…as executives take pay-cut

The board of the Canada Pension Plan Investment Board will not award the individual component of executive’s short term incentive plans, due to current economic circumstances, however the chief executive and the three key investment professionals still earned a combined C$8.6 million in total compensation in the fiscal year to March.

This remuneration total is about $3.894 million less than the 2008 fiscal year, when the four executives earned $12.4 million collectively.

Set up in June 2005 and updated in March 2007, the CPPIB has an incentive compensation framework which means the chief executive, the chief financial officer, and three investment professionals – head of private markets, head of public markets, and head of real estate – all have compensation determined by a base salary combined with short-term and long-term incentive plans.

The individual components of those short-term incentive plans will not be paid this year and the key executives will not receive any base salary increases in 2010.

In the past year the chief executive, David Denison, was the CPPIB’s highest paid executive with a total remuneration of $2.9 million for the year; followed by head of private markets, David Wiseman, ($2.49 million); head of public markets, Donald Raymond ($1.67 million), and head of real estate investments, Graeme Eadie ($1.42 million).

The target short term incentive plan is set as a percentage of salary, to which a multiplier, based on actual fund performance and individual performance, is added.

Similarly the target long term incentive plans is set as a percentage of salary and are paid at the end of a four-year cycle.

Executive compensation is closely linked to a combination of individual and CPP Fund performance measures, and for 2009, the CPPIB also established a series of non-financial goals including continued diversification of the investment portfolio, and execution of management and operational processes and technologies.

In particular Denison had personal objectives that included continuing to champion and foster the CPPIB’s culture; ensuring the successful integration of the offices in Toronto, London and Hong Kong; overseeing the cooperation of a comprehensive enterprise risk management framework, and building credit capabilities.

In the CPPIB annual report, the board particularly noted the CEO’s strong leadership.