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Broader Public Sector Executive Compensation Act, 2014

ONTARIO REGULATION 304/16

EXECUTIVE COMPENSATION FRAMEWORK

Historical version for the period September 6, 2016 to November 21, 2016.

No amendments.

This is the English version of a bilingual regulation.

Application and interpretation

1. (1) The compensation framework set out in this Regulation is established for all designated employers and designated executives.

(2) Subject to subsection (3), the compensation framework shall be effective with respect to a designated employer as of the date the employer first posts a compensation program on its website under subsection 4 (3), which shall be no later than September 5, 2017.

(3) The requirement of the compensation framework regarding public consultations, set out in paragraph 7 of section 2, shall be effective as of September 6, 2016.

(4) A designated employer shall ensure that the effective date described in subsection (2) that applies to the designated employer is clearly indicated on its website.

(5) In this Regulation,

“non-executive managers” are employees and office holders who exercise managerial functions and who directly report to one or more designated executives.

Terms of compensation framework

2. The terms of the compensation framework are as follows:

1. A designated employer shall not provide to a designated executive salary and performance-related pay that is greater than the maximum salary and performance-related pay calculated under section 3 for the designated executive or class of designated executives to which the designated executive belongs.

2. The maximum salary and performance-related pay amounts calculated for a designated employer in respect of its designated executives,

i. shall be recalculated under section 3 in the event of significant organizational restructuring, and

ii. may be recalculated under section 3 in respect of one or more designated executives at any other time if recalculation is warranted in the circumstances.

3. A designated employer shall not provide the following elements of compensation to a designated executive, subject to any entitlement to the element under the Employment Standards Act, 2000:

i. Payments or other benefits provided in lieu of perquisites.

ii. Signing bonuses.

iii. Retention bonuses.

iv. Cash housing allowances.

v. Insured benefits that are not generally provided to non-executive managers.

vi. Termination payments, including payments in lieu of notice of termination, and severance payments that in total equal more than 24 times the average monthly salary of the designated executive.

vii. Termination or severance payments that are payable in the event of termination for cause.

viii. Paid administrative leave, unless provided to the head of a college or university or another designated executive who is part of or will return to the faculty at a college or university.

ix. Paid administrative leave that accrues at a rate in excess of 10.4 paid weeks per year.

x. Payments in lieu of administrative leave.

4. A designated employer shall not provide an element of compensation, other than salary and performance-related pay, to a designated executive unless the element is also generally provided, in the same manner and relative amount, to non-executive managers.

5. Paragraph 4 does not apply if the element is required for the performance of the designated executive’s job or is otherwise required for critical business reasons.

6. A designated employer shall not increase the salary it provides to a designated executive except as follows:

i. Every increase must be approved by the board of directors of the designated employer, or, if the designated employer does not have a board of directors, by the equivalent governing body or officer of the designated employer.

ii. The average rate of increase in salary for the designated employer’s designated executives in a year must not exceed the average rate of increase in salary for the designated employer’s non-executive managers in that year. The calculation of the average rate of increase for a designated employer’s designated executives in a year shall not include increases resulting from the first calculation of the maximum salary and performance-related pay under section 3, or from a recalculation of that amount.

7. A designated employer shall engage in public consultations in which members of the public have a reasonable opportunity to provide comments on the manner in which the designated employer determines the compensation it may provide to its designated executives in accordance with this framework.

Maximum salary and performance-related pay

3. (1) The maximum salary and performance-related pay that a designated employer may provide to a designated executive or class of designated executives shall be calculated by,

(a) selecting at least eight comparator organizations in accordance with subsection (2); and

(b) performing the calculations set out in subsection (3) or (4), as the case may be.

(2) The selection of comparator organizations shall be in accordance with the following:

1. An organization may be selected if,

i. it has at least one executive who holds a position comparable to the position or class of positions held by the designated executive or class of designated executives, and

ii. the organization is comparable to the designated employer with respect to most or all of the following factors:

A. The scope of responsibilities of the organization’s executives.

B. The type of operations the organization engages in.

C. The industries within which the organization competes for executives.

D. The size of the organization.

E. The location of the organization.

2. At least one Canadian public sector or broader public sector organization must be selected as a comparator organization.

3. An organization that is not a Canadian public sector or broader public sector organization may be selected as a comparator organization subject to the Minister’s approval. The designated employer may apply for approval in writing and shall include a business case articulating the reasons the designated employer cannot be compared solely to Canadian public sector or broader public sector organizations.

(3) If all of the comparator organizations selected under subsection (2) are Canadian public sector or broader public sector organizations, the maximum salary and performance-related pay shall be calculated by,

(a) determining the maximum amounts of salary and performance-related pay that may be paid to the executives in the comparator organizations who hold positions comparable to the position or class of positions held by the designated executive or class of designated executives;

(b) selecting a percentile that is no greater than the 50th percentile of the amounts determined under clause (a); and

(c) determining the amount that is at the percentile selected under clause (b).

(4) If any of the comparator organizations selected under subsection (2) is not a Canadian public sector or broader public sector organization, the maximum salary and performance-related pay shall be calculated by,

(a) for comparator organizations that are Canadian public sector or broader public sector organizations, determining the maximum amounts of salary and performance-related pay that may be paid to the executives in the comparator organizations who hold positions comparable to the position or class of positions held by the designated executive or class of designated executives;

(b) selecting a percentile that is no greater than the 50th percentile of the amounts determined under clause (a);

(c) determining the amount that is at the percentile selected under clause (b);

(d) performing the same calculations required under clauses (a), (b) and (c) for comparator organizations that are not Canadian public sector or broader public sector organizations;

(e) multiplying the amount determined under clause (c) by at least 50 but less than 100 per cent;

(f) multiplying the amount determined under clause (d) by a percentage equal to 100 less the percentage applied under clause (e); and

(g) adding the amounts determined under clauses (e) and (f).

Compensation program

4. (1) Every designated employer shall have a written executive compensation program setting out the compensation that may be provided to its designated executives.

(2) The executive compensation program shall conform to the terms of the compensation framework set out in section 2 and shall include the following information:

1. The maximum salary and performance-related pay calculated under section 3 for each designated executive or class of designated executives.

2. The executive positions and comparator organizations used in each calculation, together with an explanation of how the positions used are comparable to the position or class of positions held by the designated executive or class of designated executives, and of how the comparator organizations used are comparable to the designated employer with respect to the factors mentioned in sub-subparagraphs 1 ii A to E of subsection 3 (2).

3. The percentile values that were selected for each calculation.

4. The percentage values that were chosen under clauses 3 (4) (e) and (f) for each calculation.

5. A description of any other element of compensation available to designated executives that is not generally provided, in the same manner and relative amount, to non-executive managers, and the reasons why the element is required.

6. A description of the designated employer’s compensation philosophy, including details regarding,

i. how the compensation program supports the designated employer’s strategic objectives, and

ii. what the compensation program, including its approach to performance-related pay, is designed to reward.

(3) The executive compensation program shall be posted on the designated employer’s website, and shall indicate the date on which it was posted.

(4) On the recalculation of the maximum salary and performance-related pay that may be provided to a designated executive or class or designated executives or the provision by the designated employer of any additional element of compensation under paragraph 5 of section 2, the designated employer shall update its executive compensation program in accordance with subsection (2) and post the updated compensation program in accordance with subsection (3).

5. Omitted (provides for coming into force of provisions of this Regulation).