Next month, shareholders of Algoma Steel Group Inc. will be asked to do something they've never done before in the company's 123-year history.
They'll be asked to signal their approval — or disapproval — of millions of dollars in performance incentives paid to senior executives.
Under a new "Say on Pay" policy, they'll be asked during a virtual annual meeting on Tuesday, Sept. 24 to vote on whether they approve of Algoma's approach to executive compensation.
"This policy is designed to enhance accountability for the board's compensation decisions by giving shareholders a formal opportunity to provide their views on the board's approach to executive compensation through an annual non-binding advisory vote," the company said in an information circular filed last week with the United States Securities and Exchange Commission.
"This is an advisory vote and the results will not be binding upon the board. However, the board will take the results of the vote into account, as appropriate, when considering future compensation policies, procedures and decisions and in determining whether there is a need to significantly increase their engagement with shareholders on compensation and related matters," the circular stated.
"The company will disclose the results of the shareholder advisory vote as a part of its report on voting results for the meeting."
If you equate 'executive compensation' with garden-variety perquisites like a housing or vehicle allowance, group term insurance premiums, or a personal protective equipment allowance, you're hardly scratching the surface.
Michael Garcia, Algoma's chief executive officer, is paid a base salary of US$750,000, which converts to about $1.04 million in Canadian dollars.
But in the 2024 fiscal year ended March 31, just-released executive compensation figures show Garcia being paid a total of C$5.6 million, up from $3 million the previous year.
Here are the comparable fiscal 2024 payments, in Canadian dollars, to other members of Algoma's Top Five money-earners, with last year's compensation shown in brackets:
- Rajat Marwah, chief financial officer – $1.6 million ($919,785)
- John Naccarato, vice president strategy and chief legal officer – $1.6 million ($892,932)
- Michael Panzeri, senior vice president production – $1.5 million (nil last year)
- Mark Nogalo, vice president strategic transformation – $1.2 million ($722,282)
The company says it's focused "on building compensation programs for Algoma that align with best practices in executive compensation and corporate governance in North America and that incentivize long-term shareholder value creation."
"Our approach to executive compensation will continue to evolve in order to attract, retain and engage talent while supporting the
company's strategy and staying aligned with best governance practices and the interests of our stakeholders."
The big payouts to Algoma Steel's top brass include base salary and a dog's breakfast of short-term incentives and long-term incentives including options, restricted stock units and performance share equity units.
They're calculated using a complex matrix of factors including the following:
- meeting electric arc furnace strategic milestones
- prime shipments
- total plate shipments
- EBITDA (a key measure of profitability)
- environmental spills
- cash flow from operations
- workplace safety
In a year of several industrial accidents at Algoma, safety appeared to be a special concern to Algoma’s compensation committee.
"Despite exceeding target performance [lost-time injury ratio], the committee applied downward discretion to limit the payout," said a footnote to last week's filing to security regulators.
"This decision reflects our commitment to ensuring full site safety performance, including that of our contractors, as a critical component of our overall performance and success," the compensation committee said.
The committee paid a consultant $197,166 over the past year to benchmark the paycheques of Algoma Steel executives against those at comparable companies including:
- Algoma Central Corp.
- Allegheny Technologies Inc.
- Arch Resources, Inc.
- Canfor Pulp Products Inc.
- Carpenter Technology Corp.
- Century Aluminum Co.
- Commercial Metals Co.
- GrafTech International Ltd.,
- Haynes International Inc.
- Olympic Steel, Inc.
- Peabody Energy Corp.
- Russel Metals Inc.
- Schnitzer Steel Industries, Inc.
- Shawcor Ltd.
- Stelco Holdings Inc.
- Timken Steel Corp.
- Warrior Met Coal, Inc.
- Western Forest Products Inc.
There were even larger executive compensation packages during Algoma's 2022 fiscal year, when the company merged with Legato Merger Corp., a publicly traded special purpose acquisition company, and itself became publicly traded.
Three current executives who were with Algoma then cashed in on a total of $25 million.
Rajat Marwah received $8.9 million that year.
John Naccarato got $8.8 million and Mark Nogalo earned $7.6 million.
At its Sept. 24 meeting, shareholders will be asked to vote on the following resolution: "Be it resolved that, on a non-binding, advisory basis and not to diminish the role and responsibilities of the board, the shareholders accept the approach to executive compensation disclosed in the company's information circular dated Aug. 1 2024, and delivered in advance of the meeting."
