Bumpy economy puts pressure on mining CEO bonuses

More incentive plans for lower-level staff to address talent shortage: Survey
|hrreporter.com|Last Updated: 09/19/2012

CEOs of Canada’s mining companies saw their average total cash compensation decline seven per cent in 2012, from $826,000 in 2011 to $767,000, according to the 2012 Mining Industry Salary Survey by Coopers Consulting and PwC.

The average annual base salary for the CEOs was $490,000 in 2012, almost unchanged from $486,000 in 2011, but the average annual CEO bonus dropped 31 per cent to $370,000 from $540,000 reported in 2011.

Of the 97 per cent of CEOs who reported being eligible for a cash bonus payment, only 76 per cent actually received such a payment in 2012, and the average bonus was 67 per cent of base salary, found the survey of 113 Canadian-based mining operations.

"Board compensation committees, driven by regulatory changes and stakeholder demands for greater accountability and transparency, have been implementing refined performance criteria for CEOs over the last several years," said Lou Vujanich, survey leader and principal of Coopers Consulting. "There is also greater emphasis on the variable equity-based component of the overall CEO compensation. These factors are contributing to lower total mining CEO compensation."

CEO bonuses are performance-driven, said Michael Cinnamond, survey contributor and senior partner at PwC's mining practice.

"Softer commodities demand and prices, investor risk aversion, the European sovereign debt crisis and (a) slowdown in China's economy resulted in lower profitability and market capitalization of many mining companies,” he said. “This is affecting CEO performance metrics and compensation."

Staff incentive plans becoming more common

In 2012, across the full range of salaried staff positions found at a mine site, more than 80 per cent of positions continue to be eligible for some form of incentive plan, such as an annual cash bonus, gain-share plan or productivity improvement plans, found the survey. This is a significant change compared to 10 years ago when eligibility hovered at 59 per cent.

"Market conditions and commodity prices notwithstanding, the increase in the prevalence of compensation incentives for salaried positions lower down in the hierarchy is a reflection of the continued fierce competition to attract and retain qualified mining professionals across the spectrum of positions" said Vujanich. "The result being upward pressure on compensation costs for mining companies."

New graduate mining engineers can reasonably expect a starting salary in the range of $70,000, a figure consistent with new graduate hire rates in 2011, found the study. After one to two years of experience, the figure jumps to about $76,000, with fully qualified mining engineers potentially earning an annual base pay in the vicinity of $90,000.

By region, Western Canadian mining operations generally pay more than their Eastern Canada counterparts. Compensation data also shows companies that mine coal, industrial and other minerals generally pay more across the board, while base metal mining operations generally pay less.

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