What went up? Executive Compensation Trends from the Mid-Market

Did compensation change from last year?

All compensation components experienced strong growth in the past year within the TSX mid-market (the approximately 100th to 300th ranked companies by market capitalization). Notably, base salary rose by 8.2%, contributing to double-digit increases in both total cash and total direct compensation¹. Additionally, Long-Term Incentive (LTI) grants saw a significant rise, with a median growth of 5.3% and an average growth of 10.9%.

¹ Total Cash = Base Salary + Short-Term Incentives, Total Direct = Total Cash + Long-Term Incentives.

What is the Typical Pay Mix?

Pay mix refers to the ratio of compensation representing base salary and incentive pay such as short-term incentives (STI) and long-term incentives (LTI).

For the average Canadian named executive at a TSX mid-cap organization, incentive compensation still represents most of their total compensation package. This makes sense, as incentive compensation is meant to align pay with the organization's performance. For a TSX mid-cap executive, only 36% of total direct compensation is attributable to base salary, while the remaining 64% is composed of incentive compensation, which includes STI payouts and LTI grants.

The majority of incentive pay comes from LTI grants, with senior executives typically receiving a larger share of their total compensation in LTI, reflecting their more strategic roles. For example, the average CEO of a TSX mid-cap company receives 46% of their total compensation in the form of LTI, compared to 39% for other named executives.

Figure 2: Target pay mix for named executives in the Canadian Mid-Market.

These pay mixes are similar to 2023 pay mixes, with a slight decrease to base salary % and slight increases to STI % and LTI %.

STI Targets and Payouts

Approximately 71% of named executive officers have an STI target. The typical STI target for a CEO is 100% of salary, while targets for COOs and CFOs are lower, with median targets of 80% and 75% respectively. In 2024, STI payouts generally exceeded targets, with the average payout being 4% higher than the target. We note that CEOs, COOs and CFOs were on average more likely to exceed their targets than other NEOs.

LTI Grants versus Targets

LTI targets are less common, with only 39% of named executive officers having a formal LTI target. The median LTI target for a CEO is 225% of salary, while COOs and CFOs have median targets of approximately 150% and 125%, respectively. In 2024, LTI grants generally exceeded targets, though approximately one-fifth of organizations made LTI grants equal to target. We note that CEOs are on average less likely to exceed their targets than other NEOs.