(The Globe and Mail posted the following article by Bertrand Maroutte on its website on March 17.)
MONTREAL — Paul Tellier pocketed almost $10-million in 2002, his last year as president and chief executive officer of Canadian National Railway Co.
Mr. Tellier’s $9.8-million compensation package was disclosed yesterday in CN’s management proxy circular.
Mr. Tellier stepped down as CEO of Montreal-based CN at the end of last year to become chief of troubled air and rail transport company Bombardier Inc.
On top of his base salary of $1.7-million at CN compared with $1.4-million in 2001 Mr. Tellier received a bonus of $629,730 and other payments. He also exercised $7.4-million worth of stock options.
Mr. Tellier’s bonus last year was slashed in half from the $1.2-million he received in 2001.
The proxy says senior executives received only partial bonus payouts for 2002 because “the targets for operating income and revenues were met. but certain cash flow, profitability and customer satisfaction measures were not achieved.”
CN’s share price fell 21 per cent last year, compared with a 73-per-cent jump in 2001.
Mr. Tellier’s total compensation in 2001 was $9.6-million.
Chief operating officer Hunter Harrison, who replaced Mr. Tellier as president and CEO of CN, collected $3.3-million last year, compared with $5.9-million in 2001.
The proxy says Mr. Harrison’s new CEO employment agreement includes tax equalization benefits to bring Canadian tax rates in line with lower U.S. rates. Mr. Harrison is a U.S. citizen.Tax equalization payments that insulate executives from a bigger tax bite are a tool available to Canadian companies to woo and retain U.S. talent.
The proxy also indicates that a $653,250 (U.S.) interest-free loan granted to Mr. Harrison in 2001 will be forgiven on June 30, 2004.
A $1.5-million interest-free loan to Mr. Harrison was forgiven in 2001.The proxy also shows that CN paid KPMG LLP $1.75-million (Canadian) for audit and audit-related services in 2002. KPMG also billed $2.8-million for non-audit services, “of which [$2.25-million] was attributable to a one-time implementation fee in respect of a research and development claim for tax credits.”
The implementation fee for such services tends to be higher in the first year, the proxy says. For 2003, the board has approved a $350,000 fee for similar services.
Critics have blasted the practice of hiring auditing firms for both audit and non-audit services in the wake of the Enron Corp. financial scandal in the United States that involved allegations of conflict of interest on the part of the auditors.
The CN board’s audit committee has previously stated it has determined that hiring KPMG for non-audit services does not jeopardize the auditor’s independence.