TORONTO (Reuters) - Royal Bank of Canada’s chief executive plans to forfeit nearly C$5 million in compensation as the country’s biggest bank looks to weather the global financial crisis.
Gord Nixon will forgo his 2008 variable compensation package, made up of deferred share units and 10-year stock options, totaling C$4.95 million. It is part of his mid- and long-term compensation package at RBC.
He received a cash bonus of C$2.4 million in December, part of his short-term incentive package and down 40 percent from the prior year. Nixon said he will use the after-tax proceeds to buy Royal shares.
Nixon had a base salary of C$1.4 million in 2008 and his total direct compensation was listed at C$8.75 million in the proxy circular.
Battered by fallout from the global financial crisis and economic downturn, Royal Bank shares hit their lowest level in more than five years last week, but have since recovered a little. Royal was down 1 percent at C$30.10 on the Toronto Stock Exchange late afternoon on Monday.
“I have confidence in the future performance of Canada and RBC, but feel my decision is appropriate at this time,” Nixon said in a statement that accompanied the bank’s management proxy circular, adding his move was a “personal” decision.
“I believe as the global economic performance turns around, RBC has significant opportunities, given its strong businesses and relative global strength. And, as its CEO and a significant shareholder, I would benefit from any recovery.”
Royal Bank reported more than C$4.5 billion in profit in 2008, though down 17 percent from the year before. Results in the latest quarter were down 15 percent on higher loan loss provisions.
The bank missed on its 2008 target to grow diluted earnings per share and return on equity, but topped expectations on its dividend payout ratio.
Bank of Montreal also announced on Monday that CEO Bill Downe would give up both his mid-term and long-term compensation of C$4.1 million for 2008.
“While BMO delivered solid financial performance in 2008 ... my decision to forgo this compensation is a result of my reflection upon the current economic environment,” Downe said in a statement.
The banks said Downe plans to invest his 2008 short-term compensation of C$1.4 million in BMO’s share units and common stock.
At Bank of Nova Scotia, CEO Rick Waugh’s total compensation was cut to about C$7.5 million, down 20 percent from the previous year and in line with the bank’s performance.
Due to the “unprecedented” economic environment last year, several key targets were not met at Scotiabank, including its missed aims for EPS growth and return on equity.
Waugh, the CEO at Canada’s third-largest bank, will continue to earn a base salary of C$1 million in fiscal 2009, the circular said.
Canada’s banking sector, described as one of the strongest in the world, has endured the financial crisis better than many of its international peers, which have needed massive amounts of government aid.
Reporting by Ka Yan Ng; editing by Rob Wilson