FSB Principle
CWB Alignment
Board monitors and reviews the operation of the compensation system
• The HR Committee approves key performance objectives at the beginning of the year, and performance against those objectives is evaluated periodically during and at the end of each year to establish that year’s awards. • The HR Committee periodically engages an independent compensation consultant to review the compensation structure and the executives’ level of compensation. • Compensation for employees in oversight functions (risk, audit, compliance, and finance) is based on enterprise performance and individual performance, and is independent of the results of specific businesses overseen.
Employees in financial and risk control functions must be compensated in a manner that is independent of the business areas they oversee Compensation is adjusted for all types of risk
• All executive compensation plans have a discretionary element that permits the HR Committee to consider risk when determining award grants and payouts. • Our STIP and PSU programs include a mix of financial, operational, and strategic performance metrics incorporating both quantitative and qualitative measurements, some of which are assessed in relative performance terms, and some in absolute performance terms. • The HR Committee tests the performance goals for the main STIP metrics in a range of possible scenarios, to check that goals are suitably calibrated and appropriately challenging. • Amendments were introduced to the Fiscal 2024 STIP design to introduce a formal risk review step in the evaluation of corporate performance. • Short-term incentive payouts are subject to maximum percentages of base salary and a minimum of zero. • All employees’ variable compensation may be subject to forfeiture if an employee resigns or is terminated for cause. • Senior managers’ variable compensation is subject to recoupment and forfeiture in the event of (i) a financial restatement; or (ii) if the individual engages in job-related gross negligence, severe dereliction of duty, fraudulent conduct, intentional misconduct, or serious or systemic breach or breaches of the Code; or (iii) a serious breach of any of CWB’s risk management policies (particularly including CWB’s Enterprise Risk Management Policy and Enterprise Risk Appetite) or in the HR Committee’s reasonable view, if the individual has otherwise engaged in excessive risk taking. • Stock options and PSUs vest after three years and RSUs vest in one-third instalments in each year after they are awarded over a three-year period, providing sufficient time for the share price to incorporate the impact of risks taken. • Share ownership requirements for all officers align their interests with shareholders at all times. • The Executive Committee is required to hold their minimum shareholdings for a six-month period post-employment. In addition, the CEO is required to hold one-half of his minimum shareholdings for a further six months, should he (a) retire, or (b) unilaterally resign for a reason other than a change of control where his position is eliminated or substantially changed or as required under our Majority Voting Policy. • Directors and officers are not permitted to use hedging strategies designed to monetize or reduce market risk associated with equity-based compensation or their holdings in CWB securities. • Equity-based compensation as a percentage of total compensation increases with seniority and the authority of individuals to make decisions that could have a material impact on our risk profile.
Compensation outcomes are symmetric with risk outcomes
Compensation payouts are aligned with the time horizon of risks
The mix of cash, equity, and other forms of compensation is consistent with risk alignment
NON-GAAP FINANCIAL MEASURES
Use of Adjusted Financial Measures in Executive Compensation
Certain non-GAAP financial measures, defined in the “Non -GAAP Measures” section of our 2023 MD&A (dated December 7, 2023), including adjusted EPS and adjusted return on common shareholders ’ equity, are used in making executive compensation decisions to set compensation performance measures and to assess performance against those measures. Such financial measures do not have any standardized meaning under GAAP and, therefore, may not be comparable to similar measures presented by other issuers. Adjusted measures used for executive compensation purposes are generally consistent from year to year, are the key metrics we use to analyze our business results against internal budgets and operational plans, and are computed consistently with the same non-GAAP measures in our annual MD&A, except where noted otherwise. Our MD&A provides details and reconciliations of the non-GAAP financial measures we use to the comparable metric computed in accordance with IFRS. The Audit Committee recommends the annual MD&A, including the non-GAAP measures, to the Board for approval. We believe these measures provide readers the ability to better understand and analyze trends related to profitability and the effectiveness of our operations and strategies, and aligns to how management assesses performance. Adjustments relate to items which we believe are not indicative of underlying operating performance, and therefore, provide a more useful measure for executive compensation metrics. In fiscal 2023, the non-GAAP financial measures of adjusted EPS , adjusted return on common shareholders’ equity, and efficiency ratio were used in the STIP and/or PSU plans and were consistent with the same adjusted measures discussed in our MD&A, unless stated (see Performing Loan Provision for Credit Losses below). The HR Committee reviewed those definitions when it approved the STIP and PSU plan designs for the fiscal 2023 awards.
Other performance measures used in the STIP and PSU programs in fiscal 2023 included employee engagement, client satisfaction, relative TSR, and strategic and/or operational objectives, which do not rely on financial data.
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