A look at the hidden force behind the rise of executive pay: consultants
As the debate over rising executive pay intensifies, a key architect of Canada’s current compensation landscape has largely avoided scrutiny: the consultant.
While public criticism is typically directed at board directors, shareholders and chief executive officers, people intimate with the process of setting pay want that to change, hoping consultants are also put under the spotlight.
Executive compensation levels in Canada keep climbing, and are often divorced from performance. Median pay for CEOs of Canada’s 100 most valuable companies rose 47 per cent over six years between 2008 and 2014 – and shareholders are taking note. Canadian Imperial Bank of Commerce, Barrick Gold Corp. and Yamana Gold Inc. all lost say-on-pay votes in 2015, making this the first year three major Canadian companies faced a firm rebuke from shareholders on pay.
Little known outside of board circles, a handful of firms in Canada – such as Towers Watson, Hugessen Consulting, Hay Group and Global Governance Advisors – play a powerful role behind the scenes by developing increasingly complex CEO pay systems. They have a say in every element of compensation, from cash bonuses to performance share units, helping craft the complicated formulas used to calculate payouts.