Director Compensation
2008 Director Compensation Package
We establish director compensation based on the advice of independent consultants, with a view to establishing compensation at the median of the applicable Comparator Group (see “Compensation Discussion and Analysis – Compensation Principles”). Only such directors that are not also officers or employees of the company, that is all directors other than Mr. Doyle (the “outside directors”), are compensated for service on the Board.
Cash Compensation
Each outside director was paid a retainer at an annual rate of $135,000 and a travel fee of $500 per day where travel was required on a day or days on which a meeting did not occur. Outside directors received an additional $10,000 per year if they served as a chair of a Board Committee ($15,000 in the case of the Compensation Committee Chair and the Audit Committee Chair). All Audit Committee members received an additional $5,000 per year, with the exception of the Audit Committee Chair. Each outside director who was a member of a Board Committee received a per diem fee of $1,500 for meetings he or she attended, provided such meetings were not held the same day as a Board meeting. Outside directors were also reimbursed for expenses incurred in discharging their responsibilities. Mr. Howe, as Board Chair, received an annual retainer of $320,000, but did not receive per diem or travel fees.
As described below, each outside director can defer, in the form of Deferred Share Units, up to 100% of the annual retainer fees payable to such director in respect of serving as a director, which would otherwise be payable in cash.
Stock-Based Compensation
Effective November 20, 2001, we adopted the Plan, which allows non-employee directors to defer, in the form of Deferred Share Units up to 100% of the annual retainer payable to such director in respect of serving as a director that would otherwise be payable in cash. Each Deferred Share Unit has an initial value equal to the market value of a Share at the time of deferral. The Plan is intended to enhance our ability to attract and retain highly qualified individuals to serve as directors and promote a greater alignment of interests between such directors and our shareholders. The Plan also provides for discretionary grants of Deferred Share Units, which the Board discontinued on January 24, 2007 in connection with an increase to the annual retainer.
Each Deferred Share Unit is credited to the account of an individual director and fully vests upon an award, but is distributed only when the director has ceased to be a member of the Board or the board of directors of any subsidiary and the director is neither our employee nor an employee of any of our subsidiaries. At such time, the director will receive a cash payment equal to the market value of a number of Shares purchased on the open market equal to the number of Deferred Share Units recorded in the director’s account (reduced by the amount of applicable withholding taxes). While the Compensation Committee, with Board approval, has the discretion to distribute Shares in lieu of cash, the Committee and Board have determined that all distributions pursuant to the Plan will be made in cash. Deferred Share Units earn dividends in the form of additional Deferred Share Units at the same rate as dividends are paid on Shares.
The number of Deferred Share Units credited to the director’s account with respect to director retainer fees that the director elects to allocate to the Plan is determined as of the last trading day of each calendar quarter and is equal to the quotient obtained by dividing (a) the aggregate amount of retainer fees allocated to the Plan for the relevant calendar quarter by (b) the market value of a Share on such last trading day (determined on the basis of the closing price on the Toronto Stock Exchange (“TSX”) for participants resident in Canada and on the basis of the closing price on the NYSE for all other participants).
In 2008, the following directors elected to receive 2008 director retainer fees in the form of Deferred Share Units: Mr. Blesi, 100% of director retainer; Mr. Hoffman, 85% of director retainer; Ms. Laberge, 65% of director retainer; Mr. Martell, 100% of director retainer; Mr. McCaig, 100% of director retainer; and Ms. Mogford, 100% of director retainer.
The directors were not granted any stock options in 2008 and have not been granted any stock options since the Board’s decision in 2003 to discontinue stock option grants to outside directors.
Stock Ownership Guidelines
The Board believes that the economic interests of directors should be aligned with those of shareholders. To achieve this, all directors are required to hold Shares and/or Deferred Share Units with a value at least five times their annual retainer. One-half of the ownership threshold is required to be achieved within 2 ½ years, and full compliance is required within five years of joining the Board. The Board may make exceptions to this standard where, as a result of the unique financial circumstances of a director, compliance would result in an unacceptable hardship. As of February 20, 2009, all of our directors were in compliance with the requirements described above.
Other Benefits
Directors participate in our Group Life insurance coverage (Cdn$50,000), Accidental Death and Dismemberment coverage (Cdn$100,000), Business Travel Accidental coverage (Cdn$250,000) and Supplemental Business Travel Medical coverage ($250,000) per calendar year.
The following table sets forth compensation earned by our directors during fiscal 2008 as prescribed in accordance with Item 402(k) of Regulation S-K. The amounts set forth for each director in the “Stock Awards” and “Total” columns include the appreciation or decline in value, as applicable, of Deferred Share Units received prior to, and during, 2008 pursuant to the Plan. The table in footnote (2) below sets forth further details, including the amount of each director’s 2008 annual retainer and Committee meeting and other fees received in the form of cash and Deferred Share Units.
2008 Director Compensation (1)
(see explanatory notes)
| Name | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(2)(3)(4) | Option Awards ($)(5) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($)(6) | Total ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
| Frederick J. Blesi * | 10,500 | 1,234,677 | — | — | — | 62 | 1,245,239 |
| William J. Doyle (7) | — | — | — | — | — | — | — |
| John W. Estey | 161,000 | (1,560,537) | — | — | — | 2,482 | (1,397,055) |
| Wade Fetzer III | 145,500 | (750,438) | — | — | — | 2,510 | (602,428) |
| C. Steven Hoffman ** | 22,616 | 51,931 | — | — | — | 2,401 | 76,948 |
| Dallas J. Howe | 320,000 | (2,571,041) | — | — | — | 3,633 | (2,247,408) |
| Alice D. Laberge | 116,000 | (1,060,635) | — | — | — | 4,461 | (940,174) |
| Keith G. Martell | 15,500 | 21,339 | — | — | — | 6,214 | 43,053 |
| Jeffrey J. McCaig | 16,000 | (1,645,322) | — | — | — | 2,762 | (1,626,560) |
| Mary Mogford | 19,000 | (1,556,158) | — | — | — | 4,628 | (1,532,530) |
| Paul J. Schoenhals | 155,500 | (1,304,493) | — | — | — | 2,850 | (1,146,143) |
| E. Robert Stromberg, Q.C. | 146,000 | (1,180,649) | — | — | — | 4,852 | (1,029,797) |
| Elena Viyella de Paliza | 149,000 | (1,037,300) | — | — | — | 3,341 | (884,959) |
| * | Retired from the Board on May 8, 2008. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ** | Elected to the Board on May 8, 2008. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Those amounts that were paid in Canadian dollars have been converted to United States dollars using the average exchange rate for the month prior to the date of payment. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (2) | The following table sets forth each director’s annual retainer, meeting and other fees for fiscal year 2008 that were received in the form of cash or deferred to Deferred Share Units.
Remuneration of Directors
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| (3) | Reports the amounts recognized for fiscal year 2008 US GAAP financial statement reporting purposes in accordance with FAS 123R for Deferred Share Units received pursuant to the Plan. Deferred Share Units are settled in cash upon a director’s retirement and, therefore, are considered a liability award under FAS 123R. As such, we recognize amounts attributable to (1) the annual increase or decrease in the value of outstanding Deferred Share Units received prior to 2008, which value is based on the annual increase or decrease in the market price of our Shares as measured on the last trading day of each year, and (2) the value of Deferred Share Units received in 2008, which value is based on the market price of our Shares on the last trading day of the year. The amounts set forth in column (c) above reflect amounts recognized for the 2008 decline in the value of outstanding Deferred Share Units received prior to 2008, based on the 2008 decline in the price of our Shares on the NYSE from $143.96 to $73.22. The amounts set forth in column (c) also reflect amounts recognized for the value of Deferred Share Units received in 2008, which value is based on $73.22, the price of our Shares on the NYSE on the last trading day of 2008. Each outside director was permitted to defer, in the form of Deferred Share Units, up to 100% of the annual retainer fees payable to such director in respect of serving as a director, which we would otherwise have paid in cash. See “Remuneration of Directors” in footnote (2) above. The number of Deferred Share Units that each director received, in lieu of cash, was determined by the closing price of our Shares on the last trading day of the quarter in which such fees were earned (using the closing price on the TSX for residents of Canada and the closing price on the NYSE for all other participants) (Cdn$159.50 and $155.21 for the quarter ended March 31, 2008, Cdn$236.57 and $228.57 for the quarter ended June 30, 2008, Cdn$137.97 and $132.01 for the quarter ended September 30, 2008 and Cdn$89.54 and $73.22 for the quarter ended December 31, 2008). The following table sets forth the amounts recognized for fiscal year 2008 US GAAP financial statement reporting purposes that are attributable to (a) the decline in the value of Deferred Share Units received prior to, and during, 2008, (b) the value of Deferred Share Units received in 2008 for the deferral of the annual retainer and (c) the value of dividends received in 2008 in the form of Deferred Share Units.
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| (a) | Mr. Blesi, who served since 2001, retired from the Board on May 8, 2008. Mr. Blesi received the payout value of his 23,274 Deferred Share Units in cash on August 6, 2008 in accordance with the Plan. Pursuant to the Plan, the payout value of each of Mr. Blesi’s Deferred Share Units was equal to $195.06, which represents the average closing price of our Shares on the NYSE for the ten trading days prior to August 7, 2008, the tenth trading day following the release of our quarterly results immediately following Mr. Blesi’s retirement. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (4) | As of December 31, 2008, the total number of all Deferred Share Units held by each outside director is as follows: Mr. Blesi, 0; Mr. Estey, 22,196; Mr. Fetzer, 10,674; Mr. Hoffman, 709; Mr. Howe, 36,568; Ms. Laberge, 15,936; Mr. Martell, 1,966; Mr. McCaig, 25,671; Ms. Mogford, 24,565; Mr. Schoenhals, 18,554; Mr. Stromberg, 16,792; and Ms. Viyella de Paliza, 14,754. The grant date fair value of each grant of Deferred Share Units received by each director in 2008 is as follows:
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| (5) | As of December 31, 2008, the following directors held outstanding options: Mr. Blesi, 15,500; Mr. Fetzer, 9,000; Mr. Howe, 61,200; Mr. McCaig, 78,000; Ms. Mogford, 18,000; and Mr. Stromberg, 39,600. The following table provides information relating to outstanding stock options held by each of our outside directors as of December 31, 2008 and stock option exercises by each of our outside directors during 2008.
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| (a) | As of December 31, 2008, the aggregate value of unexercised options that are currently exercisable held by each outside director was as follows: Mr. Blesi, $967,660; Mr. Fetzer, $559,980; Mr. Howe, $4,309,727; Mr. McCaig, $5,337,560; Ms. Mogford, $1,222,856; and Mr. Stromberg, $2,713,866. The aggregate value of unexercised options held by Mr. Howe, Mr. McCaig, Ms. Mogford and Mr. Stromberg was converted to U.S. dollars using the average Canadian exchange rate of 1.0671 for fiscal year 2008. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (b) | The number of Shares retained by each director following exercise of the stock options is as follows: Mr. Howe, 18,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (c) | The value realized upon exercise was converted to U.S. dollars using the average Canadian exchange rate of 1.0671 for fiscal year 2008. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (6) | Reports the cost of tax gross-ups for taxable benefits and life insurance premiums paid for the benefit of each director. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (7) | As CEO, any compensation Mr. Doyle receives is disclosed in the Summary Compensation Table for Named Executive Officers. See “Executive Compensation — Summary Compensation Table”. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||