HOT TOPICS IN EXECUTIVE COMPENSATIONHugessen Breakfast Seminar | June 7, 2016

2

Agenda for Today’s Event

Welcome

Highlights from the 2016 proxy season

Panel introduction

Panel discussion

Audience Q&A

Closing remarks

3

Highlights from the 2016 Proxy Season

4

Highlights from the 2016 Proxy Season

Performance and Pay

Pay Mix and Plan Design

Notable Topics and Issues

Say on Pay Results

Scope of study:

TSX 60 companies

2016 proxies filed by May 18, 2016 (n= 56)

Say on Pay results as of May 25, 2016 (n = 43)

5

Performance and Pay: TSR 60 Total Return and CEO Pay

-12%

-6%

0%

6%

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

2015 TSX60 Index Return

$7,496

$2,733

$1,111

$7,585

$2,753

$1,138

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

TDC

TCC

Salary

Year-over-Year Changes in Actual Compensation2015 2014

1.2%

0.7%

2.4%

-10%

-75%

-55%

-35%

-15%

5%

25%

45%

65%

20

15

TSR

TSX 60 Constituents - 2015 Total Shareholder Return

Resource

Non-Resource

6

Performance and Pay: A Tale of Two Economies

-24%

-27%

Distribution of 2015 TSR

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Performance and Pay: A Tale of Two Economies

2

3

0

5

7

10

4

6

5

6

0

2

4

6

8

10

12

<-50% -25% to -50%

-10% to -25%

-5% to -10%

0% to -5% 0% to 5% 5% to 10% 10% to25%

25% to50%

>50%

# o

f C

om

pan

ies

Changes in Same Incumbent Acutal TDC Year-over-Year (n = 50)

Year Over Year Change in TSX 60 CEO Total Direct Compensation

$6,000,000

$6,500,000

$7,000,000

$7,500,000

$8,000,000

$8,500,000

$9,000,000

All TSX60(n = 56)

O&G Companies(n = 12)

Mining Companies(n = 10)

Excluding ResourceCompanies

(n = 38)

Same Incumbents(n = 49)

Act

ual

To

tal D

irec

t C

om

pen

sati

on

Year-over-Year Actual Compensation for CEOs

2014 2015

1.2%7.6%

-14.5%

-21.6%16%

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Performance and Pay: A Tale of Two Economies

9

Pay Mix and Plan Design: Fixed vs. Variable Pay

Fixed, 20%

Variable, 80%

2014

Fixed, 19%

Variable, 81%

2015

10

Long-term incentive plan mix generally consistent year over year

Pay Mix and Plan Design: LTI Mix

Stock Options

34%

RSUs 15%

PSUs 51%

2015

Stock Options

35%

RSUs 18%

PSUs 47%

2014

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On average, TSX 60 PSU plans are based on the following metrics:

Pay Mix and Plan Design: LTIP Performance Framework

Two performance metrics used on average

Include total shareholder return (TSR) metric

Use return metric (e.g. ROE)

Include operational metric (e.g., recycle ratio)

2

70%

35%

25%

12

Notable Topics and Issues

Use of Discretion

USD-CAD Exchange Rate

13

Notable Topics and Issues: Use of Discretion

Applied Discretion

33%

Did Not Apply Discretion

67%

Board Discretion on STIP Payout

Took STIP scorecard down from 150% to 100%

Bonuses reduced by 10% for Senior Management

No bonus awarded to NEOs in 2015

STIP payout reduced to 55% from 77%

14

Notable Topics and Issues: USD-CAD Exchange Rate

$0.68

$0.73

$0.78

$0.83

$0.88

Jan Apr Jul Oct Jan Apr

Canadian / U.S. Dollar Exchange Rate

2015 2016 YTD

-16% in 2015

-25% between 2013-15

15

Applied discretion to moderate pay of execs paid in USD / are benchmarked to U.S. peers

Applied discretion to account for the impact of exchange rate on performance

Adopted USD compensation for U.S. Directors

USD-CAD Exchange Rate -- What TSX 60 Companies Did

“To adjust for the impact of the strong U.S. dollar on his base salary, we made a reduction to his variable cash compensation.”

16

Average Say on Pay voting results are slightly lower than 2015 (89% vs. 90.4%)

Say on Pay Results

0%

10%

20%

30%

40%

50%

60%

>95% 90%-94% 85%-89% 80%-84% 70%-79% 60%-69% 50%-59% <50%

% o

f Is

suers

with S

ay-o

n-P

ay

Say-on-Pay Results2016 vs. 2015

2016

2015

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Say on Pay Results: Influence of ISS and Glass Lewis

94.3%

73.5%

51.9% 51.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

16

Say

on

Pay

Sco

re

Influence of ISS and Glass Lewis on Say on Pay Results

n=9 n=3 n=3n=34

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Panel Discussion

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Panel Discussion – Toronto Panel

Georges Soaré

Partner, Hugessen

Consulting Inc.

Tom O’Neill

Chair of the Board,

Scotiabank

Paul Schneider

Head of Corporate

Governance, Public

Equities, Ontario

Teachers’ Pension Plan

David Crawford

Partner, Hugessen

Consulting Inc.

20

Panel Discussion – Calgary Panel

Scott Munn

Partner, Hugessen

Consulting Inc.

Randy Findlay

Chair of the Board,

Pembina Pipeline

Harvey Doerr

Chair of the Board,

Velvet Energy

Erin Poeta

Manager, Hugessen

Consulting Inc.