New Brunswick

N.B. pension management employees score record $5M in bonuses

The organization handling New Brunswick government pension and other funds awarded its employees a record $5 million in bonuses last year, including  $902,438 to its president after the province's investments managed to post a two per cent gain, despite significant declines in global stock markets.

Province's investments saw 2% gain last year, despite significant declines in global stock markets

Vestcor president John Sinclair earned $1.39 million in 2018, documents show. (You Tube/Vestcor)

The organization handling New Brunswick government pension and other funds awarded its employees a record $5 million in bonuses last year, including $902,438 to its president after the province's investments managed to post a two per cent gain, despite significant declines in global stock markets.

Vestcor is the Fredericton-based investment firm set up by the province to manage what has become $16.9 billion in funds, including retirement savings for provincial civil servants, teachers and most hospital workers.

Vestcor also invests pension money for the University of New Brunswick and the City of Fredericton and handles hundreds of millions of dollars set aside by NB Power to deal with the eventual decommissioning of the Point Lepreau nuclear generating station and its stockpile of nuclear waste.

According to its latest annual report, Vestcor posted a 2.08 per cent gain on investments in 2018 — less than the rate of inflation — but significantly better than pension plans across the country, many of which bled money during the year thanks to turbulent stock prices.

In a letter attached to the annual report, Vestcor's chairman Michael Walton said it was "gratifying" that the organization was able to post gains in what he called "the generally negative financial market environment" of 2018.

In February, the Royal Bank's Investor and Treasury Services division reported that Canadian defined benefit pension plans overall lost 0.7 per cent of their value in 2018, placing Vestcor's result in the top tier of performances nationwide.

That helped fuel another boost in employee performance bonuses, which have grown significantly at Vestcor in recent years.

Vestcor's long-time president John Sinclair saw his pay package in 2018 hit a new high of $1.39 million, a 9.5 per cent increase over 2017.

Bonuses exceed salary by 200%

Sinclair's base salary is $351,389 and, although Vestcor guidelines show the upper target for executive bonuses allows for another 130 per cent on top of that, Sinclair's bonus was once again well above that upper range.

He earned $902,438 in bonuses in 2018 — what Vestcor calls "incentive pay" —  just under 257 per cent of his base salary.

Vestcor had more than $6 billion invested in global stock markets in 2018 and lost money on many of those holdings, like the $7 million it had invested in the struggling General Mills as markets plunged. But with $10 billion invested in other areas, such as real estate and private companies, Vestcor managed to overcome those losses and post overall investment gains for the year. (Matt Rourke/Associated Press)

It's at least the fourth year in a row Sinclair's bonuses have exceeded his salary by 200 per cent or more.

Other Vestcor executives earning bonuses in excess of 130 per cent of their base pay in 2018 include chief investment officer Jonathan Spinney, who was awarded bonuses of $466,628 (190 per cent of his salary), vice-president Daniel Goguen, who earned $344,476 on top of his base pay (161 per cent), and vice-president James Scott, whose bonuses totalled $328,891 (143 per cent).

Extended to all employees 

Bonus payments at Vestcor have doubled over the last four years and, in 2018, were expanded to cover all employees — not just those involved in making investment decisions.

"This change provides further alignment with the performance of our clients and ensures we continue to be able to attract and retain talent while competitively keeping pace with other similar service providers in our industry," wrote Walton in the annual report.

Vestcor defended bonus payments as a way to reward strong performance and attract and retain talented employees. It also noted the practice is common in the investment field.

However, Vestcor has never explained why the range it sets for employee bonuses of between 30 and 130 per cent of base pay is routinely exceeded by its top executives.

Vestcor does claim that its senior executives have beaten their investment targets by a combined $567.1 million over the last four years, including by $171.6 million in 2018 — the basis of the elevated bonuses.

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