Bumpy economy puts pressure on mining CEO bonuses

Prevalence of incentive plans at lower staff levels rises significantly to address talent shortage

VANCOUVER, Sept. 13, 2012 /CNW/ - Canadian mining company CEOs saw their average total cash compensation decline in 2012, as average base pay rates remain flat from the previous year, but average annual bonus payments dropped, according to the 2012 Mining Industry Salary Survey by Coopers Consulting and PwC.

The Coopers Consulting - PwC survey revealed that the average total mining CEO cash compensation package—annual base salary plus cash bonus—was $767,000 in 2012, down 7% from $826,000 in 2011. The average annual base salary for Canadian mining CEOs was $490,000 in 2012, almost unchanged from $486,000 in 2011. Meanwhile the average annual CEO bonus paid in 2012 dropped 31% to $370,000 from the $540,000 reported in 2011. Notably, of the 97% of CEOs who reported being eligible for a cash bonus payment, only 76% actually received such a payment in 2012, and the average bonus was 67% of base salary.

"Board Compensation Committees, driven by regulatory changes and stakeholder demands for greater accountability and transparency, have been implementing refined performance criteria for CEOs over the last several years," says Lou Vujanich, survey leader and principal of Coopers Consulting. "There is also greater emphasis on the variable equity based component of the overall CEO compensation. These factors are contributing to lower total mining CEO compensation."

"CEO bonuses are performance driven," said Michael Cinnamond, survey contributor and senior partner in PwC's mining practice. "Softer commodities demand and prices, investor risk aversion, the European sovereign debt crisis and slowdown in China's economy resulted in lower profitability and market capitalization of many mining companies. This is affecting CEO performance metrics and compensation." 

Staff incentive plans becoming more common

In 2012, across the full range of salaried staff positions found at a mine site, over 80% of positions continue to be eligible for some form of incentive plan, such as an annual cash bonus, gainshare plan or productivity improvement plans. This is a significant change compared to ten years ago when eligibility hovered at only 59%.

"Market conditions and commodity prices notwithstanding, the increase in the prevalence of compensation incentives for salaried positions lower down in the hierarchy is a reflection of the continued fierce competition to attract and retain qualified mining professionals across the spectrum of positions" says Vujanich. "The result being upward pressure on compensation costs for mining companies."

The study also found new graduate mining engineers can reasonably expect a starting salary in the range of $70,000, a figure consistent with new graduate hire rates in 2011. After one to two years of experience, the figure jumps to about $76,000, with fully qualified mining engineers potentially earning an annual base pay in the vicinity of $90,000. By region, Western Canadian mining operations generally pay more than their Eastern Canada counterparts. Compensation data also shows companies that mine coal, industrial and other minerals generally pay more across the board, while base metal mining operations generally pay less.

Survey Methodology

The 2012 Coopers Consulting and PwC survey covers 65 typical salaried corporate office positions, 58 mine site positions and 14 field exploration positions. The 2012 reports contain data for 175 North American based mining companies or business units.  The total 2012 North America mining industry salary survey database contains salaried staff compensation information for 20,457 incumbents; 8,854 are based in Canada and 11,603 in the United States. Data is provided for more than 314 Canada and United States based mining operations (113+ in Canada and 201+ in the United States).The figures are current to the end of the second quarter of 2012.

To book an interview with a spokesperson to discuss the findings of the report contact Jim Nelson, PwC, at 604-806-7047 or [email protected].

For information on how to obtain copies of the report contact Lou Vujanich, Coopers Consulting at [email protected].

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at http://www.facebook.com/pwccanada.

About Coopers Consulting
Coopers Consulting Ltd. is a B.C.-registered limited liability company founded in 2002 by former Principals of the Mining Management Consulting practice of PwC; each has significant mining industry experience.

About PwC Canada
PwC Canada helps organizations and individuals create the value they're looking for. More than 5,700 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with close to 169,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

© 2012 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved.

PwC refers to the Canadian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

SOURCE: PwC (PricewaterhouseCoopers)

Jim Nelson, PwC
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Email: [email protected]

Abby Yung, PwC
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Email: [email protected]