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Shareholders and other stakeholders have a strong interest in executive pay and its alignment with performance. This is evident in evolving regulatory requirements, increased emphasis on pay-for-performance in what continues to be a challenging business environment for the energy industry, in expectations for the application of good governance practices, and transparency in disclosure of executive pay.
Compensation linked to goals
Our executive compensation plans, policies and programs are designed to support and reinforce successful strategy execution, achievement of our corporate and business unit goals, and to attract and retain top talent, resulting in profitable growth and long-term shareholder value.
Alignment on key priorities through our goal-setting process begins with the president and chief executive officer and cascades through the organization. Goals are established by each of the business units in key performance areas that will drive value:
- base business
- workforce and organizational performance
We ensure our executives’ focus is linked with the interests of our shareholders through alignment on key priorities, and tying executive incentive compensation to the achievement of our goals and strategy.
Consistent pay-for-performance approach
To deliver sustained performance and increased shareholder value, it is essential that we attract, engage and retain talented, capable executives who can lead and execute business plans that position us for long-term success. One way we do this is by designing and implementing compensation plans, policies and programs that provide an attractive and competitive total compensation opportunity.
This is demonstrated in the total direct compensation provided to executives, which has a significant portion at risk (70-85% for senior executives), in the form of short, medium and long-term performance-based pay. The annual, medium and long-term incentive plans are tied directly to operational performance measures, to absolute increases in share price and to our relative increase in shareholder return compared to peers.
Our incentive-based pay-for-performance design provides executives with the opportunity to increase their compensation when above-target operational and shareholder return performance is achieved and limits their compensation when performance warrants.
This pay-for-performance approach is a fundamental part of our identity, underpins the design of our incentive programs and responds to shareholder expectations of a strong link between executive pay and longer term value creation.
Oversight of compensation programs
An important responsibility of the Board is ensuring that executive compensation plans, policies and programs are aligned with shareholder interests, are competitive and that compensation risks are limited.
This key governance responsibility is carried out with the assistance of the Human Resources and Compensation Committee and accomplished through the committee’s mandate, which includes:
- design of executive compensation plans, policies and programs to reinforce performance and to include thresholds, caps or maximums, performance hurdles and robust share ownership requirements
- review and approval of incentive plan performance goals
- monitoring and feedback on performance versus plans
- application of sound executive compensation governance based on best practices
For more information on executive compensation, download the 2017 Management Proxy Circular (PDF, 111 pp., 887 KB).