Michelle de Cordova: Quantum Shift

Quantum Shift: Engaging on
Excessive Compensation & Pay Equity
Michelle de Cordova
Director, Corporate Engagement & Public Policy
NEI Investments
• Canadian investment management company
• Owned by Desjardins Group and Credit Union
Centrals of Canada
• Approximately $5 billion assets under management
• NEI Ethical Funds: Canada’s oldest and biggest SRI
fund family
• ESG Services = Environmental, Social & Governance
Stakeholder-based Compensation
• Excessive focus on share price in “pay
for performance”, although executive
direct impact on share price is limited
• Many CEOs emphasize importance of
ESG performance - but are not paid to
improve performance in these areas
• Solution: Reward executives to improve
performance in range of strategic &
operational areas that contribute to
long-term sustainable value
2006-12: Engaging on ESG Compensation
• In 2006 we wrote to all TSX Composite companies asking for
linkage between pay and performance against ESG metrics
• Only 5% of companies said they considered ESG metrics in pay,
almost none provided evidence in the proxy circular
• Linking pay to ESG performance becomes a regular theme in our
corporate engagement program
• Focus on progressive dialogue with financials and extractives
– Greatest exposure to ESG risks
– Most developed ESG metrics in sustainability reporting, but almost no
ESG metrics in executive compensation frameworks
• By 2012, ESG metrics are established feature in these sectors
2013 Compensation Engagement Priorities
• Continue five-year effort pushing companies to
link compensation to performance on ESG metrics
of long-term sustainable value
• Enhance discussion
of risks relating to
excessive pay,
internal pay equity
and income
Does High Quantum Matter?
• Is high quantum the best way to attract and motivate
talented, committed executives of highest integrity?
• How does high quantum executive compensation and
increasing pay disparity between company levels
affect employee retention, motivation and
performance overall?
• How does high quantum executive compensation
contribute to income inequality in the economy as a
whole, and what are the consequences?
A Quantum Shift for Canada’s Banks?
• Fall 2012: Filed shareholder proposals asking Canada’s
five biggest banks to explore risk of setting executive
compensation levels based on horizontal comparisons
with peer companies, and potential to integrate
vertical comparisons with pay of other workers in the
company or economy
• Why banks? Corporate governance leadership,
stewardship role in the economy
• Progress so far: All five proposals withdrawn when the
banks agreed to explore the issues raised
To Engage with the Engagement…
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