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

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

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

She said her office identified 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 — and Loto-Québec.

In her report, she wrote that the average pay of vice-presidents at those organizations has doubled over time compared to those at other government agencies. This means vice-presidents at the companies 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-Québec and Investissement Québec (IQ) received bonuses of between 26 to 36 per cent of their salaries.

Leclerc highlighted how severance pay is concealed by confidentiality agreements at various organizations, including school boards. Signing bonuses and other details about how certain officials are compensated are 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.

Quebec Treasury Board President Christian Dubé and Economy Minister Pierre Fitzgibbon said they are taking the 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 Crown corporations received severance packages totalling $3.5 million, but more than 75 per cent of that money was never disclosed publicly.

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

Four school boards, including the Commission scolaire de Montréal, paid $547,000 in severance to seven senior executives without 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 at a press conference.

In some instances, severance benefits were negotiated case by case, even if there was no provision for severance in the original employment 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 job for less than two years. Sépaq, the agency that manages Quebec's network of parks, paid five months' salary to a manager who 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, and Loto-Québec 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 undertakings than 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 and Loto-Québec should "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 Sépaq should "establish clear guidelines consistent with government guidelines for severance packages available to their vice-presidents."
   
• The SAQ, IQ, Loto-Québec and Sépaq 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.

Leclerc said she was surprised by this response. She said that 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.