UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of March, 2015
CANADIAN
PACIFIC RAILWAY LIMITED
(Commission File No. 1-01342)
CANADIAN PACIFIC RAILWAY COMPANY
(Commission File No. 1-15272)
(translation of each Registrants name into English)
7550 Ogden Dale Road S.E., Calgary, Alberta, Canada, T2C 4X9
(address of principal executive offices)
Indicate by
check mark whether the registrants file or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F x
Indicate by check mark if the registrants are submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1): ¨
Indicate by check mark if the
registrants are submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
This Report furnished on Form 6-K shall be incorporated by reference into, or as an exhibit to, as applicable, the Registration Statements of
Canadian Pacific Railway Limited on Form S-8 (File Nos. 333-127943, 333-13962, 333-140955, 333-183891, 333-183892, 333-183893, 333-188826 and 333-188827). The Management Proxy Circular attached hereto as
Exhibit 99.2 is incorporated by reference into Registration Statement on Form F-10 No. 333-190229 (Canadian Pacific Railway Limited) and Form F-10 No. 333-189815 (Canadian Pacific Railway Company) as an exhibit thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
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CANADIAN PACIFIC RAILWAY LIMITED |
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CANADIAN PACIFIC RAILWAY COMPANY |
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(Registrants) |
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Date: March 30, 2015 |
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Signed: |
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/s/ Scott Cedergren |
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By: |
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Name: |
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Scott Cedergren |
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Title: |
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Assistant Corporate Secretary |
DOCUMENTS FILED AS PART OF THIS REPORT ON FORM 6-K
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99.1 |
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Notice of Annual Meeting of Shareholders. |
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99.2 |
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Management Proxy Circular. |
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99.3 |
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Form of Proxy. |
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
You are invited to the annual and special meeting of shareholders (the Meeting) of Canadian Pacific Railway Limited (Canadian
Pacific).
The Meeting will be held at The Westin Calgary, Britannia-Belaire Ballroom, 320 4th
Avenue S.W., Calgary, Alberta T2P 2S6, at 9:00 a.m. (Mountain Daylight Time) on Thursday, May 14, 2015.
The Meeting will cover:
1) |
receipt of the audited consolidated financial statements for the year ended December 31, 2014; |
2) |
appointment of auditors; |
3) |
a non-binding advisory vote on Canadian Pacifics approach to executive compensation; |
4) |
election of directors; |
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consideration of and, if deemed appropriate, passing, with or without variation, an ordinary resolution, the full text of which is reproduced on page 8 of the Management Proxy Circular, confirming By-law No. 2 of
the Company, adopting advance notice requirements for nominations of directors by shareholders (the Advance Notice By-Law); |
6) |
consideration of and, if deemed appropriate, passing, with or without variation, a special resolution, the full text of which is reproduced on page 8 of the Management Proxy Circular approving amendments to the Articles
of Canadian Pacific to authorize Canadian Pacific to hold shareholder meetings in Canada and the United States; and |
7) |
consideration of other business as may properly come before the Meeting or any adjournment or postponement thereof. |
Shareholders of record at the close of business on March 17, 2015 will be entitled to vote at the Meeting and are encouraged to participate either in person or by
proxy.
/s/ Paul A. Guthrie
Paul A. Guthrie
Corporate Secretary
March 17, 2015
Calgary, Alberta
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Canadian Pacific Railway Limited |
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NOTICE OF ANNUAL AND SPECIAL MEETING |
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OF SHAREHOLDERS AND |
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MANAGEMENT PROXY CIRCULAR |
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WHATS INSIDE
CANADIAN PACIFIC
March 17, 2015
DEAR FELLOW SHAREHOLDER,
It is my pleasure to invite you to the annual and special meeting of shareholders of Canadian Pacific Railway Limited, to be held at the Westin Calgary,
Britannia-Belaire Room, 320 4th Avenue S.W., Calgary, Alberta on Thursday, May 14, 2015 at 9:00 am local time.
2014 was an exceptional year for Canadian Pacific, presenting many moments of both challenge and reward. Your Board of Directors was very pleased with the
Corporations performance and is encouraged by the positive response of our stakeholders. In all decisions we will continue to be guided by our foundations to ensure we deliver the value and results consistent with a railway industry leader.
As a shareholder of Canadian Pacific, you have the right to participate and vote your shares on all items of business during the annual meeting. This management
proxy circular describes the business to be conducted at the meeting and provides background and information detailing our philosophies and policies, including Canadian Pacifics approach to executive compensation and corporate governance.
We hope that you will review this circular in advance of the meeting. Even if you are not able to attend the meeting in person, we encourage you to exercise your right
to vote. Further information on common questions may be found in the section of the circular titled Questions and Answers about Voting and Proxies.
In
addition to the ordinary business of the annual meeting, two special items will be proposed to shareholders, with respect to the confirmation of CPs advance notice by-law, and regarding an amendment to the articles of the Corporation. Upon
conclusion of the formal meeting, Hunter Harrison our CEO and Keith Creel our President and COO will be available to take questions relating to Canadian Pacifics operations.
On behalf of the Board and management of Canadian Pacific, we look forward to welcoming you to this years annual shareholders meeting.
Sincerely,
/s/ Gary F. Colter
Gary F. Colter
Chairman of the Board
2015 MANAGEMENT PROXY
CIRCULAR 1
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
You are invited to the annual and special meeting of shareholders (the Meeting) of Canadian Pacific Railway Limited (Canadian
Pacific).
The Meeting will be held at The Westin Calgary, Britannia-Belaire Ballroom, 320 4th
Avenue S.W., Calgary, Alberta T2P 2S6, at 9:00 a.m. (Mountain Daylight Time) on Thursday, May 14, 2015.
The Meeting will cover:
1) |
receipt of the audited consolidated financial statements for the year ended December 31, 2014; |
2) |
appointment of auditors; |
3) |
a non-binding advisory vote on Canadian Pacifics approach to executive compensation; |
4) |
election of directors; |
5) |
consideration of and, if deemed appropriate, passing, with or without variation, an ordinary resolution, the full text of which is reproduced on page 8 of the Management Proxy Circular, confirming By-law No. 2 of
the Company, adopting advance notice requirements for nominations of directors by shareholders (the Advance Notice By-Law); |
6) |
consideration of and, if deemed appropriate, passing, with or without variation, a special resolution, the full text of which is reproduced on page 8 of the Management Proxy Circular approving amendments to the Articles
of Canadian Pacific to authorize Canadian Pacific to hold shareholder meetings in Canada and the United States; and |
7) |
consideration of other business as may properly come before the Meeting or any adjournment or postponement thereof. |
Shareholders of record at the close of business on March 17, 2015 will be entitled to vote at the Meeting and are encouraged to participate either in person or by
proxy.
/s/ Paul A. Guthrie
Paul A. Guthrie
Corporate Secretary
March 17, 2015
Calgary, Alberta
2
CANADIAN PACIFIC
SUMMARY
SHAREHOLDER VOTING MATTERS
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Voting matter |
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Board Vote
Recommendation |
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For more information see page |
Appointing Deloitte LLP as auditors |
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For |
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Advisory vote on executive compensation |
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For |
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6 |
Election of 13 directors |
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For each nominee |
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7 |
Confirming adoption of advance notice By-Law |
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For |
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Amendment to Articles authorizing Canadian Pacific to hold shareholder meetings in certain locations outside of Canada |
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For |
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OUR DIRECTOR NOMINEES
You will be electing a Board of 13 members. Each director is elected annually and individually and must meet our majority voting guidelines. Detailed information about
each directors background, qualification experience and areas of expertise can be found in the section entitled Director Nominee Profiles.
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Name |
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Age |
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Director since |
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Position |
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Indep- endent |
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Committee memberships |
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Board and committee attendance 2014 |
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Other current public boards |
W.A. Ackman |
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48 |
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May 17, 2012 |
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CEO, Pershing Square Capital Management, L.P. |
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YES |
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Governance Finance |
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94% |
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1 |
J. Baird |
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45 |
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N/A |
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Former Member of Parliament of Canada |
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YES |
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N/A |
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N/A |
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G.F. Colter |
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69 |
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May 17, 2012 |
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President, CRS Inc. |
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YES |
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Board (Chair) |
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100% |
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3 |
I. Courville |
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52 |
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May 1, 2013 |
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Chair of the Board of the Laurentian Bank of Canada |
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YES |
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Audit (Chair) SOE |
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100% |
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2 |
K.E. Creel |
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46 |
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N/A |
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President and Chief Operating Officer |
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NO |
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N/A |
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N/A |
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E.H. Harrison |
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70 |
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July 6, 2012 |
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Chief Executive Officer |
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NO |
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SOE |
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91% |
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1 |
P.C. Hilal |
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48 |
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May 17, 2012 |
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Partner, Pershing Square Capital Management, L.P. |
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YES |
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Compensation (Chair)
Finance |
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100% |
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K.T. Hoeg |
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65 |
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May 11, 2007 |
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Corporate Director |
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YES |
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Governance (Chair)
Compensation |
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100% |
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2 |
R. MacDonald |
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61 |
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May 17, 2012 |
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Executive Chair, Just Energy Group Inc. |
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YES |
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Governance
Compensation |
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100% |
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1 |
A.R. Melman |
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67 |
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May 17, 2012 |
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President and Chief Executive Officer, Acasta Capital |
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YES |
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Finance SOE |
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100% |
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L.J. Morgan |
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62 |
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May 5, 2006 |
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Partner, Nossaman LLP |
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YES |
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Audit SOE |
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100% |
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A.F. Reardon |
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69 |
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May 1, 2013 |
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Retired Chairman and Chief Executive Officer, TTX |
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YES |
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Finance (Chair) Audit
Compensation |
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88% |
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1 |
S.C. Tobias |
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70 |
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May 17, 2012 |
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Former Vice Chairman and Chief Operating Officer, Norfolk Southern Corporation |
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YES |
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Compensation SOE
(Chair) |
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100% |
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1 |
2015 MANAGEMENT PROXY
CIRCULAR 3
Best Practices
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Share ownership requirements for the top 85 senior management employees |
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No single-trigger change in control benefits |
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Anti-hedging policy on equity |
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Clawback policy for senior executive compensation and stock option plan |
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Caps on annual bonus payouts and performance share units payouts |
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Vesting criteria for performance share units fully aligned to long-term strategic plan |
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Equity hold period for CEO |
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CORPORATE GOVERNANCE
CP is committed to high standards of corporate governance. Several of our key governance strengths and actions are noted in the table below.
BOARD AND OTHER GOVERNANCE INFORMATION AS OF MARCH 17, 2015
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Size of Board |
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12 |
Number of Independent Directors |
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11 |
Average Age of Directors |
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62 |
Percentage of Female Directors |
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33% |
Annual Election of Directors |
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Yes |
Directors Elected Individually (rather than slate voting) |
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Yes |
Majority Voting Guidelines for Directors |
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Yes |
Separate Chair & CEO |
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Yes |
Board Interlocks Guidelines |
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Yes |
Share Ownership Guidelines for Directors and Executives |
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Yes |
Board Orientation/Education Program |
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Yes |
Number of Board Meetings Held in 2014 |
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6 |
Code of Business Conduct and Ethics Program |
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Yes |
Annual Advisory Vote on Executive Compensation |
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Yes |
Formal Board Evaluation Process |
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Yes |
Dual-Class Shares |
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No |
Average Director Tenure |
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3.5 yrs |
EXECUTIVE COMPENSATION
Philosophy and Compensation Components
Canadian Pacific is focused on a
pay-for-performance approach for all non-union employees including our executives. In order to attract and retain top talent as well as to align the goals of the Company with employees, the Company offers a competitive compensation package.
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Base Salary: positioned at the median of our comparator group, rewards the scope of a position |
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Annual Incentive: positioned to the median of our comparator group, encourages strong performance against yearly objectives |
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Long-Term Incentive: positioned at the median of our primary comparator group and 75th percentile of the secondary comparator group, aligns long-term interests
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The mix of options and PSUs awarded under the long-term incentive plan drives multiple objectives. The vesting of performance share units depends on
the achievement of targets and the realization of our strategic plan while stock options align the interests of management with the interests of shareholders in the creation of long term shareholder value.
4
CANADIAN PACIFIC
GENERAL INFORMATION
We are sending you this Management Proxy Circular (the Circular) to solicit proxies by the management of
Canadian Pacific to be used at the annual and special meeting (the Meeting) of shareholders of Canadian Pacific to be held on May 14, 2015.
In
this document you and your refer to the shareholders of Canadian Pacific; and CP, Canadian Pacific, the Corporation, the Company or we, us and
our refer to Canadian Pacific Railway Limited and, where applicable, its subsidiaries; and the Board of Directors or the Board refer to the board of directors of Canadian Pacific. Unless otherwise noted, the
information contained in this Circular is given as of March 17, 2015 and all dollar amounts used in this document are shown in Canadian dollars. Payments made in 2014 in United States dollars (US$) were converted into Canadian
dollars using the Bank of Canada average exchange rate for 2014 of 1.1045 Canadian dollars per United States dollar.
The Meeting will be held at
The Westin Calgary,
Britannia-Belaire Ballroom,
320 4th Avenue
S.W.,
Calgary, Alberta T2P 2S6,
at
9:00 a.m. (Mountain Daylight Time)
on Thursday, May 14, 2015
Forward-Looking Information
This Circular contains certain forward-looking
information and forward-looking statements (collectively, forward-looking information) within the meaning of applicable securities laws relating, but not limited, to our operations, priorities and plans, anticipated financial
performance, business prospects, planned capital expenditures, programs and strategies. This forward looking information also includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions,
information and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words such as anticipate, believe, expect,
plan or similar words suggesting future outcomes.
Undue reliance should not be placed on forward-looking information as actual results may differ materially from the
forward-looking information. Forward-looking information is not a guarantee of future performance. By its nature, CPs forward-looking information involves numerous assumptions, inherent risks and uncertainties that could cause actual results
to differ materially from the forward-looking information, including but not limited to the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks in agricultural
production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; inflation; changes in laws and regulations,
including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of investigations, proceedings or other types of claims and litigation; labour disputes; risks and liabilities
arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of
pension plans and investments; and various events that could disrupt operations, including severe weather, droughts, floods, avalanches and earthquakes as well as security threats and governmental response to them, and technological changes. The
foregoing list of factors is not exhaustive.
These and other factors are detailed from time to time in reports filed by CP with securities regulators in Canada and
the United States. Reference should be made to Managements Discussion and Analysis in CPs annual and interim reports, Annual Information Form and Form 40-F. Forward-looking information is based on current expectations,
estimates and projections and it is possible that predictions, forecasts, projections, and other forms of forward-looking information will not be achieved by CP. Except as required by law, CP undertakes no obligation to update publicly or otherwise
revise any forward-looking information, whether as a result of new information, future events or otherwise.
2015 MANAGEMENT PROXY
CIRCULAR 5
BUSINESS OF THE MEETING
1. FINANCIAL STATEMENTS
The audited consolidated financial statements of Canadian Pacific for the year ended December 31, 2014, and the report of the auditors, will be placed before the
shareholders at the Meeting. These audited consolidated financial statements form part of the Annual Report of Canadian Pacific, which was mailed to registered shareholders and to all non-registered shareholders who requested it. Additional copies
of the Annual Report may be obtained from the Corporate Secretary of Canadian Pacific upon request. The Annual Report is also available online at www.cpr.ca or www.sedar.com.
2. APPOINTMENT OF AUDITORS
At
Canadian Pacifics annual meeting of shareholders held on May 1, 2014, Deloitte LLP was appointed as Canadian Pacifics auditors. Deloitte was first appointed on May 12, 2011. For information on fees paid to Deloitte LLP for
the year ended December 31, 2014, refer to Schedule A Audit Committee Disclosure Audit and Non-Audit Fees and Services, 2014 & 2013. In order to be approved, the appointment of Deloitte LLP as the
Corporations auditors requires an affirmative vote of the majority of the votes cast at the Meeting.
The Board of Directors recommends that Deloitte LLP
be appointed as Canadian Pacifics auditors until the close of the next annual meeting of shareholders. Unless otherwise instructed, the persons designated in the form of proxy or the voting instruction form, intend to vote FOR the
appointment of Deloitte LLP as auditors of Canadian Pacific to hold office until the next annual meeting of shareholders at remuneration to be fixed by the Board of Directors.
3. ADVISORY VOTE ON EXECUTIVE COMPENSATION
Canadian Pacific is committed to providing shareholders with clear, comprehensive and transparent disclosure on executive compensation. For information on Canadian
Pacifics executive compensation, refer to 2014 Executive Compensation Letter to Shareholders and Compensation Discussion and Analysis. In order
to receive feedback from shareholders on this matter, we are providing shareholders with our fifth annual non-binding advisory vote on our approach to executive compensation, commonly known as
Say on Pay. The Say on Pay resolution we are proposing to our shareholders is the form recommended by the Canadian Coalition for Good Governance.
The
Management Resources and Compensation Committee has spent considerable time and effort recruiting top level talent and developing our executive compensation program to fit extraordinary circumstances. The Board of Directors believes that the
executive compensation program which has been implemented achieves the goal of maximizing long-term shareholder value while attracting, motivating and retaining world-class talent. We recognize that the proper structure of executive compensation is
critical to both managing risk and appropriately incentivizing management. We have been successful in recruiting individuals with unique and demonstrated abilities to improve railway performance and shareholders have enjoyed extraordinary results.
We believe that our approach to executive compensation is fair and balanced, and creates incentives well-aligned with shareholders interests over the long term. CPs management regularly meet and engage with CPs shareholders and,
during 2014, met with shareholders representing approximately 80% of our outstanding shares. None of these shareholders raised executive compensation as a current concern regarding the Company. In addition, the Chairman of the Board of Directors,
the Chair of the Management Resources and Compensation Committee and management representatives met with proxy advisory firm Glass Lewis in late 2014 to better understand its pay for performance evaluation methodology.
As this is an advisory vote, the results will again not be binding upon the Board. However, in considering the Corporations approach to compensation, the Board
will take into account the results of this vote, together with other shareholder feedback and best practices in compensation and governance.
6
CANADIAN PACIFIC
The Board of Directors recommends that shareholders vote FOR the resolution set out below and, unless otherwise
instructed, the persons designated in the form of proxy or the voting instruction form intend to vote FOR the following resolution:
RESOLVED, on an
advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the Corporations Circular delivered in advance of the 2015 annual
meeting of shareholders.
4. ELECTION OF DIRECTORS
Directors are elected annually by shareholders, each to hold office until the close of the next annual meeting of shareholders or until such persons successor is
elected or appointed. Between shareholder meetings, the Board may appoint additional directors.
Our governing documents provide that our Board of Directors shall
consist of a minimum of five and a maximum of 20 directors. The Corporate Governance and Nominating Committee (the Governance Committee), with the assistance of an external search consultant if necessary, identifies and recommends to the
Board the proposed nominees for appointment or election at each annual meeting of shareholders consistent with criteria approved by the Board.
CP is committed to
Board diversity. In determining qualified nominees for election as directors of CP, the Governance Committee takes into account diversity considerations such as gender, age, cultural heritage and regional representation of candidates in order to
ensure that the Board reflects the gender, age, cultural and geographic representation of the regions in which CP operates.
Pursuant to a resolution of the Board of
Directors, 13 persons are to be elected as directors at the Meeting, each to hold office until the close of the next annual meeting of shareholders or until such persons successor is elected or appointed.
The appointees named in the proxy are officers of CP who intend to vote at the Meeting FOR the election of the nominees whose names are set out below, unless
specifically instructed on the proxy to withhold such vote. If, prior to the Meeting, any of the listed nominees becomes unable or unwilling to
serve, the persons named in the proxy will have the right to use their discretion in voting for such other properly qualified nominees. The persons named in the section Nominees for
Election to the Board (the Nominees) will be presented for election at the Meeting.
The Board recommends that you vote FOR each of the
Nominees. Unless otherwise instructed, the persons designated in the form of proxy and the voting instruction form intend to vote FOR the election of the Nominees. If, prior to the Meeting, any of the Nominees becomes unable or unwilling
to serve, the persons designated in the form of proxy or voting instruction form will have the right to use their discretion in voting for such other properly qualified nominees.
5. ADVANCE NOTICE BY-LAW
On
December 16, 2014, the Board approved the adoption of the Advance Notice By-Law to establish a framework for advance notice of nominations of directors by the shareholders of CP. Among other things, the Advance Notice By-Law fixes deadlines by
which shareholders must submit a notice of director nominations to CP prior to any annual or special meeting of shareholders where directors are to be elected and sets out the information that a shareholder must include in the notice.
More specifically, the Advance Notice By-Law requires that advance notice be provided to the Corporation in circumstances where nominations of persons for election as a
director of Canadian Pacific are made by shareholders other than pursuant to (i) a shareholder proposal made in accordance with the provisions of the Canada Business Corporation Act (CBCA); or (ii) a requisition of the
shareholders made in accordance with the provisions of the CBCA.
The purpose of the Advance Notice By-Law is to ensure that an orderly nomination process is
observed and that shareholders can make a well-informed voting decision about director nominees. The full text of the Advance Notice By-law is set forth in Schedule D to this Circular.
Although the Advance Notice By-Law went into effect on March 13, 2015, shareholders must confirm the Advance Notice By-Law at the Meeting. If shareholders do not approve
the ordinary resolution confirming the adoption of the Advance Notice By-Law, it will no longer be valid.
2015 MANAGEMENT PROXY
CIRCULAR 7
At the Meeting, shareholders will be asked to consider and, if deemed appropriate, to approve, a resolution in the form
set out below (the Advance Notice By-Law Resolution), subject to such amendments, variations or additions as may be approved at the Meeting, confirming the adoption of the Advance Notice By-Law. In order to be passed, the Advance Notice
By-Law Resolution must be passed by an affirmative vote of the majority of the votes cast at the Meeting.
The Board recommends that you vote FOR the
adoption of the Advance Notice By-Law Resolution. Unless otherwise instructed, the persons designated in the form of proxy and the voting instruction form intend to vote FOR the adoption of the Advance Notice By-Law Resolution.
The text of the Advance Notice By-Law Resolution to be submitted to shareholders at the Meeting is set forth below:
RESOLVED THAT By-law No. 2 of the Company, as set forth in the Circular of the Corporation dated March 17, 2015, is hereby confirmed without amendment
and any one director or officer of the Corporation be and is hereby authorized and directed to execute and deliver for and in the name of and on behalf of the Corporation all such certificates, instruments, agreements, documents and notices and to
do all such other acts and things as in such persons opinion may be necessary or desirable for the purpose of giving effect to this resolution.
6. LOCATION OF SHAREHOLDER MEETINGS
Canadian Pacific is a transcontinental railway in Canada and the United States
with a large shareholder base in each of these countries. Currently, the provisions of the CBCA limit CP from holding shareholder meetings outside of Canada. In order to reflect the nature of CPs business and to accommodate the large number of
shareholders in the United States, CP is proposing to amend its Articles in order to authorize the holding of meetings of shareholders at such place within Canada or the United States of America as the directors may from time to time determine,
including, but not limited to, Chicago, Illinois, Minneapolis, Minnesota, Saint Paul, Minnesota and New York, New York.
Section 132 of the CBCA provides that a meeting of shareholders of a corporation may be held at a place outside
Canada if the place is specified in the articles of the corporation. Currently CPs Articles do not provide for shareholder meetings to be held outside of Canada. Section 173 of the CBCA permits, by special resolution of the shareholders,
an addition to the articles of any provision that is permitted by the CBCA to be set out in the articles.
At the Meeting, shareholders will be asked to consider
and, if deemed appropriate, to approve, a special resolution in the form set out below (the Meeting Location Resolution), subject to such amendments, variations or additions as may be approved at the Meeting, authorizing CP to amend its
Articles to authorize shareholder meetings held in Canada or the U.S. In order to be passed, the Meeting Location Resolution must be passed by an affirmative vote of a majority of not less than two-thirds of the votes cast at the Meeting.
The Board recommends that you vote FOR the adoption of the Meeting Location Resolution. Unless otherwise instructed, the persons designated in the form of
proxy and the voting instruction form intend to vote FOR the adoption of the Meeting Location Resolution.
The text of the Meeting Location Resolution to
be submitted to shareholders at the Meeting is set forth below:
RESOLVED AS A SPECIAL RESOLUTION:
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THAT the articles of the Corporation be amended to permit meetings of the shareholders of the Corporation to be held at such place within Canada or the United States of America as the directors may from time to time
determine, including, but not limited to Chicago, Illinois, Minneapolis, Minnesota, Saint Paul, Minnesota and New York, New York; |
2. |
THAT any director or officer of the Corporation be, and each of them is hereby authorized and directed for and in the name of and on behalf of the Corporation to execute and deliver or cause to be delivered Articles of
Amendment to the Director under the CBCA and to execute and deliver or cause to be delivered all documents and to take any action which, in the opinion of that person, is necessary or desirable to give effect to this special resolution;
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8
CANADIAN PACIFIC
3. |
THAT notwithstanding that this special resolution has been duly passed by the shareholders of the Corporation, the directors of the Corporation may, in their sole discretion, revoke this special resolution in whole or
in part at any time prior to the issuance by the Director under the CBCA of a certificate of amendment of articles without further notice to, or approval of, the shareholders of the Corporation; and |
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THAT any one director or officer of the Corporation be and is hereby authorized and
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directed to execute and deliver for and in the name of and on behalf of the Corporation all such certificates, instruments, agreements, documents and notices and to do all such other acts and
things as in such persons opinion may be necessary or desirable for the purpose of giving effect to these resolutions. |
Articles of
Amendment setting out the proposed amendment relating to shareholder meeting locations are attached to this Circular as Schedule E.
2015 MANAGEMENT PROXY
CIRCULAR 9
QUESTIONS AND ANSWERS
ABOUT VOTING AND PROXIES
Please carefully read this section, as it contains important information regarding how to vote your common shares of the
Corporation (Shares). Canadian Pacific has sent or caused to be sent forms of proxy to the Corporations registered shareholders and voting instruction forms and, in some cases, forms of proxy, to the Corporations
non-registered shareholders.
What is the purpose of the Meeting?
At the Meeting, you will be asked to vote on the following matters:
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the appointment of Deloitte LLP as the Corporations auditors; |
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in an advisory, non-binding capacity, the Corporations approach to executive compensation; |
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the election of directors; |
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the confirmation of the Advance Notice By-Law; and |
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the approval of the Meeting Location Resolution. |
How does the Board recommend that I vote?
The Board recommends that you vote FOR the appointment of Deloitte LLP as the Corporations auditors, FOR the Corporations
approach to executive compensation, FOR each of the Nominees, FOR the Advance Notice By-Law and FOR the Meeting Location Resolution. For more information on the Nominees, refer to Nominees for Election to the Board.
Where and when is the Meeting?
The Meeting will be
held at The Westin Calgary, Britannia-Belaire Ballroom, 320 4th Avenue S.W., Calgary, Alberta T2P 2S6 at 9:00 a.m. (Mountain Daylight Time) on Thursday, May 14, 2015. For information
regarding voting in person at the Meeting see How do I vote if I am a REGISTERED shareholder? or How do I vote if I am a NON-REGISTERED shareholder?.
How many Shares are outstanding and who are the Corporations Principal Shareholders?
As of March 17, 2015, there were 163,956,169 Shares issued and outstanding. Each Share carries one vote on each matter voted upon at the Meeting.
Based on publicly available information as at March 17, 2015, no person beneficially owned or controlled or directed
or indirectly owned 10% or more of the outstanding Shares.
What vote is required to elect directors?
At the Meeting, 13 directors will be elected. The 13 Nominees receiving the highest number of FOR votes cast in person or by proxy at the Meeting will be elected to
the Board.
What vote is required for the approval of the Advance Notice By-Law Resolution, and the Meeting Location Resolution?
The Advance Notice By-Law Resolution must be approved by an ordinary resolution of shareholders, consisting of a simple majority of the votes cast by those shareholders
who voted on the resolution voting FOR the Advance Notice By-Law Resolution.
The Meeting Location Resolution must be approved by a special resolution of
shareholders, consisting of a majority of two-thirds of the votes cast by those shareholders who voted on the resolution FOR the Meeting Location Resolution.
Who is entitled to vote at the Meeting?
The Board has fixed March 17, 2015 as the record date (the Record Date) for the
purpose of determining shareholders entitled to receive the Notice of Annual Meeting of Shareholders (the Notice) and to vote at the Meeting or any adjournment or postponement thereof, either in person or by proxy. Only shareholders of
record at the close of business on the Record Date are entitled to vote at the Meeting. Each shareholder is entitled to one vote for each Share held.
Who is soliciting my proxy and how do I appoint a proxyholder?
Management of Canadian Pacific is soliciting your proxies in connection with
this Circular and the Meeting. The cost of this solicitation will be borne by the Corporation. Proxies will be solicited by mail, in person, by telephone or by electronic communications. Canadian Pacific has retained Kingsdale Shareholder Services,
(Kingsdale) located at the Exchange Tower, 130 King Street West, Suite 2950, Toronto, Ontario, M5X 1E2 to assist with our communications with shareholders
10
CANADIAN PACIFIC
and solicitation of proxies. In connection with these services, Kingsdale will receive an initial fee of $60,000. In addition, Kingsdale will be reimbursed for disbursements and out-of-pocket
expenses, as well as an additional $8 fee for each telephone call to or from Canadian Pacific shareholders and additional fees as determined by Canadian Pacific and Kingsdale.
Shareholders wishing to be represented by proxy at the Meeting must deposit a properly executed proxy with the Corporation or its agent, Computershare Investor Services
Inc. (Computershare), or Kingsdale, not less than 24 hours prior to the time fixed for holding the Meeting (or any adjournment thereof). The time limit for the deposit of proxies may be waived or extended by the Chair of the Meeting at
his or her discretion without notice. All Shares represented by a properly executed proxy will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for and if the shareholder
specifies a choice with respect to any matter to be acted upon, the Shares will be voted accordingly.
If I do not provide management with
instructions in my proxy, how will my Shares be voted?
Shareholders who have appointed a named appointee of management to act and vote on their behalf, as
provided in the enclosed form of proxy or voting instruction form, and who do not provide instructions concerning any matter identified in the Notice, will have the Shares represented by such form of proxy or voting instruction form voted FOR
the appointment of Deloitte LLP as the Corporations auditors, FOR the Corporations approach to executive compensation, FOR the election of the Nominees, FOR the Advance Notice By-Law Resolution, and FOR
the Meeting Location Resolution.
The enclosed form of proxy or voting instruction form to be used in connection with the Meeting also confers discretionary
authority on the person or persons named to vote on any amendment or variation to the matters identified in the Notice and on any other matter properly coming before the Meeting. As of March 17, 2015, management is not aware of any such
amendment, variation or other matter. If, however, any such amendment, variation or other matter properly comes before the Meeting, proxies will be voted at the discretion of the person
or persons named on the enclosed form of proxy or voting instruction form.
How do I vote
if I am a REGISTERED shareholder?
You are a registered shareholder if your name appears on your Share certificate. If this is the case, this Circular
will be accompanied by a form of proxy. If you are a registered shareholder, there are two ways, listed below, that you can vote your Shares:
1) Voting by Proxy
You may appoint the management appointee or someone else that need not be a shareholder to vote for you as your proxyholder by using the enclosed form of proxy. A
shareholder has the right to appoint a person or company other than the named appointee of management to represent such shareholder at the Meeting. To appoint a person or company other than the named appointee, write the name of the person or
company you would like to appoint in the space provided.
You may vote using any of the methods outlined on the form of proxy.
2) Voting in Person
As a registered shareholder, you may exercise your right to vote
by attending and voting your Shares in person at the Meeting. Upon arriving at the Meeting, report to the desk of our registrar and transfer agent, Computershare, to sign in and revoke any proxy previously given. You do not need to complete or
return your form of proxy if you intend to vote at the Meeting.
To be valid, a proxy must be signed by the shareholder or his or her attorney authorized in writing.
There are several ways to submit your form of proxy which are indicated on the form of proxy. Carefully review your form of proxy for these instructions.
How do I vote if I am a NON-REGISTERED shareholder?
If your Shares are not registered in your name and are held in the name of a
nominee such as a trustee, financial institution or securities broker, you are a non-registered shareholder. If your Shares are listed in an account statement provided to you by your broker, those Shares will, in all likelihood, not be registered in
your name.
2015 MANAGEMENT PROXY
CIRCULAR 11
Such Shares will more likely be registered under the name of your broker or an agent of that broker. Without specific
instructions, Canadian brokers and their agents or nominees are prohibited from voting Shares for the brokers client. Without specific instructions, U.S. brokers and their agents or nominees are prohibited from voting Shares for the
brokers client with respect to the non-binding advisory vote on the Corporations approach to executive compensation, the election of directors, confirmation of adoption of advance notice By-Law, and the amendment to Articles authorizing
Canadian Pacific to hold shareholder meetings in certain locations outside of Canada, but may vote such Shares with respect to the appointment of Deloitte LLP.
If
you are a non-registered shareholder, there are two ways, listed below, that you can vote your Shares:
1) Giving Your Voting Instructions
Your nominee is required to seek voting instructions from you in advance of the Meeting. Accordingly, you will receive, or have already received, from your nominee
either (i) a voting instruction form for completion and execution by you, or (ii) a form of proxy for completion by you, executed by the nominee and restricted to the number of Shares owned by you. These procedures are to permit
non-registered shareholders to direct the voting of the Shares that they beneficially own.
Each nominee has its own procedures which should be carefully followed
by non-registered shareholders to ensure that their Shares are voted at the Meeting. Please contact your nominee for instructions in this regard. You may vote using any of the methods outlined on the voting instruction form or form of proxy.
2) Voting in Person
If you wish to vote in person at the Meeting, insert your
own name in the space provided on the voting instruction form or form of proxy to appoint yourself as proxyholder and follow the instructions of your nominee.
Non-registered shareholders who instruct their nominee to appoint themselves as proxyholders should, at the Meeting, present themselves to a representative of
Computershare. Do not otherwise
complete the voting instruction form or form of proxy sent to you as your vote will be taken and counted at the Meeting.
How will Shares held in the Corporations employee share purchase plan be voted?
Employees of the Corporation are eligible to participate in an employee share purchase plan (ESPP) under which they purchase Shares. Shares held by
participants under the ESPP (ESPP Participants) are held in a custodial account until such time as the Shares held by ESPP Participants are withdrawn from the ESPP pursuant to its terms and conditions.
Voting rights attached to Shares held by ESPP Participants may be exercised through the use of a voting instruction form, which provides instructions regarding the
voting of Shares held by ESPP Participants. ESPP Participants will have received this Circular together with the voting instruction form, or advice as to the availability of these documents electronically, from the Corporations registrar and
transfer agent, Computershare.
Shares held by ESPP Participants will be voted in accordance with the instructions received from the employee.
If I change my mind, can I revoke or change my proxy once I have given it?
Yes. A shareholder may revoke a proxy by depositing an instrument in writing executed by such shareholder or by such shareholders attorney authorized in writing
(or, in the case of a corporation, by a duly authorized officer or attorney), either at the Office of the Corporate Secretary, Canadian Pacific, 7550 Ogden Dale Road S.E., Calgary, Alberta, T2C 4X9, or with the Chairman of the Meeting on
the day of the Meeting, or by an adjournment or postponement of the Meeting, or in any other manner permitted by law.
In addition to any other manner permitted by
law, a shareholder may change a previously submitted proxy or voting instruction by submitting a new proxy or conveying new voting instructions by any of the means described under How do I vote if I am a REGISTERED shareholder? or
How do I vote if I am a NON-REGISTERED shareholder?, as applicable. Non-registered shareholders must ensure that any change in voting instructions is
12
CANADIAN PACIFIC
communicated to the applicable nominee sufficiently in advance of the time of voting at the Meeting. Non-registered shareholders who have voted and who wish to change their voting
instructions should contact their nominee promptly if assistance is required.
What is the latest time that I can submit my form of proxy or
voting instruction form?
To be effective, your proxy must be received not less than 24 hours prior to the time fixed for holding the Meeting (or any
adjournment thereof). The time limit for the deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion without notice.
The Corporation reminds shareholders that only the most recently dated voting instructions will be counted and any prior dated instructions will be disregarded.
How will votes be tabulated?
Proxies will be
counted and tabulated by the Corporations registrar and transfer agent, Computershare. Computershare maintains the confidentiality of individual shareholder votes. However, proxies will be submitted to management
where they contain comments clearly intended for management or to meet legal requirements.
Whom should I contact if I have questions?
If you have any questions about the information contained in this document or require assistance
in completing your form of proxy or voting instruction form, please contact Kingsdale, located at The Exchange Tower, 130 King Street West, Suite 2950, P.O. Box 361, Toronto, Ontario, M5X 1E2, or by telephone at North American Toll Free:
1-866-879-7649, Outside North America, Banks and Brokers Call Collect: 416-867-2272 or by email at contactus@kingsdaleshareholder.com.
How may I contact the registrar and transfer agent?
You
may contact Computershare, Canadian Pacifics registrar and transfer agent, by telephone, Internet or mail, as follows: by telephone 1-877-4-CP-RAIL / 1-877-427-7245 (within Canada and the United States) between the hours of 8:30 a.m.
and 8:00 p.m. Eastern, or 1-514-982-7555 (international direct dial); by internet at www.investorcentre.com/cp, by mail addressed to Computershare, 100 University Ave., 8th Floor, Toronto, Ontario, M5J 2Y1.
2015 MANAGEMENT PROXY
CIRCULAR 13
NOMINEES FOR ELECTION TO THE BOARD
DIRECTOR NOMINEE PROFILES
The following tables provide
information on the Nominees. Included in these tables is information relating to the Nominees current membership on committees of the CP Board of Directors, other public company directorships held in the past five years, and Board and
committee meeting attendance in the twelve months ended December 31, 2014. The tables also show the present principal occupation and principal occupations held in the past five years, if different. In addition, the tables show securities of CP
held as of March 17, 2015 by each of the Nominees, and whether they meet or exceed minimum shareholding requirements. Certain other personal information is also included.
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William A. Ackman
New York New
York U.S.A.
Age: 48 Director
since May 17, 2012 Independent
2014 annual meeting votes in favour: 99.75 % |
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Mr. Ackman is the founder and CEO of Pershing Square Capital Management, L.P. (Pershing Square), an investment adviser with
over US$18 billion of assets under management. Pershing Square is a concentrated, research-intensive, fundamental value investor in the public markets.
Mr. Ackman is Chairman of the Board of The Howard Hughes Corporation, a trustee of the Pershing Square Foundation and a member of the Board of Deans Advisors of
the Harvard Business School. In addition to his substantial public company board experience, Mr. Ackmans investment and capital allocation experience in a wide array of businesses and assets, as well as his expertise in real estate, enable him
to make a substantial contribution to the CP board. Mr. Ackman holds an M.B.A. from Harvard
Business School and a Bachelor of Arts magna cum laude from Harvard College. Principal
Occupations Held in Last Five Years Founder, Chief Executive Officer, Pershing Square Capital Management, L.P.
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Overall attendance: 94% |
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Meeting attendance |
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Public company directorships in the past five years |
|
Board |
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6 of 6 |
|
100% |
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CPRC |
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2012 present |
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Finance |
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6 of 7 |
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86% |
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The Howard Hughes Corporation |
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2010 present |
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Governance |
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5 of 5 |
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100% |
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J.C. Penney Company, Inc. |
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2011 2013 |
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Justice Holdings Ltd. |
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2011 2012 |
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General Growth Properties Inc. |
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2009 2010 |
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Securities held as at March 17, 2015(d) |
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Shares |
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DDSUs |
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Options |
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Meets or exceeds minimum
shareholding requirements |
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13,940,890(a) |
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0 |
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0 |
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Yes |
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14
CANADIAN PACIFIC
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The Hon. John
Baird, P.C.
Ottawa Ontario
Canada Age:
45 Director since
N/A
Independent |
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The Hon. John Baird most recently served as a Member of Parliament of Canada until his resignation on March 16, 2015. He was elected in the
House of Commons in 2006 and was re-elected in 2008 and 2011. As a Member of Parliament he was the President of the Treasury Board, Minister of the Environment, Minister of Transport, Infrastructure and Communities, the Government House Leader and,
most recently, the Minister of Foreign Affairs until February 3, 2015. Prior to being elected as a MP Mr. Baird was a Member of the Legislative Assembly of Ontario, during which time he served in a number of capacities including Minister of
Community and Social Services, Minister Responsible for Children, Minister of Francophone Affairs, Deputy House Leader, Chief Government Whip, Minister of Energy and Government House Leader.
Mr. Baird holds an Honours Bachelor of Arts degree in political studies from Queens
University. He was designated as a Privy Councillor in 2006. Principal Occupations Held in
Last Five Years Member of Parliament of Canada. During the last five years Mr. Baird served as Minister of Transport, Infrastructure and Communities, Government
House Leader and Minister of Foreign Affairs for the Government of Canada. |
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Securities held as at March 17, 2015(d) |
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Shares |
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DDSUs |
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Options |
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Meets or exceeds minimum
shareholding requirements |
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0 |
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N/A |
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N/A |
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To be fully met by May 2020 |
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2015 MANAGEMENT PROXY
CIRCULAR 15
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Gary F. Colter
Mississauga
Ontario Canada
Age: 69
Director since May 17, 2012
Independent
2014 annual meeting votes in favour: 99.81% |
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Mr. Colter has been the Chairman of the Board of Canadian Pacific Railway Limited and Canadian Pacific Railway Company since May 1,
2014. Mr. Colter is the President of CRS Inc., a corporate consulting company which he founded in 2002. He was with KPMG Canada, previously Peat Marwick, for 34 years where he held senior positions, including Vice Chairman of Financial Advisory
Services, Managing Partner of KPMG Global Financial Advisory Services and Vice Chairman until 2002. Mr. Colter has been a director of Owens-Illinois Inc. since 2002 and is on the Governance and Compensation Committees. He is currently on the Board
of CIBC where he sits on the Governance and Audit Committees. Since 2004, Mr. Colter has been on the Board of Core-Mark Holding Company Inc. where he sits on the Audit and Governance Committees. Mr. Colter is also on the Board of Revera Inc., a
large private company. He holds a B.A. (Hon) in Business Administration from the Ivey Business
School of the University of Western Ontario, and is a Fellow Chartered Accountant. Principal
Occupations Held in Last Five Years President, CRS Inc. |
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Overall attendance: 100% |
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Meeting attendance |
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Public company directorships in the past five years |
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Board |
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6 of 6 |
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100% |
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CPRC |
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2012 present |
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Audit |
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4 of 4(e) |
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100% |
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Core-Mark Holding Company, Inc. |
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2004 present |
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Finance |
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2 of 2(e) |
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100% |
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Canadian Imperial Bank of Commerce |
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2003 present |
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Owens Illinois Inc. |
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2002 present |
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Securities held as at March 17, 2015(d) |
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Shares |
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DDSUs |
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Options |
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Meets or exceeds minimum
shareholding requirements |
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1,500 |
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5,653 |
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0 |
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To be fully met by May 2017 |
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16
CANADIAN PACIFIC
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Isabelle Courville
Rosemère
Québec Canada
Age: 52
Director since May 1, 2013
Independent
2014 annual meeting votes in favour: 99.84 % |
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Ms. Courville is Chair of the Board of Directors of the Laurentian Bank of Canada. From 2007 to 2013, she was President of
Hydro-Québec Distribution and Hydro-Québec TransÉnergie. Ms. Courville was active for 20 years in the Canadian telecommunications industry. She served as President of Bell Canadas Enterprise Group and as President and
Chief Executive Officer of Bell Nordiq Group. Ms. Courville holds a Bachelors degree in
Engineering Physics from the École Polytechnique de Montréal and a Bachelors degree in Civil Law from McGill University.
Principal Occupations Held in Last Five Years Corporate Director; Chair,
Laurentian Bank of Canada, President, Hydro-Québec Distribution; President, Hydro-Québec TransÉnergie |
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Overall attendance: 100% |
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Meeting attendance |
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Public company directorships in the past five years |
|
Board |
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6 of 6 |
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100% |
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CPRC |
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2013 present |
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Audit (Chair) |
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9 of 9 |
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100% |
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TVA Group |
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2013 present |
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SOE |
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5 of 5 |
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100% |
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Laurentian Bank of Canada |
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2007 present |
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Miranda Technologies Inc. |
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2006 2012 |
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Securities held as at March 17, 2015(d) |
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Shares |
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DDSUs |
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Options |
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Meets or exceeds minimum shareholding requirements |
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900 |
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2,790 |
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0 |
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To be fully met by May 2018 |
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2015 MANAGEMENT PROXY
CIRCULAR 17
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Keith E. Creel
Chicago
Illinois U.S.A.
Age: 46
Director since N/A
Not Independent |
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Mr. Creel was appointed CPs President and Chief Operating Officer in February 2013. He is responsible for the Operations and
Marketing & Sales functions at the railway. Prior to joining CP, Mr. Creel was Executive
Vice President and Chief Operating Officer at Canadian National (CN). He held various positions at CN including executive Vice President, Operations, Senior Vice President Eastern Region, Senior Vice President Western Region, and Vice President of
the Prairie Division. Mr. Creel began his railroad career at Burlington Northern Railway in 1992
as an intermodal ramp manager in Birmingham, Alabama. He also spent part of his career at Grand Trunk Western Railroad as a superintendent and general manager and at Illinois Central Railroad as a trainmaster and director of corridor operations,
prior to its merger with CN in 1999. Mr. Creel obtained a Bachelor of Science in Marketing from
Jacksonville State University. He also completed the Advanced Management Program at the Harvard Business School. Mr. Creel has a military background as a commissioned officer in the US Army, during which time he served in the Persian Gulf War in
Saudi Arabia. Mr. Creel was the 2014 recipient of the Railroad Innovator Award, from
Progressive Railroading and RailTrends®, which award recognizes an individuals outstanding achievement in the rail industry.
Principal Occupations Held in Last Five Years
President and Chief Operating Officer, Canadian Pacific Railway Limited and Canadian Pacific Railway Company; Executive Vice President and Chief Operating Officer,
Canadian National Railway Company. |
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Securities held as at March 17, 2015(d) |
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Shares |
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DDSUs(c) |
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Options(c) |
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Meets or exceeds minimum shareholding requirements |
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|
908 |
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30,420 |
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294,425 |
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Yes |
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18
CANADIAN PACIFIC
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E. Hunter Harrison(b) Wellington
Florida U.S.A.
Age: 70
Director since July 6, 2012
Not Independent
2014 annual meeting votes in favour: 99.85% |
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Mr. Harrison is the Chief Executive Officer of Canadian Pacific Railway Limited and Canadian Pacific Railway Company (CPRC). He
joined CP in 2012. Mr. Harrison served as President and Chief Executive Officer at Canadian National Railway Company (CN) from 2003-2009 and as the Executive Vice President and Chief Operating Officer from 1998-2002. He served on CNs Board of
Directors for 10 years. Prior to joining CN, Mr. Harrison was President and CEO at Illinois
Central Corporation (IC), and Illinois Central Rail Road Company (ICRR) from 1993-1998, during which time he was also a member of the Board. Mr. Harrison held various positions throughout his time at IC and ICRR, including Vice President, COO
and Senior VP of Operations. Before his time at IC and ICRR in 1989, Mr. Harrison served as
Burlington Northerns Vice President of Transportation and Vice President of Service Design. Mr. Harrison has served as a director on several railway companies and industry associations, including The Belt Railway of Chicago, Wabash National
Corporation, The American Association of Railroads, Terminal Railway, TTX Company, CN, IC, and ICRR.
Mr. Harrison was recently named 2015 Railroader of the Year by railroad industry trade journal Railway Age. This is the second time he has been so-honored; the
first time was in 2002, when he was chief operating officer of the then-recently combined Canadian National/Illinois Central system. He was honored on March 10, 2015, at Chicagos Union League Club.
Principal Occupations Held in Last Five Years
President and Chief Executive Officer, Canadian Pacific Railway Limited and Canadian Pacific Railway Company; Chairman of the Board, Dynegy Inc.; Interim President and
Chief Executive Officer, Dynegy Inc.; President and Chief Executive Officer, Canadian National Railway Company. |
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Overall attendance: 91% |
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Meeting attendance |
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Public company directorships in the past five years |
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Board |
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6 of 6 |
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100% |
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CPRC |
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2012 present |
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SOE |
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4 of 5 |
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80% |
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Foresight Energy LP |
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2014 present |
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Dynegy Inc. |
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2011 (Mar Dec) |
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Canadian National Railway Company
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1999 2010 |
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Securities held as at March 17, 2015(d) |
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Shares |
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DDSUs(c) |
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Options(c) |
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Meets or exceeds minimum shareholding requirements |
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178,617 |
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67,469 |
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837,873 |
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Yes |
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2015 MANAGEMENT PROXY
CIRCULAR 19
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Paul C. Hilal
New York New
York U.S.A
Age: 48 Director
since May 17, 2012
Independent
2014 annual meeting votes in favour: 98.20% |
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Mr. Hilal is a Partner at Pershing Square Capital Management, L.P., an investment adviser with over US$18 billion of assets under
management. Pershing Square is a concentrated, research-intensive, fundamental value investor in the public markets. Mr. Hilal joined Pershing Square in 2006. From 2002 to 2005, he was the Managing Partner of Caliber Capital Management, an
investment adviser. From 1998 to 2001, he ran the information technology sector investment program at Hilal Capital Management, also as an investment adviser. Before his investing career, Mr. Hilal worked as a Principal at Broadview Associates
(1992-1997) as a mergers and acquisitions advisor. From 1999 to 2000, Mr. Hilal served as the
Chairman of the Board and Interim Chief Executive Officer of publicly traded Worldtalk Communications Corporation and served as a Director on the Board of Ceridian Corporation in 2007. Since 2012, Mr. Hilal has served as a director on the Board of
The Grameen Foundation. Mr. Hilal has served as a trustee of the Supreme Court Historical Society since 2013.
Mr. Hilal received an A.B. degree in Biochemistry from Harvard College in 1988, a J.D. from Columbia University School of Law in 1992, and a Masters of Business
Administration from Columbia University School of Business in 1992. Principal Occupations
Held in Last Five Years Partner, Pershing Square Capital Management, L.P. |
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Overall attendance: 100% |
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Meeting attendance |
|
Public company directorships in the past five years |
|
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Board |
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6 of 6 |
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100% |
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CPRC |
|
2012 present |
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Compensation (Chair) |
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5 of 5 |
|
100% |
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Finance |
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7 of 7 |
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100% |
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Securities held as at March 17, 2015(d) |
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum shareholding requirements |
|
|
|
|
0(a) |
|
0 |
|
0 |
|
Yes |
|
|
20
CANADIAN PACIFIC
|
|
|
|
|
|
|
|
|
|
|
Krystyna T. Hoeg
Toronto
Ontario Canada
Age: 65
Director since May 11, 2007
Independent
2014 annual meeting votes in favour: 99.27% |
|
Ms. Hoeg is the former President and Chief Executive Officer of Corby Distilleries Limited, a marketer and seller of spirits and wine. She
occupied this position from October 1996 to February 2007. She joined the Allied Domecq group of companies in 1985 and held a number of senior financial positions with Hiram Walker & Sons Ltd., Hiram Walker G&W Ltd., Allied Domecq
Spirits and Wine and Hiram Walker and Sons Limited, lastly as Senior Vice President of Finance the Americas.
Ms. Hoeg is currently a director of Imperial Oil Limited, Sun Life Financial Inc. as well as Revera Inc. and Samuel, Son & Co., Limited, both of which are private
companies. She is a past director of Cineplex Galaxy Income Fund, Ganong Bros. Limited, and Shoppers Drug Mart Corporation. Currently, Ms. Hoeg is Vice Chair of the Board of the Toronto East General Hospital. She was a director of the Woodrow Wilson
Center Canadian Institute (Advisory Council), Green Shield Canada and St. Michaels Hospital Foundation, as well as the Business Advisory Council of United Nations Office for Project Services.
Ms. Hoeg is a CPA, Chartered Accountant (1982) and holds a Bachelor of Science from McMaster
University, and a Bachelor of Commerce and a Masters of Science from the University of Windsor.
Principal Occupations Held in Last Five Years Corporate Director; former
President and Chief Executive Officer, Corby Distilleries Limited |
|
Overall attendance: 100% |
|
|
|
|
|
Meeting attendance |
|
Public company directorships in the past five years |
|
|
Board |
|
6 of 6 |
|
100% |
|
CPRC |
|
2007 present |
|
|
Compensation |
|
5 of 5 |
|
100% |
|
Imperial Oil Limited |
|
2008 present |
|
|
Governance |
|
5 of 5 |
|
100% |
|
Sun Life Financial Inc. |
|
2002 present |
|
|
(Chair) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shoppers Drug Mart Corporation |
|
2006 2014 |
|
|
|
|
|
|
|
|
Cineplex Galaxy Income Fund |
|
2006 2010 |
|
|
Securities held as at March 17, 2015(d) |
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum
shareholding requirements |
|
|
0 |
|
22,656 |
|
0 |
|
Yes |
2015 MANAGEMENT PROXY
CIRCULAR 21
|
|
|
|
|
|
|
|
|
|
|
Rebecca MacDonald
North York
Ontario Canada
Age: 61
Director since May 17,2012
Independent
2014 annual meeting votes in favour: 99.63% |
|
Ms. MacDonald is a founder and current Executive Chair of Just Energy Group Inc., a Toronto-based independent marketer of deregulated gas
and electricity. Ms. MacDonald has been a director of Just Energy since 2001 and has held the position of Executive Chair since 2007. She served as President and Chief Executive Officer of Just Energy prior to becoming Executive Chair in 2007. In
1989, Ms. MacDonald founded Energy Marketing Inc., and in 1995 founded another company which aggregated customers within the U.K. natural gas deregulation.
Ms. MacDonald serves on the Board of The Next 36, is a member of the Board of Governors of the Royal Ontario Museum and a member of the Board of the Horatio Alger
Association in both Canada and the United States. She founded the Rebecca MacDonald Centre for Arthritis and Autoimmune Disease at Mount Sinai Hospital in Toronto. She is Vice Chair of the Board of Directors of Mount Sinai Hospital.
Ms. MacDonald holds an honorary LLD degree from the University of Victoria.
Principal Occupations Held in Last Five Years
Founder, Executive Chair, Just Energy Group Inc. |
|
Overall attendance: 100% |
|
|
|
|
|
Meeting attendance |
|
Public company directorships in the past five years |
|
Board |
|
6 of 6 |
|
100% |
|
CPRC |
|
2012 present |
|
Compensation |
|
5 of 5 |
|
100% |
|
Just Energy Group Inc. |
|
2001 present |
|
|
Governance |
|
5 of 5 |
|
100% |
|
|
|
|
|
|
Securities held as at March 17, 2015(d) |
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum shareholding requirements |
|
|
|
|
3,900 |
|
5,096 |
|
0 |
|
Yes |
|
|
22
CANADIAN PACIFIC
|
|
|
|
|
|
|
|
|
|
|
Dr. Anthony R. Melman
Toronto
Ontario Canada
Age: 67
Director Since May 17, 2012
Independent
2014 annual meeting votes in favour: 99.88% |
|
Dr. Melman is the President and CEO of Acasta Capital. Previously, Dr. Melman was a Managing Director and a Special Advisor, Strategic
Acquisitions at Onex Corporation. Prior to joining Onex, he served as Senior Vice President of CIBC. Dr. Melman was Chair of The Baycrest Centre for Geriatric Care, from 2006 2011, and is presently Executive Chair of Baycrest Global
Solutions. He was also Chair of Cogniciti Inc. Dr. Melman served as a director at the Ontario Lottery and Gaming Corporation, and a director of Celestica Inc., ProSource Inc. and the University of Toronto Asset Management Corporation.
Dr. Melman holds a Bachelor of Science degree in Chemical Engineering from the University of the
Witwatersrand, an M.B.A. degree (Gold Medalist) from the University of Cape Town and a Ph.D. in Finance from the University of the Witwatersrand.
Principal Occupations Held in Last Five Years President and Chief Executive
Officer, Acasta Capital; Chairman and CEO of Nevele Inc. |
|
Overall attendance: 100% |
|
|
|
|
|
Meeting attendance |
|
Public company directorships in the past five years |
|
Board |
|
6 of 6 |
|
100% |
|
CPRC |
|
2012 present |
|
Finance (Chair) |
|
7 of 7 |
|
100% |
|
|
|
|
|
SOE |
|
5 of 5 |
|
100% |
|
Celestica Inc. |
|
1996 2008 |
|
|
Securities held as at March 17, 2015(d) |
|
|
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum shareholding requirements |
|
|
15,000 |
|
5,253 |
|
0 |
|
Yes |
|
|
2015 MANAGEMENT PROXY
CIRCULAR 23
|
|
|
|
|
|
|
|
|
|
|
Linda J. Morgan
Bethesda
Maryland U.S.A.
Age: 62
Director since May 5, 2006
Independent
2014 annual meeting votes in favour: 99.48% |
|
Ms. Morgan is a Partner at Nossaman LLP, a transportation law firm in the United States. Prior to joining Nossaman in 2011, she was a
Partner at Covington & Burling LLP, a United States based international law firm. She serves on the Board of Visitors for the Georgetown University Law Centre and the Business Advisory Committee for Northwestern Universitys Transportation
Centre. Ms. Morgan was previously Chairman of the United States Surface Transportation Board,
the primary regulatory authority in the United States, and its predecessor the Interstate Commerce Commission from March 1995 to December 2002. Prior to joining the Interstate Commerce Commission, Ms. Morgan served as General Counsel to the Senate
Committee on Commerce, Science and Transportation. Ms. Morgan holds a Bachelor of Arts from
Vassar College and a Juris Doctor Degree from the Georgetown University Law Centre. She is an alumna of the Harvards Program for Senior Managers in Government.
Principal Occupations Held in Last Five Years Partner, Nossaman LLP; Of
Counsel, Covington & Burling LLP; Partner, Covington & Burling LLP |
|
Overall attendance: 100% |
|
|
|
|
|
Meeting attendance |
|
Public company directorships in the past five years |
|
Board |
|
6 of 6 |
|
100% |
|
CPRC |
|
2006 present |
|
Audit |
|
9 of 9 |
|
100% |
|
|
|
|
|
SOE |
|
5 of 5 |
|
100% |
|
|
|
|
|
|
Securities held as at March 17, 2015(d) |
|
|
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum shareholding requirements |
|
|
|
|
0 |
|
26,625 |
|
0 |
|
Yes |
|
|
24
CANADIAN PACIFIC
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Reardon
Marco Island
Florida U.S.A.
Age: 69
Director since May 1, 2013
Independent
2014 annual meeting votes in favour: 99.72% |
|
Mr. Reardon was an attorney at the law firm of Reardon & Chasar, LPA, which he co-founded in 2009 until he retired in December 2011.
Prior to that, Mr. Reardon served as Chairman and Chief Executive Officer, and President and Chief Executive Officer from 2001 to 2008, and Vice President, Law and Human Resources from 1992 to 2000 of TTX Company, the leading railcar leasing
company in North America. Previously, he was a Presidential Appointee to the Railroad Retirement Board and was the Senior Vice President, Law and Administration for Illinois Central Railroad. He is currently a director of Appvion Inc. where he
serves on the Compensation Committee and chairs the Governance Committee. Mr. Reardon was a
Presidential Appointee confirmed by the US Senate from 1990-1992. He has also served on various railroad industry boards including TTX, Terminal Railroad Association of St. Louis, and the Peoria and Pekin Union Railway.
Mr. Reardon holds a Bachelors Degree from the University of Notre Dame, a Juris Doctor Degree
from the University of Cincinnati and a Masters Degree in Taxation from Washington University Law School. He served as an officer in the United States Navy from 1967 to 1971.
Principal Occupations Held in Last Five Years
Corporate Director; Attorney; Chairman and Chief Executive Officer, TTX Company, President and Chief Executive Officer, TTX Company
|
|
Overall Attendance: 88% |
|
|
|
|
|
Meeting Attendance |
|
Public company directorships in the past five years |
|
Board |
|
6 of 6 |
|
100% |
|
CPRC |
|
2013 present |
|
Audit |
|
4 of 5 |
|
80% |
|
Appvion Inc. |
|
2007 present |
|
Compensation |
|
4 of 5 |
|
80% |
|
|
|
|
|
Securities held as at March 17, 2015(d) |
|
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum shareholding requirements |
|
|
|
|
4,031 |
|
2,896 |
|
0 |
|
Yes |
|
|
2015 MANAGEMENT PROXY
CIRCULAR 25
|
|
|
|
|
|
|
|
|
|
|
Stephen C. Tobias
Garnett South
Carolina U.S.A.
Age: 70 Director
since May 17, 2012
Independent
2014 annual meeting votes in favour: 99.53 % |
|
Mr. Tobias is the former Vice Chairman and COO of Norfolk Southern Corporation. He began his career with Norfolk and Western. Between 1989
and 1998, Mr. Tobias was Vice President of Transportation, Vice President Strategic Planning, Senior Vice President Operations, and Executive Vice President Operations before being named Vice Chairman and Chief Operating Officer in 1998.
He was on the Board of Directors of TTX Company, the Association of American Railroads (AAR);
Transportation Technology Center, Inc.; and Norfolk Southerns subsidiary Norfolk Southern Railway Company. He was also a member and Chairman of AARs Safety and Operations Management Committee and the AARs Security Committee. Mr.
Tobias is currently a member of the board of directors of Plum Creek Timber Company, Inc. He is a former non-voting member of The Board of Visitors of The Citadel, The Military College of South Carolina, The Citadel Foundation (Chairman), and was a
member of the Virginia Business Council. In 2008, Mr. Tobias was awarded Railway Ages Railroader of the Year award.
Mr. Tobias was a Captain in the United States Army, and holds a B.A. from The Citadel, The Military College of South Carolina, and is a graduate of Harvards
Advanced Management Program. Principal Occupations Held in Last Five Years
Former Vice Chairman and Chief Operating Officer of Norfolk Southern Corporation; Interim Chief Executive Officer, Canadian Pacific Railway Limited; Vice Chairman
and Chief Operating Officer, Norfolk Southern Corporation |
|
|
Overall attendance: 100% |
|
|
|
|
|
|
Meeting attendance |
|
Public company directorships in the past five years |
|
|
Board |
|
6 of 6 |
|
100% |
|
CPRC |
|
2012 present |
|
|
Compensation |
|
5 of 5 |
|
100% |
|
Plum Creek Timber Company, Inc. |
|
2001 present |
|
|
Governance |
|
2 of 2 |
|
100% |
|
|
|
|
|
|
SOE (Chair) |
|
5 of 5 |
|
100% |
|
|
|
|
|
|
Securities held as at March 17, 2015(d) |
|
|
|
|
Shares |
|
DDSUs |
|
Options |
|
Meets or exceeds minimum
shareholding requirements |
|
|
|
|
4,000 |
|
9,529 |
|
0 |
|
Yes |
|
|
Notes:
a) |
Messrs. Ackman and Hilal are each investors in funds managed by Pershing Square Capital Management, L.P. that holds 13,940,890 Shares of the Corporation. Accordingly each has an indirect interest in such Shares. In
addition, Mr. Ackman, as the Managing Member of PS Management GP, LLC, exercised control over the voting and disposition of such Shares. Each of Messrs. Ackman and Hilal has certified to CP that the magnitude of his indirect interest in such
Shares satisfies the Corporations minimum shareholder requirement. |
b) |
Mr. Harrison was a director of Dynegy Inc. (Dynegy) from March 9 to December 16, 2011 (Chairman from July 11 to December 16, 2011), as well as its Interim President and Chief
Operating Officer from April 9 to July 11, 2011. On July 6, 2012, Dynegy filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, such filing being primarily a technical step necessary to facilitate the
restructuring of one or more Dynegy subsidiaries. Dynegy exited bankruptcy on October 1, 2012. |
c) |
Deferred share units were granted to Mr. Harrison and Mr. Creel pursuant to the Executive Deferred Share Unit Plan. Stock options granted to Mr. Harrison and Mr. Creel were granted pursuant to a stand-alone
option agreement and pursuant to the Management Stock Option Incentive Plan. |
d) |
Securities held include shares beneficially owned or controlled or held directly or indirectly by each director. |
e) |
Mr. Colter attended all meetings of committees of which he was a member prior to his appointment as Chairman of the Board on May 1, 2014. |
f) |
Other than as disclosed herein, none of the Nominees is, or has been in the last 10 years: (a) a director, chief executive officer or chief financial officer of any company that: (i) was subject to a cease
trade order or similar order or an order that denied the issuer access to any exemptions under securities legislation, for a period of more than 30 consecutive days, that was issued while the proposed director was acting in that capacity; or
(ii) was subject to a cease trade or similar order or an order that denied the issuer access to any exemption under securities legislation, for a period of more than 30 consecutive days, that was issued after the proposed director ceased to be
a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or (b) a director or
executive officer of any company that, while that proposed director was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or
insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. |
26
CANADIAN PACIFIC
BOARD TENURE
The following chart shows the tenure of the Corporations Board. The average tenure of CPs Board is 3.5 years.
Board Tenure
as of March 17, 2015
DIRECTOR SKILLS MATRIX
The Governance Committee maintains and annually evaluates a matrix which summarizes the skills, experience, qualifications, and competencies identified as important for
directors to provide effective oversight of the Corporation. The matrix below shows the areas of experience and expertise that the nominees have indicated that they bring to the Board.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skills, Experience,
Qualifications and Competencies
|
|
W. Ackman |
|
J. Baird |
|
G. Colter |
|
K. Creel |
|
I. Courville |
|
E.H. Harrison |
|
P. Hilal |
|
K. Hoeg |
|
R. MacDonald |
|
A. Melman |
|
L. Morgan |
|
A. Reardon |
|
S. Tobias |
Accounting/Financial Literacy and Expertise -
based on the definitions of financial literacy/expert for members of the Audit Committee under securities laws |
|
ü |
|
|
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
|
Environment, Health and Safety - experience in
oversight of environmental, health and safety matters, corporate responsibility or sustainable development |
|
|
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
|
|
|
|
|
|
|
|
ü |
|
ü |
|
ü |
Executive Compensation/Human Resources -
experience in oversight of compensation design and decision-making; experience with talent management, leadership development, succession planning and executive recruitment |
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
Transportation Industry Knowledge - experience
in, or knowledge of, transportation industry including strategic context and business issues facing the transportation industry |
|
|
|
ü |
|
ü |
|
ü |
|
|
|
ü |
|
|
|
|
|
|
|
ü |
|
ü |
|
ü |
|
ü |
Investment Management - experience in overseeing
complex financial transactions, real estate, and investment management |
|
ü |
|
|
|
ü |
|
|
|
|
|
ü |
|
ü |
|
ü |
|
|
|
ü |
|
|
|
ü |
|
|
Governance - experience in, or understanding of,
governance practices in a public company; experience leading a culture of accountability and transparency |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
Government/Regulatory Affairs and Legal -
experience in government affairs, public policy, government relations, or law and compliance in complex regulatory regimes |
|
|
|
ü |
|
|
|
ü |
|
|
|
ü |
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
Risk Management - experience in, or
understanding of, risk assessments and systems and mitigation measures to oversee the management of risk |
|
|
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
Sales and Marketing - experience as a senior
executive in a product, service or distribution company or experience in supply chain management |
|
|
|
|
|
|
|
ü |
|
ü |
|
ü |
|
|
|
ü |
|
ü |
|
|
|
|
|
ü |
|
ü |
Senior Executive Leadership - broad business
experience as a senior executive or director of a public company or other major organization |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
Strategic Oversight - experience driving
strategic direction and leading growth |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
|
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
|
ü |
2015 MANAGEMENT PROXY
CIRCULAR 27
DIRECTORS OF OTHER REPORTING ISSUERS
All of the current directors are also directors of CPRC which is a reporting issuer and is registered with the United States Securities and Exchange Commission.
The following table sets out other public company directorships and committee appointments for all Nominees:
|
|
|
|
|
Director |
|
Other reporting issuers of which the director is a director |
|
Committee Memberships |
W.A. Ackman |
|
The Howard Hughes Corporation |
|
Compensation Committee |
G.F. Colter |
|
Canadian Imperial Bank of Commerce |
|
Audit Committee
Corporate Governance Committee (Chair) |
|
|
Core-Mark Holding Company, Inc. |
|
Audit Committee
Governance Committee |
|
|
Owens-Illinois Inc. |
|
Compensation Committee
Governance Committee(Chair) |
I. Courville |
|
Laurentian Bank of Canada |
|
Audit Committee
Human Resources and Corporate Governance Committee |
|
|
TVA Group |
|
Human Resources Committee |
E.H. Harrison |
|
Foresight Energy LP |
|
Audit Committee |
K.T. Hoeg |
|
Imperial Oil Limited |
|
Audit Committee
Nominations & Corporate Governance Committee
Executive Resources Committee (Chair)
Environment, Health & Safety Committee
Contributions Committee |
|
|
Sun Life Financial Inc. |
|
Risk Review Committee
Management Resources Committee (Chair) |
R. MacDonald |
|
Just Energy Group Inc. |
|
|
A.F. Reardon |
|
Appvion Inc. |
|
Compensation Committee
Governance Committee (Chair) |
S.C. Tobias |
|
Plum Creek Timber Company, Inc. |
|
Corporate Governance and Nominating Committee
Compensation Committee |
28
CANADIAN PACIFIC
DIRECTOR ATTENDANCE
Regularly scheduled Board and committee meeting dates are established approximately two years in advance. Special meetings are also scheduled as needed and these
meetings can be called on short notice. In 2014, the Board called one special meeting and the Finance Committee called one special meeting.
Directors are expected
to attend all regularly scheduled Board meetings and meetings of committees on which they serve and to exercise best efforts to attend all special meetings. All directors are also invited to attend all of the regularly scheduled meetings of the
committees. In 2014, the incumbent Nominees attended 98% of all Board and Committee meetings, as set forth below.
Prior to being elected as Chairman of the Board on May 1, 2014, Mr. Colter had been a member of the Audit and
Finance Committees. In 2014, Mr. Colter attended 100% of the 19 committee meetings held subsequent to his election as Chairman. As Chairman he regularly attends committee meetings.
Board and committee meeting materials are typically provided to the directors in advance of meetings. If a director is unable to attend a meeting, the director provides
his or her comments to the Chair, Chair of the committee or the Corporate Secretary in advance of the meeting, and the recipient will ensure those comments and views are considered at the meeting.
The following table is a summary of each incumbent
Nominees attendance at Board and committee meetings in 2014:
|
|
|
|
|
|
|
|
|
Director |
|
Board Meetings
Attended |
|
Committee Meetings Attended |
|
Total Meetings Attended |
W.A. Ackman |
|
6 of 6 |
|
11 of 12 |
|
17 of 18 |
|
(94%) |
G.F. Colter (Chair) |
|
6 of 6 |
|
6 of 6 |
|
12 of 12 |
|
(100%) |
I. Courville |
|
6 of 6 |
|
14 of 14 |
|
20 of 20 |
|
(100%) |
E.H. Harrison |
|
6 of 6 |
|
4 of 5 |
|
10 of 11 |
|
(91%) |
P.C. Hilal |
|
6 of 6 |
|
12 of 12 |
|
18 of 18 |
|
(100%) |
K.T. Hoeg |
|
6 of 6 |
|
10 of 10 |
|
16 of 16 |
|
(100%) |
R. MacDonald |
|
6 of 6 |
|
10 of 10 |
|
16 of 16 |
|
(100%) |
A.R. Melman |
|
6 of 6 |
|
12 of 12 |
|
18 of 18 |
|
(100%) |
L.J. Morgan |
|
6 of 6 |
|
14 of 14 |
|
20 of 20 |
|
(100%) |
A.F. Reardon |
|
6 of 6 |
|
8 of 10 |
|
14 of 16 |
|
(88%) |
S.C. Tobias |
|
6 of 6 |
|
12 of 12 |
|
18 of 18 |
|
(100%) |
Totals |
|
66 of 66 |
|
113 of 117 |
|
179 of 183 |
|
(98%) |
ADDITIONAL INFORMATION ABOUT CURRENT DIRECTORS NOT STANDING FOR ELECTION
Mr. Paul G. Haggis, an independent director who has served as a director since May 2012, will not be standing for re-election at the Meeting. Mr. Haggis
is Chairman of the Alberta Enterprise Corporation, an investor in venture capital funds. Mr. Haggis
served as Chairman of the Board of the Corporation from May 2012 to May 2014. Subsequent to May 2014, he was a member of the Corporations Audit Committee and a member of the Finance
Committee. In 2014, Mr. Haggis attended 6 of 6 Board meetings, 5 of 5 Audit Committee meetings, and 4 of 5 Finance Committee meetings.
2015 MANAGEMENT PROXY
CIRCULAR 29
DIRECTORS COMPENSATION
|
|
|
Director compensation is aligned with shareholder interests and compensates fairly based on market standards to attract and retain qualified directors |
|
|
|
|
Director compensation is comprised entirely of an annual retainer in the form of deferred share units with a one-year post-retirement hold period. Directors who have met their share ownership requirement may elect to
take 50% of their retainer in cash |
|
PHILOSOPHY
Canadian Pacifics directors compensation program shares the same objectives as the Corporations executive compensation program, namely to:
(i) attract and retain skilled director talent; and (ii) create alignment with shareholder interests. The compensation elements used to achieve these objectives consist of annual retainers, share ownership requirements and director
deferred share units (DDSUs) granted under the Directors Deferred Share Unit Plan (the DDSU Plan). These elements are described in further detail below.
Messrs. Ackman and Hilal have elected not to receive any retainer or fees, or any initial, annual or quarterly DDSUs, in connection with their service on the Board or
any committees.
Directors who are also employees of CP do not receive any compensation for Board or committee service.
DIRECTORS 2014 COMPENSATION
The Corporate Governance
and Nominating Committee reviews directors compensation on an annual basis after considering the advice of an independent compensation consultant, taking into account such factors as the time commitment, compensation provided by comparable
companies, and responsibilities of directors.
The comparator group used to establish competitive pay practices for directors compensation is the same peer
group as used for executives set out in Schedule B.
Starting July 1, 2013, the Board adopted a flat fee structure for director compensation,
comprised
entirely of deferred share units with a one-year post-retirement hold period. The flat fee structure is simpler to administer and disclose, and aligns with the ongoing responsibilities of the
Board of Directors. Attendance at meetings is an important component of the role of a director; however, CPs Board provides continual oversight to the Company and a flat fee structure better compensates for this responsibility.
|
|
|
|
|
Item or Service |
|
Annual Retainer |
|
Board Chair Retainer |
|
$ |
395,000 |
|
Director Retainer |
|
$ |
235,000 |
|
Committee Chair Retainer |
|
$ |
30,000 |
|
In 2014, the Corporate Governance and Nominating Committee reviewed director compensation relative to the executive compensation
comparator group used for executives set out in Schedule B with the Class I Railroads being used as a secondary reference. As a result of this review, the Corporate Governance and Nominating Committee made the following changes to
director compensation effective October 1, 2014:
|
|
Total director compensation is increased by $35,000 to reflect the need to attract and retain North American directors and the additional time commitments required of CP directors |
|
|
Committee Chair retainers are increased by $10,000 to reflect the significant additional work required of Chairs |
|
|
The Board Chair retainer is increased by $45,000, which reflects the $35,000 general increase for all directors and the $10,000 increase for committee Chairs |
|
|
Each director is required to receive 100% of compensation in DSUs until the director has met the share ownership requirements, after which 50% of compensation will be in DSUs and the director may elect to receive the
balance in cash, DSUs or a combination |
The change to allow directors to receive up to 50% of their retainer in cash once they have met their share
ownership requirements was made because the Committee determined that deferring 100% of director compensation for directors entire tenure
30
CANADIAN PACIFIC
could negatively impact economic diversity on the Board. The policy, as changed, remains aligned with good governance practices.
The Corporate Governance and Nominating Committee has determined that director compensation will be reviewed every 2 to 3 years.
Directors are reimbursed for travel and out-of-pocket expenses related to the Board and committee meetings.
Directors Deferred Share Unit Plan
All directors will receive 100% of their
annual retainer entirely in the form of DDSUs until they have met the share ownership requirements and at least 50% in DDSUs after that. A DDSU is a bookkeeping entry having the same value as one Share, paid after the director leaves the Board,
thereby providing an ongoing equity stake in the Corporation throughout the directors tenure. DDSUs earn dividends in the form of additional DDSUs at the same rate as dividends on Shares. DDSUs are subject to a one year post-retirement hold
period. One year after the director leaves the Board, the director will receive a cash amount equal to the value of the DDSUs held by the director, based on the market value of the Shares at that time, minus applicable withholding taxes.
A director who has met the share ownership requirements may elect annually to receive up to 50% of his or her retainer in DDSUs. To participate in this aspect of the
DDSU Plan, the directors
election must be received prior to the beginning of each calendar year. Only non-employee directors participate in the DDSU Plan.
Director Share Ownership Requirements
To enhance the alignment of directors
interests with those of shareholders, non-employee directors are required to hold $1,175,000 in Shares/DDSUs within five years of their initial election or appointment to the Board. The Chairman of the Board is required to hold $1,975,000 in
Shares/DDSUs within five years of the Chairs initial appointment. These amounts represent five times their respective annual retainers. This multiple was increased from three to five times by the Board, effective October 26, 2012. The
share ownership requirement may alternatively be satisfied through an indirect interest in Shares.
Directors Compensation Consultant
In discharging its mandate, the Governance Committee engaged Meridian Compensation Partners to provide expertise and advice on matters relating to director
compensation. This included providing market compensation information and advice on appropriate comparator organizations, current market practice and best practices with regard to director compensation. The decisions made by the Governance Committee
are its responsibility and may reflect factors and considerations other than the information and recommendations provided by Meridian Compensation Partners.
2015 MANAGEMENT PROXY
CIRCULAR 31
The following table sets out each incumbent Nominees equity ownership interest in the Corporation as at
December 31, 2014 and 2013, the total value of Shares and DDSUs held, and the amount needed to meet the minimum share ownership requirement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director |
|
Year |
|
|
Number of Shares |
|
|
Number of DDSUs |
|
|
Total Number of Shares and DDSUs |
|
|
Total At- Risk Value of Shares and DDSUs ($) |
|
|
Multiple of Minimum Shareholding Requirement |
|
|
Minimum Shareholding Requirement ($) |
|
|
Value At Risk as
a Multiple of Annual Retainers & Stock Based Comp |
|
|
Has Achieved Minimum Shareholding Requirement |
|
G.F. Colter |
|
|
2014 |
|
|
|
1,500 |
|
|
|
5,197 |
|
|
|
6,697 |
|
|
|
1,498,454 |
|
|
|
0.76 |
|
|
|
1,975,000 |
|
|
|
4.81 |
|
|
|
No |
|
|
|
|
2013 |
|
|
|
1,500 |
|
|
|
4,096 |
|
|
|
5,596 |
|
|
|
898,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be met by |
|
|
|
|
Change |
|
|
|
0 |
|
|
|
1,101 |
|
|
|
1,101 |
|
|
|
599,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2017 |
|
W.A. Ackman |
|
|
2014 |
|
|
|
|
(a) |
|
|
0 |
|
|
|
|
(a) |
|
|
|
(a) |
|
|
|
(a) |
|
|
1,175,000 |
|
|
|
n/a |
|
|
|
Yes |
(a) |
I. Courville |
|
|
2014 |
|
|
|
900 |
|
|
|
2,486 |
|
|
|
3,386 |
|
|
|
757,618 |
|
|
|
0.64 |
|
|
|
1,175,000 |
|
|
|
3.37 |
|
|
|
No |
|
|
|
|
2013 |
|
|
|
900 |
|
|
|
1,659 |
|
|
|
2,559 |
|
|
|
411,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be met by |
|
|
|
|
Change |
|
|
|
0 |
|
|
|
827 |
|
|
|
827 |
|
|
|
346,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2018 |
|
E.H. Harrison |
|
|
2014 |
|
|
|
178,617 |
|
|
|
67,398 |
|
|
|
246,015 |
|
|
|
52,358,414 |
|
|
|
4.30 |
|
|
|
12,149,500 |
|
|
|
N/A |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
153,100 |
|
|
|
38,546 |
|
|
|
191,646 |
|
|
|
29,866,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
25,517 |
|
|
|
28,852 |
|
|
|
54,369 |
|
|
|
25,178,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.C. Hilal |
|
|
2014 |
|
|
|
|
(a) |
|
|
0 |
|
|
|
|
(a) |
|
|
|
(a) |
|
|
|
(a) |
|
|
1,175,000 |
|
|
|
n/a |
|
|
|
Yes |
(a) |
K.T. Hoeg |
|
|
2014 |
|
|
|
0 |
|
|
|
22,322 |
|
|
|
22,322 |
|
|
|
4,994,548 |
|
|
|
4.25 |
|
|
|
1,175,000 |
|
|
|
21.60 |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
0 |
|
|
|
21,307 |
|
|
|
21,307 |
|
|
|
3,422,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
0 |
|
|
|
1,015 |
|
|
|
1,015 |
|
|
|
1,571,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. MacDonald |
|
|
2014 |
|
|
|
3,900 |
|
|
|
4,823 |
|
|
|
8,723 |
|
|
|
1,951,771 |
|
|
|
1.66 |
|
|
|
1,175,000 |
|
|
|
9.35 |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
3,900 |
|
|
|
4,016 |
|
|
|
7,916 |
|
|
|
1,271,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
0 |
|
|
|
807 |
|
|
|
807 |
|
|
|
680,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.R. Melman |
|
|
2014 |
|
|
|
15,000 |
|
|
|
4,946 |
|
|
|
19,946 |
|
|
|
4,462,918 |
|
|
|
3.80 |
|
|
|
1,175,000 |
|
|
|
19.30 |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
15,000 |
|
|
|
4,061 |
|
|
|
19,061 |
|
|
|
3,062,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
0 |
|
|
|
885 |
|
|
|
885 |
|
|
|
1,400,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.J. Morgan |
|
|
2014 |
|
|
|
0 |
|
|
|
26,275 |
|
|
|
26,275 |
|
|
|
5,879,031 |
|
|
|
5.00 |
|
|
|
1,175,000 |
|
|
|
28.16 |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
0 |
|
|
|
25,230 |
|
|
|
25,230 |
|
|
|
4,053,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
0 |
|
|
|
1,045 |
|
|
|
1,045 |
|
|
|
1,825,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.F. Reardon |
|
|
2014 |
|
|
|
4,031 |
|
|
|
2,585 |
|
|
|
6,616 |
|
|
|
1,480,330 |
|
|
|
1.26 |
|
|
|
1,175,000 |
|
|
|
7.09 |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
2,575 |
|
|
|
1,720 |
|
|
|
4,295 |
|
|
|
689,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
1,456 |
|
|
|
865 |
|
|
|
2,321 |
|
|
|
790,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S.C. Tobias |
|
|
2014 |
|
|
|
4,000 |
|
|
|
9,167 |
|
|
|
13,167 |
|
|
|
2,946,116 |
|
|
|
2.51 |
|
|
|
1,175,000 |
|
|
|
12.74 |
|
|
|
Yes |
|
|
|
|
2013 |
|
|
|
4,000 |
|
|
|
8,167 |
|
|
|
12,167 |
|
|
|
1,954,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
0 |
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
991,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(a) |
Messrs. Ackman and Hilal are each investors in funds managed by Pershing Square Capital Management, L.P. that holds 13,940,890 Shares of the Corporation. Accordingly each has an indirect interest in such Shares. In
addition, Mr. Ackman, as the Managing Member of PS Management GP, LLC, exercised control over the voting and disposition of such Shares. Each of Messrs. Ackman and Hilal has certified to CP that the magnitude of his indirect interest in such
Shares satisfies the Corporations minimum shareholding requirement. |
Total dollar values determined by reference to the DDSUs owned by the
directors and the closing price of Shares on the TSX on December 31, 2014 ($223.75) and December 31, 2013 ($160.65).
32
CANADIAN PACIFIC
Directors Compensation Table
The following table provides the total compensation received by non-employee directors who served at any
time during 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Fees |
|
|
Total Compensation ($)(a) |
|
|
% of Total Compensation Taken in DDSUs |
|
|
Total Fees Earned ($)(a) |
|
|
Amount of Fees in DDSUs ($)(a) |
|
|
Amount of Fees in Cash ($) |
|
|
|
G.F. Colter |
|
|
311,387 |
|
|
|
311,387 |
|
|
|
0 |
|
|
|
311,387 |
|
|
|
100 |
|
W.A. Ackman(b) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
I. Courville |
|
|
224,602 |
|
|
|
224,602 |
|
|
|
0 |
|
|
|
224,602 |
|
|
|
100 |
|
P.G. Haggis |
|
|
246,525 |
|
|
|
246,525 |
|
|
|
0 |
|
|
|
246,525 |
|
|
|
100 |
|
P.C. Hilal(b) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
K. T. Hoeg |
|
|
231,250 |
|
|
|
231,250 |
|
|
|
0 |
|
|
|
231,250 |
|
|
|
100 |
|
R.C. Kelly (former director) |
|
|
81,441 |
|
|
|
81,441 |
|
|
|
0 |
|
|
|
81,441 |
|
|
|
100 |
|
R. MacDonald |
|
|
208,750 |
|
|
|
208,750 |
|
|
|
0 |
|
|
|
208,750 |
|
|
|
100 |
|
A.R. Melman |
|
|
231,250 |
|
|
|
231,250 |
|
|
|
0 |
|
|
|
231,250 |
|
|
|
100 |
|
L.J. Morgan |
|
|
230,564 |
|
|
|
230,564 |
|
|
|
0 |
|
|
|
230,564 |
|
|
|
100 |
|
J. Prentice (former director) |
|
|
77,473 |
|
|
|
77,473 |
|
|
|
0 |
|
|
|
77,473 |
|
|
|
100 |
|
A.F. Reardon |
|
|
230,564 |
|
|
|
230,564 |
|
|
|
0 |
|
|
|
230,564 |
|
|
|
100 |
|
S.C. Tobias |
|
|
255,416 |
|
|
|
255,416 |
|
|
|
0 |
|
|
|
255,416 |
|
|
|
100 |
|
Notes:
(a) |
Payments made in U.S. dollars were converted into Canadian dollars using an average rate of exchange for 2014 of 1.1045 Canadian dollars per United States dollar. |
(b) |
Messrs. Ackman and Hilal have elected not to receive any retainer or fees, nor any initial, annual or quarterly DDSUs, in connection with their service on the Board or any committees. |
The total compensation received by non-employee directors in 2014 was approximately $2,329,222. This amount includes the approximate dollar value of DDSUs credited to
the directors respective DDSU accounts in 2014.
2015 MANAGEMENT PROXY
CIRCULAR 33
BOARD AND COMMITTEES
The Board is responsible for the stewardship of the Corporation and for monitoring the actions of, and providing guidance and direction to management.
In fulfilling its mandate, the Board has established the following board committees: Audit (the Audit Committee), Corporate Governance and Nominating (the
Governance Committee), Finance (the Finance Committee), Management Resources and Compensation (the Compensation Committee) and the Safety, Operations and Environment (the SOE Committee). The Board has
approved the terms of reference for each of its committees and delegated responsibilities as set out in those mandates. Such terms of reference may be found at www.cpr.ca.
All members of the Audit Committee are financially literate as required by the New York Stock Exchange (NYSE) and the Canadian Securities
Administrators (CSA). Ms. Courville, Mr. Haggis and Mr. Reardon have been determined to meet the Audit Committee financial expert criteria prescribed by the U.S. Securities and Exchange Commission (SEC).
All members of each Committee met Board approved independence standards for the applicable committee. Standards derived from the NYSE corporate governance rules and CSA
corporate governance guidelines are available at www.cpr.ca.
Every year the Board and each Committee reviews its terms of reference and evaluates whether it
fulfills that mandate. Each Committee is satisfied that it has fulfilled all responsibilities under its terms of reference.
REPORT OF THE
SAFETY, OPERATIONS AND ENVIRONMENT COMMITTEE
The SOE Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference.
|
|
|
MANDATE |
|
Responsible for providing oversight on health, safety, security and environmental issues and the operations of the Corporation. Reviews practices and procedures in light of changes to applicable legislation, regulatory requirements
and industry standards. |
|
|
HIGHLIGHTS
MEMBERSHIP S.C. Tobias (Chair)
I. Courville E.H. Harrison
A.R. Melman L.J. Morgan |
|
The SOE Committee, in accordance with its mandate, accomplished the following:
Oversight of Health, Safety, Security and Environmental Issues
Reviewed and made recommendations on matters relating to the environment, safety, and occupational health
Reviewed managements efforts focused on prevention and mitigation of problems and incidents related to significant
environmental, safety, and occupational health issues, and major hazard analysis Reviewed legislation and regulatory
changes in Canada & U.S. Reviewed operational performance to ensure the continued alignment of the operational
plans Reviewed specific programs and initiatives aimed at improving operational performance
Reviewed key safety performance metrics
Reviewed the 2014 Safety Plan and the 2014 Environmental Plan
Reviewed operational plans and objectives included in the Corporations multi-year strategic plan
Reviewed the operational plans and objectives contained within the annual budget
Risk Oversight
Reviewed key issues and risks, opportunities and strategies with respect to health, safety, security and environmental
issues Reviewed risks that relate to the development and implementation of Corporations operations |
34
CANADIAN PACIFIC
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is satisfied it has fulfilled all responsibilities under its Terms of Reference.
|
|
|
MANDATE |
|
Responsible for fulfilling public company audit committee legal obligations and assisting the Board of Directors in fulfilling its oversight responsibilities in relation to the disclosure of financial statements and information
derived from financial statements, including the review of the annual and interim financial statements of the Corporation, the integrity and quality of the Corporations financial reporting and internal controls, the Corporations
compliance with applicable legal and regulatory requirements, and the qualifications, independence, engagement, compensation and performance of the Corporations external auditors, and the performance of the Corporations internal audit
function. |
|
|
HIGHLIGHTS
MEMBERSHIP I. Courville (Chair)
P.G. Haggis L.J. Morgan
A.F. Reardon |
|
The Audit Committee, in accordance with its mandate, accomplished the following:
External Auditors
Obtained and reviewed the external auditors annual
audit report of the year-end financial statements and reports describing all work performed, the outcome of the audit and a formal opinion on the financial statements of the Company
Received a report summarizing all required communications from the auditors to ensure that all applicable
standards for communications with Audit Committees were complied with Met with management, Internal Audit
and the external auditors to review annual and interim financial statements, the related Managements Discussion and Analysis (MD&A), and earnings releases prior to publication
Obtained assurance from the external auditors that the audit was conducted in a manner consistent with
accepted audit standards Reviewed with the Chief Legal Officer, the Corporations compliance with
applicable legal and regulatory requirements Reviewed external auditors compensation and recommended
for Board approval Reviewed external auditors internal quality control reports
Reviewed and accepted the independence of the external auditor
Reviewed and approved the external auditors annual audit plans
Internal Audit
Reviewed and approved internal auditors annual audit plan
Reviewed reports and recommendations relating to internal audit issues, and monitored managements
response to any issues identified Internal Controls
Reviewed with management, the internal auditors and external auditors, the Corporations financial
reporting processes and its internal controls Established procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters
Reviewed with the internal auditors the adequacy of internal controls and procedures
Risk Oversight
Monitored material financial disclosure
Reviewed the Corporations program of insurance to mitigate risks |
2015 MANAGEMENT PROXY
CIRCULAR 35
REPORT OF THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The Governance Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference.
|
|
|
MANDATE |
|
Responsible for monitoring and assessing the functioning of the Board and Committees, and for developing and implementing good corporate governance practices. Identifies individuals qualified to become Board Members and recommends
to the Board the director nominees for the annual meetings of shareholders. |
|
|
HIGHLIGHTS
MEMBERSHIP K.T. Hoeg (Chair)
W.A. Ackman R. MacDonald |
|
The Governance Committee, in accordance with its mandate, accomplished the following:
Board Composition, Director Qualifications and Director Nominations
Reviewed the competencies and skills that the Board as a whole should possess
Reviewed the competencies, skills and other diverse qualities that the existing directors possess
Reviewed and recommended the adoption of the Advance Notice By-Law
Effectiveness of Board, Committees and Directors
Reviewed and evaluated the performance and effectiveness of the Board, its Committees, individual Directors,
the Chairman of the Board implemented a comprehensive assessment process for directors Retained external
advisor for assessment of Board performance Assessed the effectiveness of the working relationship and
communications between the Board and management Assessed the availability, relevance and timeliness of
information required by the Board Reviewed, and where applicable revised, the terms of reference of the
Board and each Committee Reviewed position descriptions for Board Chair, CEO and Committee Chairs
Corporate Governance
Reviewed and confirmed the corporate governance principles and guidelines for the Corporation
Reviewed corporate governance disclosures and monitored legal and regulatory requirements, as well as best
practices Reviewed and approved the adoption of advanced notice by-law
Directors Orientation and Education
Reviewed orientation and continuing education programs for directors
Approved annual director education program for 2015
Directors Compensation
Reviewed directors compensation. Revised the payment structure for the directors DSU grants and
implemented mandatory exercise of DSUs one year after retirement Risk Oversight
Monitored the Boards oversight of enterprise risk management
Reviewed and reported to the Board on a process to determine in light of the risks and opportunities facing
the Corporation what skills and personal qualities are required for new directors |
36
CANADIAN PACIFIC
REPORT OF THE FINANCE COMMITTEE
The Finance Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of
Reference.
|
|
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MANDATE |
|
Responsible for assisting the Board in fulfilling its responsibility to oversee the Corporations financial position, financing plans, programs and dividend policy; strategic options and opportunities for the Corporation,
including acquisitions and divestitures. Oversight of the pension plans sponsored by the Corporation and its subsidiaries. |
|
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HIGHLIGHTS
MEMBERSHIP A.F. Reardon (Chair effective February 19, 2015)
W.A. Ackman P.G. Haggis
P. Hilal A.R. Melman |
|
The Finance Committee, in accordance with its mandate, accomplished the following:
Finance Matters
Oversaw the Corporations capital structure, cash flows
and key financial ratios recommending the Corporations share repurchase program and normal course issuer bid
Reviewed the Corporations credit facilities, and compliance with financial covenants
Reviewed major financings, offering documents and financing plans and strategies, recommending the renewal of
the Corporations commercial paper and supporting term debt and hedging programs Reviewed the
Corporations credit ratings and monitored the Corporations activities relating to credit rating agencies
Reviewed strategic options and opportunities for the Corporation, including the sale of a portion of the
Delaware and Hudson Railroad Reviewed the Corporations real estate portfolio
Reviewed the operating and capital budgets for the Corporation
Pension Matters
Exercised oversight responsibilities of pension matters
Appointed pension fund auditors
Received the annual audited pension fund financial statements and reviewed the auditors reports
Revised the Statement of Investment Policy
Selected new investment managers
Risk Oversight Reviewed
financial risks, including credit risk, commodity risk, M&A risk and interest rate risk. Reviewed risk assessment and risk management policies relative to financial risk that may impact the Corporation
Reviewed and made recommendations relating to the financial policies of the Corporation generally and
managements plans relating to Treasury operations Oversaw financial risks and contingent
exposure |
2015 MANAGEMENT PROXY
CIRCULAR 37
REPORT OF THE MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE
The Compensation Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference.
|
|
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MANDATE |
|
Responsible for fulfilling public company compensation legal obligations and assisting the Board with its responsibility relating to the appointment, compensation and reporting relationships of the Corporations executives.
Reviews the Corporations compensation philosophy and programs, the adoption and amendment of incentive compensation plans, and retirement plans. Establishes the performance objectives and performance evaluations for senior officers. Reviews
organizational health, and succession planning. |
|
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HIGHLIGHTS
MEMBERSHIP P. Hilal (Chair)
K.T. Hoeg R. MacDonald
A.F. Reardon S.C. Tobias |
|
The Compensation Committee, in accordance with its mandate, accomplished the following:
Succession Planning
Undertook succession planning for senior management positions in the Corporation, and reviewed processes to
identify, develop and retain executive talent Appointed persons as officers of the Corporation including a
new Chief Risk Officer, Laird Pitz, Vice President and Treasurer, Darren Yaworsky, Vice President Marketing and Sales Energy and Merchandise, Thompson Browning, Vice President Strategic Planning, James Clements, Vice President Network
Transportation, Mike Foran and Vice President Network Services, Jaqueline Coyle Compensation
Philosophy Reviewed the compensation philosophy and programs of the Corporation generally and reviewed
reports from independent advisors Considered total compensation for named executives and those officers
reporting to the CEO Recommended long-term and short-term incentive plans and metrics for 2015
Approved awards under the short-term incentive plans for 2014
Reviewed executive share ownership guidelines and monitored compliance
Reviewed guidelines for adjustments under annual incentive plans
Chief Executive Officer Performance and Compensation
Established the performance objectives and the process for evaluating the performance of the CEO
Conducted performance evaluations of the CEO in accordance with the performance evaluation process
Reviewed and made recommendations to the independent directors of the Board on the level of compensation to be
paid to the CEO Reviewed and made recommendations to the independent directors of the Board on revisions
to the CEOs Employment Agreement Risk Oversight
Reviewed Corporations compensation plans with the view towards not encouraging excessive or undue risk
taking Oversight of risk associated with the compensation philosophy and programs |
38
CANADIAN PACIFIC
2014 EXECUTIVE COMPENSATION
2015 MANAGEMENT PROXY
CIRCULAR 39
2014 EXECUTIVE COMPENSATION LETTER
TO SHAREHOLDERS
To our Fellow Shareholders
In 2014 Canadian
Pacific delivered the strongest full-year financial results in our railroads history. In addition to achieving significant records in revenue, operating income, and net income, the Company recorded an all-time low operating ratio of 64.7% for
the year. These results all exceed the Companys operational and financial goals, and advance CP toward an industry-leading position.
Marked by an intense
cycle of winter weather that affected all transportation supply chains throughout North America, 2014s sustained period of record cold temperature was a particular challenge for the rail industry as a whole. During this time of disruption, CP
worked to provide the best possible service and distinguished itself through the continued safe delivery our customers goods. Under the leadership of CEO, Hunter Harrison and our President and COO, Keith Creel, this commitment to providing
premium service is visible in all levels of the Company.
Above all, our success was achieved with solid safety performance in each community where we operate. As a
Board we take pride in knowing that our management team believes in continuous safety improvement, and the Company continues to explore methods of enhancing current safe operating practices.
Substantial value for our shareholders was created in 2014, building on the extraordinary value creation of the prior two years:
|
|
Share price increased from $159.37 to $223.75 on the TSX in 2014; |
|
|
We outperformed the S&P/TSX 60 by 28%; and |
|
|
Our total shareholder return was at the 86th percentile of the S&P/TSX 60. |
Building the CP team is an important and
ongoing task on which the Board and the Management of the Company all focus. The Board is particularly pleased that our CEO, Hunter Harrison agreed to extend his contract by an additional year to June 30th, 2017. We have a succession plan with Mr.
Creel, who, after Mr. Harrison, is regarded by many to be the best active rail operations executive in the business. We have increased our bench strength and have a robust succession and development program in place.
We focus on a balanced compensation program with reasonable base salary and annual and long-term incentives. The majority of executive compensation is at risk, linked
to our strategy and with a long-term focus. Our pay is fully aligned with our performance, safety record, and with the creation of shareholder value as is illustrated by the chart on page 55 of this Circular. We pay particular attention to the
possibility that misaligned incentives created by compensation plans could introduce unintended risk to our organization, and we are satisfied with our plan design.
We set aggressive targets in our Short-Term and Long-Term Incentive Plans. We assess the level of stretch in targets by reference to the results (amount and pace of
improvement) achieved by the other Class I Railroads during similar transformation periods, and by reference to the performance of other Class I Railroads and our year-over-year improvement.
Identifying an appropriate, shareholder aligned compensation package for Mr. Harrison is challenging, given his unique and proven ability to drive transformational
change in railroads. We designed a compensation package that closely aligns his compensation with the key drivers of our transformational strategy and with the best
40
CANADIAN PACIFIC
interests of our shareholders. We have a carefully balanced mix of long-and short-term goals and Mr. Harrison cannot access any of his long-term incentive compensation, other than 50% of his 2014
option grant, until 2017. This provides an incentive to build an organization that will sustain its success over the long term.
We would like to express our
appreciation to the Board for its strategic support and ongoing commitment to the Company, and our management and employees for both their passion and excellence. 2014 has been a year in which Canadian Pacific has re-established itself as an
industry leader in service and safety, and has delivered outstanding results for all shareholders.
Sincerely,
|
|
|
/s/ Paul Hilal
Paul Hilal |
|
/s/ Gary Colter Gary Colter |
Chair of the Management Resources and Compensation Committee |
|
Chairman of the Board |
2015 MANAGEMENT PROXY
CIRCULAR 41
STATEMENT OF EXECUTIVE COMPENSATION
MANAGEMENT RESOURCES AND COMPENSATION
COMMITTEE
Composition of the Management Resources and Compensation Committee
CPs Management Resources and Compensation Committee (the Committee) comprises five independent directors: Paul Hilal (Chair), Krystyna Hoeg, Rebecca
MacDonald, Andrew Reardon, and Stephen Tobias.
Each member of the Committee has education, skills and experience which are relevant to the performance of their
responsibilities as a member of the Committee. The following skills and experience enable the Committee to make decisions on the suitability of CPs compensation policies and practices:
* Paul Hilal (Chair) is a Partner at Pershing Square Capital Management, L.P., an
investment advisor with approximately US$18 billion of assets under management. Mr. Hilal received an A.B. degree in Biochemistry from Harvard College in 1988, a J.D. from Columbia University in 1992, and a Masters of Business Administration
from Columbia University School of Business in 1992. The Committee benefits from Mr. Hilals extensive experience assessing compensation and related issues from a shareholders perspective. His experience as a professional investor
enables him to provide strong financial oversight to compensation policies and practices.
* Krystyna Hoeg is the former President and Chief Executive Officer of Corby Distilleries Limited, a marketer and seller of spirits and wine. As Chief Executive Officer, the Vice President of Human Resources reported
directly to Ms. Hoeg providing her with direct experience overseeing executive compensation and other human resource matters. She has also served on the human resource committees of various other public companies including currently chairing
the Executive Resources Committee at Imperial Oil Limited and the Management Resources Committee at Sun Life Financial Inc.
* Rebecca Macdonald is a founder and current Executive Chair of Just Energy Group Inc., a
Toronto-based independent marketer of deregulated gas and electricity. She served as President and Chief Executive Officer of Just Energy prior to becoming Executive Chair in 2007. As Chief
Executive Officer, the head of the human resources department reported directly to her. Ms. Macdonald has strong succession planning experience including her development of candidates in preparation for her succession as Chief Executive Officer
of Just Energy.
* Andrew Reardon is a thirty-two year veteran of the railroad
industry, and is the former Chairman and Chief Executive Officer of TTX Company, the leading railcar leasing company in North America. Prior to his appointment as Chairman and CEO, Mr. Reardon served as the Vice President, Law and Human
Resources of TTX Company from 1992 to 2000. Previously, he was a Presidential Appointee to the US Railroad Retirement Board. His railroad experience includes service as the Sr. Vice President Law and Administration at the Illinois Central
Transportation Company. At both TTX and the Illinois Central, Mr. Reardon was responsible for all compensation practices and policies as well as all labour matters including direct involvement in union contract negotiations. Mr. Reardon
has extensive experience in compensation policies and practices, discussion of compensation matters with investors, talent development, succession planning, executive recruitment and compensation, pension benefits and human resource management in
the rail industry. Mr. Reardon is on the Compensation Committee of Appvion Inc. (formerly Appleton Papers Inc).
* Stephen Tobias is a forty-year veteran of the railroad industry and the former Vice Chairman and Chief Operations Officer of Norfolk Southern Corporation.
Mr. Tobias has extensive experience in talent development, succession planning, and human resource and executive compensation policies and practices in the rail industry. He also brings strong oversight in labour matters. Mr. Tobias is a
member of the Compensation Committee of Plum Creek Timber Company, Inc.
42
CANADIAN PACIFIC
Overall the Committee members possess human resource and compensation-related experience in the following areas of
expertise:
|
|
Direct responsibility for executive compensation matters |
|
|
Membership on Other HR Committees |
|
|
Experience in compensation plan design and administration, compensation decision-making and understanding of the Boards role in the oversight of these practices |
|
|
Understanding the principles and practices related to leadership development, talent management, succession planning, employment contracts |
|
|
Engagement with Investors and Investor Representatives on Compensation Issues |
|
|
Oversight of Financial Analysis Related to Compensation Plan Design and Practices |
|
|
Oversight of Labour Matters and a Unionized Workforce |
|
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Pension Benefit Oversight |
|
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Recruitment of Senior Executives |
|
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Oversight of Risk in Compensation Plan Design and Practice |
PRINCIPLES
AND OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
CPs executive compensation program is closely linked to the crucial metrics which will drive the
achievement of the organizations strategic plan and create shareholder value. We are creating a railroad-focused culture with compensation plans designed to align management compensation with shareholder interests. For executive officers, the
majority of their pay is at risk and will be earned only through the successful execution of CPs strategic plan.
The Committee is committed to a compensation
program that drives short and long-term business
performance, is competitive and encourages broad share ownership. Our executive compensation program is weighted towards pay-for-performance components that are integrated into a comprehensive
executive compensation program; is aligned with shareholders interests; is competitive in attracting and retaining talent; and provides compensation to motivate sustained performance of executives and support the achievement of corporate and
individual objectives.
Executive Compensation Consultants
The Committee and management retain separate independent executive compensation advisors.
Committee Advisors
In 2014 the Committee continued to engage Meridian Compensation
Partners LLC (Meridian) as its independent compensation consultant. Meridian was originally retained by the Committee in 2012. Meridian has agreed not to perform any work for management. During 2014, the services performed by Meridian
related to expertise and advice to the Committee on executive compensation and to the Governance Committee on director compensation. The Chair of the Committee approves all fees and work performed by Meridian. In addition, to ensure independence,
management must receive pre-approval from the Committee for any executive compensation services provided by the Committees compensation consultant. Meridians fees were $228,455 for 2014 and $302,951 for 2013.
Management Advisors
In 2014, Management engaged Towers Watson to provide market
data and survey results relating to executive compensation. Total fees paid in this regard were $71,407 for 2014 and $78,169 for 2013.
2015 MANAGEMENT PROXY
CIRCULAR 43
COMPENSATION DISCUSSION AND
ANALYSIS
EXECUTIVE SUMMARY
Named Executive Officers
For 2014, the Named Executive
Officers (NEOs) are: E. Hunter Harrison, Chief Executive Officer (CEO), Keith Creel, President and Chief Operating Officer (COO), Bart Demosky, Executive Vice President and Chief Financial Officer (CFO),
Robert Johnson, Senior Vice President Operations Southern Region and Anthony Marquis, Senior Vice President Operations Eastern Region.
Compensation Framework for Executive Officers
CP
maintains a comprehensive executive compensation program including base salary, short-term incentives, long-term incentives, pension benefits and executive perquisites. Decisions on level of pay for NEOs and
all other executive officers reporting to the CEO are made by the Compensation Committee and are based on an executive compensation policy designed to position total direct compensation close to the 50th percentile of Class I Railroads with
additional reference made to similar positions in a peer group which includes companies from one third to three times the asset size of CP. More information on our comparator group can be found on page 45.
2014 Short-term Incentive Results
The 2014 short-term
incentive plan was based on three metrics: operating income, operating ratio and free cash flow. These measures were chosen because they support CPs strategic plan. Overall, corporate performance for 2014 was exceptional, with financial
results exceeding the exceptional performance standards for all three measures. Consequently, the Board of Directors approved a payout of 200% for the corporate component of the Plan. Further information on the 2014
short-term incentive plan can be found on page 48.
Each NEO has a target annual incentive based on corporate performance as
well as individual performance. The Committee assessed the individual performance of the CEO and considered the CEOs assessment of the individual performance
of the NEOs. This individual performance assessment combined with corporate performance forms the basis for the level of annual incentive payouts for each executive provided in the Summary
Compensation Table on page 63.
2014 Long-Term Incentive Grants
To support CPs strategic plan and align the interests of management with the interests of shareholders, long-term incentives are comprised of 50% performance share
units (PSUs) and 50% stock options (Options). To determine the appropriate value of long-term incentive grants provided to NEOs, based on our established comparator group, the Committee considered external market data
together with factors including leadership and talent retention.
Summary of Risk Profile and Risk Management
The Compensation Committee oversees risk management related to executive compensation and considers the implications of the risks associated with CPs compensation
policies and practices. Broad-based short-term and long-term incentive plans as well as the executive compensation program are aligned with CPs strategic plan and enterprise risk management practices. Our compensation programs, policies and
practices operate to encourage the right behaviours, to reward performance and to align with long-term shareholder interests. Risks are mitigated through appropriate plan design, implementation of risk mitigating policies, and specific risk
mitigation measures discussed on page 52.
Diversity
CP encourages the
advancement of women and individuals with diverse back grounds at the Corporation through its employment equity program. CP has put in place an in depth Diversity and Employment Equity program pursuant to the Employment Equity Act (Canada) to
remove workplace barriers at all levels that impede or prevent the inclusion of qualified individuals and minority groups, including women, from
44
CANADIAN PACIFIC
consideration for positions. CP believes that the Diversity and Employment Equity Program encourages the advancement and employment of women and that arbitrary targets are not in the best
interests of CP in obtaining the highest caliber executives.
COMPENSATION ELEMENTS FOR
EXECUTIVE OFFICERS
CPs executive compensation program and policies are designed to provide a clear link between our long-term strategy, business plans,
and executive compensation. We pay for performance and a significant portion of executive compensation is tied to meeting key corporate objectives that drive shareholder return. Plans are also designed to be competitive to attract and retain top
talent.
Comparator Group
The Committee reviews the compensation of each NEO
and other select senior officers upon appointment and on an annual basis. In determining compensation for the NEOs and other executive officers reporting to the CEO, the Committee considers a comparator group of the following Class I Railroads:
BNSF Railway, Canadian National Railway Company, CSX Corporation, Kansas City Southern Railroad, Norfolk
Southern Corporation and Union Pacific Corporation. This comparator group reflects CPs need to attract and retain experienced railroad executives. We have balanced this North American focus
by continuing to use a secondary reference point to verify the alignment with general compensation trends and benchmark pay levels. This secondary reference group, reviewed by the Committee in 2014, is a group of capital intensive Canadian
businesses ranging from one-third to three times the size of CP on an asset basis, with CP positioned close to the median of the group. The companies in this secondary reference group are listed on Schedule B.
Each element of compensation is targeted at the median of the primary comparator group. Salary and short-term incentives are targeted at the median of the secondary
group. LTIP, which has challenging performance goals, is designed to target the 75th percentile of the secondary group, with total compensation targeted between the 50th and 75th percentiles. Actual pay received is highly dependent on performance, particularly share price performance. Throughout the annual executive compensation review process, the Committee receives advice
from its independent compensation consultant.
2015 MANAGEMENT PROXY
CIRCULAR 45
The following table summarizes the various elements of CPs executive compensation program:
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Compensation Element |
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Form |
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Design Summary and
Performance Period |
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Risk Mitigating
Elements |
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Alignment/Fit With
Overall Compensation Objectives |
Base Salary |
|
Cash |
|
Fixed pay with individual salary recommendations based on competitive assessment and economic outlook, leadership, retention, and succession considerations. |
|
Provides an adequate fixed component of pay to ensure access to talented employees and is set taking into account external advisor and peer group analysis. |
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Attract and retain highly qualified leaders: benchmarking against the comparator group ensures base pay is competitive. |
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Annual performance period |
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Short-term Incentive Plan |
|
Cash |
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Target awards are based on the executives level in the organization and are benchmarked to the
50th percentile of the comparator group; actual payouts are based on achievement of pre-determined corporate and individual objectives.
One year performance period. |
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Multiple performance metrics used with plan targets reviewed and approved annually based on detailed review of strategic plan. Payouts are capped with no guaranteed minimum payout. |
|
Attract and retain highly qualified leaders through an opportunity to earn a market-competitive
level of cash incentives, based on annual performance. Motivate high corporate and individual performance. Alignment of personal objectives with area of responsibility and role in realizing operating results.
Sustained alignment of executive and shareholder interests since the value of DSUs is directly
related to share price and DSUs cannot be liquidated until six months after termination of employment. |
|
Deferred Share Units (DSUs) |
|
At the executives election, DSUs are awarded in lieu of cash payout of the short-term incentive to
facilitate achievement of share ownership requirements. DSUs are held until termination of employment.
One Year Performance Period with DSUs required to be held until 6 months after retirement |
|
Aligns management interests with shareholder value growth and contributes to retention of key talent. |
|
Long-Term Incentive Plan |
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PSUs |
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Designed to target total long-term incentives at the median of the primary group and 75th
percentile of the secondary comparator group. PSUs are granted to Executive Officers as half of
their LTIP value. They vest only upon achievement of predefined market and financial goals. 3
year performance period |
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Significant weighting towards long term incentive compensation with overlapping multi-year performance periods. Performance multiplier is capped with no minimum guaranteed payout. |
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Align executive and shareholder interests over the longer term: actual value realized depends on
share price performance. Attract and retain highly qualified leaders by providing a competitive incentive opportunity.
Focus the leadership team on achieving challenging performance goals, with the value received driven by both share price improvement and company performance.
Focuses leadership on creating sustainable, long-term shareholder value |
|
Stock Options |
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Options are granted to Executive Officers as half of their LTIP value with the value based on the
executives level in the organization. Vesting over 4 years with 10 year Option
term. |
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Significant weighting towards long-term incentive compensation with overlapping multi-year vesting periods. |
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Pension |
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Defined Benefit and Defined
Contribution pension plans |
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Pension benefit is based on pay and service and is designed to be market competitive. Non registered Plan limited to senior managers and executives. |
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Provide an appropriate risk management balance to an otherwise highly performance-focused pay package. |
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Attract and retain highly qualified leaders. |
46
CANADIAN PACIFIC
2014 Compensation and Performance
Base Salary
The Committee reviews the base salaries of
NEOs and officers reporting directly to the CEO at the time of hire and, on an ongoing basis in February each year. The Committee takes into consideration the individuals leadership abilities, performance, responsibilities and experience as
well as median comparator group practices, succession, retention considerations and economic outlook. Employees are required to set performance objectives annually.
Short-term Incentive Plan
Approximately 3,500
non-unionized employees are eligible to participate in CPs Short Term Incentive Plan (STIP). This plan provides an opportunity for employees to earn an annual cash award based on the achievement of corporate targets and specific
individual performance objectives. Employees are required to set performance objectives annually. Assessment of performance against objectives is conducted through performance review discussions mid-year and at year-end.
Minimum, target and maximum payouts, expressed as a percentage of base salary are established for the CEO, other NEOs, executives, senior managers and other management
participants:
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Level |
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Minimum Payout as Percentage of Base Salary (%) |
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Target Payout as Percentage of Base Salary (%) |
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Maximum Payout as Percentage of Base Salary (%) |
|
CEO |
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0 |
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150 |
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300 |
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Other NEOs |
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0 |
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65 100 |
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130 200 |
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Other Executive Officers |
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0 |
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50 65 |
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100 130 |
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Payouts received under the STIP depend upon the achievement of both corporate and individual objectives. The weighting of the corporate
and individual components is dependent upon the employees level in the organization, with executives
having a more significant portion of annual incentive based on corporate results. This design reflects CPs view that short-term incentives should be tied to both overall corporate
performance as well as those areas of its business that each employee influences directly. Weightings for the 2014 short-term incentive plan are as follows:
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Level |
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Target Award as a percentage of base salary (%) |
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Corporate Component Weighting (%) |
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Individual Component Weighting (%) |
|
CEO |
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150 |
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75 |
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25 |
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Other NEOs |
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65 100 |
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75 |
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25 |
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Other Executive Officers |
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50 65 |
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75 |
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25 |
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Senior Managers |
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35 40 |
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60 |
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40 |
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Remaining Participants |
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7.5 25 |
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50 |
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50 |
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The Committee aligns performance goals directly with CPs strategic plan, which is reviewed and approved by the Board of Directors.
In setting STIP targets for the upcoming year, CP generally excludes items that are outside the normal business of the company and can impact the comparability of CPs year-over-year financial performance.
The Committee also considers safety as part of its overall assessment of performance in determining incentive payouts. Safety is treated as an integral part of each
employees responsibility in addition to forming part of the Operations teams individual objectives.
The individual component of the STIP is based on
goals that reflect the strategic and operational priorities critical to each executives function. The executives rating for the individual component of the STIP may be zero or range from 50% to 200%. Any award payable under the
individual component is subject to a minimum level of corporate performance, which is set annually by the Board. No award under the STIP Plan is paid unless this minimum corporate hurdle is achieved.
2015 MANAGEMENT PROXY
CIRCULAR 47
Payouts under the STIP are a sum of the corporate and individual components calculated as follows:
The Board has discretion to adjust targets and payouts under the STIP. In 2013, the Committee adopted guidelines for the
exercise of this discretion. Adjustments, both positive and negative, will be reviewed on an individual basis, using these guidelines, with the overriding rule being that the
Board assesses the effect that risk management, safety, financial results and other factors may have had on performance. The Committee may also approve in any individual instance, a downward
adjustment on the corporate component of the Plan for any executive officer.
Actual payouts for all NEOs are reported in the
Summary Compensation Table on page 63.
2014 Short-term Incentive Plan Performance
In 2014, corporate performance was assessed against measures approved by the Board of Directors in November of 2013 as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Range |
|
Company Measure |
|
|
|
Weight |
|
|
Threshold |
|
|
Target |
|
|
Exceptional |
|
Operating Ratio |
|
Operating expenses divided by total revenues |
|
|
50 |
% |
|
|
69 |
% |
|
|
67 |
% |
|
|
66.3 |
% |
Operating Income ($M) |
|
Revenues less expenses using US GAAP |
|
|
25 |
% |
|
|
1,962 |
|
|
|
2,091 |
|
|
|
2,212 |
|
Free Cash Flow ($M) |
|
Cash provided by operating activities less cash used in investing activities as shown on the Consolidated Statement of Cash-Flows and exclude costs of assets acquired under lease
strategy |
|
|
25 |
% |
|
|
700 |
|
|
|
762 |
|
|
|
908 |
|
Both operating income and operating ratio were set based on an assumed foreign exchange set at the beginning of the year.
These rigorous measures were selected because they are appropriate for a capital intensive business and provide quantifiable metrics that focus on achieving growth in a cost efficient manner. Target levels for the 2014 short-term incentive plan were
designed to drive significant improvements over actual results achieved in 2013 and align with CPs strategic plan. In assessing the level of stretch in targets the Committee considered, among other things, the results (amount and pace of
improvement) achieved on these metrics by the other Class I Railroads, during similar transformation periods to ensure that
targets not only required significant improvement year over year, but reflect a very high level of improvement relative to the performance that the other Class I Railroads have been able to
achieve.
In determining the performance level achieved for the STIP, the Committee may at its discretion, make adjustments to the companys reported results to
reflect unusual items. The Committee considered and approved each adjustment to the performance metrics. Specifically, the Committee approved the exclusion of a cash influx of $165M and net income of $8M relating to the Dakota, Minnesota and Eastern
Railroad (DME) sale which was not included in the budget on which the targets were set. The Committee may also decrease payouts if CP
48
CANADIAN PACIFIC
achieves its financial and operational objectives at the expense of safety and minimizing environment impact. Taking these factors into consideration together with the overall financial results
against short-term incentive plan targets, the Board of Directors, on the recommendation of the Committee, assessed the corporate performance as above exceptional performance on each metric. The overall corporate performance factor approved by the
Board of Directors was 200% for operating income, 200% for operating ratio and 200% for free cash flow. This results in an overall corporate performance factor of 200%.
The following table shows the 2014 corporate performance objective and results achieved in 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measure |
|
Target |
|
|
Exceptional Target |
|
|
2014 Actual Result |
|
|
Performance Assessment |
|
Operating Ratio |
|
|
67 |
% |
|
|
66.3 |
% |
|
|
64.9 |
% |
|
|
Exceptional |
|
Operating Income |
|
$ |
2,091 |
M |
|
|
$2,212 |
M |
|
$ |
2,290 |
M |
|
|
Exceptional |
|
Free Cash Flow |
|
$ |
762 |
M |
|
|
$ 908 |
M |
|
$ |
909 |
M |
|
|
Exceptional |
|
The individual component of the 2014 STIP Plan was based on personal objectives. The personal objectives for each NEO together with an
assessment of each NEOs performance, is provided on pages 56 to 62.
Long-Term Incentive
The Board of Directors and the Committee consider factors including executive retention, dilution impact, long-term value creation and executive stock ownership in
setting long term incentive strategies. Long-term incentives currently consists 50% Stock Options and 50% Performance Share Units (PSUs) for NEOs, and other executives.
The annual grant of PSUs and Stock Options to NEOs and other eligible employees is reviewed and approved at a meeting of the Board of Directors on the recommendation of
the Compensation Committee, on an annual basis. The Committee reviews individual performance, retention risk, and succession plans in light of CPs compensation philosophy. Reference is also made to the value of
long-term incentives granted by the comparator groups.
The performance period for PSUs is based on a three year cycle.
Performance measures and targets are set by the Board of Directors at the beginning of
each performance period. Performance measures are assessed independently and payouts may be made in respect of each measure if thresholds for that measure are met. If threshold measures are not
met, no award is payable under the PSU Plan. If performance is exceptional, an award up to a maximum of 200% may be approved by the Board.
The Committee does not
take into account previous executive grants when setting the individual awards, as long-term plans are contingent on future performance. At the CEOs recommendation, the Board may approve adjustments to an executives actual grant level
ranging from withholding a grant to making a grant 25% above the target level. In determining adjustments the Committee considers, among other factors, competitive positioning of the individuals compensation. If performance targets are achieved at
the end of the three year period, PSUs vest and are paid out in cash or, at the CEOs discretion, in shares using the after tax value, based on the number of units that are earned and the average of the 30 trading days closing share price
at the end of the performance period; if performance targets are not achieved at the end of the three year period, PSUs expire and are not paid out. The PSU Plan also provides that the Board of Directors may exercise discretion to adjust payouts if
the Board considers it appropriate to do so. PSUs also earn dividends which are reinvested into additional PSUs, which vest at the same time and based on the achievement of same performance conditions as the PSUs.
Stock Options are granted to provide an incentive to NEOs and other eligible executive employees to create enduring long-term shareholder value. If the share price
increases between the grant date and the vesting date, Stock Options are in-the money and provide value to the Option holder once the Stock Options are exercised.
2014 Grants of Options and PSUs
On January 31, 2014, a grant of Options and
PSUs was awarded to eligible participants of the Plans.
Stock Options were granted to NEOs and other designated employees under the Management Stock Option
Incentive Plan (MSOIP), which is described in detail on page 66. The Stock Options granted have a ten year term, and vest over four years at a rate of 25% at each anniversary date. The
2015 MANAGEMENT PROXY
CIRCULAR 49
exercise price was $168.84. The grant date fair value of these Stock Options awarded to NEOs is included in the Summary Compensation Table on page 63, under the Option Awards column.
PSUs were granted to NEOs and other executives under the PSU plan. The PSUs are subject to a three year performance period beginning on January 1, 2014 and ending
on December 31, 2016. The Board established that the PSUs would vest contingent on performance against the following four measures:
|
|
|
|
|
|
|
Measure |
|
|
|
Weight |
|
Performance range |
2016 Operating Ratio |
|
Operating expenses divided by total revenues |
|
40% |
|
65% to 61.8% |
2016 Free Cash Flow |
|
Cash provided by operating activities less cash used in investing activities as shown on the Consolidated Statement of Cash |
|
40% |
|
$790M-$1,132M |
Total Shareholder Return (Measured over 3 years) |
|
Compound average growth rate (CAGR) relative to S&P/TSX 60 Index |
|
10% |
|
exceeds index by 1% to 5% |
Total Shareholder Return (Measured over 3 years) |
|
Ranking relative to Class I Railroads |
|
10% |
|
fourth-first |
The measures of Operating Ratio and Free Cash Flow were chosen because they are fundamental to achieving the Corporations strategic
plan. Free Cash Flow is a non-GAAP measure that management considers to be an indicator of liquidity. The measure is used by management to provide information with respect to the relationship between cash provided by operating activities and
investment decisions and provides a comparable measure for period to period changes. It has no standardized meaning prescribed by U.S. GAAP and, therefore, may not be comparable to similar measures of other companies. In assessing the level of
stretch in the PSU targets the Compensation Committee considered CPs historical performance and long term strategic objectives and also considered the performance achieved on these metrics by the other Class I Railroads, during similar
transformation periods. The Compensation Committee determined that the targets require significant and sustained improvement, reflect a very
high level of improvement relative to the performance that the other Class I Railroads have been able to achieve and, if achieved, should provide significant increase in value to long term
shareholders.
Total Shareholder Return (TSR) was chosen as a relative performance measure to align long-term incentive compensation with long-term shareholder
interests by rewarding outperformance of the 2 key comparative markets for investors in CP Class I railroads and the S&P/TSX 60. Total Shareholder Return is calculated as the increase in the value of CPs Shares listed on the Toronto
Stock Exchange from the beginning of the performance period to the end of the performance period including the reinvestment of dividends paid. The CAGR of CPs Total Shareholder Return is calculated as the difference between CPs initial
share value for the performance period and the ending share value expressed as an annualized percentage of the initial share value. This percentage amount will be measured against both the total return CAGR of the other Class I Railroads and against
total return CAGR of the corporations in the S&P/TSX 60 index.
The Committee discussed the overlap of the performance measures with the short-term incentive
plan measures, and determined these measures continued to be closely aligned with the companys strategy in both the long and short term. For 2015, the Free Cash Flow measure for PSUs was replaced with a three year average return on invested
capital measure.
The grant date fair value of the PSUs awarded to NEOs is included in the Summary Compensation Table on page 63, under the Share Awards column.
OTHER KEY COMPENSATION POLICIES OF THE COMPANY
Executive Perquisites
NEOs are eligible to receive
perquisites and personal benefits as approved by the Compensation Committee as well as in accordance with the Companys policies. These typically include the use of a company-leased vehicle, parking, financial counseling and club memberships.
Other executives and senior management employees are also eligible
50
CANADIAN PACIFIC
to receive certain perquisites in line with market practices. The type and value of perquisites is generally determined by the level of the employees position.
As part of its contract with Mr. Harrison, CP prefers that he use the Companys aircraft for personal as well as for business travel, for efficiency and
security reasons, and provides reasonable accommodation for him in the city of Calgary.
Employee Share Purchase Plan
CPs ESPP is available to all employees and provides the opportunity to purchase voting Shares on the open market through payroll deductions which aligns
employees interests with those of shareholders. Employees may contribute between 1 and 10% of their base salary to the ESPP every pay period. CP provides a 33% match on the first 6% of non-unionized and specified unionized employees
contributions which vest at the end of each quarter. Employees must remain participants of the ESPP at the time of vesting in order to receive the CP match. As of December 31, 2014, approximately 41% of CPs employees participated in the
ESPP.
Share Ownership Requirements
Executive share
ownership is strongly encouraged by CP. Share ownership guidelines require that a minimum level of share ownership set as a multiple of base salary be achieved within a five year period. Share ownership guidelines can be met through the holding of
common shares and deferred share units. Ownership is determined using the greater of acquisition value and the closing price of CP Shares on December 31, 2014 which was $223.75 per share.
The share ownership guidelines applies to approximately 85 executives and senior management employees. The following guidelines are currently in place:
|
|
|
Position |
|
Guidelines |
CEO |
|
5 times salary |
President and COO |
|
4 times salary |
EVP |
|
3 times salary |
SVP |
|
2 times salary |
VP |
|
1.5 to 2 times salary |
Senior Management |
|
1 times salary |
Mr. Demosky, hired in December 2013 and Mr. Marquis, hired in July 2013, are both below their ownership
guidelines and have until 2018 to meet the requirements.
Hold policy for the CEO
The Committee believes it is important for the CEO to be aligned with the long-term interests of the Company and its shareholders. To this end, the CEO may not exercise
any options, other than 50% of his 2014 grant, until June 2017 and may not redeem any deferred share units until one year after he retires from the Company.
The CEO
accumulated equity holdings as of December 31, 2014 are:
|
|
|
|
|
|
|
|
|
|
|
# of Units |
|
|
Value on Dec. 31, 2014 (CDN$) |
|
CP Shares (personally held) |
|
|
178,617 |
|
|
$ |
38,014,360 |
|
DSUs |
|
|
67,398 |
|
|
$ |
14,344,054 |
|
Value of Shares and DSUs |
|
|
|
|
|
$ |
52,358,414 |
|
Options |
|
|
753,280 |
|
|
$ |
103,405,105 |
|
Total Value |
|
|
|
|
|
$ |
155,763,519 |
|
Anti-Hedging Policy
Under
CPs Disclosure and Insider Trading/Reporting Policy, CP directors, officers and employees are prohibited from purchasing financial instruments that are designed to hedge or offset a decrease in market value of equity securities of CP granted
as compensation or held, directly or indirectly, by them.
Executive Compensation Clawback
In December 2011, the Board of Directors adopted an executive compensation clawback policy concerning future awards made under CPs short-term and long-term
incentive plans. Under this policy, the Board may require reimbursement of short-term and long-term incentive compensation paid to a senior executive or former senior executive if:
(a) the incentive compensation received by the senior executive or former senior executive was calculated based upon the achievement of financial results that were
subsequently materially restated or corrected, in whole or in part;
(b) the senior executive or former senior executive engaged in gross negligence, fraud or
intentional
2015 MANAGEMENT PROXY
CIRCULAR 51
misconduct that caused or partially caused the need for such restatement or correction, as admitted by the senior executive, or, in the absence of such admission, as determined by the Board
acting reasonably; and
(c) the incentive compensation paid to the senior executive or former senior executive would have been lower based on the restated or
corrected results.
In such circumstances, reimbursement of all or a portion of the applicable incentive compensation paid to the senior executive or former senior
executive will be sought as permitted by applicable laws and to the extent the Board determines, in its sole discretion, it is in the best interests of the Corporation.
Governance Structure and Risk Mitigation in Compensation Programs
The Committee is focused on supporting CPs key goal of creating enduring shareholder value by developing an executive compensation program that aligns with
CPs strategic plan, emphasizes the importance of long-term value creation and mitigates risk.
Risk management is integral to CPs overall business strategies and long-term success. The Board believes that
executive compensation programs should not raise the Companys risk profile. Accordingly, the Committee undertakes a comprehensive annual compensation risk review. The focus of this review is to ensure that compensation risks are identified and
appropriate mitigation measures are in place. This review is undertaken with the assistance of the Committees independent compensation consultant. As a result of this review, the Committee concluded that CPs pay programs and policies are
not reasonably likely to have a material adverse effect on CP, its business or its value.
In assessing compensation related risk, the Committee reviewed the
broad-based STIP and LTIP programs with anticipated payout levels and key risks under these plans being presented to the Committee when targets are set and again when performance is assessed. Targets in incentive plans are based on the
Board-approved strategic plan. This links targets to corporate objectives within the corporate risk appetite. The Committee also reviews and recommends to the Board for approval compensation for NEOs and individuals reporting directly to the CEO.
52
CANADIAN PACIFIC
CPs compensation programs and its policies and practices are aligned to enterprise risk management practices and the Committee considers the implications of risks
associated with compensation practices. Risks are mitigated through appropriate plan design, implementation of risk mitigating policies, and specific risk mitigation measures including the following:
|
|
|
Plan Design |
|
Executive compensation is comprised of a mix of fixed and variable compensation with significant pay at risk |
|
|
The STIP is capped and not guaranteed with the Committee having discretion to reduce awards |
|
|
The payout curve under the STIP is designed asymmetrically to reflect that target performance has significant stretch |
|
|
The STIP and LTIP have multiple specific measurable criteria that are closely aligned with the achievement of CPs long-term business strategy and are set based on the performance required to achieve results in accordance
with guidance provided to the market |
|
|
The LTIP is designed with an overlap of vesting periods to address longer term risks and maintain executives exposure to the risks of their decision making through unvested share based awards |
Policies |
|
A clawback policy is in place for senior executives |
|
|
A holdback policy applies to the CEO whereby the earliest date he can exercise the majority of his options is June 2017 and his deferred share units cannot be redeemed until one year after retirement |
|
|
Share ownership requirements apply to a broad group of senior management |
|
|
A whistleblowing policy is in place for all employees including prohibitions on retaliation for whistleblowers |
|
|
An anti-hedging policy prohibits directors, officers, and employees from hedging of Shares and share-based awards |
Mitigation Measures |
|
Pay mix is managed so that more senior roles have a significant portion of their compensation deferred |
|
|
Awards under the STIP are examined to ensure they are reasonable as a percentage of net earnings |
|
|
No payments are made under the STIP unless a specified operating income threshold is achieved |
|
|
Financial performance is verified by CPs auditors before decisions are made respecting payouts under the STIP |
|
|
The Committee has approved principles for adjustments in determining payouts under the STIP |
|
|
The Committee takes safety and environmental principles, fundamental to how CP achieves its financial and operational objectives, into account in exercising its discretion to determine payouts under the STIP |
|
|
Safety is considered as part of the individual performance component for the CEO and operations executives |
|
|
Executive compensation is benchmarked regularly against primary and secondary comparator groups |
|
|
The Committee uses an independent compensation consultant who attends all regular Committee meetings and meets with the Chair of the Committee in advance of each meeting |
|
|
Incentive plans are stress tested to understand possible outcomes |
The Committee also benefits from overlapping membership with other committees with respect to risk monitoring. Mr. Hilal, Committee
Chair, is a member of the Finance Committee; Ms. Hoeg Chairs the Governance Committee; Mr. Tobias chairs the SOE Committee; Ms. Macdonald is a member of the Governance Committee and Mr. Reardon Chairs the Finance Committee and is
a member of the Audit Committee. This overlapping membership provides a link between the committees risk oversight responsibilities and ensures that the Compensation Committee has an in depth understanding of enterprise risks.
2015 MANAGEMENT PROXY
CIRCULAR 53
Performance graph
Historically CPs total shareholder return performance has tracked the S&P/TSX Composite Index, however, late in 2011 CPs performance began to
differentiate from the Index. This differentiation has magnified under the leadership of Chief Executive Officer, E. Hunter Harrison, hired in 2012.
The following
performance graph illustrates the cumulative total shareholder return on $100 investment in CPs common Shares (assuming reinvestment of dividends) compared with the cumulative total return of the S&P/TSX Composite Index from
December 31, 2009 to December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
CP TSR |
|
|
100.00 |
|
|
|
115.76 |
|
|
|
125.91 |
|
|
|
187.10 |
|
|
|
301.17 |
|
|
|
422.66 |
|
S&P/TSX Composite Index |
|
|
100.00 |
|
|
|
117.61 |
|
|
|
107.36 |
|
|
|
115.08 |
|
|
|
130.03 |
|
|
|
143.75 |
|
The following performance graph illustrates the cumulative total shareholder return on $100 investment in CPs common Shares
(assuming reinvestment of dividends) compared with the cumulative total shareholder return of the Class I Railroads from December 31, 2011 to December 31, 2014.
54
CANADIAN PACIFIC
The following graph illustrates the relationship between shareholder value and total direct compensation for the named executive officers. NEO compensation is defined as
Total Compensation less Pension. The NEO Total Compensation when compared with the trend in Total Shareholder Return from the period beginning December 31, 2009 to the period ending December 31, 2014 shows a strong relationship between
compensation earned by NEOs and shareholder return.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
TDC |
|
|
9,799 |
|
|
|
13,001 |
|
|
|
9,909 |
|
|
|
15,217 |
|
|
|
19,297 |
|
|
|
31,669 |
|
CP TSR |
|
|
100.00 |
|
|
|
115.76 |
|
|
|
125.91 |
|
|
|
187.10 |
|
|
|
301.17 |
|
|
|
422.66 |
|
For the purpose of calculating total direct compensation (TDC) in years where there were more than 5 NEOs, the following were used:
|
|
In 2013, NEOs were Messrs. Harrison, Creel, Grassby, Guthrie and Ms. OHagan. 2013 TDC costs exclude one-time make whole costs for Mr. Creel as well as Mr. Grassbys retiring allowance.
|
|
|
In 2012, NEOs were Messrs. Harrison, Grassby, Guthrie, Edwards and Ms. OHagan. Mr. Harrisons cash compensation was annualized. 2012 TDC costs exclude one-time make whole costs for
Mr. Harrison. |
2015 MANAGEMENT PROXY
CIRCULAR 55
NAMED EXECUTIVE OFFICER
COMPENSATION FOR 2014
CHIEF EXECUTIVE OFFICER
|
|
|
E. Hunter Harrison
Chief Executive Officer |
|
E. Hunter Harrison was appointed Chief Executive Officer on June 28, 2012. As CEO, Mr. Harrison is responsible for providing leadership for
CP as it achieves operational and strategic goals that will build long-term shareholder value.
Mr. Harrison is compensated for performance with a significant component of his ongoing remuneration provided through long-term incentives aligning his interests
with those of other shareholders. In 2014, Mr. Harrison extended his employment contract with the Company to June, 2017. With this extension a number of changes were made to Mr. Harrisons compensation package. Prior to the contract
extension, Mr. Harrisons initial option award could only be exercised one year post retirement, i.e., June 2017. With the contract extension, the earliest exercise date remained at June 2017 for the exercise of options, rather than being
extended an additional year as well. The remaining changes are described below. Compensation
Components Mr. Harrisons annual salary remained at US$2,200,000 for 2014. As
background, when the Committee initially set Mr. Harrisons salary, they took into consideration that Mr. Harrison had to forego his pension payments of $1.5 million annually from his former employer, Canadian National Railway Company
(CN) when he became an employee of the Company. From an economic perspective, net of his foregone pension payments, Mr. Harrison receives $700,000 as a base salary. This amount is significantly below his prior salary at CN, industry norms, and
CPs comparator group. When Mr. Harrison retires from CP, he will be entitled to an annual pension that is equal to the annual pension that had been provided by CN, which again, is a make whole payment, rather than an additional benefit to
Mr. Harrison. In accordance with Mr. Harrisons employment contract, he is only
eligible for future long-term incentive awards in the discretion of the Board of Directors. In 2013, the Board determined that Mr. Harrison would not participate in the LTIP grant issued in February 2013, however would receive a grant in 2014
with an expected value of 350% of base salary. In 2014, under the revised terms of Mr. Harrisons contract extension, the expected value of the LTIP grant was reduced to 300% of Mr. Harrisons salary. On January 31, 2014
Mr. Harrison received this LTIP award along with other participants, consisting of 50% of the award in regular Options and the remaining 50% of his long-term incentive award in the form of PSUs.
Mr. Harrison is eligible for a short-term incentive award based on the Companys
profitability and achievement of individual goals as determined each year by the Board of Directors. For 2014, the target level of this award increased from 100% to 150% of Mr. Harrisons salary (with a payout range between 0 and 300%
of annual salary). In addition, in consideration of Mr. Harrisons high ownership level (21.5 times salary), the Committee agreed that all future short-term incentive awards would be paid in cash similar to all other participants,
rather than in the form of deferred share units. |
|
|
|
|
Although Mr. Harrisons total compensation is much higher than his peers, the return to shareholders during his tenure is equally impressive. Mr. Harrisons total compensation value as disclosed in the summary
compensation table from June 2012 to December 2014 is 0.31% of the total additional value created for |
56
CANADIAN PACIFIC
|
|
|
|
|
|
|
shareholders over the same period ($24,374,965,006). If the CEOs make whole payments are excluded, this number is reduced to 0.17% of incremental
shareholder value. Mr. Harrisons employment agreement continues to provide for
reasonable accommodation in the city of Calgary and states CPs preference that he use the corporate aircraft for business and personal use in North America. Under the agreement, Mr. Harrison is also eligible for tax equalization payments
in respect of his employment income to compensate for higher tax liabilities in Canada, if any, compared to those applicable in the United States. For 2014, there was no tax equalization payment made.
The agreement also includes non-competition and non-solicitation restrictions.
For 2014, Mr. Harrisons performance was assessed by the Committee taking into account the
safety and environmental performance of CP and his individual performance objectives, which included building the organizations bench strength, organizational redesign, creating a railroader culture and customer centricity. Mr. Harrison
was assessed as outstanding on his overall individual performance objectives. Based on these individual objectives and the Companys financial performance, Mr. Harrison received a 2014 annual bonus in the amount of
$7,289,700. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes Mr. Harrisons compensation for 2014:
|
|
|
|
Compensation ($000) |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Fixed: |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
2,422 |
|
|
|
2,267 |
|
|
|
|
|
Variable: |
|
|
|
|
|
|
|
|
|
|
|
|
STIP |
|
|
7,290 |
|
|
|
4,430 |
|
|
|
|
|
LTIP |
|
|
|
|
|
|
|
|
|
|
|
|
-MSOIP |
|
|
3,662 |
|
|
|
|
|
|
|
|
|
-PSUs |
|
|
3,662 |
|
|
|
|
|
|
|
|
|
|
Total Direct Compensation: |
|
|
17,036 |
|
|
|
6,697 |
|
|
|
|
|
|
|
Total Target Direct Compensation: |
|
|
13,364 |
|
|
|
4,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Target
Multiple of Salary |
|
Minimum Ownership Value |
|
Total Ownership Level |
|
Total Ownership (Multiple of Salary) |
|
|
|
|
5x |
|
$12,149,500 |
|
$52,358,414 |
|
21.5x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
Base salary is actual amount received in the year. Payments made in US dollars were converted using an average rate of exchange of $1.1045 for 2014 and $1.0299 for
2013. Short-term incentive bonus amount received for 2013 performance was paid in DSUs. |
2015 MANAGEMENT PROXY
CIRCULAR 57
OTHER NAMED EXECUTIVE OFFICERS COMPENSATION
|
|
|
Keith Creel
President and Chief Operating Officer |
|
Keith Creel was appointed President and Chief Operating Officer (COO) on February 5, 2013. Providing strategic leadership and driving
superior customer service and operational excellence across the organization, Mr. Creel is responsible for CPs operations and sales and marketing teams.
Prior to joining Canadian Pacific, Mr. Creel had a very successful operating career which began at Burlington Northern as a management trainee in operations and
eventually lead to him becoming the EVP and COO at Canadian National Railway in 2010.
Mr. Creel holds a Bachelor of Science degree in marketing from Jacksonville State University and has completed the Advanced Management Program at the Harvard
Business School. He served as a commissioned officer in the US Army during which time he served in the Persian Gulf War.
In 2014, Mr. Creel received a special grant of performance options. These options will vest upon meeting certain operating ratio and operating income hurdles.
Notwithstanding the vesting criteria, Mr. Creel cannot exercise these options before June 2018. In awarding this grant, the Compensation Committee recognized the personal and professional impact the CEOs contract extension had on
Mr. Creel who is the CEOs potential successor and also acknowledged that, in assessing Mr. Creels compensation should he succeed Mr. Harrison as CEO, it would take into account that, on appointment in 2017, he would be
compensated as a fully proficient CEO. Mr. Creel is also eligible for tax equalization
payments in respect of his employment income to compensate for higher tax liabilities in Canada, if any, compared to those applicable in the United States. For 2014, there was no tax equalization payment made.
The agreement also includes non-competition and non-solicitation restrictions.
For 2014, Mr. Creels performance was assessed by the CEO against individual performance
objectives, which included improvements in service performance and operating efficiency. Safety and environmental principles, which are fundamental to how the Company operates, were taken into consideration during the assessment. Mr. Creel was
assessed as outstanding on his overall individual performance objectives. Based on these individual objectives and the Companys financial performance, Mr. Creel received a 2014 annual bonus in the amount of $1,923,730. |
58
CANADIAN PACIFIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation ($000) |
|
2014 |
|
|
2013 |
|
|
|
|
|
Fixed: |
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
964 |
|
|
|
796 |
|
|
|
|
|
Variable: |
|
|
|
|
|
|
|
|
|
|
|
|
STIP |
|
|
1,924 |
|
|
|
1,679 |
|
|
|
|
|
LTIP |
|
|
|
|
|
|
|
|
|
|
|
|
-MSOIP |
|
|
1,415 |
|
|
|
1,335 |
|
|
|
|
|
-PSUs |
|
|
1,415 |
|
|
|
1,335 |
|
|
|
|
|
-Performance Options |
|
|
1,805 |
|
|
|
|
|
|
|
|
|
|
Total Direct Compensation: |
|
|
7,523 |
|
|
|
5,145 |
|
|
|
|
|
|
Total Target Direct Compensation: |
|
|
4,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Target
Multiple of Salary |
|
Minimum Ownership Value |
|
Total Ownership Level |
|
Total Ownership (Multiple of Salary) |
|
|
4X |
|
$3,896,160 |
|
$6,652,895 |
|
6.8x |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
Base salary is actual amount received in the year. Payments made in US dollars were converted using an average rate of exchange of $1.1045 for 2014 and $1.0299 for
2013. |
2015 MANAGEMENT PROXY
CIRCULAR 59
|
|
|
Bart W. Demosky
Executive Vice President and Chief Financial Officer |
|
Bart Demosky was appointed Executive Vice President and Chief Financial Officer (CFO) of CP on December 28, 2013 and will be leaving
the Company effective May 31, 2015. As CPs CFO, Mr. Demosky is a key member of the senior management team responsible for helping develop the long-term strategic direction of the company. Other responsibilities include
financial planning, reporting and accounting systems as well as pension, treasury and tax. Prior
to joining CP, Mr. Demosky served as Chief Financial Officer for Suncor Energy Inc (Suncor). He has broad business experience and financial talent which will help CP in its long-term strategic planning. Mr. Demosky is a
graduate in Economics from the University of Calgary and is an honours graduate from the University of Calgarys Management Development Program.
Mr. Demoskys employment agreement entitles him to supplemental retirement benefits which equal the incremental benefits that would have been provided under
the retirement plan of Suncor and the supplemental executive retirement plan of Suncor in effect at the time of his departure from Suncor, had he continued participation in those plans during his employment at CP. These supplemental benefits are
reduced by the value accumulated in Mr. Demoskys account in the Companys defined contribution plan. There is an 18 month vesting period for this arrangement, should he resign within 18 months Mr. Demoskys pension benefits
would be forfeited. His agreement also includes non-competition and non-solicitation
restrictions. For 2014, Mr. Demoskys performance was assessed by the CEO against
individual performance objectives, which included developing CPs financial strategy, implementing finance operating model and raising the bar of financial service offerings to improve shareholder value. Mr. Demosky was assessed as
achieving his overall individual performance objectives. Based on these individual objectives and the Companys financial performance, Mr. Demosky received a 2014 annual bonus in the amount of $868,000. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation ($000) |
|
2014 |
|
|
2013 |
|
|
|
|
Fixed: |
|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
604 |
|
|
|
4.7 |
|
|
|
Variable: |
|
|
|
|
|
|
|
|
|
|
STIP |
|
|
868 |
|
|
|
|
|
|
|
LTIP |
|
|
|
|
|
|
|
|
|
|
-MSOIP |
|
|
889 |
|
|
|
|
|
|
|
-PSUs |
|
|
889 |
|
|
|
|
|
|
|
Total Direct Compensation: |
|
|
3,250 |
|
|
|
4.7 |
|
|
|
Total Target Direct Compensation: |
|
|
2,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Target Multiple of Salary |
|
Minimum Ownership Value |
|
Total Ownership Level |
|
Total Ownership (Multiple of Salary) |
|
|
3x |
|
$1,860,000 |
|
$1,284,595 |
|
2.07x |
|
|
|
|
|
|
|
Note:
Base salary is actual amount received in the year. |
60
CANADIAN PACIFIC
|
|
|
Robert Johnson
Senior Vice President
Operations, Southern Region |
|
Robert Johnson joined CP in June 2013 and was appointed Senior Vice President Operations, Southern Region July, 2014. Mr. Johnson is responsible
for CPs US field operations, including train servicing and car repair. In this key role, he focuses on train performance and overall fluidity of the US franchise.
Mr. Johnsons railroad career spans 32 years with BNSF where he held successively more responsible roles in operations, transportation, engineering, and
service excellence. His most recent position at BNSF was General Manager, Northwest Division, overseeing day-to-day operations for that region.
Mr. Johnson received a special grant of 2,400 Restricted Share Units (RSUs) for recognition and retention purposes. These RSUs will vest in May
2017. In 2014, Mr. Johnsons performance was assessed by the CEO against individual
performance objectives, which included delivering consistent, reliable service, improving asset utilization, preventing rule violations and personal injuries and building a railroad culture with the Southern Region. Safety and environmental
principles, which are fundamental to how the Company operates, were taken into consideration during the assessment. Mr. Johnson was assessed as exceeds his overall individual performance objectives. Based on these individual objectives and the
Companys financial performance, Mr. Johnson received a 2014 annual bonus in the amount of $436,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation ($000) |
|
2014 |
|
|
2013 |
|
|
|
|
Fixed: |
|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
350 |
|
|
|
156 |
|
|
|
|
Variable: |
|
|
|
|
|
|
|
|
|
|
|
STIP |
|
|
437 |
|
|
|
194 |
|
|
|
|
LTIP |
|
|
|
|
|
|
|
|
|
|
|
-MSOIP |
|
|
208 |
|
|
|
99 |
|
|
|
|
-PSUs |
|
|
208 |
|
|
|
|
|
|
|
|
-RSUs |
|
|
416 |
|
|
|
|
|
|
|
|
DSUs |
|
|
|
|
|
|
515 |
|
|
|
|
Total Direct Compensation: |
|
|
1,619 |
|
|
|
964 |
|
|
|
|
Total Target Direct Compensation: |
|
|
1,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Target Multiple of Salary |
|
Minimum Ownership Value |
|
Total Ownership Level |
|
Total Ownership (Multiple of Salary) |
|
|
2x |
|
$716,710 |
|
$1,153,462 |
|
3.22x |
|
|
|
|
Notes:
Base salary is actual amount received in the year. Payments made in US dollars were converted using an average rate of exchange of $1.1045 for 2014.
In 2013, Mr. Johnson received a make whole payment consisting of DSUs and a special stock option grant. |
2015 MANAGEMENT PROXY
CIRCULAR 61
|
|
|
Anthony Marquis
Senior Vice President Operations, Eastern Region |
|
Tony Marquis joined CP in July 2013 and was appointed Senior Vice President Operations, Eastern Region July, 2014. Mr. Marquis responsible for
CPs Canadian Eastern field operations, including train servicing and car repair. In this key role, he focuses on train performance and overall fluidity for the eastern franchise.
Mr. Marquis has nearly 30 years of railway operating experience. After spending 25 years
with Canadian National Railway Company in various operating positions, Tony moved on as owner and President of Strategic Training Simulators Inc. STSI designs, builds, and installs locomotive simulators, and provides computer based training in the
railroad industry. Most recently he successfully completed a corporate turn-around at Colombia-based coal railroad, Fenoco S.A. As President and Chief Executive Officer, Tony reduced Fenoco S.A.s operating costs per ton of coal by
24 per cent and dramatically improved safety at the railroad in less than a year.
Mr. Marquis received a special grant of 2400 RSUs for recognition and retention purposes. These RSUs will vest in May 2017.
In 2014, Mr. Marquis performance was assessed by the CEO against individual performance
objectives, which included delivering consistent, reliable service, improving asset utilization, preventing rule violations and personal injuries and building a railroad culture with the Eastern Region. Safety and environmental principles, which are
fundamental to how the Company operates, were taken into consideration during the assessment. Mr. Marquis was assessed as exceeds his overall individual performance objectives. Based on these individual objectives and the Companys
financial performance, Mr. Marquis received a 2014 annual bonus in the amount of $395,423. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation ($000) |
|
2014 |
|
|
2013 |
|
|
|
|
Fixed: |
|
|
|
|
|
|
|
|
|
|
|
Base Salary |
|
|
317 |
|
|
|
131 |
|
|
|
|
Variable: |
|
|
|
|
|
|
|
|
|
|
|
STIP |
|
|
395 |
|
|
|
167 |
|
|
|
|
LTIP |
|
|
|
|
|
|
|
|
|
|
|
-MSOIP |
|
|
196 |
|
|
|
100 |
|
|
|
|
-PSUs |
|
|
196 |
|
|
|
|
|
|
|
|
-RSUs |
|
|
416 |
|
|
|
|
|
|
|
|
DSUs |
|
|
|
|
|
|
100 |
|
|
|
|
Total Direct Compensation: |
|
|
1,520 |
|
|
|
|
|
|
|
|
Total Target Direct Compensation: |
|
|
940 |
|
|
|
498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Target Multiple of Salary |
|
Minimum Ownership Value |
|
Total Ownership Level |
|
Total Ownership (Multiple of Salary) |
|
|
2x |
|
$648,900 |
|
$228,045 |
|
0.7x |
|
|
|
|
Notes:
Base salary is actual amount received in the year. For 2013, Mr. Marquis
received a make whole payment consisting of DSUs and a special stock option grant. |
62
CANADIAN PACIFIC
COMPENSATION DETAILS
The following disclosure of executive compensation provides information on the compensation of CPs NEOs, being the CEO, the CFO, and CPs next three most
highly compensated Executive Officers, during the years ended December 31, 2014, 2013 and 2012.
Messrs. Harrison, Creel and Johnson receive their compensation
in US dollars. Their compensation has been converted to Canadian dollars using an average rate of exchange of $1.1045 for 2014, $1.0299 for 2013 and $.9996 for 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity incentive plan compensation |
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position |
|
Year |
|
|
Salary Paid ($) |
|
|
Share Awards ($) |
|
|
Options Awards ($) |
|
|
Annual Incentive Plans ($) |
|
|
Long Term Incentive Plans ($) |
|
|
Pension Value ($) |
|
|
All other Compensation ($) |
|
|
Total Compensation ($) |
|
E.H. Harrison
Chief Executive Officer |
|
|
2014 2013 2012 |
|
|
|
2,421,592 2,266,718 1,045,069 |
|
|
|
3,662,444 0 1,776,539 |
|
|
|
3,661,937 0 10,017,735 |
|
|
|
7,289,700 4,429,600 1,319,688 |
|
|
|
0 0 0 |
|
|
|
14,152 11,000 11,562 |
|
|
|
582,344 499,046 34,974,972 |
|
|
|
17,632,169 7,206,364 49,145,565 |
|
B.W. Demosky
Executive Vice President and
Chief Financial Officer |
|
|
2014 2013 |
|
|
|
603,621 4,753 |
|
|
|
888,943 3,577,500 |
|
|
|
889,601 2,652,500 |
|
|
|
868,000 470,000 |
|
|
|
0 0 |
|
|
|
579,928 1,639,000 |
|
|
|
16,469 175,000 |
|
|
|
3,846,562 8,518,753 |
|
K.E. Creel
President and
Chief Operating Officer |
|
|
2014 2013 |
|
|
|
963,772 795,839 |
|
|
|
1,415,470 6,755,371 |
|
|
|
3,219,521 5,203,559 |
|
|
|
1,923,730 1,678,608 |
|
|
|
0 0 |
|
|
|
184,504 58,693 |
|
|
|
114,558 11,756,720 |
|
|
|
7,821,555 26,248,790 |
|
R.A Johnson
Senior Vice President
Operations Southern Region |
|
|
2014 2013 |
|
|
|
350,479 156,250 |
|
|
|
623,868 514,950 |
|
|
|
208,129 99,020 |
|
|
|
436,746 193,654 |
|
|
|
0 0 |
|
|
|
52,156 17,283 |
|
|
|
0 146,348 |
|
|
|
1,671,378 1,127,505 |
|
A. Marquis
Senior Vice President
Operations Eastern Region |
|
|
2014 2013 |
|
|
|
316,593 131,089 |
|
|
|
611,559 100,000 |
|
|
|
195,719 99,869 |
|
|
|
395,423 167,446 |
|
|
|
0 0 |
|
|
|
37,716 15,731 |
|
|
|
8,400 25,000 |
|
|
|
1,565,410 539,135 |
|
Notes:
Salary is different than
annualized salary because annual increases occur on April 1 of the relevant year.
Share awards in the form of performance share units, were granted on
January 31, 2014. The fair value of the PSUs, based on the binomial lattice model methodology for valuing long-term incentives is $136.76, while the accounting value is $168.84.
In 2014, Messrs. Johnson and Marquis also received share awards in the form of Restricted Share Units.
The grant date fair value is calculated using Towers Watsons binomial long-term incentive valuation methodology which includes a discount to account for the
vesting restrictions and adjustment to reflect the payout range. The Compensation Committee used the binomial long-term incentive valuation methodology in making its decisions regarding long-term incentive grant levels since it is applied
consistently in its consultants competitive market analysis.
Option Awards represent the fair value of the Options granted under the Management LTIP on January 31, 2014 at an
exercise price of $168.84. The grant date fair value is $35.46 for the Option, while the accounting value is $44.46.
Mr. Creel received a performance option
award on July 24, 2014 at an exercise price of $210.32. The grant date fair value is $37.65 for the Option, while the accounting value is $48.33.
The grant
date fair value is calculated using Towers Watsons binomial Option pricing methodology which is fundamentally similar to the methodology used to determine the accounting fair value; however, some of the underlying assumptions are different.
For example, the binomial methodology assumes a slightly lower historical volatility, a higher risk-free rate and includes a discount to account for vesting restrictions. The Compensation Committee uses the binomial Option pricing methodology in
making its decisions regarding long-term incentive grant levels since it is applied consistently.
2015 MANAGEMENT PROXY
CIRCULAR 63
Pension Value represents the employer portion as well as any notional payments. For Mr. Demosky the value includes
the 2014 employer service cost plus changes in compensation in excess of the actuarial assumptions.
All other compensation represents the value of personal benefits and other compensation such as the Shares purchased by CP
pursuant to the matching provisions of the ESPP and the value of matching DSUs awarded under the executive DSU Plan and any auto gross-ups. Details for 2014 are provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Perquisites and Other Personal Benefits ($) |
|
|
Other Compensation ($) |
|
|
All Other Compensation (Total of the two previous columns) ($) |
|
E.H. Harrison |
|
|
Personal Use of Company aircraft |
|
|
|
467,740 |
|
|
|
|
|
|
|
|
|
|
|
582,344 |
|
|
|
|
Housing Allowance |
|
|
|
71,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Perquisites |
|
|
|
43,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
B.W. Demosky |
|
|
Nil |
|
|
|
|
|
|
|
ESPP Match |
|
|
|
11,763 |
|
|
|
16,469 |
|
|
|
|
Nil |
|
|
|
|
|
|
|
Tax Gross-up |
|
|
|
4,706 |
|
|
|
|
|
K.E. Creel |
|
|
Personal Use of Company aircraft |
|
|
|
41,080 |
|
|
|
ESPP Match |
|
|
|
19,082 |
|
|
|
114,558 |
|
|
|
|
Other Perquisites |
|
|
|
54,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
R.A Johnson |
|
|
Nil |
|
|
|
|
|
|
|
|
|
|
|
Nil |
|
|
|
Nil |
|
A. Marquis |
|
|
Nil |
|
|
|
|
|
|
|
ESPP Match |
|
|
|
3,694 |
|
|
|
8,400 |
|
|
|
|
|
|
|
|
|
|
|
|
Tax Gross-up |
|
|
|
4,706 |
|
|
|
|
|
Notes:
Perquisites and other personal benefits
include the use of a company leased vehicle, club membership, financial counseling exceeding coverage offered to salaried employees. Perquisites and other personal benefits that, in aggregate amount to less than $50,000 or 10% of the total salary
for any of the NEOs, are reported as Nil in this column.
The amount reflects the value of Mr. Harrisons and Mr. Creels personal
travel on company-owned or leased aircraft. This value is based on aggregate incremental operating costs to the company, such as fuel costs, trip-related maintenance, landing fees and other miscellaneous
variable costs.
The amount reflects the value of Mr. Harrisons housing. This value is based on aggregate incremental operating costs to the company such
as condo fees, housekeeping, and other miscellaneous costs.
64
CANADIAN PACIFIC
INCENTIVE PLAN AWARDS
Incentive Plan Awards
Outstanding Share-Based and Option-Based Awards
The following table shows all equity based incentive plan awards outstanding as at December 31, 2014.
Option-based awards were granted based on the fair market value on the date of the award. For additional information about Option and Share-based awards, see the description of Executive DSU Plan and Long-Term Incentives in the Compensation
Discussion and Analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option-based Awards |
|
|
Share-based awards |
|
Name |
|
Number of Securities Underlying Unexercised Options (#) |
|
|
Option Exercise Price ($) |
|
|
Option Expiration Date |
|
|
Value of unexercised in- the-
money Options ($) |
|
|
Vested date |
|
|
Number of Shares or Units of Stock that have not vested |
|
|
Market or payout value of share-based awards that have not vested ($) |
|
|
Market payout value of vested share-based awards not paid out or distributed ($) |
|
E.H. Harrison |
|
|
650,000 |
|
|
$ |
73.39 |
|
|
|
26-Jun-2022 |
|
|
|
97,734,000 |
|
|
|
28-Jun-2015 |
|
|
|
6,393 |
|
|
|
1,360,597 |
|
|
|
11,622,716 |
|
|
|
|
103,280 |
|
|
$ |
168.84 |
|
|
|
31-Jan-2024 |
|
|
|
5,671,105 |
|
|
|
28-Jun-2016 |
|
|
|
6,393 |
|
|
|
1,360,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-2016 |
|
|
|
26,921 |
|
|
|
6,023,574 |
|
|
|
|
|
Total |
|
|
753,280 |
|
|
|
|
|
|
|
|
|
|
|
103,405,105 |
|
|
|
|
|
|
|
39,707 |
|
|
|
8,744,768 |
|
|
|
11,622,716 |
|
B.W. Demosky |
|
|
53,700 |
|
|
$ |
159.62 |
|
|
|
27-Nov-2023 |
|
|
|
3,443,781 |
|
|
|
31-Dec-2015 |
|
|
|
5,369 |
|
|
|
1,201,314 |
|
|
|
986,557 |
|
|
|
|
25,400 |
|
|
$ |
159.62 |
|
|
|
27-Nov-2023 |
|
|
|
1,628,902 |
|
|
|
31-Dec-2015 |
|
|
|
12,753 |
|
|
|
2,853,484 |
|
|
|
|
|
|
|
|
25,090 |
|
|
$ |
168.84 |
|
|
|
31-Jan-2024 |
|
|
|
1,377,692 |
|
|
|
28-Dec-2016 |
|
|
|
1,102 |
|
|
|
246,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-2016 |
|
|
|
6,534 |
|
|
|
1,461,983 |
|
|
|
|
|
Total |
|
|
104,190 |
|
|
|
|
|
|
|
|
|
|
|
6,450,375 |
|
|
|
|
|
|
|
25,758 |
|
|
|
5,763,353 |
|
|
|
986,557 |
|
K.E. Creel |
|
|
119,325 |
|
|
$ |
115.78 |
|
|
|
04-Feb-2023 |
|
|
|
12,883,520 |
|
|
|
6-Feb-2015 |
|
|
|
24,328 |
|
|
|
5,177,633 |
|
|
|
0 |
|
|
|
|
53,350 |
|
|
$ |
119.18 |
|
|
|
22-Feb-2023 |
|
|
|
5,578,810 |
|
|
|
31-Dec-2015 |
|
|
|
14,043 |
|
|
|
3,142,121 |
|
|
|
|
|
|
|
|
39,900 |
|
|
$ |
168.84 |
|
|
|
31-Jan-2024 |
|
|
|
2,190,909 |
|
|
|
31-Dec-2015 |
|
|
|
29,029 |
|
|
|
6,495,239 |
|
|
|
|
|
|
|
|
47,940 |
|
|
$ |
210.32 |
|
|
|
24-Jul-2024 |
|
|
|
643,834 |
|
|
|
6-Feb-2016 |
|
|
|
6,082 |
|
|
|
1,294,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-2016 |
|
|
|
10,405 |
|
|
|
2,328,119 |
|
|
|
|
|
Total |
|
|
260,515 |
|
|
|
|
|
|
|
|
|
|
|
21,297,073 |
|
|
|
|
|
|
|
83,887 |
|
|
|
18,437,521 |
|
|
|
0 |
|
R.A. Johnson |
|
|
3,640 |
|
|
$ |
129.54 |
|
|
|
02-Jul-2023 |
|
|
|
342,924 |
|
|
|
1-Mar-2015 |
|
|
|
1,300 |
|
|
|
276,674 |
|
|
|
460,783 |
|
|
|
|
5,870 |
|
|
$ |
168.84 |
|
|
|
31-Jan-2024 |
|
|
|
322,322 |
|
|
|
1-Mar-2016 |
|
|
|
871 |
|
|
|
185,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24-Jun-2016 |
|
|
|
1,084 |
|
|
|
230,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-2016 |
|
|
|
1,528 |
|
|
|
341,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-May-2017 |
|
|
|
2,408 |
|
|
|
538,790 |
|
|
|
|
|
Total |
|
|
9,510 |
|
|
|
|
|
|
|
|
|
|
|
665,246 |
|
|
|
|
|
|
|
7,191 |
|
|
|
1,573,429 |
|
|
|
460,783 |
|
A. Marquis |
|
|
3,690 |
|
|
$ |
128.88 |
|
|
|
06-Aug-2023 |
|
|
|
350,070 |
|
|
|
1-Mar-2015 |
|
|
|
383 |
|
|
|
85,696 |
|
|
|
85,592 |
|
|
|
|
5,520 |
|
|
$ |
168.84 |
|
|
|
31-Jan-2024 |
|
|
|
303,103 |
|
|
|
15-Jul-2016 |
|
|
|
191 |
|
|
|
42,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-2016 |
|
|
|
1,438 |
|
|
|
321,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-May-2017 |
|
|
|
2,408 |
|
|
|
538,790 |
|
|
|
|
|
Total |
|
|
9,210 |
|
|
|
|
|
|
|
|
|
|
|
653,174 |
|
|
|
|
|
|
|
4,420 |
|
|
|
988,975 |
|
|
|
85,592 |
|
Notes:
The value of Options is based on the closing
share price on the TSX of December 31, 2014 of $223.75
Vested share-based awards not paid out or distributed represents the value of vested DSUs based on the
closing share price on the TSX of $223.75; for Messrs. Harrison, Creel and Johnson, the DSU value is based on the closing share price on the NYSE on December 31, 2014 of US$192.69 converted into Canadian dollars using an average exchange rate
of $1.1045
2015 MANAGEMENT PROXY
CIRCULAR 65
Incentive Plan Awards Value Vested Or Earned During The Year
The following table shows the value from incentive plans vested or earned by the NEOs under the Companys LTIP and the STIP payment in 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Option based Awards Value vested during the year ($) |
|
|
Share based Awards Value vested during the year ($) |
|
|
Non- Equity Incentive Plan Compensation value earned during the year ($) |
|
E.H. Harrison |
|
|
19,339,125 |
|
|
|
1,262,329 |
|
|
|
7,289,700 |
|
B.W. Demosky |
|
|
1,510,415 |
|
|
|
761,967 |
|
|
|
868,000 |
|
K.E. Creel |
|
|
2,660,788 |
|
|
|
0 |
|
|
|
1,923,730 |
|
R.A Johnson |
|
|
58,122 |
|
|
|
372,589 |
|
|
|
436,746 |
|
A. Marquis |
|
|
72,289 |
|
|
|
59,606 |
|
|
|
395,423 |
|
Note
Share based awards include the value of the DSUs
that vested in 2014, which may be redeemed only upon termination of employment per the terms of the Executive DSU plan described under the heading Pension Plan Benefits Deferred Compensation Plans.
Options Exercised During the Financial Year
The following
table provides details regarding Options exercised and sold by the NEOs during the financial year ended December 31, 2014. Amounts were calculated using the market price of the Shares acquired on exercise of the respective Options and
subtracting the respective exercise prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Number of options exercised |
|
|
Option exercise price |
|
|
Value realized |
|
E. H. Harrison |
|
|
0 |
|
|
|
|
|
|
$ |
|
|
B.W. Demosky |
|
|
0 |
|
|
|
|
|
|
$ |
|
|
K.E. Creel |
|
|
39,775 |
|
|
$ |
115.78 |
|
|
$ |
4,819,827 |
|
R.A Johnson |
|
|
0 |
|
|
|
|
|
|
$ |
|
|
A. Marquis |
|
|
0 |
|
|
|
|
|
|
$ |
|
|
MANAGEMENT STOCK OPTION INCENTIVE PLAN
The Management Stock Option Plan (MSOIP) was established in October 2001 for the purpose of providing certain officers and select key employees of the Company with an
incentive to enhance shareholder value.
The number of Options granted to a recipient is determined by dividing a targeted dollar amount
(determined taking into account market practice and a number of other factors), which is expressed as a percentage of the recipients salary, by the theoretical value of an Option. That
value is determined by broadly used valuation models that estimate the probable future payout, applied to the 30 day average closing share price prior to the approval of the grant. Neither the amount, nor the terms of previously granted Options are
taken into consideration in determining the size of a new grant. To do so might result in an unintended consequence of encouraging early exercise to avoid having future grants penalized due to significant outstanding Option holdings. In addition, it
might disadvantage long-service employees and those who remain committed to the stock.
Regular Options expire ten years from the date of grant; vesting for grants
made prior to June, 2012 consisted of half becoming exercisable on the second anniversary of the grant and the balance on the third anniversary. For grants made after June 2012, options vest over four years at a rate of 25% at each anniversary date.
An Option will expire before its normal expiry date if: (a) an Option holder resigns from his or her employment, in which case the Option will expire in 30
days; (b) an Option holders employment is terminated without cause, in which case the Option will expire in six months; (c) an Option holders employment is terminated for cause, including where an Option holder resigns after
being requested to do so as an alternative to being terminated for cause, in which case the Option will expire immediately; (d) an Option holder dies, in which case the Option will expire in 12 months and may be exercised by the holders
estate. An Option will continue to vest and expire on its normal expiry date if an Option holders employment ceases due to permanent disability. An Option granted will expire on the earlier of a) its normal expiry date or b) five years
after the Option holder retires, upon attaining the mandatory or early retirement age.
If an Option would otherwise expire during a blackout period, it will be
extended beyond its normal expiry date to a date 10 business days after the date on which the blackout period ends, provided that if a further blackout period is imposed prior to the end of the extension, the Option term
66
CANADIAN PACIFIC
will be further extended to a date 10 business days after the date on which the additional blackout period expires.
Options may be assigned only to an Option holders family trust, personal holding corporation, or retirement trust or a legal representative of an Option
holders estate or a person who acquires the Option holders rights by bequest or inheritance.
Under the terms of the MSOIP, the maximum number of Shares
that may be reserved for issuance to insiders as Options is 10% of the number of Shares outstanding. The maximum number of Options which may be granted to insiders within a one year period is 10% of the number of Shares outstanding and to any one
insider is 5% of the number of Shares outstanding. The maximum number of Options which may be granted to any one individual is 5% of the number of Shares outstanding at the time of the reservation.
Notwithstanding the limits noted above, the dilution level, measured by the number of Options available for issuance as a percentage of outstanding Shares continues to
be capped, at the discretion of the Board, at 7%. CPs potential dilution level at year end is 2.4%.
The CEO, as well as the Chairman of the Board and the
Chair of the Compensation Committee, have authority to grant Options to employees within certain defined parameters, which include the position of the employee and the expected value of the Options being granted. For 2014, the Compensation Committee
authorized a pool of 100,000 Options for allocation by the CEO under this authority from which 12,030 Options in total were granted to 7 employees for the purposes of performance recognition and retention.
Participants in the MSOIP are granted a number of Options, exercisable at the last closing market price of Shares on the TSX or the NYSE (for grants after
December 15, 2014 depending on the grant currency) prior to the approval of the grant. The exercise price of Options may not be reduced without shareholder approval. The following table illustrates information relating to Options as of and for
the year ended December 31, 2014.
Options Outstanding and Available for Grant as at December 31, 2014
|
|
|
|
|
|
|
|
|
2014 |
|
Number of Options/Shares |
|
|
Percentage of Outstanding Shares |
|
Options outstanding (December 31, 2014) |
|
|
1,921,339 |
|
|
|
1.2 |
% |
Options available to grant (December 31, 2014 |
|
|
2,109,577 |
|
|
|
1.3 |
% |
Shares issued on exercise of Options |
|
|
14,047,726 |
|
|
|
8.5 |
% |
Options granted |
|
|
426,020 |
|
|
|
0.3 |
% |
Note
Messrs. Harrison, Creel and Demosky were granted
stand-alone option agreements not granted under the Management Stock Option Plan.
Since the inception of the MSOIP in October 2001, a total of 18,078,642 Shares
have been made available for issuance under the MSOIP and 14,047,726 Shares have been issued through the exercise of Options. No financial assistance is provided to Option holders to facilitate the purchase of Shares under the MSOIP. In addition, CP
has a policy that prohibits employees from forward selling Shares that may be delivered upon the future exercise of Options under MSOIP or otherwise monetizing Options granted under the MSOIP other than through exercising the Option and subsequently
selling the Shares in a public venue.
The Board may amend the MSOIP, but no amendment may be made without required regulatory or shareholder approval. No Options
have been granted under the MSOIP that require ratification by shareholders.
The MSOIP was amended effective February 28, 2012 to include a double
trigger provision in the event of a change in control. Pursuant to such provision, the vesting of Options held by a participant will not accelerate upon a change in control of the Corporation unless the participant is thereafter terminated
without cause or constructively dismissed.
Securities Authorized For Issuance Under Equity Compensation Plans
The following table shows, as of December 31, 2014, compensation plans under which equity
2015 MANAGEMENT PROXY
CIRCULAR 67
securities of the Corporation are authorized for issuance upon the exercise of Options outstanding under the MSOIP and the Companys Directors Stock Option Plan (DSOP). The table also shows
the number of Shares remaining available for issuance and includes 340,000 Shares under the DSOP. On July 21, 2003, the Board of Directors suspended all further grants of Options under the DSOP and there are no options outstanding under this
plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category |
|
Number
of securities to be issued upon exercise of outstanding Options, warrants and rights(a) (#) |
|
|
Weighted- average exercise price of outstanding Options, warrants and rights ($) |
|
|
Number of securities available
for future issuance under equity compensation plans (excluding securities reflected in column a) (#) |
|
Equity compensation plans approved by security holders |
|
|
2,769,764 |
|
|
|
93.93 |
|
|
|
2,449,577 |
|
Equity compensation plans not approved by security holders |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Total |
|
|
2,769,764 |
|
|
|
93.93 |
|
|
|
2,449,577 |
|
The equity compensation plans referred to in the previous table, being the MSOIP and the DSOP, are described in Note 1 to the
Corporations audited consolidated financial statements for the year ended December
31, 2014, and in this Circular at page 66.
PENSION PLAN BENEFITS
Canadian Pension Plans and Other Retirement Arrangements
CP maintains both a
contributory defined benefit and defined contribution pension plan which enables pensions to be paid to eligible officers and employees of CP at retirement.
On
July 1, 2010, the defined benefit plan was closed to new employees and replaced with a defined contribution plan for employees hired on or after July 1, 2010. Employees hired before that date either continue to participate in the previous
plan, which includes both a defined benefit and defined contribution option or transferred to the new defined contribution plan.
None of the NEOs participate in the
defined benefit plan.
Defined Contribution Plan
In 2010, a
new DC option was also introduced for management employees. Employees who were members of the existing DC pension plan had the option to join the new DC Plan with newly hired management employees becoming members of the new DC option. Messrs.
Harrison, Demosky and Marquis participate in this federally registered plan.
Depending on the employees age and service, an employee will contribute between
4% and 6% of earnings and the company will contribute between 4% and 8% of earnings. Total contributions are limited to the maximum allowed under the Canadian Income Tax Act (C$24,930 in 2014).
Mr. Marquis also participates in a DC Supplemental Plan (DC SERP). The DC SERP is a non-registered plan which provides benefits in excess of the
Canadian Income Tax Act limits applicable to the DC Option. Specifically, the SERP provides an additional 6% company contribution on base salary and annual bonus. There are no employee contributions and there is a two year vesting period.
US Pension Plans
The US retirement program has three elements:
|
|
A voluntary qualified 401(k) plan with employer match |
|
|
A qualified defined contribution plan which provides automatic employer contributions |
|
|
A non-qualified defined contribution plan for certain employees whose compensation exceeds the IRS limits (US $260,000 for 2014) |
401(k) Plan
Employees can contribute pre-tax contributions to the 401(k) plan
subject to limitations imposed by the US Internal Revenue Code. The Company provides a matching contribution of 50% on the first 6% of eligible earnings. All contributions are immediately vested.
Defined Contribution Plan (US DC Plan)
The US DC plan is employer
funded with an annual contribution amount equal to 3.5% of eligible earnings. Eligible earnings include base salary and annual bonus. These earnings are subject to compensation limitations imposed by the US Internal Revenue Code.
68
CANADIAN PACIFIC
Supplemental Defined Contribution Plan (US SERP)
The US SERP is an unfunded non-qualified defined contribution plan that provides an additional 6% company contribution on eligible earnings without regard for the
limitations imposed by the US Internal
Revenue Code. Eligible earnings include base salary and annual bonus. There is a three year cliff vesting schedule.
Messrs. Creel and Johnson participate in these US pension plans.
Defined Benefit Table
The following table shows the aggregate annual retirement benefits payable under Mr. Demoskys retirement arrangement at year end and upon retirement at age
65. It also reflects the value of pension benefits earned in 2014. Mr. Demoskys retirement arrangement is described on page 60.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Benefits Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Years of Credited Service |
|
|
Years of Credited Service at Age 65 |
|
|
At
Year End(a) ($) |
|
|
At
Age 65(b) ($) |
|
|
Accrued Obligation at Start of Year ($) |
|
|
Compensatory Change(c)
($) |
|
|
Non - Compensatory Change(d) ($) |
|
|
Accrued Obligation at End of Year ($) |
|
B.W. Demosky |
|
|
1.00 |
|
|
|
17.42 |
|
|
|
80,000 |
|
|
|
555,000 |
|
|
|
1,639,000 |
|
|
|
567,000 |
|
|
|
608,000 |
|
|
|
2,814,000 |
|
Notes:
a) |
This is the annual pension earned to the end of 2014 |
b) |
Assumes highest plan earnings as at December 31, 2014. |
c) |
Includes the 2014 employer service cost plus changes in compensation in excess of the actuarial assumptions. |
d) |
Impact of all other changes including interest on prior years obligation plus changes in discount rate used to measure the obligations, changes in other assumptions and experience gains or losses other than
compensation related gains or losses. |
Defined Contribution Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Value
at Start of the Year ($) |
|
|
Compensatory ($)(a) |
|
|
Accumulated Value at End of the Year ($)(b) |
|
E. H Harrison |
|
|
48,000 |
|
|
|
14,000 |
|
|
|
84,000 |
|
B.W. Demosky |
|
|
0 |
|
|
|
12,000 |
|
|
|
26,000 |
|
K.E. Creel |
|
|
72,000 |
|
|
|
184,000 |
|
|
|
283,000 |
|
R. A Johnson |
|
|
26,000 |
|
|
|
52,000 |
|
|
|
107,000 |
|
A. Marquis |
|
|
23,000 |
|
|
|
37,000 |
|
|
|
87,000 |
|
a) |
Represents employer contributions and for Messrs. Creel, Johnson and Marquis also includes notional contributions. |
b) |
Represents employer and employee contributions and, if any, investment gains and losses and notional investment credits and losses. |
Messrs. Creel and Johnson participate in the 401k Plan, the US DC Plan and the US SERP.
Deferred Compensation Plans
The Company has a voluntary
deferral program whereby Executive Officers may elect to receive all or portion of their short-term incentive award in DSUs. This is designed to promote the sustained alignment of Executive Officers interests with shareholders. Executive
Officers must make their
election prior to the beginning of the calendar year for which the short-term incentive award is paid. When any short-term incentive award is determined, the amount elected is converted to DSUs,
which have a value equal to the average market price of a share for the ten trading days immediately prior to December 31 of the calendar year for which the award is paid.
CP will grant an additional 25% (Company match) of the amount each participant elected in DSUs, which vest after three years. Once the value of the participants
DSU account is sufficient to meet CPs stock ownership guidelines the participant may no longer elect to receive any portion of their short-term incentive award in DSUs.
Executive DSU participants may redeem their DSUs only after termination of employment or retirement. For DSUs granted after December 31, 2004, redemption is
permissible only after six months have passed since the end of the executives employment and no later than the end of the following calendar year. The value of the DSU at the time of payment will be based on the average market price of a share
for the ten trading days immediately preceding the payment date. Payment is made in a lump sum following the termination of employment. For
2015 MANAGEMENT PROXY
CIRCULAR 69
eligible US executives, in compliance with US tax regulations, payment of amounts deferred or vested is made after a six-month waiting period.
The following table shows the number of DSUs outstanding and their value based on the closing share price on December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested DSUs
(#) |
|
|
Vested DSUs (#) |
|
|
Total Units |
|
|
Market Value as at December 31, 2014 ($) |
|
E.H. Harrison |
|
|
12,786 |
|
|
|
54,612 |
|
|
|
67,398 |
|
|
|
14,344,054 |
|
B.W. Demosky |
|
|
1,102 |
|
|
|
4,409 |
|
|
|
5,511 |
|
|
|
1,233,086 |
|
K.E. Creel |
|
|
30,410 |
|
|
|
0 |
|
|
|
30,410 |
|
|
|
6,472,042 |
|
R.A. Johnson |
|
|
3,255 |
|
|
|
2,165 |
|
|
|
5,420 |
|
|
|
1,153,517 |
|
A. Marquis |
|
|
573 |
|
|
|
383 |
|
|
|
956 |
|
|
|
213,905 |
|
Note
The value of vested and unvested DSUs as at
December 31, 2014 based on the closing share price on the TSX of $223.75 for Messrs. Demosky and Marquis and a closing share price on the NYSE of US $192.69 with an average exchange rate of $1.1045 for Messrs. Harrison, Creel and Johnson
TERMINATION AND CHANGE IN CONTROL BENEFITS
Change in Control Agreements
Messrs. Harrison and Demosky
are party to change in control agreements. These agreements are double trigger, meaning that cash severance payments will not be made and Options will not vest upon a change in control of the Corporation unless the NEO is thereafter
terminated without cause or constructively dismissed. Unvested DSUs and PSUs granted prior to February 22, 2013 are single trigger in that they will vest upon a change in control. Effective February 22, 2013, all equity awards under
CPs equity incentive plans will only vest on a double trigger basis. Although Mr. Harrison has unvested DSUs issued prior to this date, these DSUs cannot be redeemed until one year after cessation of his employment, regardless
of whether there is an intervening change in control. Accordingly, none of Mr. Harrisons equity can be redeemed on a single trigger basis on a change in control. Mr. Demosky does not have any awards that vest on a single trigger
basis.
A change in control arises in the following circumstances:
|
|
20% or more of the Shares are acquired by any person or persons acting jointly or in concert;
|
|
|
80% or more of the Corporations Shares are held by a new entity created by any transaction or series thereof; |
|
|
All or substantially all of the assets of the Corporation are sold, assigned or transferred; |
|
|
A majority (more than 50%) change in the Corporations Board of Directors over a 12 month period; or |
|
|
The Board adopts a resolution confirming that a change in control has occurred. |
NEOs are subject to a protection period
following a change in control. If an NEO is involuntarily terminated other than for cause or resigns for certain defined reasons such as a material change in responsibilities or a reduction in salary or benefit, in each case following a change in
control, a payment is triggered. The protection period for Mr. Harrison is 12 months and for Mr. Demosky is 18 months.
If there is termination within the
protection period, both individuals are entitled to receive a lump sum severance payment equal to the base salary they would have earned through the end of the applicable severance period (24 months for Mr. Demosky, the lesser of 24 months and
the period remaining to the end of employment term for Mr. Harrison). Mr. Demoskys agreement also provides that he is entitled to certain benefits, including payments under CPs compensation plans and the continuation of certain
benefits for the duration of the severance period as follows:
|
|
An amount equal to the target award level under the STIP for the severance period; |
|
|
Outstanding PSUs are pro-rated to the change in control date and paid out at target; |
|
|
Continuation of coverage under the companys group benefit plans; |
|
|
Additional benefits accrual under the Companys Supplemental Pension Plan for the severance period; and |
|
|
The value of any perquisites provided for the notice period. |
70
CANADIAN PACIFIC
Payable on Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment |
|
|
|
|
|
|
|
|
Value of early vesting of Options & equity based awards ($) |
|
|
|
|
Name |
|
Severance Period (# of months) |
|
Base Pay ($) |
|
|
Short-term Incentive at target ($) |
|
|
Additional Retirement Benefits ($) |
|
|
Other Benefits ($) |
|
|
|
Payable on Change of Control ($) |
|
E.H. Harrison |
|
24 |
|
|
4,859,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,212,323 |
|
|
|
65,072,123 |
|
B.W. Demosky |
|
24 |
|
|
1,240,000 |
|
|
|
992,000 |
|
|
|
2,519,000 |
|
|
|
155,969 |
|
|
|
9,400,229 |
|
|
|
14,307,198 |
|
Total NEOs |
|
|
|
|
5,640,000 |
|
|
|
992,000 |
|
|
|
2,519,000 |
|
|
|
146,012 |
|
|
|
69,624,048 |
|
|
|
73,281,060 |
|
Notes:
Other benefits include the cost of group
benefits and perquisites for the severance period, and value of accelerated vesting of ESPP.
The value of early vesting of Options and equity based awards is based
on the closing Share price on the TSX of $223.75. For Mr. Harrison the value of unvested DSUs is based on the closing Share price on the NYSE of $192.69 converted in to Canadian dollars using an average exchange rate of $1.1045.
The costs relating to relocation and legal fees provided by the Change in Control Agreement are not included in the total amounts payable.
Compensation on Termination of Employment
We have developed policies to cover all forms of termination. Executives are subject to the same terms as all other employees of the Company for voluntary termination,
retirement, and termination for cause. In the event a NEO ceases to be an employee, the NEO will receive compensation treatment as summarized below:
Voluntary
Termination
In the event of resignation from the Company, any outstanding base pay including pay for any unused accrued vacation will be paid. All unvested awards
will be forfeited with the exception of Mr. Harrison, whereby his unvested DSUs would become payable. The value of these DSUs at December 31, 2014 is $2,721,337. With respect to Options, the executive will have the earlier of 30 days and
the expiry of the Option term to exercise any vested Options.
Should Mr. Demosky voluntarily resign from the Company prior to November 30, 2016, he would
have to repay, on a prorated basis, amounts awarded in respect of deferred compensation foregone as a result of leaving his former employer.
With respect to
Mr. Creel, should he voluntarily cease employment prior to February 5, 2018, he would be required to repay, on a prorated basis, up to $9.28 million for awards paid to him in respect of foregone compensation from his prior employer.
Retirement
In addition to any
outstanding base pay and unused vacation owing to the retirement date, provided the NEO has five years of service, or if age 60, has two years of service, the executive will receive the following:
|
|
Provided the executive has three months of service in the plan year up to the retirement date, a pro-rated award to the retirement will be available under the STIP.
|
|
|
Provided the executive has six months of service in the performance period, PSUs awarded will be pro-rated to the retirement date for any outstanding PSU awards prior to January
2014. PSUs awarded after 2013 are not prorated upon retirement. |
|
|
Options will continue to vest and will expire the earlier of five years after the retirement date and the normal expiry date. |
|
|
Executive will receive $50,000 in post-retirement life insurance and a health spending account with the annual value based on the number of years of company service. |
Termination for Cause
In the event of a termination for cause, the executive would
receive any outstanding base pay and accrued vacation to his termination date. Where applicable, provisions of the Companys executive compensation clawback policy would be enforced.
2015 MANAGEMENT PROXY
CIRCULAR 71
In addition, both Mr. Demosky and Mr. Creel would be subject to the same repayment conditions described under
Voluntary Termination above.
Employment Agreements Terminations Without Cause
As common practice for senior level positions, the Company has entered into individual agreements with the NEOs listed below to alleviate any uncertainty they may have
concerning their severance arrangement should they be involuntarily terminated from the Company during the term of their Agreement. The remaining NEOs do not have contractual severance arrangements in place.
Mr. Harrison
Mr. Harrison will receive a retiring allowance in the amount
of US$2,000,000. Mr. Harrisons unvested DSUs would vest, however, contrary to Plan terms he will forfeit any unvested options from his initial grant in 2012.
Mr. Creel
Mr. Creel has an employment agreement with CP that governs the
terms and conditions of his departure should Mr. Creel be terminated without cause. Mr. Creel will receive a lump sum equivalent to:
a) |
36 months salary plus
|
b) |
his target short-term incentive paid for the 36 month period |
Notwithstanding the above, If Mr. Creels
employment had been terminated without cause prior to February 4, 2015, he would have received a lump sum equivalent to his annual salary and target short-term incentive for the period from his termination date to February 5, 2018 rather
than the lump sum noted above. In order to provide an incentive to Mr. Creel to leave a secure position at another high performing railway and to join CP, which was undergoing a significant and very challenging transition, it was necessary to
provide severance arrangements that reflected the real security he was giving up and the risks and challenges he would be undertaking.
Mr. Demosky
Mr. Demosky has an employment agreement with CP that governs the terms and conditions of his departure should Mr. Demosky be terminated without cause.
Mr. Demosky will receive a lump sum equivalent to:
a) |
24 months salary plus |
b) |
his target short-term incentive paid for the 24 month period plus |
c) |
the actuarial value, if any, of the pension accrued over the 24 month period |
Payable on Termination without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment |
|
|
|
|
|
|
|
|
Value
of Options & equity based awards ($) |
|
|
Payable
on Termination without Cause ($) |
|
Name |
|
Severance Period (# of months) |
|
Base Pay ($) |
|
|
Short-term Incentive ($) |
|
|
Additional Retirement Benefits ($) |
|
|
Other Benefits ($) |
|
|
|
E.H. Harrison |
|
N/A |
|
|
2,209,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,480,317 |
|
|
|
8,689,317 |
|
K.E. Creel |
|
37 |
|
|
2,719,140 |
|
|
|
2,719,140 |
|
|
|
|
|
|
|
19,860 |
|
|
|
13,437,906 |
|
|
|
18,896,046 |
|
B.W. Demosky |
|
24 |
|
|
1,240,000 |
|
|
|
992,000 |
|
|
|
2,519,000 |
|
|
|
12,728 |
|
|
|
3,879,466 |
|
|
|
8,643,194 |
|
Total NEOs |
|
|
|
|
5,959,140 |
|
|
|
3,711,140 |
|
|
|
2,519,000 |
|
|
|
|
|
|
|
23,829,038 |
|
|
|
36,018,318 |
|
Notes:
In the event of a termination without cause,
NEOs have a contractual arrangement which is described under Employment Agreements.
Other Benefits represents the value of accelerated vesting of ESPP.
Value of Options and equity based awards represents the value of options vesting within six months following termination and the prorated value to the termination
date of PSU awards. For Mr. Harrison, it also includes early vesting of DSUs.
72
CANADIAN PACIFIC
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As at the date of this Circular, there is no indebtedness outstanding by, or any guarantees, support agreements, letters of credit or other similar
arrangements or understandings provided by CP or its subsidiaries to, any of the Corporations Directors or Executive Officers or any of their associates.
DIRECTORS AND OFFICERS INSURANCE
CP carries on its own behalf, and on behalf of its subsidiaries, a Directors and Officers liability insurance policy. This policy has an annual aggregate
coverage limit of US$150,000,000 Side A/B with an additional US$75,000,000 in Side A Difference in Conditions excess coverage. The overall program is subject to a zero deductible for directors and officers (applicable when CP is not
legally permitted to or does not indemnify the directors or officers), and a US$5,000,000 corporate deductible for all company reimbursement claims in cases where a director or officer is indemnified by CP for any loss covered by the policy. The
total premium paid for the 2014 directors and officers policy program was US$1,357,586.
SHAREHOLDER PROPOSALS
In 2014 Canadian Pacific did not receive any shareholder proposals for inclusion in this Circular. Notice respecting shareholder proposals for the 2016 annual general
meeting must be received on or before December 18, 2015.
AVAILABILITY OF DOCUMENTS
Copies of the following documents are available free of charge on written request to the Office of the Corporate Secretary, Canadian Pacific,
7550 Ogden Dale Road S.E., Calgary, Alberta, T2C 4X9 or online at www.cpr.ca, www.sedar.com and www.sec.gov: Terms of Reference of the Board of Directors and each of the committees of the Board, the 2014 Annual Information Form, the 2014
Annual Report to Shareholders containing the consolidated financial statements for the year ended December 31, 2014, together with the auditors report and MD&A, the interim financial statements for periods subsequent to
December 31, 2014, Form 40-F and the 2015 Circular.
The Corporations financial information is provided in the Corporations comparative annual
financial statements and MD&A for the year ended December 31, 2014.
2015 MANAGEMENT PROXY
CIRCULAR 73
DIRECTORS APPROVAL
The contents of this Circular and its distribution have been approved by the Directors of the Corporation.
/s/ PAUL A. GUTHRIE
|
PAUL A. GUTHRIE |
Corporate Secretary |
March 17, 2015 |
74
CANADIAN PACIFIC
SCHEDULE A STATEMENT OF CORPORATE GOVERNANCE
|
|
|
CPs Board is dedicated to maintaining the highest standards of corporate governance and to nurturing a culture of good business ethics and corporate governance throughout the organization |
|
|
|
|
CPs philosophy is that effective governance involves more than policies, procedures and protocols; it must be ingrained in the everyday business practices of all those who work for CP |
|
The Board and management believe that good corporate governance practices are essential to the effective management of CP
and to the protection of its investors, employees and other stakeholders. The Board has developed Corporate Governance Principles and Guidelines (Governance Guidelines), available on our website at www.cpr.ca, which set out the
Corporations governance standards and requirements. CPs corporate governance practices fully comply with the requirements of the Canadian Securities Administrators (CSA) National Policy 58-201 Effective Corporate Governance.
BOARD OF DIRECTORS
|
|
|
All current directors are independent, with the exception of the CEO |
|
|
|
|
The roles of Chairman and CEO are separate |
|
|
|
|
There are no interlocking directorships at other reporting issuers |
|
Independent Directors
The Board has
adopted standards for director independence, which are provided in Schedule C of this Circular. The Board conducted a comprehensive assessment of each of its members as against these standards and determined that a majority of the
directors of CP have no material relationship with CP and are independent.
Mr. Harrison is not independent by virtue of the fact that he is CEO of the
Corporation. Mr. Keith Creel is a nominee for election as a director at the Meeting.
If elected, Mr. Creel will not be independent by virtue of the fact that he is President and Chief Operating Officer of the Corporation.
The following table indicates which of the current Board members are independent:
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Independent
(no material relationship) |
|
|
Not
Independent |
|
Reason for
Not Independent Status |
|
G.F. Colter |
|
ü |
|
|
|
|
|
|
|
|
W.A. Ackman |
|
ü |
|
|
|
|
|
|
|
|
I. Courville |
|
ü |
|
|
|
|
|
|
|
|
P.G. Haggis |
|
ü |
|
|
|
|
|
|
|
|
E.H. Harrison |
|
|
|
|
|
ü |
|
|
CEO of the Corporation |
|
P.C. Hilal |
|
ü |
|
|
|
|
|
|
|
|
K.T. Hoeg |
|
ü |
|
|
|
|
|
|
|
|
R. MacDonald |
|
ü |
|
|
|
|
|
|
|
|
A.R. Melman |
|
ü |
|
|
|
|
|
|
|
|
L.J. Morgan |
|
ü |
|
|
|
|
|
|
|
|
A.F. Reardon |
|
ü |
|
|
|
|
|
|
|
|
S.C. Tobias |
|
ü |
|
|
|
|
|
|
|
|
Other Board Memberships and Interlocks
Several of
the directors of CP are also directors of other reporting issuers. A table showing the memberships of the Director Nominees is set out under Nominees for Election to the Board Directors of Other Reporting Issuers. The
Governance Committee considers it to be good governance to avoid interlocking relationships if possible. No CP Board Members sit on the same board of directors of any outside reporting issuer. Mr. Colter and Ms. Hoeg are both currently
directors of Revera Inc. a private Canadian company.
In Camera Sessions
The
independent directors met in In Camera Sessions without management present at the regular and special meetings of the Board and its standing committees in 2014. Each regularly scheduled meeting includes at least one in camera session at
the beginning and/or end of each meeting.
2015 MANAGEMENT PROXY
CIRCULAR 75
Independent Chair
The Chairman of
the Board, Mr. Colter, is an independent director. He has served as Chairman of the Board since May 1, 2014.
Director Attendance
Each director is expected to attend each meeting of the Board and the Board committees of which he or she is a member. The attendance record of each Nominee for all
Board and committee meetings held in 2014 is set out under Nominees for Election to the Board Director Attendance. In addition, regularly scheduled Board and committee meetings are held sequentially and all directors are invited
to attend each of the committee meetings.
Access to Independent Advisors
The
Board and its committees have the authority to retain independent financial, legal, compensation and other advisors.
Communications and Shareholder Engagement
The Board welcomes engagement with its shareholders and encourages them to express their views. Interested parties may communicate directly with Mr. G.F. Colter,
the independent Chairman of the Board of Directors, by writing to him at the following address, and all communications received at this address will be forwarded to him:
c/o Office of the Corporate Secretary
Canadian
Pacific
7550 Ogden Dale Road S.E.
Calgary,
Alberta
T2C 4X9
Shareholders and others may also contact any
director by mailing correspondence in care of the Office of the Corporate Secretary at the above address. Communications by e-mail should be sent to shareholder@cpr.ca.
CPs shareholder and investor relations personnel also provide information to, and respond to inquiries from, shareholders and other stakeholders, in accordance
with the parameters set forth in the Disclosure and Insider Trading/Reporting Policy and the directions of the Board, senior management and
CPs Disclosure Policy Committee. They can be reached at shareholder@cpr.ca and investor@cpr.ca, respectively.
BOARD MANDATE
|
|
|
CPs Board of Directors represents company, shareholder and other stakeholder interests |
|
|
|
The Board is responsible for CPs long-term strategic direction, succession plans for senior officers and risk management oversight |
The Board has adopted the Corporate Governance Principles and Guidelines which provide that the Board is the ultimate decision-making authority within the Corporation,
except with respect to those matters, including the election of directors, which are reserved to shareholders. As the Board has plenary power, its Terms of Reference, found at www.cpr.ca are intended not to limit the power of the Board but to assist
it in the exercise of its powers and the fulfillment of its duties.
Strategic Planning
The Board oversees the development, execution and fulfillment of CPs strategic goals. This responsibility includes a strategic planning process whereby, prior to
approval by the Board of CPs multi-year strategic plan (the Strategic Plan): (i) the SOE Committee reviews and makes recommendations on the strategy, plans and objectives within the Strategic Plan that support continuous
improvement in operating performance, and (ii) the Finance Committee reviews and makes recommendations on the financial aspects of, and strategic options and opportunities associated with, the Strategic Plan. As part of these reviews, such
committees consider and discuss the key issues, assumptions, risks, opportunities and strategies that relate to the development and implementation of the Strategic Plan.
One Board meeting per year is specifically set aside for a substantial strategic planning session in which the Board reviews and discusses the Strategic Plan developed
by management, following which the Board provides its approval. As part of this, the Board considers CPs major opportunities, priorities
76
CANADIAN PACIFIC
and the risk impact of the Strategic Plan, and reviews and approves CPs financial objectives, including significant capital allocations. Subsequently, it oversees the implementation of the
Strategic Plan and monitors CPs performance against the plan.
Succession Planning
The Board and its Compensation Committee are actively engaged in the succession planning processes. A detailed and documented process exists which includes reviewing the
depth and diversity of succession pools for the CEO, COO, CFO and other key leadership roles. The Compensation Committee and Board annually review the Corporations leadership and development strategies, succession plans for key leadership
roles, as well as plans and programs for the assessment and development of senior talent.
The Board provides opportunities for directors to get to know employees
who have been identified as succession candidates. These individuals make presentations to the Board and are invited to functions where they can interact with directors more informally.
The Compensation Committee reviews, reports on and, where appropriate, provides recommendations to the Board on the structure and reporting relationships of senior
management, the appointment of persons to the rank of Vice President and above, and the leadership development of senior management.
Oversight of Risk Management
The Board has oversight responsibility for material risks associated with CPs business. This includes taking reasonable steps to confirm that management has
an effective risk management structure in place to identify, understand and appropriately manage the risks of the business. All Committees of the Board have a role in risk oversight, as follows:
|
|
the Audit Committee assists the Board with the identification of the principal risks of the Corporations business and ensures the implementation of appropriate risk assessment
|
|
|
and risk management policies and processes to manage these risks. The Audit Committee also (i) discusses risk assessment and risk management policies and processes to be implemented for the
Corporation, reviews with management and the Corporations internal auditors the effectiveness and efficiency of such policies and processes and their compliance with other relevant policies of the Corporation, and makes recommendations to the
Board with respect to any outcomes, findings and issues arising in connection therewith; (ii) reviews managements program to obtain appropriate insurance to mitigate risks; and (iii) oversees risks that may have a material impact on
the Corporations financial statements. |
|
|
the Compensation Committee reviews the Corporations compensation plans with the view towards not encouraging excessive or undue risk taking, and oversees the identification, consideration and management of risks
associated with the Corporations compensation philosophy and programs, and reviews disclosure on: (i) the role of the committee and the Board in that regard; (ii) the practices used to identify and mitigate any such risks
(particularly inappropriate or excessive risks); and (iii) any risk identified as part of the compensation philosophy and programs which is reasonably likely to have a material adverse effect on the Corporation. |
|
|
the Governance Committee monitors the Board oversight of enterprise risk management and develops, monitors, and reports to the Board regarding a process to determine, in light of the opportunities and risks facing the
Corporation, what competencies, skills and personal qualities are required for new directors in order to add value to the Corporation. |
|
|
the Finance Committee oversees financial risks and contingent exposure that may have a material impact on the Corporation including oversight of the Corporations pension plans and mergers. |
|
|
the SOE Committee provides oversight on health, safety, security and environmental issues and reviews and discusses key issues, assumptions, risks, opportunities and strategies that relate to the development and
implementation of the Corporations operations. |
2015 MANAGEMENT PROXY
CIRCULAR 77
BOARD OF DIRECTORS
Overall responsibility for risk oversight at CP and responsible for strategic business risks
|
|
|
|
|
|
|
|
|
Audit |
|
Compensation |
|
Finance |
|
Governance |
|
SOE |
Monitors material financial disclosure
Reviews insurance program to mitigate
risk |
|
Oversees compensation risk, talent management risk, succession risk, labour relations risk and pandemic risk |
|
Oversees financial risks Oversees pension plan funded
status and investment policies and procedures Oversees mergers and
acquisitions risk |
|
Oversees enterprise risk management oversight by the Board and its committees
Oversees ethics and compliance risk |
|
Oversees policies and systems related to safety, health, security and environmental issues
Oversees operational risks, including natural disasters, security risks, passenger accident risk and fuel supply volatility |
Internal Controls and Certification
The Board and its Audit Committee oversee the integrity of the internal control and management information systems of the Corporation and its subsidiaries, which are
designed, monitored and periodically reviewed by the CEO, the CFO, the Vice President and Controller, and the Internal Audit Department. Such systems are also examined periodically by CPs external auditors. On a quarterly basis, all senior
officers are required to review the operation of the key internal controls within their respective areas of responsibility, report any changes to the Office of the Vice President and Controller, and provide written confirmations as to the operation
and effectiveness of such controls. Management has, in accordance with the requirements of Section 404 of the Sarbanes Oxley Act, assessed the effectiveness of its internal controls over financial reporting in accordance with the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework and has reported to the Audit Committee. Based on this assessment, management determined that CP maintained
effective control over financial reporting as of December 31, 2014.
Annually and quarterly, the CEO and CFO certify that they are responsible for establishing
and
maintaining disclosure controls and procedures and internal control over financial reporting for both the Corporation and CPRC.
These certifications have been filed with the SEC as an exhibit to our annual report on Form 40-F or furnished to the SEC on Form 6-K, as applicable. As an issuer listed
in Canada and the United States, CP fulfills Canadian requirements by filing these certifications annually and quarterly.
In addition, the CEO and CFO, following
review by senior management and CPs Disclosure Policy Committee, also certify that our annual and quarterly filings do not contain an untrue statement of material fact, or omit to state a material fact, and that the financial statements and
other financial information included in the annual and quarterly filings fairly present, in all material respects, CPs financial condition, the results of our operations and cash flows.
Governance
The Board and its Governance Committee are responsible for developing
CPs approach to corporate governance. This includes annual reviews of the Corporate Governance Principles and Guidelines, as well as the terms of reference for the Board and each of its committees.
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CANADIAN PACIFIC
POSITION DESCRIPTIONS
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CPs Board has approved written position descriptions for the independent chair, Committee Chairs, and CEO |
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Board and Committee Chair Position Descriptions
The Chairman of the Board presides at meetings of shareholders and directors. He also serves as an advisor to the CEO and other members of senior management. His mandate
provides, among other things, that he is responsible for establishing and ensuring:
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efficient and effective procedures to govern the Boards operations and functions |
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processes are in place for the assessment of the effectiveness of the Board and Board Committees, and the fulfillment by Board, Committee Chairs and Board Committees of their mandates |
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collaboration with the CEO in setting the Boards agenda and consultation with the Board Committee Chairs with respect to the committee agendas |
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Board meetings are conducted in a manner that facilitates full participation |
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appropriate briefing materials are being provided to directors in a timely fashion |
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the Board meets regularly without management present |
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directors have access to adequate resources and independent advisors |
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effective relationships are developed between the Board and management |
Mandates for chairs of the Boards
committees include responsibility for:
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setting the agendas of the committee in collaboration with the CEO, senior management, Corporate Secretary and the Chairman of the Board |
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ensuring that committee meetings are conducted in a manner that facilitates full participation and
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discussion and that the committee members receive appropriate briefing materials in a timely fashion |
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ensure that the committee agendas facilitate fulfillment of the committees terms of reference and the Boards terms of reference and that the committee is annually evaluated against its own mandate
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ensuring that committee members have adequate resources and access to outside advisors at the expense of the Corporation |
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report to the Board on the meetings of the committee |
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liaising with the CEO and senior management between committee meetings |
CEO Position Description
The mandate of the CEO provides, among other things, that the CEO has responsibility for:
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developing a long-term strategy, annual business plans and budgets to the Board of Directors |
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managing CPs business in accordance with the Boards approved strategy, business plan and budget |
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implementing Board approved decisions and policies |
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establishing and monitoring policies and plans for retention, compensation, performance management and executive development and succession |
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identifying and managing risks and opportunities which CP faces in day to day operations |
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establishing and maintaining human resource policies and an ethical work environment which supports CPs vision and values |
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ensuring that financial policies and systems are established and maintained |
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establishing and maintaining organization structure and processes that align with the strategy and business plans |
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establish and maintain a corporate communications strategy |
2015 MANAGEMENT PROXY
CIRCULAR 79
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collaborating with the Board Chair in setting Board agendas |
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ensuring that the Board is informed of all relevant trends and developments in the Corporations business |
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ensuring that policies and operations are in accordance with government and regulatory requirements |
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overseeing preparation of annual reporting to shareholders |
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regularly reporting to the Board |
ORIENTATION AND CONTINUING EDUCATION
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Orientation material and educational presentations are delivered to new directors to provide a basis of informed decision-making |
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Ongoing education on matters of significance and developing issues are provided periodically |
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Site visits are provided to increase understanding of CPs operations |
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Orientation
CP has developed a
directors orientation program to provide prospective Board candidates with background on both the Corporations business and the role of the Board and its committees. Prospective Board candidates are provided with substantial information
about CPs operations and the rail industry. Annual Board and Board committee schedules and work plans are also provided to all prospective directors.
New
directors are provided with the opportunity to interact with management, particularly in those areas of activity overseen by the committees to which the new director is appointed.
Continuing Education
The Board recognizes the importance of ensuring that all
directors understand the business of CP and the railway industry to assist in the fulfillment of their duties. The continuing education program is
comprised of director site visits, director education sessions, a directors handbook, as well as procedures in place to ensure that the Board is kept up to date with information related to
the fulfillment of directors duties.
(a) |
Director Site Visits directors are provided from time to time with site tours of CP facilities, and on occasion, tours of CP customer facilities. In 2014, the directors toured CPs Alyth rail yard in
Calgary, Alberta and CPs Bensenville rail yard in Chicago, Illinois. |
(b) |
Director Education Sessions directors are regularly provided with education sessions on CP and the railway industry. Management and external advisors make presentations to the Board and committees on
topical issues in preparation for key business decisions, during strategic planning meetings and in response to requests from directors. The Board also receives regular reports and presentations on the regulatory and business environment from senior
executives, as well as CPs Investor Fact Book and a daily media scan which covers important news and developments about the Corporation and the railroad industry in general. In addition, CP has a policy of encouraging, supporting and paying
for individual Board members outside director education. |
(c) |
Directors Handbook the Corporate Secretarys office prepares and regularly updates a Corporate Handbook for new and existing directors. The Handbook contains, among other items:
copies of all Board and Committee terms of reference, the Corporations charter documents, a corporate organizational chart outlining the Corporations structure and subsidiaries, current lists of directors and officers, information on
directors and officers liability insurance, Corporate Governance Principles and Guidelines, Code of Business Ethics, Code of Ethics for CEO and Senior Financial Officers, and position descriptions for the Board chair, chairs of the Board
committees and the CEO. |
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CANADIAN PACIFIC
(d) |
Procedures are in place to provide the Board with timely and efficient access to information necessary to fulfill its duties including: |
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provision of detailed Board and Board committee meeting schedules and agendas in advance with ongoing review and updates |
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maintenance of a directors Intranet site to facilitate ongoing communication of company and industry developments
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provision of comprehensive documentation approximately one week in advance in preparation for Board and Board committee meetings |
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provision of reports from each Board committee on their work at previous committee meetings |
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Periodic updates from the CEO provided to directors between scheduled meetings |
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Quarter |
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Topic |
Ongoing presentations and programs |
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Regular reports on legal and regulatory
developments were provided to the Board and its committees on relevant topics including recent decisions and commentary from US Surface Transportation Board and Canada Transportation Agency
Regular updates of analyst reports and media coverage are provided
Supplementary subscriptions to industry leading publications including: Trains, and Progressive Railroading
Regular management presentations on business related topics
Presentations and publication by external auditors on current topics and trends |
Fiscal Q1 2014 |
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Audit Committee education program provided by finance management and external
auditors |
Fiscal Q2 2014 |
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Site visit for all directors to Alyth Rail Yard |
Fiscal Q3 2014 |
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Site visit for directors to Bensenville Rail
Yard Financial Analyst Reports from rail industry expert analysts |
Fiscal Q4 2014 |
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Transparency Report 2014, External Auditors, Deloitte LLP |
BOARD DINNER SESSIONS
CPs Board
of Directors meets for dinner the evening of Committee meetings prior to regularly scheduled Board meetings. Board dinners function as an opportunity to achieve a number of important governance objectives including meeting in a less formal
atmosphere with the Chief Executive Officer, President and other senior officers. This permits the Board to meet high potential employees for succession planning purposes, learn more about the Companys business and strategic direction, and
strengthen the collegial working relationship of the Board of Directors.
ETHICAL BUSINESS CONDUCT
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Annual certification for all directors, officers and non-union employees |
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Code of Business Ethics and Code of Ethics for CEO and Senior Financial Officers available at www.cpr.ca and in print to any shareholder upon request |
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Code of Business Ethics
The
Corporations Code of Business Ethics (the Code) specifically addresses, among other things, conflicts of interest, protection and proper use of corporate assets and opportunities, confidentiality of corporate information, fair
dealing with third parties, compliance with laws, rules and regulations and reporting of illegal or unethical behaviour. The Code applies to all directors, officers and employees, both unionized and non-unionized, of the Corporation and its
subsidiaries in Canada, the United States and elsewhere, and forms part of the terms and conditions of employment of all such individuals. All directors have signed acknowledgements that they have read, understood and agree to comply with the Code,
and they annually confirm compliance. Annually, officers and non-union employees are required to acknowledge that they have read, understood and agree to comply with the Code. Contractors engaged on behalf of the Corporation or its subsidiaries must
undertake, as a condition of their engagement, to adhere to principles and standards of business
2015 MANAGEMENT PROXY
CIRCULAR 81
conduct consistent with those set forth in the Code. All amendments to the Code, and all waivers of the Code with respect to any director or Executive Officer, will be posted on CPs website
and provided in print to any shareholder who requests them.
Code of Ethics for Chief Executive Officer and Senior Financial Officers
A Code of Ethics for the CEO and Senior Financial Officers applies to the Corporations CEO, CFO and Vice President and Controller. All amendments to the code, and
all waivers of the code with respect to any of the officers covered by it, will be posted on CPs website and provided in print to any shareholder who requests them.
Monitoring of Ethics Codes
The Governance Committee, with the assistance of the
Audit Committee, is responsible for periodically reviewing, and if appropriate recommending changes to, the Code and the Code of Ethics for the CEO and Senior Financial Officers of the Corporation, monitoring compliance with the codes, and
reviewing, and if appropriate approving, waivers from compliance therefrom for directors or Executive Officers and promptly disclosing such waivers to the shareholders.
The Governance Committee did not approve any waivers of the codes for any directors or Executive Officers during 2014.
Material Interests in Transactions
If a director has a material interest in a
transaction or agreement involving the Corporation they are required to disclose that interest to the CEO and the Chairman of the Board, and will not participate in any discussions or votes concerning such transactions. During 2014, no director had
any material interest in a transaction with the Corporation.
Promotion of Ethical Culture
The Board promotes a culture of ethical business conduct and sets the tone for a foundation of high business standards, integrity and respect.
Insider Trading and Disclosure Policies
The Board has approved a disclosure and insider trading/reporting policy. It is available on CPs website at www.cpr.ca and reflects the commitment of the
Board and management to promote timely, factual and accurate communications to the investing public. Among the matters addressed in the policy are guidelines on CPs interaction with analysts and the public and measures to avoid selective
disclosure.
The Board has also appointed a Disclosure Policy Committee comprised of senior legal, financial/accounting and communications officers. The committee
reports to the Board and is responsible for overseeing and monitoring disclosure matters and implementing additional policies and procedures, where necessary. The committee reviews all major disclosure documents. These documents are also approved by
the Board and/or one or more of its committees, in each case before they are distributed. Under the direction of the CEO and CFO, the Disclosure Policy Committee also oversees the Corporations disclosure controls and procedures and provides
quarterly reports to the Audit Committee.
NOMINATION OF DIRECTORS
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CPs shareholders elect individual directors annually |
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The Board has a majority voting policy in the uncontested election of directors |
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A skills matrix is used to assess areas of director expertise and experience |
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Nomination Process
Directors are
elected annually by shareholders, each to hold office until the close of the next annual meeting of shareholders or until such persons successor is elected or appointed. Between shareholder meetings, the Board may appoint additional directors.
The Governance Committee, with the assistance of an external search consultant if necessary, identifies and recommends to the Board qualified director
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CANADIAN PACIFIC
nominees for appointment or election at the annual meeting of shareholders consistent with criteria approved by the Board which takes into account:
(a) |
the competencies and skills the Board, as a whole, should possess; |
(b) |
the competencies, skills and personal and other diverse qualities the existing directors possess; |
(c) |
the competencies, skills and personal and other diverse qualities required for new directors in order to add value to CP in light of the opportunities and risks facing the Corporation; and |
(d) |
the size of the Board, with a view to facilitating effective decision-making. |
The requirements derived from this process
are used in determining whether, and how many, new directors should be added to the Board. The Board considers a skills matrix and regularly reviews and updates, as applicable, the industries, regions and companies where director candidates meeting
the skills required by CP are most likely to be identified, and will, if necessary or deemed advisable, retain outside advisors to assist in the identification of director candidates. A table identifying some of the current skills and experience of
the Nominees is set out under the heading Nominees for Election to the Board Director Skills Matrix.
The Governance Committee also considers
director nominees, if any, recommended by the shareholders for election as directors.
Evergreen Process
Each year the Governance Committee, with the assistance of an external search consultant, reviews the composition of the Board in order to ensure it has the best
representation of skills and experience. This information is compiled through the use of a competency/skills matrix that outlines the areas of expertise and experience for each director.
In line with CPs needs, the Governance Committee reviews and updates, as applicable, the industries, regions and companies where director candidates meeting the
skills required by CP are most likely to be identified.
Term Limits and Retirement Age
The
Board believes that the need to have experienced directors who are familiar with the business of CP must be balanced with the need for renewal, fresh perspectives and a healthy skepticism when assessing management and its recommendations. The
average age of CPs directors is 62 and the average director tenure at CP is currently 3.5 years with directors ranging from less than one years experience to eight years on the Board. In November 2013, the Board approved removing the
mandatory retirement age for directors. After considering the director profile at CP, the Board has determined that neither a mandatory retirement age nor term limits are appropriate for the Corporation. Instead, the Board has implemented a more
comprehensive assessment process that evaluates the performance, skills and contribution of each director on an annual basis that the Board believes is the preferable route to board refreshment.
Majority Voting Policy
In an uncontested election of directors, a director is
required to tender his or her resignation if that director receives more withheld votes than for votes. The Governance Committee would be expected to recommend that the Board accept the resignation except in extenuating
circumstances. The majority voting policy is set forth in CPs Corporate Governance Principles & Guidelines, which can be found on the Companys website at www.cpr.ca under Corporate Governance.
Board Size
CPs governing documents provide for the Board to consist of a
minimum of five and a maximum of 20 directors. The Governance Committee assesses the optimal size annually, and believes the current size should be between 10 and 14 directors in order to fulfill its responsibilities.
DIVERSITY AT CP
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CP has implemented a Diversity Philosophy |
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CP is committed to diversity throughout the Corporation and is a founding member of the Canadian Board Diversity Council |
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Women currently represent one third of CPs directors, including the Chairs of the Audit and the Governance Committee |
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2015 MANAGEMENT PROXY
CIRCULAR 83
CP is committed to Board diversity, including with respect to gender, age, cultural heritage and geographical
representation and has therefore adopted a diversity philosophy that reflects CPs ongoing commitment to maintaining and increasing diversity at the Board level. CPs diversity philosophy can be found on the Companys website at
www.cpr.ca under Corporate Governance. CP is also a founding member of the Canadian Board Diversity Council, an organization that is dedicated to advancing diversity on Canadian boards.
The Governance Committee and the Board do not adhere to any quotas or specific targets in determining Board membership as we do not believe that it is in the
Corporations best interest to implement arbitrary targets with respect to the composition of the Board. However, CPs diversity philosophy states that the Governance Committee will take into account the diversity considerations, such as
gender, age, cultural heritage and regional representation of candidates when identifying and recommending qualified director nominees in order to ensure that the Board reflects the gender, age, cultural and geographic representation of the regions
in which CP operates. The Governance Committees thorough investigation and nominating process, including the engagement of an external search consultant, which is set out in this process acts to ensure implementation of CPs Governance
Principles and Guidelines respecting director nominations, including diversity.
Due to CPs ongoing commitment to diversity of experience and competencies as
well as through the regular review and consideration of the Boards skill matrix, CPs Board currently consists of four women representing 33% of the Board and includes representation from numerous regions in Canada and the United States.
In addition, the Chair of both the Audit Committee and the Corporate
Governance and Nominating Committee, two of the key committees at CP, are female.
CP encourages the advancement of women and other individuals with diverse backgrounds at the Corporation through its
employment equity program. CP has put in place an in depth Diversity and Employment Equity program pursuant to the Employment Equity Act (Canada) to remove workplace barriers at all levels that impede or prevent the inclusion of qualified
individuals and minority groups, including women, from consideration for positions. CP has not implemented quotas or specific targets with respect to gender diversity at the Executive Officer level other than with respect to CPs Diversity and
Employment Equity Program. CP believes that the Diversity and Employment Equity Program encourages the advancement and employment of women and that arbitrary targets are not in the best interests of CP in obtaining the highest caliber
Executives. CP does not currently have any female executive officers.
COMMITTEES OF THE BOARD
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Committees of the Board assist CPs Board to fulfill its responsibilities and duties |
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CP has five standing committees see table below |
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Fully independent Audit, Compensation, Finance and Governance committees |
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All committees of the Board, with the exception of the SOE Committee, are comprised solely of directors who are independent
and the CEO does not participate in selecting members. All committees are chaired by an independent director. For additional information on the Corporations standing committees of the Board, see Nominees for Election to the Board
Board and Committees, and Director Attendance.
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CANADIAN PACIFIC
The following table sets out committee members as at March 17, 2015:
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Director |
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Audit Committee |
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Governance Committee |
|
Finance Committee |
|
Compensation Committee |
|
SOE Committee |
G.F. Colter (Chair) |
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W. A. Ackman |
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ü |
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ü |
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I. Courville |
|
ü(Chair) |
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ü |
P.G. Haggis |
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ü |
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ü |
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E.H. Harrison |
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ü |
P.C. Hilal |
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ü |
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ü(Chair) |
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K.T. Hoeg |
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ü(Chair) |
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ü |
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R. MacDonald |
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ü |
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ü |
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A.R. Melman |
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ü |
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ü |
L.J. Morgan |
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ü |
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ü |
A.J. Reardon |
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ü |
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ü(Chair) |
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ü |
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S.C. Tobias |
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ü |
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ü (Chair) |
All directors are invited to attend every committee meeting and committee meetings are not scheduled concurrently in order to allow
attendance.
AUDIT COMMITTEE DISCLOSURE
The following individuals comprise the current membership of the audit committees of both the Corporation and CPRC (CPs Audit Committees), which have
been established in accordance with Securities Exchange Act of 1934 (Exchange Act) and New York Stock Exchange Standards (NYSE Standards) and CSA National Instrument 52-110 Audit Committees (NI 52-110).
The US Securities and Exchange Commission (SEC) requires at least one financial expert on
an audit committee. Ms. Courville, Mr. Haggis, and Mr. Reardon have been determined by the Board to meet the audit committee financial expert criteria prescribed by the SEC and have been designated as audit committee financial experts
for CPs Audit Committee.
The Board has determined that all members of CPs Audit Committee have accounting or related financial management
expertise within the meaning of the NYSE Standards. The Board has determined that all members of CPs Audit
Committee are financially literate within the definition contained in, and as required by, NI 52-110 and the NYSE Standards.
A member of CPs Audit Committee may not serve on the audit committees of two or more other outside public companies, unless the Board determines that this
simultaneous service would not impair the ability of that individual to effectively serve on CPs Audit Committee. No member of CPs Audit Committee serves on more than one public company audit committee in addition to CPs Audit
Committee.
The Audit Committee has adopted a written policy governing the pre-approval of audit and non-audit services to be provided to CP by its independent
auditors. The policy is reviewed annually and the audit and non-audit services to be provided to CP by its independent auditors, as well as the budgeted amounts for such services, are pre-approved at that time, including by the Board in respect of
fees for audit services. CPs Vice President and Controller must submit to the Audit Committee at least quarterly a report of all services performed or to be performed by the independent auditors pursuant to the policy. Any additional non-audit
services to be provided by the independent auditors either not included among the pre-approved services or exceeding the budgeted amount for such
2015 MANAGEMENT PROXY
CIRCULAR 85
pre-approved services by more than 10% must be individually pre-approved by the Audit Committee or its Chairman, who must report all such additional
pre-approvals to the Audit Committee at its next meeting following the granting thereof. The independent auditors annual audit services engagement terms are subject to the specific pre-approval of the Audit Committee, with the associated fees
being subject to approval by the Board. In addition, prior to the granting of any pre-approval, the Audit Committee or its Chairman, as the case may be, must be satisfied that the performance of the services in question will not compromise the
independence of the independent auditors. Compliance with this policy is monitored by CPs Chief Internal Auditor.
NI 52-110 also requires issuers to include
the charter of their audit committee and disclose information with respect to the composition, education and experience of the members of their audit committee. In compliance with the requirements set out in NI 52-110, such additional information is
contained in Canadian Pacifics 2014 Annual Information Form, under Section 12 titled Audit Committee, which is available online at www.cpr.ca, www.sedar.com, or www.sec.gov.
Audit and Non-Audit Fees and Services 2014 & 2013
In
accordance with applicable laws and the requirements of stock exchanges and securities regulatory authorities, the Audit Committee must pre-approve all audit and non-audit services to be provided by the independent auditors.
Fees payable to Deloitte LLP for the years ended December 31, 2014, and December 31, 2013, totaled $2,885,400 and $2,213,000, respectively, as detailed in the
following table:
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|
|
|
|
|
|
|
|
For the year ended December 31 |
|
Total
2014 ($) |
|
|
Total
2013 ($) |
|
Audit Fees |
|
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2,184,800 |
|
|
|
1,943,000 |
|
Audit-Related Fees |
|
|
155,000 |
|
|
|
228,500 |
|
Tax Fees |
|
|
295,600 |
|
|
|
41,500 |
|
All Other Fees |
|
|
250,000 |
|
|
|
|
|
TOTAL |
|
|
2,885,400 |
|
|
|
2,213,000 |
|
The nature of the services provided under each of the categories indicated in the table is described below.
Audit Fees
Audit fees were for professional services rendered for the audit and
interim reviews of CPs annual financial statements and services provided in connection with statutory and regulatory filings or engagements, including the attestation engagement for the report from the independent registered public accounting
firm on the effectiveness of internal controls over financial reporting, the audit or interim reviews of financial statements of certain subsidiaries and of various pension and benefits plans of CP; special attestation services as may be required by
various government entities; and general advice and assistance related to accounting and/or disclosure matters with respect to new and proposed U.S. accounting standards, securities regulations, and/or laws.
Audit-Related Fees
Audit-related fees were for assurance and related services
reasonably related to the performance of the audit or review of the annual financial statements, but which are not reported under Audit Fees above. These services consisted of audit work related to securities filings; refinancing of
subsidiary companies; and accounting training.
Tax Fees
Tax fees were for
professional services related to tax compliance, tax planning and tax advice. These services consisted of: tax compliance including the review of tax returns; assistance with questions regarding corporate tax audits; tax planning and advisory
services relating to common forms of domestic and international taxation (i.e. income tax, capital tax, goods and services tax, and value added tax); and access fees for taxation database resources.
All Other Fees
Fees disclosed under this category would be for products and
services other than those described under Audit Fees, Audit-Related Fees and Tax
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CANADIAN PACIFIC
Fees above. These Finance services consisted of advice with respect to an internal reorganization initiative. There were no such services in 2013.
COMPENSATION GOVERNANCE
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|
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Annual review of director compensation |
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|
|
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Details on director compensation provided in this Circular, under the heading Directors Compensation |
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|
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Details on executive compensation provided in this Circular, under the headings 2014 Executive Compensation Letter to Shareholders and Compensation Discussion and Analysis |
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|
|
|
CP has adopted Say on Pay |
|
Director Compensation
The Governance
Committee reviews director compensation to maintain a compensation level that is competitive to other public companies of comparable size and complexity and also aligns the interests of directors with the interests of shareholders. The Governance
Committee recommends any changes for Board approval when considered appropriate to align with these objectives, as well as the workload, time commitment and responsibility of directors.
Executive Compensation
The Compensation Committee oversees the executive
compensation program. This program is designed to pay for performance at market competitive levels and to align managements interests with CPs business strategy and shareholder interests.
Shareholder Advisory Vote on Executive Compensation
In 2015, shareholders will once
again have an advisory vote on CPs approach to executive compensation disclosed in this Circular. As this is an advisory vote, the results will not be binding on the Board. However, the Board and its Compensation Committee will take the
results of the vote into account in determining its approach to compensation in the future.
BOARD ASSESSMENT
The Board of Directors has implemented a comprehensive process to annually assess individual directors, Board committees, Committee Chairs, the Board Chair as well as
the overall functioning of the Board. The process is under the supervision of the Governance Committee who retains an independent advisor to facilitate the process.
This formal assessment consists of individual director interviews conducted by the independent advisor, as well as interviews with select executive officers and
Governance Committee and Board discussions. In 2014, the evaluation process included:
|
|
The completion by each of the directors of detailed self-assessment questionnaires with respect to his or her performance that included open ended questions that allow the directors to provide full responses regarding
their performance. The questions were provided for the private contemplation of individual performance and to aide in each directors annual meeting with the Chairman of the Board |
|
|
The independent advisor conducted confidential, one-on-one interviews with each Board member, as well as several senior officers of CP, using an interview outline provided in advance covering the following topics: board
composition, board operation, board information, human resources, strategy, risk, communications, effectiveness of board chair and effectiveness of committees and Committee chairs |
|
|
The independent advisor met with the Chair of the Governance Committee and the Board Chair to review the independent advisors report and recommendations |
|
|
The Chairman of the Board conducted an annual private meeting with each director in order to review and assess the individual performance of each director as well as the performance of the Board as a whole and each of
the committees |
|
|
The Governance Committee met to review and discuss the independent advisors report and recommendations and suggestions for improvement. |
The Board and Committee Chairs take into consideration the overall results and suggestions derived from the annual performance review in order to improve the functioning
of the Board and
2015 MANAGEMENT PROXY
CIRCULAR 87
its committees. The Governance Committee monitors progress on suggestions made as a result of the performance assessment at each meeting.
The evaluation of the Board Chair is led by the Chair of the Governance Committee who contacts every director and conducts confidential one-on-one discussions with each
director.
COMPLIANCE WITH NYSE CORPORATE GOVERNANCE STANDARDS
The practices and procedures of CPs management and Board of Directors comply with legal and regulatory governance rules and industry best practices. As a Canadian
public company with securities listed on the Toronto Stock Exchange
(TSX), we have in place a system of corporate governance practices that meets or exceeds all applicable Canadian requirements.
CP is classified as a foreign private issuer in connection with its listing on the NYSE, and as a result many of the governance rules of the NYSE that apply
to U.S. domestic companies do not apply to CP.
The NYSE governance rules do require that any significant differences between the Corporations governance
practices and the NYSE governance rules be disclosed which are set forth on the Corporations website at www.cpr.ca under Corporate Governance.
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CANADIAN PACIFIC
SCHEDULE B COMPARATOR GROUP
The secondary group is a group of capital intensive Canadian businesses ranging from one-third to three times the size of CP on an asset basis, with CP positioned close
to the median of the group. The companies in this secondary reference are:
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Agnico Eagle Mines Ltd. |
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Canadian National Railway Company |
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Finning International Inc. |
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First Quantum Minerals Ltd. |
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Penn West Petroleum Ltd. |
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SCHEDULE C DIRECTOR INDEPENDENCE
A. INDEPENDENCE STANDARDS
The following standards of director independence have been adopted by the Board of Directors of the Corporation based on
criteria of the NYSE, US Securities and Exchange Commission and, the Canadian Securities Administrator (CSA) in National Instrument 58-101 Disclosure of Corporate Governance Practices and National Instrument 52-110 Audit Committee:
NYSE Independence Standards
No director qualifies as independent unless the board of directors affirmatively determines that the director has no material relationship with the
Corporation (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Corporation).
1. |
In addition, a director is not independent if: |
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(i) |
the director is, or has been within the last three years, an employee of the Corporation, or an immediate family member is, or has been within the last three years, an executive officer of the Corporation;
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(ii) |
the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than US$120,000 in direct compensation from the Corporation, other than
director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); |
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(iii) |
(a)the director is a current partner or employee of the internal or external auditor of the Corporation, (b) the director has an immediate family member who is a current partner of such auditors, (c) the
director has an immediate family member who is a current employee of such auditors and personally works on the Corporations audit, or (d) the director or an immediate family member was within the last three years a partner or employee of
such
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auditors and personally worked on the Corporations audit within that time; |
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the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Corporations present executive officers at the same time
serves or served on that companys compensation committee; or |
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the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Corporation for property or services in an amount
which, in any of the last three fiscal years, exceeds the greater of US$1 million or 2% of such other companys consolidated gross revenues. |
2. |
For the purposes of these independence standards, an immediate family member includes a persons spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than domestic employees) who shares such persons home. When applying the look-back provisions, the board need not consider individuals who are no longer immediate family members as a result of legal separation
or divorce, or those who have died or become incapacitated. |
3. |
The board will broadly consider all relevant facts and circumstances that might signal potential conflicts of interest or that might bear on the materiality of
a directors relationship to the Corporation or any of its consolidated subsidiaries. In particular, when assessing the materiality of a directors relationship with the Corporation, the board will consider the issue not merely from the
standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial
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relationships, among others. However, ownership of even a significant amount of stock, by itself, is not a bar to an independence finding. |
Additional Independence Standards for Audit Committee Members
In addition to the
foregoing independence standards, the members of the Audit Committee must satisfy the audit committee independence requirements prescribed by Section 10A(m)(3) and Rule 10A-3(b)(1) of the Securities Exchange Act of 1934. In particular:
1. |
each member of the Audit Committee shall be a member of the board and shall otherwise be independent; and |
2. |
in order to be considered to be independent for the aforementioned purposes, a member of the Audit Committee may not, other than in his or her capacity as a member of the Audit Committee, the board, or any other board
committee: |
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accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Corporation or any subsidiary thereof, provided that, unless the rules of the NYSE provide otherwise, compensatory fees do not
include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Corporation (provided that such compensation is not contingent in any way on continued service); or
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be an affiliated person of the Corporation or any subsidiary thereof. |
Note: An affiliated person is
someone who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation, including a significant shareholder. A person who is neither an executive officer nor a
shareholder owning, directly or indirectly, more than 10% or more of any class of voting equity securities of the Corporation will be deemed not to be in control of the Corporation.
National Instrument 58-101 Disclosure of Governance Practices and National Instrument 52-110 Audit Committees
1. |
A member of the Corporations board is independent if the member has no direct or indirect material relationship with the Corporation. |
2. |
For the purposes of item 1, a material relationship means a relationship which could, in the view of the Corporations board, be reasonably expected to interfere with the exercise of a members independent
judgment. |
3. |
Despite item 2, the following individuals are considered to have a material relationship with the Corporation: |
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an individual who is, or who has been within the last three years, an employee or executive officer of the Corporation; |
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b) |
an individual whose immediate family member is, or has been within the last three years, an executive officer of the Corporation; |
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c) |
an individual who is a partner of, or employed by, the internal or external auditor of the Corporation, or was within the last three years a partner or employee of such auditors and personally worked on the
Corporations audit within that time; |
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d) |
an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual, is a partner of the Corporations internal or external auditor, an employee of such auditors and
participates in its audit, assurance or tax compliance (but not tax planning) practice, or was within the last three years a partner or employee of such auditors and personally worked on the Corporations audit within that time;
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e) |
an individual who is, or has been within the last three years, or whose immediate family member is or has been within the last three years, an executive officer of an entity if any of the Corporations current
executive officers serves or served at the same time on the entitys compensation committee; and |
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f) |
an individual who received, or whose immediate family member who is employed as an executive officer of the Corporation received, more than $75,000 in direct compensation from the Corporation during any 12 month period
within the last three years. |
4. |
Despite item 3, an individual will not be considered to have a material relationship with the Corporation solely because (a) he or she had a relationship identified in item 3 if that relationship ended before
March 30, 2004, or (b) he or she had a relationship identified in item 3 by virtue of item 8 if that relationship ended before June 30, 2005. |
5. |
For the purposes of items 3(c) and 3(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation
(including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
6. |
For the purpose of item 3(f), direct compensation does not include: (a) remuneration for acting as a member of the board of directors or of any board committee of the Corporation; and (b) the receipt of fixed
amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Corporation if the compensation is not contingent in any way on continued service. |
7. |
Despite item 3, a person will not be considered to have a material relationship with the Corporation solely because the individual or his or her immediate family member: |
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a) |
has previously acted as an interim chief executive officer of the Corporation; or |
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b) |
acts, or has previously acted, as a chair or vice chair of the board of directors or of any board committee of the Corporation on a part-time basis. |
8. |
For the purpose of the foregoing items 1 through 7, the Corporation includes a subsidiary entity of the Corporation.
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9. |
For the purposes of the foregoing independence determination, the term immediate family member means an individuals spouse, parent, child, sibling, mother or father-in-law, son or daughter-in-law,
brother or sister-in-law, and anyone (other than an employee of either the individual or the individuals immediate family member) who shares the individuals home. |
National Instrument 52-110 Audit Committees
1. |
In addition to the foregoing, the members of the Audit Committee are considered to have a material relationship with the Corporation if: |
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a) |
the member has a relationship with the Corporation pursuant to which the individual accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the Corporation or any subsidiary entity of
the Corporation, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice chair of the board or any board committee; or |
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b) |
the member is an affiliated entity of the Corporation or any of its subsidiary entities. |
2. |
For the purposes of the foregoing: |
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a) |
compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Corporation if the compensation is not contingent in any
way on continued service; |
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b) |
the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by: |
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i) |
an individuals spouse, minor child or stepchild, or a child or stepchild who shares the individuals home; or |
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ii) |
an entity in which such individual is a partner, member, an officer such as a managing director occupying a
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comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active
role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Corporation or any subsidiary entity of the Corporation. |
B. BOARD DETERMINATION OF DIRECTOR INDEPENDENCE
The
Corporations board of directors has conducted, through a combination of questionnaires, biographical reviews and discussions, a
comprehensive assessment of all business and other relationships and interests of each director vis-à-vis the Corporation and its subsidiaries, as against the aforementioned standards and
has determined that each director, except E.H. Harrison, is independent of the Corporation in accordance with the standards for independence established for all directors by the NYSE Independence Standards, and National Instrument 58-101 Disclosure
of Governance Practices and that each member of the Audit Committee, meets the additional independence standards established for audit committee members under Section 10A(m)(3) and Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, and
National Instrument 52-110 Audit Committees.
Mr. Harrison is not independent by virtue of the fact that he is Chief Executive Officer of the Corporation.
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SCHEDULE D
March 13, 2015
CANADIAN PACIFIC RAILWAY LIMITED
BY-LAW
NO. 2
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CANADIAN PACIFIC RAILWAY LIMITED BY-LAW NO. 2
A by-law relating to certain procedural requirements for the election of directors of Canadian Pacific Railway Limited.
1.01 DEFINITIONS
In this By-law, which may
be cited as By-law No. 2, unless the context otherwise requires:
Act means the Canada Business Corporations Act, and any statute that may be
substituted therefor, as from time to time amended;
Applicable Securities Laws means the applicable securities legislation of each relevant province and
territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities
commission and similar regulatory authority of each province and territory of Canada;
Articles means the articles of Corporation as defined in the Act;
Board means the Board of Directors of the Corporation;
Corporation means Canadian Pacific Railway Limited; and
public
announcement means disclosure in a press release reported by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System of Electronic Document Analysis and Retrieval at www.sedar.com.
2.01 NOMINATION PROCEDURES
Subject only to
the Act and the Articles of the Corporation, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board may be made at
any annual meeting of shareholders, or at any special meeting of
shareholders if one of the purposes for which the special meeting was called is the election of directors:
(a) |
by or at the direction of the Board, including pursuant to a notice of meeting; |
(b) |
by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the
Act; or |
(c) |
by any person (a Nominating Shareholder): (A) who, at the close of business on the date of the giving of the notice provided for below in this By-law and on the record date for notice of such meeting of
shareholders, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and (B) who complies with the notice
procedures set forth below in this By-law. |
3.01 TIMELY NOTICE
In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation at the principal executive offices of the Corporation in accordance with section 5.01 below.
4.01 MANNER OF TIMELY NOTICE
To be timely, a Nominating Shareholders notice to the Secretary of the Corporation must be made:
(a) |
in the case of an annual meeting of shareholders, not less than 30 days prior to the date of the annual meeting of shareholders; provided, however, that in the
event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement (the
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Notice Date) of the date of the annual meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the tenth (10th) day following
the Notice Date; and |
(b) |
in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes as well), not later than the close of
business on the fifteenth (15th) day following the day on which the first public announcement of the date of the special meeting of shareholders was made. |
5.01 PROPER FORM OF TIMELY NOTICE
To be in
proper written form, a Nominating Shareholders notice to the Secretary of the Corporation must set forth:
(a) |
as to each person whom the Nominating Shareholder proposes to nominate for election as a director: (A) the name, age, business address and residential address of the person; (B) the principal occupation or
employment of the person for the last five years; (C) the status of such person as a resident Canadian as defined in the Act; (D) the class or series and number of shares in the capital of the Corporation which are controlled
or which are owned beneficially or of record by the person as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (E) any
other information relating to the person that would be required to be disclosed in a dissidents proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws; and
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(b) |
as to the Nominating Shareholder giving the notice, any information relating to such Nominating Shareholder that would be required to be made in a dissidents proxy circular in connection with solicitations of
proxies for election of directors pursuant to the Act and Applicable Securities Laws. |
6.01 NOTICE TO BE UPDATED
All information to be provided in a timely notice pursuant to section 5.01 above shall be provided as of the date of such notice. If requested by the Corporation, the
Nominating Shareholder shall update such information forthwith so that it is true and correct in all material respects as of the record date for the meeting of shareholders.
7.01 ELIGIBILITY FOR NOMINATION AS A DIRECTOR
No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this By-law; provided, however, that
nothing in this By-law shall be deemed to preclude discussion by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of any matter in respect of which it would have been entitled to submit a proposal pursuant to
the provisions of the Act. The Chairman of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is not in
compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded.
8.01 DELIVERY OF NOTICE
Notwithstanding any other provision of this By-law, notice given to the Secretary of the Corporation pursuant to this By-law may only be given by personal
delivery, facsimile transmission or by email (to the Secretary of the Corporation), and shall be deemed to have been given and made only at the time it is served by personal delivery, email or sent by facsimile transmission (provided that receipt of
confirmation of such transmission has been received) to the Secretary at the address of the principal executive offices of the Corporation; provided that if such delivery or electronic communication is made on a day which is a not a business day or
later than 5:00 p.m. (Calgary time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the subsequent day that is a business day.
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CANADIAN PACIFIC
9.01 BOARD DISCRETION
Notwithstanding the foregoing, the Board may, in its sole discretion, waive any requirement in this By-law.
10.01 EFFECTIVE DATE
Subject to its confirmation by the shareholders in accordance with the Act, this By-law is effective as of March 13, 2015.
MADE this 13th day of March, 2015.
WITNESS the corporate seal of the Corporation.
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/s/ Gary F. Colter |
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/s/ Paul A. Guthrie |
Gary F. Colter |
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Paul A. Guthrie |
Chairman of the Board |
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Corporate Secretary |
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SCHEDULE E
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Industry
Canada |
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lndustrie
Canada |
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Form 4
Articles of Amendment
Canada Business Corporations Act (CBCA) (s. 27 or 177) |
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Formulaire 4
Clauses modificatrices Loi canadienne sur
les sociétés par actions (LCSA) (art. 27 ou 177) |
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1 |
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Corporate name |
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Dénomination sociale |
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CANADIAN PACIFIC RAILWAY LIMITED |
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CHEMIN DE FER CANADIEN PACIFIQUE LIMITEE |
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2 |
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Corporation number |
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Numéro de la société |
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3952169 |
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3 |
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The articles are amended as follows |
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Les statuts sont rnodifiés de la façon suivante |
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See attached schedule / Voir lannexe ci-jointe |
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Declaration: I certify that I am a director or an officer of the corporation. |
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Déclaration: Jatteste que je suis un administrateur ou un dirigeant de la société. |
Misrepresentation constitutes an offence and, on summary conviction, a person is liable to a fine not exceeding $5000
or to imprisonment for a term not exceeding six months or both (subsection 250 (1) of the CBCA).
Faire une fausse déclaration
constitue une infraction et son auteur, sur déclaration de culpabilité par procédure sommaire, est passible dune amende maxirnale de 5 000 $ et dun emprisonnement maximal de six mois, ou lune de ces peines
(paragraphe 250(1) de la LCSA).
You are providing information required by the CBCA. Note that both the CBCA and the Privacy Act allow this
information to be disclosed to the public. It will be stored in personal information bank number IC/PPU-049.
Vous fournissez des renseignements
exigés par la LCSA.. Il est à noter que la LCSA et la Loi sur lesrenseignements personnels permettent que de tels renseignements soient divulués au public. Ils seront stockés dans la banque de renseignements
personnels numéro IC/PPU-049.
Amendment Schedules / Annexes Modification
Item 7 of the Articles of the Corporation be and is hereby amended pursuant to Section 173(1)(o) of the Canada Business Corporations Act by adding the
following to Other provisions, if any:
Meetings of the shareholders of the Corporation may be held at such place within Canada or the United States
of America as the directors may from time to time determine, including, but not limited to Chicago, Illinois, Minneapolis, Minnesota, Saint Paul, Minnesota and New York, New York.
Any questions and requests for assistance may be directed to the
Proxy Solicitation Agent:
The Exchange Tower
130 King Street West, Suite 2950, P.O. Box 361
Toronto,
Ontario
M5X 1E2
www.kingsdaleshareholder.com
North American Toll Free Phone:
1-866-879-7649
Email:
contactus@kingsdaleshareholder.com
Facsimile: 416-867-2271
Toll Free Facsimile: 1-866-545-5580
Outside
North America, Banks and Brokers Call Collect: 416-867-2272
Canadian Pacific
7550 Ogden Dale Road SE
Calgary Alberta
Canada T2C 4X9
TSX/NYSE: CP
www.cpr.ca
Computershare Investor Services Inc. Transfer Agent for Canadian Pacific Railway Limited 8th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
www.investorcentre.comcp
Security Class
Holder Account Number
Fold
Form of Proxy - Annual and Special Meeting of Shareholders to be held on May 14, 2015
This Form of Proxy (the Proxy) is solicited by and on behalf of Management of Canadian Pacific Railway
Limited.
Notes to proxy
1. This proxy is solicited by Management of Canadian Pacific Railway Limited (Canadian Pacific or the Corporation). Shareholders are directed to Canadian
Pacifics Management Proxy Circular dated March 17, 2015, as may be amended (the Management Proxy Circular) and the Notice of Annual and Special Meeting of Shareholders dated March 17, 2015 (the Notice) for
more detailed information.
2. You have the right to appoint a proxyholder, who need not be a shareholder, to
attend and act on your behalf at the Meeting. If you wish to appoint a person or company other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse).
3. This Proxy must be signed by you, the registered holder, or by your attorney duly authorized by you in writing or, in
the case of a corporation, by a duly authorized officer or representative of the corporation; and if executed by an attorney, officer, or other duly appointed representative, the original or a notarial copy of the instrument so empowering such
person, or such other documentation in support of such empowerment as shall be acceptable to the Chairman of the Meeting, must accompany this Proxy. If the Common Shares are registered in the name of more than one owner (for example, joint
ownership, trustees, executors, etc.), then all those registered should sign this Proxy.
4. This Proxy should
be signed in the exact manner as the name appears on the Proxy.
5. If this Proxy is not dated, it will be
deemed to bear the date on which it is received by or on behalf of the Corporation.
6. The Common Shares
represented by this Proxy will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for and, if the shareholder has specified a choice with respect to any matter to be acted upon,
the Common Shares will be voted accordingly. This Proxy confers discretionary authority on the proxyholder to vote as such proxyholder sees fit in respect of each matter set forth herein if no choice is specified and in respect of any amendments or
variations to matters identified in the Notice and in respect of other matters that may properly come before the Meeting. If you do not specify a choice with respect to any matter, the proxyholder designated in this Proxy will vote FOR each of items
1,2,4 and 5 and FOR the election of each of the Director Nominees in item 3.
Proxies submitted must be
received no less than 24 hours prior to the time fixed for the Meeting (or any adjournment thereof) in order to be used at the Meeting. Fold
VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
To Vote Using the Telephone To Vote Using the Internet To Vote by Mail
Call the number listed BELOW from a touch tone telephone. Go to the following web site: www.investorvote.com
Complete, sign and date the reverse hereof.
Return this Proxy in the envelope provided.
1-866-732-VOTE (8683) Toll Free
Smartphone?
Scan the QR code to vote now.
Instead of mailing this Proxy, you may choose one of the two other voting methods outlined above to vote this proxy.
If you choose to vote by telephone or the Internet, DO NOT mail back this proxy.
Voting by mail may be the only method for securities held in the name of a corporation or securities being voted on behalf
of another individual.
Voting by mail or by Internet are the only methods by which a holder may appoint a
person as proxyholder other than the management nominees named on the reverse of this proxy.
To vote by
telephone or the Internet, you will need to provide your CONTROL NUMBER listed below.
CONTROL NUMBER
01440F
This form
of proxy (the Proxy) is solicited by and on behalf of Management of Canadian Pacific and will be used at the Annual and Special Meeting of Shareholders to be held on Thursday, May 14, 2015 at 9:00 a.m. (Mountain Daylight time) and
any adjournment or postponement thereof (the Meeting).
Appointment of Proxy
I/We, being holder(s) of Common Shares of Canadian Pacific Railway Limited hereby appoint: E. Hunter Harrison, or failing
him, Paul A. Guthrie
OR
Print the name of the person or company you are appointing if it is a person or company other than the Management appointees listed herein.
as the proxyholder of the undersigned, to attend and act on behalf of the undersigned at the Meeting, with the power of
substitution and with all the powers that the undersigned could exercise with respect to the said Common Shares if personally present and with authority to vote at the said proxyholders discretion except as otherwise specified herein and to
vote and act in said proxyholders discretion with respect to amendments or variations to matters referred to in the Notice and with respect to other matters that may properly come before the Meeting. In the absence of any instructions in
respect of any matter, the proxyholder designated in this Proxy is hereby instructed to vote FOR each of items 1,2,4 and 5 and FOR the election of each of the Director Nominees in item 3. Reference should be made to the Notice and the Management
Proxy Circular.
VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES.
1. Appointment of Auditors as named in the Management Proxy Circular
For Withhold
For Against
Fold
2. Advisory vote accepting the Corporations approach to executive compensation as described in the Management Proxy
Circular
3. Election of Directors: You may vote For up to thirteen (13) nominees for election
as director in total.
DIRECTOR NOMINEES
01. William A. Ackman 04. Isabelle Courville 07. Paul C. Hilal 10. Dr. Anthony R. Melman 13. Stephen C. Tobias
For Withhold
02. The Hon. John Baird 05. Keith E. Creel 08. Krystyna T. Hoeg 11. Linda J. Morgan
For Withhold
03. Gary F. Colter 06. E. Hunter
Harrison 09. Rebecca MacDonald 12. Andrew F. Reardon
For Withhold
For Against
4. Confirmation of new Advance Notice By-Law (By-Law No. 2) as described in the Management Proxy Circular.
5. Approval of amendments to the Articles of Canadian Pacific authorizing Canadian Pacific to hold shareholder meetings in certain locations outside of Canada. Refer to Management Proxy
Circular for details.
Fold
The undersigned confirms that it is the express wish of the undersigned that the documents relating hereto, including the Management Proxy Circular and this form of proxy, have been and
shall be drawn up in English only. Le (la) soussigné(e) confirme sa volonté expresse que les documents se rapportant aux présentes, y compris la circulaire ainsi que le présent formulaire de procuration, soient
rédigés en anglais seulement.
Signature(s) Date
Authorized Signature(s) - This section must be completed for your instructions to be executed.
I/We authorize you to act in accordance with my/our instructions set out above. I/We hereby revoke any proxy previously
given with respect to the Meeting. If no voting instructions are indicated above, this Proxy will be voted as recommended by Management.
MM / DD / YY
Interim Financial Statements
Mark this box if you would like to receive interim financial statements and accompanying Managements
Discussion and Analysis by mail.
Annual Report
Mark this box if you would NOT like to receive the Annual Report and accompanying Managements Discussion and
Analysis by mail. By marking the box, you agree that this instruction shall continue in force from year to year (unless revoked). You may revoke or change this instruction at any time by notifying our transfer agent at 1-877- 4CP-RAIL or by mail at
100 University Avenue, 8th Floor, Toronto. Ontario M5J 2Y1.
If you are not mailing back your proxy, you may
register online to receive the above financial report(s) by mail at www.computershare.com/mailinglist.
CPDQ
052253 AR2
01441E
Canadian Pacific Kansas ... (NYSE:CP)
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From Apr 2024 to May 2024
Canadian Pacific Kansas ... (NYSE:CP)
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From May 2023 to May 2024