Ontario government updates framework governing compensation of university executives

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This past spring, Ontario’s colleges proposed changes to their executive compensation packages that could have seen the already high salaries of their presidents increase by an average of 32 per cent (in many cases a raise of over $100,000). The changes were announced in response to the provincial government’s new Executive Compensation Framework, a regulation aimed at ensuring institutions in the broader public service (including universities and colleges) justify increases to the compensation they offer their executive officers. However, many colleges took advantage of the new rules to cherry-pick “comparable” institutions with highly paid executives to maximize the salaries they could offer their own executive officers. For more on how this transpired, read OCUFA’s initial summary from January.

When the colleges’ proposals were publicized, as required by the Framework, the media picked up the story, which quickly gained traction with the public. Shortly thereafter, the provincial government informed colleges that they would need to go back to the drawing board and come up with more reasonable proposals.

In June, following several months of reflection, the Ontario government updated the Executive Compensation Framework to better achieve its intended goals. The new Framework (published June 9) makes several changes and additions:

  • The September 5, 2017 deadline for executive compensation programs to be finalized has been extended. Now organizations have until September 29 to submit their proposals to government for review. Instead of requiring that draft proposals be posted online at the outset, now they must be submitted to the relevant ministry for approval first.
  • The “salary and performance-related pay cap”, which represents the total amount an executive can be paid, may be increased once a year, but the increase cannot exceed the lesser of either the Ontario public sector wage trend (currently 1.3%) or the average rate of increase for the institution’s non-executive managers.
  • The Framework now requires institutions to also set a “salary and performance-related pay envelope”. The envelope represents the total amount by which the combined executive salaries of an institution can be increased, but it is up to the institution’s Board of Governors to determine how the money is distributed among executives (as long as no individual executive member exceeds the pay cap defined for their position). Institutions must also consider the “financial priorities and the compensation priorities of the Government of Ontario” when determining the pay envelope.

The process for having an executive compensation program approved has also been revised:

  1. The institution submits an initial executive compensation program proposal to the Ministry for approval.
  2. The Ministry either conditionally approves the program, or provides feedback that requires the institution to update and resubmit.
  3. Once the program has received initial approval, it must be posted to the institution’s public website for at least 30 days and provide a way for the public to provide feedback.
  4. The institution resubmits its proposed compensation program, including a summary of public feedback received and any changes made as a result of government or public feedback.
  5. The Ministry approves the final program.
  6. The institution’s Board of Governors votes to adopt the executive compensation program, which is considered in effect as soon as the final document is posted to the institution’s public website.

These changes provide a more rigorous process for regulating executive compensation, but it remains important for faculty associations to pay close attention to the executive compensation program proposals brought forward by their universities and actively engage in providing feedback. One key measure of the effectiveness of the Executive Compensation Framework will be whether institutions and government meaningfully respond to the feedback provided by the public.

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