David Friend, THE CANADIAN PRESS
Some of Canada's top bankers are giving up stock compensation worth millions of dollars and seeing their paycheques reduced as their American peers come under intense public scrutiny from Washington, which has committed billions to bail out the financial sector.
The Canadian banks are releasing their annual salary disclosures at a time when the economy is facing the biggest downturn in decades and U.S. President Barack Obama has deplored as "shameful" pay practices on Wall Street.
The picture on Bay Street is different – the Canadian banks remain solid and highly profitable and they haven't required the same degree of help from Ottawa – but the bank bosses and the board committees that set their pay are showing signs of sensitivity.
In fact, Gordon Nixon, chief executive of the Royal Bank of Canada (TSX: RY) refused to take almost $5 million in stock compensation he had been awarded.
That was in addition to a 30 per cent cut in Nixon's cash compensation.
The boss of Canada's largest bank still got a base salary of $1.4 million, unchanged from last year. But his bonus was cut to $2.4 million from $4 million, and he said he will invest all of the 2008 bonus in Royal Bank shares.
He voluntarily forfeited $2.75 million in restricted shares and $2.2 million in stock options that the board had awarded him.
Meanwhile, Rick Waugh, head of the Bank of Nova Scotia (TSX: BNS) took a 20 per cent reduction in his direct compensation to $7.5 million.
Waugh's base salary was unchanged at $1 million, while his bonus was cut to $500,000, from $1.6 million in 2007.
He also received share units valued at just over $3 million, plus stock options with a deemed value of $3 million.
CIBC announced Monday that president and chief executive Gerald McCaughey earned $5.3 million in compensation for 2007 including a base salary of $1 million, $2.7 million in share units and $1.6 million in options. He was not paid a cash bonus.
Because of a one-year lag in determining his bonus, McCaughey could have been eligible for up to $12.96 million in compensation, based on the bank's record performance in 2007.
However after post year-end adjustments and recommendations by the board and McCaughey, including his decision to forgo $1.4 million in share units, the bank chief took home roughly $5.3 million for 2007, down from about $9.1 million for 2006.
McCaughey, who earned a salary of $1 million for 2008, will have his bonus for 2008 calculated at the end of the bank's 2009 financial year.
Bank of Montreal (TSX: BMO) disclosed last week that its chief executive, Bill Downe, received just under $6 million in direct compensation last year, up from $5.5 million in 2007.
Downe's bonus was restored to $1.4 million as BMO "performed well in challenging times."
However, the bank said Monday that Downe has decided to forego his mid-term and long-term compensation valued at $4.1 million for this year.
The decision to reduce paycheques as an astute move in the current economic climate, said Laura O'Neill, director of law and policy at SHARE, a shareholder rights group based in Vancouver.
"They are obviously trying to do something to address what we can only characterize as public outrage around these issues," she said.
"What shareholders will make of it when they ... look at their own portfolios and what the decrease has been there, is still to be seen."
Laurence Booth, a professor at Rotman School of Management, said the move by Canadian executives makes them look more reasonable in a country that's known for criticizing its banking structure.
"I think it's probably an optics move more than anything else," Booth said.
"You can understand in a recession like this, when they're getting some help from the Canadian government ... why politically they (the banks) might make a move like this."
The Canadian banks haven't received bailouts, as such, but the federal government and Bank of Canada have taken several steps to ensure the domestic banks aren't disadvantaged by the huge amounts of money being spent by other countries to prop up their banks.
Booth said the banking executives will take their biggest hit from forfeiting stock options, not from slashing paycheques.
He said the options could prove especially lucrative in the next few years when banks' stocks – which have been ravaged by the credit crisis – start to recover.