Page 34 - MIC 2014 - English

EXECUTIVE COMPENSATION

Managing Compensation Risk. Suncor’s executive • The HR&CC uses the Risk Framework on an annual

compensation policies and programs are designed to create basis to take account of any significant shifts in
appropriate incentives to increase long-term shareholder Suncor’s business strategies or compensation policies

value. While the energy business by its nature requires and programs. The HR&CC reviewed Suncor’s
some level of risk-taking to achieve returns in line with compensation programs in 2013 using the Risk

shareholder expectations, Suncor structures compensation Framework and confirmed that Suncor’s compensation
plans and programs and has guidelines and policies which policies and programs do not encourage excessive risk

it believes limits excessive risk. Key oversight procedures that is reasonably likely to have a material adverse
and risk mitigating features to support managing effect on Suncor.

compensation risk are outlined below.
Key Risk Mitigating Features

Oversight Procedures
Plan and Program Design

• Suncor’s strategic plan, as reviewed by the Board, is • Total direct compensation for executives provides an
believed to balance investment risk and reward, and
appropriate balance between base salary and variable
assesses company and industry risks in advance to performance-based compensation. For our NEOs,
support planning risk management and decision
emphasis is not focused on one compensation
making.
component, but is spread across short-, mid- and

• Suncor uses tools including an Enterprise Risk long-term programs to support and balance sustained
Management System (‘‘ERMS’’), Operational Excellence short-term performance and long-term profitable

Management System (‘‘OEMS’’) and Trading Risk growth.
Management Policy to identify and manage risk.
• For our NEOs, typically 70% or more of their target
• In the normal course of business, Suncor has financial total direct compensation is variable based on

controls that provide limits and authorities in areas such company, business unit and personal performance and
as capital and operating expenditures, divestiture the remaining 30% or less is base salary. Of the 70%
decisions and marketing and trading transactions. or more of variable compensation, approximately 75%

These financial controls mitigate inappropriate or more is mid- and long-term focused and
risk-taking that could affect compensation.
approximately 25% or less is short-term focused. The

weighting towards mid- to long-term compensation
mitigates the risk of undue emphasis on short-term

‘‘A combination of oversight goals at the expense of long-term sustainable
performance. More information on the pay mix for
procedures and compensation
executives is provided on page 37 of this management
program risk mitigating proxy circular.

• Stock options vest over three years and have a
features, in the form of plan
seven-year term, reinforcing the goal of building and
designs, policies, guidelines and sustaining long-term value in line with shareholder

governance practices, limit the interests.

• Our mid-term PSU Plan rewards relative TSR
potential for programs to performance over three years versus our PSU peer

encourage unacceptable and group of companies, as described on page 68 of this
management proxy circular. The three-year performance
excessive risk taking.’’
period deters short-term focused decision making.
There is no payout if relative TSR performance is in the

bottom quartile for the 2012 award or bottom
company grouping for awards beginning in 2013, with
• The HR&CC uses the Risk Framework in assessing
Suncor’s compensation policies and programs to a payout cap of 200% of target when relative TSR
performance is at the very top of the peer group and a
determine whether any components could encourage
unacceptable excessive risk taking. The elements of the sliding scale in between.
Risk Framework are categorized in four areas: pay
• The AIP for all salaried employees is inherently designed
philosophy and compensation structure, plan designs, to limit risk. Short-term incentive pay is earned based
performance metrics and governance.
on achievement against a balanced, diversified mix of
performance measures. The performance measures

32 SUNCOR ENERGY INC. MANAGEMENT PROXY CIRCULAR 2014