Highlights of National Bank's Management Proxy Circular for its Annual Meeting

Montreal, 4 March 2010 - 

National Bank of Canada (TSX: NA) today announced that it has filed with securities regulators and is mailing to shareholders the Notice of its Annual Meeting, to be held in Montreal on March 31, 2010, and the Management Proxy Circular.

The Circular contains information pertaining to the Board of Directors and its committees, the election of directors and the appointment of auditors, as well as two proposals submitted by a shareholder. The Circular also discloses detailed information on the Board of Directors' approach to the compensation of the Bank’s executives for the fiscal year ended October 31, 2009. 

Last year, National Bank was the first Canadian bank to agree to put the Board of Directors' approach for the compensation of the Bank’s executives to an advisory vote of its shareholders. In 2009, the Bank and other reporting issuers in Canada worked with various stakeholders, including shareholders and the Canadian Coalition for Good Governance, to develop a standard resolution. Although the resolution is non-binding, the Board will consider the results of the vote in the ongoing review of its approach to the compensation of the Bank’s executives.

The Circular presents the guiding principles of the Bank’s compensation policy and explains in detail the short-, mid- and long-term performance-based remuneration programs for the named executive officers. The Bank has provided a summary of the Board of Directors’ approach to the compensation of the Bank’s executives on its Website at www.nbc.ca/investorrelations. (see Reports, Circulars and AIF)

Compensation tied to the Bank’s performance
Despite challenging economic times, the Bank turned in a very strong performance in 2009 with a record net income (excluding specified items) of $1.061 billion, up 12% from 2008. Net income available to common shareholders reached $795 million, up 6.7% from 2008. Excluding specified items, diluted earnings per share rose to a record high of $6.22. Total shareholder return (TSR) was 32% compared to -13% in 2008.

The main results for 2009 and 2008 are:

 

2009

2008

Change

Net income, excluding specified items

$1.061 billion

$947 million

12%

Net income available to common shareholders

$795 million

$744 million

6.7%

Diluted earnings per common share, excluding specified items

$6.22

$5.75

8%

Diluted earnings per common share, including specified items

$4.94

$4.67

5.8%

Share price as at October 31, 2009

$56.39

$45.21

25%

Total shareholder return

32%

-13%

 

 

 

 

 

 

 

Other highlights of fiscal 2009 included the excellent quality of the credit portfolio, the strong capital base and liquidity position, as well as the maintenance of the dividend. The Bank also continued successfully implementing its One client, one bank transformation plan.

Compensation of the President and Chief Executive Officer
Under the guiding principles, executive compensation is tied to the Bank's performance. As a result, more than 75% of the named executive officers' target compensation is "at risk" and hinges on the achievement of a combination of corporate and individual objectives, as well as the Bank’s share price. For the President and CE0, 84 % of its total compensation is tied to performance.

For fiscal 2009, Louis Vachon exceeded the objectives that the Board had set for him at the beginning of the year in terms of growth in diluted earnings per share (6% versus a target of 1%), increase in revenues (7.5% versus 1.9%) and loan loss ratio (32 basis points versus 35-40 basis points).  

Mr. Vachon achieved all the objectives linked to implementing the One client, one bank strategy: a new distribution model was successfully deployed; a consolidated operations group was formed; a procurement program generating recurring annual savings of $100 million was implemented; the organizational structure and the roles of more than 4,000 employees were reviewed; and corporate functions were centralized. Great progress was made in building a client-centric corporate culture that places considerable emphasis on cooperation, rigour and accountability. Also, internal surveys demonstrate the commitment of employees and managers to the transformation, which is nearing completion.

For the fiscal year ended October 31, 2009, Mr. Vachon received a base salary of $806,453 compared to $800,000 in 2008, and a bonus of $1,400,000 compared to $743,900 in 2008. He also received medium- and long-term compensation in the form of stock options and performance share units valued at approximately $3,400,000. Mr. Vachon's total direct compensation was therefore $5,606,453, 6% higher than his target compensation -the compensation he is entitled to when delivered results match the objectives set.

This 6% increase in relation to target compensation is in line with the 5.8% growth in earnings per share and the 6.7% growth in available net income for the fiscal year ended October 31, 2009.

Last year, Mr. Vachon's total direct compensation represented 5% less than his target compensation at that time, or $4,743,900. In 2007, the total direct compensation granted to Mr. Vachon represented 22% less than his target compensation. Mr. Vachon's base salary, initially set at $800,000 upon his appointment on June   1, 2007, was adjusted to $850,000 effective August 31, 2009.

For the period ended October 31, 2009, National Bank Financial Group’s total shareholder return is 32%, the best return within Canadian banks (median of 21%). Mr. Vachon’s total direct compensation increased by 19% while that of his peers is up 20% at median line. The Bank thus generated an excellent shareholder return while correlating the compensation of its top executive.

"We are pleased with the Bank's achievements in 2009 and the progress made in terms of its strategic objectives. The Bank's ability to weather the financial crisis and overcome a difficult economic environment, all while rolling out a major transformation in the way the Bank serves its clients is quite an achievement. This demonstrates exceptional leadership on the part of senior management, under the direction of Louis Vachon, and the high level of commitment from the more than 17,500 Bank employees," stated Chairman of the Board Jean Douville.

The Human Resources Committee ensures that the long-term interests of the executives of the Bank and its designated subsidiaries are closely tied to those of its common shareholders.   Executives must therefore have minimum holdings, which can include common shares of the Bank, stock units or options, in proportion to their base salary and position level. For example, the President and Chief Executive Officer is required to hold a minimum total share value equivalent to five times his base salary for the previous three years.  As at October 31, 2009, Mr. Vachon had shareholdings with a total value (including the value added of non-vested options), representing more than 19 times his base salary for the previous three years.

Guiding principles
The Circular sets out the Bank's total compensation policy, which seeks to promote the achievement of objectives for the sustained growth of shareholder value. The policy is founded on the following principles:

  • Offer competitive compensation in order to attract, motivate and retain qualified executives;
  • Reward executives for obtaining results in the short, medium and long term;
  • Pay competitive compensation when results meet expectations, higher compensation when they exceed set objectives, and lower compensation when they fall short of expectations;
  • Engage executives to focus on enhancing the performance of the Bank and the value of shareholders' investment;
  • Require executives to hold a minimum number of common shares of the Bank in order to align their interests with those of the Bank's shareholders.

Finally, the Bank recommends voting against two proposals submitted by a shareholder and explains its position in Schedule A of the Circular.

About National Bank of Canada
National Bank of Canada is an integrated group which provides comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in its core market, while offering specialized services to its clients elsewhere in the world. National Bank offers a full array of banking services, including retail, corporate and investment banking. It is an active player on international capital markets and, through its subsidiaries, is involved in securities brokerage, insurance and wealth management as well as mutual fund and retirement plan management. National Bank has over $134 billion in assets and, together with its subsidiaries, employs 17,946 people. The Bank’s securities are listed on the Toronto Stock Exchange (NA:TSX). For more information, visit the Bank’s website at
www.nbc.ca.

Information: (The telephone number provided below is for the exclusive use of journalists and other media representatives.)

Denis Dubé
Senior Manager – Public Relations
National Bank Financial Group
Tel.: 514-394-8644