Despite stagnant revenue, layoffs, facility closings and big losses, the top executives of some of the largest cannabis companies in Canada were awarded millions in bonuses and performance stock grants on top of their sizable salaries in their most recent fiscal years, company filings show.
The pay decisions at Canopy Growth Corp., Tilray Inc. (the former Aphria Inc.) and Aurora Cannabis Inc. show the companies are rewarding executives for minimizing cash losses and simply surviving in the Canadian weed industry.
Canopy Growth chief executive officer David Klein received a cash bonus of US$1.72-million in addition to his base salary of US$975,000 for the fiscal year ending March 31, even as the company’s net losses grew to $1.7-billion in that time period as a result of restructuring charges and the costs of closing and selling multiple cannabis production facilities across the country.
Canopy’s proxy statement for fiscal 2021 showed that 50 per cent of Mr. Klein’s bonus was based on a free cash flow goal – not losing more than US$850-million. In part because Canopy recorded smaller cash losses – negative US$478-million – they deemed Mr. Klein as deserving of 140 per cent of his target, even though Canopy missed goals for revenue and other measures of profit.
The Smiths Falls, Ont.-based company, which is still among the top two largest cannabis producers in the country, saw its quarterly revenue grow between March and December, 2020, but has since suffered two consecutive quarters of revenue decline.
Mr. Klein’s total pay was US$2.79-million, down significantly from the prior year, which included an initial grant of Canopy stock options the company valued at US$24.8-million. Mr. Klein became CEO in January, 2020.
Mr. Klein declined The Globe and Mail’s interview request to discuss his compensation. A statement from company spokesperson Niklaus Schwenker said that its executive compensation supports the company’s strategy of “attracting and retaining top talent” and is necessary to Canopy’s “ambitious growth plans.” At the company’s annual meeting last month, 97.5 per cent of shareholders voted to approve the company’s approach to executive compensation.
Tilray CEO Irwin Simon, who had been serving as CEO of Aphria, received a cash bonus of US$10-million for agreeing to become CEO of the combined company when the two merged at the end of April this year. Mr. Simon also received a performance bonus of US$3.19-million for the fiscal year ended May 31, on top of a base salary of US$1.7-million. Mr. Simon made US$13.68-million in the first five months of 2021, the period Tilray used to disclose Mr. Simon’s compensation.
Mr. Simon made $18.63-million at Aphria in the year ended May 31, 2020, including $10.9-million in cash and stock awarded when he moved from the executive chairman’s role to the CEO job in January, 2020.
Tilray, too, embarked on a cost-cutting exercise after its merger with Aphria, shutting down two major facilities in British Columbia and Ontario. But the company’s revenue in the two quarters since the merger has grown by more than 20 per cent, and relative to its peers, charted a net loss of just US$34.6-million for the three months ending Aug. 31.
Mr. Simon told The Globe in a recent interview that he was proud of how he turned Aphria around from the time he was appointed chairman of the company after a December, 2019, short seller’s report tanked the company’s stock. “You can go out there and criticize my compensation. But most of it is performance based and you saw the condition of Aphria years ago, and where it is today,” he said.
Edmonton-based Aurora recently announced that 8 per cent of its work force would be laid off as a result of multiple facility closings. Its revenue has declined for three consecutive quarters between Sept. 30, 2020, and June 30, 2021, while losses for the year ending June 30 came to almost $700-million.
Aurora awarded its CEO Miguel Martin, who joined the company in September, 2020, a bonus of $365,579 in addition to a base salary of $670,689 for the fiscal year ended June 30. Mr. Martin’s total pay was $4.35-million, including $2.2-million in stock awards.
Aurora used a mix of revenue, cash flow, profit and employee-satisfaction measures as goals, with the earnings targets anticipating the company would lose money. The company capped the bonus-performance calculation at 50 per cent, saying “the overall performance was not tracking to meet expectations.” However, it then added more than $100,000 total to three executives’ bonuses as “discretionary” amounts, including $60,930 for Mr. Martin.
Aurora paid director Michael Singer $4.72-million, including $3.56-million in stock awards. Mr. Singer served as interim CEO for seven months, until September, 2020, and as executive chairman until May, when Aurora decided to appoint an independent chairman of the board. The company gave Mr. Singer $600,000 in severance and stock awards valued at $1.5-million as a “retention award,” explaining that Mr. Singer agreed to waive part of his employment agreement that would have allowed him to acquire and possibly sell previous stock awards that he wasn’t yet entitled to.
Aurora declined The Globe’s request for an interview with Mr. Martin and instead referred to its proxy statement for an explanation of its compensation policy.
During their respective fiscal years, Canopy stock outperformed Aurora and the S&P/TSX Composite Index but underperformed the Horizons Marijuana Life Sciences Index ETF. Tilray/Aphria easily outperformed the two cannabis peers, HMMJ and the Composite. Aurora Cannabis underperformed its peers, HMMJ and the Composite.
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