Bank Of Montreal 6-K, filed Mar 8, 2021
Bank Of Montreal (BMO)
About this 6-K
Bank Of Montreal filed this 6-K on March 8, 2021.
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
| For the month of: March, 2021 | Commission File Number: 001-13354 |
| BANK OF MONTREAL (Name of Registrant)
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| 100 King Street West 1 First Canadian Place Toronto, Ontario Canada, M5X 1A1 |
129 rue Saint-Jacques Montreal, Quebec Canada, H2Y 1L6 | |
| (Executive Offices) | (Head Office) | |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
INCORPORATION BY REFERENCE
The information contained in this Form 6-K and any exhibits hereto shall be deemed filed with the Securities and Exchange Commission (“SEC”) solely for purposes of incorporation by reference into and as part of the following registration statements of the registrant on file with and declared effective by the SEC:
| 1. | Registration Statement – Form F-3 – File No. 333-237342 |
| 2. | Registration Statement – Form F-3 – File No. 333-214934 |
| 3. | Registration Statement – Form S-8 – File No. 333-191591 |
| 4. | Registration Statement – Form S-8 – File No. 333-180968 |
| 5. | Registration Statement – Form S-8 – File No. 333-177579 |
| 6. | Registration Statement – Form S-8 – File No. 333-177568 |
| 7. | Registration Statement – Form S-8 – File No. 333-176479 |
| 8. | Registration Statement – Form S-8 – File No. 333-175413 |
| 9. | Registration Statement – Form S-8 – File No. 333-175412 |
| 10. | Registration Statement – Form S-8 – File No. 333-113096 |
| 11. | Registration Statement – Form S-8 – File No. 333-14260 |
| 12. | Registration Statement – Form S-8 – File No. 33-92112 |
| 13. | Registration Statement – Form S-8 – File No. 333-207739 |
| 14. | Registration Statement – Form S-8 – File No. 333-237522 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BANK OF MONTREAL | ||||||
| By: | /s/ Tayfun Tuzun | |||||
| Name: | Tayfun Tuzun | |||||
| Title: | Chief Financial Officer | |||||
| By: | /s/ Barbara M. Muir | |||||
| Name: | Barbara M. Muir | |||||
| Title: | Corporate Secretary | |||||
Date: March 8, 2021
EXHIBIT INDEX
| Exhibit | Description of Exhibit | |
| 99.1 | Notice of Annual Meeting of Shareholders on April 7, 2021 and Proxy Circular | |
| 99.2 | Form of Proxy | |
| 99.3 | Registered Form of Notice and Access | |
| 99.4 | Virtual Meeting Guide | |
Exhibit 99.1
Notice of Annual Meeting of Shareholders and Management Proxy Circular
Annual Meeting
April 7, 2021 | Bank of Montreal
Notice of Annual Meeting of Shareholders
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You’re invited to attend BMO’s 2021 annual meeting of shareholders.
How to attend As COVID-19 continues to challenge Canadians and the economy, we have decided to hold our 2021 annual meeting virtually again this year. You can participate in the virtual meeting by logging on to the webcast.
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| Date and time | Webcast | |||||
| Wednesday, April 7, 2021 9:30 a.m. Eastern time |
https://web.lumiagm.com/458701741 Enter password: bmo2021 (case sensitive) | |||||
| Who can vote You can vote if you held BMO shares as of the close of business on February 8, 2021, except as noted on page 4. You have one vote per share. There were 646,949,486 common shares outstanding on February 8, 2021, but there may be fewer eligible votes because of voting restrictions – see page 4.
How to vote You can vote in advance by proxy or voting instruction form, or vote in real-time at the virtual meeting by logging on to the webcast. Voting using the form you received is the easiest way to vote. How you cast your vote depends on how you hold your shares (see page 5 for details). | ||||||
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Have questions about voting?
Contact our transfer agent, Computershare Trust Company of Canada: | |||||||
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by phone 1-800-340-5021 (toll-free in Canada and the United States) 1-514-982-7555 (outside North America)) |
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by email service@computershare.com | |||
| On the cover: Ashley Amaral Front and Berkeley Branch 236 Front Street East |
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2021 meeting agenda
| Board recommendation | Read more | |||
| 1. Receive BMO’s consolidated financial statements for the year ended October 31, 2020 and the auditors’ report |
> Download a copy at www.bmo.com | page 2 | ||
| 2. Elect the board of directors |
> Vote FOR each nominated director | page 2 | ||
| 3. Appoint the auditors |
> Vote FOR | page 2 | ||
| 4. Vote (on an advisory basis) on our approach to executive compensation |
> Vote FOR | page 3 | ||
| 5. Consider the shareholder proposal requesting an additional climate change related report |
> Vote AGAINST | page 3 | ||
You will also consider any other business that is properly brought before the meeting.
Items 3, 4 and 5 will be approved only if the majority (more than 50%) of the votes cast are FOR the proposal.
Please take a moment to vote. Your participation is important to us.
Barbara M. Muir
SVP, Chief Legal Officer, Corporate & Corporate Secretary
By order of the board of directors
February 23, 2021
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How to ask questions You can ask questions during the webcast, or by sending them to us before the meeting:
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Where to get a copy of the 2021 management proxy circular We’re making the circular available online instead of by mail according to a set of rules developed by the Canadian Securities Administrators called notice and access, and pursuant to an exemption received from the Office of the Superintendent of Financial Institutions. If you’re a beneficial holder who has already given us instructions to send you printed documents, your circular is attached to this notice.
You can download the circular at (www.envisionreports.com/BMO2021), on our website (www.bmo.com/home/about/banking/investor-relations/annual-general-meeting), or on SEDAR (www.sedar.com). If you prefer to have a paper copy, contact our transfer agent, Computershare, and they will send you a copy.
Check in regularly for information updates Updates on how to vote and participate at the meeting will be posted on (www.envisionreports.com/BMO2021), on our website (www.bmo.com/home/about/banking/investor-relations/annual-general-meeting), and on SEDAR (www.sedar.com). Please be sure to check in from time to time.
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corp.secretary@bmo.com | |||||
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Bank of Montreal Corporate Secretary’s Department 100 King Street West 1 First Canadian Place, 21st Floor Toronto, Ontario, Canada M5X 1A1 |
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Look for more information online
www.bmo.com/corporategovernance
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| 2021 Management Proxy Circular | 2020 Annual Report | 2020 Sustainability Report and Public Accountability Statement
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2020 Voting results |
Management Proxy Circular
Message to shareholders
Guide to the 2021 management proxy circular
In this circular:
| • | we, our, us, BMO and the bank mean Bank of Montreal and our subsidiaries |
| • | you, your and shareholder refer to holders of BMO common shares |
| • | shares means BMO common shares |
| • | circular means this management proxy circular |
| • | board means BMO’s board of directors |
Information in this circular is as at February 11, 2021 and in Canadian dollars, unless indicated otherwise.
The board has approved the content of this circular for distribution to shareholders.
| What we’re discussing at our 2021 annual meeting, important information about voting, and details about the proposed board. |
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7 About the Nominated Directors
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| All about our board and corporate governance practices, and how these are integral to our performance and long-term sustainability. |
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16 About the Board of Directors 23 Building an Effective Board
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| How executive compensation effectively links bank results, compensation for executives, financial returns to shareholders, and our commitment to pursuing growth responsibly and sustainably. |
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40 Message from the Chair of the Human Resources Committee 45 Compensation Governance and Oversight 48 BMO’s Approach to Executive Compensation 60 2020 Performance and Compensation 74 Executive Compensation Tables and Other Financial Information
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Administrative information and the board’s mandate.
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The shareholder proposals received this year, including the one being voted on. |
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| Bank of Montreal Management Proxy Circular 2021 | 1 |
1. Receive BMO’s financial statements
Our consolidated financial statements for the year ended October 31, 2020 are available in our 2020 Annual Report on our website at www.bmo.com and in our profile on SEDAR at www.sedar.com.
| 2. Elect the board of directors
Shareholders will elect 13 directors to the board this year. Each nominated director is experienced and qualified to serve on our board. You can read about each nominee beginning on page 8.
Eleven of the 13 nominees were elected at our 2020 annual meeting and are standing for re-election, to hold office for a term of one year until our next annual meeting or until their successors are elected or appointed. Stephen Dent and Madhu Ranganathan are new nominees standing for election to the board for the first time.
If, for any reason, at the time of the meeting any nominee is unable to serve, your proxyholder can vote for a substitute nominee at their discretion, unless you have specified otherwise on your proxy or voting instruction form. You can read more about voting beginning on page 4.
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The board recommends you vote FOR each nominee.
If you have selected the BMO representatives (George Cope or Darryl White) as your proxyholder and have not specified your voting instructions, they will vote for all of the nominees listed in this circular.
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Majority voting for directors
Our Majority Voting Policy requires a director standing for election or re-election in an uncontested election to offer to resign if he or she receives more withhold votes than for votes. The Governance and Nominating Committee will review the matter and recommend to the board to accept the resignation unless there are exceptional circumstances. The nominee will not participate in the discussions.
| 3. Appoint the auditors
The board proposes that KPMG LLP be appointed as the shareholders’ auditors for the 2021 fiscal year. KPMG LLP has been one of BMO’s auditing firms since 1990 and became our sole auditing firm on November 1, 2003.
Auditors’ fees The table below shows the fees paid to KPMG LLP for the fiscal years ended October 31, 2020 and 2019: |
The board recommends you vote FOR the appointment of KPMG LLP as auditors.
If you have selected the BMO representatives (George Cope or Darryl White) as your proxyholder and have not specified your voting instructions, they will vote for the appointment of KPMG LLP as auditors.
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| Fees ($ millions) (1) | 2020 | 2019 | ||||||
| Audit fees based on applicable Canadian securities laws and U.S. SEC definitions |
$ | 21.1 | $ | 20.8 | ||||
| Audit-related fees for accounting advice, specified procedures on the circular and other specified procedures |
2.5 | 2.8 | ||||||
| Tax fees |
0.1 | 0.1 | ||||||
| All other fees mainly for reviews of compliance with regulatory requirements for financial information and reports on internal controls for services provided by various BMO businesses and for translation services |
1.5 | 0.6 | ||||||
| Total |
$ | 25.2 | $ | 24.3 | ||||
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(1) The classification of fees is based on applicable Canadian securities laws and U.S. Securities and Exchange Commission definitions. |
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| 2 | Bank of Montreal Management Proxy Circular 2021 |
Auditor independence
We have a strict policy limiting other services that the auditors can provide to the bank. The Audit and Conduct Review Committee (or its delegate) pre-approves all services to be provided by the auditors following our Auditor Independence Standard, either case by case, or in annual budgets for specific services. This helps protect the audit function from conflicts of interest and helps ensure auditor independence. A rigorous process ensures that all services provided by the auditors comply with our standard as well as professional standards and securities regulations.
| 4. Vote (on an advisory basis) on our approach to executive compensation
We are asking you to vote on the way we compensate our executives.
BMO’s success depends on the strength and performance of its people. The executive
This vote is
advisory and non-binding, but the results will influence how the Human Resources |
The board recommends you vote
If you have selected the BMO
Last year 94.49% of the votes cast
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You will vote on the following resolution:
Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders accept the approach to executive compensation disclosed in the management proxy circular delivered in advance of our 2021 annual meeting of shareholders.
If you have questions or comments about our executive compensation program, you can contact the Corporate Secretary’s department or communicate directly with the board of directors (see page 22 for details).
| 5. Consider the shareholder proposals
Harrington Investments, Inc. has submitted one shareholder proposal to the bank to be
The Mouvement d’éducation et de défense des
actionnaires (MÉDAC) submitted seven
See page 88 for the complete text of each shareholder proposal and our response. |
The board recommends you
If you have selected the BMO
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How to submit a shareholder proposal
If you would like to submit a proposal for the next annual meeting, we must receive it by November 15, 2021.
You’ll find instructions for submitting director nominations in the board’s Proxy Access Policy, on our website at www.bmo.com/home/about/banking/corporate-governance/select-documents.
| Bank of Montreal Management Proxy Circular 2021 | 3 |
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As COVID-19 continues to challenge Canadians and the economy, the health and well-being of our employees, clients, investors and communities is our collective priority. As a result of the anticipated ongoing impact of COVID-19, and in consideration of the evolving protocols from public health and government authorities, we have decided, and received a court order to permit us, to hold our 2021 annual meeting virtually again this year. You can participate in the virtual meeting by logging on to the webcast.
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| Date and time | Webcast | |||
| Wednesday, April 7, 2021 9:30 a.m. Eastern time |
https://web.lumiagm.com/458701741 Enter password: bmo2021 (case sensitive) | |||
You will vote on the four items listed below, and consider any other business that is properly brought before the meeting. Each of these items, except the election of the board of directors, can be approved only if the majority (more than 50%) of the votes cast are FOR the proposal.
| Board recommendation | Read more | |||
| Elect the board of directors You can vote for or withhold |
> Vote FOR each nominated director | page 2 | ||
| Appoint the auditors You can vote for or withhold |
> Vote FOR | page 2 | ||
| Vote (on an advisory basis) our approach to executive compensation You can vote for or against |
> Vote FOR | page 3 | ||
| Consider the shareholder proposal requesting an additional climate change related report Vote for, against or abstain |
> Vote AGAINST | page 3 |
| 4 | Bank of Montreal Management Proxy Circular 2021 |
You can vote in advance by proxy or voting instruction form, or vote in real-time at the virtual meeting. Voting using the form you received is the easiest way to vote. How you cast your vote depends on how you hold your shares.
If you hold your shares directly with BMO or through BMO’s Employee Share Ownership Plan, Employee Share Purchase Plan or 401(k) Savings Plan
You have received a proxy form or voting instruction form from Computershare.
About proxyholders
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If you hold your shares through a bank or broker (your intermediary)
You are a non-registered shareholder, and you received a voting instruction form from your intermediary. Most BMO shareholders are non-registered.
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| An effective board is independent, qualified and diverse. Directors must have appropriate skills and be committed to the role. Having the right mix of directors leads to better decision-making and more effective oversight. |
What you’re voting on
You’re electing 13 directors to hold office for a one-year term. Eleven of the 13 nominated directors currently serve on the board.
The board recommends you vote FOR each nominee. |
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A strong foundation
Corporate governance is important – to our shareholders, our customers, our employees, the communities we operate in – and to us. Sound corporate governance is the foundation for responsible business behaviour and integral to our performance and long-term sustainability.
Our high corporate governance standards reflect emerging best practices and meet or exceed the legal and regulatory requirements of the Toronto Stock Exchange (TSX), New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automatic Quotation System (NASDAQ) that apply to us.
| Board expertise Good governance starts with our board of directors. We get the board composition and structure right by having well-informed people with diverse backgrounds, relevant experience, and independence from management. We gain from their expertise and pay them fairly in return.
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> Independent > Elected annually > Elected individually (not slate) > Majority voting policy > Orientation, continuing education and assessment > Tenure policy > Conflict of interest policy > Proxy access policy
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| Leading governance practices We monitor regulatory changes and emerging best practices in corporate governance to make sure we are at the forefront |
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> Code of conduct rooted in our values > Separate chair and CEO positions > Board and committee chair term limits > Policy on interlocking directors > Board diversity policy > No hedging of BMO securities > Director and executive share ownership guidelines > Annual ‘say on pay’ > Non-executive directors cannot participate in BMO stock option plans > Leading subsidiary governance practices
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| Recognition We’ve been recognized over the years for our governance practices
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> 100 Most Sustainably Managed Companies in the World – Wall Street Journal > 2020 Bloomberg Gender-Equality Index > Best 50 Corporate Citizens in Canada – Corporate Knights > Global 100 Most Sustainable Corporations in the World – Corporate Knights > Best Employers for Diversity 2020 (United States) – Forbes > Gold Award in Excellence in Leadership Development – Brandon Hall Group > Governance Professionals of Canada, Best Practices Compensation Disclosure and Communication, 2018
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BMO’s governance structure
| Board of Directors
(see page 86 for the board mandate) • Provides stewardship, sets general direction and alignment with Purpose, and oversees management, technology and operations • Defines the role of the Chair, committee chairs, directors and the CEO, and reviews the definitions every year • Oversees subsidiary operations (201 subsidiaries in 22 jurisdictions on October 31, 2020)
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| Board committees
(see our website for each committee’s charter, and pages 34 to 38 for the 2020 committee reports) • Help the board carry out its responsibilities • Are led by an independent chair and made up entirely of independent directors • Committee membership is reviewed by the Governance and Nominating Committee once a year, to match director skills to committee mandates
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| Audit and Conduct Review Committee |
• Integrity of financial reporting • Effectiveness of internal controls • Qualifications, independence and performance of the independent auditors • Transactions involving related parties, conflicts of interest and confidential information • Standards of ethical business conduct • Sustainability governance and disclosure • Compliance with legal and regulatory requirements
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| Governance and Nominating Committee |
• Governance principles and guidelines • Board composition, including performing public searches and retaining independent recruitment firms to identify qualified diverse candidates • Director development, assessment and succession planning • Director compensation • Subsidiary oversight • Coordination of effective committee oversight
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| Human Resources Committee |
• Human resources strategies • Talent development, retention and succession planning • Compensation oversight and governance • CEO and senior executive appointment and compensation
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| Risk Review Committee |
• Risk appetite framework and governance • Identification and management of risk • Adherence to risk management corporate policies • Compliance with risk-related regulatory requirements
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Ethical culture
| BMO’s Purpose
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Rooted in our values
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Articulated in our codes of conduct
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| Boldly Grow the Good in business and life. | Integrity: Do what’s right.
Empathy: Put others first.
Diversity: Learn from difference.
Responsibility: Make tomorrow better.
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Our Code of Conduct applies to every BMO director, officer and employee.
Our Supplier Code of Conduct includes our expectations for supplier integrity, fair dealing and sustainability. | ||||||||||
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Strategic planning
Risk oversight
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Sustainability
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Subsidiary governance
| A legal entity framework
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| The framework includes procedures for establishing, operating and dissolving legal entities.
The complexity of each subsidiary is assessed based on criteria including size of assets, whether the subsidiary is operating, client-facing and/or regulated.
It is then placed into one of four categories of ascending degrees of governance. |
Subsidiary boards have structures that comply with the governing law of the subsidiary.
They are composed of executives as management directors and may include qualified independent non-executive directors where required by law or regulator preference. The non-executive directors are nominated based on their independence from the business, using a skills matrix developed by the subsidiary board.
BMO’s Operating Directive ensures consistent governance best practices and proper oversight of each legal entity, promotes thoughtful, effective and efficient governance processes, and clarifies the roles and responsibilities of the directors, officers and corporate units.
The subsidiary’s corporate secretary works with the subsidiary board to implement the governance tools that are appropriate for the subsidiary. |
The board is responsible for overseeing BMO’s subsidiaries.
The Subsidiary Governance Office provides information to the board, including, among other things: • An annual Legal Entities Report for the Governance and Nominating Committee, which includes the structure of subsidiary boards, statistics by operating group, jurisdiction and assets, the background of non-executive directors and other relevant information. • Comprehensive reporting about each subsidiary’s line of business and legal entity activities and the connection to BMO’s business strategy.
Board and committee chairs are also in regular communication with the chairs of the U.S. holding company board and its committees.
Specific subsidiary-related information must be escalated to a senior management committee or to the board, under our Board Approval and Oversight Requirements Policy and related guidelines.
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Leadership diversity, development and succession planning
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Communication and engagement
| Engagement |
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| BMO’s Shareholder Engagement Policy outlines how management and the board engage with shareholders, how they can communicate with us, and how to request a meeting with BMO directors.
The board meets regularly with institutional shareholders and responds to questions or issues raised by retail shareholders (by telephone or email).
The Corporate Secretary, Shareholder Services, Investor Relations department, and ESG/Sustainability team also have ongoing discussions with shareholders, and respond promptly to any questions, concerns and shareholder proposals.
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Regular communication with shareholders includes: • quarterly earnings calls (live webcast with a question and answer period) • news releases • disclosure documents (annual report, management proxy circular, annual information form, sustainability report & public accountability statement and quarterly reports) • industry conferences • our website • phone calls, letters and emails • our annual meeting of shareholders (which is also webcast live) • meetings with institutional shareholders (one-on-one and as a group).
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BMO welcomes your feedback,
You can reach management by email:
Management corp.secretary@bmo.com
Investor Relations investor.relations@bmo.com
Shareholder Services corp.secretary@bmo.com
You can also contact the Chair of the Board, and any of our directors or committee chairs using the information below.
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Independence
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| A director is independent if he or she does not have a relationship with the bank or any of its affiliates that could interfere with his or her independent judgment.
The board uses Director Independence Standards to determine whether a director is independent (available on our website). The standards take into consideration the Bank Act (Canada) definition of affiliated persons, and the Canadian Securities Administrators (CSA), NYSE, and NASDAQ definitions of independence.
In its review of a director’s independence, the board looks at his or her personal, business, and other relationships, and his or her dealings with bank and its affiliates. This involves reviewing biographical information, reports, director questionnaires, bank records and reports, and information about entities the director is involved with.
The threshold for independence is higher for members of our Audit and Conduct Review Committee.
Certain relationships (for example, being an officer of the bank) automatically mean a director is not independent. According to the board’s policies, only two of the board’s directors can also be employees of the bank.
While the bank has lending, banking, and other commercial arrangements with some of the directors and entities they have relationships with, the board is satisfied that these directors are independent under the standards.
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BMO has an independent and non-executive Chair of the Board. This allows the board to operate independently of management and provides leadership to the independent directors.
The Chair normally serves for five years with the possibility of renewal for another three years.
The Governance and Nominating Committee is responsible for board Chair succession. The process includes identifying issues facing the bank and interviewing each director individually, as well as determining the most appropriate process for the board to make a final decision, which could include deliberation and a vote if more than one person has significant support. |
Meeting without management Every board meeting and board committee meeting includes time for independent directors to meet without management present.
Managing conflicts of interest The Directors’ Conflict of Interest Policy is designed to ensure independent decision-making by the board.
The policy includes guidelines for identifying and dealing with conflicts when they arise. Directors or executive officers with a material interest in a matter do not receive related board or committee materials, and are excluded from subsequent discussions or votes.
Getting independent advice The Chair and each committee can engage outside consultants paid for by the bank, without consulting management. This helps ensure they can receive independent advice.
Serving on other boards Outside directorships are monitored to make sure directors can operate with independent judgment and have the time available to commit to BMO’s board. No more than two directors can serve on the same outside public company board (called a board interlock) without the consent of the Governance and Nominating Committee.
Members of the Audit and Conduct Review Committee cannot serve on more than three public company audit committees without board approval. | ||||||
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Diversity and skills
Skills matrix
| We capture the ideal list of skills for directors in four broad categories and record them in a skills matrix. The directors confirm their skills every February. The items in the list are reviewed every year and added to as necessary. We use this information to assess the overall strength and diversity of the board and when recruiting new directors.
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| Executive leadership Experience as a senior executive/officer of a publicly listed company or major organization |
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| Human resources Experience with benefit, pension and compensation programs (in particular, executive compensation programs) |
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| Strategic planning Experience in the development and implementation of a strategic direction of a large organization |
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| Risk management Knowledge of, and experience with internal risk controls, risk assessments and reporting |
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| Mergers and acquisitions Experience with investment banking or mergers and acquisitions |
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| Accounting and finance Knowledge of and experience with financial accounting and reporting, corporate finance and familiarity with internal financial/accounting controls, Canadian or U.S. GAAP and/or IFRS |
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| Legal Experience as a lawyer either in private practice or in-house with a publicly listed company or major organization |
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| Financial services Oversight, advisory or operational experience in the financial services industry other than serving as a director of the bank |
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| Retail Experience as a senior executive in a major products, services or distribution company |
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| Information technology and security Experience or knowledge relating to the information technology and security needs of a major organization |
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| Corporate responsibility/sustainability Understanding and experience with corporate responsibility practices and the constituents involved in sustainable development practices |
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| Bank of Montreal Management Proxy Circular 2021 | 25 |
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| Other board experience Served as a board member of a public, private or non-profit entity |
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Orientation and development
| Director orientation
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+ | Ongoing education | + | Engaging with management | ||||||||
| Orientation by the Chair of the Board, the committee chairs and the CEO, to learn about the bank’s history and culture, structure, strategic direction, current issues and opportunities, including how BMO differs from its peers. Sessions are held within six months of new directors joining the board. | Regular presentations on BMO’s operations and regulatory briefings, to complement and enhance director understanding of the bank, its products and services and the risks it faces, as well as developments in corporate and risk governance and regulatory matters. | Board dinners – held virtually over the last year – to strengthen the collegial working relationship among directors. These are scheduled alongside regular board meetings, and often include educational sessions related to the bank’s business and strategic direction presented by senior management.
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| Director governance documents, policies, bylaws, compliance requirements and other information to ensure a smooth transition into their role as director.
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Materials and reading recommendations from the Chair, committee chairs, the CEO and the Corporate Secretary. | There is regular engagement between directors and senior management between board meetings. | ||||||||||
| Individual meetings with the heads of each of our operating groups and corporate functions to learn about our business. Additional meetings and site visits may also be arranged.
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Daily News Monitor emails circulated each morning. Articles posted in the Resource Center of the Board portal. | Interaction with senior management and employees through the Executive Meets Directors programs to gain greater insight into the business and for senior management succession planning.
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| 26 | Bank of Montreal Management Proxy Circular 2021 |
Ongoing education
Directors are expected to continuously upgrade their knowledge about issues affecting our businesses, the financial services sectors we operate in, emerging trends and issues and significant strategic initiatives. Working with the Corporate Secretary, the committee chair identifies relevant and timely information for directors. Directors also identify their own continuing education needs in discussions with management, the board and committees. During the 2020 fiscal year, directors participated in educational and round-table sessions and received educational materials on the topics outlined below. They also received quarterly and ad hoc briefings on regulatory developments. The Session/topics below are aligned to our strategic priorities.
| Session/topic | Audience (Board/Committee) | |
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Client loyalty
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| Agricultural Portfolio Review: portfolio overview, risk profile and exposure concentration | Risk Review | |
| Market and Risk Implications Related to COVID-19 and Energy Markets | Risk Review | |
| Agricultural Portfolio Review | Risk Review | |
| Oil and Gas Portfolio Update | Board | |
| COVID-19 – Client Impact and Client Flows | Board | |
| Commercial Real Industry Review | Risk Review | |
| Quarterly review of net promoter scores in Wealth Management and Personal Banking | ||
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Winning culture
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| Compensation Governance Framework and Senior Leadership Succession, Diversity and Inclusion | Chair, Human Resources Committee | |
| Pension Governance | Human Resources | |
| ISS and Glass Lewis Reports COVID-19 Workforce Support |
Human Resources | |
| BMO Learning from Difference for All (digital course) | Chair, Audit and Conduct Review Committee Member, Audit and Conduct Review Committee and Risk Review Committee | |
| Racial Justice Response | Human Resources Committee | |
| The Use of Non-financial Metrics in Incentive Plans; Structured Discretion in Executive Pay; and Incentive Compensation Issues to Consider During a Downturn |
Human Resources Committee | |
| Activating Our Culture to Achieve Our Ambition | Board | |
| Diversity Update: BIPOC, LGBTQ2+ and Indigenous segments | Board | |
| Diversity and Inclusion Update (including racial justice events and the creation of Black and Latinx Advisory Council) | Human Resources Committee | |
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Digital first and simplify work
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| Quarterly VAULT Update: Progress on technology stability/security and driving end-to-end critical services | Board | |
| Simplifying and Digitizing: Using a “Digital First” operating model, including work optimization levers | Board | |
| Technology Modernization and High-Performance Culture as Key Enablers | Board | |
| Disruption Perspectives: Trends, digital operating models and barriers to entry | Board | |
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Manage risk
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| Structural Market Risk and Fund Transferring Pricing | Risk Review | |
| Structured MTN Programs | Board | |
| Impact of Changing Minimum Credit Card Payments in Credit | Risk Review |
| Bank of Montreal Management Proxy Circular 2021 | 27 |
| Session/topic | Audience (Board/Committee) | |
| Cybersecurity Briefing AML: Regulatory amendments in Canada; Updates on Cannabis and Bank Secrecy Act Reform FINTRAC’s New Operational Alert Updates on BREXIT; U.S. Sanctions on Iran Spotlight – Comprehensive Model Risk Audit Coverage Subsidiary Governance Review |
Audit and Conduct Review | |
| Finance Technology Update; Cyber Security Briefing; COVID-19 Government Relief Programs | Audit and Conduct Review | |
| Economics Update: G7 and Monetary Responses to COVID-19 (BMO Chief Economist) COVID-19 Pandemic Response – The impact of COVID-19 on cyber security, fraud, technology resiliency and supplier risk Liquidity, Funding & Market Risk Update (including an overview of Canadian and U.S. government programs and structural market risk) Credit Impact of COVID-19 and Payment Holidays Plans and Hardship Relief Programs |
Risk Review | |
| Cyber Security Update (including fraudulent schemes initiated by criminal groups) Ontario Capital Markets Modernization Taskforce Update COVID-19 Litigation and Related Risks AML Update (Hong Kong Autonomy Act, the US Anti-Money Laundering Act of 2020, UK human rights sanctions) |
Audit and Conduct Review | |
| North American Outlook: BMO Capital Markets Economic Research IBOR Transition Update Update on Global Equity Products |
Risk Review | |
| Global Outlook: Pre & Post U.S. Presidential Election by The Global Institute of Financial Professionals & Momentum Advisors: How do markets price-in election results; The impact of a protracted election on futures volatility International Association of Credit Portfolio Managers Webinar: Resilience after COVID-19 – What CPM Need to Know International Association of Credit Portfolio Managers Virtual Fall Conference: Resilience after COVID-19 – Board Member Perspectives |
Chair, Risk Review Committee | |
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Regulatory
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| OSFI Focus on Culture and Conduct Update on FRB Control Rules, Volcker Amendments, Modernizing Canada’s Privacy Law and California Consumer Privacy Act and US Privacy Laws |
Audit and Conduct Review | |
| OCC Large Bank Supervision Directors Conference | Chair, Governance and Nominating Committee | |
| Significant Changes in Governance Rules and Regulations (CSA Report on Women on Boards and in the Executive Officer Positions; CSA Consultation Paper on Access Equals Deliver; ISS and Glass Lewis Updates; SEC Proposed Amendments for Proxy Advisory Firm; Modern Slavery Legislation) | Governance and Nominating Committee | |
| Updates on Significant Changes in Governance Rules and Regulations (Capital Markets Modernization Taskforce Consultation Period; Diversity Beyond Gender; SEC Final Rules on Proxy Advisory Firms; B.C. New Benefit Company Legislation) | Governance and Nominating | |
| AML New Regulatory Requirements and Developments (Cullen Commission, the 2nd Canadian Regulatory Package in Canada | Audit and Conduct Review | |
| Capital Analysis and Review | Board | |
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Governance
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| The Governance Advisory Market | Governance and Nominating Committee | |
| Market Review of Director Compensation | Governance and Nominating Committee | |
| Deloitte Virtual Board Symposium (Sharpening the Board’s Role in Cyber Risk Oversight; The Board’s Role in ESG; How to be a Champion for Diversity and Inclusion in the Boardroom; The Purpose of the Corporation) | Chair, Audit and Conduct Review Committee | |
| Capital Markets Modernization Task Force Consultation Report, board diversity proposals The Canadian Council of Business Leaders Against Anti-Black Systemic Racism CEO Pledge BMO Governance and Board Effectiveness/Opportunities: COVID-19 as an Opportunity to Assess and Strengthen the Bank; Increased Focus on ESG; Role of the Board Survey of Diverse Board Candidates Review of BMO and BFC Deferred Share Unit Plans |
Governance and Nominating | |
| Women Corporate Directors Compensation & Human Capital Peer Group: The impact of COVID-19 on Executive Compensation NACD Audit Committee Chair Advisory Council: COVID-19 impacts on audit committee function, reopening and recovery Public Company Accounting Oversight Board Webinar for Audit Committee Members: Observations and expectations of audit firms with a COVID-19 lens |
Chair, Audit and Conduct Review Committee | |
| Interdisciplinary Center, Herzliah Israel – Policy Responses to COVID-19 | Member, Audit and Conduct Review Committee and Risk Review Committee | |
| Women Corporate Directors: US Federal Response to COVID-19; Board lessons – 2018 v COVID-19; Stakeholder considerations and ESG Metrics; What Role Can Directors Play in Leading Racial Equality in our Companies and Beyond? |
Chair, Governance and Nominating Committee |
| 28 | Bank of Montreal Management Proxy Circular 2021 |
| Session/topic | Audience (Board/Committee) | |
| ESG and the Mining Industry (How greater investment in responsible mining could benefit local communities and stakeholders; Actions gold miners will need to take to attract impact funds to fuel transformational change; Changing investor expectations and the need to define and deliver long-term value; An investor’s view of the gold sector) | Member, Audit and Conduct Review Committee | |
| Legal Entities Report: subsidiary board structures, board oversight, subsidiary activities overview, impact of COVID-19 pandemic on subsidiary governance, recent enhancements in subsidiary governance, spotlight on BMO Nesbitt Burns Inc. and legal entity classifications | Governance and Nominating | |
| Sustainability – Climate Change Briefing Competition / Anti-Trust Program Technology Update |
Audit and Conduct Review | |
| Women Corporate Directors: Global Threat of Cyberwarfare Systemic Racism – How the Best Boards Lead Real and Lasting Change Canadian Public Accountability Board/Public Company Accounting Oversight Board Audit Committee Chair Roundtable on COVID-19; Regulatory Priorities; Inspections; Non-GAAP Reporting; Fraud and Open Discussion including ESG Cyber Security Summit: Talking to the Board About the New Realities of IT Security; Cybercrime Tactics & Techniques 2020; How the Rapid Growth of Security Tools is Increasing Overall Risk |
Chair, Audit and Conduct Review Committee | |
| Winston & Strawn Disruptive Technologies Conference: The Business Technology Climate in the Age of Covid 19; Eliminating Bias in AI Women Corporate Directors: Diversity, Equity and Inclusion – A Governance Challenge through the Risk Prism Federalist Society Conference: Election Implications on Financial Services Regulation |
Chair, Governance and Nominating Committee | |
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The economic environment
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| Economic Outlook & Scenarios: Update on the macro environment in our key markets |
Board | |
| 2020 Economic Outlook: 2020 Seeing Double, BMO Economics | Risk Review | |
| The Macroeconomy and COVID-19: World Bank The Microeconomic and COVID-19 Seminars: Federal Reserve Bank of Atlanta; Northwestern University; Federal Reserve of Chicago; European Central Bank; International Monetary Fund |
Member, Audit and Conduct Review Committee and Risk Review Committee | |
| Bank of Canada: Rethinking Canada’s Monetary Policy Framework National Association of Business Economists – The COVID Recession and Its Aftermath Chicago Federal Reserve Bank: Advisory Board Talk – Monetary Policy and Central Bank Independence in the Post-COVID World |
Member, Audit and Conduct Review Committee and Risk Review Committee |
In 2020 directors also attended external conferences and events on a range of topics including board diversity, the economic and governance landscape, the implications of Brexit on global companies, climate change, bitcoin and blockchain, the 2020 proxy season, financial modeling and public company financial statement analysis, the macro economy and COVID-19 outlook, cyber risk oversight, systemic racism, compensation and human capital, credit portfolio management, audit committee peer discussions and nominations and governance among other things.
Commitment and tenure
| Bank of Montreal Management Proxy Circular 2021 | 29 |
Attendance
The table below shows the attendance of the nominated directors and retired directors at fiscal 2020 board and committee meetings. The independent directors met without management at every board meeting.
The board’s Resignation Policy requires directors to offer to resign when their principal occupation changes, or at the end of a fiscal year where they attended fewer than 75% of the meetings of the board and the committees they serve on. The Governance and Nominating Committee recommends to the board whether to accept or reject the director’s resignation.
| Board (16 meetings) |
Audit and Conduct Review Committee (7 meetings) |
Governance and Nominating Committee (6 meetings) |
Human Resources Committee (9 meetings) |
Risk Review Committee (9 meetings) |
Total attendance | |||||||||||||||||
| Janice M. Babiak (1) |
16 | 100% | 7 | 100% | 6 | 100% | – | – | – | – | 100% | |||||||||||
| Sophie Brochu (2) |
16 | 100% | 7 | 100% | 3/3 | 100% | – | – | – | – | 100% | |||||||||||
| Craig W. Broderick (3) |
16 | 100% | – | – | 3/3 | 100% | – | – | 9 | 100% | 100% | |||||||||||
| George A. Cope (4) |
15 | 94% | – | – | 5 | 83% | 9 | 100% | – | – | 94% | |||||||||||
| Christine A. Edwards (5) |
16 | 100% | – | – | 6 | 100% | 9 | 100% | 9 | 100% | 100% | |||||||||||
| Martin S. Eichenbaum |
16 | 100% | 7 | 100% | – | – | – | – | 9 | 100% | 100% | |||||||||||
| Ronald H. Farmer (6) |
16 | 100% | – | – | 3/3 | 100% | 9 | 100% | 9 | 100% | 100% | |||||||||||
| David E. Harquail |
16 | 100% | 6 | 86% | – | – | – | – | – | – | 96% | |||||||||||
| Linda S. Huber |
16 | 100% | 7 | 100% | – | – | – | – | 9 | 100% | 100% | |||||||||||
| Eric R. La Flèche |
15 | 94% | – | – | – | – | 9 | 100% | – | – | 96% | |||||||||||
| Lorraine Mitchelmore (7) |
15 | 94% | – | – | 3/3 | 100% | 9 | 100% | 9 | 100% | 97% | |||||||||||
| Philip S. Orsino (8) |
7/7 | 100% | 3/3 | 100% | – | – | – | – | 5/5 | 100% | 100% | |||||||||||
| J. Robert S. Prichard (8) |
7/7 | 100% | – | – | 2/3 | 67% | 4/4 | 100% | 4/5 | 80% | 89% | |||||||||||
| Darryl White (9) |
16 | 100% | – | – | – | – | – | – | – | – | 100% | |||||||||||
| Don M. Wilson III (8) |
7/7 | 100% | – | – | 3/3 | 100% | 4/4 | 100% | 5/5 | 100% | 100% | |||||||||||
| Average |
99% | 98% | 94% | 100% | 97% | 98% | ||||||||||||||||
| 30 | Bank of Montreal Management Proxy Circular 2021 |
Assessment
|
Director effectiveness |
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+ |
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Board and committee chair effectiveness |
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+ |
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Board and committee effectiveness
| ||||||
| Annual director survey The survey is completed by every director, and includes: • an assessment of the board and committees against: • operation of the board and each committee • adequacy of information provided to directors for board and committees • agenda planning for meetings • strategic direction and process, including regarding IT, information security and ESG • the board and committee goals for the year.
Results are compiled confidentially by an outside consultant.
Individual interviews Each director meets with the Chair, who: • asks for candid feedback from the director on board and committee effectiveness • provides feedback on the director’s performance relative to the performance standards under the director position description.
Feedback After the interviews, the Chair summarizes the themes and develops the board goals for the coming year.
The Governance and Nominating Committee monitors and tracks progress against opportunities for improvement that were identified in the self-assessment process.
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Annual board chair review The Governance and Nominating Committee assesses the Chair’s performance against the position description, taking into account the input from each director.
The results are reviewed with the board and the Chair.
Annual committee chair review The Governance and Nominating Committee assesses the contribution and effectiveness of each committee chair against the committee’s objectives and the position descriptions.
The Chair meets with each committee chair to provide feedback. |
The board and its committees continuously refine various aspects of their practices.
Setting objectives Issues are identified every year that help with creating annual objectives for the board and its committees.
Ongoing assessment and follow-up Board and committee objectives are set out in board packages.
Progress against the objectives is discussed at each board and committee meeting. | ||||||||||||
| Bank of Montreal Management Proxy Circular 2021 | 31 |
2020 Director compensation table
The table below breaks out the compensation paid to non-employee directors in fiscal 2020. Directors who served in any capacity for a portion of the fiscal year were compensated on a pro-rated basis.
| Board retainer | Committee retainer ($) |
Committee fees ($) |
Travel Allowance ($) |
Other fees ($) |
Total fees ($) |
Portion of (%) |
Total DSUs – ($) (1) |
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| Cash ($) |
DSUs ($) |
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| Janice M. Babiak (2) |
75,000 | 145,833 | 50,000 | 15,000 | 20,000 | 4,000 | (4) | 309,833 | 100 | 309,833 | ||||||||||||||||||||||||||
| Sophie Brochu |
75,000 | 145,833 | – | 8,750 | – | 4,000 | (4) | 233,583 | 100 | 233,583 | ||||||||||||||||||||||||||
| Craig W. Broderick (2) |
75,000 | 145,833 | 29,167 | 8,750 | 20,000 | 4,000 | (4) | 282,750 | 100 | 282,750 | ||||||||||||||||||||||||||
| George A. Cope (2) |
177,081 | 166,250 | – | 6,250 | – | 114,402 | (3)(4) | 463,985 | 87 | (3) | 403,766 | |||||||||||||||||||||||||
| Christine A. Edwards (2) |
75,000 | 145,833 | 43,750 | 30,000 | 20,000 | 243,065 | (3)(4) | 557,648 | 98 | (3) | 540,921 | |||||||||||||||||||||||||
| Martin S. Eichenbaum |
75,000 | 145,833 | – | 15,000 | 20,000 | 4,000 | (4) | 259,833 | 100 | 259,833 | ||||||||||||||||||||||||||
| Ronald H. Farmer (2) |
75,000 | 145,833 | 20,833 | 21,259 | – | 4,000 | (4) | 266,925 | 100 | 266,925 | ||||||||||||||||||||||||||
| David E. Harquail |
75,000 | 145,833 | – | – | – | 4,000 | (4) | 224,833 | 100 | 224,833 | ||||||||||||||||||||||||||
| Linda S. Huber |
75,000 | 145,833 | – | 15,000 | 20,000 | 4,000 | (4) | 259,833 | 100 | 259,833 | ||||||||||||||||||||||||||
| Eric R. La Flèche |
75,000 | 145,833 | – | – | – | 4,000 | (4) | 224,833 | 100 | 224,833 | ||||||||||||||||||||||||||
| Lorraine Mitchelmore |
75,000 | 145,833 | 29,167 | 23,750 | 20,000 | 4,000 | (4) | 297,750 | 100 | 297,750 | ||||||||||||||||||||||||||
| Philip S. Orsino (5) |
31,250 | 58,333 | – | 6,250 | – | – | 95,833 | 100 | 95,833 | |||||||||||||||||||||||||||
| J. Robert S. Prichard (5) |
104,167 | 72,916 | – | – | – | 111,936 | (3) | 289,019 | 100 | (3) | 289,019 | |||||||||||||||||||||||||
| Don M. Wilson III (5) |
31,250 | 58,333 | 20,833 | 12,500 | 10,000 | – | 132,916 | 100 | 132,916 | |||||||||||||||||||||||||||
| Total in DSUs: $3,822,628 Total in cash: $76,946 |
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| Bank of Montreal Management Proxy Circular 2021 | 33 |
Committee charters are on our website at www.bmo.com/corporategovernance. Turn to page 30 for details about attendance at committee meetings in fiscal 2020.
Audit and Conduct Review Committee
| Oversees the integrity of the bank’s financial reporting, the effectiveness of internal controls, the qualifications, independence and performance of the independent auditors, compliance with legal and regulatory requirements, sustainability disclosure, transactions involving related parties, conflicts of interest and confidential information, and standards of business our conduct and ethics. It also acts as the audit and conduct review committee of certain designated subsidiaries.
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100% independent
Members: Jan Babiak (chair), Sophie Brochu, Dr. Martin Eichenbaum, David Harquail and Linda Huber
Each committee member is financially literate, as defined in the rules of the Canadian Securities Administrators (CSA) and U.S. Securities and Exchange Commission (SEC) and standards of the NYSE and the NASDAQ. Jan Babiak and Linda Huber are Audit Committee Financial Experts as defined by SEC rules. Definitions of financially literate and Audit Committee Financial Experts are in the Audit and Conduct Review Committee Charter on our website at www.bmo.com/corporategovernance.
2020 Highlights
| 34 | Bank of Montreal Management Proxy Circular 2021 |
| Bank of Montreal Management Proxy Circular 2021 | 35 |
Governance and Nominating Committee
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Develops governance principles and guidelines for BMO and the board. It identifies and recommends director candidates for election or appointment to the board, and reviews our director orientation and development program and board assessment process. It reviews the board mandate, committee charters and position descriptions annually to make sure that they meet or exceed all regulatory requirements and best practices. The committee also evaluates shareholder proposals submitted for the bank’s shareholder meetings.
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100% independent
Members: Christine Edwards (chair), Jan Babiak, Sophie Brochu, Craig Broderick, George Cope and Lorraine Mitchelmore
| 36 | Bank of Montreal Management Proxy Circular 2021 |
Human Resources Committee
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Oversees human resources strategies, including compensation and talent management.
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100% independent
Members: Lorraine Mitchelmore (chair), George Cope, Christine Edwards, Ronald Farmer and Eric La Flèche
| Bank of Montreal Management Proxy Circular 2021 | 37 |
Risk Review Committee
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Oversees the identification and management of risk, adherence to corporate risk management policies and compliance with risk-related regulatory requirements. It reviews the bank’s Risk Appetite Framework and the organizational structure, resources and effectiveness of the risk management function. The committee also reviews and, as applicable, approves our corporate risk management policies, reviews and/or ratifies transactions involving material risk and recommends to the board the limits and risk-taking authority to be delegated to the Chief Executive Officer.
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100% independent
Members: Craig Broderick (chair), Christine Edwards, Dr. Martin Eichenbaum, Ronald Farmer, Linda S. Huber and Lorraine Mitchelmore
| 38 | Bank of Montreal Management Proxy Circular 2021 |
Driving our success
BMO’s success depends on the strength and performance of its people. Executive compensation — an important tool we use to reinforce our Purpose, drive the success of our people and ensure our long-term success — is a well-governed, disciplined process.
The executive compensation program is designed to support our strategic priorities and tie executive rewards to the long-term growth and health of the organization. Bank results, compensation for executives, financial returns to shareholders and BMO’s commitment to pursuing growth responsibly and sustainably are all connected in a way that does not encourage or reward inappropriate risk-taking.
| Compensation governance and oversight
Effective structure and oversight and a disciplined process provide proper governance and sound decision-making |
u
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> Our independent directors have human resources, risk management and executive leadership experience > Oversight structure supports a culture of prudent risk-taking > The Human Resources Committee receives advice from an independent, external compensation advisor > An independent third party reviews our material compensation plans > Management oversight committees operate at the enterprise level and in the U.S. and the UK, and include control function leaders
| ||
| Leading compensation practices
Our compensation policies and practices align with the practices, standards and guidelines required by regulators and industry best practices |
u
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> A significant portion of executive pay is equity-based > Each executive must meet share ownership requirements > Our compensation structure does not encourage or reward excessive risk-taking > Executive variable pay can be clawed back or forfeited > A significant portion of executive variable pay is deferred
| ||
| Strong link between pay and performance
Executive pay is tied to bank, operating group and individual performance and our total shareholder return (TSR) compared to our peers, and is aligned to the bank’s strategy and four core compensation principles
|
u
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> Attract and retain executive talent > Link compensation to bank performance > Encourage a long-term view to increase shareholder value > Align with prudent risk-taking | ||
| Bank of Montreal Management Proxy Circular 2021 | 39 |
Message from the Chair of the Human Resources Committee
| Client loyalty |
• We helped our customers navigate the pandemic, providing a safe retail banking environment, financial advice and support, payment deferral strategies, expedited commercial loan approvals, and access to government relief programs in Canada and the U.S., all while effectively managing risk. • We achieved record customer loyalty across BMO’s businesses and received the highest ranking among Canada’s largest banks in the J.D. Power 2020 Canada Retail Banking Advice Satisfaction Study, with top marks for frequency, relevance, clarity and quality of advice, as well as concern for customer needs. | |
| Winning culture |
• We implemented effective protocols for the safety and well-being of our employees and met or exceeded four of five goals in our 2020 diversity strategy, which included representation of women, minorities, People of Colour and people with disabilities. Knowing that more is required, we also launched an ambitious Zero Barriers to Inclusion program to be achieved by 2025, building on our strong history of leadership in diversity and inclusion. • We were ranked first among all banks and #15 of 5,500 global enterprises in the 2020 Wall Street Journal survey of the 100 Most Sustainably Managed Companies in the World, and were the only Canadian bank to be named to the 2020 World’s Most Ethical Companies list by the Ethisphere® Institute. | |
| 40 | Bank of Montreal Management Proxy Circular 2021 |
| Digital first |
• We invested in tools to improve digital banking, including making the largest improvement in mobile functionality of any of the Canadian banks (Forrester Research). We delivered government programs virtually, accelerated the launch of several key features, and completed the launch of BMO QuickPay, which made us the only Canadian financial institution to allow customers to pay bills without logging into online or mobile banking. • We increased our use of AI to support the bank in the new remote environment, and won a 2020 Artificial Intelligence Excellence Award from Business Intelligence Group for our use of AI to help customers spot and manage potential cash flow concerns. | |
| Simplify work |
• We advanced BMO’s data and analytics platform to build out analytics and robotics capabilities, supporting business initiatives and enabling further gains in efficiency. • We won two international Business Transformation and Operational Excellence Industry Awards for the seamless digitization of critical services like Treasury and Payment Solutions, and the transformation of legacy systems that streamlined processes, reduced costs, improved operational risk management and created a better user and customer experience. | |
| Manage risk |
• We accelerated our investment in tools that allowed our employees to work safely and efficiently from home, and managed the associated operational and cybersecurity risks. • We appropriately provisioned for credit losses, and retained the confidence of investors, analysts, rating agencies and regulators in our risk profile. | |
Financial performance
BMO’s financial results this year are a reflection of the resilience and diversification of the business and our ability to quickly adapt to the evolving environment. Results can fall within a range of variable pay outcomes both above and below the goals set at the beginning of the year and have a direct impact on what our executives earn. This year, results that were not impacted by provisions for credit losses (PCLs) (revenue, net of CCPB and efficiency ratio, net of CCPB) were at or above goal amounts. PCLs were elevated this year primarily due to impacts related to the pandemic, and results such as return on equity and earnings per share growth, which are impacted greatly by PCLs, were below the goal amounts. You can read more about these measures and our results on page 61.
| Adjusted(1) | ||||||||||||
| Reported(1) | vs 2019 adjusted | vs goal for compensation purposes | ||||||||||
| Revenue, net of CCPB(2) | $23,478 | $23,478 | up 3% | above | ||||||||
| Return on equity(3) | 10.1% | 10.3% | down 340 basis points | below | ||||||||
| Earnings per share | $7.55 | $7.71 | down 18% | below | ||||||||
| Efficiency ratio, net of CCPB | 60.4% | 59.8% | up 160 basis points | above | ||||||||
*All returns represent total returns.
| Bank of Montreal Management Proxy Circular 2021 | 41 |
Executive compensation
| 2018
Separate short, mid and long-term incentive pools with different financial and customer performance measures drove funding up or down.
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| q |
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| 2019
A simplified design drew clearer lines of sight to performance by creating a single variable pay pool with one set of financial and customer performance measures tied to strategic priorities. Added three-year relative TSR as a modifier for all variable pay funding to better account for performance against our peers.
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| q |
||||||||||||||
| 2020
Continued to evolve our variable pay design to strengthen leadership’s focus on accelerating BMO’s strategy and culture by: • reweighting financial goals from 90% to 75% for the CEO and corporate executives. Financial goals continue to be assessed against challenging goals that can be accomplished within the bank’s risk appetite and compliance and ethics requirements. • linking 25% of variable pay funding to the achievement of annual objectives that are tied directly to the bank’s strategic priorities and some of the key priority topics in our sustainability scorecard. This includes our commitment to customer loyalty, which was weighted at 10% in our previous design.
| ||||||||||||||
| Financial goals (75%)
Build financial strength and shareholder value
Revenue growth, net of CCPB – 15% Return on equity – 20% EPS growth – 20% Efficiency ratio – 20% |
Strategic objectives (25%) new
Reinforce operational sustainability and culture
> World-class client loyalty and growth > Winning culture driven by alignment, empowerment and recognition > Digital first for speed, efficiency and scale > Simplify work and eliminate complexity > Superior management of risk and capital performance
| |||||||||||||
| 2020 compensation results
Executive compensation for 2020 was directly tied to BMO’s performance against the financial goals and strategic objectives set for the year. Financial goals were not adjusted during the year, but strategic objectives were revised to include monitoring and assessment of management’s response to COVID-19.
The graphic on the following page illustrates the impact our 2020 performance had on variable pay, based on total bank financial goals (75%) and strategic objectives (25%). For operating groups, financial goals are weighted equally between total bank results and operating group results. This is discussed in the executive profiles starting on page 64. |
2020 named executives (NEOs)
• Darryl White, Chief Executive Officer • Thomas E. Flynn, Chief Financial Officer • Dan Barclay, Chief Executive Officer & Group Head, BMO Capital Markets • Cameron Fowler, Chief Strategy & Operations Officer • David R. Casper, U.S. Chief Executive Officer, BMO Financial Group, Chair and Chief Executive Officer, BMO Harris Bank N.A. and Group Head, North American Commercial Banking | |||||||||||||
| 42 | Bank of Montreal Management Proxy Circular 2021 |
| [ | Financial goals
BMO’s absolute performance against measures tied to the bank’s annual performance goals was below target
70% (out of 75%)
|
+ | Strategic objectives
BMO outperformed the annual objectives tied directly to our strategic priorities
29% (out of 25%)
|
] x | Relative TSR modifier
BMO’s three-year TSR ranked fifth against our Canadian bank peers
-10%
|
= |
Calculated multiplier
89%
|
+/- |
Discretion
-2%
|
= |
Adjustment to 2020 variable pay funding
87%
| |||||||||||
| Bank of Montreal Management Proxy Circular 2021 | 43 |
| 44 | Bank of Montreal Management Proxy Circular 2021 |
Compensation Governance and Oversight
Qualified directors
| Number of committee member with specific experience or expertise | ||
| Human resources experience Experience with compensation, pension and benefit programs (in particular, executive compensation programs) |
5 of 5 | |
| Risk management experience Knowledge of and experience with internal risk controls, risk assessments and reporting |
5 of 5 | |
| Accounting and finance experience Knowledge of and experience with financial accounting and reporting, corporate finance and familiarity with internal financial/accounting controls, Canada or U.S. GAAP and/or IFRS |
5 of 5 | |
| Executive leadership experience Experience as a senior executive/officer of a publicly listed company or major organization |
5 of 5 |
Supporting a culture of prudent risk-taking
| Bank of Montreal Management Proxy Circular 2021 | 45 |
Effective oversight
| Board |
Approves the bank’s strategic plans, including key initiatives, opportunities, risk, competitive position, financial projections and other key performance indicators for each operating group. Gives the final approval on compensation decisions for the CEO.
| |||||
| p | ||||||
| Independent compensation advisor Provides an annual independent view of global trends, best practices, BMO’s executive compensation program and compensation decisions. |
u | Human Resources Committee |
Governs and oversees the bank’s material compensation plans on behalf of the board, assessing the alignment of pay with performance, and whether the plans operate within the bank’s risk appetite, support the bank in achieving its goals and align with the interests of shareholders.
| |||
| p | ||||||
| Independent third party Conducts a review of BMO’s material compensation plans to ensure the compensation policies and decision-making processes are sound.
|
u | Management oversight committees |
Control function leaders are actively involved in reviewing compensation design and the annual compensation decision-making process, including assessing risk and other control function inputs. There are committees at the enterprise level and in the U.S.
|
| 46 | Bank of Montreal Management Proxy Circular 2021 |
Independent advice
Sound policies and practices
| Bank of Montreal Management Proxy Circular 2021 | 47 |
BMO’s Approach to Executive Compensation
The board believes that BMO’s success depends on the performance of its people. Executive compensation — an important tool the committee uses to reinforce our Purpose, drive the success of our people and ensure our long-term success — is a well-governed, disciplined process.
Executive compensation at BMO is based on four core principles
| Attract and retain executive talent (see page 50) |
Link compensation to bank performance (see page 53) |
Encourage a long- term view to increase shareholder value (see page 56)
|
Align with prudent risk-taking (see page 57) | |||||||||||||||
| Compensation helps attract and retain talented people and motivates them to excel and achieve objectives | Executive compensation design and implementation must align with BMO’s strategic priorities and Purpose, and link to both bank and operating group performance | A significant portion of variable pay for each executive is equity-based
There are share ownership requirements for each executive |
Compensation structure does not encourage excessive risk-taking and rewards appropriate use of capital
Each executive’s variable pay can be clawed back or forfeited and a significant portion is deferred
| |||||||||||||||
| 48 | Bank of Montreal Management Proxy Circular 2021 |
Annual decision-making process
Each year, the committee uses a formal six-step process to ensure that the governance of its compensation policies and decision-making processes are sound.
| At the beginning of the year | 1. Review corporate strategy The board reviews and approves the bank’s strategic plans, including key initiatives, opportunities, risk appetite, competitive position, financial projections and other key performance indicators for each operating group. The board works with management to develop a deeper understanding of the year’s priorities and how they relate to the overall strategic plan, and discusses with management the alignment of the priorities.
| |
| 2. Set performance goals for the variable pay plans to align with strategy The CEO and management recommend the business performance measures, performance goals for each, and weightings for each operating group. These support the bank’s overall priorities and commitment to pursuing growth sustainably and responsibly, are aligned with the bank’s risk appetite and drive variable pay funding. Performance goals are reviewed by the management oversight committees and control functions before they are recommended to the committee for approval.
| ||
| 3. Review variable pay plan changes and set target variable pay levels for executives The committee reviews changes to variable pay plan designs and approves the target variable pay for senior executives. It also approves individual performance goals for the CEO, and recommends the CEO’s target variable pay to the board.
| ||
| At the end of the year | 4. Review and approve business performance factors used to adjust variable pay Finance determines the business results and calculates the business performance factor and TSR modifier used to determine variable pay, as well as the performance factor adjusting the payout of PSUs when they vest.
Management and the management oversight committees work together to: • Consider risk implications when assessing the business performance factor and TSR modifier used to calculate variable pay • Recommend adjustments or holdbacks to reflect risk, compliance, conduct or other factors when necessary, including behaviour aligned with our commitment to our community, our employees, our customers, the environment and other stakeholders • Perform an annual review of business events that have exceeded pre-defined risk and compliance thresholds at both the U.S. and enterprise levels, and may recommend modifications to variable pay funding or individual variable pay awards to the committee.
Management and the management oversight committees review and recommend to the CEO variable pay funding for executives. The CEO then presents his recommendations to the committee for approval.
The committee also has the discretion to modify calculated variable pay funding, awards or payouts based on its review and on the management oversight committees’ assessment of other financial and non-financial considerations not explicitly included in the business performance factor (see page 55).
| |
| 5. Assess individual performance and award variable pay to senior executives The committee: • Determines the business performance factor and reviews the calculated result at the end of the year • Reviews secondary considerations at the bank and operating group levels, including any reportable control deficiencies in risk, compliance, conduct or audit, to determine if discretion should be applied to variable pay funding or to the variable pay awards calculated for executives • Assesses individual performance against the personal objectives set for the CEO and senior executives at the beginning of the year • Recommends the CEO’s final variable pay award to the board • Approves variable pay awards for senior executives, control function leaders and other top earners across the bank.
| ||
| Throughout the year | 6. Ongoing risk review (see page 57) Various activities help make sure risk considerations are included in the compensation decision-making process and support the work of the committee:
• The Risk Review Committee: • Regularly assesses the bank’s credit, market, operational, liquidity and funding risk positions against the risk appetite statement and approved exposure limits • Receives quarterly presentations about the bank’s risk management processes.
• Three of the members of the Risk Review Committee are members of the Human Resources Committee, and they leverage that participation to help inform compensation decisions.
• The management oversight committees review material risk events at the regional, enterprise and operating group level and by line of business. Material risk events, such as financial losses and violations of law or standards of conduct or risk management controls, can affect variable pay awards or payouts. These reviews consider the effects on variable pay funding or individual variable pay awards and whether additional adjustments are required.
| |
| Bank of Montreal Management Proxy Circular 2021 | 49 |
PRINCIPLE: Attract and retain executive talent
Compensation helps attract and retain talented people and motivates them to excel and achieve objectives
BMO’s executive compensation program is designed to be competitive with the market to attract and retain the top talent needed to execute the bank’s strategy. The program includes a combination of total direct compensation and benefits.
| TOTAL DIRECT COMPENSATION | BENEFITS | |||||||
| FIXED PAY | VARIABLE PAY | BMO also offers to eligible employees market competitive benefits and retirement savings, Employee Share Ownership Programs (Canada) or Employee Share Purchase Plans (U.S.) and, for executives, an annual taxable cash allowance to support their business development activities as ambassadors of the bank.
| ||||||
| Salary |
Short-term incentive | Mid-term incentive |
Long-term incentive | |||||
| The base level of pay given for carrying out day-
|
All variable pay awards are adjusted up or down based on the achievement of financial goals and strategic objectives tied to our strategy.
The amount allocated to short, mid and long-term incentives for each executive is set as a fixed percentage of total variable pay based on job level. For more information about the mix for the CEO and other senior executives, please see page 56. The committee does not consider the mid and long-term incentives the executive currently holds when determining new awards.
The table below describes each element of BMO’s variable pay program.
| |||||||
Variable pay: Short, mid and long-term incentives
Short-term incentive
Performance-based incentive that motivates performance against annual goals that are tied to BMO’s strategy.
| Who participates |
• All executives | |
| Type of award |
• Cash bonus, paid after fiscal year-end results are finalized, usually in December. Target awards are adjusted up or down based on bank and operating group performance for the fiscal year (see page 54). | |
| Payout |
• Can be forfeited or clawed back (see page 59 for details). • Before the start of the fiscal year, participants can elect to defer their bonus into deferred share units (see page 51). This choice is irreversible.
| |
| 50 | Bank of Montreal Management Proxy Circular 2021 |
Mid-term incentive
Performance-based incentives that are deferred, equity-based and designed to motivate the creation of sustainable shareholder value over a 3-year term.
| Performance share units (PSUs) |
Restricted share units (RSUs) | |||
| Who participates |
• Senior executives |
• Bank executives below the senior executive level | ||
| Type of award |
• Phantom share units directly linked to the price of BMO common shares. • Target awards are adjusted up or down based on bank and operating group performance in the fiscal year they are awarded (see page 54). |
• Phantom share units directly linked to the price of BMO common shares. • Target awards are adjusted up or down based on bank and operating group performance in the fiscal year they are awarded (see page 54). | ||
| Vesting and payout |
• Vesting is at the end of a 3-year term. Units earn dividend equivalents that are reinvested as additional units. • The final payout depends on our performance: it is adjusted up or down (+/-20%) based on the bank’s average adjusted return on equity (ROE)(1) over the 3-year term (see page 54). • The payout is calculated by multiplying the units that vest by a 20-day volume weighted average closing share price of BMO shares on the TSX at vesting. • All units can be forfeited or clawed back (see page 59 for details).
|
• Vesting is at the end of a 3-year term. Units earn dividend equivalents that are reinvested as additional units. • The payout is calculated by multiplying the units that vest by a 20-day volume weighted average closing share price of BMO shares on the TSX at vesting. • All units can be forfeited or clawed back (see page 59 for details). | ||
| (1) | Adjusted ROE is calculated as adjusted net income, less non-controlling interest in subsidiaries and preferred dividends, as a percentage of average common shareholders’ equity. Adjusted results and measures exclude the impact of certain items and are non-GAAP, as discussed on page 41 of this circular and page 17 of BMO’s 2020 Annual Report. Adjusted results for compensation purposes also exclude provision for credit losses on performing loans, consistent with our prior practice, before the adoption of IFRS 9 in fiscal 2018, of excluding credit losses on the collective allowance. See page 41 for reported results for the most recent year. |
Long-term incentive
Performance-based incentives that are deferred, equity-based and designed to motivate the creation of sustainable shareholder value over a 10-year term or longer.
| Stock options |
Deferred share units (DSUs) | |||
| Who participates |
• Senior Vice-Presidents and above |
• All bank executives | ||
| Type of award |
• Options give executives the right to buy BMO common shares at some future date, at a set price (the exercise price). • Target awards are adjusted up or down based on bank and operating group performance in the fiscal year they are awarded (see page 54).
|
• Executives may voluntarily elect to defer all or a portion of their short-term incentive into phantom share units directly linked to the price of BMO common shares. • Units earn dividend equivalents that are credited as additional units. | ||
| Vesting and payout |
• Options vest in equal tranches of 50% on the third and fourth anniversaries of the award, and expire at the end of 10 years. • The payout of an option is based on the difference between its exercise price and the market price of BMO shares on the day the option is exercised. • All options can be forfeited or clawed back (see page 59 for details).
|
• Units vest immediately, but pay out only after the executive’s employment with BMO ends. • The payout is calculated by multiplying the number of units awarded, plus any dividend equivalents earned, by the market price of BMO shares on the TSX at redemption. • All units can be forfeited or clawed back (see page 59 for details). | ||
| Bank of Montreal Management Proxy Circular 2021 | 51 |
Competitive with our peers
| 52 | Bank of Montreal Management Proxy Circular 2021 |
PRINCIPLE: Link compensation to bank performance
Executive compensation design and implementation must align with BMO’s strategic priorities and Purpose, and link to both bank and operating group performance
|
Financial goals (75%)
To build financial strength and shareholder value
We assess bank and operating group performance against challenging financial goals that can be accomplished within the bank’s risk appetite and compliance and ethics requirements.
|
+ |
Strategic objectives (25%)
To reinforce operational sustainability and culture
We assess total bank performance against annual objectives tied directly to the bank’s strategic priorities and some of the key priority topics in our sustainability scorecard. | ||||||||||
| Our 2020 performance measures(1) |
Why we use it | Our 2020 strategic priorities |
Priority topics in our sustainability scorecard(2) | |||||||||
| Revenue growth |
> Key measure of growth |
World-class client loyalty and growth |
> Customer experience | |||||||||
| Return on equity |
> Key measure of overall profitability |
Winning culture, driven by alignment, empowerment and recognition |
> Financial inclusion > Diversity and inclusion > Employee experience | |||||||||
| Earnings per share growth |
> Key measure for analyzing earnings growth |
|||||||||||
| Efficiency ratio |
> Key measure of how well we are managing expenses |
Digital first, for speed, efficiency and scale |
> Data security | |||||||||
| Total shareholder return |
> Key measure of shareholder value |
Simplify work and eliminate complexity |
||||||||||
| Superior management of risk and capital performance |
||||||||||||
|
(1) Measures are non-GAAP as discussed on page 41 of this circular and on page 17 of our 2020 Annual Report. (2) Our sustainability scorecard is on page 14 of our 2020 Sustainability Report. |
||||||||||||
Individual performance
| Bank of Montreal Management Proxy Circular 2021 | 53 |
How variable pay funding is calculated
| [ |
Target variable pay funding
The sum of all executive short, mid and long-term incentive targets |
x [ | Financial goals (75%)
Absolute performance against challenging financial goals tied to the bank’s annual performance goals
|
+ | Strategic objectives (25%) – new
Performance against annual objectives that are tied directly to our strategic priorities |
] x | Relative TSR modifier (+/-20%)
Relative performance against our Canadian bank peers |
= | Performance- adjusted variable pay funding | |||||||||
| Financial measures – total bank (adjusted) (a)(b) • Revenue growth – 15% • Return on equity(c) – 20% • EPS growth(d) – 20% • Efficiency ratio – 20%
CEO and corporate executives: 75% of variable pay funding
Operating group executives: 50% of variable pay funding
|
Strategic priorities > World-class client loyalty and growth > Winning culture driven by alignment, empowerment and recognition > Digital first for speed, efficiency and scale > Simplify work and eliminate complexity > Superior management of risk and capital performance |
Canadian bank peers • The Bank of Nova Scotia • The Canadian Imperial Bank of Commerce • National Bank of Canada • Royal Bank of Canada • The Toronto-Dominion Bank
How we calculate three-year TSR We use the average share price for the 90 days ending October 31 (rather than the closing share price on October 31), because we believe this is a better reflection of sustained performance. |
||||||||||||||||
|
New in 2020
To focus leadership on accelerating BMO’s strategy and culture, in fiscal 2020 we began assessing performance against:
Financial goals (75%) – to build financial strength and shareholder value • reweighted financial goals from 90% to 75% for the CEO and corporate executives. Financial goals continue to be assessed against challenging goals that can be accomplished within the bank’s risk appetite and compliance and ethics requirements.
Strategic objectives (25%) – to reinforce operational sustainability and culture • linked 25% of variable pay funding to the achievement of annual objectives that are tied directly to the bank’s strategic priorities and the priority topics in our sustainability scorecard. This includes our commitment to customer loyalty, which was weighted at 10% in our previous design.
|
| (a) | Adjusted measures are non-GAAP as discussed on page 41 of this circular and page 17 of our 2020 Annual Report. |
| (b) | BMO Capital Markets operating group measures are the same as the total bank measures, except for EPS growth. |
| (c) | Return on equity is only used as an operating group measure for BMO Capital Markets executives. |
| (d) | For operating group executives, net income growth is used in place of EPS growth. It is weighted 25% except for BMO Capital Markets, where it is weighted 20%. |
| 54 | Bank of Montreal Management Proxy Circular 2021 |
|
How the committee uses discretion
As part of the bank’s annual governance process, the committee can use its discretion in three ways:
1. Variable pay funding: to modify calculated variable pay funding up or down based on its assessment and information received from the management oversight committees.
2. Individual awards: to modify variable pay awards up or down for individual executives.
3. Payouts of the mid and long-term incentives: to reduce the payout of mid and long-term incentives that are vesting, including PSUs, down to 0%.
The management oversight committees provide information about four key factors to the Human Resources Committee for consideration when assessing performance and determining whether to exercise its discretion to adjust downward:
Performance – Poor financial performance, either absolute or relative, that is significant, sustained or not aligned with the overall risk appetite of the bank
Risk – Material failures are identified in the risk management controls of the bank, or inappropriate risk-taking has been found to occur
Compliance – Non-compliance with statutory, regulatory or supervisory standards that results in enforcement actions, litigation or financial restatement
Conduct – Misconduct, fraud or intentional misrepresentation of information used to determine compensation awards
See page 49 for more information about the Human Resources Committee’s compensation decision-making process.
| |||
| (1) Adjusted measures are non-GAAP as discussed on page 41 of this circular, and page 17 of BMO’s 2020 Annual Report. |
| Bank of Montreal Management Proxy Circular 2021 | 55 |
PRINCIPLE: Encourage a long-term view to increase shareholder value
A significant portion of variable pay for each executive is equity-based
There are share ownership requirements for each executive
A significant portion of variable pay is allocated to mid and long-term incentives, which are equity-based and deferred (see page 51). This approach, combined with executive share ownership requirements, focuses the executive team on executing business strategies, sustaining performance and growing shareholder value over the longer term.
This also encourages prudent risk-taking and retention, because future payouts may be affected by an executive’s current decisions.
Executives are required to have an equity stake
| 56 | Bank of Montreal Management Proxy Circular 2021 |
PRINCIPLE: Align with prudent risk-taking
Compensation structure does not encourage excessive risk-taking and rewards appropriate use of capital
Each executive’s variable pay can be clawed back or forfeited and a significant portion is deferred
Managing compensation risk
The board’s Human Resources Committee sets the compensation philosophy and strategy of the bank, and makes sure the executive compensation program aligns with the bank’s risk appetite statement and supports the bank’s requirements on compliance and ethics.
The committee manages current and future compensation risk in four ways:
|
Managing compensation risk
| ||||||
| 1 Design of variable pay plans |
2 Setting of variable pay funding goals and tracking performance against these goals at the enterprise and operating group levels |
3 Determination of individual variable pay awards |
4 Design and use of BMO’s clawback and forfeiture policies | |||
| Bank of Montreal Management Proxy Circular 2021 | 57 |
| 58 | Bank of Montreal Management Proxy Circular 2021 |
| Who it applies to |
How it works | |||
|
Clawback
| ||||
| Cash |
Executives and BMO Capital Markets employees at the Managing Director level and above and all Material Risk Employees |
All or part of the variable pay awarded or that has vested and paid out in the past three years can be clawed back when: • The bank restates its financial statements • Employee misconduct or inappropriate risk-taking result in or could result in significant financial or reputational harm to the bank, or • If required by law. | ||
|
Forfeiture | ||||
| Equity |
All mid and long-term incentive plan participants |
All unvested PSUs, RSUs, DSUs and vested and unvested stock options are subject to forfeiture when: • The bank uncovers inappropriate risk-taking by a participant • A participant resigns or is terminated for cause • It is discovered that a participant who no longer works for the bank committed an act while employed with the bank that would have been cause for termination • A participant whose employment has been terminated solicits bank employees, or • A participant who has retired solicits employees or customers of the bank. | ||
| Other policies and mechanisms | ||||
| Anti-hedging |
All mid and long-term incentive plan participants |
To maintain alignment between pay for performance, participants are prohibited from using any kind of personal hedging (for example, prepaid variable contracts, equity swaps, collars or units of exchange funds) to undermine or reduce the risk and shareholder alignment embedded in their mid-term and long-term incentives or other BMO shares or securities they hold. | ||
| Individual performance considerations |
All employees |
Managers consider BMO’s Code of Conduct, our BMO values and applicable expectations on risk, audit and compliance accountabilities when conducting individual performance assessments and making variable pay decisions. | ||
| Limits on guarantees |
All employees |
Variable pay for new employees can only be guaranteed for up to 12 months, which the committee considers to be a sufficient amount of time to transition into the bank. | ||
| Change of control(1) |
All mid and long-term incentive plan participants |
To mitigate compensation risk, the stock option plan calls for a double trigger for accelerated vesting of stock options. Stock options will vest immediately if the bank undergoes a change of control and the participant is terminated without cause within 24 months of a change of control.
Unvested RSUs and PSUs continue to vest if there is a change of control or if the participant is terminated without cause. | ||
| (1) | Change of control occurs in the following circumstances: (i) 50% or more of the outstanding voting securities are acquired, (ii) all or substantially all of the bank’s assets are sold, assigned or transferred other than to a subsidiary, (iii) an acquisition of the bank via merger, amalgamation, consolidation or otherwise or dissolution of the bank, or (iv) a change in a majority of our board members occurs. |
| Bank of Montreal Management Proxy Circular 2021 | 59 |
2020 Financial results – building financial strength and shareholder value
The bank’s philosophy is to set challenging financial goals that continue to move BMO forward in delivering growth. We believe setting a high bar motivates us to deliver strong performance and is consistent with our ambition to achieve first quartile performance relative to our Canadian peers.
| Financial measure
|
How we calculate it
|
2020 Performance
| ||
| Revenue growth (15%) |
Revenue net of insurance claims, commissions and changes in policy benefit liabilities (CCPB). |
Reported net revenue increased 3.1%.
Adjusted net revenue(1) increased 3.0%, driven by strong performance in BMO Capital Markets, primarily due to increased trading revenue, and increases in the P&C businesses and BMO Wealth Management, partially offset by a decrease in Corporate Services revenue.
Adjusted net revenue growth of 3.0% exceeded our goal of 2.9% due to better than expected growth in BMO Capital Markets and U.S. P&C, largely offset by lower than expected growth in BMO Wealth Management and Canadian P&C and lower than expected Corporate Services revenue. | ||
| Return on equity (20%) |
Net income, less non-controlling interest in subsidiaries and preferred dividends, as a percentage of average common shareholders’ equity, which consists of common share capital, contributed surplus, accumulated other comprehensive income (loss) and retained earnings.
Adjusted ROE for compensation purposes(1) is calculated using adjusted net income and also excludes the provision for credit losses on performing loans. |
Reported ROE was 10.1%, compared to 12.6% in 2019.
Adjusted ROE(1) was 10.3%, compared to 13.7% in 2019.
Adjusted ROE for compensation purposes(1) was 12.4%. This was below our goal of 13.6% due to higher than expected provisions for credit losses on impaired loans and higher common shareholders’ equity due to higher accumulated other comprehensive income. | ||
| Earnings per share (EPS) growth (20%) |
Net income attributable to bank shareholders, less preferred share dividends and distributions on other equity instruments, divided by the average number of common shares outstanding.
Adjusted EPS for compensation purposes(1) is calculated using adjusted net income and also excludes the provision for credit losses on performing loans. |
Reported EPS decreased 12.8% to $7.55 in 2020.
Adjusted EPS decreased 18.2% to $7.71 in 2020.
Adjusted EPS for compensation purposes(1) decreased 2.3% primarily due to lower net income, mainly reflecting higher provisions for credit losses on impaired loans partially offset by higher revenue for the reasons noted above, and higher preferred dividends and distributions on other equity instruments.
Adjusted EPS for compensation purposes(1) was below our goal of 4.2% growth, primarily due to higher than expected provisions for credit losses on impaired loans. | ||
| Efficiency ratio (20%) |
Non-interest expense divided by total revenue, net of CCPB, expressed as a percentage. |
The reported efficiency ratio was 60.4%, compared to 64.2% in 2019.
The adjusted(1) efficiency ratio improved 160 basis points to 59.8% in 2020 and met our goal for the year. | ||
| (1) | Reflects adjusted performance. For ROE and EPS, performance also excludes the provision for credit losses on performing loans, consistent with our prior practice, before the adoption of IFRS 9 in fiscal 2018, of excluding credit losses on the collective allowance. See page 41 for reported results. |
| Bank of Montreal Management Proxy Circular 2021 | 61 |
2020 Strategic results – reinforcing operational sustainability and culture
We measure progress on our strategy by assessing our performance against annual objectives tied directly to our strategic priorities. In 2020, the bank exceeded its strategic objectives with highlights as follows:
| Client loyalty |
Achieve net promoter scores set for each business and continue to be recognized as an industry leader on customer loyalty • We helped our customers navigate the pandemic, providing a safe retail banking environment, financial advice and support, payment deferral strategies, expedited commercial loan approvals, and access to government relief programs in Canada and the U.S., all while effectively managing risk. • We achieved record customer loyalty across the businesses and received the highest ranking among Canada’s largest banks in the J.D. Power 2020 Canada Retail Banking Advice Satisfaction Study, with top marks for frequency, relevance, clarity and quality of advice, as well as concern for customer needs. | |
| Winning culture |
Strengthen our inclusive work environment, advance our Purpose, engage our workforce and execute on succession • We implemented safeguards and programs for our employees safety and well-being. • We met or exceeded four of five goals in our 2020 diversity strategy, which included representation of women, minorities, People of Colour and people with disabilities. Knowing that more is required, we also launched an ambitious Zero Barriers to Inclusion program to be achieved by 2025, building on our strong history of leadership in diversity and inclusion. • We were ranked first among all banks and #15 of 5,500 global enterprises in the 2020 Wall Street Journal survey of the 100 Most Sustainably Managed Companies in the World, and were the only Canadian bank to be named to the 2020 World’s Most Ethical Companies list by the Ethisphere® Institute. • Delivered on succession plans for critical roles, including the Chief Financial Officer, General Counsel, and Group Head, North American Personal and Business Banking. | |
| Digital first |
Achieve top tier digital adoption, protect our customers and deliver meaningful client value through digital solutions • We invested in tools to improve digital banking, including making the largest improvement in mobile functionality of any of the Canadian banks (Forrester Research). We delivered government programs, accelerated the launch of several key features, completed the launch of BMO QuickPay, and were the only Canadian financial institution to provide automated bill payment without logging into online or mobile banking. • We also increased our use of AI to support the bank in the new remote environment and won a 2020 Artificial Intelligence Excellence Award from Business Intelligence Group for our use of AI to help customers spot and manage potential cash flow concerns. | |
| Simplify work |
Simplify, speed up and improve productivity • We advanced BMO’s data and analytics platform to build out analytics and robotics capabilities, supporting business initiatives and enabling further gains in efficiency. • We won two international Business Transformation and Operational Excellence Industry Awards for the seamless digitization of critical services like Treasury and Payment Solutions, and the transformation of legacy systems that streamlined processes, reduced costs, improved operational risk management and created a better user and customer experience. | |
| Manage risk |
Effectively manage resiliency of BMO during COVID-19 pandemic, ensuring the safety of our employees and customers • We accelerated our investment in tools that allowed our non-customer facing employees to work safely and efficiently from anywhere and managed the associated operational risk by accelerating testing of team software to ensure security against cybersecurity and other risks. • We appropriately provisioned for credit losses, and retained the confidence of investors, analysts, rating agencies and regulators in our risk profile. | |
| 62 | Bank of Montreal Management Proxy Circular 2021 |
Generating shareholder value
Shareholder returns
| (1) | Cumulative value of $100 invested on October 31, 2015, reflecting the change in share price plus reinvested dividends. |
| (2) | Includes base salary, annual short-term incentive payment, value of mid-term incentive awards at the time of grant, fair market value of the long-term incentive awards at the time of grant, other compensation and the annual pension service and compensation cost for the NEOs in each year. |
| (3) | NEOs from 2015 to 2017 were William A. Downe, Thomas E. Flynn and the three most highly compensated executive officers other than the CEO and CFO. In 2019 and 2020, the NEOs were Darryl White, Thomas E. Flynn and the three most highly compensated executive officers other than the CEO and CFO. |
Cost of management ratio
| Bank of Montreal Management Proxy Circular 2021 | 63 |
2020 Compensation for the Named Executive Officers
|
Darryl White, Chief Executive Officer
Darryl was appointed Chief Executive Officer of BMO in 2017. He chairs the bank’s Executive Committee and serves as a director of BMO Financial Group, as well as its U.S. subsidiary, BMO Financial Corp. Through the Board of Directors, he is accountable to shareholders for defining, communicating and implementing the strategic and operational goals and is responsible for enterprise-wide performance, financial results, including profit and loss, balance sheet and shareholder value metrics, and defining and maintaining a culture of corporate responsibility.
|
A long-standing community builder with strong ties to the United Way Centraide movement, Darryl has volunteered for these organizations in Montréal, New York, Chicago and Toronto. In 2018, Darryl became Co-Chair of the Inclusive Local Economic Opportunity Roundtable, a partnership between BMO and United Way Greater Toronto that brings together business and community leaders to develop approaches to reduce economic disparity in the region. An advocate for BMO’s efforts to ensure a diverse and inclusive workplace, Darryl serves as Vice-Chair of Catalyst Canada’s Advisory Board and has volunteered with the Advisory Council of Women in Capital Markets. Darryl is a director of Unity Health Toronto, which includes St. Michael’s Hospital, St. Joseph’s Health Centre and Providence Healthcare, and serves as Campaign Cabinet Co-President for the Montréal Children’s Hospital Foundation. Darryl is also a director of the National Hockey League’s Montreal Canadiens and Alpine Canada, the governing body for alpine, para-alpine and ski cross racing in Canada.
2020 Performance
The bank had strong relative performance in an unprecedented year under Mr. White’s leadership:
| • | Prioritized support for our customers, employees and the broader community; implementing government financial relief programs for customers and initiatives to safeguard operations for employees |
| • | Achieved strong relative adjusted operating leverage for the fifth consecutive year at 2.7%, and the adjusted efficiency ratio of 59.8% was an improvement of 570 bps from 2015(1) |
| • | Executed on major initiatives fueling growth through a number of cost-saving measures and data-driven portfolio choices |
| • | Recognized as a global leader in sustainability, including the highest rated bank by the Wall Street Journal in its Most Sustainably Managed Companies in the World report, and scoring in the top 10% of banks on the Dow Jones Sustainability Indices |
| • | Produced our strongest customer loyalty results to date. Ranked #1 in the J.D. Power 2020 Canada Retail Banking Advice Satisfaction Study |
| • | Advanced the dialogue on social justice and established five-year D&I goals and action plan |
2020 Compensation
At the start of the fiscal year, Mr. White’s 2020 total compensation target was set at $10.5 million, made up of $1.0 million in base salary (no change), and a variable pay target of $9.5 million (increased $0.5 million from his 2019 target).
Mr. White was awarded $9.265 million in total direct compensation for 2020 ($1.235 million less than his target compensation). This included $1.0 million in base salary (at target) and $8.265 million in variable pay (87% of target).
The board determined his 2020 variable pay award based on his target compensation and links to performance, including total bank performance against the five key measures tied to the bank’s strategy, and our three-year TSR. The calculated multiplier for variable pay funding based on total bank performance was 89%. After a review of risk and the bank’s performance against a range of other secondary considerations, management recommended and the committee agreed to use its discretion to reduce funding by 2%, to 87% (see page 60).
The committee and the board assessed Mr. White’s performance against his individual goals for the year and did not adjust his award from the funded amount.
| 71% of Mr. White’s 2020 variable pay is deferred |
(Canadian $) |
2020 | 2019 | 2018 | ||||||||||||||
| Fixed pay |
||||||||||||||||||
| Salary |
1,000,000 | 1,000,000 | 1,000,000 | |||||||||||||||
| t | Variable pay |
8,265,000 | 8,460,000 | 7,645,000 | ||||||||||||||
| Cash |
||||||||||||||||||
| Short-term incentive |
2,392,500 | 2,350,000 | 1,980,000 | |||||||||||||||
| Equity (deferred) |
||||||||||||||||||
| Mid-term incentive – performance share units (PSUs) |
4,545,750 | 4,700,000 | 4,506,250 | |||||||||||||||
| Long-term incentives – stock options |
1,326,750 | 1,410,000 | 1,158,750 | |||||||||||||||
| Total direct compensation |
9,265,000 | 9,460,000 | 8,645,000 | |||||||||||||||
| (1) | Results and measures are presented on an adjusted or non-GAAP basis and exclude the impact of certain items as discussed on page 41 of this circular and page 17 of BMO’s 2020 Annual Report. See page 41 of this circular for reported results. |
| 64 | Bank of Montreal Management Proxy Circular 2021 |
29% of Mr. White’s variable pay was allocated to his short-term incentive (an annual cash bonus). The remaining 71% was deferred into stock options and performance share units (PSUs), which are adjusted for performance again before they are paid out. Both stock options and PSUs are adjusted for performance based on increases or decreases in BMO’s share price. PSUs are also adjusted for performance based on BMO’s three-year average adjusted return on equity (ROE) compared to plan.
Target for 2021
Mr. White’s target total compensation was not changed for 2021.
Alignment with shareholder interests
One of the governing principles of BMO’s compensation objectives is to align compensation with shareholder interests. Deferring compensation into equity-linked vehicles is one way to accomplish this, and 71% of Mr. White’s 2020 variable pay award is deferred.
The table below shows the total direct compensation of our CEO over the last five fiscal years, and its current value compared with shareholder value. Mr. White was appointed CEO on November 1, 2017.
| Total direct compensation awarded ($)(1) |
Annual total direct compensation value as of Dec 31, 2020 ($) |
Value of $100 | ||||||||||||||||||
| Year | CEO | Period | CEO ($)(2) | Shareholders ($)(3) | ||||||||||||||||
| 2016 | William Downe | 10,623,750 | 11,215,757 | Oct 31, 2015 to Dec 31, 2020 | 106 | 158 | ||||||||||||||
| 2017 | William Downe | 10,500,000 | 9,886,727 | Oct 31, 2016 to Dec 31, 2020 | 94 | 135 | ||||||||||||||
| 2018 | Darryl White | 8,645,000 | 8,669,318 | Oct 31, 2017 to Dec 31, 2020 | 100 | 112 | ||||||||||||||
| 2019 | Darryl White | 9,460,000 | 8,090,426 | Oct 31, 2018 to Dec 31, 2020 | 86 | 109 | ||||||||||||||
| 2020 | Darryl White | 9,265,000 | 8,295,406 | Oct 31, 2019 to Dec 31, 2020 | 90 | 105 | ||||||||||||||
| Average | 95 | 124 | ||||||||||||||||||
| (1) | Includes salary and variable pay awarded at year-end in respect of performance during the year. |
| (2) | The CEO’s compensation value measured on December 31, 2020 for each $100 awarded in total direct compensation during the fiscal year indicated. |
| (3) | The cumulative value of $100 invested in BMO shares on the first trading day of the period indicated, assuming reinvestment of dividends. |
Share ownership
Mr. White is required to own 8.0 times base salary. He exceeds his share ownership guidelines.
| Share ownership as at December 31, 2020 | ||||||||||||||||||||||||||||||||||||
| RSUs | PSUs | DSUs | Shares held privately |
Total share ownership |
Total as a multiple of base salary |
|||||||||||||||||||||||||||||||
| Vested | 0 | 0 | 57,266 | $5,542,265 | $2,033,251 | $ 7,575,516 | 7.58 | |||||||||||||||||||||||||||||
| Unvested | 0 | 149,697 | $14,487,744 | 0 | 0 | $14,487,744 | 14.49 | |||||||||||||||||||||||||||||
| Total | 0 | 149,697 | $14,487,744 | 57,266 | $5,542,265 | $2,033,251 | $22,063,260 | 22.06 | ||||||||||||||||||||||||||||
Pension
As part of his employment agreement as CEO with the bank, Mr. White receives an enhanced pension benefit that defines his overall pension arrangement and caps the maximum benefit payable at normal retirement at $1,250,000.
Mr. White participates in the following:
| • | The BMO Canada Pension Plan, a federally-registered defined benefit pension plan for eligible Canadian employees. |
| • | An enhanced pension benefit provided via a bank-funded, non-registered agreement defining his overall pension arrangement, and clarifying his entitlement if there is a change of control. |
Mr. White’s overall annual normal retirement pension benefit is:
| • | An annual accrual of $125,000 per year of service to a maximum annual pension benefit of $1.25 million, inclusive of any benefits payable from the BMO Canada Pension Plan or any other bank-sponsored pension or retirement savings plans. |
| • | Pension benefits under the enhanced pension benefit are payable at a normal retirement age of 60. This benefit is reduced by 4% for each year that the retirement precedes age 60 but early retirement cannot occur prior to age 50. |
The pensions under both the enhanced pension benefit and the BMO Canada Pension Plan are paid as periodic payments.
Mr. White’s total annual retirement pension benefit accrued to date is $379,858, payable at age 60. This amount will increase with additional years of credited service. See page 77 for more information.
| Bank of Montreal Management Proxy Circular 2021 | 65 |
Thomas E. Flynn,
Chief Financial Officer
Tom Flynn is Vice Chair and served as BMO Financial Group’s Chief Financial Officer from 2011 to 2020 and Chief Risk Officer from 2008 to 2011. Prior to that, Tom held other leadership positions including Executive Vice President Finance and Treasurer, and Head of the Financial Services Corporate and Investment Banking Group in BMO Capital Markets.
Tom is Chair of the board of Sunnybrook Health Sciences Centre and a director of TELUS. He was previously Chair of the board of both Holland Bloorview Kids Rehabilitation Hospital and Symcor, and was a member of the major individual giving cabinet for the United Way of Greater Toronto.
Tom obtained his MBA and Bachelor of Arts (Honours) in Business Administration from the Ivey School of Business at Western University and is a Chartered Professional Accountant, a Chartered Accountant and a Fellow of the Chartered Professional Accountants Ontario.
2020 Performance
Mr. Flynn’s leadership during COVID-19 was critical to the bank’s performance. He performed well against 2020 priorities including:
| • | Achieved strong relative performance versus peers; ranked first on adjusted expense growth and adjusted operating leverage, and third on adjusted revenue(1) |
| • | Led on several initiatives providing strong operational delivery across the bank on disciplined expense management, management of market volatility, liquidity, capital and balance sheet strength |
| • | Achieved an increase in the capital ratio despite the challenges of COVID-19 |
| • | Oversaw the successful implementation of a critical phase of a major multi-year technology project revamping the General Ledger |
2020 Compensation
Mr. Flynn was awarded $2.705 million in variable pay for 2020.
The committee determined the award based on his target compensation, total bank performance against the five key measures tied to the bank’s strategy, and our three-year TSR. The calculated multiplier for variable pay funding based on total bank performance was 89%. After a review of risk and the bank’s performance against a range of other secondary considerations, management recommended and the committee agreed to use its discretion to reduce funding by 2%, to 87% (see page 60).
The committee assessed Mr. Flynn’s performance against his individual goals for the year and did not adjust his award from the funded amount.
28% of Mr. Flynn’s variable pay was allocated to his short-term incentive (an annual cash bonus). The remaining 72% was deferred into stock options and performance share units (PSUs), which are adjusted for performance again before they are paid out.
| 72% of Mr. Flynn’s 2020 variable pay is deferred |
(Canadian $) |
2020 | 2019 | 2018 | ||||||||||||||||
| Fixed pay |
||||||||||||||||||||
| Salary |
600,000 | 600,000 | 600,000 | |||||||||||||||||
| t | Variable pay |
2,705,000 | 2,910,000 | 2,955,000 | ||||||||||||||||
| Cash |
||||||||||||||||||||
| Short-term incentive |
765,000 | 820,000 | 792,000 | |||||||||||||||||
| Equity (deferred) |
||||||||||||||||||||
| Mid-term incentive – performance share units (PSUs) |
1,545,000 | 1,670,000 | 1,725,250 | |||||||||||||||||
| Long-term incentives – stock options |
395,000 | 420,000 | 437,750 | |||||||||||||||||
| Total direct compensation |
3,305,000 | 3,510,000 | 3,555,000 | |||||||||||||||||
| (1) | Results and measures are presented on an adjusted or non-GAAP basis and exclude the impact of certain items as discussed on page 41 of this circular and page 17 of BMO’s 2020 Annual Report. See page 41 of this circular for reported results. |
| 66 | Bank of Montreal Management Proxy Circular 2021 |
Target for 2021
Mr. Flynn’s base salary was not changed for 2021, but his target total variable pay was reduced commensurate with the appointment to his new role as Vice Chair in January 2021.
Alignment with shareholder interests
One of the governing principles of BMO’s compensation objectives is to align compensation with shareholder interests. Deferring compensation into equity-linked vehicles is one way to accomplish this, and 72% of Mr. Flynn’s 2020 variable pay award is deferred.
Share ownership
Mr. Flynn exceeds his share ownership guidelines.
| Share ownership as at December 31, 2020 | ||||||||||||||||||||||||
| Required multiple | Shares | RSUs | PSUs | DSUs | Total share ownership |
Total as a multiple of base salary |
||||||||||||||||||
| 5.0 | $1,759,364 | $0 | $5,205,473 | $3,786,424 | $10,751,261 | 17.92 | ||||||||||||||||||
Pension
| • | The BMO Canada Pension Plan, a federally-registered defined benefit pension plan for eligible Canadian employees. |
| • | The Executive Supplementary Pension Plan (Supplementary Plan), a bank-funded non-registered arrangement for executives, designated managing directors and designated officers. |
Mr. Flynn’s total annual normal retirement pension benefit is:
| • | Equal to 1.25% of his average pensionable salary (subject to certain limits), multiplied by his years of credited service, less an offset for a Canada Pension Plan (CPP) entitlement, plus 1.25% of the average of his five highest consecutive short-term incentive awards, capped at 45% of his average pensionable salary (subject to certain limits) multiplied by his years of credited service plus 0.75% of his average pensionable salary multiplied by the years of contributory service, because he has chosen to enhance a portion of his pension benefit by making optional contributions. |
| • | Payable at age 65 but can be paid up to 15 years earlier on a reduced basis (a reduction of 3% per year for each year that retirement precedes age 60 for the portion of the pension based on service accrued prior to July 1, 2007, and a reduction of 4% per year for each year that retirement precedes age 65 for the portion of the pension based on service accrued after June 30, 2007), subject to legislation, regulations and plan rules. |
| • | Paid as periodic payments from both the BMO Canada Pension Plan and the Supplementary Plan. |
Mr. Flynn’s total annual retirement pension benefit to date is $272,581, payable on an unreduced basis at age 65. This amount will increase with additional years of credited service and earnings. See page 77 for more information.
| Bank of Montreal Management Proxy Circular 2021 | 67 |
Dan Barclay,
Chief Executive Officer & Group Head, BMO Capital Markets
Dan was appointed CEO & Group Head of BMO Capital Markets in November 2018. In this role, he is responsible for BMO Financial Group’s interactions with corporate, institutional and government clients worldwide. Dan serves on BMO Financial Group’s Executive Committee and chairs BMO Capital Markets’ Operating and Executive committees.
As a proud supporter of the United Way, Dan acted as past co-chair of the BMO Capital Markets Employee Giving Campaign and is a recipient of the Women in Capital Markets Champion of Change Award (2016). He also currently serves as the Chair of the Board of Directors of the Children’s Aid Foundation of Canada.
2020 Performance
Under Mr. Barclay’s leadership, BMO Capital Markets performed well despite the headwinds from COVID-19, including:
| • | Achieved strong financial results and a year-over-year adjusted revenue increase of approximately 12%, including record revenue performance in the U.S. increasing 16% year-over-year |
| • | Expanded electronic trading capabilities with the strategic acquisition of Clearpool Group Inc. |
| • | Developed and executed on succession plans for key leadership roles |
BMO Capital Markets’ performance is shown in the table below.
| Variable pay measures(1) | 2020 performance(2) | Impact on variable pay | ||||
| Net income | $1.372 million | Slightly below goal due to higher provision for credit losses on impaired loans and higher expense, partially offset by higher revenues |
Operating group (50%): 94%(4)
Total bank (50%): 87% (see page 60 for more information) | |||
| Revenue growth | 11.9% | Above goal | ||||
| Return on equity | 11.7% | Below goal due to higher common shareholders’ equity and lower net income | ||||
| Efficiency ratio(3) | 60.1% | Above goal | ||||
| (1) | Results and measures are non-GAAP as discussed on page 41 of this circular and on pages 17 and 50 of BMO’s 2020 Annual Report. Adjusted results exclude amortization of acquisition-related intangible assets ($18 million after-tax in 2020) and acquisition-related costs ($11 million after-tax in 2020). |
| (2) | For compensation purposes, an adjustment was made to BMO Capital Markets’ results for measuring compensation to exclude provisions for credit losses on performing loans. |
| (3) | Efficiency ratio is calculated as adjusted non-interest expense divided by adjusted total revenue, expressed as a percentage. |
| (4) | The final performance-adjusted funding amount includes a 6% reduction in calculated results to account for secondary considerations related to the economic environment arising from COVID-19 and its impact on our business. |
2020 Compensation
At the beginning of the fiscal year the committee reviewed Mr. Barclay’s 2020 compensation target and increased his total variable pay target to position it more competitively with the market. There was no change to his base salary.
Mr. Barclay was awarded $6.49 million in variable pay for 2020.
The committee determined the award based on his target compensation, the performance of the bank (50%) and of his operating group (50%), and our three-year TSR. The calculated multiplier for variable pay funding based on total bank performance was 89%. After a review of risk and the bank’s performance against a range of other secondary considerations, management recommended and the committee agreed to use its discretion to reduce funding by 2%, to 87% (see page 60).
The committee assessed Mr. Barclay’s performance against his individual goals for the year and did not adjust his award from the funded amount.
| 68 | Bank of Montreal Management Proxy Circular 2021 |
35% of Mr. Barclay’s variable pay was allocated to his short-term incentive (an annual cash bonus). The remaining 65% was deferred into stock options and performance share units (PSUs), which are adjusted for performance again before they are paid out.
| 65% of Mr. Barclay’s 2020 variable pay is deferred |
(Canadian $) |
2020 | 2019 | 2018 | ||||||||||||||||
| Fixed pay |
||||||||||||||||||||
| Salary |
600,000 | 600,000 | 250,000 | |||||||||||||||||
| t | Variable pay |
6,490,000 | 5,900,000 | 4,375,000 | ||||||||||||||||
| Cash |
||||||||||||||||||||
| Short-term incentive |
2,260,000 | — | (1) | 1,531,250 | ||||||||||||||||
| Equity (deferred) |
||||||||||||||||||||
| Mid-term incentive – performance share units (PSUs) |
3,380,000 | 4,725,000 | 2,593,750 | |||||||||||||||||
| Long-term incentives – stock options |
850,000 | 1,175,000 | 250,000 | |||||||||||||||||
| Total direct compensation |
7,090,000 | 6,500,000 | 4,625,000 | |||||||||||||||||
| (1) | In 2019, given the performance of the group against annual goals, Mr. Barclay offered and the committee agreed that 100% of his award would be allocated into PSUs and stock options, which are adjusted for performance again before they are paid out; 0% was allocated to cash bonus. |
Target for 2021
Mr. Barclay’s target total direct compensation was not changed for 2021.
Alignment with shareholder interests
One of the governing principles of BMO’s compensation objectives is to align compensation with shareholder interests. Deferring compensation into equity-linked vehicles is one way to accomplish this, and 65% of Mr. Barclay’s 2020 variable pay award is deferred.
Share ownership
Mr. Barclay exceeds his share ownership guidelines.
| Share ownership as at December 31, 2020 | ||||||||||||||||||||||||
| Required multiple | Shares | RSUs | PSUs | DSUs | Total share ownership |
Total as a multiple of target total direct compensation |
||||||||||||||||||
| 1.0 of target total direct compensation | $361,377 | $2,788,392 | $8,411,206 | $0 | $11,560,975 | 1.54 | ||||||||||||||||||
Pension
Mr. Barclay participates in the BMO Nesbitt Burns Employee Retirement Plan, on the same basis as other BMO Nesbitt Burns employees. As a participant, he is required to contribute 2% of his earnings to an annual maximum of $2,000 and the bank contributes 3% of his earnings to an annual maximum of $3,500. The bank will match 100% of additional voluntary contributions equal to 2% of his earnings to a maximum of $2,000 per year. See page 78 for more information.
| Bank of Montreal Management Proxy Circular 2021 | 69 |
Cameron Fowler,
Chief Strategy & Operations Officer
Cameron (Cam) Fowler is the Chief Strategy and Operations Officer. In this role, Cam is accountable for mobilizing efforts across the bank to enhance both our medium term strategic focus and our near-term performance. His mandate also includes amplifying our brand and stakeholder impact, while focusing our strategic planning and investments on key areas of future growth, including our digital agenda. Cam is a member of the BMO Financial Group Executive Committee and Chair of the bank’s Operating Committee. He also serves as BMO’s Executive Diversity Champion.
Cam is a member of the Board of Directors of BMO Financial Corp., CivicAction, the Centre for Addiction and Mental Health Foundation (CAMH). He is Co-Chair of the Major Banks Campaign for the United Way of Greater Toronto and has served as a past Chair of the Executive Council of the Canadian Bankers Association, Moneris Solutions and the Enbridge Ride to Conquer Cancer. Cam, who was named one of Canada’s Top 40 Under 40, has a BA (Honours) from Queen’s University and received his MBA from the London Business School at the University of London (UK).
2020 Performance
Mr. Fowler was President, North American Personal & Business Banking for four months before transitioning to his current role of Chief Strategy & Operations Officer. He delivered strong results against 2020 priorities including:
| • | Led the Strategic Response Operating Committee to drive an enterprise approach to the bank’s operational response to COVID-19 |
| • | Accelerated digital and digital penetration and a delivery pipeline of digital capabilities that enhance customer experience, including BMO QuickPay, BMO Insights, AI CashFlow and Google Pay |
| • | Achieved the highest customer service ratings and service levels in BMO contact centre history |
| • | Led the review and refresh of our mid-term strategic goals |
| • | Co-chaired the Leadership Committee on Inclusion & Diversity, a steering body to Zero Barriers to Inclusion 2025 |
2020 Compensation
Upon appointment to his new role, the committee reviewed Mr. Fowler’s 2020 compensation target and increased his total variable pay target to position it more competitively with the market. There was no change to his base salary.
Mr. Fowler was awarded $4.27 million in variable pay for 2020.
The committee determined the award based on his target compensation, total bank performance against the five key measures tied to the bank’s strategy, and our three-year TSR. The calculated multiplier for variable pay funding based on total bank performance was 89%. After a review of risk and the bank’s performance against a range of other secondary considerations, management recommended and the committee agreed to use its discretion to reduce funding by 2%, to 87% (see page 60).
The committee assessed Mr. Fowler’s performance against his individual goals for the year and did not adjust his award from the funded amount.
33% of Mr. Fowler’s variable pay was allocated to his short-term incentive (an annual cash bonus). The remaining 67% was deferred into stock options and performance share units (PSUs), which are adjusted for performance again before they are paid out.
| 67% of Mr. Fowler’s 2020 variable pay is deferred |
(Canadian $) |
2020 | 2019 | 2018 | ||||||||||||||||
| Fixed pay |
||||||||||||||||||||
| Salary |
600,000 | 600,000 | 600,000 | |||||||||||||||||
| t | Variable pay |
4,270,000 | 4,310,000 | 4,400,000 | ||||||||||||||||
| Cash |
||||||||||||||||||||
| Short-term incentive |
1,390,000 | 1,370,000 | 1,400,000 | |||||||||||||||||
| Equity (deferred) |
||||||||||||||||||||
| Mid-term incentive – performance share units (PSUs) |
2,310,000 | 2,350,000 | 2,400,000 | |||||||||||||||||
| Long-term incentives – stock options |
570,000 | 590,000 | 600,000 | |||||||||||||||||
| Total direct compensation |
4,870,000 | 4,910,000 | 5,000,000 | |||||||||||||||||
| 70 | Bank of Montreal Management Proxy Circular 2021 |
Target for 2021
Mr. Fowler’s target total direct compensation was not changed for 2021.
Alignment with shareholder interests
One of the governing principles of BMO’s compensation objectives is to align compensation with shareholder interests. Deferring compensation into equity-linked vehicles is one way to accomplish this, and 67% of Mr. Fowler’s 2020 variable pay award is deferred.
Share ownership
Mr. Fowler exceeds his share ownership guidelines.
| Share ownership as at December 31, 2020 | ||||||||||||||||||||||||
| Required multiple | Shares | RSUs | PSUs | DSUs | Total share ownership |
Total as a multiple of base salary |
||||||||||||||||||
| 5.0 | $1,065 | $0 | $7,441,811 | $2,101,931 | $9,544,807 | 15.9 | ||||||||||||||||||
Pension
Mr. Fowler participates in the following:
| • | The BMO Canada Pension Plan, a federally-registered defined benefit pension plan for eligible Canadian employees. |
| • | The Executive Supplementary Pension Plan (Supplementary Plan), a bank-funded non-registered arrangement for executives, designated managing directors and designated officers. |
Mr. Fowler’s total annual normal retirement pension benefit is:
| • | Equal to 1.25% of his average pensionable salary (subject to certain limits), multiplied by his years of credited service, less an offset for a Canada Pension Plan (CPP) entitlement, plus 1.25% of the average of his five highest consecutive short-term incentive awards, capped at 45% of his average pensionable salary (subject to certain limits) multiplied by his years of credited service. |
| • | Pension attributed to the BMO Canada Pension Plan and the Supplementary Plan is payable at age 65 but can be paid up to 10 years earlier on a reduced basis (a reduction of 4% per year for each year that retirement precedes age 65), subject to legislation, regulations and plan rules. |
| • | The portion paid from the BMO Canada Pension Plan and the Supplementary Plan, paid as periodic payments. |
Mr. Fowler’s total annual retirement pension benefit to date is $71,554 payable on an unreduced basis at age 65. This amount will increase with additional years of credited service and earnings. See page 77 for more information.
| Bank of Montreal Management Proxy Circular 2021 | 71 |
David R. Casper,
U.S. Chief Executive Officer, BMO Financial Group, Chair and Chief Executive Officer,
BMO Harris Bank N.A. and Group Head, North American Commercial Banking
David is responsible for the overall performance of BMO Financial Corp., BMO Harris Bank N.A. and their subsidiaries. Additionally, he has responsibility for BMO Financial Group’s North American Commercial Banking business, which includes the bank’s Treasury and Payment Solutions group. He is also responsible for ensuring effective governance across all BMO U.S. operations. David is a member of BMO Financial Group’s Executive Committee, and he chairs BMO’s U.S. Management Committee.
David began his career with BMO Financial Group working at Harris Bank in Chicago. In his most recent role, David led the commercial banking business for BMO Harris Bank as Executive Vice-President and Head of Commercial Banking. Prior to that, from 2006 to 2010, David served as Executive Managing Director and Co-Head, Investment & Corporate Banking U.S. for BMO Capital Markets. In this role, he was responsible for coordinating the investment and corporate banking activities of the U.S. industry sector and product groups.
David currently serves on the Board of Directors for the Chicago Public Library Foundation, Start Early (formerly the Ounce of Prevention Fund), the United Way of Metro Chicago, Northwestern Medical Group, Milwaukee’s Summerfest, Sentry Insurance Company, the Civic Federation and World Business Chicago. He is also the Board Chair for Kids First Chicago. He is a member of the Civic Committee of the Commercial Club of Chicago and the Trustees Committee of the Chicago Community Trust.
A Wisconsin native, David received a Masters of Management Degree from Kellogg Graduate School of Management at Northwestern University and a BA (AB) from Dartmouth College.
2020 Performance
Mr. Casper delivered strong results against 2020 priorities including:
| • | Consistent and strong financial performance, despite higher provisions for credit losses related to COVID-19 |
| • | Oversaw the consolidation of Canadian business banking operations into personal and commercial banking units |
| • | Strengthened cross-border payment capabilities improving efficiencies and customer experience |
| • | Customer loyalty scores in all segments achieved goals |
| • | Played active role in the launch of BMO EMpower, our new five-year, US$5 billion commitment aimed at addressing key barriers faced by minority businesses, communities and families in the U.S. |
U.S. P&C performance is shown in the table below.
| Variable pay measures(1) | 2020 performance (US$)(2) | Impact on variable pay | ||||
| Net income | $1.220 million | Above goal |
Operating groups (50%): 90%(4)
Total bank (50%): 87% (see page 60 for more information) | |||
| Revenue growth | 1.6% | Above goal | ||||
| Return on equity | 10.7% | Above goal | ||||
| Efficiency ratio(3) | 54.6% | Above goal | ||||
| (1) | Results and measures are non-GAAP as discussed on page 41 of this circular and on page 17 and 42 of BMO’s 2020 Annual Report. Adjusted results exclude the amortization of acquisition-related intangible assets (US$30 million after-tax in 2020). |
| (2) | For compensation purposes, an adjustment was made to U.S. P&C’s results for measuring compensation to exclude provision for credit losses on performing loans. |
| (3) | Efficiency ratio is calculated as adjusted non-interest expense divided by adjusted total revenue, expressed as a percentage. |
| (4) | Includes a 6% reduction in calculated results to account for Canadian personal and commercial banking performance as well as secondary considerations related to the economic environment arising from COVID-19 and its impact on our businesses. |
2020 Compensation
Mr. Casper was awarded $3.33 million in variable pay for 2020.
The committee determined the award based on his target compensation, the performance of the bank (50%) and of his operating group (50%), and our three-year TSR. The calculated multiplier for variable pay funding based on total bank performance was 89%. After a review of risk and the bank’s performance against a range of other secondary considerations, management recommended and the committee agreed to use its discretion to reduce funding by 2%, to 87% (see page 60).
The committee assessed Mr. Casper’s performance against his individual goals for the year and did not adjust his award from the funded amount.
| 72 | Bank of Montreal Management Proxy Circular 2021 |
27% of Mr. Casper’s variable pay was allocated to his short-term incentive (an annual cash bonus). The remaining 73% was deferred into stock options and performance share units (PSUs), which are adjusted for performance again before they are paid out.
| 73% of Mr. Casper’s 2020 variable pay is deferred |
(US $) |
2020 | 2019 | 2018 | ||||||||||||||||
| Fixed pay |
||||||||||||||||||||
| Salary(1) |
600,000 | 600,000 | 550,000 | |||||||||||||||||
| t | Variable pay |
3,330,000 | 3,670,000 | 2,950,000 | ||||||||||||||||
| Cash |
||||||||||||||||||||
| Short-term incentive |
900,000 | 990,000 | 815,000 | |||||||||||||||||
| Equity (deferred) |
||||||||||||||||||||
| Mid-term incentive – performance share units (PSUs) |
2,100,000 | 2,310,000 | 1,840,000 | |||||||||||||||||
| Long-term incentives – stock options |
330,000 | 370,000 | 295,000 | |||||||||||||||||
| Total direct compensation |
3,930,000 | 4,270,000 | 3,500,000 | |||||||||||||||||
| (1) | $600,000 effective November 1, 2018 |
Target for 2021
Mr. Casper’s target total direct compensation was not changed for 2021.
Alignment with shareholder interests
One of the governing principles of BMO’s compensation objectives is to align compensation with shareholder interests. Deferring compensation into equity-linked vehicles is one way to accomplish this, and 73% of Mr. Casper’s 2020 variable pay award is deferred.
Share ownership
Mr. Casper exceeds his share ownership guidelines.
| Share ownership as at December 31, 2020 | ||||||||||||||||||||||||
| Required multiple | Shares | RSUs | PSUs | DSUs | Total share ownership |
Total as a multiple of base salary |
||||||||||||||||||
| 5.0 | $2,396,466 | $0 | $8,657,776 | $3,043,947 | $14,098,189 | 17.5 | ||||||||||||||||||
Pension
Mr. Casper participates in the following defined contribution savings plans:
| • | the Employees’ 401(k) Savings Plan of Bank of Montreal/Harris (401(k) Savings Plan). |
| • | the BMO Financial Corp. Non-Qualified Savings Plan (Non-Qualified Savings Plan). |
The bank annually contributes 2% of his earnings (subject to annual statutory limits on earnings established by the IRS). He may elect to make voluntary contributions up to 25% of his earnings and the bank will match 100% of voluntary contributions equal to 5% of his earnings (subject to annual statutory limits on contributions and earnings established by the IRS). The BMO Financial Corp. Non-Qualified Savings Plan provides similar benefits on earnings between the statutory earnings limit and $500,000.
Mr. Casper has also accrued defined benefit pension benefits in the following plans:
| • | the Employees’ Retirement Plan of the Bank of Montreal/Harris (Harris Qualified Plan) in the final average earnings grandfathered provisions, which is a company plan frozen to future benefit service as of February 28, 2017. |
| • | the Harris Retirement Benefit Replacement Plan (Harris Non-Qualified Plan), also frozen as of February 28, 2017. |
Mr. Casper’s total annual normal retirement pension benefit is:
| • | equal to 2% of his final average earnings (subject to certain limits) multiplied by his pre-July 1, 1995 service, plus 1.7% of his final average earnings (subject to certain limits) multiplied by his post-June 30, 1995 service less an offset for a Social Security entitlement. |
| • | no future benefit service will be received after February 28, 2017. Future pay increases will be reflected in the final average earnings benefit after that date. The 35-year service cap applicable to the Harris Qualified Plan was reached by Mr. Casper on July 31, 2013. |
| • | the Harris Non-Qualified Plan provides for benefits in excess of statutory compensation limits for the Harris Qualified Plan. |
| • | the portion paid from the Harris Qualified Plan is paid as either periodic payments or in a lump sum. The portion from the Harris Non-Qualified Plan is paid in a lump sum. |
His total annual retirement pension benefit to date is $631,382, payable on an unreduced basis at age 62. This amount will increase with additional earnings. See pages 77 and 78 for more information.
| Bank of Montreal Management Proxy Circular 2021 | 73 |
and other Financial Information
Summary compensation table
The table below shows the compensation for the NEOs in each of the last three fiscal years.
| Non-equity incentive plan compensation |
||||||||||||||||||||||||||||||||
| Name and principal position | Year | Salary ($) |
Share-based awards |
Option based awards ($)(1)(2) |
Annual ($)(3) |
Pension value ($)(4) |
All other compensation ($)(5) |
Total compensation ($) |
||||||||||||||||||||||||
| Darryl White Chief Executive Officer |
2020 | 1,000,000 | 4,545,750 | 1,326,750 | 2,392,500 | 1,818,920 | 3,000 | 11,086,920 | ||||||||||||||||||||||||
| 2019 | 1,000,000 | 4,700,000 | 1,410,000 | 2,350,000 | 1,386,790 | 3,000 | 10,849,790 | |||||||||||||||||||||||||
| 2018 | 1,000,000 | 4,506,250 | 1,158,750 | 1,980,000 | 1,476,234 | 3,000 | 10,124,234 | |||||||||||||||||||||||||
| Thomas E. Flynn Chief Financial Officer |
2020 | 600,000 | 1,545,000 | 395,000 | 765,000 | 157,914 | 0 | 3,462,914 | ||||||||||||||||||||||||
| 2019 | 600,000 | 1,670,000 | 420,000 | 820,000 | 127,314 | 0 | 3,637,314 | |||||||||||||||||||||||||
| 2018 | 600,000 | 1,725,250 | 437,750 | 792,000 | 132,423 | 0 | 3,687,423 | |||||||||||||||||||||||||
| Dan Barclay Chief Executive Officer & Group Head, BMO Capital Markets |
2020 | 600,000 | 3,380,000 | 850,000 | 2,260,000 | 5,500 | 3,000 | 7,098,500 | ||||||||||||||||||||||||
| 2019 | 600,000 | 4,725,000 | 1,175,000 | 0 | 5,500 | 3,000 | 6,508,500 | |||||||||||||||||||||||||
| 2018 | 250,000 | 2,593,750 | 250,000 | 1,531,250 | 6,356 | 3,000 | 4,634,356 | |||||||||||||||||||||||||
| Cameron Fowler Chief Strategy & Operations Officer |
2020 | 600,000 | 2,310,000 | 570,000 | 1,390,000 | 66,728 | 3,000 | 4,939,728 | ||||||||||||||||||||||||
| 2019 | 600,000 | 2,350,000 | 590,000 | 1,370,000 | 51,291 | 3,000 | 4,964,291 | |||||||||||||||||||||||||
| 2018 | 600,000 | 2,400,000 | 600,000 | 1,400,000 | 55,405 | 3,000 | 5,058,405 | |||||||||||||||||||||||||
| David R. Casper U.S. Chief Executive Officer, BMO Financial Group, Chair and Chief Executive Officer, BMO Harris Bank N.A. Group Head and North American Commercial Banking |
2020 | 806,460 | 2,722,335 | 427,796 | 1,209,690 | 48,616 | 0 | 5,214,896 | ||||||||||||||||||||||||
| 2019 | 797,400 | 3,066,525 | 491,175 | 1,315,710 | 50,262 | 0 | 5,721,072 | |||||||||||||||||||||||||
|
|
2018
|
|
708,290 | 2,445,176 | 392,026 | 1,049,557 | 269,278 | 0 | 4,864,327 | |||||||||||||||||||||||
| 74 | Bank of Montreal Management Proxy Circular 2021 |
Outstanding option-based awards and share-based awards
The following tables show the value of the outstanding option-based and share-based awards for each NEO as of October 30, 2020.
| Option-based awards | ||||||||||||||||||||||||
| Name | Grant date | Number of securities underlying unexercised options |
Option exercise price(1) |
Option expiration date |
Value of unexercised in-the-money options(2) |
Value of options exercised(3) |
||||||||||||||||||
| Darryl White |
|
16-Dec-2013 |
|
17,312 | $ | 68.60 | 16-Dec-2023 | $ | 185,758 | |||||||||||||||
| 15-Dec-2014 | 15,876 | $ | 78.09 | 15-Dec-2024 | $ | 19,686 | ||||||||||||||||||
| 14-Dec-2015 | 44,960 | $ | 77.23 | 14-Dec-2025 | $ | 94,416 | ||||||||||||||||||
| 19-Dec-2016 | 46,440 | $ | 96.90 | 19-Dec-2026 | $ | 0 | ||||||||||||||||||
| 18-Dec-2017 | 40,919 | $ | 100.63 | 18-Dec-2027 | $ | 0 | ||||||||||||||||||
| 17-Dec-2018 | 80,559 | $ | 89.90 | 17-Dec-2028 | $ | 0 | ||||||||||||||||||
| 16-Dec-2019 | 92,639 | $ | 101.47 | 16-Dec-2029 | $ | 0 | ||||||||||||||||||
| Total |
338,705 | $ | 299,860 | $ | 0 | |||||||||||||||||||
| Thomas E. Flynn |
|
16-Dec-2013 |
|
39,359 | $ | 68.60 | 16-Dec-2023 | $ | 422,322 | |||||||||||||||
| 15-Dec-2014 | 17,288 | $ | 78.09 | 15-Dec-2024 | $ | 21,437 | ||||||||||||||||||
| 14-Dec-2015 | 19,423 | $ | 77.23 | 14-Dec-2025 | $ | 40,788 | ||||||||||||||||||
| 19-Dec-2016 | 18,212 | $ | 96.90 | 19-Dec-2026 | $ | 0 | ||||||||||||||||||
| 18-Dec-2017 | 17,537 | $ | 100.63 | 18-Dec-2027 | $ | 0 | ||||||||||||||||||
| 17-Dec-2018 | 30,434 | $ | 89.90 | 17-Dec-2028 | $ | 0 | ||||||||||||||||||
| 16-Dec-2019 | 27,595 | $ | 101.47 | 16-Dec-2029 | $ | 0 | ||||||||||||||||||
| Total |
169,848 | $ | 484,547 | $ | 0 | |||||||||||||||||||
| Dan Barclay |
|
14-Dec-2015 |
|
19,063 | $ | 77.23 | 14-Dec-2025 | $ | 40,032 | |||||||||||||||
| 19-Dec-2016 | 16,694 | $ | 96.90 | 19-Dec-2026 | $ | 0 | ||||||||||||||||||
| 18-Dec-2017 | 16,076 | $ | 100.63 | 18-Dec-2027 | $ | 0 | ||||||||||||||||||
| 17-Dec-2018 | 17,381 | $ | 89.90 | 17-Dec-2028 | $ | 0 | ||||||||||||||||||
| 16-Dec-2019 | 77,199 | $ | 101.47 | 16-Dec-2029 | $ | 0 | ||||||||||||||||||
| Total |
146,413 | $ | 40,032 | $ | 0 | |||||||||||||||||||
| Cameron Fowler |
|
16-Dec-2013 |
|
5,941 | $ | 68.60 | 16-Dec-2023 | $ | 63,747 | |||||||||||||||
| 15-Dec-2014 | 9,605 | $ | 78.09 | 15-Dec-2024 | $ | 11,910 | ||||||||||||||||||
| 14-Dec-2015 | 16,186 | $ | 77.23 | 14-Dec-2025 | $ | 33,991 | ||||||||||||||||||
| 19-Dec-2016 | 20,033 | $ | 96.90 | 19-Dec-2026 | $ | 0 | ||||||||||||||||||
| 18-Dec-2017 | 21,921 | $ | 100.63 | 18-Dec-2027 | $ | 0 | ||||||||||||||||||
| 17-Dec-2018 | 41,714 | $ | 89.90 | 17-Dec-2028 | $ | 0 | ||||||||||||||||||
| 16-Dec-2019 | 38,764 | $ | 101.47 | 16-Dec-2029 | $ | 0 | ||||||||||||||||||
| Total |
154,164 | 109,648 | $ | 0 | ||||||||||||||||||||
| David R. Casper |
|
16-Dec-2013 |
|
18,578 | $ | 68.60 | 16-Dec-2023 | $ | 199,342 | |||||||||||||||
| 15-Dec-2014 | 12,819 | $ | 78.09 | 15-Dec-2024 | $ | 15,896 | ||||||||||||||||||
| 14-Dec-2015 | 19,211 | $ | 77.23 | 14-Dec-2025 | $ | 40,343 | ||||||||||||||||||
| 19-Dec-2016 | 22,418 | $ | 96.90 | 19-Dec-2026 | $ | 0 | ||||||||||||||||||
| 18-Dec-2017 | 18,855 | $ | 100.63 | 18-Dec-2027 | $ | 0 | ||||||||||||||||||
| 17-Dec-2018 | 27,255 | $ | 89.90 | 17-Dec-2028 | $ | 0 | ||||||||||||||||||
| 16-Dec-2019 | 32,271 | $ | 101.47 | 16-Dec-2029 | $ | 0 | ||||||||||||||||||
| Total |
151,407 | $ | 255,581 | $ | 0 | |||||||||||||||||||
| Bank of Montreal Management Proxy Circular 2021 | 75 |
| Share-based awards | ||||||||||||||||||||||||
| Name | Grant date | Plan | Number of shares or units that have not vested |
Market or payout value of unvested share-based awards not paid out or distributed |
Number of shares or units that have vested(4) |
Market or payout value of vested share- based awards not paid out or distributed(5) |
||||||||||||||||||
| Darryl White |
|
14-Dec-2015 |
|
Awarded DSU | 12,441 | $ | 986,973 | |||||||||||||||||
| 19-Dec-2016 | Awarded DSU | 11,985 | $ | 950,756 | ||||||||||||||||||||
| 18-Dec-2017 | Awarded DSU | 13,966 | $ | 1,107,949 | ||||||||||||||||||||
| 18-Dec-2017 | PSU | 39,770 | $ | 3,154,928 | ||||||||||||||||||||
| 17-Dec-2018 | PSU | 49,516 | $ | 3,928,081 | ||||||||||||||||||||
| 16-Dec-2019 | PSU | 48,453 | $ | 3,843,765 | ||||||||||||||||||||
| Deferred DSU | 18,099 | $ | 1,435,799 | |||||||||||||||||||||
| Total |
151,705 | $ | 12,034,723 | 42,525 | $ | 3,373,528 | ||||||||||||||||||
| Thomas E. Flynn |
|
14-Dec-2012 |
|
Awarded DSU | 7,842 | $ | 622,122 | |||||||||||||||||
| 16-Dec-2013 | Awarded DSU | 6,793 | $ | 538,903 | ||||||||||||||||||||
| 15-Dec-2014 | Awarded DSU | 6,590 | $ | 522,758 | ||||||||||||||||||||
| 14-Dec-2015 | Awarded DSU | 6,687 | $ | 530,498 | ||||||||||||||||||||
| 19-Dec-2016 | Awarded DSU | 5,654 | $ | 448,562 | ||||||||||||||||||||
| 18-Dec-2017 | Awarded DSU | 5,028 | $ | 398,861 | ||||||||||||||||||||
| 18-Dec-2017 | PSU | 15,340 | $ | 1,216,901 | ||||||||||||||||||||
| 17-Dec-2018 | PSU | 18,957 | $ | 1,503,894 | ||||||||||||||||||||
| 16-Dec-2019 | PSU | 17,216 | $ | 1,365,764 | ||||||||||||||||||||
| Total |
56,541 | $ | 4,485,420 | 33,566 | $ | 2,662,843 | ||||||||||||||||||
| Dan Barclay |
|
18-Dec-2017 |
|
RSU | 25,169 | $ | 1,996,619 | |||||||||||||||||
| 17-Dec-2018 | RSU | 28,501 | $ | 2,260,962 | ||||||||||||||||||||
| 16-Dec-2019 | PSU | 48,711 | $ | 3,864,211 | ||||||||||||||||||||
| Total |
102,381 | $ | 8,121,792 | 0 | $ | 0 | ||||||||||||||||||
| Cameron Fowler |
|
15-Dec-2014 |
|
Awarded DSU | 3,970 | $ | 314,915 | |||||||||||||||||
| 14-Dec-2015 | Awarded DSU | 5,443 | $ | 431,801 | ||||||||||||||||||||
| 19-Dec-2016 | Awarded DSU | 6,146 | $ | 487,567 | ||||||||||||||||||||
| 18-Dec-2017 | Awarded DSU | 5,866 | $ | 465,339 | ||||||||||||||||||||
| 18-Dec-2017 | PSU | 20,453 | $ | 1,622,535 | ||||||||||||||||||||
| 17-Dec-2018 | PSU | 26,372 | $ | 2,092,071 | ||||||||||||||||||||
| 16-Dec-2019 | PSU | 24,226 | $ | 1,921,882 | ||||||||||||||||||||
| Total |
76,917 | $ | 6,101,827 | 15,559 | $ | 1,234,283 | ||||||||||||||||||
| David R. Casper |
|
14-Dec-2015 |
|
Awarded DSU | 6,411 | $ | 508,609 | |||||||||||||||||
| 19-Dec-2016 | Awarded DSU | 6,151 | $ | 487,958 | ||||||||||||||||||||
| 18-Dec-2017 | Awarded DSU | 5,037 | $ | 399,570 | ||||||||||||||||||||
| 18-Dec-2017 | PSU | 17,592 | $ | 1,395,549 | ||||||||||||||||||||
| 17-Dec-2018 | PSU | 26,868 | $ | 2,131,456 | ||||||||||||||||||||
| 16-Dec-2019 | PSU | 31,613 | $ | 2,507,859 | ||||||||||||||||||||
| Deferred DSU | 13,427 | $ | 1,065,198 | |||||||||||||||||||||
| Total |
81,110 | $ | 6,434,434 | 25,989 | $ | 2,061,765 | ||||||||||||||||||
| 76 | Bank of Montreal Management Proxy Circular 2021 |
Incentive plan awards – Value vested or earned
The table below shows the value of option-based awards, share-based awards and non-equity incentive plan compensation that vested or was earned in fiscal 2020.
| Name | Option-based awards – value vested during the year |
Share-based awards – value vested during the year ($)(2) |
Non-equity incentive plan compensation – value earned during the year |
|||||||||
| Darryl White | $ | 656,603 | $ | 5,311,432 | $ | 2,392,500 | ||||||
| Thomas E. Flynn | $ | 279,219 | $ | 2,355,395 | $ | 765,000 | ||||||
| Dan Barclay | $ | 271,205 | $ | 1,539,255 | $ | 2,260,000 | ||||||
| Cameron Fowler | $ | 244,351 | $ | 2,723,146 | $ | 1,390,000 | ||||||
| David R. Casper | $ | 286,764 | $ | 2,886,881 | $ | 1,209,690 | ||||||
Retirement benefits
Defined benefit pension plan table
Four of the NEOs participate in a defined benefit pension plan sponsored by the bank. Mr. Barclay participates in the Nesbitt Burns Employee Retirement Plan which is a defined contribution plan. The table below shows the pension benefits under the defined benefit pension plans, including the annual pension payable to the NEOs for three pension-eligibility time frames – year-end, estimated at normal retirement and estimated at age 65 – and accrued obligations determined on a defined benefit basis.
| Annual benefits payable ($)(1)(2) | ||||||||||||||||||||||||||||||||
| Name | Number of years credited service |
At year-end(3) |
At normal retirement(4) |
At age 65 | Accrued obligation at start of |
Compensatory ($)(6) |
Non- compensatory change ($)(6) |
Accrued ($)(5) |
||||||||||||||||||||||||
| Darryl White | 4.00 | 379,858 | 1,250,000 | 1,250,000 | 3,677,204 | 1,818,920 | 507,675 | 6,003,799 | ||||||||||||||||||||||||
| Thomas E. Flynn | 27.92 | 272,581 | 256,237 | 358,070 | 4,058,297 | 157,914 | 327,411 | 4,543,622 | ||||||||||||||||||||||||
| Cameron Fowler | 11.78 | 71,544 | 163,580 | 163,580 | 737,783 | 66,728 | 81,061 | 885,572 | ||||||||||||||||||||||||
| David R. Casper | 38.58 | 631,382 | 688,832 | 688,832 | 8,902,696 | 0 | 976,786 | 9,879,482 | ||||||||||||||||||||||||
| Bank of Montreal Management Proxy Circular 2021 | 77 |
Defined contribution pension plan table
The table below describes the defined contribution pension from the BMO Nesbitt Burns Employee Retirement Plan for Mr. Barclay and the company contributions to the Employees’ 401(k) Savings Plan and Non-Qualified Savings Plan of Bank of Montreal/Harris for Mr. Casper.
| Name | Defined Contribution Pension Accumulated Value at start of year ($) |
Compensatory ($)(1) |
Defined Contribution Pension Accumulated Value at year-end ($) |
|||||||||
| Dan Barclay | 120,061 | 5,500 | 130,120 | |||||||||
| David R. Casper | 3,672,404 | 48,616 | (2) | 4,166,197 | ||||||||
Termination and change of control benefits
The table below explains how the components of the executive compensation program for the NEOs are treated under five termination scenarios, and where applicable the incremental payment.(1)
| Compensation element | Resignation | Termination with cause |
Termination without cause |
Retirement (early or normal) |
Change of control | |||||
| Base pay (salary) | Ceases immediately | Ceases immediately | Severance paid as a lump sum or salary continuation | Ceases upon voluntary retirement | No incremental payment | |||||
| Short-term incentive plan (bonus) | Forfeited | Forfeited | As negotiated | Pro-rated for the year | No incremental payment | |||||
| Bank mid-term incentive plan (RSUs and PSUs) |
Forfeited | Forfeited | Normal vesting and payout dates apply
Units are forfeited if non-solicit or non-compete provisions are breached or if employee engaged in misconduct while employed |
Normal vesting and payout dates apply
Units are forfeited if non-solicit or non- |
Normal vesting and payout dates apply | |||||
| Long-term incentive plan (stock options) | All options are cancelled | All options are cancelled | All vested options expire the earlier of normal expiry or 90 days after termination. If non-solicit or non-compete provisions are breached, all options are cancelled. However, if employee is at retirement age, the retirement provisions apply instead | Normal expiry for all options for retirement on or after January 1, 2020. For retirements prior to that, all options expire at the earlier of five years from retirement or normal expiry. If non-solicit or non-compete provisions are breached, all options are cancelled | Upon termination other than for cause within 24 months after change of control, all options become fully vested and will expire within 90 days |
| 78 | Bank of Montreal Management Proxy Circular 2021 |
| Compensation element | Resignation | Termination with cause |
Termination without cause |
Retirement (early or normal) |
Change of control | |||||
| Deferred share units (DSUs) | Units are redeemed if vested, otherwise forfeited | Units are redeemed if vested, otherwise forfeited(2) |
Units are redeemed if vested, otherwise forfeited | Units are redeemed | Units remain outstanding | |||||
| BMO Canada Pension Plan
Executive Supplementary Pension Plan |
No incremental payment | No incremental payment | No incremental payment from the BMO Canada Pension Plan
For Supplementary Plan, prior to age 55, bonus-related pension provision (1.25% of best average earnings less the average pensionable salary, multiplied by Canadian credited service) is payable |
No incremental payment | No incremental payment(3) | |||||
| BMO Nesbitt Burns Employee Retirement Plan
Employees’ Retirement Plan of Bank of Montreal/Harris
Employees’ 401(k) Savings Plan of Bank of Montreal/Harris |
No incremental payment | No incremental payment | No incremental payment | No incremental payment | No incremental payment | |||||
| Benefits | None | None | None | None | None | |||||
| Perquisites | Cease | Cease | Subject to negotiation | Cease | No incremental payment |
| (2) | All DSUs granted on or after December 2013 that are vested are subject to forfeiture on termination with cause. |
| (3) | Mr. White is entitled to an enhanced pension benefit provided via a bank-funded, non-registered agreement defining his overall pension arrangement which, on a change of control entitles him to $250,000. |
The table below shows the estimated incremental payments to each NEO at, following, or in connection with each of the termination scenarios below as at October 30, 2020(1). The table below includes severance amounts for those NEOs whose severance payments are governed by written employment agreements, but does not include amounts to which an NEO may be entitled under common law or civil law.
| Name | Type of payment | Resignation ($) |
Termination with cause |
Termination without cause |
Retirement (early or |
Change of control ($)(2,3) |
||||||||||||||||
| Darryl White |
Total cash severance | 0 | 0 | 7,500,000 | 0 | 7,500,000 | ||||||||||||||||
| Stock options | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Pension | 0 | 0 | 250,000 | 0 | 250,000 | |||||||||||||||||
| Total | 0 | 0 | 7,750,000 | 0 | 7,750,000 | |||||||||||||||||
| Bank of Montreal Management Proxy Circular 2021 | 79 |
| Name | Type of payment | Resignation ($) |
Termination with cause |
Termination without cause |
Retirement (early or |
Change of control ($)(2,3) |
||||||||||||||||
| Thomas E. Flynn(4) |
Total cash severance | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
| Stock options | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Pension | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Dan Barclay |
Total cash severance | 0 | 0 | 7,762,500 | 0 | 7,762,500 | ||||||||||||||||
| Stock options | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Pension | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total | 0 | 0 | 7,762,500 | 0 | 7,762,500 | |||||||||||||||||
| Cameron Fowler |
Total cash severance | 0 | 0 | 4,400,000 | 0 | 4,400,000 | ||||||||||||||||
| Stock options | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Pension | 0 | 0 | 22,089 | 0 | 0 | |||||||||||||||||
| Total | 0 | 0 | 4,422,089 | 0 | 4,400,000 | |||||||||||||||||
| David R. Casper |
Total cash severance | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
| Stock options | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Pension | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| Total | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
| (3) | For the definition of a change of control for the stock option plan, refer to page 78. For the purposes of the enhanced pension benefit for Mr. White, a change of control is the result of a merger, amalgamation, consolidation of operations or purchase of the bank. The enhanced pension benefit requires a change of control and termination without cause in order for severance payments to be made. |
| (4) | Mr. Flynn transitioned to a Vice Chair role on January 1, 2021, at which time he ceased to be in an executive officer role. His target compensation was reduced and he became entitled to severance on a termination without cause equal to two times his new salary and short-term incentive. |
Additional information about the long-term incentive plans
Stock option plans
Dilution impact of long-term incentive plan
| Measure (shown as a % of issued and outstanding shares as of October 30, 2020)(1) |
||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
| Overhang the total number of options available to be issued, plus all options outstanding that have not yet been exercised, expressed as a percentage of 646,542,126, the total number of issued and outstanding shares at the end of the fiscal year |
3.10% | 1.34% | 1.49% | |||||||||
| Dilution the number of options issued but not exercised, expressed as a percentage of the total number of issued and outstanding shares at the end of the fiscal year |
1.00% | 0.96% | 0.95% | |||||||||
| Burn rate the number of stock options granted in the applicable fiscal year, expressed as a percentage of the weighted-average number of outstanding shares for the applicable fiscal year |
0.15% | 0.15% | 0.11% | |||||||||
| (1) | Includes options granted under the bank’s stock option plan as well as those assumed under the M&I stock option plans. |
| 80 | Bank of Montreal Management Proxy Circular 2021 |
Securities authorized for issuance under the equity compensation plans
The following table shows (at October 30, 2020):
| • | shares to be issued when outstanding options under the stock option plan are exercised; |
| • | remaining number of shares available for issue under the stock option plan. |
Shareholders have approved all equity compensation plans that involve issuing shares.
| Plan category | Number of securities to be issued upon outstanding |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column) |
|||||||||
| Equity compensation plans approved by the security holders | 6,446,110 | $ | 81.50 | 13,575,259 | ||||||||
| Equity compensation plans not approved by the security holders |
nil | nil | nil | |||||||||
| Total | 6,446,110 | $ | 81.50 | 13,575,259 | ||||||||
Bank’s stock option plan – Issuance limits
| Eligibility | Options granted to employees of the bank and its affiliates (including employees on a temporary leave of absence) at the committee’s discretion. | |
| Maximum number of shares issuable | 84,200,000 shares (representing 13.02% of issued and outstanding shares as at October 30, 2020). | |
| Currently issued (dilution) |
6,446,110 shares issuable upon exercise of outstanding options (representing 1% of the bank’s issued and outstanding shares as at October 30, 2020). | |
| Available for issue | 13,575,259 shares remaining available for issuance (representing 2.10% of the bank’s issued and outstanding shares as at October 30, 2020). | |
| Other limits | The number of shares issuable to insiders, at any time, under all security-based compensation arrangements, cannot exceed 10% of the issued and outstanding shares.
The number of shares issued to insiders, within any one-year period, under all security-based compensation arrangements, cannot exceed 10% of the issued and outstanding shares.
The maximum number of shares reserved for issuance under options to any one participant cannot exceed 5% of the shares then issued and outstanding. | |
| Committee guideline (overhang) | The committee adopted a guideline that the total number of options available for issue, plus all options outstanding that have not yet been exercised, should be 7.5% or less of the total number of the bank’s issued and outstanding shares. | |
Bank’s stock option plan – Conditions
| Maximum term |
Expires 10 years from date of grant. If the expiry falls during a bank trading blackout period, the term is extended to the fifth business day after the blackout period is lifted. Any option holder who is a U.S. taxpayer is excluded from this provision. | |
| Exercise price |
Equal to the closing price of the shares on the TSX on the trading day immediately preceding the date of grant. | |
| Vesting and exercise of options |
Stock options must vest before they can be exercised. Stock options granted on or after December 2013 vest in equal tranches of 50% on the third and fourth anniversaries of their grant date. Options granted prior to December 2013 vest in equal tranches over a four-year period starting from their grant date. Options cannot vest prior to the first anniversary of the grant date.
Beginning in 2013, the committee may outline different vesting terms in the participant’s award acknowledgement.
The committee has full discretion to determine the number of options to be granted in the form of standard options and those with growth in share price conditions. | |
| Expiry of options |
Options expire on the tenth anniversary of the grant date. For retirements, death or long-term disability prior to January 2020, options will expire the earlier of the tenth anniversary of the grant date and the fifth anniversary of the date of retirement, death or long-term disability.
Options are forfeited if a participant resigns or is terminated for cause. For termination without cause, the participant may exercise outstanding exercisable options within 90 days of termination. All remaining options are then forfeited. | |
| Transfer/assignment |
Only by will or under succession laws. | |
| Forfeiture on detrimental act committed while employed | All or a portion of a former executive’s vested and non-vested options may be forfeited if it is discovered that they committed an act detrimental to the bank while they were still employed by the bank. | |
| Forfeiture on competition |
Options may be forfeited where a retired participant or participant on permanent disability competes with the bank or solicits the bank’s employees or customers, or when a participant who was terminated without cause solicits the bank’s employees or customers. | |
| Stock appreciation rights |
The plan permits the granting of stock appreciate rights (SARs) in lieu of or in tandem with option grants on substantially the same terms as options except that the market price on exercise shall be the weighted average trading price of the shares for the five trading days prior to exercise. On exercise, SARs entitle the holder to receive a cash payment equal to any increase in the market price of a share from the date of grant to the exercise date. No SARs are outstanding. | |
| Bank of Montreal Management Proxy Circular 2021 | 81 |
| Change of control |
If an executive is terminated (other than for cause) within 24 months of a change of control, the executive’s options vest immediately and the executive has 90 days to exercise. | |
| Plan changes |
The committee or Board of Directors may amend, modify or terminate the plan at any time as long as any changes do not decrease entitlements that have accrued prior to the date of change. Shareholders must approve the following changes: | |
| (i) increasing the number of shares reserved for issue under the plan; | ||
| (ii) reducing the exercise price of an award (the cancellation or termination of an award of a plan participant prior to its expiry date for the purpose of re-issuing awards to the same plan participant shall be treated as an amendment to reduce the exercise price of an award); | ||
| (iii) extending the term of an award beyond the expiry date (except where an expiry date would have fallen within a blackout period of the bank); | ||
| (iv) extending eligibility to participate in the plan to non-employee directors; | ||
| (v) allowing options or stock appreciation rights to be transferred other than for normal estate settlement purposes; | ||
| (vi) extending the expiry date of an option beyond 10 years from its grant date (except where an expiry date would have fallen within a blackout period of the bank); | ||
| (vii) allowing awards, other than options and stock appreciation rights, to be made under the plan; | ||
| (viii) deletion of or reduction to the range of amendments which require shareholder approval under the plan. | ||
| Amendments which may be made without shareholder approval include: amendments of a “housekeeping” nature, the addition of covenants of the bank to protect participants, adjustments to outstanding options in the event of certain corporate transactions, specifying practices for applicable withholding taxes, a change to the vesting provisions of an option and a change to the termination provisions of an option, which does not involve extending the term of the option beyond its original expiry date. | ||
| Exercise process |
(i) Executives open a BMO brokerage account. | |
| (ii) When the option is exercised, the account is debited for the amount of the strike price and, to the extent that the amount debited exceeds available funds in the account, the executive is charged interest at the same rate charged to customers for purchases of securities on margin. | ||
| (iii) When the executive has elected to sell all or some of the shares issued after exercising the options, the brokerage firm retains a portion of the sale proceeds to cover the strike price, applicable commissions and taxes and debit interest. | ||
| (iv) When any executive has elected to hold the shares issued after exercising the options, he or she must pay the strike price, applicable commissions and taxes and debit interest. | ||
| An executive may also elect to surrender their in-the-money options a day prior to expiry in exchange for shares equivalent in value to the in-the-money amount. | ||
| Clawback |
Up to 100% of the benefit associated with an executive’s unexercised options may be clawed back, if through the executive’s misconduct or gross negligence in managing risk, BMO or BMO Financial Corp. suffers a consequential financial or reputational loss or is required to restate its financials.
Up to 100% of the benefit received from exercising stock options in the past 36 months may be clawed back if there is a financial restatement or misconduct, as per bank policy. | |
BMO Capital Markets variable compensation plan – Key features
| Eligibility |
BMO Capital Markets employees (excluding the BMO Capital Markets CEO) | |
| Form of award |
Cash or restricted share units (RSUs) | |
| Pool funding |
A global pool is established based on a fully expensed model driven on Net Income before Bonus and Taxes.
The pool incorporates a BMO Capital Markets ROE measure.
The pool is fully adjusted for actual loan losses (excluding provisions on performing loans), and may also be adjusted to reflect other considerations such as risk and total bank performance. | |
| Form of award(1) |
Individual awards are apportioned between cash and RSUs, based on the nature of the role and compensation level.
The cash portion can be voluntarily deferred into DSUs.
All material risk-taking employees in BMO Capital Markets receive at least 40% of their incentive award in RSUs. See page 83 for more information on material risk-taking employees. | |
| RSU terms |
• Value of the RSUs is based on the share price. • Vest and pay out either, a) in instalments over a period of three years or, b) at the end of three years. • Earn dividend equivalents as additional RSUs. • Non-vested units are forfeited on resignation. • Continue to vest upon retirement or termination without cause, subject to a non-compete provision and/or non-solicit provision. • Non-vested RSUs are forfeited if a participant committed an act while employed with the bank that would have led to termination for cause. | |
| Clawback |
Cash, RSUs and DSUs paid out in the past 36 months may be clawed back if there is a financial restatement, and if there is or could be significant financial or reputational harm to the bank by employee misconduct or negligence in managing risk, as per bank policy.
Payouts of RSU equity awards may be reduced or eliminated based on information that would have negatively impacted the size of an award when it was granted. | |
| (1) | For BMO Capital Markets employees whose awards are governed by the Capital Requirements Directive (CRD) IV, the structure of awards aligns with those prescribed by legislation. |
| 82 | Bank of Montreal Management Proxy Circular 2021 |
Other financial information
| Bank of Montreal Management Proxy Circular 2021 | 83 |
Total direct compensation awarded in fiscal 2020 and 2019
| 2020 | 2019 | |||||||||||||||
| Category(1) | Senior Executives |
Other material risk-takers |
Senior Executives |
Other material risk-takers |
||||||||||||
| Number of employees |
11 | 146 | 13 | 148 | ||||||||||||
| Total fixed pay (non-deferred) ($) |
7,106,460 | 51,820,411 | 7,747,400 | 52,922,815 | ||||||||||||
| Total variable pay |
||||||||||||||||
| Cash (non-deferred) ($) |
11,240,990 | 85,878,003 | 11,401,710 | 69,822,915 | ||||||||||||
| Cash (deferred) ($) |
750,000 | 1,487,751 | 230,000 | 1,956,517 | ||||||||||||
| Share-based (deferred) ($) |
23,058,085 | 96,316,256 | 35,043,025 | 104,218,740 | ||||||||||||
| Option-based (deferred) ($) |
5,575,746 | 7,340,178 | 6,532,175 | 8,323,717 | ||||||||||||
| Total variable pay ($)(2) |
40,624,821 | 191,022,188 | 53,206,910 | 184,321,889 | ||||||||||||
| Total direct compensation ($) |
47,731,281 | 242,842,599 | 60,954,310 | 237,244,704 | ||||||||||||
| (1) | Employees who have left the bank during the year are included in these categories. Senior Executives are the bank’s most senior executives. |
| (2) | Total variable pay represents the total of cash (excluding fixed compensation), share-based and option-based. |
Deferred compensation outstanding and paid out in fiscal 2020 and 2019
| 2020 | 2019 | |||||||||||||||
| Category | Senior Executives |
Other material |
Senior Executives |
Other material |
||||||||||||
| Cash |
||||||||||||||||
| Vested |
0 | 1,565,141 | 0 | 1,548,255 | ||||||||||||
| Unvested |
0 | 2,659,977 | 0 | 1,052,859 | ||||||||||||
|
Share-based(1)(2) |
||||||||||||||||
| Vested |
18,667,727 | 29,351,026 | 28,104,046 | 46,445,547 | ||||||||||||
| Unvested |
63,435,850 | 203,437,403 | 95,141,549 | 276,413,216 | ||||||||||||
|
Option-based(1)(3) |
||||||||||||||||
| Vested |
5,422,858 | 8,079,426 | 24,554,734 | 27,630,488 | ||||||||||||
| Unvested |
0 | 0 | 5,788,264 | 7,013,477 | ||||||||||||
| Paid in the fiscal year |
20,986,958 | 87,691,810 | 34,731,356 | 125,463,570 | ||||||||||||
| (1) | Based on the closing price of a BMO common share on the TSX on October 30, 2020 ($79.33) and October 31, 2019 ($97.50). |
| (2) | The value of vested and unvested share-based awards equals the number of outstanding units on October 30, 2020 multiplied by the closing share price. |
| (3) | The value of vested and unvested in-the-money options is equal to the difference between the grant price of the options and the closing share price on October 30, 2020. Vested options include options that have vested and cannot be exercised because they have not met the price condition hurdles. |
| 84 | Bank of Montreal Management Proxy Circular 2021 |
Related party transactions
Indebtedness
| Name and principal position |
Involvement of bank or subsidiary |
Largest amount outstanding during fiscal year ended October 31, 2020 |
Amount outstanding as at January 31, 2021 |
Financially assisted securities purchases during fiscal year ended October 31, 2020 |
Amount forgiven during fiscal year ended October 31, 2020 | |||||
| Sharon Haward-Laird General Counsel |
Bank of Montreal (lender) | $423,991.84 | $421,850.87 (a) | — | $0 | |||||
| Steve Tennyson Chief Technology & Operations Officer | Bank of Montreal (lender) | $4,000,000.00 | $3,959,939.36 (b) | — | $0 |
| (a) | A conventional 5-year closed fixed-rate mortgage with the rate of 3.49% and a maturity date of February 1, 2024. Secured by secondary property. |
| (b) | A collateral 5-year closed fixed-rate mortgage installment with the rate of 1.62% and a maturity date of October 16, 2025. Secured by residence. |
The table below shows total employee loans outstanding to us or our subsidiaries at January 31, 2021:
| To us or our subsidiaries | ||
| Total indebtedness (other than routine indebtedness) |
$ 18,170,689.74 |
| Bank of Montreal Management Proxy Circular 2021 | 85 |
| 86 | Bank of Montreal Management Proxy Circular 2021 |
| Bank of Montreal Management Proxy Circular 2021 | 87 |
Harrington Investments, Inc. (Harrington), 1001 2nd Street, Suite 325, NAPA, California 94559, submitted the following proposal for your vote. Harrington’s supporting comments, and the bank’s response, are set out in full below.
Proposal No. 1
Whereas, the Intergovernmental Panel on Climate Change, issued a dire warning in October 2018 that global warming emissions are accelerating, and we are in the midst of a series of escalating climate events, imperiling life on the planet;
Whereas, by late September 2020, wildfires had burned more than 6.6 million acres of the Western United States and killed dozens of people, as a direct result of climate change; and
Whereas, the Intergovernmental Panel concluded that to avoid the environmental abyss, we will have to cut the emission of global warming gasses 45% from 2010 levels in which we now have only 11 years left to make this happen;
Whereas, our bank has noted on climate that “The overall impact of a financial institution of our size can be significant. This is an important issue for BMO, especially as we consider how we can best support the transition to a lower-carbon economy while acknowledging the ongoing importance of Canada’s energy sector and supporting our clients in that sector.”
Whereas, BMO acknowledges significant fossil fuel financing in its 2019 Climate Report “Lending in support of carbon-related assets in 2019 was approximately $14.7 billion and represents 3.3% of our total lending portfolio.” However, another analysis (Banking on Climate Change: Fossil Fuels Finance Report Card 2020) identified BMO financing of fossil fuels in excess of $22 billion in 2019 and totaling over $82 billion from 2016 through 2019;
Whereas, our bank has committed to supporting renewable energy, and to purchasing carbon offsets to be carbon neutral on greenhouse gas emissions due to its infrastructure (buildings and transportation), but has not yet demonstrated an intent to neutralize the carbon footprint of its portfolio;
Whereas, according to BMO’s website: “It is the Bank’s intention to avoid direct financing for any project or transaction that involves exploration or development in the Arctic National Wildlife Reserve (ANWR).”
Resolved: Shareholders request that our Board of Directors issue a report, at reasonable expense and excluding proprietary information, describing a clear plan to make the greenhouse gas footprint of our company, including our portfolio on lending practices, carbon neutral. In doing so, it should describe the process of curtailing or transforming the bank’s financing of the fossil fuels sector.
BMO’s Response
| 88 | Bank of Montreal Management Proxy Circular 2021 |
| Bank of Montreal Management Proxy Circular 2021 | 89 |
Mouvement d’éducation et de défense des actionnaires (MÉDAC), 82 Sherbrooke Street West, Montréal, Québec, H2X 1X3 submitted the following proposals. An English translation and MÉDAC’s supporting comments are set out in full below. MÉDAC has agreed not to submit these shareholder proposals to a vote. The bank has agreed with MÉDAC to include these shareholder proposals in the circular for informational purposes only. They are not part of the formal business of the meeting.
Proposal No. 2
Purpose and commitment
It is proposed that the Board of Directors and management precisely define the purpose of the Bank of Montreal as an organization and that a committee of the Board be tasked with monitoring the implementation of policies, undertakings and initiatives implemented to give effect to this new strategic direction, particularly in terms of health, the environment, human resources and stakeholder relations.
BMO’s Response
| 1 | Jean-Dominique Senard: “Le sens et le pourquoi nourrissent la motivation,” Les Échos, June 8, 2018 https://business.lesechos.fr/directions-generales/innovation/innovation-sociale/0301754783119-jeandominique-senard-president-de-michelin-le-sens-et-le-pourquoi-nourrissent-la-motivation-321483.php |
| 90 | Bank of Montreal Management Proxy Circular 2021 |
Proposal No. 3
Virtual meetings and shareholder rights
It is proposed that the Board of Directors adopt a policy setting out the rules for holding virtual annual meetings.
Supporting statement
BMO’s Response
| 2 | https://medac.qc.ca/1798 |
| Bank of Montreal Management Proxy Circular 2021 | 91 |
Proposal No. 4
Dedicated Human Resources Committee
It is proposed that the Board of Directors revise the mandate of its compensation or human resources committee in order to include specific responsibilities regarding the health, safety and well-being of all employees.
BMO’s Response
Proposal No. 5
COVID-19 – Equitable sharing of the recovery burden
It is proposed that the Board of Directors disclose the actions taken by the organization to ensure that both the company’s senior management and other employees share equitably in the economic recovery effort following the pandemic.
| 92 | Bank of Montreal Management Proxy Circular 2021 |
BMO’s Response
Proposal No. 6
Global warming
It is proposed that the Bank produce a report on loans it has made in support of projects with polluting consequences leading to a significant rise in global temperatures.
| Bank of Montreal Management Proxy Circular 2021 | 93 |
BMO’s Response
Proposal No. 7
Circular economy
It is proposed that the Bank produce a report on the loans it has made in recent years to support the circular economy.
BMO’s Response
| 3 | http://instituteddec.org/themes/economie-circulaire/ |
| 94 | Bank of Montreal Management Proxy Circular 2021 |
Proposal No. 8
Discretion of the Board of Directors and the Compensation Committee
It is proposed that the Management Proxy Circular explicitly state the criteria used by each of these bodies to review the objectives pertaining to the compensation and performance of its senior executives.
BMO’s Response
| Bank of Montreal Management Proxy Circular 2021 | 95 |
Your vote matters.
See page 4 for detailed
information about who can vote, and how to vote. We encourage you to vote right away.
Exhibit 99.2
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Computershare Trust Company of Canada 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 Telephone 1-800-340-5021 514-982-7800 Facsimile 1-866-249-7775 416-263-9524 www.computershare.com |
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| Fold |
| Form of Proxy - Annual Meeting of Shareholders of Bank of Montreal to be held on April 7, 2021 |
Notes to proxy
| 1. | Every shareholder has the right to appoint some other person of their choice, who need not be a shareholder of Bank of Montreal, to attend and act on their behalf at the meeting. If you wish to appoint a person other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse). In addition, YOU MUST go to www.computershare.com/BankOfMontreal by 5:00 pm (ET) on April 5, 2021 and provide Computershare with the required information for your chosen proxyholder so that Computershare may provide the proxyholder with a username via email. This username will allow your proxyholder to log in and vote at the meeting. Without a username, your proxyholder will only be able to log in to the meeting as a guest and will not be able to vote. |
| 2. | The form of proxy should be signed in the exact manner as the name appears above. If a corporation is the shareholder, the form of proxy should be signed by its duly authorized officer(s). |
| 3. | If the form of proxy is not dated, it will be deemed to bear the date on which it is mailed by Bank of Montreal. |
| 4. | The shares represented by this proxy will be voted as directed by the shareholder. In the absence of such directions, shares represented by proxies received by management will be voted FOR the matters listed in items 1 through 3 and AGAINST shareholder proposal no. 1. |
| 5. | The shares represented by this proxy will be voted for or against or withheld from voting in accordance with the instructions in this proxy. If you mark the “Abstain” box, you are directing your proxyholder to abstain from voting on the matter. An abstention will be counted as present for quorum purposes but will not be counted as a vote cast in determining whether the requisite majority of votes cast has approved the proposal. The number of abstentions will be reported distinctively in the voting results. |
| 6. | This form of proxy should be read in conjunction with the accompanying Notice of Annual Meeting of Shareholders and Management Proxy Circular. |
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| • Call the number listed BELOW from a touch tone telephone.
1-866-732-VOTE (8683) Toll Free |
• Go to the following web site: www.investorvote.com
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• Complete, sign and date the reverse hereof.
• Return this Proxy in the envelope provided. |
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| • Smartphone? Scan the QR code to vote now.
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| • You can enroll to receive future shareholder communications electronically by visiting www.investorcentre.com. |
• You can attend the meeting virtually by visiting https://web.lumiagm.com/458701741 – Enter password: bmo2021 (case sensitive). For further information on the virtual annual meeting and how to attend, please view the information circular available on www.envisionreports.com/BMO2021 |
• Complete, sign and date the reverse hereof.
• Forward it by fax to 1-866-249-7775 for calls within Canada and the U.S. There is NO CHARGE for this call.
• Forward it by fax to 416-263-9524 for calls outside Canada and the U.S. |
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If you vote by Fax or the Internet, DO NOT mail back this proxy.
Proxies submitted must be received by 5:00 P.M., Eastern Daylight Time, on April 5, 2021. If the meeting is postponed or adjourned, proxies submitted must be received by 5:00 pm (ET) on the second-last business day before the reconvened meeting date.
THANK YOU
To vote by telephone or Internet, you will need to provide your CONTROL NUMBER listed below.
CONTROL NUMBER
01OWQD
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Form of Proxy - Bank of Montreal
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| This Proxy is solicited by and on behalf of the management of Bank of Montreal (the “Bank”). The undersigned shareholder of the Bank hereby appoints George A. Cope, Chair of the Board, or failing him, Darryl White, Chief Executive Officer, or instead of either of them the undersigned wishes to appoint (insert name in box to the right) the attorney and proxy of the undersigned, with right of substitution, for and in the name and on behalf of the undersigned to attend, vote and act in respect of all matters that may come before the Annual Meeting of Shareholders to be held on the 7th day of April, 2021 via webcast online at https://web.lumiagm.com/458701741 – Enter password: bmo2021 (case sensitive) and at any and all adjournments thereof. Subject to the voting restrictions under the Bank Act, a shareholder desiring to appoint some other person, who need not be a shareholder, to represent him/ her at the meeting may do so by inserting such other person’s name in the boxed area to the right. This proxy confers authority to vote in the proxyholder’s discretion unless otherwise specified and to vote in the proxyholder’s discretion with respect to amendments to matters identified in the accompanying Notice of Annual Meeting of Shareholders and with respect to other matters that may properly come before the meeting. NOTE: If you are appointing a proxyholder, YOU MUST go to www.computershare.com/BankOfMontreal by 5:00 pm (ET) on April 5, 2021 and provide Computershare with the required information for your chosen proxyholder so that Computershare may provide the proxyholder with a username via email. This username will allow your proxyholder to log in and vote at the meeting. Without a username, your proxyholder will only be able to log in to the meeting as a guest and will not be able to vote.
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| Unless otherwise specified, your shares will be voted by the management of the Bank FOR the matters in items 1 through 3 and AGAINST shareholder proposal 1. |
Directors and management recommend shareholders vote FOR the following matters:
| 1. Election of Directors |
Fold |
| For | Withhold | For | Withhold | For | Withhold | For | Withhold | |||||||||||||||||
| Janice M. Babiak |
☐ | ☐ | Stephen Dent | ☐ | ☐ | Linda S. Huber | ☐ | ☐ | Darryl White | ☐ | ☐ | |||||||||||||
| Sophie Brochu |
☐ | ☐ | Christine A. Edwards | ☐ | ☐ | Eric R. La Flèche | ☐ | ☐ | ||||||||||||||||
| Craig W. Broderick |
☐ | ☐ | Martin S. Eichenbaum | ☐ | ☐ | Lorraine Mitchelmore | ☐ | ☐ | ||||||||||||||||
| George A. Cope |
☐ | ☐ | David E. Harquail | ☐ | ☐ | Madhu Ranganathan | ☐ | ☐ | ||||||||||||||||
| For | Withhold | For | Against | |||||||||||||||||||||
| 2. Appointment of Shareholders’ Auditors |
☐ | ☐ | 3. Advisory vote on the Bank’s Approach to Executive Compensation |
☐ | ☐ | |||||||||||||||||||
| Shareholders’ Proposal Directors and management recommend Shareholders vote AGAINST shareholder proposal 1: | ||||||||||||||||||
| For | Against | Abstain | ||||||||||||||||
| Shareholder Proposal No. 1 |
☐ | ☐ | ☐ | |||||||||||||||
| Fold |
The text of the shareholder proposals is contained in the Management Proxy Circular starting on page 88.
| Authorized Signature(s) - Sign Here - This section must be completed for your instructions to be executed. |
Signature(s) Signing Capacity (if applicable)
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Quarterly Financial Statements Request
| These documents are available at bmo.com/investorrelations so we encourage you not to mark this box in order to protect the environment and reduce costs. If you wish to receive the Bank’s interim financial statements along with the related Management’s Discussion and Analysis by mail, please check the box to the right. If you wish to receive these documents electronically, see reverse for enrollment instructions for electronic delivery. |
☐ | Information Circular – Mark this box if you would like to receive the Information Circular by mail for next shareholders meeting. | ☐ |
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01OWRE
Exhibit 99.3
Bank of Montreal 2021 Annual Meeting Notice and access for shareholders
You have been invited to attend BMO’s 2021 annual meeting of shareholders.
| As COVID-19 continues to challenge Canadians and the economy, we have decided, and have received a court order to allow us to hold our 2021 annual meeting virtually again this year. You can participate in the virtual meeting by logging on to our live webcast. |
Date and time April 7, 2021 9:30 a.m. (Eastern time)
Webcast Watch live at https://web.lumiagm.com/458701741 Enter password: bmo2021 (case sensitive) |
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We’re making our 2021 management proxy circular available online this year instead of mailing it to you, following a set of rules developed by the Canadian Securities Administrators called notice and access, and pursuant to an exemption received from the Office of the Superintendent of Financial Institutions.
We encourage you to get your copy right away, and to read it before you vote. | |
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Bank of Montreal 2021 Annual Meeting Notice and access for shareholders |
2021 meeting agenda
| The following items will be covered at the meeting. | Where to read about it in the circular | |
| 1. Receive BMO’s consolidated
financial statements for the year ended October 31, 2020 and the |
page 2 | |
| 2. Elect the board of directors |
page 2 | |
| 3. Appoint the auditors |
page 2 | |
| 4. Vote (on an advisory basis) on our approach to executive compensation |
page 3 | |
| 5. Consider the shareholder proposal requesting an additional climate change related report |
page 3 | |
| Questions? If you have questions about notice and access or need help getting a copy of the circular, call: • 1-866-964-0492 |
Check in regularly for information updates Updates on how to vote and participate at the meeting will be posted on (www.envisionreports.com/BMO2021), on our website (www.bmo.com/home/about/banking/investor-relations/annual-general-meeting), and on SEDAR (www.sedar.com). Please be sure to check in from time to time. | |||
How to vote
Please see the voting instructions starting on page 4 of the circular for detailed information about voting.
You can vote in advance by proxy or voting instruction form, or vote in real-time at the virtual meeting. Voting using the form provided is the easiest way to vote.
Exhibit 99.4
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VIRTUAL AGM USER GUIDE
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The broadcast bar: Allows you to view and listen to the proceedings. 
Home page icon: Displays meeting information 
Questions icon: Used to ask questions
Voting icon: Used to vote. Only visible when the chairperson opens poll.
01OXUB
will appear on your device and the Meeting Resolutions will be displayed.
in the broadcast bar. Audio will still be available. To return to the audio cast after voting, select the arrow again.
then press the
button to submit a question.
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