Background DRAFT EXECUTIVE COMPENSATION PROGRAM In 2010, the Province of Ontario legislated a two-year compensation freeze for all non-unionized employees in the Broader Public Sector which prohibited increases to compensation including rates of pay, pay ranges, benefits, and other payments, but allowed for employees to progress through the ranks if their terms and conditions of employment included a salary grid. In 2012, the Province lifted the compensation freeze for all non-unionized employees but continued a freeze on all elements of compensation for designated executives and certain office holders, including performance pay envelopes. These compensation restraint measures continue to apply until a new executive compensation framework becomes effective for an employer. In September 2016, the Executive Compensation Framework Regulation under the Broader Public Sector Executive Compensation Act (BPSECA) came into force. The intent of this Regulation was to ensure responsible and transparent administration of executive compensation in the Ontario broader public sector through the development of an approved executive compensation framework. Under BPSECA, a process was defined to develop an executive compensation framework that applies to designated executive positions at specific Ontario institutions. The framework must identify the executive positions, include the compensation philosophy, set salary and performance-related pay caps and specify a maximum rate by which the total executive salary and performance-related pay envelope could be increased in each year. In determining the salary ranges and performance pay targets, the framework must be based on a comparable peer group that consists of a minimum of eight comparator organizations with specific rationale that explains why these specific comparator organizations were chosen. The salaries and performance pay for similar jobs at these comparator organizations are then to be used to determine a contemporary executive compensation framework and to set the maximum rate of pay for executive roles and their respective incumbents. As per the Executive Compensation Framework Regulation under the Broader Public Sector Executive Compensation Act (BPSECA), the Board of Directors of the Northern Ontario School of Medicine ( NOSM ) has the lead responsibility for executive compensation philosophy framework development, including: Developing an executive compensation framework that meets the criteria specified above; Submitting the proposed framework to the Ministry of Advanced Education and Skills Development and securing its approval of the comparator organizations and of the proposed maximum rate of increase to its salary and performance-related pay envelope; After receiving approval by the Ministry to do so, seeking public comment by posting its proposed framework on its public-facing website for a minimum of 30 days; Submitting to the Ministry the summary of the public feedback received and any changes being made to the program; Approving the final Executive Compensation Framework and posting it on its website; and, Approving all wage increases for designated executives. 30-Day Public Consultation April 3, 2018 Page 1 of 7
In support of this initiative, NOSM retained the services of Mercer Canada to provide 3rd party advice, guidance, and support, in order to ensure compliance with the BPSECA, as well as good practices for independence and governance. Who We Are To help overcome a longstanding chronic physician shortage in Northern Ontario, the Government of Ontario established the Northern Ontario School of Medicine (NOSM) in 2002. NOSM was created as a not for profit corporation with a social accountability mandate to improve the health and wellness of Northerners. Since its official opening in 2005, NOSM has developed and delivered a distinctive model of distributed, community-engaged medical education and research. While NOSM is affiliated with Lakehead University in Thunder Bay and Laurentian University in Sudbury, for degree granting purposes only, NOSM is a stand-alone legal entity with its own governance and corporate reporting. Teaching and research occurs at over 90 communities across Northern Ontario with over 1,400 part-time clinical and stipendiary faculty. The entire geography of Northern Ontario serves as the campus of NOSM. The School s 1,400+ faculty members educate physicians, dietitians, physician assistants, audiologists, occupational therapists, physiotherapists, and speech-language pathologists in over 100 clinical teaching sites across Northern Ontario. Learners are woven into the fabric Northern Ontario s communities, where they learn in context about the determinants of health relevant in the region. NOSM has become a significant recruitment strategy that is helping Northern communities attract and retain health-care professionals. In addition, NOSM provides hundreds of hours of continuing education each year across the North, preventing physicians and health professionals from having to leave the North in order to maintain their license to practice. Most importantly, NOSM has dramatically changed the healthcare landscape in Northern Ontario, and significantly contributed to improvements in health care and economic growth throughout the North. Designated Executives As a fully independent and standalone school of medicine, NOSM needs to attract and retain a strong executive team to lead and guide a truly unique organization, with a mandate that is critically important to the health of the Northern Ontario communities that it serves. In this regard, the proposed Executive Compensation Framework will apply to the following designated executive positions at NOSM: 1. President, Dean & Chief Executive Officer 2. Vice-President & Deputy Dean, Community Engagement 3. Vice-President & Senior Associate Dean, Postgraduate Education 4. Vice-President & Senior Associate Dean, Research 5. Vice-President & Chief Operating Officer 6. Vice-President & Associate Dean, Faculty Affairs & CEPD 7. Vice-President & Associate Dean, Undergraduate Medical Education 30-Day Public Consultation April 3, 2018 Page 2 of 7
Compensation Philosophy In order to attract and retain executive talent and the necessary leadership team with the requisite high-calibre skills and knowledge, executives are typically recruited from other universities, schools of medicine, and the broader healthcare sector, and from as far away as Australia. Accordingly, NOSM s executive compensation program is designed to attract and retain highly qualified leaders with the necessary skills, qualifications and experience to lead a truly unique academic medical institution operating across Northern Ontario. In support of NOSM s mandate and strategic context, the following principles were used to guide the design and governance of the executive compensation strategy: Aligned with NOSM's strategic direction, business model, and organization design Optimizing the attraction and retention of key executive talent; To the greatest extent possible, aligning with and supporting NOSM s unique medical school and corporate mandate and enabling business model; Providing meaningful transparency both in terms of process and content; Development of formal salary ranges to manage salary positioning and competencybased progression; Contemporary practices and standards for internal equity differentiation between executive classification and compensation levels; Externally equitable against a relevant and comparable set of peer organizations, and; Based on a total rewards approach to compensation. Determining Compensation Levels Comparator Group While the legislation allows for comparison with any broader public sector organizations, NOSM s comparator group was specifically selected from the higher education and health care sectors, given the need to attract and retain specialized sector-specific skill sets. Further, given NOSM s distributed education model and broad geographic coverage of services, a special focus was placed on Northern Ontario academic and healthcare institutions, in order to ensure that NOSM s compensation strategy is aligned with its critically important strategic partnerships in the North. The comparator peer group is also based on objectively measured criteria and qualitative considerations such as NOSM s mandate and scope of programs and services, and its most likely competitors in the labour market for executive talent attraction and retention. Comparable positions were chosen from these comparators that were generally similar with respect to core roles and responsibilities, essential competencies (knowledge, skills, and abilities), relative complexity, and the level of accountability associated with the position. Based on the above criteria, the following comparator organizations were chosen (for details on each of the comparators, please see Appendix A): 1. McMaster University: School of Medicine 2. Queen s University: School of Medicine 3. University of Ottawa: School of Medicine 4. University of Western Ontario: School of Medicine 5. Lakehead University 30-Day Public Consultation April 3, 2018 Page 3 of 7
6. Laurentian University 7. Health Science North 8. Sault Area Hospital 9. Thunder Bay Regional Health Sciences Centre 10. Royal College of Physicians and Surgeons of Canada 11. The Medical Council of Canada Executive Compensation Framework Based on the analysis of related executive compensation pay practices across the identified peer group comparators, contemporary executive pay structures (minimum to maximum base salary ranges), and with due regard to the BPSECA regulations, the following Executive Compensation Framework is recommended for adoption. As summarized below, this framework consists of four tiers of pay with specific executive position placement based on relative levels of accountability and job value (internal equity), and peer group practices. Pursuant to the Regulations, the maximum salary and performance-related pay caps for each of the four tiers and designated executive positions are based on the 50th percentile of comparator peer group total cash (base salary plus variable pay-at-risk) compensation practices. Consistent with pay practices in the peer group, NOSM's executive compensation framework does not include a pay-at-risk component. Tier of Pay Designated Executive Positions Base Salary Range Minimum Base Salary Base Salary Range Maximum Tier 1 Dean & Chief Executive Officer $297,000 371,300 Tier 2 Tier 3 Tier 4 Vice-President & Deputy Dean, Community Engagement Vice-President & Senior Associate Dean, Postgraduate Education Vice-President & Senior Associate Dean, Research Vice-President & Chief Operating Officer Vice-President & Associate Dean, Faculty Affairs & CEPD Vice-President & Associate Dean, Undergraduate Medical Education $231,900 $289,900 $202,500 $253,100 $176,800 $221,000 Designated Executive Salary and Performance-Related Pay Envelope NOSM s total pay envelope for designated executives for the period of April 1, 2016 to March 31, 2017 was $1,624,545. The proposed maximum rate of increase to the total pay envelope is 4.5%. This increase reflects an implementation plan that will allow NOSM to position each of the 30-Day Public Consultation April 3, 2018 Page 4 of 7
current executives within their respective salary ranges with the ability/option to provide movement within the salary range on an annual basis. The maximum rate of increase to the compensation envelope was determined based on the incumbent s base salary range placement, competency, performance, and tenure. Conversion costs to implement the proposed Executive Compensation Framework (and related rate of increase to the compensation envelope) are based on the following: Individual salary adjustments based on executive competency profiles, performance, and tenure applied to allow for movement within the salary range. Flexibility to provide future economic increases as appropriate and in line with the governments directives with respect to annual salary scale increases In determining the appropriate maximum rate of increase, NOSM considered four of the five factors outlined in Section 3.3 of the BPSECA Framework Regulation (note that the fifth applies where significant expansion of operations is planned, which is not currently the case for NOSM): 1. The financial priorities and the compensation priorities of the Government of Ontario, as indicated in the Speech from the Throne, the Budget, the Economic Outlook and Fiscal Review, and the public documents of the Crown in right of Ontario, the Cabinet, the Treasury Board and the Management Board of Cabinet. The Government of Ontario s priorities include controlling costs, providing accountability to the public regarding provincial-wide services, and making those services cost-effective. In order to best support these priorities, NOSM needs to be able to attract and retain qualified executives who are capable of leading a truly unique and important organization, and ensure that it delivers high quality health care education services to Ontario constituents and providing medical education to the future physicians of Northern Ontario, while managing its public funding responsibly. NOSM operates in compliance with legislation and in alignment with the Government's priorities. 2. Recent executive compensation trends in the part of the Canadian public sector and broader public sector that is in the industry within which the designated employer competes for executives. Executive compensation trends, and more specifically peer group reference points, were generally based on the Ontario healthcare and education sectors where NOSM competes for executive talent. The proposed rate of increase for comparable organizations (hospitals and universities) complying with BPSECA is forecasted to range from 4% to 5%. Further, according to Mercer (Canada) Limited s compensation planning forecast for 2018, Canadian broader public sector executive base salary increases are forecasted to be in the range of 3%, excluding variable pay-at-risk. 3. A comparison between the percentage of the designated employer s operating budget that is used for executive salary and performance-related pay and the percentages of the operating budgets of the designated employer s comparator organizations under section 3 that are used for executive salary and performance-related pay. Given NOSM s mandate, scope of services, and diverse organization, and its determined peer group of comparators, NOSM s proposed executive compensation budgets are comparable to its peer group comparators. 30-Day Public Consultation April 3, 2018 Page 5 of 7
4. The effect on attracting talent to the designated employer s executive positions, and retaining talent in the designated employer s executive positions, of the difference between the salary and performance-related pay range for those positions and the salary and performance-related pay ranges for the employees or office holders who directly report to the holders of those positions. In addition to the government's financial priorities, as well as the need for external labour market competitive positioning given the reality that employers in the medical education and academic health sciences sectors are challenged with, it is important to consider internal relativities within an organization as a critical factor in attracting and retaining talent. Accordingly, NOSM also considered the both current rates of pay, and in-range increases provided to non-executive managers and other NOSM employees. The proposed executive compensation framework will result in contemporary differences and relativities between management and executive pay levels and addresses current compression challenges. 5. Any significant expansion in the operations of the designated employer that is not the result of a significant organizational restructuring. O. Reg. 187/17, s. 3. There are no significant organizational changes anticipated at NOSM at this time. 30-Day Public Consultation April 3, 2018 Page 6 of 7
Appendix A Comparator Organization Details NOSM s Core Enterprise-Wide Peer Group Comparator Organization 1. McMaster University: School of Medicine 2. Queen s University: School of Medicine 3. University of Ottawa - School of Medicine 4. University of Western Ontario: School of Medicine 5. Lakehead University 6. Laurentian University 7. Health Science North 8. Sault Area Hospital 9. Thunder Bay Regional Health Sciences Centre 10. Royal College of Physicians and Surgeons of Canada 11. The Medical Council of Canada Mandate Description The Michael G. DeGroote School of Medicine, known as the McMaster University School of Medicine prior to 2003, is the medical school of McMaster University in Hamilton, Ontario, Canada. It is operated by the McMaster Faculty of Health Sciences The Queen's School of Medicine is a unit of the Faculty of Health Sciences at Queen's University responsible for research, as well as undergraduate and graduate education in Medicine The Faculty of Medicine at the University of Ottawa is a bilingual medical school in Ottawa, Ontario. The Schulich School of Medicine & Dentistry is the combined medical school and dental school of the University of Western Ontario, one of 17 medical schools in Canada and one of six in Ontario Lakehead University is a public research university with campuses in Thunder Bay and Orillia, Ontario. Lakehead University works in partnership with the Northern Ontario School of Medicine, which acts as the University s school of medicine. Laurentian University, which was incorporated on March 28, 1960, is a mid-sized bilingual university in Greater Sudbury, Ontario. Laurentian University works in partnership with the Northern Ontario School of Medicine, which acts as the University s school of medicine. Health Sciences North is an academic health science centre in Greater Sudbury, Ontario. HSN offers a variety of programs and services, with regional programs in the areas of cardiac care, oncology, nephrology, trauma and rehabilitation. HSN s academic health science centre is affiliated with the Northern Ontario School of Medicine. Serving a catchment population of approximately 115,000 SAH provides primary, secondary and select tertiary services to residents in Sault Ste. Marie and the District of Algoma. Thunder Bay Regional Health Sciences Centre is an acute care facility serving Thunder Bay and much of Northwestern Ontario. The hospital s academic health science centre is affiliated with the Northern Ontario School of Medicine. The Royal College of Physicians and Surgeons of Canada is a regulatory college which acts as a national, nonprofit organization established in 1929 by a special Act of Parliament to oversee the medical education of specialists in Canada The Medical Council of Canada (MCC) is an organization that is charged with assessing medical candidates, evaluation of physicians through exams and granting a qualification called Licentiate of the Medical Council of Canada (LMCC) to those who wish to practice medicine in Canada. 30-Day Public Consultation April 3, 2018 Page 7 of 7