Hydro One Compensation
Introduction
The Human Resources and Public Policy Committee (HR&PPC) at Hydro One Inc., an electricity transmission and distribution company wholly owned by the government, was facing a situation in which the current compensation packages for senior executives needed to be updated and modified to become competitive compared to its counterparts at similar firms due to the undergoing privatization of Hydro One. As a government-owned corporation, Hydro One’s compensation plan was modest with job security and opportunities for career advancement within the organization in the public sector. However, as Hydro One was planning to go public, the compensation system was under discussion in order to get more effective and motivated for senior officers with fair and reasonable rise in pay aligning with market level.
With regards to Canada’s electricity industry, it was becoming more open and free. This divested government ownership and encouraged a lot more new entrants into this market, which resulted in stronger competition among electricity generator within and outside Ontario. The restructuring of the electricity industry and the coming free market would make it more urgent to revisit Hydro One’s compensation system and turn this into a competitive position as compared to its comparator firms.
Key Issues
First, as Hydro One was planning to launch an IPO, how to design a competitive compensation plan to attract, motivate and retain competent staff as well as satisfy the current and prospective shareholders was one of the key issues. On one hand, to retain the senior officers of the company, Hydro One’s compensation has to be as competitive as its counterparts and aligned with market practices. On the other hand, if the managers are overpaid, under the new transparent and shared culture, the public will perceive Hydro One as bureaucratic as it used to be, and the current and potential shareholders will feel unfair and unreasonable. The overpayment, therefore, will
The Human Resources and Public Policy Committee (HR&PPC) at Hydro One Inc., an electricity transmission and distribution company wholly owned by the government, was facing a situation in which the current compensation packages for senior executives needed to be updated and modified to become competitive compared to its counterparts at similar firms due to the undergoing privatization of Hydro One. As a government-owned corporation, Hydro One’s compensation plan was modest with job security and opportunities for career advancement within the organization in the public sector. However, as Hydro One was planning to go public, the compensation system was under discussion in order to get more effective and motivated for senior officers with fair and reasonable rise in pay aligning with market level.
With regards to Canada’s electricity industry, it was becoming more open and free. This divested government ownership and encouraged a lot more new entrants into this market, which resulted in stronger competition among electricity generator within and outside Ontario. The restructuring of the electricity industry and the coming free market would make it more urgent to revisit Hydro One’s compensation system and turn this into a competitive position as compared to its comparator firms.
Key Issues
First, as Hydro One was planning to launch an IPO, how to design a competitive compensation plan to attract, motivate and retain competent staff as well as satisfy the current and prospective shareholders was one of the key issues. On one hand, to retain the senior officers of the company, Hydro One’s compensation has to be as competitive as its counterparts and aligned with market practices. On the other hand, if the managers are overpaid, under the new transparent and shared culture, the public will perceive Hydro One as bureaucratic as it used to be, and the current and potential shareholders will feel unfair and unreasonable. The overpayment, therefore, will