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of the plan design. "We look at who is auditing it and double checking the work. Often finance might pass finan- cial results to HR and they plug those numbers into the bonus formula and calculate the payout. We go through and define each of the roles and make sure the numbers are right and then look at governance practices such as board oversight and level of transpar- ency in disclosure, looks at the performance metrics put in place to fund the incentive pool and then they map it into a risk profile relative to the plan design and measure from a governance perspective the risk- iness of the plan. "For instance, we look at whether it is a direct drive compensa- tion plan where the sky is the limit for the size of the bonus pool — it may just be contingent on a couple of metrics the executive might need to achieve. Or, is it a more robust plan that uses deferred compensation in the mix? We simulate the business through stretching posi- tive and negative results to understand For each plan, Global Governance " says Gryglewicz. whether the payouts accrue in those environments and do the payouts make sense given the state of the business we stretched it to?" In terms of trends Gryglewicz says the Canadian economy seems ripe for M&A activity right now and there may be more cases like Vittera. "Depending on what side of the table they're on, directors are starting to say, 'let's take another look at the employment agree- ment to potentially update them,'" he says. "They may request updates on the latest trends on common change and control provisions." Global Governance just went through that process with one of mining clients to give it an idea of where its peer group was on what could be a reasonable multiplier. "Going from two to three times can be a big differen- tial, its boards spending more time engaging in putting some level of performance vesting conditions into the long-term incentive. "You will start to see a trend " says Gryglewicz. But the biggest trend he sees is towards directors wanting to adopt up to three different long-term incentives. So performance share units, restricted share units, and stock options all being used, and when you total it the target opportunity meets the same value but what they've done is change the prob- ability of attainment by adding perfor- mance vesting conditions into the plan design." Of course risk to the business doesn't in the resource space is what is the cost of a life if they have a death in a mine? Does it affect executive pay- out if financial results were still posi- tive?" says Gryglewicz. "It's that process of determining which performance metrics are important and drive value for the long run that is now being implemented in pay-for-performance analysis." IH stop with financial results. In some sec- tors, executives are being measured against other factors they may find to be even harder to control from their downtown urban offices. "The hardest one for companies Employment and Labour Lawyers Experience Counts. Referrals respected and appreciated. Shields O'Donnell MacKillop LLP 416.304.6400 65 Queen Street W, Suite 1800, Toronto, Ontario Canada M5H 2M5 Shields_IH_Apr_11.indd 1 INHOUSE JUNE/JULY 2012 • 3/1/11 10:04:56 AM 23

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