the Public Service in the changing environment as Canada approached the new millennium. Since then, we have seen a number of signs that this is happening. Increasingly, the Clerk of the Privy Council's annual reports to the Prime Minister identify and clarify strategic directions and the vision for the Public Service.

The emerging vision sees a values-based Public Service that is an employer of choice for the future. At its core are the following values:

• democratic values, which include providing non-partisan support to elected office holders;
• professional values, which include providing impartial advice of the highest quality;
• ethical values, which include valuing honesty, integrity and probity; and
• people values, which include valuing respect, caring, fairness and inclusiveness.

To support these values and become an employer of choice, the Public Service is emphasising the quality and nature of work, streamlining work processes, improving the work environment and developing leaders at all levels.

New organizational structures are giving the government greater flexibility to improve service to Canadians. Many involve new partnering arrangements within the federal government, with other levels of government, and with the private and not-for-profit sectors. The Canadian Food Inspection Agency has brought together previously dispersed government food inspection functions to enhance productivity. The Canada Customs and Revenue Agency has been created to encourage more integrated, cost-effective tax administration by promoting efficiency and cooperation between levels of government. Team Canada is a partnership of Canadian federal and provincial governments and some private-sector associations that have come together to provide export-related services to Canadian companies. The Service Canada initiative, introduced in 1998 "to put a new face on government within two years," is exploring options for a more integrated approach to providing Canadian government services to the public.

Public Service employees are increasingly using electronic communications technology to make information about government programmes and services easily available to Canadians. This technology should not only improve productivity in the Public Service and improve service to Canadians, but also improve the federal government's responsiveness by bringing it closer to its citizens.

In summary, then, the Public Service is making progress in setting new directions for itself. The Committee's concern is ensuring that high-calibre people with the necessary skills and competencies are available to deliver the government's agenda.

Human Resource Management

Since we published our first report, there has been a growing commitment to improve human resource management. At the most senior levels, numerous initiatives are underway on planning and coordination and the Clerk of the Privy Council asked that the new Performance Management Programme assign a high priority to achieving excellence in human resource management. Frameworks have been created, career development for executives and future executives is getting more attention, and facilitating information systems are being created. More details on the various initiatives are provided in Appendix F.

Public Service Employee Survey 1999

Intended as part of Public Service renewal, the 1999 Employee Survey is a rich source of information. Distributed to more than 190,000 employees from coast to coast and at every level of the Public Service, it generated responses from more than 104,000 employees, or 55 percent of the workforce. Perhaps the survey's greatest value is that it provides baseline data that can be used in the future to measure progress toward the vision.

On a Public Service-wide basis, the survey results are extremely positive. It is clear that federal Public Service employees take pride in their work and feel they are making an important contribution. Overall, 88 percent like their jobs. Positive results at the work unit level related to empowerment, information sharing, fairness and collaboration suggest that, generally, executives are showing leadership in implementing the vision. The fact that the overall survey results are less positive for visible minorities and the disabled affirms the government's emphasis on a more inclusive Public Service. Similarly, the survey shows a need to emphasize learning and development more strongly, which has already been identified as a corporate priority.

In terms of the executive cadre, the primary focus of the Committee, the survey results are also informative. Executives responded even more positively than did members of the Public Service as a whole. Reasonably, given their positions, executives are generally more satisfied than other Public Service employees with their access to information, and with their ability to make and influence decisions. They are also more positive about working in teams and being treated fairly.

However, many executives are concerned about the quality of work because of resource levels and unreasonable deadlines. Almost 65 percent believe that workloads are unreasonable and report difficulty balancing their work and personal commitments. Women executives are less satisfied than their male colleagues when it comes to workload pressures. Although lower than the average for the Public Service, 13 percent of executives reported that they had experienced discrimination or harassment.

In 1998, the Association of Professional Executives of the Public Service of Canada (APEX) studied the health of executives; it found high levels of stress and related short- and long-term health effects. The following year, APEX studied harassment, and executives reported a significantly higher incidence rate than they reported in the Employee Survey. The APEX studies should be examined further in light of the survey results.

The Committee believes that action on the results of the Employee Survey is imperative. At the executive level, it is particularly important to address workload and overtime, and related stress and balance issues.

Demographics

Since the mid-'90s, recruitment and retention have improved. This is to be expected since these were Programme Review years, when expenditures were cut and departures encouraged. Separation rates have now returned to levels close to previous norms. This suggests that the loss of executive talent has been controlled for the short term. On recruitment, preliminary data for 1998-1999 and to date in 1999-2000 show that the hiring of executives and employees at levels immediately below has increased.

While these trends may be positive in the very short term, the ageing of the Public Service workforce remains a serious concern. Roughly two thirds of executives are currently aged between 45 and 54. It is anticipated that separation rates will begin to rise again in as little as two to three years, as these executives retire. Unless the Public Service begins to hire younger employees at all levels, the pool of candidates for upcoming executive positions will gradually shrink, and the candidates available will be older.

We were pleased to note that the recent Speech from the Throne recognized this challenge when it committed the government to focusing on recruitment, retention and continuous learning to ensure a skilled federal workforce. Replenishing the executive community is necessary to ensure the future leadership of the Public Service. The Committee will be interested in reviewing recruitment, retention and learning plans developed to address this problem.

Summary

To summarize, the Committee believes that some excellent progress has been made in implementing the recommendations of our first report. Integrity has, in large measure, been restored to the EX and DM compensation structure, and implementation of performance management and the at-risk pay regime is progressing well. However, both the government and the most senior Public Service officials must continue to fulfill their commitments if the new regimen is to be successful. Consideration of another DM level is an important final step which will be addressed in our third report. The major ongoing challenge will then become setting salary rates based on external benchmark data. We will revisit this issue in our next report.

The recommendations for the cash compensation of CEOs of Crown corporations, in the Committee's judgement, restore integrity and internal consistency within that group. However, they may not solve the problem for the larger organizations of being able to offer CEO salaries that are competitive with those offered for similar jobs in the private sector; experience will show whether the government has difficulty recruiting qualified candidates. In the context of the broader public sector, though, these recommendations maintain horizontal equity.

Thus, to set cash compensation, the Committee has identified three discrete populations within the federal Public Service management cadre:

• the EX and DM communities;
• CEOs of Crown corporations; and
• other full-time Governor in Council appointees, consisting mainly of heads of agencies and administrative tribunals.

It remains for the PCO to review the appropriateness of the current compensation structure for this third group, as well as for members of agencies and tribunals who are appointed by the Governor in Council.

The work on vision and values is progressing, but any effort to make cultural change is necessarily a journey and the Committee will continue to review progress in this area.

Finally, on human resource management in general, the Committee is pleased with a series of very positive indications. This good work needs to continue. The new ways of doing things must be reinforced and improved, and a more concrete plan must be developed to address the significant turnover anticipated during the coming decade. The loss of experience and know-how implicit in this turnover remains the most significant long term Public Service issue facing the government.

Appendix A
Committee Members

Lawrence F. Strong, B.Sc. - Chair
President and Chief Executive Officer, Unilever Canada Limited

Director, UL Canada Inc., Bertolli Canada Inc. and Unilever Canada Limited. Past President and COO, Unilever Canada. Past Vice-President, Finance, Unilever Canada. Past President, Monarch Fine Foods and Chesebrough-Pond's (Canada). Past Chair, Food and Consumer Products Manufacturers of Canada (FCPMC) and Public Policy Forum (PPF). Trustee, Grocery Industry Foundation Together (GIFT) and the Invest in Kids Foundation. Director, Canadian Council of Christians and Jews (CCCJ) and Public Policy Forum. Chair, Electronic Commerce Council of Canada (ECCC).

John L. Fryer, C.M., B.Sc.(Econ.), M.A.
Chair, Advisory Committee on Labour Management Relations in the Federal Public Service

Adjunct Professor, School of Public Administration, University of Victoria. President Emeritus, National Union of Public and General Employees (NUPGE).

Marilyn H. Knox, B.Sc., RD
President, Nutrition, Nestlé Canada Inc.

Past Deputy Minister, Tourism and Recreation, Government of Ontario. Past Assistant Deputy Minister, Ministry of Agriculture and Food, Government of Ontario. Past Executive Director, Ontario Premier's Council on Health Strategy. Past Vice-President, Grocery Products Manufacturers of Canada. Former consultant, Health Protection Branch, Health and Welfare Canada.

Gaétan Lussier, O.C., B.Sc. (Agr.), M.Sc., Ph.D.

Past Assistant Deputy Minister and Deputy Minister, Quebec Ministry of Agriculture. Past Deputy Minister of Agriculture Canada. Past Deputy Minister and Chairman, Employment and Immigration Canada. Past President, Les Boulangeries Weston Québec Inc. Past President and Chief Executive Officer, Culinar Inc.

Judith Maxwell, C.M., B.Com., D.Com.
President, Canadian Policy Research Networks

Past Director, Policy Studies, C.D. Howe Institute. Former consultant, Esso Europe Inc. Former consultant, Economics, Coopers & Lybrand. Past Chairman, Economic Council of Canada. Past Associate Director, School of Policy Studies, Queen's University. Past Executive Director, Queen's University of Ottawa Economic Projects. Director, Bank of Canada and Mutual Life Assurance of Canada.

Courtney Pratt, C.M., B.A., LLD (Hon)
President and Chief Executive Officer, Ontario Hydro Networks Company

Past Chairman and Director, Noranda Inc. Director, The Empire Company and Moosehead Breweries. Chairman, Imagine and Director, The Learning Partnership, Career Edge and The University Health Network. Past Executive Vice-President and Past President, Noranda Inc. Past Senior Vice-President, Human Resources and Administration, Royal Trust Company. Member, Advisory Group on Executive Compensation in the Public Service (Burns Committee). Member, Ontario Advisory Committee on Deputy Minister and Senior Management Compensation.

Appendix B
Committee Mandate

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 programmes, 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 C
Background on Crown Corporations

$ million

Group 1

Title:	Great Lakes Pilotage Authority
Mandate:	To operate, maintain and administer a safe and efficient pilotage service in all Canadian waters in Ontario and Manitoba, as well as in Quebec south of the northern entrance to the St. Lambert Lock.
Employees:	86
Assets:	$15.3
Revenues:	$17.2

Title:	Atlantic Pilotage Authority
Mandate:	To operate, maintain and administer a safe and efficient pilotage service within designated waters in and around the Atlantic provinces.
Employees:	72
Assets:	$4.5
Revenues:	$9.5

Group 2

Title:	Canadian Race Relations Foundation
Mandate:	To facilitate, throughout Canada, the development, sharing and application of knowledge and expertise to contribute to the elimination of racism and all other forms of racial discrimination in Canadian society.
Employees:	7
Assets:	$27.0
Revenues:	$2.3

Title:	Enterprise Cape Breton Corporation
Mandate:	To promote and assist the financing and development of industry on Cape Breton Island and a portion of mainland Nova Scotia in and around the Town of Mulgrave; to provide employment outside the coal-producing sector; and to broaden the base of the local economy.
Employees:	55
Assets:	$10.5
Revenues:	$0.8
Budgetary appropriations:	$8.4

Title:	Laurentian Pilotage Authority
Mandate:	To operate, maintain and administer a safe and efficient pilotage service in the St. Lawrence River between Les Escoumins and the north end of the St. Lambert Lock, in the Saguenay River and in Chaleur Bay north of Cap d'Espoir.
Employees:	232
Assets:	$9.6
Revenues:	$41.3

Title:	Pacific Pilotage Authority
Mandate:	To operate, maintain and administer a safe and efficient pilotage service in the coastal waters of British Columbia.
Employees:	167
Assets:	$7.7
Revenues:	$37.4

Group 3

Title:	Defence Construction (1951) Limited
Mandate:	To provide contracting, contract management and environmental project management services to assist with the delivery of the construction programme of National Defence. As owner and design authority, National Defence provides the Corporation with the necessary land and funding, as well as complete drawings and specifications.
Employees:	236
Assets:	$7.8
Revenues:	$17.3

Title:	Federal Bridge Corporation Limited, The
Mandate:	To manage two wholly owned subsidiary bridge corporations - The Seaway International Bridge Corporation, Ltd. and the Jacques Cartier and Champlain Bridges Incorporated.
Employees:	60
Assets:	$52.8
Revenues:	$2.7
Budgetary appropriations:	$32.1

Title:	Freshwater Fish Marketing Corporation
Mandate:	To market fish in an orderly manner, to maximize returns to fish producers and to promote international markets and increase trade in fish. Established with the participation of each of the provinces and the territory in which it operates for the purpose of marketing and trading in fish, fish products and fish by-products in and outside of Canada.
Employees:	35
Assets:	$18.7
Revenues:	$50.7

Title:	Standards Council of Canada
Mandate:	To oversee Canada's National Standards System by promoting voluntary standardization in Canada where standardization is not expressly provided for by law. These activities are aimed at advancing the national economy, supporting sustainable development, and benefiting the health, safety and welfare of workers and the public. These functions are also intended to assist and protect consumers, facilitate domestic and international trade, and further international co-operation in relation to standardization.
Employees:	58
Assets:	$3.7
Revenues:	$3.9
Budgetary appropriations:	$5.0

Group 4

Title:	Canadian Dairy Commission
Mandate:	To give milk and cream producers the opportunity to get a fair return for their labour and investment while giving consumers a continuous and adequate supply of high quality dairy products.
Employees:	70
Assets:	$120.0
Revenues:	$233.0
Budgetary appropriations:	$144.1

Title:	Canadian Film Development Corporation
Mandate:	To foster and promote an independent film and television production industry in Canada.
Employees:	140
Assets:	$42.0
Revenues:	$0.46
Budgetary appropriations:	$78.5

Title:	Canadian Museum of Nature
Mandate:	To increase interest in, knowledge of, and appreciation and respect for the natural world throughout Canada and internationally. This involves establishing, for research and posterity, a collection of natural history objects with special but not exclusive reference to Canada.
Employees:	154
Assets:	$43.0
Revenues:	$1.6
Budgetary appropriations:	$20.8

Title:	National Arts Centre Corporation
Mandate:	To play a leadership role in fostering artistic excellence in all of the performing arts disciplines.
Employees:	239
Assets:	$17.8
Revenues:	$21.6
Budgetary appropriations:	$20.3

Title:	National Gallery of Canada
Mandate:	To develop, maintain and make known, throughout Canada and internationally, a collection of historic and contemporary works of art with special, but not exclusive, reference to Canada; and to further the knowledge, understanding and enjoyment of art among Canadians.
Employees:	247
Assets:	$20.7
Revenues:	$9.0
Budgetary appropriations:	$33.3

Title:	National Museum of Science and Technology Corporation
Mandate:	To foster scientific and technological literacy throughout Canada by establishing, maintaining and developing a collection of scientific and technical objects with special, but not exclusive, reference to Canada, and by demonstrating the products and processes of science and technology, as well as their economic, social and cultural relationships with society.
Employees:	239
Assets:	$12.3
Revenues:	$4.6
Budgetary appropriations:	$20.0

Group 5

Title:	Canada Council
Mandate:	To promote the study and enjoyment of, and the production of works in the arts.
Employees:	160
Assets:	$289.0
Revenues:	$24.0
Budgetary appropriations:	$116.2

Title:	Canada Lands Company Limited
Mandate:	To dispose of surplus federal real properties in order to optimize value to Canadian taxpayers while respecting the government's policies with regard to First Nations' land claims, as well as environmental, official languages and heritage considerations.
Employees:	87
Assets:	$429.2
Revenues:	$189.2

Title:	Canadian Commercial Corporation
Mandate:	To assist in the development of trade between Canada and other nations by facilitating sales to foreign governments and international agencies as well as other approved buyers on behalf of Canadian suppliers.
Employees:	80
Assets:	$286.2
Revenues:	$793.4

Title:	Canadian Museum of Civilization Corporation
Mandate:	To increase interest in, knowledge of, and appreciation for human cultural achievements and behaviour throughout Canada and internationally. This involves establishing, for research and posterity, a collection of objects of historical or cultural interest with special but not exclusive reference to Canada.
Employees:	463
Assets:	$34.1
Revenues:	$11.4
Budgetary appropriations:	$45.9

Title:	Marine Atlantic Incorporated
Mandate:	To provide quality, safe and efficient marine transportation and hospitality services in Atlantic Canada. Its principal activity is the operation of ferry services on behalf of the Government of Canada.
Employees:	798
Assets:	$228.2
Revenues:	$50.3
Budgetary appropriations:	$63.4

Title:	National Capital Commission
Mandate:	To prepare plans for and assist in the development, conservation and improvement of the National Capital Region; to organize, sponsor, or promote public activities and events in the National Capital Region to enrich the cultural and social fabric of Canada.
Employees:	410
Assets:	$424.8
Revenues:	$24.7
Budgetary appropriations:	$91.6

Group 6

Title:	Canada Deposit Insurance Corporation
Mandate:	To provide limited insurance for deposits with member institutions; to promote standards of sound business and financial practices, and contribute to the stability of the Canadian financial system; and to pursue the foregoing for the benefit of depositors and in such a manner as will minimize exposure to loss.
Employees:	83
Assets:	$1,007.6
Revenues:	$578.5

Title:	Cape Breton Development Corporation
Mandate:	To reorganize and rehabilitate the coal industry on Cape Breton Island. The goal of the corporation is to operate safe and commercially viable coal mines that are dependable supplies of quality coal and related energy products.
Employees:	1,635
Assets:	$120.9
Revenues:	$98.9
Budgetary appropriations:	$ 44.0

Title:	Farm Credit Corporation
Mandate:	To deliver specific programmes of the Government of Canada on a cost-recovery basis; and to assist Canadian farmers in establishing and developing viable farming enterprises by providing long-term credit and other financial services. The Corporation's legislated mandate was expanded in 1993 to include aquaculture, agri-forestry and agri-business.
Employees:	900
Assets:	$6,125.1
Revenues:	$498.4

Title:	International Development Research Centre
Mandate:	To initiate, encourage, support and conduct research into the problems of the developing regions of the world. The Centre also promotes and carries on research into the means for applying and adapting scientific, technical and other knowledge for the economic and social advancement of those regions.
Employees:	329
Assets:	$55.9
Revenues:	$125.1
Budgetary appropriations:	$88.6

Group 7

Title:	Business Development Bank of Canada
Mandate:	To promote and assist in the establishment and development of business enterprises in Canada, especially small and medium-sized businesses, by providing a wide range of financial and management services.
Employees:	1,122
Assets:	$5,098.5
Revenues:	$ 269.2

Title:	Export Development Corporation
Mandate:	To support and develop Canada's export trade and Canadian capacity to engage in that trade and respond to international business opportunities.
Employees:	698
Assets:	$15,262.0
Revenues:	$ 1,291.0

Title:	Royal Canadian Mint
Mandate:	To mint coins in anticipation of profit and to carry out other related activities.
Employees:	769
Assets:	$159.1
Revenues:	$512.4

Title:	Via Rail Canada Incorporated
Mandate:	To manage and provide a safe and efficient passenger rail service.
Employees:	2,952
Assets:	$623.8
Revenues:	$200.2
Budgetary appropriations:	$178.4

Group 8

Title:	Atomic Energy of Canada Limited
Mandate:	To develop, design and market CANDU power reactors, MAPLE research reactors and MACSTOR waste storage facilities; and manage the construction of nuclear reactor projects worldwide.
Employees:	3,384
Assets:	$916.5
Revenues:	$544.4
Budgetary appropriations:	$110.4

Title:	Canada Mortgage and Housing Corporation
Mandate:	To promote the construction of new houses, the repair and modernization of existing houses, and the improvement of housing and living conditions. In 1996, the Government of Canada assigned to the Canada Mortgage and Housing Corporation a new mandate in the areas of housing finance, assisted housing, housing export promotion, and research and information transfer.
Employees:	2,046
Assets:	$21,912.0
Revenues:	$ 1,338.0
Budgetary appropriations:	$ 1,776.0

Group 9

Title:	Bank of Canada
Mandate:	To formulate and implement monetary policy in Canada; and to act as the government's fiscal agent. The Bank has the sole right to issue paper currency for circulation in Canada.
Employees:	1,300
Assets:	$33,809.2
Revenues:	$ 1,678.8

Title:	Canadian Broadcasting Corporation
Mandate:	As Canada's national public broadcaster, the corporation's mission is to inform, entertain and enlighten; to contribute to the development of shared national consciousness and identity; to reflect the regional and cultural diversity of Canada; and to contribute to the development of Canadian talent and culture.
Employees:	7,017
Assets:	$1,474.5
Revenues:	$484.1
Budgetary appropriations:	$901.4

Group 10

Title:	Canada Post Corporation
Mandate:	To operate Canada's postal service on a self-sustaining basis with a standard of service that meets the needs of Canadians. The federal government compensates Canada Post for postal services that are provided at less than cost pursuant to government measures to support the publishing industry and other programmes, such as northern parcel mail, parliamentary free mail and blind persons' free mail.
Employees:	51,692
Assets:	$2,802.0
Revenues:	$5,380.0
Budgetary appropriations:	$14.0

Appendix D
Parent Crown Corporations Grouped by Ministerial Portfolio

Agriculture and Agri-Food

• Canadian Dairy Commission
• Farm Credit Corporation

Canadian Heritage

• Canada Council
• Canadian Broadcasting Corporation
• Canadian Film Development Corporation
• Canadian Museum of Civilization Corporation
• Canadian Museum of Nature
• Canadian Race Relations Foundation
• National Arts Centre Corporation
• National Capital Commission
• National Gallery of Canada
• National Museum of Science and Technology Corporation

Finance

• Bank of Canada
• Canada Deposit Insurance Corporation

Fisheries and Oceans

• Freshwater Fish Marketing Corporation

Foreign Affairs

• International Development Research Centre

Industry

• Business Development Bank of Canada
• Enterprise Cape Breton Corporation
• Standards Council of Canada

International Trade

• Canadian Commercial Corporation
• Export Development Corporation

Natural Resources

• Atomic Energy of Canada Limited
• Cape Breton Development Corporation

Public Works and Government Services

• Canada Lands Company Limited
• Canadian Mortgage and Housing Corporation
• Canada Post Corporation
• Defence Construction (1951) Limited
• Royal Canadian Mint

Transport

• Atlantic Pilotage Authority
• Federal Bridge Corporation Limited, The
• Great Lakes Pilotage Authority
• Laurentian Pilotage Authority
• Marine Atlantic Incorporated
• Pacific Pilotage Authority
• VIA Rail Canada Incorporated

Appendix E
Base Salary Compensation - Hay versus Mercer

The graph provides a comparison of median base salaries as measured by Hay and Mercer using 1997 data. It can be seen that there are significant similarities between the Hay database and the Mercer survey results.

Appendix F
Details of Human Resource Management Initiatives

As the Committee recommended in our first report, the Public Service has taken steps towards a more strategic, corporate view of human resource management. Through retreats and committee work, deputy ministers have collectively established corporate priorities and a Public Service-wide management agenda. The Treasury Board, as a management board, is taking a more holistic approach to financial and human resource management within the government. The Committee of Senior Officials, which advises the Clerk of the Privy Council, is developing an integrated workplan to address corporate human resource priorities. These priorities are recruitment, retention and learning "to ensure a representative workforce with the requisite skills and experience for now and for the future."

Deputy minister committees have been established to consider each of these issues from the perspective of departments, functional communities and the overall Public Service, and to develop action-oriented workplans.

Recognizing that the Public Service needs to become more representative and inclusive, the government has created two task forces. The Task Force on an Inclusive Public Service (1998) was given a mandate to advise on how to achieve a federal Public Service that broadly represents both the population it serves and the Canadian labour force. More narrowly focused is the Task Force on the Participation of Visible Minorities in the Public Service of Canada (1999).

To ensure that the corporate emphasis on human resource management becomes embedded in departments and individual workplaces, the Clerk of the Privy Council asked all deputy ministers and senior executives to make excellence in human resource management a priority when developing their personal performance management objectives for 1999-2000.

The Treasury Board Performance Management Programme, developed on the recommendation of the Committee to link at-risk pay to the achievement of specific objectives, also assesses performance in relation to executive leadership competencies. Based on broad consultations led by the Public Service Commission, these competencies include teamwork, partnering, and personal and relationship competencies (ethics and values, behavioural flexibility, communications) that support the vision, as well as organizational and cultural change.

The Treasury Board Framework for Good Human Resources Management in the Public Service, designed to help departments and managers improve human resource management, emphasizes common themes of "developing capacity in people and communities, streamlining structures and systems, and improving results and accountability." It identifies five key results that also support the vision and priorities:

• leadership;
• a productive workforce;
• an enabling work environment;
• a workforce built on values; and
• a sustainable workforce.

On October 30, 1998, in response to the Committee's observation about the need for a more holistic vision for managing executives, the Public Service Commission (PSC) released an extensive study, Vision 2010 Report and Recommendations on a Management Framework and Service Systems for Executives. Incorporating the results of extensive consultation, the study recommended a leadership development strategy involving a merit-based and client-centred PSC service system for executives. The strategy would include a clear definition of the community governed by executive-specific policies. The PSC has begun implementing the study's recommendations to promote more seamless service delivery, in cooperation with its partners and stakeholders, which include professional organizations for executives such as the Association of Public Service Executives of Canada.

Another Committee recommendation was implemented when the Assistant Deputy Minister Corporate Secretariat became part of The Leadership Network in 1998. As a result, the Network provides a single-window service that helps assistant deputy ministers manage their careers. At the same time, the PSC is discussing proposals for improved human resources planning for executives below the assistant deputy minister level with other government departments and stakeholders. The PSC has also begun working with other central agency partners to develop a shared, interactive database with information about the education, experience, competencies and skills of EX1s to EX3s and the "feeder groups" immediately below these levels.

In our first report, the Committee expressed concern about the lack of movement of executives across departments, which results in serious deficits in experience among executives who should be candidates for promotion. In addition to interdepartmental assignments and experience, exposure of senior executives to regional issues, programmes and perspectives is increasingly being recognized as important, if the federal Public Service is truly going to be citizen-focussed and serve the public interest. Memoranda of understanding are now in place with provinces and some other countries. These will allow executives to gain experience in new areas, and executives in the regions will be able to do so without necessarily relocating to Ottawa.

Following the launch of the Accelerated Executive Development Programme, the new system of managing the assistant deputy minister community mentioned previously was implemented to help assistant deputy ministers broaden and diversify their experience through increased mobility.

To help executives relocate, the Treasury Board has introduced a family disruption allowance to offset some of the costs of temporary regional assignments, such as those required by the Accelerated Executive Development Programme. The Treasury Board has also introduced a new relocation programme for executives who are permanently relocating with their families. Through an innovative partnership with the private sector, the Integrated Relocation Pilot Programme offers enhanced relocation services to participants, as well as opportunities to customize their benefits to meet their personal circumstances, at no additional cost.

However, more needs to be done in this area. Executives will need access to opportunities for continuous learning to develop the skills and experience they need not only to move ahead in their careers, but also to manage increasingly complex issues.

Appendix G
Glossary of Terms

Base salary:

The portion of total cash compensation that is not 'at risk'.

Broader Public Sector or OP/NP:

This refers to the sector of the Canadian economy that includes schools, universities, municipalities, utilities and non-profit organizations such as the Canadian Cancer Society.

Governor in Council Appointees:

Persons appointed by the Governor General on the advice of Cabinet. Governor in Council appointees include deputy ministers, associate deputy ministers, Chief Executive Officers of Crown corporations, heads of agencies and heads and members of administrative tribunals and regulatory agencies.

Hay median:

Hay Management Consultants conducts an annual compensation survey with more than 300 organizations in the private and public sectors. The median of the data gathered and collated is the point above and below which 50% of the total observations fall.

Hay methodology:

A point factor job evaluation system that evaluates jobs with respect to "know-how", "problem-solving" and "accountability."

Increments:

A fixed annual increase to base salary that moves the salary by steps up to the maximum rate of pay established for the range.

Job rate:

The maximum salary an organization is prepared to pay for satisfactory performance by a fully trained incumbent.

Median:

The median is the value found in the middle of a group of values that have been ranked from lowest to highest. For example, of the group '2,4,7,10,12,' 7 is the median. The median is often used in salary surveys to measure the middle of the market.

Performance management:

A comprehensive approach to improving performance that includes defining expectations and accountabilities, setting performance measures, and assessing results. Variable pay may be a feature of such a programme.

Pre-requisites:

Additional elements of a compensation package provided to selected employees on the basis of status or income level.

Privy Council Office (PCO):

PCO is the department that provides public service support to the Prime Minister, to Ministers within the Prime Minister's portfolio, and to the Cabinet in order to facilitate the smooth and effective operation of the Government of Canada.

Salary compression:

This exists when there is an insignificant difference between the salary of a subordinate level and that of the superior level. A difference of less than 10 per cent between the salary maximums can create compression problems.

Salary freeze:

As a result of the 1991 Public Sector Compensation Act, employees of the federal Public Service for a period of time received no increments, performance pay or increases to base salaries.

Salary inversion:

This exists when the salary range maximum of an employee at a lower level is higher than the salary range maximum of the supervisor (even if the difference is only a dollar).

Salary minimum:

The lowest rate of a salary range.

Total compensation:

The total dollar value of the combined elements of a compensation package including base salary, variable pay, benefits (e.g., pension, medical coverage) and perquisites.

Universal Classification Standard (UCS):

The UCS is the new job classification instrument for comparing the relative value of various Public Service work. The UCS will apply to all federal Public Service employees (Public Service Staff Relations Act, Schedule 1, Part 1), for whom Treasury Board is the employer, with the exception of the executive (EX) group.

Variable pay:

The portion of an employee's salary that is dependent upon rated achievements over a fixed period of time. A portion of the pay is said to be 'at risk' or re-earnable.