ICBC is tapping the brakes on its controversial system of paying out bonuses to management.
The incentive pay program – which saw $17 million handed out in 2010 – will be reduced or eliminated starting this year if the public auto insurer falls short of its annual profit targets.
The move was disclosed as ICBC comes under greater financial pressure and just weeks after it announced plans to raise basic auto insurance premiums 11 per cent, resulting in a net increase of $27 to most motorists after a partly offsetting cut to optional rates.
“We feel it’s quite a proactive step,” ICBC spokesman Adam Grossman said. “We’re creating a financial trigger that creates a stronger tie between our financial performance and our performance-related pay.”
The full bonus pay package will continue as it did last year if the corporation’s net income for 2011 is at least $217 million – 75 per cent of its 2011 profit target of $290 million.
Payouts will be reduced for the CEO, other executives and remaining management if net income is between $35 million and $217 million.
That’s the most likely scenario this year, since ICBC reported net income of just $52 million for the first nine months of 2011.
If net income levels are between zero and $35 million in this or future years, Grossman said, there will be no payouts for the CEO or other executives and payouts for remaining management will be significantly less.
Performance pay is scrapped altogether if ICBC records a net loss.
“We thought this was important,” Grossman said, citing volatile financial markets and an uncertain economy.
“It’s been a difficult financial year. We’re seeing increased pressure from bodily injury claims.”
Consumers Association of Canada president Bruce Cran takes little issue with the bonus pay system.
“I think they do a great job and they earn their bonuses,” he said.
The part of ICBC Cran wants reformed is the province’s directive that the corporation hand over about $145 million a year as an annual dividend to government.
“Making profits was never the intention of this corporation,” Cran said, adding that the BC Liberal government should allow ICBC to return all excess cash to motorists.
“They’ve virtually stolen our money,” he said.
The dividend to government fluctuates based on surplus capital from the optional side of ICBC’s business, Grossman said, adding it is also likely to be lower than in recent years.