Five years ago, William Doyle was already a wealthy man, earning a good salary of $780,000 (U.S.) a year to head Potash Corp. of Saskatchewan Inc., plus holding stock options worth $7-million at the end of 2003.
Then agriculture got caught up in the commodity boom and fertilizer prices took off. As a result, Mr. Doyle has moved beyond wealthy into a stratosphere inhabited by only a handful of Canadians.
Potash prices have gone from around $100 a tonne four years ago to more than $600 recently, and some forecasts are calling for $1,000 by the end of the year. The firm's share price has risen alongside, quadrupling in 16 months. As for his personal bottom line, Mr. Doyle's stock options are now worth almost $600-million - a value never seen before for an executive at a public company in Canada, never mind at the mature Saskatoon-based fertilizer company.
After heading Potash Corp. for the past nine years, Mr. Doyle's options - rights to buy stock at a predetermined price - now dwarf those held by any other executive in Canada, from the red-hot oil patch to the highly compensated financial services sector.
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A Globe and Mail review of public companies in Canada shows only six executives outside of Potash Corp. held unexercised options worth more than $100-million as of Dec. 31.
The next highest after Mr. Doyle was Onex Corp. CEO Gerry Schwartz, with options worth $141-million (Canadian), followed by Power Financial Corp. chairman Robert Gratton, whose unexercised options totalled $139-million.
The co-CEOs of another runaway Canadian success story - James Balsillie and Michael Lazaridis of Research In Motion Ltd. - each held unexercised options worth just over $100-million (U.S.) at the date of the company's last proxy circular.
Potash Corp. shareholders will get a chance to have their say on 2008 compensation for Mr. Doyle, who lives in suburban Chicago and works from the company's U.S. offices, as well for the rest of management at the company's annual meeting today in Saskatoon.
Mr. Doyle, 57, who joined Potash Corp. in 1987 and was named CEO in 1999, did not respond to a request for comment on his wealth windfall.
The head of Potash Corp.'s compensation committee said Mr. Doyle's options are so valuable because he usually only exercises them as they are reaching their 10-year expiry. That means he still holds most of those he has been granted over the years.
"I think it's to his credit that he has held on to them, and he shouldn't be blamed for the fact that he didn't exercise them sooner, which would have taken them off the table and avoided the spotlight," said John Estey, whose committee developed the executive pay system.
Mr. Doyle's options were worth about $406-million at Dec. 31. At the company's share price peak on April 22, his option value topped $640-million.
The company's top five executives in total held options worth over $1-billion on April 22.
The whopping values are the result of an enormous increase in Potash's share price over the past 16 months as global demand for fertilizer has soared. The company's shares surged 200 per cent over the year ended Dec. 31, 2007.
They have climbed 38 per cent since then, buoyed by a new deal in April to boost the price paid by China by $400 a tonne.
Mr. Estey said the company's investors want a compensation program that rewards good performance - and options achieve that goal.
He added that shareholders have been supportive of the plan. The company has adopted a practice of having its option grants approved annually by shareholders - and approval rates have been around 90 per cent.
"We've never had complaints about compensation," Mr. Estey said. "Because while these [option] numbers look big, the growth in the market cap of the company dwarfs any numbers like these."
Nonetheless, numbers like these will undoubtedly help fuel the debate in Canada about how commodity companies should pay executives when corporate performance is linked to factors beyond their control. The debate has grown in recent years as commodity prices have soared.
Michel Magnan, a business professor at Concordia University in Montreal who specializes in compensation issues, said he has grown increasingly concerned that CEOs in resource sectors are still being "paid for luck" rather than for their own performance.
"In theory we shouldn't reward people for things over which they didn't have any control - it's just a bonanza," he said. "However, in practice, it's been very hard to implement."
That's because it is difficult to design a workable compensation scheme that aligns executive pay with corporate performance but also builds in features that control for commodity price changes.
Inmet Mining Corp. eliminated all stock options in 2001 because the company decided it would leave compensation under the control of commodity markets rather than the board of directors, says chairman and CEO Richard Ross.
"If shareholders benefit because of just commodity price changes ... I think one has to ask what have you compensated management for," he said. "Sitting at their desks and simply keeping the business running?"
That view, however, remains rare among commodities companies, where stock options remain highly popular.
Frank Proto, chairman of fertilizer company Agrium Inc., supports the use of stock options, saying shareholders want companies to align total executive compensation with bottom-line performance. And options fill that demand.
"If managers are making money on their options, then shareholders are making money. And that's fair," he said.
Potash wealth
This is an estimate of the value of unexercised in-the-money stock options held by the top five executives of Potash Corp. of Saskatchewan Inc., including options that are both vested and unvested. The chart shows the estimated value of the options at Dec. 31, as well as on April 22 when Potash shares closed at their all-time high value, and their value
as of Tuesday. Different executives have options denominated in U.S. or Canadian dollars.
Yesterday's close $190.7, up $4.26
EXECUTIVE OPTIONS
| Dec. 31, 2007 | April 22, 2008 | May 6, 2008 | |
| William Doyle, president and CEO ($U.S.) | $406.3-million | $644.3-million | $590.1-million |
| Wayne Brownlee, chief financial officer ($ Canadian) | $107.2-million | $174.7-million | $159.8-million |
| James Dietz, chief operating officer ($U.S.) | $102.9-million | $164.1-million | $150.1-million |
| Garth Moore, president of PCS Potash ($ Canadian) | $30.5-million | $51.2-million | $46.6-million |
| Thomas Regan Jr., president of PCS Phosphate and PCS Nitrogen ($U.S.) | $23.8-million | $36.6-million | $36-million |
SOURCE: THOMSON DATASTREAM, THE GLOBE AND MAIL
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