Investors are questioning the Bank of Nova Scotia’s compensation plan for its upper echelons, with a shareholder adviser saying that there is a noticeable gap between the bank’s performance and the pay received by its chief executive officer Brian Porter.
The bank’s say-on-pay support resolution garnered only 60.8% of supporting votes in its meeting earlier this week. For perspective, an overwhelming 93.8% supported the resolution last year, The Globe and Mail reported.
By comparison, executive compensation resolutions by Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, and Canadian Imperial Bank of Commerce garnered at least 95% support from their respective boards.
The weaker support came in the wake of recommendations by Institutional Shareholder Services Inc., which found that Scotiabank posted the lowest one-, three-, and five-year shareholder return of the Big Six banks, “while the CEO’s compensation was ranked near the top.”
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During the pandemic year, Scotiabank’s total shareholder return was at -22.1%, versus the -8.2% average in the other five major banks.
Aaron Regent, board chair at Scotiabank, offered assurances that the bank is playing the long game when it comes to shareholder return. This is particularly apparent in its recent changes to its international operations, which included selling off businesses in higher-risk markets – a step that contributed to a loss of $587 million in profits.
“Scotiabank’s repositioning of its business aimed to improve its earnings quality and lower its risk profile by materially changing its geographic footprint and business mix,” Regent said. “This repositioning was intended to improve long-term returns to shareholders.”
Regent added that “2020 was an exceptional year, and the bank took a patient longer-term view in the face of the unforeseeable extenuating circumstances stemming from the COVID-19 pandemic.”