Auditor general decries murky compensation practices at SAQ, Loto-Qubec, others

The annual report from Quebec's auditor general highlights easy bonuses, unjustified salariesand unregulated severance packages for top executives and calls out a lack of transparencyat the province's Crown corporations.

"If you want to have significantindependenceyou needto show significant transparency," Auditor General Guylaine Leclerc said after tabling the report at the National Assembly on Thursday.

She said her officeidentified a need for more oversight and "many gaps in transparency" around executive compensation at commercially-focused Crown companies, such as Quebec's liquor board the SAQ andLoto-Qubec.

In her report, she wrote that the average pay of vice-presidentsat those organizationshas doubledover time compared to those at other government agencies. This meansvice-presidents at thecompanies earn "on average twice as much as a deputy minister, whether it be for health, finance or education."

Bonuses are essentially taken for granted in most of those cases, "usually with little regard for their personal performance," the report says.Last year all of the vice-presidents at the SAQ,Loto-Qubec andInvestissement Qubec(IQ) received bonuses of between 26 to 36 per cent of their salaries.

Leclerc highlighted how severance pay is concealedbyconfidentiality agreementsat various organizations, including school boards.Signingbonuses andother details about how certain officials are compensatedare often not disclosed.

"Information provided by state-owned enterprises regarding the executive compensation is insufficient, which undermines the transparency and accountability of decision-makers," the report says.

QuebecTreasury Board President Christian Dub and Economy Minister Pierre Fitzgibbon saidthey are takingthe auditor general's request for stricter guidelines and a proper framework for bonuses very seriously.

Severance packages undisclosed

In the last two years, 11 senior executives at Crowncorporationsreceivedseverance packages totalling $3.5 million, but more than 75 per centof that money was never disclosed publicly.

The SAQ paid a total of $2 million in severance benefits to five senior executives without disclosing thatinformation.

Four school boards, including the Commission scolaire de Montral, paid $547,000 in severance to seven senior executiveswithout making the information public.

Some of the companies argue that severance pay is not strictly a remuneration, but "this is not our interpretation," Leclerc said ata press conference.

In some instances, severance benefits were negotiated case by case, even if there was no provision for severance in the originalemployment contracts. In a number of cases, the report said severance amounts "significantly" exceeded the amounts established in provincial guidelines.

The report points out, for example, that the SAQ granted a 15-month salary allowance for an executive who was in the jobfor less than twoyears.Spaq, the agency that manages Quebec's network of parks, paid fivemonths' salary to a managerwho worked 15 months.

Government rules provide for the payment of one month of salary for each year of service, up to 12 months total.

Auditor 'perplexed'by justification of higher pay

In their defence, Crown corporations such as the SAQ, IQ, andLoto-Qubec say they need to offer higher executive pay to attract and retain the best candidates.

Leclerc said she was "perplexed" by those justifications.

"How do we explain that it is more important to attract and retain talent to manage commercial undertakingsthan to address other societal issues that I consider to be at least as important, such as: youth education, healthcare and public debt management?" Leclerc wrote in the report.

The report includes eight recommendations that Leclerc has already shared with the stakeholders and companies in question. Among them:

• The SAQ, IQ andLoto-Qubecshould "determine parameters that take into consideration the specific context of the Quebec public service in which they operate and establish the wage scales of their senior executives."
  
• Those three organizations should also "review their incentive compensation program and its application in collaboration with central government organizations to ensure that they are appropriate for the public sector."
  
• The SAQ and Spaq should "establish clear guidelines consistent with government guidelines for severance packages available to their vice-presidents."
  
• The SAQ, IQ, Loto-Qubec and Spaq should "report, with transparency, on all components of senior executives' remuneration in their annual management report and in the credit analysis."

All of the organizations have accepted the recommendations, the report says, except for IQ, which accepted none, and the SAQ, which accepted one of four.

Leclercsaid she was surprisedby this response.Shesaidthat her team will prepare a follow-up plan, but that it will be up to the province's Committee on Public Administration to draw up a plan of action.