National Bank’s CEO says he takes comfort in a shareholder vote of confidence in his leadership held Wednesday, despite an activist group’s contention that his pay package is “exorbitant.”
In the several years since the bank gave shareholders a say on executive pay, they have voted massively in favour of the board’s compensation plan.
At National’s annual meeting Wednesday, that vote exceeded 95%. Shareholders also agreed to add millions of stock options to the pool of incentives available for senior managers.
“I think we’re comfortable that our shareholders are aligned with our compensation policies,” Louis Vachon said in an interview after the meeting.
He said the bank has performed well over the past year, producing record earnings and being the first Canadian bank to increase its dividend while adding thousands of clients and employees.
“We know we have challenges, but I think this organization is moving forward and it’s up to the shareholders and the board to decide if I’m worth it or not.”
A vocal minority of shareholders from the rights group Medac spent much of the three-hour meeting criticizing the executive compensation, including $8.4 million salary and bonuses paid to Vachon last year.
Medac member Yves Michaud denounced the payments and the peer comparisons used by National (TSX:NA) and other banks to justify their opposition.
Calling such huge payments “scandalous” he called upon the board to end the “orgy” of expenses that weigh on the backs of shareholders.
“The remuneration of corporate executives has become a cancer of modern capitalism,” he said.
At a time when the world is recovering from a global financial crisis, it’s unthinkable that these high payments would continue, Michaud added.
Instead of comparing itself to other banks and generous institutions such as Power Corp., Sun Life and Great-West Life, he said they should look at institutions such as the Caisse de depot et placement du Quebec and the Solidarity Fund.
Both Quebec groups which oversee billions of dollars in assets pay their top executive about $500,000.
Medac has been pressing the bank to reign in its compensation practices for 15 years. It has also targeted other Quebec-based companies, such as Bombardier (TSX:BBD.B) and grocer Metro Inc. (TSX:MRU).
Despite his criticisms, Michaud said Canada’s sixth-largest bank is more modest than the country’s other large banks, which pay even more to their chief executives.
Vachon’s total compensation last year was up 47% from $5.7 million in 2010. In addition to a 2011 salary of $954,473, he also received $2.5 million in share-based awards, $2.2 million in options and $1.8 million in incentives.
Board chairman Jean Douville countered that the bank’s executive compensation reflects “the realities that we live.” High pay is needed to retain and attract talent.
Meanwhile, Vachon said the bank will continue to expand its presence outside its Quebec base by extending partnerships such as the one with Investors Group.
The focus won’t just be in Ontario, but also in Western Canada and the Maritimes.
Vachon wouldn’t divulge how much the bank would spend on such efforts.
It will first focus on integrating recent acquisitions of Wellington West and HSBC before looking for new expansion opportunities in a few years, he added.
On the Toronto Stock Exchange, National shares fell 44 cents to $78.99 in afternoon trading.