Corporate Governance

Strategy

The Board oversees the strategic planning process, which includes holding a set of strategic planning meetings annually. In each Board meeting, the CEO provides an update on strategic priorities and accomplishments and engages in discussion with the Board on these matters.

Corporate Goals and Performance

On an annual basis, the Board approves corporate objectives and key results (OKRs) that are aligned with the Strategic Plan and then monitors the organization’s progress on these OKRs throughout the year. After year-end, the Board assesses and determines the level of organizational performance on the corporate OKRs. 

Risk Management

The Board retains oversight of risk management practices for the AESO. With the support of its Committees and AESO management, the Board provides input into the identification and prioritization of risks as well as reviewing and monitoring risks and mitigation processes, plans and actions. At least annually, the Board reviews the identified principal risks and, where appropriate, allocates to each of the Committees the oversight of various risks that fall within their mandates.

Financial Management

The AC oversees internal control processes. The AESO’s Audit Services group and the external auditors report to the AC. This ensures the requisite focus on financial reporting and accounting, including internal controls. The Board approves the annual audited Financial Statements including Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Succession Planning

The HRC reviews the AESO succession planning and talent management programs, including their outcomes and effectiveness. The HRC engages in succession planning for the AESO CEO, and reviews succession plans for AESO executives and other key positions.

Executive Compensation

The Board sets CEO compensation. As it relates to the additional executive members, the Board approves executive compensation levels with respect to base pay and variable pay. The assessment takes into account the individual achievement of incentive goals, and CEO recommendations, in addition to third-party market and peer information, analysis and expert advice. 

Charters and Work Plans

The Board and Committees each have a Charter setting out their respective mandates. Such Charters are reviewed and updated on a regular basis, or as required. The Board and each Committee also have annual Work Plans which guide their priorities and activities to be completed in any given year. Such Work Plans are reviewed not less than annually and updated as required.

The Board and its Committees have performance assessment processes in place. Formal assessments are conducted annually, and specific action items are identified and tracked year-over-year. Assessments include a review of the Board as a whole, the Board Chair, and the Committees. In addition, individual Member performance is monitored by the Chair throughout the year as part of the Chair’s duties.

Member Appointments and Reappointments

The EUA provides that Member appointments are made by the Government of Alberta (GoA). To support these appointments, the Board, through its Recruitment Committee, conducts a robust recruitment process to assess and identify a slate of qualified individuals to be recommended to the GoA for appointment. Where a member(s) is eligible for re-appointment, their performance and independence are also assessed. Ultimately, the entire Board (excluding Member[s] with a potential conflict of interest) is engaged to approve the recommendation to be made to the GoA. The recruitment process that is undertaken is set out on the AESO’s website.

Member Orientation

The Orientation Program for new Members is designed to meet a list of objectives and is delivered through a self-directed portion and a more focused in-person portion. The latter portion includes one-on-one or small group meetings of the new Member(s) with AESO management, a tour of AESO facilities and, as appropriate, matching a new Member with a current Member for knowledge sharing.

The Board and its four Committees meet regularly during the year (Regular Meetings) and may hold additional special meetings (Special Meetings) as and when the Board Chair deems necessary and appropriate.

Members are provided with advance notice of Regular Meetings through AESO Board-approved meeting schedules, submitted to and approved by the Board, for up to two years in advance. A Notice of Special Meeting is provided to Members in accordance with AESO Bylaws. Committee meetings are typically held in the days immediately preceding Board meetings.

Agendas and meeting materials for Board and Committee meetings are prepared by AESO management in consultation with the respective Chairs of the Board or Committees. The AESO uses the Diligent Boards platform, which is a third-party provided software portal that allows Members and AESO management to securely access Board documents. AESO Board and Committee meeting materials typically include both Decision and Information items. Meeting materials are uploaded into Diligent for access by Members approximately two weeks before the scheduled meeting.

The AESO CEO attends all Board and Committee meetings along with the Corporate Secretary and, as appropriate, other members of AESO management. The Board Chair is an ex-officio member of each Committee and may attend some or all such meetings. At certain meetings, third-party advisors may attend for all or part of a meeting. For example, the AESO retains a third-party accounting firm to provide an annual audit of the AESO’s financial records. Representatives for this firm attend a portion of each AC meeting.

The Agenda of each meeting requires the meeting Chair to request any Member who has a possible conflict of interest or independence issue with any item on the Agenda to self-declare. If such a declaration is made, the Chair must determine an appropriate course of action. This may include asking Members to recuse themselves from any further participation in the matter.

Minutes of Board and Committee meetings are prepared by the Corporate Secretary and include details of decisions made, discussions held, and action items requested. Draft minutes are sent to all Members of such meetings within a reasonable time after each meeting for their comments before being formally approved by the Board or Committee, respectively, at their next meeting.

At each Regular Meeting, AESO management makes presentations to the Board or Committee on agenda items typically included in accordance with the Annual Work Plan. The subject matter for such presentations may include the status of key projects/initiatives, AESO operations, financial performance, human resources, corporate governance and industry outlook matters. In addition, issues of current and critical importance are included for consideration and discussion by the Board. 

The GNC oversees governance matters and provides support and assistance to the Board in that regard. Among other things, it looks to monitor and assess “best governance practices” and recommend, where appropriate, alignment to such practices that have been adopted within the AESO.

Meeting Attendance and Remuneration

An independent, expert, third-party review of Member remuneration is conducted periodically as needed, using benchmark comparisons to similar roles in Canadian organizations with an emphasis on Alberta. There has been no increase in Member remuneration since April 1, 2014.

A summary of remuneration that Members are eligible to receive is as follows:

For a summary of Member attendance at Board and Committee meetings for the past year, please click here. Beginning in 2023, total compensation for Board members will be available through the Government of Alberta’s “Compensation information and disclosure for public agencies,” which is updated annually in June and can be found here.

For 2021 and prior years, please refer to the AESO’s annual Corporate Governance and Financial Results reports.

In-Camera Sessions

Members conduct in-camera sessions without AESO management at each of the Board and Committee meetings.

The AESO strives to attract, engage and retain high-performance executives and rewards and compensates executive talent based on their contributions toward its business outcomes. To accomplish this, AESO executive compensation is designed to meet the following objectives:

• Attract and retain key executive talent by providing compensation that is competitive with the AESO’s peer groups.
• Motivate performance in alignment with our Strategic Plan, corporate objectives and key results (OKRs), Business Plan and Budget, and risk profile.
• Support a high-performance culture based on demonstrated results, supporting both strong performance and reducing variable compensation paid in the event OKRs are not met.
• Promote responsible and transparent compensation practices.
• Provide flexibility to respond to evolving market and governance practices.

The Human Resources Committee (HRC) oversees program governance. Committee members review compensation objectives, policies and programs and make recommendations in that regard to the Board.

The Board and HRC, in carrying out their respective mandates, have access to AESO management’s perspectives as well as those of expert external consultants. AESO executive compensation is reviewed annually with respect to industry compensation trends, actual performance, internal existing compensation, and external market relativities.

The compensation structure is designed to align to the market median (50^th percentile) of target total cash compensation of the peer group for performance that meets expectations. It is not based on total direct compensation which would include long-term incentives in the industry private sector. Compensation will vary depending on role scope, key skills and contributions, tenure and experience, and other attraction and retention factors.

AESO’s total rewards package includes base pay, variable pay for employees below the CEO, a flexible benefits program and a defined contribution pension plan and for senior employees a supplementary retirement plan (SRP).

For analysis and advice on market comparators, compensation trends and comparator information, the Human Resources Committee (HRC) obtains the services of an independent external expert. This benchmarking process is undertaken annually.

The peer group, while balanced between public and private sector organizations, is meant to reflect the market for which the AESO competes for executive talent, to roles with similar industry talent profiles. In addition, the peer group has a significant Alberta presence, reflecting local pay practices and competitive pressures. AESO executive compensation must be competitive to ensure we can attract and retain the executive talent required to achieve the Strategic Plan, corporate objectives and key results, and Business Plan.

The HRC reviews the information from the independent external expert. Recommendations for pay-for-performance adjustments are based on results against objectives established at the beginning of the year, as well as demonstrated competencies, and are then put forward to the Board for review and approval.

The Board Chair and the HRC make recommendations to the Board regarding the CEO’s performance and pay based on individual performance, corporate performance and market comparison. The Board approves the CEO’s compensation.

Base pay is determined for each executive based on comparative market data, individual performance, achievement of business objectives, and demonstration of competencies. AESO executives received pay increases in July 2022 as part of the transition to the Reform of Agencies Boards & Commissions Compensation Act. Prior to this, executive base pay had not increased since January 2015 due to the Salary Restraint legislation.

The variable pay program is an annual program available to all AESO employees below the CEO level and subject to the discretion of the AESO Board. The variable pay is a lump-sum cash award based on two components: corporate performance and individual performance.

Variable pay rewards are based on the achievement of specific annual corporate objectives and key results (OKRs), individual OKRs, and functional competencies, which are set through rigorous processes. Corporate OKRs are approved by the Board and progress is monitored at each Board meeting. The OKRs are aligned with the Strategic Plan, and AESO executives ensure that an appropriate mix of risk, opportunity, and single-year and multi-year initiatives are addressed across the organization. Individual OKRs are established for each AESO executive in alignment with the corporate OKRs; the progress and execution of those OKRs are monitored and measured. Functional competencies are developed for each position, and the required skill, knowledge or qualifications required to perform each role. Annually each individual’s capability is assessed against the competencies for the role.

The level of achievement of corporate OKRs is recommended by the CEO. The assessment is considered by the Board and is awarded at its discretion. The CEO makes recommendations to the Human Resources Committee based on an assessment of individual OKRs. The Board approves all executive compensation. In the event a corporate component is awarded by the Board, both corporate and individual components are used to determine resulting variable pay awards.

Effective July 2022 the variable pay targets were reduced for all AESO employees. The variable pay target for all AESO executives was reduced from 30 per cent to 26 per cent of earnings with the ability to earn up to 52 per cent. The CEO no longer participates in the variable pay program. For AESO executives, other than the CEO, the allocation of corporate versus individual performance for the variable pay award is 70/30 per cent.

The AESO has no long-term incentive plans for employees or AESO executives, including the CEO.

The flexible benefits program for all employees, including executives, provides life insurance, dependent life insurance, accidental death and dismemberment, sick leave and short-term disability, group and individual long-term disability, critical illness, dental and health care benefits, as well as a health spending account and personal spending account for additional relevant expenses. Perquisites such as parking and fitness allowances are provided to the executives.

The AESO provides a defined contribution pension plan to all employees, including executives and a supplementary retirement plan (SRP) for employees at the senior management level, including executives. The pension plans are completely funded by the AESO. Employees below the senior management level receive thirteen per cent of base salary to a defined contribution plan. Senior management employees and executives receive eighteen per cent of base salary up to the maximum of the Income Tax Act limits. For senior management employees and executives who exceed the Tax Act limit prior to receiving the full eighteen per cent of base salary a supplementary retirement plan is provided. The SRP ensures senior management employees and executives receive a combined total of eighteen per cent of salary under the two plans.

Compensation for AESO Executives can be viewed on the AESO's website here, or by following the path www.aeso.ca > About the AESO > Financial Reporting, under the heading Public Sector Compensation Transparency Act (PSCTA) Disclosure Act. This information for the previous reporting year is updated annually at the end of June.   

The AESO recovers its costs, including AESO employee compensation, through revenue received from market participants. There is no government funding provided for the operations of the AESO.