TD Canada TRUST

A real executive compensation

Background
TD Canada Trust is the personal and commercial banking operated by the Toronto-dominion
bank in Canada. The company is headquartered in Toronto. It is the largest bank in Canada based
on market capitalization and assets, and is the sixth largest bank branch network in North
American. TD Canada trust offers a range of financial services and products to more than 10
million Canadian customers through more than 1100 branches. Also, TD is regarded as a leader
in customer satisfaction among big Canadian banks.
CEO compensation
Regarding CEO compensation, we choose fiscal year 2013 served as evaluating CEO
performance. CEO compensation includes basic salary, cash incentive and equity incentive. The
target of CEO compensation is based on the peer groups of companies, along with performance
and experience of CEO. In order to compare clearly, from table 1, it displays CEO target
compensation and CEO real compensation in 2012 and 2013 respectively. In fact, the target of
CEO compensation in 2012 and in 2013 was same: 11 million. However, total variable
compensation in 2013 is different with that in 2012 because of different business performance
factor. As for 2013, total variable compensation equal to 97% of target compensation; but 2012 is
102%. During considering CEOs overall performance, CEOs real compensation in 2013 was
10.3 million, which was actual lower than 97% of target compensation because the bank did not
achieve all of the financial and non-financial objective that were established. W. Edmund Clark,
as the CEO, should be responsible for the overall financial performance and is accountable for
leadership and management in achieving its strategic objective.

Salary
Cash
incentive
Equity
incentive
Total direct
compensation
Table 1

2012(target
)
$1,500,000

2013
(target)
$1,500,000

$1,800,000

2012(102% 2012(real)
)
Same with $1,500,000
target
$1,836,000 $1,725,000

$7,700,000

$7,854,000

$11,000,00
0

$11,190,00
0

CEO tenure and severance package

2013 (97%)

2013 (real)
$1,500,000

$1,800,000

Same with
target
$1,746,000

$7,525,000

$7,700,000

$7,469,000

$7,200,000

$10,750,00
0

$11,000,000

$10,715,000

$10,300,00
0

$1,600,000

With regard to tenure as CEO, prior to December 20th 2002, Mr. Clark served as COO. His tenure
served as CEO began from December 21st 2002. From succession planning, Mr. Bharat, a new
nominee, will become CEO on November 1st 2014. Thus, Mr. Clark ended tenure at end of
October 2014. His tenure lasted for almost 12 years.
In addition, the actual value of CEO severance package can only be determined at the time he
leaves the bank. Therefore, based on our investigation from fiscal year 2013, we cannot evaluate
this value before CEO termination. More importantly, Mr. Clark previous agreement was set to
expire on October 10th 2010. But he wanted to extend his tenure. This not only affected his
pension payment that would have been due to after October 2010 during the time he remains
employed by TD, but as part of the extension, he also agreed to waive his right to severance pay
under any circumstances. From table 2, it displays that the value of severance package was zero
no matter what reasons that CEO terminate his job.
Event
Resignation
Severance
Retirement
Severance
Termination without
cause
Severance
Termination with cause
Severance
Change of control
Severance
Table 2

Ed Clark
Eligible for
retirement
$0
$0

$0
$0

As table 2 mentioned above, there are four reasons that CEO many end his job: reassignment,
retirement, termination without cause and termination with cause. On April 3rd, 2013, Mr. Clark
announced his intention to retire as CEO effective Nov. 1st 2014. Thus, he ended his job because
of retirement.
Incentive (variable) compensation plan
Regarding incentive compensation set aside in 2013, at first, we should understand incentive
compensation for TD generally involves in cash incentive and equity incentive. The committee
allocated total variable compensation awards to the various member of the senior executive team
including the CEO. And then the committee evaluated individual performance to determine
individual awards including CEO and other named executives. Based on fiscal 2013, total
variable compensation was equal to 97% (business performance factor) of target compensation.
From table 1, we can find that the total incentive compensation for CEO was $1,746,000+
$7,469,000=$9,215,000.