So much based on how share prices moving

Continued from FP1

The other Big Five bank executive to step up to the helm between November 2013 and November 2014, Toronto-Dominion Bank CEO Bharat Masrani, received $8.95 million in actual total direct compensation last year, slightly under target.

Bank of Montreal’s Bill Downe, who has served as its CEO since 2007 but is retiring at the end of this fiscal year, was awarded $10.62 million, slightly above target.

It’s not unexpected that McKay would end up being paid what his predecessor, Gordon Nixon, had (albeit with a lower pension cap), said Levasseur. Nixon pulled in a target salary and incentives of $11.25 million prior to his retirement in 2014. RBC’s board increased McKay’s target to that same level in January 2016.

Both CIBC and TD recently announced increases to their CEO’s compensation for 2017, with neither reaching that of Gerald McCaughey or Ed Clark, the report added.

All four of the new CEOs were promoted from within, which typically results in lower compensation levels than if hiring an outside candidate, said Ray Murill, senior consultant at Gallagher McDowall.

Under normal circumstances, it would take about five years for someone to fully understand the complex role of CEO of a major Canadian bank, and for salary to catch up, Levasseur said.

“So much of their compensation is based on how share prices is moving, and when the markets are experiencing a bump — whether you’re new as the CEO or not — you’re going to experience that bump,” he added.

For example, RBC’s share price rose more than 12 per cent over the course of fiscal 2016, ended Oct. 31.

Overall, 2016 was a good year to be a Canadian bank chief executive, with a median of $10.11 million in actual total direct compensation awarded, up 9 per cent from fiscal 2015, according to the report.

However, what has grown even faster was the value of the bank CEOs’ unrealized stock options, the consultants found. The median amount of unrealized equity by these executives was $35.9 million in fiscal 2016, up 52 per cent from $23.6 million in 2015.

As well, the total financial stake each of the Big Five bank CEOs have has similarly swelled. The consultants tabulated the value of the common shares owned outright, and the actuarial value of accrued pension benefits and found that these CEOs had a $50.3 million median financial stake of the banks they lead.

“Boards have been encouraging their CEOs, and that spans all industries, to have a much higher ownership stake,” said Levasseur.

The CEO with the highest stake was BMO’s Downe, with a total value of $124.9 million, or 63 times his base salary, the report said. Among the newest crop of executives, TD’s Masrani had the largest stake, at $105 million or 105 times his base salary.