Toronto-Dominion Bank Chief Executive Officer Ed Clark will get a lifetime annual pension of C$2.49 million ($2.23 million) after stepping down as head of Canada’s largest lender by assets.
Clark, 66, is set to retire Nov. 1 after leading the Toronto-based bank for almost 14 years. As part of his employment agreement, Clark’s pension payout will continue “unreduced” to his surviving spouse for her lifetime following his death, the firm said in a filing yesterday with Canadian regulators.
The lifetime pension was determined using the annual average of Clark’s highest consecutive 36 months’ salary and a percentage that became fixed in October 2010, when his pension benefits were frozen with no further accruals, according to the filing. The firm’s “supplemental executive retirement plan” was closed to new members in 2009, the filing shows.
“This is a compensation element that has been decreasing in prevalence,” said Joe Sorrentino, managing director at Steven Hall & Partners LLC, a New York-based consulting firm. “When it was put in place it was pretty common practice, but over time we’ve seen the decline in these types of programs.”
Clark joined Toronto-Dominion in 2000 after it acquired Canada Trust’s parent CT Financial Services Inc., where he was president and CEO. Since taking over the top job in 2002, he’s spent more than $25 billion on U.S. acquisitions to build a network of branches stretching from Maine to Florida.
Royal Bank of Canada CEO Gordon Nixon, the country’s highest-paid bank head, is entitled to a maximum annual pension of C$2 million at age 65, according to a Jan. 31 filing by the Toronto-based bank. Annual pension benefits payable as of year-end were C$1.68 million, the filing said, and disclosures don’t say if his pension is transferable to a spouse. Nixon, 57, will retire Aug. 1 after 13 years leading Royal Bank.
Ali Duncan Martin, a Toronto-Dominion spokeswoman, and Royal Bank’s Jason Graham didn’t have an immediate response to questions about the CEO pensions.
Pensions started to fall out of fashion in the late 1990s and early 2000s, after drawing more scrutiny from shareholders, Sorrentino said.
“We saw some pretty large payouts in pensions and retirement benefits and those big numbers drew the ire of investors and was a focus of the press,” he said. “It’s also pretty costly to have these types of programs in place, so from a cost-cutting perspective that was definitely something that was a reason to curtail their usage.”
The ability to transfer pensions to a surviving spouse used to be fairly typical, though transferring the full amount is “more generous” than usual, Sorrentino said.
Many large U.S. banks have curtailed defined-pension plans with only some long-term employees grandfathered. Goldman Sachs Group Inc. froze its plan in 2004 and named executive officers haven’t accrued benefits since 1995, according to the New York-based lender’s 2013 proxy statement. Morgan Stanley froze its plan in 2010, while Charlotte, North Carolina-based Bank of America Corp. stopped offering additional compensation credits for employees in its plan in 2012, according to the firms’ proxies.
Toronto-Dominion said yesterday it cut Clark’s 2013 compensation 4.1 percent to C$10.4 million after missing financial targets. Clark led the bank to a record profit of C$6.64 billion for the fiscal year ended Oct. 31.
Clark was given C$1.5 million in salary, C$4.85 million in share-based awards, C$2.35 million of option-based awards, C$1.6 million in incentives and C$136,875 in other compensation, the firm said in the filing. That’s down from C$10.9 million for 2012 and is the second straight decrease in annual compensation. Figures exclude costs to service pensions.
Toronto-Dominion missed its targets in the fiscal year for total shareholder return and its goal of 7 percent to 10 percent growth for adjusted earnings-per-share, according to the filing. The bank also failed to meet its goal of increasing revenue faster than expenses.
“Despite achieving record results, the bank did not achieve all of the financial and non-financial objectives that were established,” the company said in the filing. “In addition, the bank did not outperform peers in a manner consistent with prior years.”