Following public and political criticism over Air Canada executives being paid bonuses while the airline negotiated a government bailout, the company’s senior executives have agreed to return their compensation and stock awards, Air Canada says.
In a statement issued Sunday night (June 6), Canada’s flag carrier confirmed that its executive vice-presidents, president and CEO have volunteered to return their bonus pay and share appreciation units.
“Unfortunately, there is now public disappointment around the actions relating to these 2020 executive compensation outcomes,” reads a company release.
The airline said its leadership team is “completely focused on Air Canada's recovery” from the pandemic, as well as its preparations to welcome back furloughed colleagues and travelling customers “as soon as possible.”
In a separate statement issued Sunday, former Air Canada President and CEO Calin Rovinescu, who retired in February, said he will donate his entire 2020 bonus and SAUs to the Air Canada Foundation, which supports Canadian charities focused on improving children's health and also partners with Canadian NGOs in times of disasters.
Mr. Rovinescu has requested that no charitable tax deduction receipt be issued to him in connection with his gift.
“Accordingly, given the considerable confusion, misinformation and public disappointment regarding these compensation plans, and to support my former colleagues I will donate my entire 2020 bonus and SAUs to the Air Canada Foundation,” said Mr. Rovinescu. “I know the funds will be put to good and appropriate use during these difficult times.”
The release notes that 2020 compensation plans were approved by Air Canada’s Board of Directors in mid-2020 – “well before any discussions with the Canadian Government on sector support.”
More than 900 management employees were included in the 2020 Bonus Program, all of whom had also agreed to salary reductions, with the opportunity for some recovery if Air Canada’s stock price improved between Dec. 31, 2020 and Dec. 31, 2022, the airline said.
The Bonus Program was adopted by the Board of Directors to “recognize the work of key contributors in stabilizing the company.”
The negative reaction to the program was an “unintended consequence,” Air Canada said.
On June 2, after the Globe and Mail broke the news, Prime Minister Justin Trudeau called the bonus compensation “completely unacceptable.”
“I completely understand the incomprehension and even anger of many Canadians regarding this news from Air Canada,” Trudeau said, speaking in French during Question Period last Wednesday.
The comments came in response to reports that Air Canada paid $10M in “COVID-19 Pandemic Mitigation Bonuses” to executives and managers earlier this year while the company negotiated $5.9M in federal support.
One of the promises in that agreement is to limit future executive compensation.
Last Wednesday, Finance Minister Chrystia Freeland told media that she was “very disappointed” businesses aren’t behaving in the Canadian spirit by awarding large bonuses to executives during the pandemic.
She said the government will use its new equity stake in the airline to voice its disapproval.
Air Canada’s proxy circular said $1.84M of the bonuses went to Mr. Rovinescu ($723,000), current Air Canada said CEO Michael Rousseau ($423,000) and three other executives, one of whom has since retired, the Globe reports.
“The 2020 compensation outcomes for all Air Canada employees were among the many important decisions made during the pandemic in the best interest of Air Canada and its stakeholders,” Air Canada said on Sunday. “They were consistent with compensation outcomes at companies that also suffered significantly during the pandemic and comply with all of the company's agreements and any applicable filing or other requirements.”
Air Canada says its $10M bonus program was designed to “provide relief and retention amounts for over 900 Air Canada employees.”
“It is worth highlighting that more than $8M of this amount was awarded to middle management (excluding executives),” the airline said. “These amounts were in recognition of their work at a time of great dislocation and high risk for the organization.”
In 2020, Air Canada says it raised around $8B through the private sector to help stabilize its finances.
“No taxpayer dollars or funds from the Canadian government sector support package are being used to fund these bonus arrangements for Air Canada employees or executives,” the airline states.
In early 2020, senior executives and 3,200 management employees at Air Canada voluntarily agreed to total reductions of $11.5M in their base salaries.
Mr. Rovinescu and Mr. Rousseau, then-deputy CEO, waived 100 per cent of their salaries last April, May and June, and 50 per cent of their salaries for the rest of 2020.
The three other top executives whose compensation is disclosed took a 50-per-cent pay cut for three months, then 20 per cent for the rest of 2020.
The cuts reduced the combined salaries by $766,723, including $490,000 for Mr. Rovinescu.
In addition to receiving a federal bailout package, Air Canada also received $656M from Ottawa’s Canada Emergency Wage Subsidy (CEWS) program in 2020.
Meanwhile, the aviation industry continues to struggle amid the coronavirus crisis. In May, Air Canada posted a $1.3B loss in its first quarter.
As Canada’s border and quarantine restrictions remain in place, CEO Michael Rousseau said the airline is currently operating a limited schedule for necessary travel and to ship essential cargo.
Despite the circumstances, he assured employees, investors and stakeholders that “better times lie ahead for our airline."
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