| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Canada | 98-0355078 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |
7550 Ogden Dale Road S.E.,
| ||
Calgary, Alberta, Canada | T2C 4X9 | |
(Address of Principal Executive Offices) | (Zip Code) | |
each classEach Class each exchangeEach Exchange on which registeredRegistered
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☐
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
PART III | ||||||||||
Item 10 | ||||||||||
| 1 | |||||||||
Item 11 | 7 | |||||||||
Item 12 | 52 | |||||||||
Item 13 | 53 | |||||||||
Item 14 | 53 | |||||||||
PART IV | ||||||||||
Item 15 | ||||||||||
| 55 | |||||||||
Item 16 | 55 | |||||||||
| 56 | ||||||||||
Directors are elected for a term of one year until the close of our next annual meeting of shareholders, unless a director resigns or is otherwise removed earlier. |
Isabelle Courville Chair | ||
  | Independent Age: Director since: May 1, 2013 Residence:
Québec, Canada 2020 voting results:
99.63% for
| |
Chairman
DIRECTOR SKILLS AND QUALIFICATIONS Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, accounting & financial expertise, environment, health & safety, executive compensation/human resources, transportation industry knowledge, governance, government/ regulatory affairs and legal, risk management, sales & marketing and strategic oversight. |
OVERALL 2020 ATTENDANCE | 100% | |||||
Meeting Attendance | ||||||
| Board | 9 of 9 | 100% | ||||
| Audit and Finance | 5 of 5 | 100% | ||||
| Governance | 5 of 5 | 100% | ||||
| Compensation | 6 of 6 | 100% | ||||
| Risk and Sustainability | 4 of 4 | 100% | ||||
BUSINESS EXPERIENCE
900 10,158Appvion(2007(2017 to 2015)present) (Chair of Human Resources Committee and member of Governance and Ethics Committee)theAccounts and Audit Committee, CompensationNominating Committee and Chair Research, Innovation and Sustainable Development Committee)TTX Company (20012008)present) (member of Human Resources Committee)rail industry boards: Terminal Railroad AssociationBoards - PastSt. Louis and Peoria and Pekin Union RailwayCorporate Directors (ICD) (2013 to 2017)Presidential appointee to the Railroad Retirement Board (1990 to 1992)Barriger Railroad Library (St. Louis) Board of Trustees (Board member (1998 to present), and President Emeritus (2009 to 2012)Other experienceOfficer, United States Navy (1967 to 1971)EDUCATIONUniversity of Notre Damein Engineering Physics, École Polytechnique de MontréalJuris Doctor degree, University of CincinnatiMaster’sBachelor’s degree in Taxation, WashingtonCivil Law, McGill University Law School4,03110,463Options: 0
| ||
 |
| |
Brings senior level executive experience in public policy and regulatory affairs, especially in transport, environment andCanada-U.S. relations
executive leadership, accounting & financial
literacy, environment, health & safety,
transportation industry knowledge, governance,
government/regulatory affairs and legal, risk
management and strategic oversight.Board 9 of 9 100% Governance 5 of 5 100% Risk and Sustainability 4 of 4 100% , Hatch Ltd. (an engineering firm) and Eurasia Group (a geopolitical risk consultancy) (2015 to present)Canfor Corporation and Products Inc.(CPPI) (2016 to present) (member of Environmental, Health and Safety Committee; Capital Expenditure Committee and Corporate Governance Committee)Friends of Israel Initiative (2015 to present) (member of the Board)3,239Options: 0Has until May 2020 to meet the6,112
Keith E. Creel | ||
 | Not Independent Age: Director since: May 14, 2015 Residence: Florida, U.S.A. 2020 voting results: 99.92% for | |
DIRECTOR SKILLS AND QUALIFICATIONS President and Chief Executive Officer of CP since January 31, 2017. Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, environment, health & safety, executive compensation/human resources, transportation industry knowledge, governance, government/regulatory affairs and legal, risk management, sales & marketing and strategic oversight. |
| ||||||
 OVERALL 2020 ATTENDANCE |
| |||||
Brings significant executive level management experience including financial and legal expertise
BUSINESS EXPERIENCE
PUBLIC COMPANY BOARD EXPERIENCE
OTHER EXPERIENCE
Other Boards
EDUCATION
SHARE OWNERSHIP
Shares: 900
DDSUs: 6,292
Options: 0
Meets share ownership requirements
100% | ||||||
| ||||||
 | ||||||
Meeting Attendance |
| |||||
| Board | 9 of 9 | 100% | ||||
President and Chief Executive Officer of CP since January 31, 2017. Brings extensive railroad operating experience and expertise in executive management and marketing and sales
18,436present, present)Vice- President,Vice-President, Operations, Senior Vice-President Eastern Region, Senior Vice-President Western Region, and Vice-President of CN’s Prairie division (2002 to 2010)2,411DSUs*: 31,218Options*: 579,546 (see page 31)
Gillian (Jill) H. Denham | ||
 | Independent Age: Director since: September 6, 2016 Residence: 2020 voting results: 99.77% for | |
DIRECTOR SKILLS AND QUALIFICATIONS Brings expertise in executive leadership, accounting & financial literacy, executive compensation/human resources, investment management, governance, government/regulatory affairs and legal, risk management, sales & marketing and strategic oversight. |
| |||||||
 OVERALL 2020 ATTENDANCE |
| 100% | |||||
Meeting Attendance | |||||||
| Board | 9 of 9 | 100% | |||||
| Audit and Finance | 5 of 5 | 100% | |||||
| Risk and Sustainability | 4 of 4 | 100% | |||||
Brings significant experience
BUSINESS EXPERIENCE
BoardBoard)Chairmember of the Audit Committee and Nominating and Governance Committee)present) (member of Human Resources Committee)2020)Kinaxis Inc. (2016 to present) (member of Nominating and Governance Committee and Audit Committee)(Board member and Chair of the Investment Committee)(2015 to 2019)1,509Options: 0Has until September 2021 to meet the4,306
Edward R. Hamberger | ||
 | Independent Age: Director since: July 15, 2019 Residence: . 2020 voting results: 99.90% for | |
2
DIRECTOR SKILLS AND QUALIFICATIONS Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, environment, health & safety, transportation industry knowledge, governance, government/regulatory affairs and legal, risk management, sales & marketing and strategic oversight. |
| |||||||
 OVERALL 2020 ATTENDANCE | 100% | ||||||
Meeting Attendance | |||||||
| Board | 9 of 9 | 100% | |||||
| Audit and Finance | 5 of 5 | 100% | |||||
| Risk and Sustainability | 4 of 4 | 100% | |||||
Rebecca MacDonald | ||
 | Independent Age: Director since: May 17, 2012 Residence:
2020 voting results:
97.98% for
| |
Brings extensive executive management, marketing, sales and corporate governance experience
12,725
executive leadership, accounting & financial
literacy, executive compensation/human
resources, investment management,
governance, risk management, sales &
marketing and strategic oversight.9 of 9 100% 6 of 6 100% 5 of 5 100% currentformer Executive Chair of Just Energy Group Inc., a Toronto-based independent marketer of deregulated gas and electricity (2001 to August 1, 2020)present)August 1, 2020) (Executive Chair since 2007)2007 to August 1, 2020) both Canada and the United States9,187Options: 0
Edward L. Monser | ||
 | Independent Age: Director since: December 17, 2018 Residence: 2020 voting results: 99.88% for | |
DIRECTOR SKILLS AND QUALIFICATIONS Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, accounting & financial expertise, environment, health & safety, executive compensation/human resources, transportation industry knowledge, governance, risk management, sales & marketing and strategic oversight. |
| |||||||
 OVERALL 2020 ATTENDANCE | 100% | ||||||
Meeting Attendance | |||||||
Board | 9 of 9 | 100% | |||||
Audit and Finance | 5 of 5 | 100% | |||||
Compensation | 6 of 6 | 100% | |||||
Matthew H. Paull | ||
 | Independent Age: Director since: January 26, 2016 Residence:
2020 voting results:
99.63% for
| |
Brings significant expertise in financial markets, corporate finance, accounting and controls, and investor relations and extensive experience in international operations and marketing
9 of 9 100% 6 of 6 100% 4 of 4 100% beforeChipotle Mexican Grill Inc. (2016 to present)NominatingSocial Responsibility Committee and Executive Committee)present) (Chair of Audit Committee until 2018 and member of Compensation Committee)2018)Best Buy Co. (2003 to 2013) (lead independent director and chair of Finance Committee)WMS Industries Inc. (2012 to 2013)
3,0001,0003,350Options: 0Has until January 2021 to meet the6,645
Jane L. Peverett | ||
 | Independent Age: Director since: December 13, 2016 Residence: 2020 voting results: 98.90% for | |
DIRECTOR SKILLS AND QUALIFICATIONS Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, accounting & financial expertise, environment, health & safety, executive compensation/human resources, governance, government/regulatory affairs and legal, risk management and strategic oversight. |
| |||||||
 OVERALL 2020 ATTENDANCE |
| 100% | |||||
Meeting Attendance | |||||||
Board | 9 of 9 | 100% | |||||
Audit and Finance (Chair) | 5 of 5 | 100% | |||||
Governance | 5 of 5 | 100% | |||||
Brings significant Board and senior management experience and extensive knowledge and training in finance, accounting and corporate governance
(Chair(Member of Audit Committee)Hydro One Limited (2015 to present) (member of Human Resources Committee and Chair of Nominating, Corporate Governance Public Policy & Regulatory Committee)(member(Chair of Finance Committee and member of Organization and Executive Compensation Committee and Public Affairs and Environmental Policy Committee)Executive CommitteeAdvisory Board1,275Options: 0Has until January 2021 to meet the4,473
Andrea Robertson | ||
 | Independent Age: Director since: July 15, 2019 Residence: 2020 voting results: 99.89% for | |
3
DIRECTOR SKILLS AND QUALIFICATIONS Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, environment, health & safety, executive compensation/human resources, transportation industry knowledge, governance, government/regulatory affairs and legal, risk management and strategic oversight. |
| |||||||
 OVERALL 2020 ATTENDANCE | 100% | ||||||
Meeting Attendance | |||||||
Board | 9 of 9 | 100% | |||||
Governance | 5 of 5 | 100% | |||||
Compensation | 6 of 6 | 100% | |||||
Gordon T. Trafton | ||
 | Independent Age: Director since: January 1, 2017 Residence:
2020 voting results:
96.90% for
| |
Brings extensive experience in the rail industry including executive positions in rail operations, sales and marketing and risk management
9 of 9 100% 5 of 5 100% 4 of 4 100% Canadian National Railway (2003CN (2009 to 2009)2010)Canadian National RailwayCN (2003 to 2009)held of Alumni and Friends, University of Colorado Boulder (Chair)(2012 to present)1,451Options: 0Has until January 2022 to meet the4,431
| (a) | a director, chief executive officer or chief financial officer of a company that: |
| (b) | a director or executive officer of a company that, while that proposed director was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, |
| (c) | become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold their |
| (d) | subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities commission. |
4
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act required our directors and executive officers, and any certain persons owning more than 10% of our common shares, to file certain reports of ownership and changes in ownership with the SEC. As of June 30, 2017, Section 16(a) of the Exchange Act no longer applied to us because we qualified as a foreign private issuer under U.S. securities laws. Based solely on our review of the copies of Forms 3, 4 and 5 filed between January 1, 2017 and June 30, 2017, we believe that all reports required to be filed under Section 16(a) were made on a timely basis with respect to transactions that occurred during such period.
Disclosures.
Code of business ethics and business ethics reporting policy Our code of business ethics (the Code) sets out our expectations for conduct. It covers confidentiality, protecting our assets, avoiding conflicts of interest, fair dealing with third parties, compliance with applicable laws, rules and regulations, as well as reporting any illegal or unethical behaviour, among other things. The Code applies to everyone at CP and our subsidiaries: directors, officers, employees (unionized and non-unionized) and contractors who do work for us.Directors, officers and non-union employees must sign an acknowledgment every year that they have read, understood and agree to comply with the Code. Unionized employees are provided with a copy of the Code every three years. Unionized employees were mailed a copy of the Code in 2019. Directors must also confirm annually that they have complied with the Code. The Code is part of the terms and conditions of employment fornon-union employees, and contractors must agree to follow principles of standards of business conduct consistent with those set out in our Code as part of the terms of engagement.We also have a supplemental code of ethics for the CEO and other senior financial officers (including the CFO, the Vice-President of Financial Planning and Accounting and the Assistant Vice-President and Controller) which sets out our longstanding principles of conduct for these senior roles. We also have a business ethics reporting policy that outlines the processes CP has established for CP personnel and others to report concerns regarding conduct within CP, including questionable management and/or corporate practices, the potential violation of any applicable law, or a potential violation of the Code. | Monitoring compliance and updating the Code The Governance Committee is responsible for monitoring compliance with the Code, reviewing it periodically and recommending changes as appropriate, and promptly disclosing any aspects of the Code that have been waived. The Audit and Finance Committee ensures compliance with the Code. In 2019, 100 percent of non-union employees completed their annual certification of compliance with the Code. For 2020, we modernized our code of ethics training process to enhance employee understanding and have once again reached 100 percent completion. |
Directors, officers andnon-union employees must sign an acknowledgement every year that they have read, understood and agree to comply with the code. Directors must also confirm annually that they have complied with the code. The code is part of the terms and conditions of employment fornon-union employees, and contractors must agree to follow principles of standards of business conduct consistent with those set out in our code as part of the terms of engagement.
We also have a supplemental code of ethics for the CEO and senior financial officers (the CFO and the Controller) which sets out our longstanding principles of conduct for these senior roles.
A copy of the code (and any amendments)policy is posted on our website (www.cpr.ca)(investor.cpr.ca/governance). Only the Board or Governance Committee (audit committee(Audit and Finance Committee in the case of the CEO and senior financial officers) can waive an aspect of the code.Code. Any waivers are posted on our website. NoneNo waivers were requested or granted in 2017.
2020.
5
issuers, and we are otherwise not required to adhere to the U.S. requirements relative to certain other proxy disclosures and requirements. Our executive compensation disclosure complies with Canadian requirements, which are, in most respects, substantially similar to the U.S. rules. We generally attempt to comply with the spirit of the U.S. proxy rules when possible and to the extent that they do not conflict, in whole or in part, with required Canadian corporate or securities requirements or disclosure.
EXECUTIVE
DISCUSSION AND ANALYSIS
The next This section describesof this Amendment No. 1 on Form
2020 NAMED EXECUTIVE OFFICERS |
Keith E. Creel President and Chief Executive Officer |
Nadeem S. Velani Executive Vice-President and Chief Financial Officer |
John K. Brooks Executive Vice-President and Chief Marketing Officer |
Mark A. Redd Executive Vice-President Operations |
Jeffrey J. Ellis Chief Legal Officer and Corporate Secretary |
Compensation Committee Report
The management resources and compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and on the discussion described above, on February 14, 2018, the Compensation Committee recommended to the full Board that the Compensation Discussion and Analysis be included in the Circular and this Annual Report on Form 10-K/A.
Compensation Committee
Isabelle Courville (Chair)
John Baird
Rebecca MacDonald
Matthew Paull
Andrew Reardon
Gordon Trafton
Where to find it
6
Table of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
We believe in the importance of paying for performance and aligning management’s interests with those of our shareholders.
The key elements of our approach to executive compensation include:
We implemented several
We received a 71.11% voteforour 2017 advisory vote on executive compensation, compared to 49.9% in 2016. The Compensation Committee continues to focus on making sure our compensation program pays for performance, reflects sound principles, supports long-term sustainable value, is clear and transparent and aligns with shareholder interests.
employees.
We believe strong performance should yield significant rewards. Our executive compensation includes fixed and variableandcomponents. Built into our compensation pay mix is a significant emphasis on incentive-driven pay where the proportion ofportioncomponent of executivetiedequity-based compensation, which links directly to the value of our shares, aligningensuring alignment with shareholder interests.the interest of shareholders. We also require our executives to own CP equity and our share ownership guidelines increase by executive level (see page 10)11).
Variable cash compensation is more focused on corporate results for executives (75%
2020 total target direct compensation mix for our NEOs are shown in the graph. For 2020, 88 percent of our CEO’s total target direct compensation and an average of 77 percent for our other NEOs was at risk. |  |
This supports our view that the short-term incentive plan should be tied to overall corporate performance and the areas of our business that each employee influences directly.
7
The table below shows the pay mix for our current named executives based on their total target compensation.
Benchmarking
We benchmark the compensation for our named executives against a peerupdated in 2018. Our comparator group of companies that consists of BNSF Railway, CN, CSX Corporation, Kansas City Southern Railroad, Norfolk Southern Corporation and Union Pacific Corporation.
These companies are the Class 1 railroads, the North American railroad companies that we compete with for executive talent. BenchmarkingIt includes six Class 1 Railroad peers as well as 11 capital-intensive Canadian companies. For certain positions within the organization, we apply a heavier weighting to Class 1 Railroad peers; however, we consistently review alignment and compensation practices against this peer group ensures that each component of ourthe whole group.
8
Class 1 Railroads | Capital Intensive Companies in Canada | |||
| BNSF Railway Company | Barrick Gold Corporation | Kinross Gold Corporation | ||
| Canadian National Railway Company | BCE Inc. | Rogers Communications Inc. | ||
| CSX Corporation | Cenovus Energy Inc. | Suncor Energy Inc. | ||
| Kansas City Southern | Enbridge Inc. | TC Energy Corporation | ||
| Norfolk Southern Corporation | Fortis Inc. | TELUS Corporation | ||
| Union Pacific Corporation | Imperial Oil Limited | |||
 |
objectives to support our growth.
Once executives have met their initial shareholding requirements, they are required to maintain compliance, which is reported annually to the Compensation Committee.
9
Executive level | Ownership requirement (as a multiple of base salary) | OUR NEOs Mr. Creel, Mr. Velani, Mr. Brooks and Mr. Ellis have achieved ownership requirements. Mr. Redd is expected to meet ownership requirements within the specified period. | ||||||
CEO | 6x | |||||||
Executive Vice-President | 3x | |||||||
Senior Vice-President | 2x | |||||||
Vice-President | 1.5 to 2x | |||||||
Senior management | 1x | |||||||
We use
Executive | Requirement (as a multiple of salary) | Minimum ownership value ($) (1) | Shares ($) | Deferred share units ($) | Total ownership value ($) (2) | Total ownership (as a multiple of salary) | ||||||||||||||||||||||||
Keith Creel | 6x | 9,083,824 | 8,326,746 | 14,553,844 | 22,880,590 | 15.11x | ||||||||||||||||||||||||
Nadeem Velani | 3x | 2,443,008 | 281,153 | 3,265,559 | 3,546,712 | 4.36x | ||||||||||||||||||||||||
John Brooks | 3x | 2,207,190 | 1,012,038 | 1,191,839 | 2,203,877 | 3.00x | ||||||||||||||||||||||||
Mark Redd | 3x | 1,997,888 | 472,006 | 1,219,808 | 1,691,814 | 2.54x | ||||||||||||||||||||||||
Jeffrey Ellis | 2x | 1,120,300 | 466,635 | 1,477,913 | 1,944,548 | 3.47x | ||||||||||||||||||||||||
| (1) | Minimum ownership values for Mr. Creel, Mr. Brooks and Mr. Redd have been converted to Canadian dollars using an exchange rate of 1.2685. |
| (2) | Total ownership values for Mr. Creel, Mr. Brooks and Mr. Redd are based on US$356.06, the closing price of our shares on the NYSE on February 26, 2021 and have been converted to Canadian dollars using an exchange rate of $1.2685. Values for Mr. Velani and Mr. Ellis are based on $453.52, the closing price of our shares on the TSX on February 26, 2021. |
Mr. Creel, Mr. Velani, Mr. Johnson, Mr. Pitz and Mr. Ellis are expected to meet theirownership requirement within the five-year period following their appointment. We used our closing share price on December 29, 2017 to value their share ownership: $229.66 for the TSX or US$182.76 on the NYSE, depending on whether the executive is paidExecutive Vice-President level from three times to four times annual base salary in Canadian or U.S. dollars. You can read about each executive’s share ownership in the profiles beginning on page 27.
2021.
time, including their advisor FW Cook.
10
Compensation Committee Interlocks and Insider Participation
The Compensation Committee has the relevant skills, background and experience for carrying out its duties. The table below shows the key skills and experience of each member:
| CEO/senior management | Governance and policy development | Transportation
| Risk management | Engagement (shareholders and others) | |||||||||||||||||||
| ||||||||||||||||||||||||
Matthew Paull (Committee Chair) | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||
Isabelle Courville (Chair of the Board) | ✓ | |||||||||||||||||||||||
| ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||
Rebecca MacDonald | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||
Edward Monser | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||
Andrea Robertson | ✓ | |||||||||||||||||||||||
| ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||
| ||||||||||||||||||||||||
| ||||||||||||||||||||||||
| ||||||||||||||||||||||||
11
Compensation Committee advisor FW Cook | Management Compensation advisor Willis Towers Watson | |
• advisor • • the Compensation Committee
| • | |
2020 | 2019 | |||||||||||||||||||||||
Committee advisor | Management advisor | Committee advisor | Management advisor | |||||||||||||||||||||
Fees | FW Cook (1) | Kingsdale | Willis Towers Watson | Kingsdale | Willis Towers Watson | |||||||||||||||||||
Executive compensation-related fees | $ | 188,473 | $ | 0 | $ | 67,743 | $ | 90,000 | $ | 74,785 | ||||||||||||||
Other fees | $ | 0 | $ | 120,551 | $ | 2,882,009 | $ | 112,821 | $ | 2,598,193 | ||||||||||||||
Total fees | $ | 188,473 | $ | 120,551 | $ | 2,949,752 | $ | 202,821 | $ | 2,672,978 | ||||||||||||||
| (1) | FW Cook fees have been converted to Canadian dollars using the average exchange rate for 2020 of $1.3415. |
| 2017 | 2016 | |||||||||||||||||||
| Meridian | Willis Towers Watson | Meridian | Willis Towers Watson | |||||||||||||||||
Executive compensation-related fees | $ | 50,751 | $ | 78,923 | $ | 170,267 | $ | 59,264 | ||||||||||||
Other fees | - | $ | 1,975,629 | - | $ | 2,215,142 | ||||||||||||||
Total fees | $ | 50,751 | $ | 2,054,552 | $ | 170,267 | $ | 2,274,406 | ||||||||||||
Fees paid
In 2016, $170,267 was paid to Meridian for executive compensation advisory fees provided to the Compensation Committee. ThisCommittee related to compensation. FW Cook fees for advisory services provided in 2020 is 100% of the total fees paid$188,473. Kingsdale continues to Meridian in 2016. be retained for services related to governance trends, specific governance items, proxy solicitation and shareholder advisory services.
In 2017, $78,9232020, $67,743 was paid to Willis Towers Watson for executive compensation advisory feesservices provided to management. The total executive compensation fees represent 4%2.3 percent of the $2,054,552total fees in 2020 paid in total to Willis Towers Watson for all services provided to management, including actuarial pension and benefitspension consulting, corporate risk and insurance brokingbrokering services.
12
Willis Towers Watson concluded that there did not appear to be significant risks associated with our compensation programs. The last review was completed at the end of 2016 in conjunction with all the changes that were being proposed to the 2017 compensation plans. Based on theCommittee reviewed Willis Towers Watson’s findings of the review, the Compensation Committee concludedand agreed that our compensation program, policies and practices areprograms did not reasonably likelyencourage excessive risk-taking that could have material adverse effects on CP. A subsequent risk assessment is expected to have an adverse effect on our business or the company overall.
be completed in 2021.
1. Plan design | • (at-risk) compensation and a significant proportion isat-risk pay• •
• • the long-term incentive plan has overlapping vesting periods to address | |
2. Policies | • • • • we have a disclosure and insider trading/reporting policy to protect our interests and ensure high business standards and appropriate conduct • • our
collateral for a loan • • admitted by the senior executive or as reasonably determined by the Board, which has sole discretion to determine whether it is in our best interests to pursue reimbursement of all or part of the incentive compensation in these circumstances and the Board’s actions would be separate from actions that may be taken by law enforcement agencies, regulators or other authorities • DSUs held by the President and CEO, executives, and Company • | |
3. Mitigation measures | • • • incentives • • • • safety is which applies to all employees • all long-term incentive eligible employees are subject to two-year non-compete andnon-solicit covenants should they leave CP• • we review and consider risks associated with retention-related compensation | |
13
6.
14
Element | Purpose | Risk mitigating features | Link to business and talent strategies | |||||||
Salary Fixed cash (see page 18) | ||||||||||
|
| • competitive level of fixed pay to reflect scope of responsibilities and market data • reviewed annually | • | • attract and retain talent • no automatic or guaranteed increases to promote a performance culture | ||||||
Short-term incentive plan (STIP) Variable cash bonus (see page 18) |
|
• | • performance is measured against predetermined, approved targets • actual payouts are based on the achievement of pre-determined corporate and individual objectives
• payouts
|
• motivate high corporate and individual performance • • align personal objectives with area of responsibility and role in achieving financial, safety and operating results | ||||||
Deferred compensation Deferred share units (see page 46) |
| |||||||||
| • encourages share ownership while aligning management interests with growth in shareholder value • executives and senior management can elect to receive • company provides a 25% match of the deferral amount in DSUs | • deferral limited to the amount
• helps retain key executive talent • company contributions vest after three years | • sustained alignment of executive and shareholder interests because the value of DSUs is tied directly to our share price • cannot be redeemed for cash until a minimum of six months after the executive leaves CP | |||||||
| ||||||||||
| • equity-based incentive • accounts for 60% of an executive’s long-term incentive award • vest after three years | • use pre-defined market and financial metrics• the number of units that vest is based on a performance multiplier that is capped • no guarantee of a minimum payout | • focuses the leadership team on achieving challenging medium-term performance goals • • attract and retain highly qualified leaders | |||||||
Stock options Long-term incentive (see page 26) |
• equity-based incentive to align with long term performance and
| |||||||||
| growth in share price • accounts for 40% of an executive’s long-term incentive award • | • focuses on appreciation in our share price, aligning with shareholder interests • only granted to senior management and executives | • focuses the leadership team on creating sustainable long-term value | |||||||
Pension Defined contribution and defined benefit pension plans (see page 45) |
| |||||||||
|
| • pension benefit based on pay, age and service and is competitive with the market • supplemental plan for | • balances risk management of highly performance-focused pay package | • attract and retain highly qualified leaders | ||||||
| • competitive with the market to support health and well-being | • | • attract and retain highly qualified leaders |
| ||||||
15
Salaries are set
The table below showsbase salaries of all NEOs are set in U.S. dollars consistent with industry practice. As Mr. Ellis was not an NEO in 2019, his 2019 salary has been converted to USD using the annual salaries2019 average exchange rate of 1.3269, and his 2020 salary has been converted using the named executives were paid as at December 31, 2017.
| 2017 | % change from 2016 | |||||
Keith Creel | US$1,125,000 | 17.6% | ||||
Nadeem Velani | $460,000 | 10.8% | ||||
Robert Johnson | US$435,000 | 0% | ||||
Laird Pitz | US$366,000 | 4.6% | ||||
Jeff Ellis | $445,000 | 0% | ||||
Mr. Creel received a 17.6% increase when he became CEO on January 31, 2017. Mr. Velani received a step increase to bring his salary closer to the market median as a result2020 average exchange rate of his appointment as Executive Vice-President and CFO. Mr. Pitz received an increase in 2017 when he was promoted to Senior Vice-President and Chief Risk Officer.
1.3415.
Executive | 2020 (in USD) | percent change from 2019 | 2019 (in USD) | |||||||||
Keith Creel | 1,193,513 | 3.0% | 1,158,750 | |||||||||
Nadeem Velani | 602,000 | 6.3% | 566,500 | |||||||||
John Brooks | 551,250 | 5.0% | 525,000 | |||||||||
Mark Redd | 446,250 | 5.0% | 425,000 | |||||||||
Jeffrey Ellis | 396,160 | 12.2% | 353,191 | |||||||||
(STIP)
Purpose | •
| |
Term | • one-year period | |
Payout | • corporate performance is assessed against financial, safety and operational measures • • pro-rated for eligibility in calendar performance year and can range from 0 to 200 percent of • cash awards are paid out in February following the performance year | |
Restrictions | • • • • | |
| ||
16
Our STIP target is based on a percentage of base salary and reviewed annually for market competitiveness | STIP target as a percent of base salary | |||||||
Executive | Minimum | Target | Maximum | |||||
| Keith Creel | 0% | 125% | 250% | |||||
| Nadeem Velani | 0% | 90% | 180% | |||||
| John Brooks | 0% | 90% | 180% | |||||
| Mark Redd | 0% | 80% | 160% | |||||
| Jeffrey Ellis | 0% | 70% | 140% | |||||
We use financial, operating andnon-financial safety measures to assess corporate performance. Individual performanceof varying weightings that total 100 percent. The year end results of each measure is assessed against
Corporaterole, including operational management, safety, financial and individual performance factors are at capped at 200% to limit payouts and avoid excessive risk-taking.
An employee’s payout on the individual component of theother objectives such as customer satisfaction.
Actual STIP awards are also capped as a percentage of base salary, as shown in the table to the right.
Assessing corporate performance
Last year we announced a number of changes to the measures for 2017 to reflect CP’s transition to focus on sustainable growth.
| Payout as a % of base salary | ||||||||||||||||
| Level | Below hurdle | Minimum | Target | Maximum | ||||||||||||
CEO | 0 | % | 60 | % | 120 | % | 240 | % | ||||||||
Other named executives | 0 | % | 30-37.5 | % | 60-75 | % | 120-150 | % | ||||||||
|
|
17
Corporate performance
The table below shows the 2017calculation of the 2020 STIP awarded to each NEO. All salaries have been converted to Canadian dollars using an average exchange rate of $1.3415 for 2020, with the exception of Mr. Velani, whose salary is set in U.S. dollars, but paid in Canadian dollars, and is subject to a foreign exchange adjustment of $1.3499. Mr. Ellis’ salary was set in Canadian dollars.
| (1) | Mr. Redd and Mr. Ellis elected to defer a proportion of their 2020 STIP award to DSUs. |
Executive | 2020 individual performance factor | The individual performance factor for the CEO cannot exceed the corporate performance factor. This ensures the payout factor for the CEO aligns with CP’s overall performance. | ||||||||||||
Keith Creel | 172 | % | ||||||||||||
Nadeem Velani | 175 | % | ||||||||||||
John Brooks | 175 | % | ||||||||||||
Mark Redd | 175 | % | ||||||||||||
Jeffrey Ellis | 170 | % | ||||||||||||
The Compensation Committee sets the individual performance factor for the CEO. The CEO reviews the performance of his direct reports against their objectives, and recommends their individual performance factors to the Compensation Committee. | ||||||||||||||
Performance measure | Why it’s important | Threshold (50%) | Target (100%) | Exceptional (200%) | 2017 reported result | 2017 STIP result | Weighting | Score | ||||||||||||||||||||||
Financial measures | ||||||||||||||||||||||||||||||
STIP Operating ratio Operating expenses divided by total revenues based on an assumed fuel price and foreign exchange rate | Continues our focus on driving down costs while focusing on growth strategy | 57.50 | % | 57.25 | % | 56.75 | % | 57.4 | % | adj. 57.1 | % | | 40% (new) (reduced | | 137 | % | ||||||||||||||
STIP Operating income ($ millions) Total revenues less total operating expenses based on an assumed foreign exchange rate | Highlights the importance of revenue growth to our corporate strategy | 2,705 | 2,745 | 2,865 | 2,793 | | adj. 2,816 | | | 40%(new) (increased | | 159 | % | |||||||||||||||||
Safety measure(new) | ||||||||||||||||||||||||||||||
Federal Railroad Administration’s (FRA) frequency of train accidents per million train miles relative to Class 1 railroads | Safety is our top priority, and the measure pays out at maximum only if we achieve the stretch target and remain the best in the industry
Introducing this measure recognizes the feedback we received from shareholders who asked for safety to be explicitly included as a performance measure | 1.30 | 1.19 | 1.15 | 0.99 | 0.99 | 10% | 200 | % | |||||||||||||||||||||
Operating measure(new) | ||||||||||||||||||||||||||||||
Train speed measures the time and movement of trains in miles per hour from origin to destination It is a key component oftrip plan compliance and critical to the service we provide customers and to our growth strategy. Trip plan compliance, as a stand-alone measure, is a relatively new measure at CP. In 2018, now that we have built up enough historical data, we plan to use it as an operating performance measure for STIP rewards. | Train speed reflects our operating performance and is a key measure for improved asset utilization and delivery times, leading to an enhanced customer experience
Introducing this measure incorporates feedback from shareholders and provides a more balanced scorecard of performance criteria | 23.7 | 24.0 | 24.6 | 23.4 | 23.4 | 10% | 0 | % | |||||||||||||||||||||
Corporate performance factor | 138 | % | ||||||||||||||||||||||||||||
Notes:
Performance measure (Weighting) | Why the measure is important | Threshold (50%) | Target (100%) | Exceptional (200%) | 2020 Reported Result | 2020 STIP Result (2) | Score | |||||||||||||||||||
Financial measures | ||||||||||||||||||||||||||
STIP Operating ratio (35%) Operating expenses divided by total revenues based on an assumed fuel price and foreign exchange rate | Continues our focus on driving down costs while focusing on growth strategy | 59.9 | % | 59.4 | % | 58.9 | % | 57.1% | 57.2% | 200% | ||||||||||||||||
STIP Operating income (35%) ($ millions) Total revenues less total operating expenses based on an assumed foreign exchange rate | Highlights the importance of revenue growth to our corporate strategy | 3,275 | 3,330 | 3,410 | 3,310 | 3,346 | 121% | |||||||||||||||||||
Safety measures | ||||||||||||||||||||||||||
FRA Train Accident Frequency (10%) Number of FRA reportable train accidents which meet FRA reporting thresholds per million train miles | CP has long been an industry leader in rail safety and we are more focused on it than ever, committed to protecting our people, our communities, our environment and our customers’ goods | 1.10 | 1.06 | 0.99 | 0.96 | 0.96 | 200% | |||||||||||||||||||
FRA Personal Injury Frequency (10%) Number of FRA reportable injuries per 200,000 employee hours | As safety is our top priority, we introduced FRA Personal Injury as an additional safety metric under our STIP for 2020 | 1.40 | 1.35 | 1.25 | 1.11 | 1.11 | 200% | |||||||||||||||||||
Operating measure | ||||||||||||||||||||||||||
Trip Plan Compliance (10%) Calculated as the number of shipments completed on time (less than 12 hours late vs. baseline plan), divided by the total number of shipments completed | Trip plan compliance is a detailed schedule of performance and the core of CP’s product offering. It balances between customer needs and what we are capable of delivering It is critical to the service we provide customers and to our growth strategy. | 75 | % | 80 | % | 85 | % | 85% | 85% | 200% | ||||||||||||||||
Corporate performance factor | 172% | |||||||||||||||||||||||||
18
CP delivered record financial performance in 2017. A growing top line coupled with disciplined cost control measures produced record operating income and adjusted earnings for the company. The reported operating ratio came in at 57.4% and reported operating income was $2,793 million – both areall-time bests for the company. From a safety perspective, CP’s personal injury rate improved one percent and our train accident frequency led the industry in this key safety metric. In 2017, CP continued to invest significantly in the capital program with an overall investment of $1.34 billion during 2017 while at the same time maintaining its strong commitment to shareholders by returning $691 million through share buybacks and dividends.
The Compensation Committee may adjust the results for unusual ornon-recurring items that are outside our normal business and do not accurately reflect our ongoing operating results or business trends and affect the comparability of our financial performance year over year. Results under the short-term incentive plan may therefore differ from our reported GAAP results. Significant items that were adjusted so that they do not impact, either favourably or unfavourably, the assumptions made when the STIP targets were planned include: a management transition recovery related to the retirement of Hunter Harrison as CEO; foreign exchange; fuel price; and land sales, all of which were adjusted to reflect assumptions made in our 2017 budget in order to incent good business decisions, made at the right time, to receive the best return.
Assessing individual performance
Executives set individual performance objectives before the start of every financial year.
The individual performance factor is based on the executive’s performance against those objectives and otherpre-defined quantitative and qualitative goals that reflect the strategic and operational priorities critical to each executive’s role, including operational management, safety, financial and other objectives.
Each objective has a minimum, target and maximum. The individual performance factor ranges from 0% to 200%.
| (1) | ||||||||||||||
Adjusted diluted EPS is a non-GAAP measure.Non-GAAP measures are defined and reconciled on
10-K for the | ||||||||||||||
| |||||||||||||
| |||||||||||||
| |||||||||||||
| |||||||||||||
| |||||||||||||
The Compensation Committee non-recurring items that are outside our normal business and do not accurately reflect our ongoing operating results or business trends and affect the comparability of our financial performance | |||||||||||||
| original assumptions made in our 2020 budget. Consequently, Operating Income was adjusted upwards compared to our reported results which increased the bonus payment. | |||||||||||||
See the profiles beginning on page 27 to read about each executive’s individual performance in 2017.
committee discretion
19
|
|
Performance share units (60%) | Stock options (40%) | |||
Purpose | • | • equity-based compensation to align executives with long-term performance of our shares and business | ||
Term | • three years | • seven years | ||
Vesting | • the number of units that vest is based on performance over a three-year period • cliff vest at the end of three years | • | ||
Payout | • paid out in cash based on units earned and the average closing share price for the 30 trading days prior to the end of the performance period on the TSX or NYSE • includes dividends earned quarterly at the same rate as dividends paid on our shares • no guarantee of a minimum payout • if performance is exceptional on a measure the Board may approve a payout of up to 200% | • right to buy CP shares at a specified price | ||
| after vesting • does not attract dividends • |
| ||
Restrictions | • |
| ||
|
| |||
|
|
|
Stock options are usually granted in January immediately after the fourth quarter financial statement blackout period ends, while performance share units (PSUs) are awarded in February after the Compensation Committee has reviewed theyear-end financial results in detail.
At the CEO’s recommendation, the Board may eliminate or adjust an executive’s actual grant (but may not increase a grant more than 25% above an executive’s target). In determining adjustments, the Compensation Committee considers the competitive positioning of each individual’s compensation, among other factors.
The Board does not take into consideration the amount or terms of previous awards when making grants because:
20
Grants are also made for special situations like retention or new hires. Special grants can include PSUs, RSUs, DSUs or options. These grants are made on the first Tuesday of the month following approval. If we are in a blackout period, the grant is made after the blackout has been lifted.
2017 long-term incentive awards
To determine the appropriate value of long-term incentive grants provided to the named executives, the Compensation Committee considers the practices of our comparator group and external market data as well as internal factors including executive retention, dilutive impact and long-term value creation. The CEO did not recommend any adjustments to the 2017 awards.
The table below shows the 2017 long-term incentives awarded to the named executives.
| ||||
| ||||
| ||||
| ||||
| ||||
2017 long-term | ||||||||||||||||||||||||||||
| incentive | > | Allocation | ||||||||||||||||||||||||||
| award | Performance share units | Stock options | ||||||||||||||||||||||||||
| (grant value) | $ | # | $ | # | ||||||||||||||||||||||||
Keith Creel | 14,924,418 | 4,407,788 | 22,294 | 10,516,630 | 229,871 | |||||||||||||||||||||||
Nadeem Velani | 985,045 | 782,395 | 3,903 | 202,650 | 4,644 | |||||||||||||||||||||||
Robert Johnson | 1,514,778 | 958,705 | 4,849 | 556,073 | 11,557 | |||||||||||||||||||||||
Laird Pitz | 622,931 | 394,237 | 1,994 | 228,694 | 4,753 | |||||||||||||||||||||||
Jeffrey Ellis | 604,199 | 386,888 | 1,930 | 217,311 | 4,980 | |||||||||||||||||||||||
Notes:
As disclosed in last year’s proxy, when Mr. Creel became CEO on January 31, 2017, he received a special grant of performance stock options, designed to motivate strong CEO performance, build his equity ownership and retain him during a period of significant change in the railroad industry. To make the upfront grant, the Compensation Committee reduced Mr. Creel’s target long-term incentive award to 400% of salary for the next five years (from the market median of 500% among the Class 1 railroads), and used the difference (5 years x 100%) to make the award, which was allocated 100% to performance stock options (see page 23 for details about the vesting and performance conditions).
21
Performance share units (PSUs)
|
| |||
Assignment | • not permitted other than by operation of law | • options will continue to vest and expire on the scheduled expiry date if the holder’s employment ends due to permanent disability. If an option holder dies, the options will expire 12 months following the date of death and may be exercised by the holder’s estate. • can only be assigned to the holder’s family trust, holding corporation or retirement trust, or a legal representative of a holder’s estate or a person who acquires the holder’s rights by bequest or inheritance |
| (1) | Although the recommendation to exercise discretion with respect to payout and vesting performance factors was made following the conclusion of the performance period ending December 31, 2020, the July 2018 special retention grants do not vest until July 20, 2021 and are settled based on the average closing price per share on the applicable stock exchange during the immediately preceding 30 days prior to July 20, 2021. |
Performance share units (60%) | Stock options (40%) | |||
Termination Provisions | ||||
Resignation | • all units cancelled | • 30 days to exercise any vested options; unvested options are cancelled | ||
Retirement (1) | • units continue to vest as long as unit holder has a minimum of six months of service in
| • options continue to vest and expire on the earlier of five years from retirement or the original expiry date | ||
Termination without Cause | • pro-rated to termination date as long as unit holder has a minimum of six months of service in the performance period | • six months to exercise vested options; unvested options are | ||
Termination with Cause | • all units cancelled | • all options cancelled | ||
Change of Control (2) | • pro-rated to change of control date• if unit holder is terminated without cause – pro-rated to termination date | • all options vest immediately (2) | ||
| (1) | Retirement with three months’ notice required in 2020. For 2021, six months’ notice will be required to allow for business continuity and knowledge transfer. |
| (2) | Stock options have a double trigger clause requiring a change of control and the option holder to be terminated without cause. |
2020 long-term | 2020 long-term | |||||||||||||||||||||||||||||||||||
incentive | incentive | Allocation | ||||||||||||||||||||||||||||||||||
target | award | Performance share units | Stock options | |||||||||||||||||||||||||||||||||
Executive | (as a % of salary) | (grant value) ($) (1) | ($) | (#) | ($) | (#) | ||||||||||||||||||||||||||||||
Keith Creel (2),(3) | 560% | 10,983,025 | 6,826,446 | 19,144 | 4,156,579 | 57,432 | ||||||||||||||||||||||||||||||
Nadeem Velani (4) | 300% | 2,975,517 | 1,818,076 | 5,172 | 1,157,441 | 17,455 | ||||||||||||||||||||||||||||||
John Brooks (2) | 275% | �� | 2,491,031 | 1,548,288 | 4,342 | 942,743 | 13,026 | |||||||||||||||||||||||||||||
Mark Redd (2),(4) | 250% | 1,833,492 | 1,139,643 | 3,196 | 693,849 | 9,587 | ||||||||||||||||||||||||||||||
Jeffrey Ellis | 200% | 1,338,239 | 817,705 | 2,326 | 520,534 | 7,850 | ||||||||||||||||||||||||||||||
| (1) | See the summary compensation table on |
| (2) | The grant value of the awards based on |
| (3) | Effective January 1, 2020, Mr. Creel’s long-term incentive target was increased to 660 percent of his base salary; however consistent with Mr. Creel’s 2017 employment agreement (as amended January 1, 2019), his LTIP target has been reduced by 100% to fund an upfront performance options grant that he received in 2017. Therefore, his target was 560 percent of his base salary in 2020. |
| (4) | Mr. Velani and
|
The award is paid out in cash based on the number of units that are earned and the average closing share price for the 30 trading days prior to the end of the performance period on the TSX or NYSE, as applicable. The awardNYSE. However, PSU awards may also be paid out in shares purchased on the open market, on the CEO’s recommendation, using the
2017
| 2017 PSU performance measures | Why the measure is important | Threshold (50%) | Target (100%) | Exceptional (200%) | Weighting | |||||||||||||
PSU three-year average return on invested capital (ROIC) Net operating profit after tax divided by average invested capital | Focuses executives on the effective use of capital as we grow. Ensures shareholders’ capital is employed in a value-accretive manner | 14.5% | 15% | 15.5% | | 60% (new) (increased | | |||||||||||
Total shareholder return Measured over three years. The percentile ranking of CP’s CAGR relative to the companies that make up the S&P TSX Capped Industrial Index | Compares our TSR to a broad range of Canadian investment alternatives Aligns long-term incentive compensation with long-term shareholder interests
| | 25th percentile |
| | 50th percentile |
| | 75th percentile |
| | 20%(new) (increased | | |||||
Total shareholder return Measured over three years. The percentile ranking of CP’s CAGR relative to the companies that make up the S&P 1500 Road and Rail Index | Compares our TSR to the companies that make up the S&P 1500 Road and Rail Index, a broad range of transportation peers, rather than the narrow group of publicly traded Class 1 peers making the payout less volatile and more consistent with the broader industry
Aligns long-term incentive compensation with long-term shareholder interests | | 25th percentile |
| | 50th percentile |
| | 75th percentile |
| | 20%(new) (increased | | |||||
2020 PSU performance measures | Why the measure is important | Threshold (50%) | Target (100%) | Exceptional (200%) | Weighting | |||||||||||||
PSU three-year average return on invested capital (ROIC) Net operating profit after tax divided by average invested capital | Focuses executives on the effective use of capital as we grow Ensures shareholders’ capital is employed in a value-accretive manner | 15.3% | 16.0% | 16.7% | 70% | |||||||||||||
Total shareholder return (TSR) Measured over three years. The percentile ranking of CP’s TSX Compound Annual Growth Rate (CAGR) relative to the companies that make up the S&P/TSX 60 | Compares our TSR on the TSX to the broader S&P/TSX 60 to reflect our progress relative to the Canadian market Aligns long-term incentive compensation with long-term shareholder interests | | 25th percentile | | 50th percentile | | 75th percentile | 15% | ||||||||||
Total shareholder return (TSR) Measured over three years. The ordinal ranking of CP’s NYSE CAGR relative to the Class 1 Railroads | Compares our TSR on the NYSE to the publicly traded Class 1 Railroads to ensure we are competitive against our primary competitors. Aligns long-term incentive compensation with long-term shareholder interests | 4th | 3rd | 1st | 15% | |||||||||||||
22
Stock options
30-day average closing share price on the TSX or the NYSE prior to the day of the grant.The table below shows the details of the 2020 annual PSU award grant.
|
|
| Grant value ($) | # of options | Grant price | ||||||||||
Keith Creel | 1,630,352 | 33,884 | US$150.99 (NYSE) | |||||||||
| 896,816 | 18,762 | US$151.14 (NYSE) | ||||||||||
Nadeem Velani | 202,650 | 4,644 | $201.49 (TSX) | |||||||||
Robert Johnson | 556,073 | 11,557 | US$150.99 (NYSE) | |||||||||
Laird Pitz | 228,694 | 4,753 | US$150.99 (NYSE) | |||||||||
Jeffrey Ellis | 217,311 | 4,980 | $201.49 (TSX) | |||||||||
The grant value of the stock optionPSU awards based on the NYSE trading price have been converted to Canadian dollars using a 20172020 average exchange rate of $1.2986.
$1.3415.
Executive | Grant value ($) | Number of PSUs | Grant price | |||||||||
Keith Creel | 6,826,446 | 19,144 | US$ | 265.81 (NYSE) | ||||||||
Nadeem Velani (1) | 1,818,076 | 5,172 | $351.55 (TSX) | |||||||||
John Brooks | 1,548,288 | 4,342 | US$ | 265.81 (NYSE) | ||||||||
Mark Redd (1) | 1,139,643 | 3,196 | US$ | 265.81 (NYSE) | ||||||||
Jeffrey Ellis | 817,705 | 2,326 | $351.55 (TSX) | |||||||||
| (1) | Mr. Velani and Mr. Redd elected to defer a proportion of their 2020 PSU award to DSUs. |
blackout period.
CEO performance stock options
Mr. Creel’s performance stock options cliff vest on February 1, 2022 (five years from the grant, date) based on our five-year total shareholder return relative to two equally weighted measures:
Performance will be assessed over a five-year period. The starting point for determining relative TSR will be the10-day trading average of the closing price of CP shares and the two indices prior to February 1, 2017 and the closing point will be the10-day trading average of the closing price of CP shares and the two indices prior to January 31, 2022. The options expire on February 1, 2024.
| Grant value ($) | # of options | Exercise price | ||||||||||
Keith Creel | 7,989,462 | 177,225 | US$151.14 (NYSE) | The performance stock options expire after seven years. | ||||||||
The grant value of the performance stock options is based on our shares traded on the NYSE and have been converted to Canadian dollars using a 2017 average exchange rate of $1.2986.
23
Executive | Grant value ($) (1) | # of options | Grant price | |||||||||
Keith Creel | 4,156,579 | 57,432 | US$ | 265.81 (NYSE) | ||||||||
Nadeem Velani | 1,157,441 | 17,455 | $351.55 (TSX) | |||||||||
John Brooks | 942,743 | 13,026 | US$ | 265.81 (NYSE) | ||||||||
Mark Redd | 693,849 | 9,587 | US$ | 265.81 (NYSE) | ||||||||
Jeffrey Ellis | 520,534 | 7,850 | $351.55 (TSX) | |||||||||
| (1) | The grant value of the stock option awards based on the NYSE trading price have been converted to Canadian dollars using a 2020 average exchange rate of $1.3415. |
The management stock option incentive plan (stock option plan) was introduced in October 2001.
Regular stock options granted before 2017 expire 10 years from the date of grant and generally vest 25% each year over four years, beginning on the anniversary of the grant date.
Stock options awarded January 1, 2017 and later have a seven-year term (reduced from 10 years). If the expiry date falls within a blackout period, the expiry date will be extended to 10 business days after the end of the blackout period date. If a further blackout period is imposed before the end of the extension, the term will be extended another 10 days after the end of the additional blackout period.
As a | ||
Maximum number of shares that may be reserved for issuance to insiders as options | 10% | |
Maximum number of options that may be granted to insiders in a one-year period | 10% | |
Maximum number of options that may be granted to any insider in a one-year period | 5% | |
As a the time the shares were reserved | ||
Maximum number of options that may be granted to any person | 5% |
The option grant price isnumber of options available for issuance as a percentage of outstanding shares continues to be capped, at the last closing market price of shares on the grant date on the TSX or the NYSE (for grants after December 15, 2014 depending on the currencydiscretion of the grant).
Board, at 7 percent.
| (as at December 31) | 2015 | 2016 | 2017 | |||||||||
Number of options granted | 317,202 | 403,740 | 396,980 | |||||||||
Weighted number of shares outstanding | 159,733,222 | 149,565,498 | 145,863,318 | |||||||||
Burn rate | 0.20% | 0.27% | 0.25% | |||||||||
as at December 31 | 2018 | 2019 | 2020 | |||||||||
Number of options granted | 282,125 | 224,730 | 217,240 | |||||||||
Weighted number of shares outstanding | 142,885,817 | 138,771,939 | 135,438,610 | |||||||||
Burn rate | 0.20% | 0.16% | 0.16% | |||||||||
| Number of options/shares | Percentage of outstanding shares | |||||||
Options outstanding (as at December 31, 2017) | 1,361,950 | 0.94 | ||||||
Options available to grant (as at December 31, 2017) | 1,555,922 | 1.07 | ||||||
Shares issued on exercise of options in 2017 | 319,403 | 0.22 | ||||||
Options granted in 2017 | 369,980 | 0.26 | ||||||
2020.
Number of options/shares | Percent of outstanding shares | |||||||
Options outstanding (as at December 31, 2020) | 1,387,366 | 1.04 | % | |||||
Options available to grant (as at December 31, 2020) | 895,969 | 0.67 | % | |||||
Shares issued on exercise of options in 2020 | 285,068 | 0.21 | % | |||||
Options granted in 2020 | 217,240 | 0.16 | % | |||||
A stand-alone option award was granted to Mr. Creel in 2013, as disclosed in prior proxy circulars. The award was not granted under the management stock option incentive plan.
We do not provide financial assistance to option holders to facilitate the purchase of shares under the plan.
24
Other things to know
There is a double trigger on options so that if there is a change of control and only if an option holder is terminated without cause, all of his or her stock options will vest immediately according to the change in control provisions in the stock option plan.
If an employee retires, the options continue to vest and expire on the original expiry date or five years from retirement, whichever is earlier.
If an employee is terminated without cause, the employee has six months to exercise any vested options. If the employee resigns, the employee has 30 days to exercise any vested options. If an employee is terminated with cause all options are cancelled.
Options will continue to vest and expire on its normal expiry date if the holder’s employment ends due to permanent disability.
If an option holder dies, the options will expire 12 months following his death and may be exercised by the holder’s estate. Options can only be assigned to the holder’s family trust, personal holding corporation or retirement trust, or a legal representative of an option holder’s estate or a person who acquires the option holder’s rights by bequest or inheritance.
The CEO, the Chairman of the Board and the Compensation Committee chair have authority to grant options to certain employees based on defined parameters, such as the position of the employee and the expected value of the option award:
The Compensation Committee has again approved 50,000 options that the CEO may allocate at his discretion in 2018.
25
The 2015
For Mr.NEO.
| (1) | The grant value for Mr. Creel, Mr. Brooks and Mr. Redd was converted to Canadian dollars using an exchange rate of $1.2957 for 2018. |
| (2) | Reflects the 30-day average closing share |
| (3) | The PSU payout value for Mr. Creel, Mr. Brooks and Mr. Redd was converted using a 2020 year-end exchange rate of $1.2732. |
| PSU measures | Threshold 50% | Target 100% | Maximum 200% | PSU Result | Weighting | Factor | ||||||||||||||||||
PSU Operating ratio Operating expenses divided by total revenues | 64% | 62% | 60% | adj. 57.1% | 50% | 200% | ||||||||||||||||||
PSU 2015 to 2017 average ROIC Net operating profit after tax divided by average invested capital | 13% | 14% | 15% | adj. 15.1% | 30% | 200% | ||||||||||||||||||
Total shareholder return Three-year CAGR relative to the S&P/TSX 60 Index | 0% | 1% | 5% | -5.6% | 10% | 0% | ||||||||||||||||||
Total shareholder return Ranking at the end of the three years relative to Class 1 Railroads | 4 | 3 | 1 | 5 | 10% | 0% | ||||||||||||||||||
PSU performance factor | 160% | |||||||||||||||||||||||
We make certain assumptions when we set the plan targets. Results under the PSU plan are adjusted to reflect changes to those assumptions so we measure the true operating performance of the business. Operating ratio was adjusted to reflect the following items: foreign exchange, the impact of a higher than forecaston-highway diesel (OHD) and land sales. ROIC was adjusted for the performance of the pension plan as its impact on the balance sheet was not a good indication of management’s ability to deliver returns from the core business on its invested capital.
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PSU performance measures | Threshold (50%) | Target (100%) | Maximum (200%) | PSU result | Weighting | PSU performance factor | ||||||||||||||||||
3 Year Average Adjusted Return on Invested Capital (1) | 14.5% | 15.0% | 15.5% | 16.6% | 60% | 200% | ||||||||||||||||||
TSR to S&P/TSX Capped Industrial Index | 25th percentile | 50th percentile | 75th percentile | 85th percentile | 20% | 200% | ||||||||||||||||||
TSR to S&P 1500 Road and Rail Index | 25th percentile | 50th percentile | 75th percentile | 88th percentile | 20% | 200% | ||||||||||||||||||
PSU performance factor | 200% | |||||||||||||||||||||||
| (1) | Adjusted Return on Invested Capital is a non-GAAP measure.Non-GAAP measures are defined and reconciled on pages61-69 of CP’s Annual Report on Form10-K for the year ended December 31, 2020. |
 | Mr. Creel Prior to joining Mr. Creel obtained a Bachelor of Science in marketing from Jacksonville State University and At CP, our purpose is to deliver transportation solutions that connect North America to the world. By doing this safely and efficiently, we create long-term, sustainable value for our employees, shareholders and the broader economy. From our multi-year strategic business plans to our daily operations and sales and marketing playbooks, everything we do is driven by, and tested against, our purpose and our values of accountability, diversity and pride. | |
2017 performance
Keith Creel was appointed President
In 2017 Mr. Creel focused on the following key areas:
2017 highlights
CP delivered record financial and safety performance in 2017.
Our total revenues grew by 5% to $6.55 billion which, combined withemployees, our disciplined operating model, produced record operating income and anall-time best operating ratio.
We invested $1.34 billion in our capital program and demonstrated our commitment to shareholders by returning approximately $691 million through share buybacks and dividends. We also increased our quarterly dividend by 12.5%, from $0.50 to $0.5625, and announced a new share repurchase program. Our total shareholder return for 2017 was 21%.
Throughout, we remained steadfast in our commitment to safety. We improved our train accident frequency rates by 12%, which marked the 12th consecutive year that we have led the industry on this key safety metric.
Strategic direction
Mr. Creel’s planned successionheroic front-line essential workers rose to the Presidentchallenge to support the North American economy and CEO role began when he arrivedcontinue to provide goods and services at CP in 2013 to work alongside the late legendary railroader Hunter Harrison and lay out a path for CP. CP achieved an extraordinary turnaround under the leadership of Mr. Harrison and Mr. Creel.
As President and CEO, Mr. Creel quickly began setting the direction for the next chapter of the CP story. CP has spent the last five years right sizing the organization and our asset base and improving our operations and service using CP’s precision railroading model. Our network now has the fastest and shortest transit timescritical time in the key markets we serve. Mr. Creel is leveraging those strengths and applying his20-plus years of railroading experience and the talent of his leadership team to grow our top line and achieve long term sustainable growth.
Our focus on safety, service and innovation, combined with our financial strength and our ability to capitalize on our network and deliver in a disciplined and cost-effective way, are key elements for achieving our strategy.
Employee engagement and team development
Building on his commitment to our people when he joined CP, Mr. Creel has devoted a significant amount of time in 2017 to deepen our relationship with employees in all areas of the business and support retention to help our future growth. He hosted a series of town halls and implemented CEO round tables to hear first-hand from employees across our network and respond to their questions, concerns and ideas about our strategy and our business.world’s history. Under Mr. Creel’s leadership, CP conductedour world-class railroaders took the global pandemic as an employee engagement surveyopportunity to demonstrate our resilient, industry-leading culture which will continue to propel us into the future. To acknowledge these extraordinary efforts, we provided each of our union employees who worked or were laid off in 2020 with a
| (1) | Adjusted diluted EPS is a non-GAAP measure.Non-GAAP measures are defined and reconciled on pages 61-69 of CP’s Annual Report on Form10-K for the year ended December 31, 2020. |
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Significant work was doneextend our reach through various initiatives in 2017 to collaborate proactively2020 including a strategic multi-year agreement with our union partners to reach a number of long-term labour agreements before expiry. Ratification of the new five-year agreements with the Canadian Pacific Police Association, the United Steelworkers (USW)A.P. Moller-Maersk benefiting North American customers and the Teamsters Canada Rail Conference Maintenance of Way Employees Division (TCRC-MWED) bring labour stability for the company and our employees and align employees’ interests with our growth objectives, while supporting a common vision that was in the best interest of all stakeholders.
As part of his appointment as President and CEO, Mr. Creel established a new leadership team and structure that better leverages ourbest-in-class service to meet the needs of current and future customers and support our long term sustainable growth strategy in the years ahead. These changes include the appointment of John Brooks as Chief Marketing Officerenvironment, and the recruitmentHapag-Lloyd AG extension of twoour long-term rail service agreement. We joined the TradeLens blockchain shipping platform, opened a new vice-presidents in sales and marketing.
Business development
CP is creating the foundation for top line growth by focusing on new business opportunities and enhancing service. In 2017 we expanded our market reach through initiatives such as our sales presence in Asia, daily service from Vancouver to Detroit, and expansion into the Ohio Valley. CP is the first railroad to offer a direct route from Vancouver to the Ohio Valley. We are already experiencing gains in market share through these enhanced offerings.
Additionally, we enhanced our service offerings such as our new “live” lift operation at Portal, North Dakota, our new large-scale, multi-commodity transload facility in Vancouver,Montréal, Québec and the roll out ofexpanded our Auto Grate technology at all of our intermodal terminals. These initiatives makes it easier and faster for our customers to do business, provide more efficient transload services and increase network fluidity which provides our customers with a strategic advantage.
Operating and safety performance
We remain grounded in our foundations of precision railroading and continue to fine-tune our operations in our constant pursuit of operational, service and safety excellence while controlling costs. In 2017, CP moved 5% more volume, while sustaining key operating metrics and improving overall safety performance. CP ended 2017 with an industry-leading FRA train accident rate of 0.99. This result not only represents a 12% improvement over 2016, but also represents the 12th consecutive year that CP has led the industry on this metric. CP’s FRA personal injury rate was 1.65, a 1% improvement over 2016.
In 2017, CP continued to roll out its Home Safe program – an initiative designed to take CP’s safety culturereach to the next level. Home Safe is a commitmentPort of Saint John, New Brunswick. In 2020, we also successfully completed the acquisition and commercial integration of Central Maine and Québec Railway (CMQ) and acquired full ownership of the Detroit River Rail Tunnel resulting in reduced operating costs for CP.
Mr. Creel also championed our trip plan effort. His leadership has involved setting clear direction and expectations on how to set and measure trip plans, and hold Operations accountable for execution. In 2017, CP continued to develop and refine our ability to measure trip plan. Trip plan is a detailed schedule for a shipment that has become CP’s cornerstone operating principle. It aligns our service plan and customer expectations, fromcut-off to local service, through to the delivery at destination. Through trip plan, CP is generating superior service that is consistent and aligned with market requirements, while controlling costs through improved efficiencies. CP will continue to refine and enhance our trip planning processes in 2018, by modifying schedules and business rules to ensure we meet market needs.
Stakeholder engagement
Mr. Creel led a range of engagement activities in 2017 with a broad group of external stakeholders, including shareholders, senior legislatorsinvestors, industry associations, government, regulators, customers and policy makers, regulators, First Nations, and industry associations. Mr. Creel had numerous meetings in Ottawa and other locationsmakers. We are proud to advocate for a balanced approach to industry regulation and legal changes to allow the proactive use of locomotive voice and video recorders to prevent incidents and improve rail safety. He had discussions with senior government officials in Canada and the U.S. to discuss the importance of the North American Free Trade Agreement to the North American economy. In addition, Mr. Creel met with current and prospective shareholders to thoroughly communicate our growth strategy and build confidence in the new management team.
All of these initiatives support our efforts to build on our operating efficiency, customer service and safety record, without compromise, and focus on growing CP into the future and creating long-term value for our customers, our employees and our shareholders. The Compensation Committee completed the assessment of CEO performance, which was discussed with and approved by the Board.share that Mr. Creel was assessednamed Railway Age 2021 Railroader of the Year. Institutional Investor’s 2020
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2017
| Compensation ($’000) | 2017 | 2016 | 2015 | ||||||||||
Fixed | ||||||||||||||
Base earnings | 1,437 | 1,261 | 1,164 | |||||||||||
Variable | ||||||||||||||
Short-term incentive | 2,419 | 1,901 | 1,602 | |||||||||||
Long-term incentive | ||||||||||||||
- PSUs | 4,408 | 2,404 | 1,959 | |||||||||||
- Stock options | 10,517 | 2,131 | 2,130 | |||||||||||
Total direct compensation | 18,781 | 7,697 | 6,855 | |||||||||||
Total target direct compensation | 9,058 | 6,336 | 5,836 | |||||||||||
Notes: Salary is the actual amount received that year. Payments made in U.S. dollars have been converted to Canadian dollars using an average exchange rate for the year: $1.2986 for 2017, $1.3248 for 2016 and $1.2787 for 2015.
In 2017, Mr. Creel received 177,225 performance stock options that cliff vest in five years based on our relative TSR against the companies that make up the S&P/TSX Capped Industrial Index and the companies that make up the S&P 1500 Road and Rail Index (see the2017 Long-term incentive – CEO granton page 23 and the summary compensation table on page 41 for details). |
| |||||||||||||
We signed a new employment agreement with Mr. Creel effective January 31, 2017, which sets out the terms of his compensation as CEO.2020. The new agreementassessment was designed to align his compensation closer to the market median of our peer group, does not include tax equalization and limits his use of the corporate aircraft to corporate travel and family visits within North America.
Salary
Mr. Creel received a 17.6% increase to US$1.125 million when he became CEO on January 31, 2017.
Short-term incentive
Based on our 2017 corporate performance and the assessment of his individual performance, Mr. Creel received a cash bonus of $2,419,292 for 2017, calculated as follows:
Year-end salary and the 2017 STIP award were paid in U.S. dollars and have been converted to Canadian dollars using an average exchange rate of $1.2986 for 2017.
Long-term incentive
Mr. Creel received annual 2017 long-term incentive awards with a total grant value of $6,934,956, 100% of his target award. The grant was allocated 60% PSUs and 40% stock options.
As disclosed in last year’s proxy, when Mr. Creel became CEO on January 31, 2017, he received a special grant of performance stock options, designed to motivate strong CEO performance, build his equity ownership and retain him during a period of significant change in the railroad industry. To make the upfront grant,reviewed by the Compensation Committee, reducedand reviewed and approved by the Board.
 | Compensation (in CAD $‘000) | 2020 | ||||
Fixed | ||||||
Salary | 1,601 | |||||
At-risk | ||||||
Short-term incentive | 3,442 | |||||
Long-term incentive | ||||||
- PSUs | 6,826 | |||||
- Stock options | 4,157 | |||||
Total direct compensation | 16,026 | |||||
Total target direct compensation | 12,569 | |||||
Note: All values above are derived from the Summary Compensation Table on page 39 Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants Total target direct compensation includes base salary, target short-term and target long-term incentives | ||||||
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The graph below shows the three-year average of Mr. Creel’s granted and realized and realizable pay from 20152018 to 2017.
Notes:
Summary compensation table: average2020.
Realized and realizable: average of salary earned, actual cash bonus received, the value of long-term incentive awards that have vested or been exercised, and the estimated current value of unvested long-term incentive awards granted from 2015 to 2017:
 | Summary compensation table. average of salary earned, actual cash bonus and long-term incentives granted as disclosed in the summary compensation table on page 39 Realized and realizable. average of salary earned, actual cash bonus, the value of long-term incentive awards that have vested or been exercised and the estimated current value of unvested long-term incentive awards granted from 2018 to 2020 • the value of vested 2018 PSUs paid in February 2021 was calculated using the 30-day average trading price of our shares prior to December 31, 2020 of US$335.39 on the NYSE with a performance multiplier of 2.0 and includes reinvested dividends up to the payment date• the value of unvested 2019 and 2020 PSUs are based on the closing price of our shares on December 31, 2020 of US$346.69 on the NYSE with a performance multiplier of 1.0 and includes reinvested dividends • the value of unvested/unexercised stock options is based on the closing price of our shares on December 31, 2020 of US$346.69 on the NYSE • the values for salary earned and actual cash bonus are as disclosed in the summary compensation table on page 39 • the value of any realized and realizable PSUs and stock options have been converted into Canadian dollars using the 2020 year-end exchange rate of $1.2732 |
We also compare the realized and realizable value of $100 awarded in total direct compensation to Mr. Creel in each year to the value of $100 invested in CP shares on the first trading day of the period, assuming reinvestment of dividends, to show a meaningful comparison of shareholder value.
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Pay linked to shareholder value
| (Cdn$) | Value of $100 | |||||||||||||||||||
| Compensation awarded | Realized and realizable value of compensation as at December 31, 2017 | Period | Keith Creel | Shareholder | ||||||||||||||||
2015 | $ | 6,855,631 | $ | 6,288,021 | Jan 1, 2015 to Dec 31, 2017 | 92 | 105 | |||||||||||||
2016 | $ | 7,696,926 | $ | 11,193.523 | Jan 1, 2016 to Dec 31, 2017 | 145 | 132 | |||||||||||||
2017 | $ | 18,780,304 | $ | 18,131,928 | Jan 1, 2017 to Dec 31, 2017 | 97 | 121 | |||||||||||||
(in CAD $‘000) | Value of $100 | |||||||||||||||||||
Compensation awarded ($) | Realized and realizable value of compensation as at December 31, 2020 ($) | Period | Keith Creel ($) | Shareholder ($) | ||||||||||||||||
2018 | 11,491,066 | 29,528,025 | Jan 1, 2018 to Dec 31, 2020 | 257 | 199 | |||||||||||||||
2019 | 14,029,129 | 24,107,429 | Jan 1, 2019 to Dec 31, 2020 | 172 | 187 | |||||||||||||||
2020 | 16,026,481 | 19,467,579 | Jan 1, 2020 to Dec 31, 2020 | 121 | 135 | |||||||||||||||
Mr. Creel’s realized and realizable value for salary earned and actual bonus received have been converted to Canadian dollars using the following average exchange rates: $1.2787$1.2957 for 2015, $1.32482018, $1.3269 for 20162019 and $1.2986 for 2017.$1.3415 for 2020. The value of any realized and realizable long-term incentive is converted into Canadian dollars using the 20172020$1.2545.
Equity ownership (at December $1.2732.
Requirement (as a multiple of salary) | Minimum ownership value ($) | Shares ($) | Deferred share units ($) | Total ownership value ($) | Total ownership (as a multiple of salary) | |||||||||
6x | $ | 8,467,875 | 552,707 | 7,157,512 | 7,710,219 | 5.46x | ||||||||
Mr. Creel is on track to meeting his share ownership requirements by January 2022. Values are based on US$182.76, the closing price
Mr. Velani joined CP in March 2013 Fixed Base earnings Variable Short-term incentive Long-term incentive - PSUs - Stock options - DSUs Total direct compensation Total target direct compensation Requirement (as a multiple of salary) Total ownership (as a multiple of salary) 3x 2020. The assessment was reviewed by the Compensation Committee, and reviewed and approved by the Board.
was appointed Vice-President and Chief Financial Officer on October 18, 2016 and was appointedhas been Executive Vice-President and Chief Financial Officer onsince October 17, 2017. Mr. Velani is a key member of the senior management team responsible for the long-term strategic direction of the Company. Other responsibilities include financial planning, reporting and accounting systems, as well as pension, treasury, investor relations and tax functions.and most recently served as Vice-President Investor Relations. Prior to CP, Mr. Velani spentafter spending approximately 15 years atwith CN where he worked inheld a variety of leadership positions in financial planning, sales and marketing, investor relations and the Office of the President and CEO.2017 performanceThe CEO assessed2017 against his individual performance objectives, which included developing a culturethe 2020 Corporate Sustainability Assessment.organizational structure in finance betteroperational performance. Mr. Velani leveraged the accounting and planning function to provide insights to drive business results and work collaboratively with the operations and sales and marketing teams. We aligned budgeted expense and resources to support an operations-focused company, buildinggrowth at low incremental costs while not compromising service or safety excellence, and continued to implement our pension asset management strategy. Mr. Velani delivered on the capital allocation strategy, adjusting to the market while continuing to drive long-term shareholder return, resulting in a strong team diluted earnings per share (EPS) increased 3 percent to $17.97 from $17.52 and adjusted diluted EPSfinancial leaders, reviewingCP’s Diversity and Leadership Steering Committee.pension plan investment strategy and improvingYear for 2020 as a result of significant contributions to business in Canada. Institutional Investor’s 2020financial planning, budgeting and forecasting process.top CFO in the capital goods/industrials sector. In addition, Mr. Velani was responsible for leading an updaterecognized as one of the company’s strategic multi-year plan.All aspects of these functions were taken into consideration as part of the assessment. Mr. Velani was assessed as exceeding his individual performance objectives for the year.The assessment was reviewedinaugural Canada’s 50 Best Executives 2020 by the Compensation Committee,Globe and approved by the Board.2017Mail’s Report on Business.2017, compared to the two previous years.
Compensation ($’000) 2017 2016 2015 451 299 224 491 374 153 782 132 87 203 105 72 24 - 15 1,951 910 551 1,840 1,141 576 SalaryMr. Velani received a 10.8% step increase in 2017 to bring his salary closer to the market median and as a result of his appointment as Executive Vice-President and CFO on October 17, 2017.2017 short-term incentiveBased on our 2017 corporate performance and the assessment of his individual performance, Mr. Velani received a cash bonus of $490,763 for 2017, calculated as follows:
322017 long-term incentiveMr. Velani also received annual 2017 long-term incentive awards in the form of PSUs and Options with a total grant value of $985,045. When options were granted on January 20, 2017, Mr. Velani’s target was 115% of base salary of $415,000. This grant was allocated at 40% of target in stock options. When PSUs were granted, Mr. Velani’s target increased to 225% of base salary. This grant was allocated at 60% of target in PSUs.Equity ownership (at December 31, 2017) Minimum
ownership value ($) Shares ($) Deferred share
units ($) �� Total ownership
value ($) 1,380,000 184,354 368,825 553,179 1.20x Mr. Velani is on track to meeting his share ownership requirements by February 2022. Values are based on $229.66, the closing price of our common shares on the TSX on December 29, 2017.33ROBERT A. JOHNSON EXECUTIVE VICE-PRESIDENT, OPERATIONS
Mr. Johnson was appointed as Executive Vice-President, Operations in April of 2016. In this role, Mr. Johnson has overall operational responsibility for CP’s rail network, including aspects of operational safety, service, engineering and mechanical services in both Canada and the U.S. with a focus on train performance and overall fluidity of the network.Prior to this appointment, Robert was CP’s Senior Vice-President Operations, Southern Region.Mr. Johnson’s railroad career spans over 36 years. He spent 32 of those years were spent with BNSF where he held successively more responsible roles in operations, transportation, engineering, and service excellence. His most recent position at BNSF was General Manager, Northwest Division, overseeingday-to-day operations for that region.2017 performanceThe CEO assessed Mr. Johnson’s performance in 2017 against his individual performance objectives in the areas of operational performance, cost control and safety. Mr. Johnson was instrumental in the implementation of our new “live” lift operation which enhances our cross-border operations at Portal, North Dakota for our intermodal traffic moving between Western Canada and the U.S. Midwest. Live lift allows us to lift single containers off trains for inspection by Canadian and U.S. authorities rather than having intermodal carsset-off. Mr. Johnson led the development of our new large-scale, multi-commodity transload facility in Vancouver as well as the implementation of operational efficiencies within that region to provide customers with more efficient services for imported and exported goods. Mr. Johnson championed our operational safety in 2017 which lead to a newall-time low train accident frequency. Mr. Johnson was assessed as having exceeded his overall individual performance objectives.2017
(1)
 | Mr. Brooks has been Executive Vice-President and Chief Marketing Officer (CMO) since February 14, 2019 after having served as Senior Vice-President and Chief Marketing Officer from February 2017. Mr. Brooks started his railroading career with Union Pacific and later helped start I&M Rail Link, LLC, which was purchased by the Dakota, Minnesota and Eastern Railroad (DM&E) in 2002. When CP acquired the DM&E in 2007, Mr Brooks was Vice-President of Marketing. With more than 26 years in the railroading business, Mr. Brooks has held senior responsibilities in all lines of business, including coal, chemicals, merchandise products, grain and intermodal. Mr. Brooks is responsible for strengthening relationships with existing customers, generating new opportunities for growth, enhancing the value of the Company’s service offerings and developing strategies to optimize CP’s business. |
| Compensation ($’000) | 2017 | 2016 | 2015 | ||||||||||
Fixed | ||||||||||||||
Base earnings | 565 | 532 | 425 | |||||||||||
Variable | ||||||||||||||
Short-term incentive | 597 | 648 | 362 | |||||||||||
Long-term incentive | ||||||||||||||
- PSUs | 959 | 359 | 300 | |||||||||||
- Stock options | 556 | 318 | 327 | |||||||||||
Total direct compensation | 2,677 | 1,857 | 1,414 | |||||||||||
Total target direct compensation | 2,260 | 2,305 | 1,203 | |||||||||||
Notes: Salary is the actual amount received that year. Payments made in U.S. dollars have been converted to Canadian dollars using an average exchange rate for the year: $1.2986 for 2017, $1.3248 for 2016 and $1.2787 for 2015. |
| |||||||||||||
Salary
Mr. Johnson did not receive a salary increase in 2017. Variances are due to foreign exchange.
2017 short-term incentive
Based on our 2017 corporate performance and the assessment of his individual performance, Mr. Johnson received a cash bonus of $597,372 for 2017, calculated as follows:
34
Year end salary and the 2017 STIP award were made in U.S. dollars have been converted to Canadian dollars using an average exchange rate of $1.2986 for 2017.
2017 long-term incentive
Mr. Johnson received 2017 long-term incentive awards in the form of PSUs and Options with a total grant value of $1,514,778, 100% of his target award. The grant was allocated 60% PSUs and 40% stock options.
Equity ownership (at December 31, 2017)
Requirement (as a multiple of salary) | Minimum ownership value ($) | Shares ($) | Deferred share units ($) | Total ownership value ($) | Total ownership (as a multiple of salary) | |||||||||||||||
3x | 1,637,123 | 52,649 | 1,275,641 | 1,328,290 | 2.43x | |||||||||||||||
Mr. Johnson is on track to meeting his share ownership requirements by April 2021. Values are based on the US$182.76 closing price of our shares on the NYSE on December 29, 2017 and have been converted using ayear-end exchange rate of $1.2545.
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LAIRD J. PITZ VICE-PRESIDENT AND CHIEF RISK OFFICER
 |
|
2017 individual performance
The CEO assessed Mr. Pitz’s performance in 2017 against his individual performance objectives, which focused mainly on reducing risk and liability for the company. This included mitigating risk in several key areas: safety, environmental, police security, casualty management, regulatory/operating practices, forensic and internal audit and disability management. Under Mr. Pitz’s leadership, CP has made significant progress in mitigating its overall risk, including the following results in 2017: $200,000 settlement of a $250 million class action lawsuit, claims recoveries in excess of $40 million including a 40% reduction in CP’s Federal Employers Liability Act (FELA) liability ($4.8 million). Mr. Pitz was assessed as having exceeded his overall individual performance objectives.
2020. The assessment was reviewed by the Compensation Committee, and reviewed and approved by the Board.
 | Compensation (in CAD $’000) | 2020 | ||||
Fixed | ||||||
Salary | 735 | |||||
At-risk | ||||||
Short-term incentive | 1,150 | |||||
Long-term incentive | ||||||
- PSUs | 1,548 | |||||
- Stock options | 943 | |||||
Total direct compensation | 4,376 | |||||
Total target direct compensation | 3,439 | |||||
Note: All values above are derived from the summary compensation table on page 39 Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants Total target direct compensation includes base salary, target short-term and target long-term incentives | ||||||
 | Mr. Redd has been Executive Vice-President Operations since September 1, 2019, bringing to his role considerable leadership experience in rail operations and safety excellence. He joined CP in October 2013 as General Manager Operations U.S. West and has held various leadership positions. In February 2017, he became Senior Vice-President Operations Western Region. Mr. Redd was proudly named CP’s 2016 Railroader of the Year. He leads the 24/7 operations of our network, which includes responsibility for network transportation, operations, mechanical, engineering, procurement and labour relations. Mr. Redd began his railroading career at Midsouth Rail in Jackson, Mississippi, and then moved to Kansas City Southern (KCS) as an engineer and was eventually appointed Vice-President Transportation. He is also a former Chairman of the operating board for the Port Terminal Railroad Association in Houston, Texas. Mr. Redd holds a Bachelor and Master of Science in Management from University of Phoenix and Executive MBA from the University of Missouri – Kansas City. |
 | Compensation (in CAD $’000) | 2020 | ||||
Fixed | ||||||
Salary | 595 | |||||
At-risk | ||||||
Short-term incentive | 827 | |||||
Long-term incentive | ||||||
- PSUs | 1,140 | |||||
- DSUs | 15 | |||||
- Stock options | 694 | |||||
Total direct compensation | 3,271 | |||||
Total target direct compensation | 2,574 | |||||
Note: All values above are derived from the summary compensation table on page 39 Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants Total target direct compensation includes base salary, target short-term and target long-term incentives | ||||||
2017 short-term incentive
Based on our 2017 corporate performance and the assessment of his individual performance, Mr. Pitz received a cash bonus of $435,601 for 2017, calculated as follows:
Year-end salary and 2017 STIP award were made in U.S. dollars and have been converted to Canadian dollars using an average exchange rate of $1.2986 for 2017.
2017 long-term incentive
Mr. Pitz also received 2017 annual long-term incentive awards in the form of PSUs and Options with a total grant value of $622,931, 100% of his target award. The grant was allocated 60% PSUs and 40% stock options.
Equity ownership(at December 31, 2017)
Requirement (as a multiple of salary) | Minimum ownership value ($) | Shares ($) | Deferred share units ($) | Total ownership value ($) | Total ownership (as a multiple of salary) | |||||||||||||||
2x | 918,294 | 7,107 | 996,557 | 1,003,664 | 2.19x | |||||||||||||||
Mr. Pitz has met his share ownership requirements. Values are based on US$182.76, the closing price of our shares on the NYSE on December 29, 2017 and have been converted using ayear-end exchange rate of $1.2545.
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Mr. Ellis is accountable for the overall strategic leadership, and has oversight at CP. private practice in Ontario. Mr. Ellis a member of the Association of Canadian General Counsel (ACGC) Executive Committee (2018 to 2020), and is a former President of the ACGC. In 2020, with Mr. Ellis’ guidance, the Globe and Mail’s Board Games annual survey of corporate boards in Canada ranked CP second out of 221 S&P/TSX Composite companies based on its governance and executive compensation practices. Mr. Ellis is currently a Board member of the Railway Association of Canada.
was appointedhas been Chief Legal Officer and Corporate Secretary effectivesince November 23, 2015.andfor the performance of the legal, corporate secretarial, government relations and public affairs functions of CP in Canada and the U.S.with the law firm of Borden Ladner Gervais LLP in Toronto, Canada.has B.A.holds a BA and M.A. degreesMA from the University of Toronto, J.D.JD and LL.M.LLM degrees from Osgoode Hall Law School andas well as an MBA from the Richard Ivey School of Business, University of Western Ontario. HeUniversity. Mr. Ellis is a member of the bars of New York, Illinois, Ontario and Ontario.2017 performanceThe CEO assessed Ellis’ performance in 2017 againstEllis and his individual performance objectives, which included managing the company’steam provide strategic guidance and have accountability for legal, risk to achieve optimal outcomes across a variety of litigation matters, helping CP’s business achieve its goals through legal support on transactions and commercial contracts and creating conditions for success in communication and public affairs, marketingcommunications and government affairs bymatters. Mr. Ellis’ team has been instrumental in facilitating communications and providing executive leadershiplegal advice and support to the CP pandemic team during this unprecedented time of thekey issues suchthe west coast. This strategic initiative will convert truck traffic to rail in the Vancouver market, thus reducing greenhouse gas emissions. In addition, Mr. Ellis’ team provided important support to facilitate the completion of CP’s purchase of the Central Maine & Québec Railway (CMQ) network, as brand awareness, rail safetywell as the acquisition of the Detroit River Rail Tunnel resulting in future reduced operating costs for CP related to the movement of goods through the tunnel.other external affairs priorities, while encouragingcommunications team to facilitate CP’s achievement of our business objectives, providing advice and strategic thinking to various internal stakeholders. Mr. Ellis’ Corporate Secretary responsibilities include corporate governance practices, compliance with CP’s Code of Business Ethics and providing strategic guidance to CP’s senior management and its Board of Directors.balanced, fairstrong advocate for diversity and market-driven regulatory environmentinclusion, Mr. Ellis is the chair of CP’s Indigenous Diversity Council founded in Canada2020, and is a member of the U.S.Executive Committee for Legal Leaders for Diversity and Inclusion. Mr. Ellis was assessed as having exceeded his overall individual performance objectives.2017 compensationThe table below is
521 638 817 137 521 2,634 1,966
2017 long-term incentive
Mr. Ellis also received 2017 long-term incentive awards with a total grant value of $604,199, 100% of his target award. The grant was allocated 60% PSUs and 40% stock options.
Equity ownership(at December 31, 2017)
Requirement (as a multiple of salary) | Minimum ownership value ($) | Shares ($) | Deferred share units ($) | Total ownership value ($) | Total ownership (as a multiple of salary) | |||||||||||||||
2x | 890,000 | 73,154 | 84,596 | 157,750 | 0.35x | |||||||||||||||
Mr. Ellis is on track to meeting his share ownership requirements by November 2020. Values are based on $229.66, the closing price of our shares on the TSX on December 29, 2017.
39
The graph also shows the total compensation awarded to our NEOs for each of the past five years. and cost of management2017 and assumes2020 assuming reinvestment of dividends.Index over the last fiveindex while our NEOs’ total compensation has increased by a lesser rate in recent years. It shows a strong correlation betweenWe have delivered significant shareholder value as our cumulative total return for the five-year period ending December 31, 2020 was 163 percent on the TSX and 186 percent on the NYSE.
paid to our named executives overin the same period. Our share price on the TSX was $160.65 at the beginning of the performance period (US$151.32 on the NYSE) compared to $229.66 at the end of 2017 (US$182.76 on the NYSE), a growth in share appreciation of 43.0%, creating significant value for shareholders. Our total shareholder return over the five year period was 48.2%, assuming reinvestment of dividends.
Notes:
table above:•Total direct compensation is the total compensation awarded to the named executives, as reported in the summary compensation table in prior years.In years where there were more than five named executives, we used the following to calculate total direct compensation in the table above:2015: Hunter Harrison, Mark Erceg, Keith Creel, Laird Pitz and Mark Wallace2014: Hunter Harrison, Bart Demosky, Keith Creel, Robert Johnson and Anthony Marquis2013: Hunter Harrison, Keith Creel, Brian Grassby, Paul Guthrie and Jane O’HaganJohnsonBrooks, Mr. Pitz, Mr. Redd and Mr. Pitz areJohnson were paid in U.S. dollars and their amounts have been converted using the following average exchange rates: $1.2986$1.3415 for 2020, $1.3269 for 2019, $1.2957 for 2018, 1.2986 for 2017 and $1.3248 for 2016, $1.2787 for 2015, $1.1045 for 2014 and $1.0299 for 2013.2016.Actual total direct compensation after resignations are the net amounts after Mr. Harrison, Mr. Erceg and Mr. Demosky left CP and forfeited amounts reported in the summary compensation table in prior proxy statements.40
All of the named executives except Mr. VelaniBrooks and Mr. EllisRedd were paid in U.S. dollars. Theirdollars and their compensation has been converted to Canadian dollars using the average exchange rates for the year: $1.2986$1.3415 for 2017, $1.32482020, $1.3269 for 20162019 and $1.2787$1.2957 for 2015.
| Non-equity Incentive plan compensation ($) | ||||||||||||||||||||||||||||||||||||
| Name and principal position | Year | Salary ($) | Share-based awards ($) | Option-based awards ($) | Annual incentive plans | Long-term incentive plans | Pension value ($) | All other compensation ($) | Total compensation ($) | |||||||||||||||||||||||||||
Keith E. Creel | 2017 | 1,436,594 | 4,407,788 | 10,516,630 | 2,419,292 | - | 398,894 | 926,402 | 20,105,600 | |||||||||||||||||||||||||||
President and Chief | 2016 | 1,261,123 | 2,403,912 | 2,131,126 | 1,900,765 | - | 348,529 | 833,257 | 8,878,712 | |||||||||||||||||||||||||||
Executive Officer | 2015 | 1,164,270 | 1,959,244 | 2,130,228 | 1,601,889 | - | 328,426 | 486,557 | 7,670,614 | |||||||||||||||||||||||||||
E. Hunter Harrison | 2017 | 361,369 | - | - | - | - | - | 6,452,479 | 6,813,848 | |||||||||||||||||||||||||||
Former Chief | 2016 | 2,904,595 | - | 4,999,757 | 6,557,760 | - | - | 4,367,682 | 18,829,794 | |||||||||||||||||||||||||||
Executive Officer | 2015 | 2,803,522 | 4,887,846 | 5,314,137 | 6,002,537 | - | 13,492 | 1,173,789 | 20,195,323 | |||||||||||||||||||||||||||
Nadeem S. Velani | 2017 | 451,355 | 806,073 | 202,650 | 490,763 | - | 101,027 | 49,523 | 2,101,391 | |||||||||||||||||||||||||||
Executive Vice-President | 2016 | 298,838 | 131,634 | 105,305 | 373,500 | - | 49,682 | 42,015 | 1,000,974 | |||||||||||||||||||||||||||
and Chief Financial Officer | 2015 | 223,972 | 102,039 | 78,833 | 152,819 | - | 33,308 | 30,457 | 621,428 | |||||||||||||||||||||||||||
Robert A. Johnson | 2017 | 564,891 | 958,705 | 556,073 | 597,372 | - | 114,037 | 54,819 | 2,845,897 | |||||||||||||||||||||||||||
Executive Vice-President, | 2016 | 532,056 | 358,674 | 317,991 | 648,324 | - | 86,189 | 54,931 | 1,998,165 | |||||||||||||||||||||||||||
Operations | 2015 | 425,160 | 300,454 | 326,539 | 362,141 | - | 88,425 | 57,035 | 1,559,754 | |||||||||||||||||||||||||||
Laird J. Pitz | 2017 | 457,901 | 394,237 | 228,694 | 435,601 | - | 82,361 | 41,137 | 1,639,931 | |||||||||||||||||||||||||||
Senior Vice-President | 2016 | 437,720 | 397,394 | 279,071 | 417,312 | - | 74,178 | 41,203 | 1,646,878 | |||||||||||||||||||||||||||
and Chief Risk Officer | 2015 | 406,126 | 347,920 | 287,967 | 331,166 | - | 70,499 | 37,901 | 1,481,579 | |||||||||||||||||||||||||||
Jeffrey J. Ellis | 2017 | 443,479 | 386,888 | 217,311 | 376,470 | - | 101,277 | 50,540 | 1,575,965 | |||||||||||||||||||||||||||
Chief Legal Officer and | 2016 | 421,918 | 455,239 | 316,312 | 400,500 | - | 50,275 | 50,638 | 1,694,882 | |||||||||||||||||||||||||||
Corporate Secretary | 2015 | 26,946 | - | - | 28,922 | - | 2,964 | 247,468 | 306,300 | |||||||||||||||||||||||||||
Notes:
Salary
Salary earned during2018. Mr. Velani and Mr. Ellis were paid in Canadian dollars.
Executive and principal position | Year | Salary ($) (1) | Share-based awards ($) (2) | Option-based awards ($) (3) | Non-equity incentive plan compensation - annual incentive plan ($) (4) | Pension Values ($) (5) | All other compensation ($) (6) | Total Compensation ($) | ||||||||||||||||||||||||
Keith E. Creel | 2020 | 1,601,097 | 6,826,446 | 4,156,579 | 3,442,359 | 546,767 | 242,948 | 16,816,196 | ||||||||||||||||||||||||
President and Chief | 2019 | 1,537,866 | 5,870,208 | 3,642,061 | 2,978,994 | 566,343 | 554,930 | 15,150,402 | ||||||||||||||||||||||||
Executive Officer | 2018 | 1,453,595 | 4,369,757 | 2,519,163 | 3,148,551 | 452,209 | 543,332 | 12,486,607 | ||||||||||||||||||||||||
Nadeem S. Velani | 2020 | 790,366 | 1,818,076 | 1,157,441 | 1,263,452 | 226,331 | 66,336 | 5,322,002 | ||||||||||||||||||||||||
Executive Vice-President | 2019 | 751,099 | 1,623,980 | 978,943 | 1,095,729 | 214,043 | 59,250 | 4,723,044 | ||||||||||||||||||||||||
and Chief Financial Officer | 2018 | 666,946 | 1,199,385 | 688,327 | 1,032,596 | 138,925 | 57,680 | 3,783,859 | ||||||||||||||||||||||||
John K. Brooks | 2020 | 735,100 | 1,548,288 | 942,743 | 1,149,741 | 588,088 | 83,767 | 5,047,727 | ||||||||||||||||||||||||
Executive Vice-President | 2019 | 670,235 | 1,240,804 | 697,030 | 829,259 | 254,186 | 66,651 | 3,758,165 | ||||||||||||||||||||||||
and Chief Marketing Officer | 2018 | 499,384 | 424,798 | 244,922 | 602,177 | 166,898 | 61,456 | 1,999,635 | ||||||||||||||||||||||||
Mark A. Redd | 2020 | 595,081 | 1,155,272 | 693,849 | 827,327 | 93,038 | 79,781 | 3,444,348 | ||||||||||||||||||||||||
Executive Vice-President | 2019 | 491,307 | 642,177 | 355,053 | 592,539 | 96,231 | 214,626 | 2,391,933 | ||||||||||||||||||||||||
Operations | 2018 | 440,209 | 832,824 | 562,059 | 510,812 | 78,942 | 283,124 | 2,707,970 | ||||||||||||||||||||||||
Jeffrey J. Ellis | 2020 | 520,967 | 954,825 | 520,534 | 638,004 | 125,011 | 44,457 | 2,803,798 | ||||||||||||||||||||||||
Chief Legal Officer | 2019 | 463,071 | 695,339 | 438,493 | 520,787 | 112,898 | 54,844 | 2,285,432 | ||||||||||||||||||||||||
and Corporate Secretary | 2018 | 450,531 | 384,531 | 220,669 | 477,750 | 99,240 | 54,963 | 1,687,684 | ||||||||||||||||||||||||
| (1) | Salary. |
| (2) | Share-based awards. 10-K filed with the SEC and securities regulatory authorities in Canada on February 18, 2021 for more details. |
Share-based awards
number of PSUs were granted on February 21, 2017. The grant date fair value of share awards granted to each named executive has been calculated in accordance with FASB ASC Topic 718: Compensation – Stock Compensation, which representsour NEOs receive, we use the grant date fair value (with reference to the Shares underlying the awards), measured using a latticed-basedWillis Towers Watson binomial lattice model. Using this valuation model, assuming the probable outcome of the applicable performance conditions and excluding the effect for estimated forfeitures during the applicable vesting periods. The 2017 grant date accounting fair value of the awards is $200.46 per share granted on the TSX or $152.25 per share granted on the NYSE. See Item 8, Financial Statements and Supplementary Data, Note 21: Stock-based compensation of our 2017 Form 10-K for more details.
We value our PSUs using the binomial lattice model methodology. The grant date expected fair value on January 31, 2020 was $162.37$284.76 on the TSX and US$123.32215.31 on the NYSE.
NYSE, based on the following assumptions:
Assumptions | Willis Towers Watson Expected Life Binomial Valuation | |||
TSX / NYSE | ||||
Term | 3 years | |||
Vesting Schedule | 3 year cliff | |||
Payout Range % (threshold-target-max) | 50-100-200 | |||
Risk of Forfeiture | 5% | |||
PSU Value (as a % of grant price) | 81% | |||
Mr. Harrison forfeited his 2015 PSU grant when he resigned from CP.
Option awards
Stock options wereDSUs granted on January 20, 2017. The grant date fair value of stock option awards granted to each named executive has been calculated in accordance with FASB ASC Topic 718: Compensation – Stock Compensation. We used31, 2020. See the Black-Scholes option-pricing model (with reference to the shares underlying the options). The grant date accounting fair value of the awards is $43.64 per share granted on the TSX or $37.05 per share granted on the NYSE. Additional options were granted to Mr. Creel on February 1, 2017 to bring him to the CEO level. The grant date accounting fair value is US$36.81 per
41
share. For the special performance grant made on February 1, 2017, the grant date accounting fair value is US$34.72 per share.See Incentive plan awardsAbout deferred compensation section on page 44 for details about the 2018 awards. See Item 8, Financial Statements and Supplementary Data, Note 21: Stock-based compensation of our 2017 Form 10-K46 for more details.
| (3) | Option-based awards. 10-K filed with the SEC and securities regulatory authorities in Canada on February 18, 2021 for more details. |
Mr. Harrison forfeited his option awards when he resigned from CP.
Non-equity incentive plan compensation
Cash bonus earned under our short-term incentive plan for 2017 and paid in February 2018.
Pension value
Mr. Creel, Mr. Velani and Mr. Ellis participate inbased on the Canadian defined contribution plan (DC plan) and in the defined contribution supplemental plan (DC SERP).
Mr. Creel, Mr. Johnson and Mr. Pitz participate in the U.S. defined contribution plan and the U.S. supplemental executive retirement plan.
SeeRetirement plans on page 47 for more details.
All other compensation
The named executives also receive certain benefits and perquisites. The table below shows the breakdown of all other compensation for 2017:
| Perquisites | Other compensation | |||||||||||||||||||||||||||||||||||||||||||
| Name | Personal use of company aircraft | Auto benefits | Housing allowance | Financial and tax planning | Additional medical | Club memberships | 401K Plan | Employer share purchase plan match | Tax reimbursement | Post- employment payments | Total | |||||||||||||||||||||||||||||||||
Keith Creel | 570,649 | 28,387 | 77,270 | 29,708 | - | 33,023 | 7,012 | 27,843 | 152,510 | - | 926,402 | |||||||||||||||||||||||||||||||||
Hunter Harrison | 83,361 | - | 3,921 | - | 42,286 | - | - | - | - | 6,322,911 | 6,452,479 | |||||||||||||||||||||||||||||||||
Nadeem Velani | - | 20,432 | - | - | - | 11,200 | - | 8,937 | 8,954 | - | 49,523 | |||||||||||||||||||||||||||||||||
Robert Johnson | - | 22,091 | - | - | - | 14,544 | 8,863 | 9,321 | - | - | 54,819 | |||||||||||||||||||||||||||||||||
Laird Pitz | - | 17,178 | - | - | - | 14,544 | 9,415 | - | - | - | 41,137 | |||||||||||||||||||||||||||||||||
Jeffrey Ellis | - | 19,679 | - | - | - | 11,200 | - | 8,781 | 10,880 | - | 50,540 | |||||||||||||||||||||||||||||||||
42
Notes:
Assumptions | Willis Towers Watson Expected Life Binomial Valuation | |||||||||
NYSE | TSX | |||||||||
Option Term | 7 years | 7 years | ||||||||
Vesting Schedule | 4 year pro-rated | 4 year pro-rated | ||||||||
Expected Life | 4.75 years | 4.75 years | ||||||||
Dividend Yield (1-year historical) | 1.07% | 1.08% | ||||||||
Volatility (3-year daily) | 19.5% | 18.5% | ||||||||
Risk-free Rate (yield curve) | 2.5 - 2.8% | 1.8 - 1.9% | ||||||||
Risk of Forfeiture | 5% | 5% | ||||||||
Stock Option Value (as a % of grant price) | 18% | 16% | ||||||||
| (4) | Non-equity annual incentive. |
| (5) | Pension. |
All other compensation. |
Perquisites | Other compensation | |||||||||||||||||||||||||||||||||||
Executive | Personal use of company aircraft ($) (a) | Auto benefits ($) (b) | Housing allowance ($) (c) | Financial and tax planning ($) (d) | Additional medical ($) (e) | Club benefits ($) (f) | 401K match ($) (g) | Employer share purchase plan match ($) (h) | Total ($) | |||||||||||||||||||||||||||
Keith Creel | 109,953 | 28,072 | 2,404 | 30,743 | 1,148 | 31,723 | 7,244 | 31,661 | 242,948 | |||||||||||||||||||||||||||
Nadeem Velani | - | 39,487 | - | - | - | 11,200 | - | 15,649 | 66,336 | |||||||||||||||||||||||||||
John Brooks | - | 39,183 | - | 3,420 | 1,548 | 15,025 | 10,036 | 14,555 | 83,767 | |||||||||||||||||||||||||||
Mark Redd | - | 41,147 | - | - | - | 15,025 | 11,826 | 11,783 | 79,781 | |||||||||||||||||||||||||||
Jeffrey Ellis | - | 19,879 | 2,816 | - | - | 11,200 | - | 10,562 | 44,457 | |||||||||||||||||||||||||||
| (a) | Calculated by multiplying the variable cost per air hour by the number of hours used for travel and includes costs for fuel, maintenance, landing fees and other miscellaneous costs. As an executive of a Calgary-based company, enabling the CEO to visit his family in the Non-corporate use of the corporate jet has been limited to |
Reflects the cost of a company-leased vehicle and reimbursement of related operating costs. A taxable reimbursement of auto benefits is provided for executives with vehicles that meets a CFCR (Combined Fuel Consumption Ratio from the Canadian federal government) of 11.8L per 100KM or less. |
Reflects total costs pro-rated for the days Mr. Creel | ||
| Calgary to provide reasonable accommodation. For Mr. |
| (d) | Executive financial |
| (e) | Under the U.S. medical benefits plan, available to all U.S. employees, the majority of the cost of a medical examination is covered by the plan. Only additional services | |
Included in the perquisites program available to all senior executives. Value of CEO’s club membership of $31,723 reflects the Canadian dollar conversion of US$23,647. |
Reflects matching company contributions to the 401k |
Reflects company contributions to the employee share purchase plan (ESPP).
| ||
As of the 2017 tax year, Mr. Creel no longer receives tax equalization benefits as a result of working for CP in Canada, and cannot use the corporate jet for purposes other than for corporate travel and family visits within North America.
43
| Option-based awards | Share-based awards | |||||||||||||||||||||||||||||||||
| Name | Grant date | Number of securities | Option exercise price ($) | Option Date | Value of in-the-money | Grant type | Number of shares or units of shares that have not vested (#) | Market or payout value of share-based awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed ($) | |||||||||||||||||||||||||
Keith Creel | 4-Feb-2013 | 119,325 | 115.78 | 4-Feb-2023 | 13,588,731 | |||||||||||||||||||||||||||||
| 22-Feb-2013 | 53,350 | 119.18 | 22-Feb-2023 | 5,894,108 | ||||||||||||||||||||||||||||||
| 31-Jan-2014 | 39,900 | 168.84 | 31-Jan-2024 | 2,426,718 | ||||||||||||||||||||||||||||||
| 24-Jul-2014 | 47,940 | 210.32 | 24-Jul-2024 | 927,160 | ||||||||||||||||||||||||||||||
| 23-Jan-2015 | 33,910 | 175.92 | 23-Jan-2025 | 290,974 | ||||||||||||||||||||||||||||||
| 22-Jan-2016 | 55,250 | 116.80 | 22-Jan-2026 | 4,571,762 | ||||||||||||||||||||||||||||||
| 20-Jan-2017 | 33,884 | 150.99 | 20-Jan-2024 | 1,350,463 | ||||||||||||||||||||||||||||||
| 1-Feb-2017 | 18,762 | 151.14 | 1-Feb-2024 | 744,238 | ||||||||||||||||||||||||||||||
| 1-Feb-2017 | 177,225 | 151.14 | 1-Feb-2024 | 7,030,035 | ||||||||||||||||||||||||||||||
| 6-Feb-2013 | DSU | 7,157,512 | ||||||||||||||||||||||||||||||||
| 23-Jan-2015 | PSU | 3,230,887 | ||||||||||||||||||||||||||||||||
| 23-Feb-2016 | PSU | 15,091 | 3,459,873 | |||||||||||||||||||||||||||||||
| 21-Feb-2017 | PSU | 22,468 | 5,151,306 | |||||||||||||||||||||||||||||||
Total | 579,546 | 36,824,189 | 37,559 | 8,611,179 | 10,388,399 | |||||||||||||||||||||||||||||
Nadeem Velani | 2-Apr-2013 | 2,310 | 126.34 | 2-Apr-2023 | 238,669 | |||||||||||||||||||||||||||||
| 31-Jan-2014 | 1,820 | 168.84 | 31-Jan-2024 | 110,692 | ||||||||||||||||||||||||||||||
| 23-Jan-2015 | 1,539 | 218.78 | 23-Jan-2025 | 16,744 | ||||||||||||||||||||||||||||||
| 22-Jan-2016 | 2,927 | 165.74 | 22-Jan-2026 | 187,094 | ||||||||||||||||||||||||||||||
| 20-Jan-2017 | 4,644 | 201.49 | 20-Jan-2024 | 130,821 | ||||||||||||||||||||||||||||||
| 26-Feb-2014 | DSU | 152,164 | ||||||||||||||||||||||||||||||||
| 23-Jan-2015 | PSU | 149,157 | ||||||||||||||||||||||||||||||||
| 19-Feb-2015 | DSU | 67 | 15,397 | 61,589 | ||||||||||||||||||||||||||||||
| 23-Feb-2016 | PSU | 796 | 182,733 | |||||||||||||||||||||||||||||||
| 21-Feb-2017 | PSU | 3,933 | 903,367 | |||||||||||||||||||||||||||||||
| 24-Feb-2017 | DSU | 122 | 27,935 | 111,741 | ||||||||||||||||||||||||||||||
Total | 13,240 | 684,020 | 4,918 | 1,129,432 | 474,651 | |||||||||||||||||||||||||||||
Robert Johnson | 2-Jul-2013 | 3,640 | 129.54 | 2-Jul-2023 | 364,437 | |||||||||||||||||||||||||||||
| 31-Jan-2014 | 5,870 | 168.84 | 31-Jan-2024 | 357,013 | ||||||||||||||||||||||||||||||
| 23-Jan-2015 | 5,198 | 175.92 | 23-Jan-2025 | 44,603 | ||||||||||||||||||||||||||||||
| 22-Jan-2016 | 8,244 | 116.80 | 22-Jan-2026 | 682,165 | ||||||||||||||||||||||||||||||
| 20-Jan-2017 | 11,557 | 150.99 | 20-Jan-2024 | 460,610 | ||||||||||||||||||||||||||||||
| 24-Jun-2013 | DSU | 1,275,641 | ||||||||||||||||||||||||||||||||
| 23-Jan-2015 | PSU | 495,554 | ||||||||||||||||||||||||||||||||
| 23-Feb-2016 | PSU | 2,252 | 516,228 | |||||||||||||||||||||||||||||||
| 21-Feb-2017 | PSU | 4,887 | 1,120,422 | |||||||||||||||||||||||||||||||
Total | 34,509 | 1,908,828 | 7,139 | 1,636,650 | 1,771,195 | |||||||||||||||||||||||||||||
Laird Pitz | 3-Jun-2014 | 3,150 | 187.00 | 3-Jun-2024 | 134,379 | |||||||||||||||||||||||||||||
| 23-Jan-2015 | 4,584 | 175.92 | 23-Jan-2025 | 39,334 | ||||||||||||||||||||||||||||||
| 22-Jan-2016 | 5,426 | 116.80 | 22-Jan-2026 | 448,984 | ||||||||||||||||||||||||||||||
| 20-Jan-2017 | 4,753 | 150.99 | 20-Jan-2024 | 189,433 | ||||||||||||||||||||||||||||||
| 19-Feb-2015 | DSU | 351 | 80,374 | 321,498 | ||||||||||||||||||||||||||||||
| 23-Jan-2015 | PSU | 436,852 | ||||||||||||||||||||||||||||||||
| 23-Feb-2016 | DSU | 519 | 118,937 | 475,748 | ||||||||||||||||||||||||||||||
| 23-Feb-2016 | PSU | 1,976 | 453,012 | |||||||||||||||||||||||||||||||
| 21-Feb-2017 | PSU | 2,010 | 460,739 | |||||||||||||||||||||||||||||||
Total | 17,913 | 812,130 | 4,856 | 1,113,062 | 1,234,098 | |||||||||||||||||||||||||||||
Jeffrey Ellis | 22-Jan-2016 | 5,981 | 165.74 | 22-Jan-2026 | 382,306 | |||||||||||||||||||||||||||||
| 22-Jan-2016 | 2,811 | 165.74 | 22-Jan-2026 | 179,679 | ||||||||||||||||||||||||||||||
| 20-Jan-2017 | 4,980 | 201.49 | 20-Jan-2024 | 140,287 | ||||||||||||||||||||||||||||||
| 22-Jan-2016 | DSU | 74 | 16,919 | 67,677 | ||||||||||||||||||||||||||||||
| 23-Feb-2016 | PSU | 2,389 | 548,668 | |||||||||||||||||||||||||||||||
| 21-Feb-2017 | PSU | 1,945 | 446,707 | |||||||||||||||||||||||||||||||
Total | 13,772 | 702,272 | 4,408 | 1,012,294 | 67,677 | |||||||||||||||||||||||||||||
44
Option-based awards (1) | Share-based awards (2) | |||||||||||||||||||||||||||||||||||
Executive | Grant date | Number of securities underlying unexercised options (#) | Option exercise price ($) | Option expiration date | Value of unexercised in-the-money options ($) (1) | Grant type | Number of shares or units of shares that have not vested (#) | Market or payout value of share-based awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed ($) | |||||||||||||||||||||||||||
Keith Creel (3) | 31-Jan-14 | 39,900 | 168.84 | 31-Jan-24 | 10,880,331 | |||||||||||||||||||||||||||||||
24-Jul-14 | 47,940 | 210.32 | 24-Jul-24 | 11,084,207 | ||||||||||||||||||||||||||||||||
22-Jan-16 | 55,250 | 116.80 | 22-Jan-26 | 16,171,451 | ||||||||||||||||||||||||||||||||
20-Jan-17 | 8,471 | 150.99 | 20-Jan-24 | 2,110,679 | ||||||||||||||||||||||||||||||||
1-Feb-17 | 18,762 | 151.14 | 1-Feb-24 | 4,671,255 | ||||||||||||||||||||||||||||||||
1-Feb-17 | 177,225 | 151.14 | 1-Feb-24 | 44,124,463 | ||||||||||||||||||||||||||||||||
22-Jan-18 | 43,148 | 185.85 | 22-Jan-25 | 8,835,912 | ||||||||||||||||||||||||||||||||
25-Jan-19 | 54,202 | 205.31 | 25-Jan-26 | 9,756,632 | ||||||||||||||||||||||||||||||||
31-Jan-20 | 57,432 | 265.81 | 31-Jan-27 | 5,914,142 | ||||||||||||||||||||||||||||||||
6-Feb-13 | DSU | 14,192,611 | ||||||||||||||||||||||||||||||||||
15-Feb-18 | PSU | 16,089,967 | ||||||||||||||||||||||||||||||||||
14-Feb-19 | PSU | 22,279 | 9,833,937 | |||||||||||||||||||||||||||||||||
31-Jan-20 | PSU | 19,279 | 8,509,982 | |||||||||||||||||||||||||||||||||
Total | 502,330 | 113,549,072 | 41,558 | 18,343,919 | 30,282,578 | |||||||||||||||||||||||||||||||
Nadeem Velani | 23-Jan-15 | 1,539 | 218.78 | 23-Jan-25 | 342,812 | |||||||||||||||||||||||||||||||
22-Jan-16 | 2,927 | 165.74 | 22-Jan-26 | 807,237 | ||||||||||||||||||||||||||||||||
20-Jan-17 | 3,644 | 201.49 | 20-Jan-24 | 874,706 | ||||||||||||||||||||||||||||||||
22-Jan-18 | 13,260 | 231.66 | 22-Jan-25 | 2,782,876 | ||||||||||||||||||||||||||||||||
25-Jan-19 | 16,313 | 271.50 | 25-Jan-26 | 2,773,699 | ||||||||||||||||||||||||||||||||
31-Jan-20 | 17,455 | 351.55 | 31-Jan-27 | 1,570,601 | ||||||||||||||||||||||||||||||||
26-Feb-14 | DSU | 301,353 | ||||||||||||||||||||||||||||||||||
19-Feb-15 | DSU | �� | 152,466 | |||||||||||||||||||||||||||||||||
24-Feb-17 | DSU | 276,621 | ||||||||||||||||||||||||||||||||||
22-Feb-19 | DSU | 273 | 120,393 | 481,571 | ||||||||||||||||||||||||||||||||
31-Jan-20 | DSU | 4,167 | 1,839,950 | |||||||||||||||||||||||||||||||||
15-Feb-18 | PSU | 4,639,031 | ||||||||||||||||||||||||||||||||||
14-Feb-19 | PSU | 5,888 | 2,599,662 | |||||||||||||||||||||||||||||||||
31-Jan-20 | PSU | 1,041 | 459,775 | |||||||||||||||||||||||||||||||||
Total | 55,138 | 9,151,931 | 11,369 | 5,019,780 | 5,851,042 | |||||||||||||||||||||||||||||||
John Brooks | 23-Jan-15 | 2,506 | 175.92 | 23-Jan-25 | 544,865 | |||||||||||||||||||||||||||||||
22-Jan-16 | 4,340 | 116.80 | 22-Jan-26 | 1,270,300 | ||||||||||||||||||||||||||||||||
20-Jan-17 | 2,610 | 150.99 | 20-Jan-24 | 650,321 | ||||||||||||||||||||||||||||||||
22-Jan-18 | 4,195 | 185.85 | 22-Jan-25 | 859,058 | ||||||||||||||||||||||||||||||||
25-Jan-19 | 7,484 | 205.31 | 25-Jan-26 | 1,347,158 | ||||||||||||||||||||||||||||||||
14-Feb-19 | 2,969 | 202.00 | 14-Feb-26 | 546,947 | ||||||||||||||||||||||||||||||||
31-Jan-20 | 13,026 | 265.81 | 31-Jan-27 | 1,341,371 | ||||||||||||||||||||||||||||||||
6-Sep-12 | DSU | 449,584 | ||||||||||||||||||||||||||||||||||
22-Feb-19 | DSU | 167 | 73,770 | 295,079 | ||||||||||||||||||||||||||||||||
15-Feb-18 | PSU | 1,564,156 | ||||||||||||||||||||||||||||||||||
14-Feb-19 | PSU | 4,542 | 2,004,864 | |||||||||||||||||||||||||||||||||
31-Jan-20 | PSU | 4,373 | 1,930,126 | |||||||||||||||||||||||||||||||||
Total | 37,130 | 6,560,020 | 9,082 | 4,008,760 | 2,308,819 | |||||||||||||||||||||||||||||||
Mark Redd (4) | 1-Apr-14 | 1,380 | 166.16 | 1-Apr-24 | 380,011 | |||||||||||||||||||||||||||||||
23-Jan-15 | 1,256 | 175.92 | 23-Jan-25 | 273,085 | ||||||||||||||||||||||||||||||||
20-Jan-17 | 933 | 150.99 | 20-Jan-24 | 232,471 | ||||||||||||||||||||||||||||||||
22-Jan-18 | 4,015 | 185.85 | 22-Jan-25 | 822,198 | ||||||||||||||||||||||||||||||||
20-Jul-18 | 3,960 | 194.97 | 20-Jul-25 | 764,953 | ||||||||||||||||||||||||||||||||
25-Jan-19 | 3,996 | 205.31 | 25-Jan-26 | 719,300 | ||||||||||||||||||||||||||||||||
3-Sep-19 | 1,297 | 234.76 | 3-Sep-26 | 184,835 | ||||||||||||||||||||||||||||||||
31-Jan-20 | 9,587 | 265.81 | 31-Jan-27 | 987,235 | ||||||||||||||||||||||||||||||||
19-Feb-15 | DSU | 194,980 | ||||||||||||||||||||||||||||||||||
22-Feb-19 | DSU | 142 | 62,577 | 250,309 | ||||||||||||||||||||||||||||||||
31-Jan-20 | DSU | 849 | 374,659 | 77,934 | ||||||||||||||||||||||||||||||||
15-Feb-18 | PSU | 1,497,334 | ||||||||||||||||||||||||||||||||||
20-Jul-18 | PSU | 1,725 | 951,781 | |||||||||||||||||||||||||||||||||
14-Feb-19 | PSU | 1,643 | 725,164 | |||||||||||||||||||||||||||||||||
3-Sep-19 | PSU | 559 | 246,664 | |||||||||||||||||||||||||||||||||
31-Jan-20 | PSU | 2,414 | 1,065,526 | |||||||||||||||||||||||||||||||||
Total | 26,424 | 4,364,088 | 7,332 | 3,426,371 | 2,020,557 | |||||||||||||||||||||||||||||||
Option-based awards (1) | Share-based awards (2) | |||||||||||||||||||||||||||||||||||
Executive | Grant date | Number of securities underlying unexercised options (#) | Option exercise price ($) | Option expiration date | Value of unexercised in-the-money options ($) (1) | Grant type | Number of shares or units of shares that have not vested (#) | Market or payout value of share-based awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed ($) | |||||||||||||||||||||||||||
Jeffrey Ellis | 22-Jan-16 | 2,097 | 165.74 | 22-Jan-26 | 578,332 | |||||||||||||||||||||||||||||||
20-Jan-17 | 4,980 | 201.49 | 20-Jan-24 | 1,195,399 | ||||||||||||||||||||||||||||||||
22-Jan-18 | 4,251 | 231.66 | 22-Jan-25 | 892,157 | ||||||||||||||||||||||||||||||||
25-Jan-19 | 7,307 | 271.50 | 25-Jan-26 | 1,242,409 | ||||||||||||||||||||||||||||||||
31-Jan-20 | 7,850 | 351.55 | 31-Jan-27 | 706,343 | ||||||||||||||||||||||||||||||||
22-Jan-16 | DSU | 167,538 | ||||||||||||||||||||||||||||||||||
31-Jan-20 | DSU | 393 | 173,449 | 693,795 | ||||||||||||||||||||||||||||||||
15-Feb-18 | PSU | 1,487,303 | ||||||||||||||||||||||||||||||||||
14-Feb-19 | PSU | 2,638 | 1,164,638 | |||||||||||||||||||||||||||||||||
31-Jan-20 | PSU | 2,342 | 1,034,273 | |||||||||||||||||||||||||||||||||
Total | 26,485 | 4,614,640 | 5,373 | 2,372,360 | 2,348,636 | |||||||||||||||||||||||||||||||
| (1) | Option-based awards. |
Valuethe value of unexercised20172020Based$229.66, our$441.53, the closing share price on the TSX on December 29, 2017.31, 2020. For allNEOs with U.S. dollar stock option grants, the named executives except Mr. Velani and Mr. Ellis, option awards made in 2015 or later have been valuedvalue of unexercised182.76, our346.69, the closing share price on the NYSE on December 29, 201731, 2020.
| (2) | Share-based awards. year-end exchange rate of $1.2732. |
Mr. Creel was awarded performance stock options on July 24, 2014. These options vested upon meeting certain performance hurdles: 50% of the options vested upon CP achieving an annual operating ratio of 63%, and the other 50% vested upon CP achieving an annual operating income of $2,618 million. The options are not exercisable until June 1, 2018.
Mr. Creel was also awarded performance stock options on February 1, 2017. These options will vest on February 1, 2022 provided certain performance metrics are achieved. See page 23 for details. Amount reflects the market value of shares or units of shares that have not vested.
Mr. Velani and Mr. Ellis: the value of unvested PSUs and DSUs is based on $229.66, our closing share price on the TSX on December 29, 2017.
Mr. Creel, Mr. Johnson and Mr. Pitz: the value of PSUs or DSUs is based on US$182.76, our closing share price on the NYSE on December 29, 2017, converted into Canadian dollars using ayear-end exchange rate of $1.2545.
PSUs assume a payout at target (100%) for the 2016 and 2017 grants. The 2015 PSU value reflects a payout at 160% on the award which includes dividends earned up to the payment date. The DSU awards are deferred and cannot be redeemed until the executiveNEO leaves the company.
Company.
| (3) | Mr. Creel was awarded a performance stock option grant on February 1, 2017. These options will vest on February 1, 2022 upon the achievement of predetermined performance measures. |
| (4) | Prior to becoming an NEO, Mr. Redd was one of a number of key senior leaders who received a retention grant on July 20, 2018, consisting of PSOs and PSUs. Upon the achievement of revenue and diluted earnings per share (EPS) targets on December 31, 2020 and a share price hurdle 10 days prior to the vest date for PSUs, the grant will vest on July 20, 2021. Diluted EPS results exceeded the target. The revenue target was achieved based on reported results, however, after defined adjustments, it was not met by less than 1 percent. While our overall company performance and shareholder return was favourable, the COVID-19 pandemic impacted our volumes due to lower consumer demand, resulting in the adjusted revenue not being achieved. Absent these impacts, the adjusted revenue goal would have been met in full. To provide an equitable outcome for all award participants, the Board approved the application of positive discretion for the PSOs to vest at 75 percent (without discretion would vest at 50 percent) and the PSUs will payout at 125 percent (without discretion would payout at 100 percent) based upon the EPS target having been exceeded, contingent upon the achievement of the share price hurdle. If the share price hurdle is not achieved it will result in a zero payout for PSUs regardless of performance. For Mr. Redd, 3,960 PSOs will vest and become exercisable on the vest date. Mr. Redd’s 1,725 PSUs with 125 percent discretion applied based on the December 31, 2020 closing share price on the NYSE and theyear-end exchange rate of 1.2732 will result in an estimated payout of $951,781, if the share price hurdle is achieved. See Compensation Committee Discretion on page 21 for details on the use of discretion. |
| Name | Option-based awards – Value vested during the year ($) | Share-based awards – Value vested during the year ($) | Non-equity incentive plan compensation – Value earned during the year ($) | |||||||||
Keith Creel | 7,825,458 | 3,230,887 | 2,419,292 | |||||||||
Nadeem Velani | 138,267 | 436,074 | 490,763 | |||||||||
Robert Johnson | 362,089 | 995,884 | 597,372 | |||||||||
Laird Pitz | 193,139 | 436,852 | 435,601 | |||||||||
Jeffrey Ellis | 140,560 | 67,677 | 376,470 | |||||||||
Notes:
Share-based awards – value vested during the year
Includes 2015 PSUs that vested at 160% on December 31, 2017 and includes dividends earned up to the payment2020.
Executive | Option-based awards - value vested during the year ($) (1) | Share-based awards - value vested during the year ($) (2) | Non-equity incentive plan compensation - value earned during the year ($) | |||||||||
Keith Creel | 6,409,932 | 16,089,967 | 3,442,359 | |||||||||
Nadeem Velani | 922,774 | 4,682,621 | 1,263,452 | |||||||||
John Brooks | 587,742 | 1,564,156 | 1,149,741 | |||||||||
Mark Redd | 413,684 | 1,497,334 | 827,327 | |||||||||
Jeffrey Ellis | 794,423 | 1,487,303 | 638,004 | |||||||||
| (1) | Option-based awards – value vested during the year. |
| (2) | Share-based awards – value vested during the year. 30-day trading price of our shares prior to December 31, 2020 on the TSX for Mr. Velani and Mr. Ellis, and US$335.39 on the NYSE for Mr. Creel, Mr. Brooks and Mr. Redd, converted to Canadian dollars using theyear-end exchange rate of $1.2732 and by multiplying that product by the achieved performance factor. |
Keith Creel Nadeem Velani Robert Johnson Laird Pitz Jeffrey Ellis 2020. Totalnamed executivesNEOs in 2017.Name Number of options exercised and sold Option exercise price ($) Value realized ($) - - - - - - - - - 1,809 US$ 116.80 89,745 - - - Value realized is calculated using the market price of the shares acquired on exercise of the respective options less the exercise price for those options. The value has been converted to Canadian dollars using the exercise date exchange rate of $1.2182. 25,413 150.99 6,030,244 33,910 175.92 6,915,646 2,310 126.34 721,002 1,000 201.49 241,160 1,820 168.84 495,375 2,345 97.70 790,911 2,850 75.71 1,029,770 1,900 119.18 596,498 1,440 168.84 381,658 2,801 150.99 427,260 2,042 116.80 404,562 900 165.74 174,294 3,600 165.74 672,182 (1) plansatplans at December 31, 2017.2020. These include the issuance of securities upon exercise of options outstanding under the management stock option incentive plan and the director stock option plan.Plan category Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities remaining
available for future issuance under equity
compensation plans (excluding securities
reflected in the first column) Equity compensation plans approved by security holders 1,481,275 $ 150.54 1,895,922 Equity compensation plans not approved by security holders - - - 1,481,275 $ 150.54 1,895,922
be issued upon exercise
of outstanding options,
warrants and rights
exercise price of
outstanding options,
warrants and rights ($)
available for future issuance under equity
compensation plans (excluding securities
reflected in the first column) 1,387,366 225.20 1,235,969 - - - 2426 to read more about the management stock option incentive plan. You can also read about the two equity compensation plans in our audited consolidated financial statements for the year ended December 31, 2017,2020, available on our website (www.cpr.ca)(investor.cpr.ca/financials), and on SEDAR (www.sedar.com) and EDGAR (www.sec.gov).46
2020.
| Accumulated value at start of year ($) | Compensatory ($) | Accumulated value at year end ($) | ||||||||||
Keith Creel | 402,371 | 376,688 | 842,518 | |||||||||
Nadeem Velani | 186,475 | 101,027 | 315,592 | |||||||||
Jeffrey Ellis | 66,157 | 101,277 | 183,455 | |||||||||
Executive | Accumulated value at start of year ($) | Compensatory ($) | Accumulated value at year end ($) | |||||||||
Keith Creel | 2,041,957 | 523,827 | 2,801,563 | |||||||||
Nadeem Velani | 774,411 | 226,331 | 1,108,415 | |||||||||
Jeffrey Ellis | 454,091 | 125,011 | 633,286 | |||||||||
DC SERP.
Years of credited service | Annual benefits payable | Opening present value of defined benefit obligation ($) | Compensatory change ($) | Non-compensatory change ($) | Closing present value of defined benefit obligation ($) | |||||||||||||||||||||||||||
Executive | At December 31, 2019 | At age 65 | At year end ($) | At age 65 ($) | ||||||||||||||||||||||||||||
John Brooks | 12.17 | 27.25 | 165,803 | 371,252 | 1,084,323 | 588,088 | 430,786 | 2,103,197 | ||||||||||||||||||||||||
salaried retirement income plan
| Accumulated value at start of year ($) | Compensatory ($) | Accumulated value at year end ($) | ||||||||||
Keith Creel | 705,262 | 22,206 | 846,244 | |||||||||
Robert Johnson | 176,959 | 114,037 | 299,094 | |||||||||
Laird Pitz | 99,062 | 82,361 | 187,811 | |||||||||
47
2020. The values intable below shows the tableU.S. Salaried Retirement Income Plan and U.S. DC SERP account information as at December 31, 2020 and values have been converted to Canadian dollars using the 20172020 average exchange rate of $1.2986.
$1.3415.
Executive | Accumulated value at start of year ($) | Compensatory ($) | Accumulated value at year end ($) | |||||||||
Keith Creel | 1,045,509 | 22,940 | 1,227,046 | |||||||||
Mark Redd | 246,286 | 93,038 | 415,177 | |||||||||
Elections must be made beforedeferred amount, including the beginning ofmatch, cannot exceed the new fiscal year.amount needed to meet the ownership requirement. The amount is converted to bonus DSUs using the average market price of a CP common share for the 10 trading days immediately before December 31 of the applicable performance year.
The matching units vest after three years.
| Unvested DSUs (#) | Vested DSUs (#) | Total units ($) | Value as at December 31, 2017 ($) | |||||||||||||
Keith Creel | - | 31,218 | 31,218 | 7,157,426 | ||||||||||||
Nadeem Velani | 189 | 1,417 | 1,606 | 368,834 | ||||||||||||
Robert Johnson | - | 5,564 | 5,564 | 1,275,672 | ||||||||||||
Laird Pitz | 869 | 3,477 | 4,346 | 996,418 | ||||||||||||
Jeffrey Ellis | 74 | 295 | 369 | 84,745 | ||||||||||||
Mr. Creel received a special make-whole DSU grant when he was hired in 2013.
We valued the outstanding DSUs using $229.66, our closing share price on the TSX on December 29, 2017 for Mr. Velani and Mr. Ellis, and US$182.76, our closing share price on the NYSE and converted to Canadian dollars using ayear-end31, 2020.
Executive | Unvested DSUs (#) | Vested DSUs (#) | Total Units (#) | Value as at December 31, 2020 ($) (1) | ||||||||||||
Keith Creel | 0 | 32,153 | 32,153 | 14,192,611 | ||||||||||||
Nadeem Velani | 4,440 | 2,745 | 7,185 | 3,172,354 | ||||||||||||
John Brooks | 167 | 1,687 | 1,854 | 818,433 | ||||||||||||
Mark Redd | 991 | 1,185 | 2,176 | 960,459 | ||||||||||||
Jeffrey Ellis | 393 | 1,951 | 2,344 | 1,034,782 | ||||||||||||
| (1) | We valued the outstanding DSUs using $441.53, our closing share price on the TSX on December 31, 2020 for Mr. Velani and Mr. Ellis, and US$346.69, our closing share price on the NYSE and converted to Canadian dollars using a year-end exchange rate of $1.2732 for Mr. Creel, Mr. Brooks and Mr. Redd. |
48
Resignation | Retirement | Termination with cause | Termination without cause | Change in control | ||||||
Severance | None | None | None | Mr. Creel: 24 months of base salary Mr. Ellis: 12 months of Other | None | |||||
Short-term incentive | Forfeited | Award for current year is pro-rated to retirement date | Forfeited | Equal to the target award for severance period for Mr. Creel Other pro-rated to termination date as per plan | None | |||||
DSUs | Unvested DSUs are forfeited | Unvested DSUs are forfeited | Unvested DSUs are forfeited | Unvested DSUs are forfeited | Unvested units vest early if the holder is terminated following change | |||||
Performance share units | Forfeited | Award continues to vest based on performance factors and executive is entitled to receive the full value as long as they have worked for six months of the performance period, otherwise the award is forfeited | Forfeited | Pro-rated based on active service within the performance period | Only vest if the executive is terminated following a change PSUs vest at target, pro-rated based on active service within the performance period | |||||
Stock options | Vested options are exercisable for 30 days or until the expiry date, whichever comes Unvested options are forfeited Performance stock options are forfeited | Options continue to vest Award expires five years after the retirement date or the normal expiry date, whichever is earlier Performance stock options are forfeited | Forfeited | Vested options are exercisable for six months following termination as well as any options that vest during the six-month periodPerformance stock options are forfeited | Options only vest early if the option holder is terminated following the change Performance stock options are forfeited | |||||
Pension | No additional value | No additional value | No additional value | No additional value | No additional value | |||||
ESPP shares | Unvested shares are forfeited | Unvested shares vest | Unvested shares are forfeited | Unvested shares vest | Unvested shares vest | |||||
Benefits | End on resignation | Post-retirement life insurance of $50,000 and a health spending account based on years of service (same for all employees) | End on resignation | None | None | |||||
Perquisites | Any unused flex perquisite dollars are forfeited | Any unused flex perquisite dollars are forfeited | Any unused flex perquisite dollars are forfeited | Any unused flex perquisite dollars are forfeited | Any unused flex perquisite dollars are forfeited |
We entered into a separation agreement with Mr. Harrison on January 18, 2017, under which he resigned from CP as CEO effective January 31, 2017. He was the only named executive with a change in control agreement with CP.
49
| Severance payment | ||||||||||||||||||||||||||||
| Name | Severance period (# of months) | Base pay ($) | Short-term Incentive ($) | Additional retirement benefits ($) | Other benefits ($) | Value of vesting of options and equity-based awards ($) | Payable on termination without cause ($) | |||||||||||||||||||||
Keith Creel | 24 | 2,822,625 | 3,387,150 | - | 34,169 | 6,369,723 | 12,613,667 | |||||||||||||||||||||
Jeffrey Ellis | 12 | 445,000 | 267,000 | - | 14,592 | 690,249 | 1,416,841 | |||||||||||||||||||||
Total | 3,267,625 | 3,654,150 | - | 48,761 | 7,059,972 | 14,030,508 | ||||||||||||||||||||||
Notes:
Severance payment | ||||||||||||||||||||||||||||
Name | Severance period (# of months) | Base pay ($) | Short-term incentive ($) | Additional retirement benefits ($) | Other benefits ($) (1) | Value of vesting of options and equity-based awards (2) | Payable on termination without cause ($) | |||||||||||||||||||||
Keith Creel | 24 | 3,039,160 | 3,798,950 | - | 48,418 | 18,797,782 | 25,684,311 | |||||||||||||||||||||
Jeffrey Ellis | 12 | 531,449 | 372,014 | - | 26,603 | 2,130,260 | 3,060,326 | |||||||||||||||||||||
Total | 3,570,609 | 4,170,964 | - | 75,021 | 20,928,042 | 28,744,637 | ||||||||||||||||||||||
Reflects the value of accelerated vesting of shares purchased under the ESPP for Mr. Creel and Mr. Ellis. Also includes the cost of group benefits for Mr. Ellis for the severance |
| (2) | Reflects the value of |
pro-rated value as of the termination date of PSU awards. year-end exchange rate of $1.2732. Mr. Ellis’ calculation is based on $441.53, our closing share price on the TSX on December |
50
Our director compensation program shares the same objective as our executive compensation program: to attract and retain qualified directors and to align the interests of directors and shareholders. Flat fee retainer We pay directors a flat fee retainer, which
| Aligning director and shareholder interests Directors receive their annual retainer in deferred share units so they have an ongoing stake in our future success, aligning their interests with those of our shareholders. About DDSUs DDSUs are granted to directors under the director deferred share unit plan. Only non-employee directors participate in the plan.A DDSU is a bookkeeping entry that has the same value as one CP common share. DDSUs earn additional units as dividend equivalents at the same rate as dividends paid on our shares. DDSUs vest immediately. The DDSU Plan was amended effective in April 2020 to allow for directors to elect to receive their DDSUs in cash after leaving the Board instead of waiting for a six or twelve month period. These changes to the DDSU plans are subject to tax rules in the country of the director’s residence and in the case of U.S. directors, this election is only possible on DDSUs awarded after April 2020. | |||||||||
Directors receive Directors must meet their share ownership requirements within five years of joining the Board, and must hold their DDSUs for one year after they The table below shows the flat fee retainers for 2020. In 2020, Canadian directors’ fees were converted to Canadian dollars and the number of DDSUs received was based on the | ||||||||||
| Annual Retainer | |||||||||
Board Chair retainer | US$395,000 | |||||||||
Director retainer | US$200,000 | |||||||||
Committee chair retainer | US$30,000 | |||||||||
Similar
We use aour comparator group in 2020. The comparator group was extensively reviewed and updated in 2018. Our comparator group consists of 21 companies which arewe compete with for talent. It includes six Class 1 Railroad peers as well as 11 capital-intensive Canadian businesses ranging fromone-thirdcompanies. For certain positions within the organization, we apply a heavier weighting to three timesClass 1 Railroad peers; however, we consistently review alignment and compensation practices against the size of CP based on size of assets.
whole group.
|
|
|
51
We also look at the director compensation of the Class 1 railroads as a secondary reference.
20172020 with respect to director compensation. The Governance Committee did not make changes to its compensation
in 2020.
All
| Name | Fees earned ($) | Share-based awards ($) | Option-based awards ($) | Non-equity incentive plan compensation ($) | Pension value | All other compensation ($) | Total ($) | |||||||||||||||||||||
John Baird | - | 235,987 | - | - | - | 1,000 | 236,987 | |||||||||||||||||||||
Isabelle Courville | 132,500 | 133,056 | - | - | - | 1,000 | 266,556 | |||||||||||||||||||||
Jill Denham | - | 235,987 | - | - | - | 1,000 | 236,987 | |||||||||||||||||||||
William Fatt | - | 228,846 | - | - | - | 1,000 | 229,846 | |||||||||||||||||||||
Rebecca MacDonald | - | 266,113 | - | - | - | 1,000 | 267,113 | |||||||||||||||||||||
Matthew Paull | - | 326,824 | - | - | - | 1,000 | 327,824 | |||||||||||||||||||||
Jane Peverett | - | 255,391 | - | - | - | 1,000 | 256,391 | |||||||||||||||||||||
Andrew Reardon | - | 518,392 | - | - | - | 1,000 | 519,392 | |||||||||||||||||||||
Gordon Trafton | - | 308,410 | - | - | - | 1,000 | 309,410 | |||||||||||||||||||||
Name | Share-based awards (1)(3) ($) | All other compensation (2)(3) ($) | Total ($) | |||||||||
John Baird | 269,430 | 1,000 | 270,430 | |||||||||
Isabelle Courville | 532,124 | 1,000 | 533,124 | |||||||||
Jill Denham | 269,430 | 1,000 | 270,430 | |||||||||
Edward Hamberger | 268,300 | 1,342 | 269,642 | |||||||||
Rebecca MacDonald | 309,844 | 1,000 | 310,844 | |||||||||
Edward Monser | 268,300 | 1,342 | 269,642 | |||||||||
Matthew Paull | 308,545 | 1,342 | 309,887 | |||||||||
Jane Peverett | 309,844 | 1,000 | 310,844 | |||||||||
Andrea Robertson | 269,430 | 1,000 | 270,430 | |||||||||
Gordon Trafton | 308,545 | 1,342 | 309,887 | |||||||||
The value of the share-based awards has been calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC 718) using the grant date fair value, which is prescribed by the DDSU Plan. |
| (2) | Each director was provided with a $1,000 donation, in local currency, to the charity of their choice in December |
The Governance Committee reviews director compensation every two to three years based on the directors’ responsibilities and time commitment and the compensation provided by comparable companies. In 2017 the committee completed a review
| (3) | All directors were paid in U.S. dollars and the value of their share-based awards, and cash and other payments, as applicable, have been converted to Canadian dollars using the 2020 average exchange rate of $1.3415. |
Share-based awards | ||||||||||||
Name | Number of shares or units of shares that have not vested (#) | Market or payout value of share-based awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed ($) (1) | |||||||||
John Baird | - | - | 2,692,891 | |||||||||
Isabelle Courville | - | - | 4,475,348 | |||||||||
Jill Denham | - | - | 1,897,254 | |||||||||
Edward Hamberger | - | - | 506,292 | |||||||||
Rebecca MacDonald | - | - | 5,606,547 | |||||||||
Edward Monser | - | - | 746,858 | |||||||||
Matthew Paull | - | - | 2,926,961 | |||||||||
Jane Peverett | - | - | 1,970,990 | |||||||||
Andrea Robertson | - | - | 504,669 | |||||||||
Gordon Trafton | - | - | 1,951,896 | |||||||||
| (1) | Calculated based on the closing price of our shares on December 31, 2020 on the TSX ($441.53), in the case of directors resident in Canada, and on the NYSE (US$346.69) which was converted to Canadian dollars using the year-end exchange rate of $1.2732, in the case of the directors resident in the U.S. |
44.46.Shares of Common Stockcommon shares beneficially owned by each person, or group of persons, known by Canadian Pacific based on publicly available information as of March 15, 2017,April 28, 2021, to own beneficially more than five percent of our Common Stock,common shares, each of our directors, each of our NEOs and all directors and executive officers as a group.Unless otherwise indicated in the table, the address of each of the individuals named below is c/o Canadian Pacific, 7550 Ogden Dale Road S.E., Calgary, Alberta, T2C 4X9.Name of Beneficial OwnerShares of Common Stock Beneficially OwnedPercent of Common Stock OutstandingJohn Baird(a)--Isabelle Courville(a)900-Jill Denham(a)--William Fatt(a)--Rebecca MacDonald(a)--Matthew Paull(a)1,000-Jane Peverett(a)--Andrew Reardon(a)4,031-Gordon T. Trafton II(a)--Keith Creel(b)2,561*Jeffrey Ellis(b)360*Robert Johnson(b)300*Laird Pitz(b)52*Nadeem Velani(b)852*All current executive officers and directors as a group18,744*
outstanding 0 — 900 * 0 — 0 — 0 — 0 — 3,000 * 0 — 0 — 0 — 262,622 * 31,218 * 23,348 * 12,373 * 16,932 * 11,172,077 8.31 % 422,454 * * Common Stock.common shares.(a) (b) (c) (d) (e) (f) (g) (h)
Code. CP considers its related party transactions obligation seriously and reviews related party transactions for all employees at the level of General Manager and above. Our accounting and legal departments work together to review any related party transactions reported by officers and employees. Our internal audit department validates the work done.
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It
CEO.
| For the year ended December 31 | 2017 | 2016 | ||||||
Audit fees | $ | 3,834,100 | $ | 2,398,500 | ||||
| for audit of our annual financial statements, reviews of quarterly reports and services relating to statutory and regulatory filings or engagements (including attestation services and audit of financial statements of certain subsidiaries and certain pension and benefits plans, and advice on accounting and/or disclosure matters) | ||||||||
Audit-related fees | $ | 21,000 | $ | 289,800 | ||||
| for assurance and services related to the audit but not included in the audit fees above, including securities filings, compliance review of third-party agreements, refinancing of subsidiary companies and accounting training | ||||||||
Tax fees | $ | 153,100 | $ | 147,000 | ||||
| for services relating to tax compliance, tax planning and tax advice and access fees for taxation database resources | ||||||||
All other fees | $ | 34,600 | $ | 26,100 | ||||
| for services provided relating to CP’s corporate sustainability report | ||||||||
Total | $ | 4,042,800 | $ | 2,861,400 | ||||
For the year ended December 31 | 2020 | 2019 | ||||||
Audit fees for audit of our annual financial statements, reviews of quarterly reports and services relating to statutory and regulatory filings or engagements (including attestation services and audit or interim review of financial statements of certain subsidiaries and certain pension and benefits plans, and advice on accounting and/or disclosure matters) | $ | 3,842,100 | $ | 3,576,300 | ||||
Audit-related fees for services related to the audit but not included in the audit fees above, including securities filings | $ | 269,500 | $ | 169,700 | ||||
Tax fees for services relating to tax compliance, tax planning and tax advice | $ | 5,800 | $ | 35,500 | ||||
All other fees for services provided relating to training programs | $ | — | $ | 90,500 | ||||
Total | $ | 4,117,400 | $ | 3,872,000 | ||||
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULE |
Exhibit | Description | |
| 31.1* | CEO Rule 13a-14(a) Certifications relating to this Amendment No. 1 on Form 10-K/A | |
| 31.2* | CFO Rule 13a-14(a) Certifications relating to this Amendment No. 1 on Form 10-K/A | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
| * | Filed with this Amendment No. 1 on Form 10-K/A |
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ITEM 16. | FORM 10-K SUMMARY |
CANADIAN PACIFIC RAILWAY LIMITED | ||
(Registrant) | ||
| By: | /s/ KEITH CREEL | |
| Keith Creel | ||
| President and Chief Executive Officer | ||
30, 2021
Signature | Title | |
* Keith Creel | President, Chief Executive Officer and Director (Principal Executive Officer) | |
/s/ NADEEM VELANI Nadeem Velani | Executive Vice-President and Chief Financial Officer (Principal Financial | |
*
Isabelle Courville | ||
* John R. Baird | Director | |
*
Gillian H. Denham | Director | |
*
Edward R. Hamberger | Director | |
* | Director | |
| Rebecca MacDonald | ||
* Edward Monser | Director | |
* Matthew H. Paull | Director | |
* Jane L. Peverett | Director | |
* Andrea Robertson | Director | |
* Gordon T. Trafton | Director | |
| *By: | /s/ NADEEM VELANI | |
| Nadeem Velani | ||
Attorney-in-Fact | ||
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