Friday, November 07, 2008

PotashCorp President & CEO Bill Doyle rolling in dough, made $47,092 a day in 2007 while unionized hourly workers at striking mines averaged $213

On Oct. 23, 2008, the Potash Corporation of Saskatchewan reported that it earned more in its third quarter of 2008 ($1.24 billion) than it did in the entire record setting year of 2007 ($1.1 billion).

Company president and CEO Bill Doyle said while PotashCorp is not isolated from economic turbulence, the essential nature of its product protects it from market instability.

“The very nature of what we do provides a unique shelter. Consumers might choose to park their car or spend less on discretionary goods, but food will remain a priority. As I’ve said before, it is not a luxury item,” he said in a conference call with investors, analysts and media.

Significantly higher prices for all PotashCorp products, including potash, nitrogen and phosphate fertilizers, fuelled the massive increase. [PotashCorp sees profit soar (StarPhoenix, Oct. 24, 2008)]

It’s hard to imagine Doyle parking his car anytime soon, spending less on discretionary goods or struggling to put food on the table due to tough economic times.

According to PotashCorp records Doyle’s total compensation in 2007 was $17,188,621 (up from $8,943,757 in 2006), including a $2.19-million bonus based on the company’s performance. This works out to $47,092.11 a day.

Based on figures posted on the PotashCorp website unionized hourly workers at the company’s Allan, Cory and Patience Lake mines earned on average $78,070.67 in 2007, including overtime, or $213.89 a day.

On July 16, 2008, the company tabled its final offer to the union locals and later sent it directly to workers’ homes. [Potash union serves strike notice (StarPhoenix, July 24, 2008)]

In Saskatoon on July 21, 2008, nearly 500 members of United Steelworkers (USW) Locals 7458, 189 and 7689 who work at Allan, Cory and Patience Lake mines voted more than 96 per cent in favour of strike action.

The USW said the vote is “a rejection of a company offer that does not address key issues, including control over contracting out, pensions, wages, vacation and bonus.”

The union went on to say that while PotashCorp receives far more profit per worker than most mining companies, it pays wages that are lower than many other major Canadian mining operations. [PotashCorp workers back strike (StarPhoenix, July 23, 2008)]

On July 23, 2008, the USW issued its 48-hour strike notice. In response, PotashCorp issued a 48-hour lockout notice.

Workers went on strike Aug. 7, 2008, after mediation sessions between the company and the United Steelworkers (USW) District Three broke down. [PotashCorp workers hit picket lines (Leader-Post, Aug. 8, 2008)]

One of the main sticking points appears to be over bonuses.

The Globe and Mail’s David Ebner reported that the union is calling for a “commodity-based bonus.”

Ebner said the demand is modelled after the Nickel Price Bonus Plan at Vale Inco Ltd.’s Greater Sudbury operations and several other Vale Inco sites. Originally won by Inco workers in 1988, such a bonus plan for miners remains a rarity, and is now under threat because Vale wants to get rid of it.

Like Vale, PotashCorp is resolutely against the idea and insists it refuses to budge, saying it doesn’t want to saddle itself with undue costs. But Lee Edwards, lead union negotiator for the workers, represented by the United Steelworkers, said the commodity-based bonus - which could deliver an average of as much as $15,000 a year to potash workers - is an elegant and egalitarian proposal.

“When times are good the employer would be rewarding its employees. And if times are bad - which we don’t foresee for a while - then they wouldn’t have to pay,” Ms. Edwards said.

“This industry is going to be highballing for a considerable amount of time and we see that [management] wants to keep all the money to themselves,” she added.

For PotashCorp itself, the new collective agreements will be a precedent-setter because separate collective agreements at its two largest mines in Saskatchewan expire next year.

“The one thing that we won’t do is destroy our cost structure,” Mr. Doyle said. “We will not become a high-cost producer of potash. We don’t want to end up like one of the airlines or a Detroit auto maker.” [Labour seeks its piece of the potash boom (The Globe and Mail, Aug. 15, 2008)]

PotashCorp says it already offers its employees a performance-based bonus – a Short Term Incentive Plan (or annual bonus of up to 10%). The company’s final offer includes a new $5,000 per year bonus.

It appears that PotashCorp has drawn a line in the sand over the issue.

In the conference call with investors, analysts and media on Oct. 23, 2008, PotashCorp president and CEO Bill Doyle said the union’s request is not grounded in the “real world” and has “paralyzed” negotiations. [Strike having ‘absolutely no impact on us’: Doyle (StarPhoenix, Oct. 24, 2008)]

In an Oct. 8, 2008, letter sent directly to striking workers’ homes PCS Potash president Garth Moore said “we would be willing to return to the bargaining table if your union removed its demand for a new bonus plan.” [Moore writes letter to striking PotashCorp workers (Leader-Post, Oct. 11, 2008)]

The USW believes restrictions should not be placed upon bargaining discussions. [Union denounces PotashCorp tactics (StarPhoenix, Oct. 11, 2008)]

Comments and actions by PotashCorp senior executives haven’t helped the situation.

In his Oct. 23 conference call Doyle said “the strike has absolutely no impact on us” and seemed to suggest that any new young potash workers hired are merely a “common labourer.” According to Doyle union leadership live in the “realm of the impossible” and “don’t seem to have much expertise in concluding a labour agreement.” [Strike having ‘absolutely no impact on us’: Doyle (StarPhoenix, Oct. 24, 2008)]

Moore’s Oct. 8 letter to striking workers’ seemed to be little more than a scare tactic designed to intimidate and undermine the union.

“During the past several weeks, the world has experienced significant financial turmoil, with companies in all sectors, from financial to manufacturing to commodities, being significantly impacted by a wide-spread credit crisis.

“North American, European and other key capital markets around the world have seen hundreds of billions of dollars of wealth vanish, and governments are scrambling to devise “bailout plans” to protect against further business failures and loss of jobs.

“On July 16, we made a final offer to the union negotiating team and shared that offer with you in a letter sent to your home. In this uncertain current global environment, we cannot provide assurance as to how long we can continue to justify our outstanding contract offer,” Moore said.

“Strikes by their nature are not pleasant affairs. We have a tremendous amount of respect for you and all our workers and we hope that this has been reflected in the way the company has conducted itself during this strike.

“Our offer remains on the table for now, and we would like to see you vote on it.” [Moore writes letter to striking PotashCorp workers (Leader-Post, Oct. 11, 2008)]

After reading Doyle’s and Moore’s comments it seems clear there are two worlds’ out there. The one the rich and super-rich live in and the other in which the “common labourer” resides.

In his Aug. 15 story The Globe’s David Ebner reported that “The soaring price of potash has made the top three executives who run Potash Corp. of Saskatchewan Inc. fantastically wealthy, with stock options worth a total of $846-million.”

Ebner noted that “Mr. Doyle’s stock options alone were worth $553-million at yesterday’s close [Aug. 14], and company profit in the first half of this year tripled to $1.5-billion (U.S.).”

To put this in some kind of perspective consider that the incredible amount of wealth concentrated in just these three individuals alone would cover the 2008 operating budgets for the cities of Saskatoon ($254.8M), Regina ($235.7M), Prince Albert ($19.6M), Moose Jaw ($22.8M), Swift Current ($33.4M), North Battleford ($29.6M) and Yorkton ($15.4M) and still leave $234 million to spare.

On at least two occasions PotashCorp shareholders have been asked to vote on resolutions to rein in excessive executive compensation, but both times was defeated.

At the 2008 Annual and Special Meeting of Shareholders on May 8, 2008, in Saskatoon, shareholders considered a proposal submitted by the Carpenters’ Local 27 Pension Trust Fund in Burnstown, Ontario:

“Be it Resolved: The shareholders of Potash Corporation of Saskatchewan Inc. (“Company”) herby request that the Board of Directors establish a policy regarding the Company’s supplemental executive retirement plan that provides the following: (1) an exclusion of all incentive pay from inclusion in the plan’s definition of covered compensation used to establish benefits, and (2) a prohibition on the granting of past service credits or accelerated service benefits to participating executives. This action should be implemented in a manner so as not to interfere with existing contractual rights of any supplemental plan participant.”

The PotashCorp board strongly recommended that shareholders vote against the proposal stating in part that “if implemented, would significantly impair our ability to provide a market competitive compensation package necessary to attract and retain the most qualified executive officers and key employees, which is not in our and our shareholders best interests.”

At the 2004 Annual and Special Meeting of Shareholders held on May 6, 2004, in Saskatoon, shareholders were asked to consider a proposal that would replace the company’s current system of compensation for senior executives with a “Commonsense Executive Compensation” program including the following features:

(1) Salary – The chief executive officer’s (“CEO”') salary should be targeted at the mean of salaries paid at peer group companies, not to exceed $1,000,000 annually. No senior executive should be paid more than the CEO.

(2) Annual Bonus – The annual bonus paid to senior executives should be based on well-defined quantitative (financial) and qualitative (non-financial) performance measures. The maximum level of annual bonus should be a percentage of the executive’s salary level, capped at 100% of salary.

(3) Long-Term Equity Compensation – Long-term equity compensation to senior executives should be in the form of restricted shares, not stock options. The restricted share program should utilize justifiable performance criteria and challenging performance benchmarks. It should contain a vesting requirement of at least three years. Executives should be required to hold all shares awarded under the program for the duration of their employment. The value of the restricted share grant should not exceed $1,000,000 on the date of grant.

(4) Severance – The maximum severance payment to a senior executive should be no more than one year’s salary and bonus.

(5) Disclosure – Key components of the executive compensation plan should be outlined in the Compensation Committee’s report to shareholders, with variances from the Commonsense program explained in detail.

“We believe that compensation paid to senior executives at most companies, including ours, is excessive, unjustified, and contrary to the interests of the Company, its shareholders, and other important corporate constituents. CEO pay has been described as a “wasteland that has not been reformed.”' (Institutional Shareholder Services senior vice-president, Wall Street Journal, “Executive Pay Keeps Rising, Despite Outcry,” October 3, 2003). We believe that the growing disparity between the compensation paid to senior executives and average workers is a disturbing trend and contrary to the long-term interests of companies, their shareholders, workers and communities,” the Carpenters’ Local 27 Pension Trust Fund said in its supporting statement.

The board of course considered this heresy and strongly recommended that shareholders vote against the proposal.

“The Board and the Compensation Committee believe that restricting potential incentive program features and capping compensation levels for executives at arbitrary levels would unduly restrict the Compensation Committee’s choice among performance based compensation arrangements and would place the Corporation at a significant competitive disadvantage in recruiting and retaining executives. Salary and compensation levels for executives and the CEO are generally established at levels that approximate the median of what our peers are paying. In addition, as proof of our executive group’s recognition of their responsibility to shareholders, all senior executive employees (including the CEO) have taken a voluntary 10% salary cut, effective July 1, 2003,” the board said in its reasons for opposing the proposal.

The pay cuts were apparently “part of cost-saving measures undertaken by the Corporation.” It seems, however, that this goodwill gesture was simply a mirage.

PotashCorp financial records show that while CEO Bill Doyle’s base salary decreased from $812,500 in 2002 to $783,750 in 2003, his bonus increased from $476,000 to $535,000 wiping out any savings that the company might’ve realized. Since then his salary has just kept climbing to where it sits in 2008 at $1,092,000.

The story for PCS Potash president Garth Moore is much the same. His salary dropped from $324,500 in 2002 to $317,216 in 2003, but his bonus increased from $107,000 to $123,000. Although his salary remained unchanged in 2004, Moore received a bonus of $267,000. In 2007 Moore’s salary was $382,900.

So twisted is the company’s executive compensation plan that Doyle’s 1994 salary ($295,000) and bonus ($250,000) alone, when he was still the company’s executive vice president of potash and sales, is still nearly seven times as much as what the average unionized hourly PotashCorp worker at the three striking mines earn today, including overtime.

In 1998, Moore’s salary ($172,285) and bonus ($121,775) was considerably lower than Doyle’s but still more than three and a half times greater than the average unionized hourly PotashCorp worker today.

Even in years when the company took a loss there seemed to be money available for executive bonuses and salary increases.

In 1999 the company reported a $412 million net loss. According to The StarPhoenix Doyle said it was a poor year largely because of lower North American demand and excess product supply.

In a conference call with analysts and investors, Doyle said he did not foresee an immediate turnaround in the industry’s fortunes.

“We see 2000 as being another difficult year for the industry,” said Doyle.

“We do think we’re at the bottom of the cycle. The question is how long does it take us to start climbing back up the ladder, and we think it’s going to be into 2001 before we really make some significant progress in that area.”

The company’s gross margin, or sales revenue minus costs, fell 33 per cent from 1998 levels. Cash flow remained fairly strong at $335.7 million, although down from $549 million the previous year. [Markets pound PCS stock: Huge writedown ends string of eight consecutive profitable years (StarPhoenix, Feb. 11, 2000)]

That year Doyle received a salary of $622,500 (up from $475,000) and a bonus of $230,000 (down from $450,000). He was granted 70,000 stock options, up from 50,000 in 1998. In 2000 his salary rose to $725,000 and he was given a bonus of $1,000,000 plus another 70,000 in options.

Meanwhile, Moore’s salary climbed from $172,285 in 1998 to $300,000 in 2000. He received bonuses of $121,775 in 1998, $80,000 in 1999 and $213,000 in 2000. In those three years he was granted a total of 85,000 stock options.

A few years earlier an interesting story appeared in the Vancouver Sun saying Doyle had taken advantage of the company’s skyrocketing share price and in two days of trading hauled in $2,865,562.

According to an insider trading report filed with the provincial government, Doyle purchased 12,900 shares at the option price of $17.50 on Nov. 27, 1995, and sold them the same day for $102.50 for a profit of $1,096,500.

On Feb. 23, 1996, Doyle purchased 22,500 shares at his option price of $25.50 and sold them the same day for $104.125 for a profit of $1,769,062. [BRIEFLY: Boss gets $3 million in options (Vancouver Sun, June 8, 1996)]

One month prior, on May 8, 1996, The StarPhoenix’s James Parker reported that production workers at PotashCorp made between $16 and $25 per hour. [Potash mine unions propose united front (StarPhoenix, May 8, 1996)]

According to figures posted on the PotashCorp website the average base hourly wage as of April 2008 was $29.17 at the Allan mine, $28.91 at Cory and $29.91 at Patience Lake.

It would seem that little has changed in the last dozen years. Senior executives continue to get the goldmine while workers get the shaft.


Potash Corporation of Saskatchewan

Net Income (Loss) ($ millions)





























Bill Doyle, President and CEO



Non-Equity Incentive Plan Compensation















































Garth W. Moore, President, PCS Potash



Non-Equity Incentive Plan Compensation


































Post a Comment

<< Home