Facing criticism over the Canada Pension Plan Investment Board’s (CPPIB) compensation structure, Federal Finance Minister Jim Flaherty has asked all government-owned companies to review their compensation practices.
As part of the Group of Twenty (G-20) countries that recently agreed on executive compensation principles, set out by the Financial Stability Forum, Canada’s adherence to the rules is being questioned due to CPPIB’s recent announcements on executive pay.
Flaherty has been in touch with industry leaders—including those of all crown-related corporations—and says he is awaiting feedback.
“I’ve set out the three principles to all of them, including the CPPIB, and asked them to confirm to me that they’re in compliance with those principles,” Flaherty says.
“I am confident that the CPP Investment Board’s compensation policies and framework comply with the G-20 Principles on Compensation in Financial Services,” notes the CPPIB’s chair, Robert Astley, in an emailed statement. “I will consult with the CPPIB board of directors regarding this request and reply as expeditiously as possible.”
The G-20 principles are a response to public backlash over executive compensation amid the recent global financial crisis. The forum seeks to end a culture of excessive risk taking in the financial industry and tie compensation to long-term profitability rather than short-term revenue.