Scott Thomson, left, and Brian Porter, right. Thomson stepped into the CEO role on Feb. 1.Scotiabank/Supplied
Bank of Nova Scotia BNS-T has set new chief executive Scott Thomson’s target pay at $9.5-million – $2.25-million less than his predecessor, Brian Porter.
The new CEO, who stepped into the role on Feb. 1, is set to earn $1-million in base salary and $8.5-million in variable compensation – bonuses and stock awards – this fiscal year. That is less than the $11.75-million set as Mr. Porter’s target in his final year on the job.
The banks’ fiscal year starts on Nov. 1, and Scotiabank was one of four major banks that disclosed executive compensation data in securities filings in recent days. The CEOs at Scotiabank, Royal Bank of Canada RY-T, Bank of Montreal BMO-T and Canadian Imperial Bank of Commerce CM-T earned a combined $55.3-million in total compensation in 2022, down slightly from $56.5-million the year prior, according to the filings.
Toronto-Dominion Bank TD-N has not yet published its proxy circular, which will include its executive pay data.
Scotiabank’s Mr. Porter received a $1.3-million salary and $10.14-million in bonuses and stock awards, for a total of $11.44-million, slightly less than the proposed target, as Scotiabank fell short of its business goals. But other compensation, including an estimated increase in his pension benefits, brought his grand total to $13.6-million, a 11.6-per-cent increase from the year prior.
Mr. Porter has a defined benefit (DB) pension plan, which guarantees a certain amount at retirement. Unlike his predecessor, Mr. Thomson has a defined contribution plan, which means that the “arrangement costs are expected to be stable and comparatively lower than they would be under a DB pension plan,” Scotiabank said in its filings.
Scotia also said Mr. Porter will receive a $1.5-million cash award at the end of April for three months’ work after stepping down from the top job Feb. 1, “in recognition of the support to the CEO transition that Mr. Porter will provide.”
Scotiabank’s board also topped up the paycheques of Jake Lawrence, the CEO and group head of global banking and markets and Dan Rees, the group head of Canadian banking, who were both considered as front-runners for the CEO job before the selection of Mr. Thomson.
The bank said in its proxy that it gave each of the two a one-time stock award valued at $1.5-million due to the “importance of maintaining the overall strength of the leadership bench, and the future potential of Mr. Lawrence and Mr. Rees.” The additional awards brought Mr. Lawrence’s total compensation to $9.52-million, a 37-per-cent increase from 2021, and Mr. Rees’s total to $7.13-million, a 55-per-cent increase.
Most of Canada’s major banks only narrowly beat or missed their profit targets in 2022, largely tempering pay increases compared with the previous year’s 23-per-cent surge in CEO compensation.
Last year, rising interest rates boosted profit margins, but those gains were offset by rising costs and gradual increases to loan loss reserves as Canada’s five largest banks built financial cushions in anticipation of an economic downturn. That stands in stark contrast to 2021, when the lenders blew past earnings goals that had been set during a time of uncertainty amid the COVID-19 pandemic.
At Royal Bank of Canada, the country’s largest bank, CEO Dave McKay pocketed the biggest paycheque of the four CEOs, earning $16.36-million. That was down slightly from $16.67-million a year earlier.
Mr. McKay’s stock and options awards were $10.76-million, up from $9.9-million in 2021. But his bonus fell to just under $3-million, from $4.1-million. RBC said the portion of his bonus based on financial performance declined by nearly $1-million, since RBC didn’t beat its profit goal in 2022 by the margin it did in 2021.
RBC said its net income target for the bonus plan was $15.2-billion, versus the $16.1-billion it earned in 2021. It made $15.8-billion.
At Bank of Montreal, CEO Darryl White’s pay fell 4 per cent to $14.29-million, from $14.88-million in 2021. His share and stock option awards of $8.17-million were down from $8.3-million, and his bonus edged lower to $3.33-million from $3.38-million.
For bonus purposes, BMO set a target that earnings per share would decrease by 3.7 per cent last year, slightly less than the 3.9-per-cent drop it anticipated in 2021. Instead, earnings per share jumped 7.7 per cent.
BMO’s incentive pay also includes goals based on return on equity and the bank’s efficiency ratio, a measure of cost management. It met or exceeded both. Over all, however, BMO outperformed goals by a smaller margin than in 2021, which resulted in a smaller bonus for Mr. White than in the previous year.
CIBC CEO Victor Dodig’s pay dropped the most of the four leaders, tumbling 13.6 per cent to $11.01-million. His bonus fell to $1.87-million from $2.14-million, and his stock and option awards decreased to $7.49-million from $8.55-million.
The bank narrowly missed its 2022 target of $7.07 in adjusted earnings per share, posting $7.05 for the year. That compared with sizable outperformance in 2021, when it earned $14.47 in adjusted earnings per share, higher than its $11.22 target.
CIBC’s bonus plan is based on a wide range of financial and other performance metrics. The bank said it also missed its goal for operating leverage, but it beat its revenue-growth goal and met two others.