Compensation program

The Board of Trustees recognizes the importance of a balanced and competitive compensation program in supporting OPTrust’s operational effectiveness and long-term performance. The Board is responsible for establishing OPTrust’s management compensation policies and has oversight of the compensation program through the Governance and Compensation Committee.

In 2010, the Board began a major review of our compensation philosophy and practices under the direction of the Governance and Compensation Committee. To support this process, the Board engaged the Hay Group as its compensation advisor to provide consulting services during the review.

The first stage of the review process was completed in early 2011 with the Board’s development and approval of an updated compensation philosophy and six key compensation principles. The philosophy and principles form the basis for the development of a comprehensive set of pay parameters, to be approved by the Board in 2011. These will in turn provide a framework for designing a consistent and competitive compensation program for OPTrust.

Philosophy and principles

OPTrust’s compensation philosophy recognizes that our compensation program must perform two primary functions. First, the program must motivate and incent employees to deliver on the organization’s mandate, goals and objectives. These include: i) generating the long-term risk-adjusted investment return needed to support the pension promise, and ii) delivering the finest service and communications to members and retirees at a reasonable cost. Second, the program must support the attraction and retention of the calibre of employees OPTrust needs to deliver on its mandate.

The six principles for OPTrust’s compensation program include:

• aligning compensation with the interests of OPTrust’s members and pensioners and the objectives established by the Board of Trustees
• supporting OPTrust’s business strategies and priorities over the short and long term
• establishing an appropriate balance between pay-for-performance and effective risk management
• ensuring fair, clear, understandable and transparent compensation practices
• providing for a consistent approach to compensation across OPTrust’s operations, while allowing flexibility to reflect the objectives and requirements of different business units
• supporting recruitment and retention of qualified staff through competitive compensation while ensuring that compensation costs are reasonable.