As shares languish, Crescent Point rolls out option plan for key executives
As the old saying goes, that was then and this is now.
In material prepared for its 2014 annual meeting, Calgary-based Crescent Point Energy Corp. told its shareholders that its executive compensation program took into consideration that, unlike some in its peer group, “it does not provide a pension or stock options to its executive officers.”
And sure enough, the circular showed that the value of unexercised in-the-money options for the five named executives was zero. For the six non-employee directors, there was a similar result: no option-based awards vested during the previous year and the value of unexercised in-the-money options was zero.
Fast forward four years and what do we find?
For the upcoming May 4 annual meeting, there is a motion to approve an ordinary resolution ratifying and approving the prior grant of an aggregate of 2.988 million options “to certain employees under the company’s stock-option plan.”
Those options, which run for seven years, have already been granted (that occurred back on Jan. 9) and are part of a plan to issue 13 million options. The initial batch comes with an exercise price of $10.16. The shares currently trade at $9.16, well below the all-time high of $47.42 in 2014.
A cynic might say that the options, which are limited to executives and select senior management, are being issued and priced as the stock trades near levels not seen in the past 16 years.
The four-person compensation committee recommended the option plan. In the circular, five reasons were given for the plan with the key one being that when combined with restricted share units and performance share units, options are part of a “well-balanced long term incentive plan.”
Other arguments included the structure of the options (they vest over time with 20 per cent each in the first three years and 40 per cent in year four) and that most other oil and gas companies have them.
In an email, Crescent Point said the policy change for options is part of “evolving our executive pay-for-performance compensation plan.”
In response to a question as to why a shareholder should support such a plan, the company said “executives are only rewarded for absolute share price gain, providing a strong focus on share price enhancement, and compensation decreases when either absolute or relative performance is lower, which is aligned with our shareholders’ expectations.” The company noted that the proxy advisory firm Glass Lewis urged shareholders to support the plan.
The option plan is being proposed at a time as the total compensation for chief executive Scott Saxberg has fallen. In 2017, he received $4.421 million about half of the $8.81 million he received in 2015. The 2017 compensation for the other four executives was higher than what they received in 2015.
The plan is also being advanced as the company’s total return lags other benchmarks. At the end of 2017, Crescent Point’s total return was down more than 60 per cent over the previous five years. While the S&P/TSX capped energy index and the S&P/TSX equal weight oil and gas index are also down, they aren’t down as much. To get over the line, the option plan requires the support of 50 per cent plus one of those shareholders who vote.
Over the years, Crescent Point hasn’t enjoyed the warmest of support from its shareholders on “say on pay” matters.
In 2014, for example, its approach to executive compensation received 56.67 per cent support; in 2015, the votes for and against weren’t disclosed but the approach was “carried”; in 2016 the approach was not carried; in 2017 the approach was carried by a 86.36 per cent to 13.64 per cent margin. None of the votes held are binding on the company.