COMPENSATION DISCUSSION AND ANALYSIS INTRODUCTION
This section of the Circular sets out our philosophy and approach to executive compensation, information about each element of our compensation program, the market research, policies and methods used in determining compensation, and details of each NEO’s compensation in fiscal 20 22. We aim to provide you with the information you need to understand our executive compensation program and to inform your “say on pay” vote.
NAMED EXECUTIVE OFFICERS (NEO)
• Christopher H. Fowler, President and CEO • R. Matthew Rudd, CFO • Stephen H.E. Murphy, Group Head, CPW
• Carolyn J. Graham, SEVP • M. Carolina Parra, CRO
COMPENSATION GOVERNANCE The Board appoints knowledgeable and experienced individuals to the HR Committee who have the necessary background, skills and experience in executive compensation, risk management and human resources matters to fulfil the HR Committee's obligations to the Board and shareholders, and to make inquiries and decisions on the suitability of CWB's compensation policies and practices. All HR Committee members have significant experience in these areas as senior leaders and directors of other organizations. In particular:
• All members have direct experience in compensation matters as current or former CEOs or executive officers; and • One member serves as compensation committee member for another public company.
We follow numerous compensation governance best practices, including those described under the heading “Alignment with FSB Pr inciple s and Standards” on page 38.
Additional information regarding the HR Committee members is provided in the individual director biographies found in the “ Your Director Nominees ” section in this Circular.
EXECUTIVE COMPENSATION PHILOSOPHY
Our executive compensation philosophy is based on three guiding objectives:
• Attract and retain competent and motivated individuals who develop and execute our strategic direction, and deliver strong and positive outcomes for our clients, people and investors; • Align compensation with the achievement of CWB Financial Group's strategic and operational objectives; and • Align compensation with long-term shareholder interests.
Our executive compensation philosophy is designed to align with our risk appetite, while considering compensation trends and practices in the market. We pursue these guiding objectives through the following key elements of our compensation philosophy:
MARKET COMPETITIVE
• To attract, motivate, and retain talented employees, we offer compensation for executive positions that is competitive in the markets where we compete for talent. • The market data median is the main reference point used for positioning total compensation for each executive. The HR Committee may determine variances from the median based on individual performance, relevant experience, tenure, internal equity considerations, and retention needs. • Actual total compensation realized by a NEO in any given year is subject to fluctuation based on CWB’s share price at the time LTIP grants vest or when stock options are exercised, and by STIP and PSU performance/payout factors for awards vesting in a given year. The HR Committee periodically reviews realized total compensation data and compares realized compensation of the CEO over time to compensation reported in the relevant year, as set out in the “Summary Compensation Table” on page 60. In addition, a table showing the actual cash value of compensation paid out and received by NEOs in 2022 and the previous two fiscal years is set out on page 61.
PAY FOR PERFORMANCE
• We provide appropriate annual base compensation commensurate with the responsibilities of the executive, and other compensation elements clearly linked to performance. The CEO’s and other members of the Executive Committee’s respective responsibilities are set out in written position descriptions approved by the HR Committee and the Board. • Our pay-for-performance approach is designed to motivate employees through short-term and long-term incentives: - STIP outcomes are based on a combination of achieving corporate financial and operational goals and individual leadership and strategy contributions; and - LTIP outcomes are based principally on financial and strategic performance leading to value creation for shareholders, and designed to encourage executives to remain with CWB over the long term. • Our objective is that a significant portion of compensation is “at risk” based on performance ; superior performance will result in superior compensation, and capable management is retained.
35 | Canadian Western Bank- Management Proxy Circular
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