PwC Report: Dramatic Rise in 2010 Bonus Payouts For Canadian Mining CEOs – 88% of Base Pay Compared To 61% in 2009

Sep 2, 2010 | Corporate Member News

Average cash bonus payout was $540,000

Reflecting a more bullish commodities market over the past year, Canadian mining CEOs saw their cash bonus payouts rise from 61% of salary in 2009 to 88% of their salary in 2010, according to the 2010 Mining Salary Survey, authored by Coopers Consulting Ltd. and PricewaterhouseCoopers (PwC). However, the average annual base pay of Canadian mining CEOs at $480,000 showed little change from the comparable figure reported in 2009. The survey also shows that: 

–   The average total cash compensation package (annual base salary plus cash bonus) was $840,000 (compared to $670,000 in 2009) 

–   The average actual cash bonus payout in 2010 was $540,000, compared to $303,000 in 2009 

–   95% of Canadian mining CEOs were eligible for short-term incentive compensation (i.e. an annual cash bonus), but of the 62 participating companies, only 45 (69%) reported payouts 

–   The highest reported cash incentive percentage amount was 434% of base pay, compared to 104% in 2009. 

“Over the past three years we have seen a roller coaster ride in terms of CEO bonus compensation in the mining industry. In 2008, the average bonus paid to CEOs was 79%, it decreased to 61% in 2009 and has now bounced back and then some, to 88% in 2010,” says Lou Vujanich, survey leader and principal of Coopers Consulting. “These fluctuations in annual bonus payouts show the effect of companies placing a greater weighting on the variable components of the executive compensation package than they do on the fixed annual base pay component.”

“In 2009 the lower number of bonuses and smaller size of the bonuses reflected the fact that actual performance of many of the companies did not hit the target levels required for larger bonus payouts. However, we are now seeing some dramatic swings back in bonus compensation that demonstrate a new confidence in commodity pricing and profitability,” adds Len Boggio, survey report contributor and senior partner in PwC’s mining practice.

The Coopers – PwC survey this year covers 44 typical corporate mining offices positions, 58 salaried mine site positions and 14 field exploration positions. The 2010 salary survey database contains information on 15,980 employees – 6,836 from Canada and 9,144 from the U.S. Data is provided for 65 mining company CEOs. In total 290 North American mine sites are represented in the 2010 update (110 in Canada and 180 in the United States).

The survey indicates that salaried mine site staff in western Canada are generally better paid than their eastern Canadian counterparts. Results also show that salaried mine staff in coal, industrial and other minerals operations are generally paid more than the other commodity groups while base metal mining in general, sees smaller paycheques across the board.

For Canadian mine site staff, over 80% of salaried positions are eligible for some form of short-term incentive plan, an increase of 21% since 2002 (59%). The average such bonus paid (across all mine site salaried staff positions) was 14%, compared to 15% in 2009, 17% in 2008, 16% in 2007 and 13% in 2006.

The report notes that while short-term incentive plans have traditionally been reserved for senior mine site based positions, more salaried staff positions are receiving this type of compensation. “This indicates a change in the compensation philosophies of Canadian-based mining companies to ensure the competitiveness of their plans,” says Boggio.

Another trend identified in the report that is gaining increasing prominence is a focus on “internal pay equity” – measuring a CEOs pay against one or more layers of the company’s employees (typically other executive officers).

“Those who are supportive of internal pay equity see the advantages of restoring fairness internally and at the same time addressing shareholder concerns about possible excessive CEO pay,” states Vujanich.

About Coopers Consulting

Coopers Consulting Ltd. is a B.C.- registered limited liability corporation founded in 2002 by the former National Director and three Principals of the Mining Management Consulting practice of PricewaterhouseCoopers LLP. The Principals of Coopers Consulting all have significant mining industry experience and offer a wide range of management consulting services to the global mining community.

About PricewaterhouseCoopers LLP

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,300 partners and staff in offices across the country.

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate legal entity.

For further information: Note to editors: To arrange an interview please contact: Jim Nelson, PricewaterhouseCoopers, 604 806 7047, [email protected]; or Kiran Chauhan, PricewaterhouseCoopers, 416 947 8983, [email protected]; For copies of the report, contact Lou Vujanich, [email protected].

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