The three millionaires of Investissement Québec

The news must have curled the ears of many taxpayers. For good and bad reasons.

On Tuesday, we learned that the first three leaders of Investissement Québec (IQ) each received more than $1 million in compensation this year. wow!

The state-owned company had taken care to summon the media to a “technical briefing” before the publication of this information, especially since the results are poor this year. The meeting focused on the sophisticated remuneration policies and the objectives of the organization, achieved or not.

The results ? Investissement Québec lost $224 million during the year ended March 31, 2023. This is a negative return on equity of 4.8%. This performance follows positive returns of 8.3% last year and 25.1% two years ago.

Of the million paid to each of the first three executives in 2022-2023, approximately 40% are bonuses, which are not linked to the negative performance which has just been published, but to those, positive, of the last three years. This year’s performance will translate into bonuses (or probably not) in next year’s annual report.

First comment: I find it rather reassuring that a Crown corporation in the financial sector has targeted and monitored objectives, with remuneration that depends on them. This practice is probably likely to encourage managers and employees to surpass themselves.

Second comment: the quality of the annual report is impressive. The 200 pages contain precise information, but especially details on the 18 objectives of Investissement Québec, with the initial targets that were set three years ago and the results (12 targets out of 18 have been achieved). There are also five targets for sustainable development, all achieved1.

We also learn that the executive committee is made up of 3 women and 5 men, and that IQ’s board of directors is much more female (8 women out of 11 directors), which is very rare in the business world.2.

Moreover, the best paid this year is a woman, the first vice-president of private placements, Bicha Ngo (1.15 million), ahead of the CEO, Guy LeBlanc (1.06 million), and the first vice-president , strategy and innovation, Sylvie Pinsonnault ($944,000).

The former head of corporate finance, Alexandre Sieber, who left a year ago, also received more than a million, which includes a severance package of $379,000.

Kudos for the transparency!

That said, I have reservations about compensation. First, one might wonder about the advisability of granting such a salary to the directors of a government corporation whose mission is to lend public money to businesses. Especially when you know that IQ has modest return expectations, since its mission is not to make as much money as possible, but to develop the Quebec economy.

Of course, demanding targets were clearly defined at the beginning of the three-year plan for the three main objectives (economic development, organizational performance and performance). And each of the three objectives must be achieved for the bosses to be entitled to their long-term bonus.

In addition, Investissement Québec aims for compensation at the median (P50) of so-called similar organizations (Business Development Bank of Canada, Solidarity Fund QFL, Laurentian Bank, Caisse de dépôt et placement, etc.). The objective is to attract and retain high quality employees to ensure the sound management of public funds.

Except IQ is a special bug. Paying a million to a boss of a company on the stock exchange does not displease the shareholders if it propels the price of the action and allows them to make money.

This is not the case with Investissement Québec, which must develop the province’s economy and in particular business productivity.

Were its targets in this regard achieved because of its decisions alone or thanks to the contribution of other organizations? And in what proportion? Would funded companies really have failed without IQ? Difficult to decide.

Another reservation: the variable compensation is not awarded based on the added value of the IQ team compared to competitors in the market. However, it is quite easy to have good returns – and to take credit – when the economy is going full speed, not a lot less when the economy is bad. Excellence is doing better than your neighbour, not doing well when everything is going well.

Given the particular nature of its activities, Investissement Québec cannot be compared to competitors in this way, says the first vice-president of human resources, Marie Zakaïb.

All the same, in its press release, the government corporation justifies its poor performance this year in particular by the tenor of the economy… “Like many other companies and investors, the Investissement Québec portfolio has been impacted by stock market instability and economic turmoil. »

For the past two years, IQ did not explain its good returns in its press release by the strength of the stock market or the economy…

Finally, last reservation, concerning the pay of administrative positions. It may be understandable that executives directly involved in investments make a lot of money, given the pay for these kinds of positions in the market. Except that the argument is much less valid for other positions, such as human resources, innovation or finance, for which IQ pays each more than $840,000 this year, all inclusive.

Very few companies grant this kind of remuneration in the market, even less to the public. At Hydro-Québec, for example, the executives all made less than $840,000 in 2022 – with the exception of the CEO – while the company has 22,000 employees, 18 times more than IQ’s 1,220. .

Investissement Québec seems to have good governance and good momentum, and that’s good. The financial arm of the government is however not a private company and does not have the same inescapable imperatives of return (otherwise, it is the door) as the private sector.

This difference should encourage the board of directors to exercise moderation in remuneration. After all, does a boss who makes a million really make twice as much as one who makes $500,000? Is its contribution to the economic development of Quebec – IQ’s mission – that much more important?

1. The annual report also provides information on the parity of the contingent of 1,220 employees by job category (624 women and 594 men), as well as their age. The average salary of each of the two groups is published by job category.

2. It was not Tuesday’s briefing that made me aware of this information; I noted the quality and transparency of the annual report last year. I planned to do a chronicle of it, but the idea was abandoned.

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