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Executive Summary
For this assignment, Rogers Communications Inc., a Canadian company operating primarily in the field of media and wireless communication, was chosen. As of 2018, the companys annual revenue had amounted to CAD$15.1 billion (Statista, 2018). According to the 2013 data, the company employed 26,000 people both in Canada and across the world (Rogers Communications, 2018). The primary objective of the present analysis is to examine the work of the compensation committee at Rogers Inc. and contrast its policies against the national human resources and compensation guidelines.
For instance, Governance Professionals of Canada (2017) highlight the importance of clear compensation communication. This recommendation is particularly sound since the need to disclose documents holds a company accountable for the impact that its policies may have. This paper provides executive compensation and director compensation reviews as well as a full pay-for-performance analysis. In addition, observations of Rogers Inc.s governance strategies and recommendations are given. The investigation of both the company of interest and 15 other companies has shown the benefits of the say on pay approach, which is also discussed in detail.
Director Compensation Review
Director Compensation Philosophy and Components
According to the companys policies, the compensation of the Board member is subject to an annual review conducted by the Corporate Governance Committee. In 2017, the Corporate Government Committee organized an extensive external evaluation of the directors compensation program, which included gathering evidence from Rogers Communications Inc..s peer group, contrast, and comparison (Rogers Communications, 2019). The Committee concluded that the former program which had been in effect since the last quarter of 2016 was not entirely up to date with the current market conditions. Rogers Communications Inc. used the services and feedback from Meridian Compensation Partners, a Canadian company specializing in compensation consulting and corporate governance (Rogers Communications, 2019).
The following guidelines were outlined for the new director compensation program:
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Attracting and retaining talent to serve on the Board by offering competitive pay;
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Aligning the interests of Directors with the interests of Shareholders to meet common objectives;
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Acknowledging risks and responsibilities associated with the role of Director and reflecting this awareness in the compensation package (Rogers Communications, 2019).
The Corporate Governance Committee settled on the pay structure that entails an annual retainer, an extra annual retainer in case the director serves as a chair of a committee or Lead Director, and an annual grant of equity (Rogers Communications, 2019). The latter is possible to obtain through the issuance of DSUs and/or by purchasing class B non-voting shares. Regardless of their membership, all directors are free to choose to receive their retainer and fees in DSUs or through the purchase of class B non-voting shares (Rogers Communications, 2019).
Rogers Communications Inc. uses the practice of benchmarking: every year, it compiles a peer group list that can include companies in the field of telecommunications as well as in other industries. For instance, as of 2019, the following businesses have been singled out:
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Bank of Montreal (banking);
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Nutrien (crop solutions);
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Barrick Gold (gold mining);
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BCE Inc. (media & communication);
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Bombardier Inc. (airline manufacturer);
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Cenovus Energy (oil & petrol);
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CGI Group (IT & consulting);
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Encana Inc. (energy);
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Husky Energy (energy);
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Sun Life Financial (financial services & planning);
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Telus (telecommunications);
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Teck Resources (resource development);
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Enbridge (energy transportation);
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Canadian Pacific Railway (transportation services);
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Canadian National Railway (transportation services) (Rogers Communications, 2019).
Rogers Communications Inc. analyzes median retainer fees across the market and makes sure that its directors are paid the same or rather more than that.
Board Chair
Formally, the current board chair of Rogers Communications Inc., Edward S. Rogers, is entitled to a retainer fee of $80,000. This amount of money puts him somewhat below the median of the peer group ($110,000). However, the meeting fee of $1,500 adds him to the 75th percentile of the sample ($1,425). The director compensation review shows some major discrepancies between board chair retainer fees across Canadian markets.
For instance, the Bank of Montreal awards its board chair a quite generous retainer of $425,000 per year. Nevertheless, as Rogers Communications Inc. states in its proxy filing, the compensation system is not rigid and is often tied to market tendencies and individual performance. As per the 2019 report, in 2018, Edward S. Rogers has paid a total of $1,000,000 instead of all retainers and attendance fees (Rogers Communications, 2019).
Board Member
When it came to boarding member retainers, the director compensation review demonstrated much less variation safe for Nutrien that pays $240,000 annually. With its $40,000, the board members of Rogers Communications Inc. are well above the median of their peer group of $32,000. The retainer fee awarded by the company puts directors in the said position in the 75th percentile. So far, there is only one company among the peer group that provides a higher retainer fee ($41,000) Sun Life Financial. In this case, we can observe the effect of benchmarking and Rogers Communications Inc.s efforts to keep up with the market trends.
Audit Chair
In its annual notice, Rogers Communications Inc. acknowledges broad responsibilities associated with the role of Audit Committee Chair. The companys current audit committee chair, John Henry Clappison, is entitled to a retainer of $30,000 per year. This reward puts him at 120% of the median of the peer group ($25,000) and in the 75 percentile of the sample. Overall, as shown in the review, only 30% of the companies (namely, Bank of Montreal, BCE Inc., Bombardier Inc., and Enbridge) in the peer group pay their audit committee chairs as much as Rogers Communications Inc. or more.
Human Resources & Compensation Chair
From the reading, it has become apparent that some companies in the peer group such as Barrick Gold single out the position of the human resources & compensation committee chair and establish a unique retainer. Other companies, however, put directors in the said position under the other committee chair category. The data was gathered and analyzed about these particularities. As the review has demonstrated, as of 2019, Rogers Communication Inc. is keeping up with its peers. The human resources & compensation committee chair is entitled to $20,000 in annual retainer fees which is coincidentally the median of the peer group. The largest retailer is ensured for the human resources & compensation committee chair of Bank of Montreal and equals 250% of the median, or $50,000.
Audit Committee, Human Resource & Compensation Committee, and Other Members
The companies analyzed do not exactly specify how much is to be paid in retainer fees for being a member of the audit, HR&C, and other committees. Instead, they mention the general retainer amounts for any committee membership these data were used in the review as it applies to the membership of any committee. As the analysis has clearly shown, the audit committee member retainer ensured by Rogers Communications Inc. is on par with these across the Canadian market and equals the median of its peer group ($5,000). The absolute majority of the companies investigated (15 out of 16) established their retainers within the range of $3,000 and $10,000. The only apparent deviation is Bank of Montreal that awards a member of any committee with up to $140,000 in annual retainer fees.
Other Chair
The majority of the companies examined for this paper do not single out other chair as an independent category in their proxy filing. Instead of that, they specify the committees other than those handling audit, human resources, and compensation.
Almost all businesses analyzed for this paper have risk review, sustainability, and corporate governance committees. For the sake of simplicity and objectivity, if a company does not specify a reward for other chair, an average of all chairs retainers was calculated. The review has demonstrated that in the case of Rogers Communications Inc., both retainer fees and total cash were somewhat subpar compared to its counterparts. The other chair retainer of $15,000 established by the company falls below the median of the peer group of $20,000. The mode of the sample, or the most common retainer amount, equals $20,000. As in several other cases, Bank of Montreal stands out among its peers with the other chair retainer fee of $50,000.
Observations, Conclusions, and Recommendations
The 2018 proxy filing contains a few recommendations for the future that Rogers Communications Inc. is committed to following. The company plans on enforcing a strong pay-for-performance culture further and supporting directors in integrating managers and shareholders interests (Rogers Communications, 2019). The goals for the years to come include finding new, better ways to not only attract talent but also retain it long-term and decide on its application.
Rogers Communications Inc. argues that its compensation programs ensure that the pay remains competitive with the external market (Rogers Communications, 2019). Our review was consistent with the companys claims; however, some possible growth areas have been revealed. For instance, as seen from the director compensation review, Rogers Communications could consider increasing the retainer for other members to make it up to the standard of the peer group. As for the rest of the analyzed positions, their retainers either equal the median of the sample or surpass it by 10-30%.
As for the other forms of payment, the directors DSU plan has been in effect since 2000. Its main objective was and remains to encourage directors to align their interests with shareholders. In 2017, some adjustments to the original plan were made, and from then on, directors have been able to choose to receive some or all of their fees in DSUs. Rogers Communications Inc. established the value of each DSU is equal to the market price of a class B non-voting share at the end of the fiscal quarter. In 2018, every director, apart from the lead director, the deputy chair, the chair, and the vice-chair was given a grand of equity for $120,000.
It was accomplished either through the issuance of DSUs or the purchase of class B non-voting shares. The Chair received the shares for $500,000, which was well above the median of the peer group ($175,000). As for the amount of DSUs established for other positions, directors at Rogers Communications Inc. also seem to enjoy a competitive advantage. With the median of the peer group being $80,000, annual DSUs of $120,000 is more than a decent award. In summation, Rogers Communications Inc. seems to keep up with the major players in its field as well as with the leaders in other industries.
Say on Pay Vote
Today, Canadian markets are moving on Say on Pay, a strategy characterized by the right to vote on the remuneration of executives within a company. The practice has generated some controversy in its early; however, in the case of Rogers Communications Inc., Say on Pay might be highly beneficial. First, the said strategy fosters a critical accountability mechanism for the shareholders involved. They are allowed to express their concerns with the companys approach toward executive compensation practices. At that, shareholders can address issues in a focused and appropriate manner.
Second, adopting Say on Pay promotes communication between different boards, clarifies ambiguity, resolves conflicts, and ensures that managers and executives in various departments are on the same page. Annual meetings of shareholders start an open dialogue and help to make compensation policies more transparent. Lastly, Say on Pay implies a continuous assessment of a companys overall health and success, especially if the meetings are held every year as opposed to biennial and triennial (Segal Marco Advisors, 2017).
References
Bank of Montreal. (2019). Notice of annual meeting of shareholders and management proxy circular. Web.
Barrick Gold Corporation. (2019). Notice of annual meeting of shareholders. Web.
BCE Inc. (2019). Notice of annual meeting of shareholders and management proxy circular. Web.
Bombardier Inc. (2019). Notice of annual meeting of shareholders and management proxy circular. Web.
Canadian National Railway Company. (2019). Management information circular and notice of annual meeting of shareholders. Web.
Canadian Pacific Railway Limited. (2019). Notice of annual meeting proxy circular. Web.
Cenovus Energy. (2019). Notice of annual meeting of shareholders and management proxy circular.Web.
CGI Inc. (2019). Notice of annual meeting of shareholders and management proxy circular.Web.
Enbridge Inc. (2019). Notice of 2019 annual meeting of shareholders and proxy statement. Web.
Encana Inc. (2019). Notice of annual meeting of shareholders and 2019 proxy statement. Web.
Governance Professionals of Canada. (2017). 2017 corporate governance best practices report. Web.
Husky Energy. (2019). Management information circular. Web.
Nutrien. (2019). Notice of annual meeting of shareholders and management proxy circular. Web.
Rogers Communications. (2018). Company overview. Web.
Rogers Communications Inc. (2019). Management information circular english. Web.
Segal Marco Advisors. (2017). 146 companies move from triennial to annual say-on-pay votes in 2017. Web.
Statista. (2018). Annual revenue of Rogers Communications Inc. from 2010 to 2018 (in billion Canadian dollars). Web.
Sun Life Financial. (2019). Notice of annual meeting of common shareholders. Web.
Teck Resources Limited. (2019). Notice of meeting and management proxy circular. Web.
Telus. (2019). 2019 information circular. Web.
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