When it comes to Exec pay...sometimes it pays to b!tch loudly.
TORONTO, Oct. 28, 2021 (GLOBE NEWSWIRE) -- The Board of Trustees of RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) today announced that it has made significant changes to its executive compensation program. The changes were made following the Trust’s 2021 annual meeting of unitholders (the “Meeting”) in May 2021, at which RioCan received a say on pay vote outcome below 50%. Following the Meeting, the Board of Trustees (the “Board”) and its People, Culture and Compensation Committee (the “Committee”) conducted a thorough review of the Trust’s executive compensation program with the goal of ensuring it is designed to create long-term unitholder value by attracting, and retaining talented executives, linking pay with performance, and driving long-term performance.
“Immediately following the 2021 Annual Meeting, the Committee and Management assembled a team to address unitholder concerns regarding RioCan’s 2021 executive compensation program. The Committee then had a series of meetings with RioCan’s investors. The purpose of the discussions was to better understand unitholder concerns with the Trust’s 2021 executive compensation structure. We received and reviewed meaningful feedback and, have taken important steps to address the concerns that were identified through our investor outreach,” said Richard Dansereau, Chair of the Committee. “We would like to extend our gratitude to the unitholders who took the time to meet with us. We will continue to review and adjust our executive compensation program to align with the interests of our unitholders and reflect evolving market and industry dynamics.”
Following the Meeting, the Board took the following actions:
- Unitholder Engagement : The Committee engaged in an extensive investor outreach initiative immediately following the Meeting. Between June and September, the Committee met with and solicited feedback from RioCan’s largest unitholders. The purpose of these meetings was to ensure that the Board had a comprehensive understanding of unitholder concerns with the Trust’s compensation program. The Committee reached out to the Trust’s 30 largest unitholders, representing approximately 25.5% of RioCan’s outstanding units. To date, the Committee has held 16 meetings with unitholders, representing approximately 18.0% of RioCan’s outstanding units. The Board intends to continue this outreach.
- Independent Compensation Advisory : The Committee engaged Meridian as an independent compensation consultant in August 2021 to review and provide a fresh perspective on the Trust’s compensation program.
- Committee Engagement : Since the Meeting, the Committee has held five meetings to consider investor feedback and determine durable solutions for the relevant issues raised.
- Proposed Significant Changes : As a result of the above actions, the Board and management have committed to significant amendments to the Trust’s compensation program that RioCan believes will create lasting enhancements to its approach to executive compensation.
The table below summarizes key themes arising from the valuable investor discussions and independent consultant reviews of the compensation program, as well as the changes being made to address the concerns:
| Feedback | Response/ Commitment |
Unit options may no longer be an ideal long-term incentive (“LTI”) vehicle for RioCan and, in particular, should not be awarded outside the regular LTI program | - Unit options will no longer be awarded either as part of the LTI program or as special awards
- RioCan has redesigned its LTI program to provide awards that are well aligned with unitholder experience, support a strong distribution yield and align long term compensation with long term performance
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Special awards are an indicator that the LTI program is not operating effectively | - RioCan will not make any special awards to any Named Executive Officers (“NEOs”)
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CEO compensation positioning relative to market median has not been transparently disclosed | - In conjunction with the CEO transition earlier in the year, the approach to CEO compensation was reset to align more closely to the median of RioCan’s peers
- Enhanced disclosure of CEO compensation relative to market median will be included as part of RioCan’s 2022 proxy disclosure
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The Executive Management Bonus Plan (“EMBP”) metrics overlap with certain of the LTI metrics and the use of G&A as a percentage of rental revenue as a short-term incentive metric should be reduced. The executive ESG metrics and weighting are not transparent | - RioCan is responding to the concerns by significantly reducing the overlap of metrics in the annual and LTI program, establishing a standalone ESG metric to increase transparency of this measure, and eliminating G&A as a metric
- RioCan’s EMBP design for 2022 is expected to be:
- 60% Funds From Operations, to maintain a significant focus on business fundamentals
- 20% ESG related goals, which has been identified as a separate metric, to reflect the importance of ESG to RioCan and its unitholders; and to facilitate more transparent disclosure
- 20% Individual Executive Objectives
|
LTI metrics overlap with certain of the EMBP metrics, and performance should be measured over a multi-year period | - RioCan is retaining the current structure of 50% Performance Equity Units (“PEUs”) and 50% Restricted Equity Units for its LTI program
- Overlap between the LTI and EMBP metrics has been reduced through the reduction of the FFO per Unit weighting, and the introduction of two new performance metrics into the LTI program
- RioCan will measure FFO on a cumulative basis over three years, rather than using three one year periods, further reducing the overlap between the EMBP and LTI program. RioCan’s PEUs will vest based on:
- 40% three-year cumulative FFO per Unit
- 40% three-year relative total unitholder return against RioCan’s peer group
- 10% three-year NAV growth
- 10% ESG related goals
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Increase unit ownership requirements | - The CEO’s unit ownership requirement has been increased to 5X base salary
- Until each NEO has met the unit ownership requirement, 50% of the net after tax portion of proceeds from any unit option exercise and 50% of the net after tax value of the any unit redemption must be retained in units or applied to the purchase of units
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Compensation peer group | - The Committee worked with its independent compensation consultant to redevelop its compensation peer group to provide a more robust sample of peers and to replace some peers in adjacent industries with more business-relevant peers
- RioCan will provide enhanced proxy disclosure of the rationale for the selection of the companies in the compensation peer group and information about RioCan’s size relative to peers on key metrics
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Performance peer group
| - RioCan will use the same group of peers for measuring both compensation and relative total unitholder return performance for the PEUs
- This simplifies the analysis of pay and performance and will allow for enhanced disclosure of the close links between compensation outcomes and performance relative to RioCan’s peers
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Proxy disclosure could be enhanced to more clearly describe compensation and incentive programs | - In addition to the specific references to enhanced disclosure in this press release, RioCan commits to making the management information circular easier to read and to providing enhanced disclosure of compensation decisions and the business rationale for these decisions
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Additional details will be provided in RioCan’s Management Information Circular prior to the 2022 annual meeting of unitholders.
RioCan remains committed to year-round and meaningful engagement with unitholders. The Committee will continue to assess the Trust’s executive compensation program to align with business goals and unitholder interests and work towards restoring unitholder confidence in the program.
About RioCan
RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at June 30, 2021, our portfolio is comprised of 214 properties with an aggregate net leasable area of approximately 37.2 million square feet (at RioCan's interest) including office, residential rental and 15 development properties. To learn more about us, please visit www.riocan.com.