2020 PROXY SEASON REVIEW & OTHER TOPICS Hugessen TSX60 Webinar - - PowerPoint PPT Presentation

2020 PROXY SEASON REVIEW & OTHER TOPICS

Hugessen TSX60 Webinar

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Cam Camil ille Jo Jovanovic Manager Hugessen – Toronto

1 Welcome 2 Highlights from 2020 Proxy Season 3 Emerging Topics and Trends 4 Q&A 5 Closing Remarks

Bria Brian Lee Lees Manager Hugessen – Calgary Peter St Stephenson Partner Hugessen – Toronto Mic ichelle Tan Principal Hugessen – Toronto Kathry ryn Nee eel Managing Director Semler Brossy - NYC

Speakers – Toronto Agenda

If you have any questions, please submit them on Zoom. Questions will be addressed at the end of this presentation

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Rea eanna Dor Dorscher Principal Hugessen – Calgary

1 Welcome 2 Highlights from 2020 Proxy Season 3 Emerging Topics and Trends 4 Q&A 5 Closing Remarks

Bria Brian Lee Lees Manager Hugessen – Calgary Peter St Stephenson Partner Hugessen – Toronto Sc Scott Munn Partner Hugessen – Calgary St Stephen Cha Charle lebois Principal Semler Brossy – L.A.

Speakers – Calgary Agenda

If you have any questions, please submit them on Zoom. Questions will be addressed at the end of this presentation

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1 Welcome 2 Highlights from 2020 Proxy Season 3 Emerging Topics and Trends 4 Q&A 5 Closing Remarks

Speakers – Montreal Agenda

If you have any questions, please submit them on Zoom. Questions will be addressed at the end of this presentation

Mari ario Brin Brin Principal Hugessen – Montreal Jea Jean-Francois s Malo lo Manager Hugessen – Toronto Geor Georges Soa Soaré Partner Hugessen – Toronto

EXECUTIVE COMPENSATION

PERFORMANCE AND PAY

Sc Scop

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• f Stud

Study: y:

• Companies in the TSX60 Index
• 2020 Proxies commenting on Fiscal 2019 (n=59)

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2019 & YTD 2020 Sector Performance

• 80%
• 60%
• 40%
• 20%

0% 20% 40% 60%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

S&P/TSX Capped Materials Index S&P/TSX 60 Index S&P/TSX Composite Index S&P/TSX Capped Financials Index S&P/TSX Capped Energy Index End of 2019

Strong 2019 performance across most sectors, new reality in 2020

• 75%

0% 75% 150% 225% 300% 375% 450%

TSX60 Index Constituents - 201 2019 Total Shareholder Return

• 75%

0% 75% 150% 225% 300% 375% 450%

TSX60 Index Constituents - 201 2018 Total Shareholder Return

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2018 – 2019 TSR

Resource Non-Resource

• 19%
• 11%
• 23%

40%

A greater proportion of TSX60 constituents had positive TSRs in 2019 compared to 2018

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2019 YoY Median CEO TDC by Industry

27% 22% 12% 10%

• 1%
• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40%

Energy (n=1 =10) Materia ials ls ( (n=9) All ll TSX SX60 ( (n=59) Other ( (n=30) Fin inancia ials ls ( (n=10)

Yea ear-Over-Year Ch Change in n Med edian & Average TSX60 CE CEO TDC

Median Average (with TSX:BB) Average (excluding TSX:BB)

Compensation in the majority of sectors saw YoY increases in median and average (excluding TSX:BB) TDC

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Median CEO Pay YoY

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 $12,000

All ll TSX60 (n=59) Same Constituent (n=52) Same Incumbent (n=37)

Thousands

5 5 Yea ear Trend in n Med edian TSX 60 60 CE CEO TDC DC

2015 2016 2017 2018 2019 3% 4-yr CAGR 4% 4-yr CAGR 4% 4-yr CAGR 12% YoY 6% YoY 3% YoY

Median TSX60 compensation has seen a relatively stable increase over the last five years

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Actual vs. Target Pay: Entire TSX60

$0 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000

TDC TCC

Compensation (CAD '000s)

201 2018 vs.

• s. 201

2019 Cha Change in n Actu ctual l an and Tar arget Com Compensatio ion

2018 - Target 2019 - Target 2018 - Actual 2019 - Actual

Contrary to 2018, above target LTIP awards drive increase in median CEO pay

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Compensation Levels: Top 5 Pay

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000

2018 2019 Aggr gregate Top 5 5 Pay

Total top 5 pay increased year over year, CEO share of total remains stable

Le Legend P75 P50/ Median P25 Average

CE CEO Pay as as a a Multiple of

• f NEO Pay

2018 2018 2019 2019 CF CFO 3.07x 2.88x NEO3 2.10x 2.28x NEO4 2.78x 3.09x NEO5 3.83x 3.68x

EXECUTIVE COMPENSATION

PAY MIX AND PLAN DESIGN

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Study: y:

• Companies in the TSX60 Index
• 2020 Proxies commenting on Fiscal 2019 (n=59)

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Short Term Incentive Design: No Significant Change

Financial 69% Operational 13% Strategic 8% ESG 6% Other 4%

201 2019 Cor Corporate STIP Mix

Financial 67% Operational 16% Strategic 7% ESG 6% Other 3%

201 2018 Cor Corporate STIP Mix

2018 STIP IP Metrics 2019

5.4 Number of metrics used, on average 5.3 60% 60% Scorecards with an individual component 63% 63% 16% 16% Board exercised discretion 17% 17%

STIP design remains relatively stable year-over-year, ESG metrics may be focus in future.

PSUs 49% RSUs 22% Options 28% DSUs 1%

201 2018 Average Target LTIP Mix ix

PSUs 52% RSUs 18% Options 30% DSUs 1%

201 2019 Average Target LTIP Mix ix

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Long Term Incentive Design: No Significant Change

2018 LTIP Metric ics 2019

2.1 Average number of metrics used in PSUs 2.4 65% 65% Relative TSR metric used 63% 63% 32% 32% Return metric used (e.g. ROE) 32% 32% 16% 16% Operational metric used (e.g. safety) 19% 19%

PSUs continued to increase in LTIP mix, with more performance metrics being added.

2020 SAY ON PAY RESULTS

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Study: y:

• Say on Pay results among the TSX Composite Index as of June 10, 2020 (n = 137)

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Canadian Say on Pay Results

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

>90% 80-90% 70-80% 50-70% Less than 50% Say-on-Pay Approval Rating

Canada Say-on-Pay Voting Results 2020 vs. 2019

2019 2020

The proportion of companies scoring below 90% decreased from 28% in 2019 to 20% in 2020

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Canadian Say on Pay Results by Industry

90.6% 89.8% 93.0% 91.0% 88.8% 91.4% 93.7% 91.3% 94.7% 85% 86% 87% 88% 89% 90% 91% 92% 93% 94% 95%

Materials Energy Financials Average Say-on-Pay Voting Result

Industry Say-on-Pay Voting Results 2018 to 2020

2018 2019 2020

Say on Pay results increased across all sectors in 2020 compared to mixed results in 2019

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Companies Responding to Low Say on Pay in 2020

Incentive design changes, shareholder engagement drive improved results

Co Company Key Is Issue in in 2019 Response 2020 2020 SoP

• P Result

lt

Pay an and per performance dis disconnect

• Shareholder outreach
• Suspension of cash

transaction bonuses

58% → 92%

Pay an and per performance dis disconnect

• Shareholder outreach
• Changes to STIP program

72% → 95%

Pay an and per performance dis disconnect

• Shareholder outreach
• Changes to LTIP program

77% → 96%

EMERGING TOPICS AND TRENDS

Two important topics related to the COVID-19 crisis, and how they impact compensation:

Emerging Topics & Trends

Perf rform rmance Management and Potentia ial l Use se of Disc iscretio ion on In Incentiv ive Programs

▪ Impacts of COVID-19 on 2020 compensation programs and how to think about the use

• f discretion

▪ Assessing organization and key executive performance in light of a challenging year ▪ Spotlight on Board effectiveness

Environmental, Social & Governance (“ESG”)

▪ Prevalence of ESG metrics in incentive programs ▪ COVID-19 has put significant focus on the social aspects of businesses, including human capital management of the broader workforce ▪ Pay equity implications

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TSX60 Proxy Webinar and Discussion

June 2020