Corporate Governance

Strategy

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

Corporate Goals and Performance

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

Risk Management

The Board oversees risk management practices for the AESO. With the support of its Committees, the Board provides input to AESO management on 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 allocates to each of the Committees the oversight of various risks that fall within their mandates. 

Financial Management

The AC oversees internal control processes. Both AESO’s Audit Services and external auditors report to the AC to ensure 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 CEO, and reviews succession plans for AESO executives and other key positions. 

Executive Compensation

The Board approves the CEO’s compensation based on individual performance, corporate performance and market comparison, while ensuring compliance with applicable public agency compensation legislation. For other AESO executive members, the Board approves executive compensation—both base pay and variable pay—based on the individual’s achievement of incentive goals, corporate performance, CEO recommendations, and third-party market peer information, analysis and expert advice. See “Executive Compensation Program” below for more information.   

Charters and Work Plans

The Board and each of the Committees have a Charter setting out their respective mandates. Such Charters are reviewed on a regular basis and updated as required. The Board and each Committee also have annual Work Plans that guide their priorities and activities to be completed. Such Work Plans are updated throughout the year 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, the Committees, and individual Members. Assessments can incorporate a variety of approaches including written questionnaires, one-on-one meetings between members and the Board Chair, round table discussions and check-ins with the Board Chair throughout the year. The Board may also engage a third party to gather data and prepare analysis, as necessary.  

Member Appointments and Reappointments

If there is a vacancy, the Board, through its Recruitment Committee, conducts a robust recruitment process to assess and identify a slate of qualified individuals. After the recruitment process is complete, the Members make a recommendation to the Alberta Government to appoint or a re-appoint a Member.  

Member Orientation

The Orientation Program for new Members is designed to meet specified 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 may include 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 as and when the Board Chair deems necessary and appropriate, or as requested by Members.  

The AESO President and CEO, and the Corporate Secretary attend all Board and Committee meetings and other members of AESO management may attend as appropriate. Third-party advisors may be invited to attend an entire or portion of a meeting. The Board Chair is an ex-officio member of each Committee and may attend some or all such meetings.  

Agendas and meeting materials for Board and Committee meetings are prepared by AESO management in consultation with the respective Chairs of the Board and Committees.  At each Regular Meeting, AESO management makes presentations to the Board or Committee on agenda items, which 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. Members also conduct in-camera sessions without AESO management at each of the Board and Committee meetings. 

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, click here. Beginning in 2023, Members’ total compensation  is available through the Government of Alberta’s “Public agency compensation disclosure” web page, which is updated annually in June and can be found here. Members’ compensation for 2021 and prior years was published in the AESO’s annual Corporate Governance and Financial Results reports.

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

• Attract and retain executive talent by providing compensation that is competitive with the AESO’s peer groups.
• Motivate performance to achieve our Strategic Plan, corporate objectives and key results (OKRs), Business Plan and Budget, and risk profile.
• Maintain a high-performance culture by rewarding strong performance and adjusting variable compensation based on results.
• Promote responsible and transparent compensation practices.
• Ensure compliance with applicable public agency compensation legislation.
• Provide flexibility to respond to evolving market and compensation practices.

The Human Resources Committee (HRC) oversees the executive compensation program by reviewing compensation objectives, policies and programs and making relevant recommendations to the Board.

The Board and HRC, in carrying out their respective mandates regarding executive compensation, solicit input from AESO management and utilize Mercer as AESO’s external expert consultants. AESO executive compensation is reviewed annually against industry compensation trends, actual performance, internal existing compensation, compliance with applicable public agency compensation legislation and external market relativities. Based on the review:

• the HRC makes recommendations for pay-for-performance adjustments for the Board’s review and approval; and
• the Board Chair and the HRC make recommendations regarding the CEO’s performance and pay for the Board’s review and approval.

The AESO’s compensation structure:

• is designed to align to the market median (50th percentile) of target total cash compensation of the peer group for performance that meets expectations; and
• does not include long-term incentives that are common in the industry’s private sector.

The HRC annually obtains information, analysis and advice on market comparators and compensation trends annually from independent external experts.

The peer group used for executive compensation benchmarking is balanced between public and private sector organizations, and reflects the market where the AESO competes for executive talent. In addition, the peer group has significant Alberta representation, reflecting local pay practices and competitive talent pressures. AESO executive compensation must be competitive to ensure we can attract and retain the executive talent required to provide leadership to Alberta’s electricity industry and achieve the Strategic Plan, corporate objectives and key results, and Business Plan.

Executive compensation varies depending on an incumbent’s role, key skills and contributions, tenure and experience, and other attraction and retention factors. 

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

Base pay (below the CEO level) is determined for each based on comparative market data, individual performance, achievement of business objectives, and demonstration of competencies.  

Variable pay 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 at the beginning of each year 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, measured and monitored for each AESO Executive in alignment with the corporate OKRs.. Functional competencies are developed for each position, and the required skills, knowledge or qualifications required to perform each role. Annually, each individual’s capability is assessed against the competencies for their role.

At year end, the CEO recommends the level of achievement of corporate OKRs. The assessment is considered by the Board and is awarded at its discretion. The CEO recommends each Executive’s achievement of individual OKRs to the HRC . The Board approves all executive compensation. 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 individual’s base pay with the maximum variable pay capped at 52 per cent of the base pay. The CEO does not participate in the variable pay program. For AESO Executives, other than the CEO, the weighting 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. Parking perquisite is also provided to 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 13 per cent of their base pay toward a defined contribution plan. Senior management employees and executives receive 18 per cent of their base pay toward a defined contribution plan up to the maximum of the Income Tax Act limit. Senior management employees and Executives who exceed the Income Tax Act limit prior to receiving the full 18 per cent of their base pay receive the SRP to ensure a combined total of 18 per cent of base pay is provided under the two plans.

The following table details the total compensation for the year that ended on December 31, 2023, for the CEO, the Vice President, Finance, and the next three highest-earning Executives.  

(1) Other cash benefits includes variable pay, payments in lieu of vacation, vehicle allowances, parking allowances, and other cash allowances.

(2) Other non-cash benefits includes contributions to all benefits as applicable, including employer's share of all employee benefits and contributions or payments made on behalf of employees’ pension, supplementary retirement plan, health care, parking and other taxable benefits.

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.