Nfld. & Labrador

Large Nalcor bonuses 'a tangly situation' leading to calls for change

The largest bonus went to CEO Stan Marshall, who received a $315,000 bonus on top of an almost $460,000 salary.

Strong case to re-examine performance-based bonuses, says MUN business prof

Large bonuses handed out at Crown orporation Nalcor in 2019 are leading some to question the ethics of the bonuses, given the pandemic and the status of the Muskrat Falls project. (CBC)

Large bonuses for executives at Nalcor Energy are again prompting calls for change, with the province's energy minister saying that change could come at the provincial level.

The bonuses were published as part of the provincial government's annual compensation disclosure listing, more commonly known as the "sunshine list," which discloses the salaries of public sector employees making more than $100,000.

The list for 2019 shows largest bonus going to Nalcor CEO Stan Marshall, who received a $315,000 bonus on top of an almost $460,000 salary.  

Executive vice-president Gilbert Bennett, who was heavily criticized in the Muskrat Falls Inquiry report, received an almost $70,000 bonus along with a $334,000 salary.

The two men have received significant bonuses every year since the province began publishing compensation disclosure in 2016, but their bonuses in 2019 — during the Muskrat Falls Inquiry — were the highest.

Ethical questions around large bonuses

The announced bonuses led to public outrage on social media, leaving some to question the ethics of rewarding such bonuses during a pandemic, or for a project that is yet to be finished.

Tom Cooper, a professor of business at Memorial University, says while bonuses do raise business ethics questions, many bonuses are pre-determined as part of industry contracts.

"It's a very tangly situation," Cooper told CBC Radio's On The Go Friday.

"In a number of ways, it's around performance-related pay. The performance is based on specific objectives you have to reach as an executive. Some bonuses actually went to machinists and carpenters, mechanics, etc. So it's not just the executives.… If you meet the objectives, you get the bonus."

Cooper said Nalcor likely also has legal and fiduciary obligations to include handing out performance-based bonuses in their contracts, including those outside the Muskrat Falls project.

"They have hydro, they have energy marketing, they have Churchill Falls that they're responsible for," he said. "So sometimes those bonuses are based on performance within those individual business units."

Memorial University business professor Tom Cooper says it's not clear what performance objectives were hit in order for Nalcor to hand out performance-based bonuses to executives. (Katie Breen/CBC)

"Those executives that are responsible for Muskrat Falls on the other hand … did get those bonuses. So the real question is what was their performance based upon to get those bonuses."

In a statement to CBC News, a Nalcor Energy spokesperson said bonuses are handed out based on individual performance contracts calculated by a percentage of base pay. Payments are not guaranteed, and a threshold to trigger a payment must be met.

Cooper said the future of the pandemic can serve as a strong case to look at existing contracts and make potential change.

"I think there is a really strong business ethics case to look at these existing contracts and basically say, do we need to have this performance-related pay going forward given the financial constraints the province is going to be operating on, given the wider pandemic?" he said.

"'Is there a better way, or is there a more ethical way … that more reflects the importance of Nalcor to the entire province, and how those people are compensated?"

Energy minister 'pissed off,' says change is coming

Andrew Parsons, the province's industry, energy and technology minister, says change is coming.

"The phrase was 'pissed off' when I first became aware of this. I think it's absolutely unacceptable," Parsons said Thursday.

Energy Minister Andrew Parsons says the provincial government hopes to bring in legislation to end bonuses at Nalcor. (Patrick Butler/Radio-Canada)

"I'm not opposed to the concept of bonuses, but it's kind of ironic that I'm here dealing with recommendations from a Muskrat Falls inquiry, and at the same time, bonuses continue on year after year, and in many cases they're increasing. I don't think that's acceptable, and we've made a decision that that can't happen."

Parsons said the government hopes to bring forward legislation to end bonuses at Nalcor, with notice being given when the House briefly reopens next week.

PC Opposition leader Ches Crosbie also spoke to the issue via a news release issued Friday, calling on Premier Andrew Furey to cancel executive bonuses for the Crown corporation and "terminate" employees responsible for cost overruns on the project.

"We have residents of this province who are in great need," Crosbie said in the release. "I can't help but think that the money paid out in bonuses could be put to better use."

"This province needs a premier who is going to take a stand and do the right thing."

In March, then premier Dwight Ball said bonuses for Nalcor executives should be taken back.

Read more from CBC Newfoundland and Labrador

With files from On The Go and Here & Now

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