Do higher executive compensation packages lead to better performance amongst publicly traded cannabis companies? Not exactly.
A recent review of 96 cannabis firms by Bedford Consulting Group, a Canada-based executive search firm, found that organizations with well-compensated executives actually unperformed against the Bloomberg Intelligence Global Cannabis Index, Bloomberg noted.
Bedford’s report — which analyzed compensation for 449 Board Members and 437 Cannabis industry executives at 96 companies – found that Acreage Holdings, Sunniva and Tilray had the most handsomely compensated executives and directors.
However, all of those companies have all underperformed over the last 12 months, with their stock prices falling 135%, 116% and 185%, respectively, since this time last year.
“The current increased volatility in the cannabis sector means compensation for senior leaders in 2020 will decline significantly,” Bedford managing partner Frank Galati said via a press release. “This presents a significant opportunity for Boards to rethink elements of compensation.”
According to Bedford, Tilray CEO Brendan Kennedy was the top earner at C$31.8 million in 2019, however 97% of that total was non-cash equity compensation.
The median compensation for a CEO at a company with over $1 billion in market cap totaled more than C$1.7 million, Bedford determined. By comparison, CEOs at similar-sized companies in the dietary supplements, and food and beverage industries earned more than C$4.6 million.
“We have found that cannabis companies have been, and remain keenly interested in, recruiting talent from these industries given the relevancy of experience and skillset,” Bedford partner Darren Raycroft said via the release.
Meanwhile, Acreage Holdings director Brian Mulroney, the former Prime Minister of Canada, received C$13.9 million last year, all of which was equity-based.
“Overall, the total compensation of directors increases as the market cap of the company increases,” Bedford noted in its 47-page report, obtained and reviewed by THCnet.
According to Bedford, 61% of board members receive annual cash retainers of up to C$150,000. Canada’s largest cannabis company, Canopy Growth Corporation, pays the highest director retainer, the search firm shared.
Bedford’s review also revealed that only 30% of the cannabis companies surveyed employed one or more female named executive officers (NEOs) in fiscal 2018. Only 8% of the 437 NEOs in the study were female, suggesting that major cannabis firms continue to grapple with gender diversity issues.
At the same time, just 17% of the females who held an executive role during fiscal 2018 were CEOs. The most popular executive role for women in the cannabis sector is CFO.
Meanwhile, only 11% of the board members included in the analysis were female, Bedford said, adding that just 38% of the companies had “at least” one female board member.
A press release from Bedford with additional information is included below. A full copy of the report can be found here.
New Bedford Report Details Cannabis Industry’s Executive and Board Compensation in Canada & US
Tilray’s Brendan Kennedy earned $31,817,459 – the highest overall compensation
TORONTO, ONT – The first-ever comprehensive report of Executive and Board compensation in the North American Cannabis industry has been published by the Bedford Consulting Group.
“This is Bedford’s inaugural industry-wide survey of compensation awards and practices for Cannabis Executives and Board members. It provides detailed insights into management compensation in this rapidly evolving industry,” says Bedford Managing Partner and Compensation Practice lead Frank Galati. “These figures are based on data from 2019. The current increased volatility in the cannabis sector means compensation for senior leaders in 2020 will decline significantly. This presents a significant opportunity for Boards to rethink elements of compensation.”
The Compensation Report: Cannabis, features an analysis of nearly 100 Cannabis industry companies publicly listed on the TSX, TSXV, CSE, NYSE, Nasdaq, and ASX. The data includes compensation for 449 Board Members and 437 Cannabis industry executives.
To provide context, the report compares the cannabis industry results with compensation practices from two closely related sectors, namely the Dietary Supplements and Food and Beverage industries. Results focus on the key elements that make up total compensation, including base salary, annual bonus, equity (share-based awards and options-based awards) and pension.
- Brendan Kennedy of Tilray Inc., earned this highest total overall compensation in 2019 at $31,817,459, with equity compensation making up 97% of this total.
- Median total compensation ranged widely, from $27,278 for directors at companies with a market cap under $100 million, up to $241,830, for directors at companies with market cap over $1 billion.
- At the 50th percentile, Cannabis CEO total compensation was $1,712,759 for companies over $1 billion in market cap . By comparison, CEOs at the same 50th percentile and market cap in the Dietary Supplements and Food and Beverage industry earned $4,632,015.
- 38% of Cannabis companies had at least one female board member. However, only 8% of the 437 Named Executive Officers were female.
Regarding the comparisons with Dietary Supplements and Food and Beverage, Bedford Partner Darren Raycroft notes there are specific elements in the industries that provide insightful comparisons.
“All of these industries are similarly regulated, whereby their product development processes and go to market are quite similar,” says Raycroft. “Additionally, through Bedford’s executive search Cannabis practice, we have found that Cannabis companies have been and remain keenly interested in recruiting talent from these industries given the relevancy of experience and skillset”.
The report found CEOs in the Dietary Supplements and Food and Beverage industry receive significantly higher total compensation than their cannabis peers at all market cap tiers. The gap is most pronounced for market caps over $1 billion, where the difference is a result of larger short-term bonus payouts and more common usage of share-based long term incentive awards.
To access the report, please visit https://bedfordgroup.com/specialties/compensation-services.
About Bedford Consulting Group
The Bedford Consulting Group is one of Canada’s leading privately-held executive search firms. Bedford is the Toronto partner of Transearch International, a global executive search organization, operating in 40 countries. In addition to executive search, Bedford provides executive compensation expertise, offering remuneration reports, executive pay benchmarking, reward strategy and pay mix, annual cash incentives, performance metrics and market trends. To learn more about Bedford, please visit www.bedfordgroup.com.