Calgary company CEOs taking pay cuts during COVID-19
A growing number of Calgary CEOs are responding to the dual crises of COVID-19 and the sharp drop in oil prices by taking a pay cut.
Article content
A growing number of Calgary CEOs are responding to the dual crises of COVID-19 and the sharp drop in oil prices by taking a pay cut.
As revenues dry up and companies look to slash spending, a significant portion of publicly traded companies have already reduced compensation for occupants of the C-suite.
In Calgary, the steepest CEO pay cuts are occurring in the hard-hit energy and aviation industries, and most often occur at companies that have already announced COVID-related layoffs or all-staff wage reductions.
At Trican Well Services Ltd. — where employees were asked in late March to move to a reduced work week or job-sharing to reduce operational expenses — the executive team and board of directors have taken a 20 per cent reduction in cash compensation.
“The reason our executives took the rollback right away wasn’t because of investor pressure, it was because our employees are taking a hit,” said Trican president and CEO Dale Dusterhoft, who, according to the company’s most recent proxy circular, was paid a total $1.8 million in 2018.
“Because we asked our employees to do that, our executives had to do that as well. We can’t ask our people to do something different than us,” Dusterhoft said in an interview.
At Cenovus Energy Inc. — which has said it will reduce its planned 2020 capital spending by $600 million as a result of unprecedented low commodity prices — salaries have been rolled back across the company. Effective May 1, CEO Alex Pourbaix (who took in $6.6 million in total compensation in 2018) will have his annual base salary reduced by 25 per cent, while other executive team members will take a 15 per cent base salary reduction.
Cenovus said vice-presidents and their equivalents in technical positions will receive a 12 per cent annual base salary rollback, while employees at other levels will experience a graduated, smaller salary impact.
“The salary rollback, which will have the greatest impact on senior leaders, is a way to demonstrate the entire company is committed to addressing the challenges we face,” Pourbaix said in a news release.
Other Calgary-based CEOs who have said they will take pay cuts include Badger Daylighting’s Paul Vanderberg, who will take a 40 per cent salary reduction, and Parkland Fuel Corp.’s Bob Espey, who will take a 35 per cent salary reduction.
At WestJet Airlines, CEO Ed Sims (who took the reins at the company in 2018 and according to the company’s proxy circular was entitled to $3.4 million in total compensation that year), as well as the rest of the executive team have taken a 50 per cent pay cut to all compensation.
WestJet, which has been hard hit by COVID-19 and the resulting drop in travel demand, served notices of voluntary or involuntary leaves to 6,900 people (50 per cent of its total workforce) in late March, though it has since said it will be able to use the federal government’s wage subsidy program to recall these employees.
WestJet’s competitor, Montreal-based Air Canada, has announced that CEO Calin Rovinescu will not draw any salary for the duration of the pandemic crisis.
Executive compensation is a “minuscule” portion of any large company’s overall expenses, said Anup Srivastava, associate professor at the University of Calgary’s Haskayne School of Business and a Canada research chair in accounting, decision-making and capital markets.
But while cutting a CEO’s salary may have very little effect on a company’s ability to financially weather these difficult times, it is an important symbolic move, he said.
“CEOs who are taking tough decisions at these times, if they approach employees requesting they take furloughs or saying they will reduce the workforce by 20 or 30 per cent, they have to demonstrate that they themselves are making sacrifices,” Srivastava said.
Arden Dalik, senior partner in the Calgary office of human capital management firm Global Governance Advisors, said while it’s not unusual to see CEOs take salary cuts during a major economic downturn or market collapse, the swiftness with which the announcements are coming this time around is noteworthy.
“That is something new, in terms of the priority and speed of it,” Dalik said. “I think part of it is that executive compensation, more than ever, is under the microscope . . . it’s an easy thing to vilify.”
But Dalik said she believes that for many CEOs, taking a pay cut is more than just a “PR exercise.”
“Of course they don’t want negative press,” she said. “But the good ones want to show their employees and shareholders that ‘look, we’re hurting too.’ It’s a way of getting across the message that ‘we’re all in this together.’ ”
Many CEOs are taking cuts to their base salary only. But Dalik pointed out that since CEOs are required as part of their overall compensation to own shares in their own company (shares whose values have plummeted in recent weeks), the true effect of COVID-19 on executive pay is actually even steeper.
Executive compensation at publicly traded companies is voted on and approved by shareholders each year at annual general meetings. Starting this month, due to COVID-19 and social distancing, many companies will be taking the unprecedented step of hosting this year’s AGM online instead of in person.
Twitter: @AmandaMsteph
Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.