Customers Notable Findings in the Report
• After significant increases in bank CEO pay prior to 2000, CEO pay has generally remained relatively flat, and the ratio of CEO to broader employee pay has declined.
• The causes of increasing executive pay are complex and numerous, and there is no strong causal connection between horizontal benchmarking and increasing pay levels.
• The increase in company size and com- plexity may explain some of the growth in pay disparity between CEOs and other employees. The CEO has responsibility for managing the whole of a large and complex organization, radically changing the nature of the role and level of CEO responsibility; whereas, typical employee duties/roles may not be affected by the size of the company.
• The six Canadian banks in the report have increased in size significantly since 1995. In aggregate, the banks have increased more than 315% in asset size and 739% in market capitalization between 1995 and 2012, relative to an increase in aggregate CEO compensation of 240% (in nominal terms) over the same period.
Workplace
Conclusions of the Research Report
• Horizontal pay comparisons, when used properly, provide relevant context and an important input for board committees when setting executive pay.
• Although vertical benchmarking is unlikely to be sufficient on its own to guide committees, it can provide additional context to assist decision-making.
In light of this report, we took the opportunity to review TD’s current practice and found our overall approach to be in alignment with the report recommenda- tions. One of the safeguards we’re adopting is to evaluate pay decisions for executives in the context of decisions for the broader company. The Human Resources Committee of the Board will continue to discuss broad-based compensation, pension and benefit programs regularly to ensure appropriate context when making executive compensation decisions.
Environment Say-on-Pay
All Canadian banks adopted “say-on-pay” in 2010. This process allows shareholders an opportunity to express concerns regarding executive compensation and provides a means to hold compensation committees accountable for their decisions.
Say-on-Pay Vote Results (% in favour) 2013 TD
Canadian average U.S. average
94.5% 89.2% 91.3%
Linking ESG Factors in Executive Compensation
Incentive compensation is based on a combination of financial and non-financial measures. For the majority of employees and executives, non-financial measures include Customer Experience Index and Customer WOW! Index results. On an individual basis, all executives and employ- ees are encouraged to establish meaningful
performance objectives across five major categories, including customer, business operations, financial, employee and community. These objectives are used to evaluate performance, which has a direct impact on compensation in alignment with the bank’s pay-for-performance philosophy.
2012 2011
93.7% 96.6% 91.8% 93.9% 90.2% 90.9%
The positive results suggest that share- holders are in favour of the Board’s approach to compensation as outlined in the Proxy Circular.
Communities
How We Operate
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TD 2013 Corporate Responsibility Report
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