Equity Requirement Policy
Purpose
• To align executives’ investment in CWB common shares and common share equivalents with long-term shareholder interests.
Key Features
• Requires officers to maintain ownership levels equal to a multiple of annual salary. The ownership level may be achieved through holding common shares and outstanding RSUs and PSUs. Compliance is assessed annually on October 31st. • The Executive Committee must hold their minimum shareholdings for a period of six months (and, in the case of the CEO, for another six months in respect of one-half of minimum holdings) should they (a) retire, or (b) unilaterally resign for a reason other than a change of control where the NEO’s position is eliminated or substantially changed, or as required under CWB’s Majority Voting Policy. Mr. Fowle r's employment agreement imposes additional requirements, discussed on page 53. • All employees at the VP levels and higher must invest up to 25% of the net after-tax proceeds of any equity-based compensation realized in a year to purchase common shares if they have not met their minimum equity requirements at the most recently completed anniversary of their appointment. • Each NEO exceeded their minimum equity requirement as at October 31, 2022.
Total Value of Common Shares, RSUs and PSUs Held (1)(2) ($)
Ownership Requirement ($)
Common Shares, RSUs and PSUs as a Multiple of Salary
Ownership Requirement Multiple
Requirement Met
Christopher H. Fowler President and CEO
✓
5 x annual salary
4,100,000
5,687,022
6.9
R. Matthew Rudd CFO
✓
1.65 x annual salary (3)
594,000
813,285
2.3
Stephen H.E. Murphy Group Head, CPW Carolyn J. Graham SEVP
✓
2 x annual salary
920,400
1,813,612
3.9
✓
2 x annual salary
762,000
1,916,420
5.0
M. Carolina Parra CRO
✓
- (4)
-
382,923
1.1
(1) The value of RSUs, PSUs, and common shares is generally determined based on the common share closing price on the TSX on October 31, 2022 ($23.70 per share), or alternatively valued at the adjusted cost base or grant price of the security, if higher. (2) Includes PSUs granted in fiscal 2019, which vested on October 31, 2022. (3) Mr. Rudd’s employment agreement provides for an ownership requirement equal to 1.65 times his base salary on October 31, 2022. Effective December 10, 2023, Mr. Rudd’s ownership require ment is equal to 2 times his base salary. (4) Ms. Parra’s employment agreement provides for an ownership requirement equal to 2 times her base salary by the 5 th anniversary of her start date, November 15, 2021. As at October 31, 2022, Ms. Parra did not have an ownership requirement. Effective November 15, 2022 Ms. Parra’s ownership requirement is equal to 0. 25 times her base salary.
ALIGNMENT WITH FSB PRINCIPLES AND STANDARDS
Our approach to compensation is consistent with the FSB Principles and Standards, which were last updated in 2009, and industry best practices for assessing conduct.
We engage Meridian periodically to complete a risk review of compensation plans at the senior executive level and for all other employees, with a particular focus on alignment with the FSB Principles and Standards. In addition, we complete a risk review whenever introducing a new compensation element, or making material revisions to our compensation program. Based on the most recent review completed in fiscal 2018, Meridian concluded that our compensation programs and policies are in compliance with the FSB Principles and Standards and appropriately mitigate compensation risk. Meridian also concluded that our compensation programs and policies are not reasonably likely to have a material adverse effect on CWB, its business, or its value. Meridian reviews all material new and revised compensation programs annually, to ensure alignment with FSB Principles and Standards continues to be met.
FSB Principle
CWB Alignment
Board actively oversees the compensation system’s design and operation
• The Board establishes our compensation philosophy and structure. • The Chair of the Audit Committee is a member of the HR Committee, the Chair of the HR Committee is a member of the Risk Committee, and the Chair of the Risk Committee is a member of the GCR Committee. In addition, there are a number of cross- committee memberships. These cross-memberships on Board committees support alignment of compensation and risk control principles. • The HR Committee, composed entirely of independent directors: - reviews the compensation structure outcomes to ensure they are consistent with the compensation philosophy;
- oversees the hiring, promotion and compensation of executive officers; - ensures effective succession and leadership development planning is in place;
- approves and amends material compensation programs; and - determines incentive compensation criteria and allocations. • T he HR Committee obtains advice on the components of compensation from an independent compensation consultant and meets in camera (without management present) with the independent compensation consultant at each meeting. • The HR Committee meets in camera for part of each HR Committee meeting and provides its report in camera to the Board. No officers, including the CEO, are present when decisions regarding their compensation are made.
Canadian Western Bank- Management Proxy Circular | 38
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