Simply who is looking the photographs at Toronto Hydro?
The century-old utility, which gives energy to virtually 700,000 houses, is 100-per-cent owned by town of Toronto. However the Star has discovered that when Toronto Hydro was requested to cut back its govt bonuses to deliver them according to a metropolis coverage on bonuses paid out to high brass at different city-owned companies and companies, the corporate’s board politely refused.
With the CEO incomes $1.33 million in whole compensation — greater than the $1.08 million earned by the present CEO of Hydro One, which is seven occasions the dimensions by whole income — a number of long-time staff of Toronto Hydro have contacted the Star saying that govt pay has gotten uncontrolled and it’s time for town to take motion.
Toronto Hydro’s refusal to adjust to town’s request can’t assist however stir reminiscences of one other latest conflict over govt pay at an electrical energy firm. Throughout his marketing campaign to change into premier, Doug Ford dubbed Hydro One’s then-chief govt officer Mayo Schmidt the “six-million-dollar man.” As soon as elected, his authorities handed new laws to power the partially privatized firm to restrict annual CEO pay to not more than $1.5 million.
It was messy and costly — Schmidt left Hydro One in 2018 with greater than $10 million in severance and inventory choices — however in the long run, the province bought its method.
Over at Toronto’s Metropolis Corridor, nonetheless, the battle over govt pay appears to be extra of a gradual burn.
Town has been attempting to rein in govt compensation at city-owned companies and companies for a few decade, stating in a 2012 report that the 2008 monetary disaster spurred public demand for extra transparency and fairness in govt pay. After a number of years of overview, by 2014, town had adopted pointers that included a restrict on incentive pay for sturdy efficiency — bonuses — to not more than 25 per cent of base wage.
Regardless of these pointers, final 12 months Toronto Hydro Corp. CEO Anthony Haines took house a bonus of $641,763, equal to greater than 96 per cent of his base wage.
In reality, Haines has acquired a bonus of between 95 and 100 per cent of his pay yearly since 2015 — whereas different executives routinely obtain bonuses equal to between 50 and 60 per cent of their wage. Their formal bonus targets are set at 65 per cent of wage for Haines and 40 per cent for the others.
It has now been greater than three years for the reason that metropolis final mentioned it could overview Toronto Hydro’s compensation insurance policies and requested the utility to take one other take a look at its govt pay and bonus packages. However nothing has modified, although each additional greenback paid to high executives is a greenback that would assist steadiness the funds for town.
Stakeholder teams have had sufficient, with the Energy Staff’ Union protesting to the Ontario Power Board (OEB) throughout a listening to over electrical energy charges in 2019 that “govt and managerial compensation (at Toronto Hydro) has been rising at an unreasonable and unsustainable fee.”
Power Probe, which advocates for decrease electrical energy charges (and opposes authorities carbon worth packages) additionally mentioned it had “main issues concerning the ranges of govt incentive pay (bonuses)” at Toronto Hydro.
“There’s a protracted historical past of council being annoyed by Toronto Hydro,” mentioned metropolis Coun. Gord Perks, who mentioned he was on the corporate’s board from 2006 to 2010.
“Senior administration at Hydro and its board have persistently taken the view that they’re a non-public company and that they need to supply compensation and set up administration insurance policies as in the event that they have been only a privately held utility.”
The long-simmering battle raises severe questions concerning the metropolis’s obvious lack of affect on the firm, regardless of being its sole shareholder and having three metropolis councillors on its board. Govt pay at Toronto Hydro cuts into the cash the corporate pays to town annually and, not directly, the taxpayers who help it.
“They neglect that they’re owned by Torontonians,” Perks mentioned. “And so they have accountability there.”
Toronto Hydro has lengthy used a coverage of beneficiant bonuses to reward its high managers, arguing that it operates within the non-public sector and has to compete to recruit and retain probably the most gifted executives.
The corporate didn’t reply to quite a few particular questions for this text, however spokesperson Russell Baker instructed the Star in an e-mail the corporate makes use of a “market-based govt compensation system … designed to draw and retain executives who’ve the talents and expertise to assist the group obtain its strategic targets.”
Baker mentioned that system, “together with the benchmarking knowledge that informs it,” is commonly reviewed by the OEB in the midst of setting electrical distribution charges. Toronto Hydro’s subsequent compensation overview is scheduled for later this 12 months, he mentioned, and will likely be submitted to the regulator “within the regular course.”
“Toronto Hydro’s govt compensation is at or under the market median and has decreased by roughly 10 per cent over the past decade,” Baker mentioned, although he didn’t present sources for these knowledge factors. He mentioned the corporate has paid virtually $700 million to town in dividends over that point interval.
Marcela Mayo, a spokesperson for town, mentioned it “has noticed gaps in compliance between Toronto Hydro’s govt compensation coverage and practices and town’s framework for govt compensation at companies and companies as indicated by metropolis council path.”
She mentioned in an e-mail that town’s companies and companies are “separate employers who’re accountable for the compensation of their staff,” and added that town has established a framework for such organizations to contemplate when creating their very own insurance policies on govt compensation, which should in flip be accepted by their respective boards.
“Town is dedicated to finishing its common overview of town’s company and company govt compensation insurance policies, together with Toronto Hydro, and updating town’s 2014 framework in line with present main apply,” Mayo mentioned, including that the work contains “procuring unbiased, exterior experience to undertake a benchmarking examine of Canadian municipal jurisdictions.”
Mayo mentioned town’s common overview of govt compensation at metropolis companies and companies had been delayed by the COVID-19 pandemic however is now “superior” and on monitor to be accomplished this 12 months.
In March, Toronto Hydro mentioned it expects to spend virtually $800,000 to high up the defined-benefits pensions of 4 of its highest-paid executives, together with Haines, once they retire. The corporate additionally revealed it’ll pay Haines a separate retirement allowance of as much as $1.5 million, a rise from a beforehand disclosed most fee of $1 million.
The pension top-ups, a few of which adopted a dedication made by an arbitrator, have been disclosed within the footnotes of a dense monetary submitting. However a number of Toronto Hydro pensioners took discover and contacted the Star, involved that the advantages have been merely the most recent instance of a protracted historical past of runaway govt compensation on the utility.
The Toronto Hydro board of administrators did attempt to do one thing about CEO pay in 2015.
When Haines turned CEO of Toronto Hydro in 2009, his bonus goal was set at 65 per cent of his wage.
That was quickly to be method out of line with town’s 25-per-cent cap, which was a part of the pointers that town developed after the monetary disaster.
In 2014, town requested all city-owned companies and companies, together with Toronto Hydro, to overview their govt compensation insurance policies, particularly asking them to cap bonuses at 25 per cent of base pay “the place potential.”
The Star has discovered that Toronto Hydro’s board dedicated in 2015 to deliver the CEO’s bonus goal right down to 40 per cent of wage, nonetheless above town pointers, however at the least according to the remainder of the city-owned utility’s high executives.
But, the brand new bonus goal will solely take impact when Haines retires and a brand new CEO is called. And Toronto Hydro not too long ago revealed — additionally through a footnote in a monetary doc — that Haines’s “energetic service will stop” on the finish of 2024, virtually a decade after the board dedicated to a extra austere bonus coverage for its high govt.
By 2015, Haines took house greater than $1 million in whole compensation and he has earned much more yearly since.
Town once more instructed Toronto Hydro to overview its compensation coverage for senior executives in 2016, as soon as extra asking the corporate to cap incentive pay at 25 per cent of wage and to use the coverage to new and current contracts “that let compensation changes.”
In a confidential response to town in 2017, the utility’s board mentioned it didn’t help bringing govt bonuses according to town’s 25-per-cent bonus coverage for a number of causes, together with the danger of litigation if current contracts are modified, discouraging the development of feminine executives and creating pay fairness points.
The board mentioned in its response to town that its variable pay program awards the achievement of “stretch” targets and its govt compensation coverage, which it included in its response, states that “staff ought to anticipate important variability” in awards payouts from 12 months to 12 months. But, monetary filings present that Toronto Hydro executives appear to exceed these targets on a routine foundation.
The board’s response to town, which was disclosed in a submitting with the 2019 OEB charges utility, additionally cited a reluctance to depart from an strategy of utilizing incentive pay to inspire high-performing executives and mentioned of the 25-per-cent cap “this apply is just not per trade apply.”
The query of how precisely to outline “trade apply” is the place issues get tough in terms of Toronto Hydro, which might appear to straddle the road between the non-public and public sectors. It’s a for-profit firm — it was integrated below the province’s enterprise companies act in 1999, a transfer mandated by Mike Harris’s Progressive Conservative authorities — however its sole shareholder is town and it operates in a intently regulated trade as a monopoly.
Town units the governing ideas for Toronto Hydro by way of a “shareholder path” to the corporate, which specifies that three metropolis councillors, together with the mayor or a delegate, sit on the board of administrators. Metropolis council can also be accountable for appointing the remaining eight board members. The present councillors on the board are deputy mayors Stephen Holyday and Denzil Minnan-Wong, and Paul Ainslie.
“The concept (behind operating municipal utilities as companies) was they might be free of lots of the constraints that the general public sector operated below,” mentioned Andrew Sancton, professor emeritus of political science who taught at Western College. “They might be extra entrepreneurial and environment friendly.”
Sancton mentioned it isn’t unusual for some public-sector executives to be paid private-sector charges for his or her work, pointing to the top of the Canada Pension Plan Funding Board, which manages virtually $500 billion. And whereas many power firms are authorities regulated, additionally they function within the non-public sector and sometimes face intense competitors.
But, Sancton mentioned, “a municipal electrical energy distribution outfit doesn’t strike me as being precisely in the identical class.”
“What they do is purchase electrical energy from the generator … and ship it out to residents and companies. It’s a fancy group however it’s not aggressive in any respect, it’s a monopoly.”
Whereas Toronto Hydro doesn’t generate energy, it does preserve near 30,000 kilometres of overhead and underground wires, plus tens of 1000’s of switches, transformers and poles. It additionally must put money into ageing infrastructure and meet the wants of a quickly rising metropolis.
The corporate has borrowed closely to put money into infrastructure, and in 2017 it bought a $250-million funding from town. Earlier than that injection of funds, Toronto Hydro had mentioned it could slash its annual payout to its sole shareholder to $25 million. Final 12 months, the corporate paid town a dividend of $92.6 million.
Haines outearns the CEO of Ontario Energy Era, who was the best paid public-sector worker in Ontario in 2020 with a pay package deal of $1.23 million. And he makes excess of the CEO of Toronto Neighborhood Housing, one other city-owned company, who took house $345,000 final 12 months. The premier and the mayor each made round $200,000 in 2020.
He does take house lower than the CEOs of EPCOR and Enmax, two Alberta-based power firms Toronto Hydro used as comparators in a compensation benchmarking report included with its 2017 response to town. The CEOs of these firms, which have out-of-province operations that transcend native energy distribution, earn greater than $2 million every.
Toronto Hydro additionally famous in its 2017 response to town that it doesn’t present long-term incentive funds, which regularly come within the type of inventory choices or grants.
Glen Hodgson, an economist with the C.D. Howe Institute who not too long ago carried out a overview of government-owned companies, mentioned Toronto Hydro’s governance on govt compensation seems to be working the best way it’s meant.
“It’s actually the decision of the board, it’s not the decision of metropolis officers or the council, as a result of that’s why you created a state-owned enterprise within the first place and never one other division of town authorities,” he mentioned, including that if town is sad with govt pay, it ought to elevate that with the board of administrators.
However Perks mentioned the present administration at Metropolis Corridor has not been “ready to exert its authority” over Toronto Hydro. He mentioned operating the utility is just like managing different public sector organizations and that compensation shouldn’t be benchmarked in opposition to non-public firms.
“It’s simply a problem of equity,” Bruno Silano mentioned concerning the pension top-ups and govt compensation. Silano was an engineering technician who retired in 2020 after 30 years with the utility, together with a few decade as an area union chief. “Within the grand scheme of issues, will (hydro) charges go up? No. However it’s simply not truthful.”
“It raises an entire set of questions on are these board members in a position to stand as much as the executives and the president and CEO?”