10-K/A

OVERALL 2020 ATTENDANCE

Meeting Attendance

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 1

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-01342

Canadian Pacific Railway Limited

(Exact name of registrant as specified in its charter)


Canada		98-0355078
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

7550 Ogden Dale Road S.E.,
Calgary, Alberta, Canada		T2C 4X9
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (403) 319-7000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Shares, without par value, of Canadian Pacific Railway Limited	CP	New York Stock Exchange Toronto Stock Exchange

Perpetual 4% Consolidated Debenture Stock of Canadian Pacific Railway Company	CP/40 BC87	New York Stock Exchange London Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Debt securities of Canadian Pacific Railway Company

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant, in U.S. dollars, was $34,600,245,541, based on the closing sales price per share as reported by the New York Stock Exchange on such date.

As of the close of business on April 28, 2021, there were 133,321,717 shares of the registrant’s common shares outstanding.

Table of Contents

EXPLANATORY NOTE

Canadian Pacific Railway Limited, a corporation incorporated under the Canada Business Corporations Act (the “Company”), qualifies as a foreign private issuer in the U.S. for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although as a foreign private issuer the Company is not required to do so, the Company currently continues to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (“SEC”) instead of filing the reports available to foreign private issuers. The Company prepares and files a management proxy circular and related material under Canadian requirements. As the Company’s management proxy circular is not filed pursuant to Regulation 14A, the Company may not incorporate by reference information required by Part III of its Form 10-K from its management proxy circular.

The Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 Form 10-K”) on February 18, 2021. In reliance upon and as permitted by Instruction G(3) to Form 10-K, the Company is filing this Amendment No. 1 on Form 10-K/A in order to include in the 2020 Form 10-K the Part III information not previously included in the 2020 Form 10-K.

No attempt has been made in this Amendment No. 1 on Form 10-K/A to modify or update the other disclosures presented in the 2020 Form 10-K. This Amendment No. 1 on Form 10-K/A does not reflect events occurring after the filing of the 2020 Form 10-K. Accordingly, this Amendment No. 1 on Form 10-K/A should be read in conjunction with the 2020 Form 10-K and the Company’s other filings with the SEC.

In this Amendment No. 1 on Form 10-K/A, we also refer to Canadian Pacific Railway Limited as “Canadian Pacific,” “CP,” “we,” “us,” “our,” “our corporation,” or “the corporation.” References to “GAAP” mean generally accepted accounting principles in the United States.

All references to our websites and to our Canadian management proxy circular filed with the SEC on March 16, 2021 as Exhibit 99.1 to our Current Report on Form 8-K (the “Circular”) contained herein do not constitute incorporation by reference of information contained on such websites and the Circular and such information should not be considered part of this document.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors


		Director profiles All 11 nominated directors are qualified and experienced, and have agreed to serve on our Board. Directors are elected for a term of one year until the close of our next annual meeting of shareholders, unless a director resigns or is otherwise removed earlier. Share Ownership All directors are CP shareholders and must meet our director share ownership requirements within five years of joining the Board. Share ownership listed here is as at February 26, 2021 and includes shares directors beneficially own or control, or hold directly or indirectly. Share ownership includes holdings under the Directors’ Deferred Share Unit (DDSU) plan. See page 52 for full details on share ownership by our directors. 100% Attendance during 2020 The 2021 nominee directors attended all of their Board and Committee meetings in 2020. Professional Associations All of the 2021 nominee directors are members of the Institute of Corporate Directors (ICD).


Isabelle Courville Chair
		Independent Age: 58 Director since: May 1, 2013 Residence: Rosemère, Québec, Canada 2020 voting results: 99.63% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior
executive leadership, accounting & financial
literacy, accounting & financial expertise,
environment, health & safety, executive
compensation/human resources, transportation
industry knowledge, governance, government/
regulatory affairs and legal, risk management,
sales & marketing and strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Audit and Finance	5 of 5	100%
Governance	5 of 5	100%
Compensation	6 of 6	100%
Risk and Sustainability	4 of 4	100%

BUSINESS EXPERIENCE

•

President of

Hydro-Québec

Distribution and

Hydro-Québec

TransÉnergie (2007 to 2013)

•

20 years of experience in the Canadian telecommunications industry, including President of Bell Canada’s Enterprise Group (2003 to 2006) and President and Chief Executive Officer of Bell Nordiq Group (2002 to 2003)

CURRENT PUBLIC COMPANY BOARD EXPERIENCE

•

SNC-Lavalin

Group Inc. (2017 to present) (Chair of Human Resources Committee and member of Governance and Ethics Committee)

•

Veolia Environnement S.A. (2015 to present) (member of Accounts and Audit Committee, Nominating Committee and Chair Research, Innovation and Sustainable Development Committee)

PAST PUBLIC COMPANY BOARD EXPERIENCE

•

Laurentian Bank of Canada (2007 to 2019) (Chair of the Board and member of Human Resources and Corporate Governance Committee)

•

Gecina S.A. (2016 to April 2017) (member of Audit Committee)

•

TVA Group (2013 to 2016) (member of Human Resources Committee)

OTHER EXPERIENCE

Other Boards - Current

•

Institute for Governance of Private and Public Organizations (2016 to present) (member of Human Resources Committee)

Other Boards - Past

•

Institute of Corporate Directors (ICD) (2013 to 2017)

EDUCATION

•

Bachelor’s degree in Engineering Physics, École Polytechnique de Montréal

•

Bachelor’s degree in Civil Law, McGill University

•

Doctorate Honoris Causa, Université de Montréal

•

Fellow of the Institute of Corporate Directors

SHARE OWNERSHIP

Shares: 900

DDSUs: 10,158

Meets share ownership requirements


The Hon. John Baird, P.C.
		Independent Age: 51 Director since: May 14, 2015 Residence: Toronto, Ontario, Canada 2020 voting results: 99.51% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior
executive leadership, accounting & financial
literacy, environment, health & safety,
transportation industry knowledge, governance,
government/regulatory affairs and legal, risk
management and strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Governance	5 of 5	100%
Risk and Sustainability	4 of 4	100%

BUSINESS EXPERIENCE

•

Senior Advisor at the law firm of Bennett Jones LLP and Eurasia Group (a geopolitical risk consultancy) (2015 to present)

•

Member of the International Advisory Board, Barrick Gold Corporation (2015 to present)

•

President of Grantham Finchley Consulting Inc. (2015 to present)

CURRENT PUBLIC COMPANY BOARD EXPERIENCE

•

Canfor/Canfor Pulp (CPPI) (2016 to present) (member of Environmental, Health and Safety Committee; Capital Expenditure Committee and Corporate Governance Committee)

•

Osisko Gold Royalties Ltd. (2020 to present) (member of Governance and Nomination Committee and Sustainability Committee)

OTHER EXPERIENCE

Other Boards - Current

•

FWD Group Ltd./FWD Ltd. (2015 to present) (member of Audit Committee and Risk Management and Actuarial Committee)

•

PineBridge Investments (2015 to present)

Other experience

•

Served as Canadian Foreign Minister, Minister of Transport and Infrastructure, Minister of the Environment, and President of the Treasury Board during his three terms as a Member of the Canadian Parliament (2006 to 2015)

•

Appointed to the Privy Council in 2006

•

Former Minister of Community and Social Services and Minister of Energy in Ontario provincial legislature

•

Senior Advisor to Community Living Ontario, an organization that supports individuals with developmental disabilities

•

Advisory Board member to Prince’s Charities Canada, the charitable office of His Royal Highness, The Prince of Wales

EDUCATION

•

Honours Bachelor of Arts (Political Studies), Queen’s University

SHARE OWNERSHIP

Shares: 0

DDSUs: 6,112

Meets share ownership requirements


Keith E. Creel
		Not Independent Age: 52 Director since: May 14, 2015 Residence: Wellington, Florida, U.S.A. 2020 voting results: 99.92% for

DIRECTOR SKILLS AND QUALIFICATIONS

President and Chief Executive Officer of CP
since January 31, 2017. Brings expertise in the
following areas: senior executive leadership,
accounting & financial literacy, environment,
health & safety, executive compensation/human
resources, transportation industry knowledge,
governance, government/regulatory affairs and
legal, risk management, sales & marketing and
strategic oversight.

BUSINESS EXPERIENCE

•

President and Chief Executive Officer of CP (2017 to present)

•

President and Chief Operating Officer of CP (February 2013 to January 2017)

•

Named “Railroader of the Year” for 2021 by Railway Age Magazine

•

Named “Railroad Innovator” for 2014 by Progressive Railroading in recognition of his leadership at CP

•

Executive Vice-President and Chief Operating Officer of Canadian National Railway Company (CN) (2010 to 2013)

•

Other positions at CN included Executive Vice-President, Operations, Senior Vice-President Eastern Region, Senior Vice-President Western Region, and Vice-President of CN’s Prairie division (2002 to 2010)

•

Trainmaster and director of corridor operations at Illinois Central Railway prior to its merger with CN in 1999

•

Superintendent and general manager at Grand Trunk Western Railroad (1999 to 2002)

•

Began his railroad career in 1992 as an intermodal ramp manager at Burlington Northern Railway in Birmingham, Alabama

OTHER EXPERIENCE

Other Boards - Current

•

Member of the Board of TTX Company (a private company) (2014 to present)

•

Representative on American Association of Railroads

Other experience

•

Commissioned officer in the U.S. Army and served in the Persian Gulf War in Saudi Arabia

EDUCATION

•

Bachelor of Science in Marketing, Jacksonville State University

•

Advanced Management Program, Harvard Business School

SHARE OWNERSHIP

Shares: 18,436

DSUs: 32,223

Options: 549,759

Meets executive share ownership requirements


Gillian (Jill) H. Denham
		Independent Age: 60 Director since: September 6, 2016 Residence: Toronto, Ontario, Canada 2020 voting results: 99.77% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior
executive leadership, accounting & financial
literacy, executive compensation/human
resources, investment management,
governance, government/regulatory affairs and
legal, risk management, sales & marketing and
strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Audit and Finance	5 of 5	100%
Risk and Sustainability	4 of 4	100%

BUSINESS EXPERIENCE

•

President, Authentum Partners Ltd., a company that invests in and advises technology related businesses (2018 to present)

•

Vice-Chair, Retail Markets for Canadian Imperial Bank of Commerce (CIBC) (2001 to 2005)

•

Previously held senior positions at CIBC Wood Gundy and CIBC, including: Managing Director, Head of Commercial Banking and

E-Commerce

•

President of Merchant Banking/Private Equity and Managing Director, Head responsible for CIBC’s European Operations

CURRENT PUBLIC COMPANY BOARD EXPERIENCE

•

Morneau Shepell Inc. (2008 to present) (Chair of the Board)

•

Kinaxis Inc. (2016 to present) (Chair of Compensation Committee and member of the Audit Committee and Nominating and Governance Committee)

•

Canaccord Genuity, Lead Director (2020 to present)

PAST PUBLIC COMPANY BOARD EXPERIENCE

•

National Bank of Canada (2010 to 2020)

•

IHS Markit Ltd. (2014 to 2016)

•

Penn West Petroleum Ltd. (2012 to 2016)

•

Calloway Real Estate Investment Trust (2011 to 2012)

OTHER EXPERIENCE

Other Boards - Current

•

Munich Reinsurance Company of Canada (Chair) (2012 to present)

•

Temple Insurance Company (Chair) (2012 to present)

•

Exiger Holdings, Inc. (2018 to present)

Other Boards - Past

•

Centre for Addiction and Mental Health (CAMH) (2015 to 2019)

EDUCATION

•

Honours Business Administration (HBA) degree, Ivey Business School, Western University

•

MBA, Harvard Business School

SHARE OWNERSHIP

Shares: 0

DDSUs: 4,306

Meets share ownership requirements


Edward R. Hamberger
		Independent Age: 70 Director since: July 15, 2019 Residence: Delray Beach, Florida, U.S.A . 2020 voting results: 99.90% for

DIRECTOR SKILLS AND QUALIFICATIONS


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Audit and Finance	5 of 5	100%
Risk and Sustainability	4 of 4	100%

BUSINESS EXPERIENCE

•

President and Chief Executive Officer, Association of American Railroads (1998 to 2019)

•

Served as Assistant Secretary for governmental affairs at the U.S. Department of Transportation (1987 to 1989)

OTHER EXPERIENCE

Other Boards - Current

•

Transportation Institute, University of Denver (2002 to present)

Other Boards - Past

•

Business Advisory Committee, Kellogg School of Management, Northwestern University (2000 to 2019)

•

TTCI (Chair of the Board) (1998 to 2019)

•

Railinc Corporation (1998 to 2019)

•

Mineta Transportation Institute, San Jose State University (2005 to 2019)

•

Baker Donelson, Management Committee (1989 to 1998)

EDUCATION

•

Juris Doctor, Georgetown University

•

Master of Science, Foreign Service, Georgetown University

•

Bachelor of Science, Foreign Service, Georgetown University

SHARE OWNERSHIP

Shares: 0

DDSUs: 1,149

Has until July 2024 to meet share ownership requirements


Rebecca MacDonald
		Independent Age: 67 Director since: May 17, 2012 Residence: North York, Ontario, Canada 2020 voting results: 97.98% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior
executive leadership, accounting & financial
literacy, executive compensation/human
resources, investment management,
governance, risk management, sales &
marketing and strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Compensation	6 of 6	100%
Governance (Chair)	5 of 5	100%

BUSINESS EXPERIENCE

•

Founder and former Executive Chair of Just Energy Group Inc., a Toronto-based independent marketer of deregulated gas and electricity (2001 to August 1, 2020)

•

President and Chief Executive Officer of Just Energy (2001 to 2007)

•

Founded Energy Savings Income Fund in 1997, another company which aggregated customers in the deregulation of the U.K. natural gas industry

•

Founded Energy Marketing Inc. in 1989

PAST PUBLIC COMPANY BOARD EXPERIENCE

•

Just Energy Group Inc. (2001 to August 1, 2020) (Executive Chair 2007 to August 1, 2020)

OTHER EXPERIENCE

Other Boards - Current

•

Horatio Alger Association in Canada and the United States

Other experience

•

Founded the Rebecca MacDonald Centre for Arthritis and Autoimmune Disease at Mount Sinai Hospital in Toronto

•

Previously Vice-Chair of the Board of Directors of Mount Sinai Hospital

•

Previously a member of the Board of Governors of the Royal Ontario Museum

EDUCATION

•

Honorary LLD degree, University of Victoria

SHARE OWNERSHIP

Shares: 0

DDSUs: 12,725

Meets share ownership requirements


Edward L. Monser
		Independent Age: 70 Director since: December 17, 2018 Residence: St. Louis, Missouri, U.S.A. 2020 voting results: 99.88% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior
executive leadership, accounting & financial
literacy, accounting & financial expertise,
environment, health & safety, executive
compensation/human resources, transportation
industry knowledge, governance, risk
management, sales & marketing and strategic
oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Audit and Finance	5 of 5	100%
Compensation	6 of 6	100%

BUSINESS EXPERIENCE

•

President (2010-2018) and Chief Operating Officer (2001-2015) of Emerson Electric Co.

•

President (1996-2001) and Executive Vice President (1991-1996) of Rosemount Inc.

•

Former Member of the Advisory Economic Development Board for China’s Guangdong Province

•

Former Member and Vice-Chairman of the U.S.-India Strategic Partnership Forum

CURRENT PUBLIC COMPANY BOARD EXPERIENCE

•

Air Products & Chemicals Corporation, Lead Director (2013 to present) (Member of Management Development and Compensation Committee and Corporate Governance, Nominating and Social Responsibility Committee)

•

Vertiv Holdings Co. (2016 to present) (Member of Audit Committee and Nominating and Corporate Governance Committee)

OTHER EXPERIENCE

Other Boards - Current

•

Seyer Industries (2019 to present)

Other Boards - Past

•

Ranken Technical College

Other experience

•

Past board member and past vice-chairman of the U.S.-China Business Council

EDUCATION

•

Bachelor’s degree, Engineering, Illinois Institute of Technology

•

Bachelor’s degree, Education, Eastern Michigan University

•

Executive MBA, Stanford University Graduate School of Business

SHARE OWNERSHIP

Shares: 0

DDSUs: 1,696

Has until December 2023 to meet the share ownership requirements


Matthew H. Paull
		Independent Age: 69 Director since: January 26, 2016 Residence: Wilmette, Illinois, U.S.A. 2020 voting results: 99.63% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, accounting and financial expertise, executive compensation/human resources, investment management, governance, government/regulatory affairs and legal, risk management and strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Compensation (Chair)	6 of 6	100%
Risk and Sustainability	4 of 4	100%

BUSINESS EXPERIENCE

•

Senior Executive Vice-President and Chief Financial Officer of McDonald’s Corporation (2001 until his retirement in 2008)

•

Before joining McDonald’s in 1993, was a partner at Ernst & Young where he managed a variety of financial practices during his

18-year

career and consulted with many leading multinational corporations

CURRENT PUBLIC COMPANY BOARD EXPERIENCE

•

Air Products & Chemicals Corporation (2013 to present) (Chair of Audit and Finance Committee and member of Corporate Governance, Nominating and Social Responsibility Committee and Executive Committee)

PAST PUBLIC COMPANY BOARD EXPERIENCE

•

Chipotle Mexican Grill Inc. (2016 to 2020) (member of Compensation Committee)

•

Best Buy Co. (2003 to 2013) (Lead independent director and chair of Finance Committee)

•

WMS Industries Inc. (2012 to 2013)

•

KapStone Paper and Packaging Corporation (2010 to 2018)

OTHER EXPERIENCE

Other Boards - Current

•

Pershing Square Capital Management, L.P. (2008 to present) (member of Advisory Board)

EDUCATION

•

Master’s degree in Accounting, University of Illinois

•

Bachelor’s degree, University of Illinois

SHARE OWNERSHIP

Shares: 3,000

DDSUs: 6,645

Meets share ownership requirements


Jane L. Peverett
		Independent Age: 62 Director since: December 13, 2016 Residence: West Vancouver, British Columbia, Canada 2020 voting results: 98.90% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, accounting & financial expertise, environment, health & safety, executive compensation/human resources, governance, government/regulatory affairs and legal, risk management and strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Audit and Finance (Chair)	5 of 5	100%
Governance	5 of 5	100%

BUSINESS EXPERIENCE

•

President & Chief Executive Officer of BC Transmission Corporation (electrical transmission) (2005 to 2009)

•

Vice-President, Corporate Services and Chief Financial Officer of BC Transmission Corporation (2003 to 2005)

•

President of Union Gas Limited (a natural gas storage, transmission and distribution company) (2002 to 2003)

•

Other positions at Union Gas Limited: President & Chief Executive Officer (2001 to 2002); Senior Vice-President Sales & Marketing (2000 to 2001) and Chief Financial Officer (1999 to 2000)

CURRENT PUBLIC COMPANY BOARD EXPERIENCE

•

CIBC (2009 to present) (Member of Audit Committee and Corporate Governance Committee)

•

Northwest Natural Gas Company (2007 to present) (Chair of Finance Committee and member of Organization and Executive Compensation Committee and Public Affairs and Environmental Policy Committee)

•

Capital Power Corporation (2019 to present) (Member of Corporate Governance, Compensation and Nominating Committee and Health, Safety and Environment Committee)

PAST PUBLIC COMPANY BOARD EXPERIENCE

•

Encana Corp. (2003 to 2017)

•

Postmedia Network Canada Corp. (2013 to 2016)

•

HydroOne Limited (2015 to 2018)

OTHER EXPERIENCE

Other Boards - Current

•

CSA Group (2019 to present) (Chair of the Board)

•

British Columbia Institute of Corporate Directors Advisory Board

EDUCATION

•

Bachelor of Commerce degree, McMaster University

•

Master of Business Administration degree, Queen’s University

•

Certified Management Accountant

•

A Fellow of the Society of Management Accountants

•

Holds the ICD.D designation from the Institute of Corporate Directors

SHARE OWNERSHIP

Shares: 0

DDSUs: 4,473

Meets share ownership requirements


Andrea Robertson
		Independent Age: 57 Director since: July 15, 2019 Residence: Calgary, Alberta, Canada 2020 voting results: 99.89% for

DIRECTOR SKILLS AND QUALIFICATIONS

Brings expertise in the following areas: senior executive leadership, accounting & financial literacy, environment, health & safety, executive compensation/human resources, transportation industry knowledge, governance, government/regulatory affairs and legal, risk management and strategic oversight.


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Governance	5 of 5	100%
Compensation	6 of 6	100%

BUSINESS EXPERIENCE

•

President & Chief Executive Officer, Shock Trauma Air Rescue Service (STARS) (2012 to present)

•

President & Chief Operating Officer, STARS (2011 to 2012)

OTHER EXPERIENCE

Other Boards - Current

•

The Calgary Airport Authority (2017 to present)

Other Boards - Past

•

Bow Valley College (2015 to 2018)

•

United Way (2007 to 2013)

EDUCATION

•

Executive Leadership, Harvard University

•

ICD.D Rotman School of Business

•

Masters in Health-Care Administration, Central Michigan University

•

Baccalaureate of Nursing, University of Calgary

•

Executive Fellowship, Wharton University

SHARE OWNERSHIP

Shares: 0

DDSUs: 1,145

Has until July 2024 to meet share ownership requirements


Gordon T. Trafton
		Independent Age: 67 Director since: January 1, 2017 Residence: Naperville, Illinois, U.S.A. 2020 voting results: 96.90% for

DIRECTOR SKILLS AND QUALIFICATIONS


OVERALL 2020 ATTENDANCE		100%

Meeting Attendance

Board	9 of 9	100%
Governance	5 of 5	100%
Risk and Sustainability (Chair)	4 of 4	100%

BUSINESS EXPERIENCE

•

Consultant, Brigadier Consulting (2014 to 2015)

•

Consultant, CP (2013)

•

Special Advisor to the Canadian National Railway (CN) leadership team (2009 to his retirement in 2010)

•

Senior Vice-President Strategic Acquisitions and Integration, CN (2009 to 2010)

•

Senior Vice-President, Southern Region, CN (2003 to 2009)

•

Held a number of leadership positions with Illinois Central Railroad and Burlington Northern Railroad

OTHER EXPERIENCE

Other Boards - Current

•

Leeds School of Business Advisory Board, University of Colorado Boulder (2012 to present)

•

Sacred Cow Consulting, Inc., Advisory Board (2020 to present)

EDUCATION

•

Bachelor of Science, Transportation Management from the Leeds School of Business, University of Colorado Boulder

SHARE OWNERSHIP

Shares: 0

DDSUs: 4,431

Meets share ownership requirements

Notes:

Other than as disclosed below, none of the nominated directors is, or has been in the last 10 years:

(a)	a director, chief executive officer or chief financial officer of a company that:

•

was subject to a cease trade or similar order or an order that denied the issuer access to any exemptions under securities legislation for over 30 consecutive days, that was issued while the proposed director was acting in that capacity, or

•

was subject to a cease trade or similar order or an order that denied the issuer access to an exemption under securities legislation for over 30 consecutive days, that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in that capacity

(b)

a director or executive officer of a company that, while that proposed director was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets,

(c)	become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold their assets, or

(d)	subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities commission.

Ms. Denham served as a director of Penn West Petroleum Ltd. (now Obsidian Energy Ltd.) from June 2012 to June 2016, which was subject to cease trade orders on its securities following the July 2014 announcement of the review of its accounting practices and restatement of certain of its financial statements. Those cease trade orders ended on September 23, 2014.

Ms. Peverett was a director of Postmedia Network Canada Corp. (Postmedia) from April 2013 to January 2016. On October 5, 2016, Postmedia completed a recapitalization transaction under a court-approved plan of arrangement under the Canada Business Corporations Act, R.S.C., 1985, c.

C-44.

Approximately US$268.6 million of debt was exchanged for shares that represented approximately 98% of the outstanding shares of Postmedia at that time. Postmedia repaid, extended and amended the terms of its outstanding debt obligations.

Table of Contents

Executive Officers

The information regarding executive officers is included in Part I of our 2020 Form

10-K

under Information about our Executive Officers, following Item 4. Mine Safety Disclosures.

Code of Business Ethics


Code of business ethics and business ethics reporting policy Our code of business ethics (the Code) sets out our expectations for conduct. It covers confidentiality, protecting our assets, avoiding conflicts of interest, fair dealing with third parties, compliance with applicable laws, rules and regulations, as well as reporting any illegal or unethical behaviour, among other things. The Code applies to everyone at CP and our subsidiaries: directors, officers, employees (unionized and non-unionized) and contractors who do work for us. Directors, officers and non-union employees must sign an acknowledgment every year that they have read, understood and agree to comply with the Code. Unionized employees are provided with a copy of the Code every three years. Unionized employees were mailed a copy of the Code in 2019. Directors must also confirm annually that they have complied with the Code. The Code is part of the terms and conditions of employment for non-union employees, and contractors must agree to follow principles of standards of business conduct consistent with those set out in our Code as part of the terms of engagement. We also have a supplemental code of ethics for the CEO and other senior financial officers (including the CFO, the Vice-President of Financial Planning and Accounting and the Assistant Vice-President and Controller) which sets out our longstanding principles of conduct for these senior roles. We also have a business ethics reporting policy that outlines the processes CP has established for CP personnel and others to report concerns regarding conduct within CP, including questionable management and/or corporate practices, the potential violation of any applicable law, or a potential violation of the Code.		Monitoring compliance and updating the Code The Governance Committee is responsible for monitoring compliance with the Code, reviewing it periodically and recommending changes as appropriate, and promptly disclosing any aspects of the Code that have been waived. The Audit and Finance Committee ensures compliance with the Code. In 2019, 100 percent of non-union employees completed their annual certification of compliance with the Code. For 2020, we modernized our code of ethics training process to enhance employee understanding and have once again reached 100 percent completion.

The latest version of the Code and the business ethics reporting policy is posted on our website (investor.cpr.ca/governance). Only the Board or Governance Committee (Audit and Finance Committee in the case of the CEO and senior financial officers) can waive an aspect of the Code. Any waivers are posted on our website. No waivers were requested or granted in 2020.

Corporate Governance

CP has a strong governance culture and we have adopted many leading policies and practices. As a U.S. and Canadian listed company, our corporate governance practices comply with or exceed the practices outlined by the Canadian Securities Administrators (CSA) in National Policy

58-201

Corporate Governance Guidelines

and the Toronto Stock Exchange (TSX), the SEC and the New York Stock Exchange (NYSE).

We regularly review our policies and practices and make changes as appropriate, so we stay at the forefront of good governance as standards and guidelines continue to evolve in Canada and the United States.

The Board and the Governance Committee are responsible for developing our approach to corporate governance. This includes annual reviews of the corporate governance principles and guidelines which were established by the Board, as well as the terms of reference for the Board and each of the four standing Board committees.

CP’s corporate governance principles and guidelines are available on our website at investor.cpr.ca/governance.

CP’s Audit and Finance Committee has been established in accordance with Section 3(a)(58)(A) the Exchange Act and NYSE standards and CSA National Instrument

52-110

Audit Committees

. The current members of the Audit and Finance Committee are Jane Peverett (chair), Isabelle Courville, Jill Denham, Edward Hamberger and Edward Monser, all of whom are independent. All members of the Audit and Finance Committee are “financially literate” as required by the NYSE and applicable Canadian securities laws. Ms. Peverett, Ms. Courville and Mr. Monser have been determined to be “audit committee financial experts” as defined by the SEC.

If significant corporate governance differences between CP’s corporate governance practices and Item 303A of the NYSE arise, they will be disclosed on our website (investor.cpr.ca/governance).

ITEM 11. EXECUTIVE COMPENSATION

As a foreign private issuer in the United States, we are deemed to comply with this Item if we provide information required by Items 6.B and 6.E.2 of Form

20-F,

with more detailed information provided if otherwise made publicly available or required to be disclosed in Canada. We have provided information required by Items 6.B and 6.E.2 of Form

20-F

in the Circular. As a foreign private issuer in the U.S., we are not required to disclose executive compensation according to the requirements of Regulation

S-K

that apply to U.S. domestic issuers, and we are otherwise not required to adhere to the U.S. requirements relative to certain other proxy disclosures and requirements. Our executive compensation disclosure complies with Canadian requirements, which are, in most respects, substantially similar to the U.S. rules. We generally attempt to comply with the spirit of the U.S. proxy rules when possible and to the extent that they do not conflict, in whole or in part, with required Canadian corporate or securities requirements or disclosure.

All dollar amounts included in this Item 11 are in Canadian dollars, unless otherwise expressly stated to be in U.S. dollars.

Compensation Committee Interlocks and Insider Participation

There were no reportable interlocks or insider participation affecting the Company’s Management Resources and Compensation Committee during the year ended December 31, 2020. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or our Management Resources and Compensation Committee.

Compensation Committee Report

The Management Resources and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Annual Report on Form

10-K/A

with management of the Company and, based on such review and discussion, the Management Resources and Compensation Committee recommended to the Board that the information set forth under “Compensation Discussion and Analysis” below be included in the Circular and this Annual Report on Form

10-K/A.

Respectfully submitted,

Management Resources and Compensation Committee

Matthew Paull (Chair)

Isabelle Courville

Rebecca MacDonald

Edward Monser

Andrea Robertson

Our approach to executive compensation

Our executive compensation program supports our railway-focused culture, and is linked to the critical metrics that drive the achievement of our strategic plan without taking on undue risk, and is designed to create long-term sustainable value for our shareholders. The key elements of our approach to executive compensation include:

•

a compensation mix that is incentive-driven with a large proportion that is variable or

“at-risk”

to support our pay for performance culture

•

competitive market pay practices to attract and retain talent

•

compensation components paying out over multiple performance periods to link to our short and longer term business strategy

•

aligning management’s interests with those of our shareholders through equity-based compensation and share ownership guidelines

We have five key foundations designed to focus us on our goal of being the best railroad company in North America:

Provide customerswith industry-leadingrail serviceControl costs Optimize our assetsRemain a leader inrail safetyDevelop our people

The Compensation Committee reviewed and approved changes to our executive compensation programs in 2016 for the 2017 program year in response to shareholder feedback. In 2019, we increased the weighting of our safety measures within short-term incentive plan targets from 10 percent to 20 percent. Also, in 2020 a second safety metric was added to our short-term incentive plan (FRA Personal Injury F

requency (see pages 20 and 21)), w

hich reinforces our unwavering commitment to the safety of our employees.

Compensation mix

Attracting and retaining high performing executives is key to our long-term sustainable growth and success. Our executive compensation includes fixed and variable

(at-risk)

pay components. Built into our compensation pay mix is a significant emphasis on incentive-driven pay where the proportion of

at-risk

pay increases by level. Executives earn more if we perform well, and less when performance is not as strong. A significant component of executive

at-risk

pay is equity-based compensation, which links directly to the value of our shares, ensuring alignment with the interest of shareholders. We also require our executives to own CP equity and our share ownership guidelines increase by executive level (see page 11).


2020 total target direct compensation mix for our NEOs are shown in the graph. For 2020, 88 percent of our CEO’s total target direct compensation and an average of 77 percent for our other NEOs was at risk.

Benchmarking

We did not make any changes to our comparator group in 2020, as it was extensively reviewed and updated in 2018. Our comparator group consists of companies we compete with for talent. It includes six Class 1 Railroad peers as well as 11 capital-intensive Canadian companies. For certain positions within the organization, we apply a heavier weighting to Class 1 Railroad peers; however, we consistently review alignment and compensation practices against the whole group.

Our 2020 compensation comparator group is as follows:



Class 1 Railroads	Capital Intensive Companies in Canada

BNSF Railway Company	Barrick Gold Corporation	Kinross Gold Corporation
Canadian National Railway Company	BCE Inc.	Rogers Communications Inc.
CSX Corporation	Cenovus Energy Inc.	Suncor Energy Inc.
Kansas City Southern	Enbridge Inc.	TC Energy Corporation
Norfolk Southern Corporation	Fortis Inc.	TELUS Corporation
Union Pacific Corporation	Imperial Oil Limited

Compensation pays out over time

Compensation pays out over timeSalaryShort-term incentivefixed pay, set annuallycash bonus paid out in Q1 2021 based on2020 corporate and individual performanceLong-term incentive (performance share units)equity-based incentive granted in January 2020,vests December 31, 2022 and pays out in Q12023 based on three-year corporate performanceand our share price2020 2021 2022 2023 2024 2025 2026 2027Long-term incentive(stock options)equity-based incentivegranted in January 2020,vests over four years andexpires after seven yearsand realized value dependson our share price

Variable pay includes short-term and long-term incentive awards which aligns with our annual and longer term performance objectives to support our growth.

Incentive awards are cash and equity-based. Equity-based awards vest at the end of three years for Performance Share Units (PSUs) and over four years for stock options. Stock options expire at the end of seven years.

The Compensation Committee ensures the performance objectives for the incentive plans align directly with our strategic plan, which is reviewed and approved by the Board.

Executives are CP shareholders

We require executives and senior management employees to own equity in the Company so they have a stake in our future success. Share ownership requirements are set as a multiple of base salary and increase by level. The ownership requirement must be achieved within five years of being appointed to their position and can be met by holding shares or deferred share units (DSUs). The CEO must maintain the ownership level of six times his base salary for one year after he retires or leaves CP. Once executives have met their initial shareholding requirements, they are required to maintain compliance, which is reported annually to the Compensation Committee.

Executives have the opportunity to participate in the Senior Executive’s Deferred Share Unit Plan (DSU Plan). DSUs are redeemed for cash after the executive retires or leaves the Company, with (i) Canadian-resident executives being entitled to elect a date of payment between the date that is six months following their departure from the Company and December 15

of the following calendar year, in compliance with Canadian tax rules; and (ii) U.S. resident executives being paid six months after their departure from the Company, in compliance with U.S. tax regulations.

The table below shows the ownership requirement by executive level, applicable to 95 executives and senior management employees in 2020.


Executive level	Ownership requirement (as a multiple of base salary)		OUR NEOs Mr. Creel, Mr. Velani, Mr. Brooks and Mr. Ellis have achieved ownership requirements. Mr. Redd is expected to meet ownership requirements within the specified period.
CEO		6x
Executive Vice-President		3x
Senior Vice-President		2x
Vice-President		1.5 to 2x
Senior management		1x

Equity ownership (at February 26, 2021)


Executive	Requirement (as a multiple of salary)		Minimum ownership value ($) (1)		Shares ($)		Deferred share units ($)		Total ownership value ($) (2)		Total ownership (as a multiple of salary)

Keith Creel		6x		9,083,824		8,326,746		14,553,844		22,880,590		15.11x

Nadeem Velani		3x		2,443,008		281,153		3,265,559		3,546,712		4.36x

John Brooks		3x		2,207,190		1,012,038		1,191,839		2,203,877		3.00x

Mark Redd		3x		1,997,888		472,006		1,219,808		1,691,814		2.54x

Jeffrey Ellis		2x		1,120,300		466,635		1,477,913		1,944,548		3.47x

(1)	Minimum ownership values for Mr. Creel, Mr. Brooks and Mr. Redd have been converted to Canadian dollars using an exchange rate of 1.2685.

(2)

Total ownership values for Mr. Creel, Mr. Brooks and Mr. Redd are based on US$356.06, the closing price of our shares on the NYSE on February 26, 2021 and have been converted to Canadian dollars using an exchange rate of $1.2685. Values for Mr. Velani and Mr. Ellis are based on $453.52, the closing price of our shares on the TSX on February 26, 2021.

New for 2021 ownership requirement

In support of our commitment to align executive compensation with shareholder interests and market competitive practices, the Board approved a change in share ownership requirement for the Executive Vice-President level from three times to four times annual base salary in 2021.

Compensation governance

Disciplined decision-making process

Executive compensation decisions involve management, the Compensation Committee and the Board. The Compensation Committee also receives advice and support from external consultants from time to time, including their advisor FW Cook.

1Management makesrecommendations to theCompensation CommitteeManagement:" reviews market dataPractices" analyzes companyperformance and receivesadvice from its externalconsultant from time totime" proposes corporate andindividual performanceobjectives to theCommittee for thecoming year2The Committee works witha consultant and makescompensation recommendationsto the BoardThe Committee:" recommends thecorporate performancetargets and weightingsfor the incentive plans" reviews the corporateperformance results forthe incentive plans" reviews individualperformance and receivesindependent advice fromits external consultant" recommends the annualand long-term incentiveawards to the Board3The Board has finalapproval on all mattersrelated to executivecompensationThe Board:" reviews corporate andindividual performance" decides whether to usediscretion" approves compensationfor the CEO and otherNEOs" approves all grants ofequity compensationawards" sets performanceobjectives for thefollowing year

The Board has final approval on all matters relating to executive compensation. They can also use discretion to adjust pay decisions as appropriate.

Qualified and experienced Compensation Committee

The Compensation Committee is responsible for our compensation philosophy, strategy and program design. The Compensation Committee consists of five independent directors. The Compensation Committee has the relevant skills, background and experience for carrying out its duties. The table below shows the key skills and experience of each member:

Human Resources/

compensation/

succession planning

CEO/senior

management

Governance
and policy
development

Transportation
industry

Risk
management

Engagement
(shareholders
and others)

Matthew Paull

(Committee Chair)

✓

Isabelle Courville

(Chair of the Board)

✓

Rebecca MacDonald

✓

Edward Monser

✓

Andrea Robertson

✓

Compensation Committee members also have specific human resources and compensation-related experience, including:

•

direct responsibility for executive compensation matters

•

membership on human resources committees

•

compensation plan design, administration, compensation decision-making and understanding the Board’s role in the oversight of these practices

•

understanding the principles and practices related to leadership development, talent management, succession planning and employment contracts

•

engagement with investors on compensation issues

•

oversight of financial analysis related to compensation plan design and practices

•

pension benefit oversight

•

recruitment of senior executives

The Compensation Committee has no interlocks or insider participation. None of the members were employed by or had any relationship with CP during 2020 requiring disclosure under Item 404 or Item 407(e)(4) of Regulation

S-K

of the Exchange Act. You can read about the background and experience of each member in the director profiles beginning on page 1.

Independent advice

The Compensation Committee and management retain separate independent executive compensation advisors to avoid any conflicts of interest:


Compensation Committee advisor FW Cook		Management Compensation advisor Willis Towers Watson

• in 2020, the Compensation Committee retained FW Cook to act as an independent compensation advisor • the Compensation Committee retained Kingsdale Advisors (Kingsdale) in 2018 and 2019 to act as an independent compensation advisor • the Compensation Committee approves all compensation-related fees and work performed by the independent compensation advisor		• management engages Willis Towers Watson to provide market survey data, analysis and advice to management related to compensation.

The next table below shows the fees paid to FW Cook, Kingsdale and Willis Towers Watson in 2019 and 2020.


	2020						2019
	Committee advisor				Management advisor		Committee advisor		Management advisor
Fees	FW Cook (1)		Kingsdale		Willis Towers Watson		Kingsdale		Willis Towers Watson
Executive compensation-related fees	$	188,473	$	0	$	67,743	$	90,000	$	74,785
Other fees	$	0	$	120,551	$	2,882,009	$	112,821	$	2,598,193
Total fees	$	188,473	$	120,551	$	2,949,752	$	202,821	$	2,672,978

(1)	FW Cook fees have been converted to Canadian dollars using the average exchange rate for 2020 of $1.3415.

Fees paid

Kingsdale was retained to provide the Compensation Committee independent advisory services related to compensation in 2018 and 2019. In 2020, FW Cook was retained to provide independent advisory services to the Compensation Committee related to compensation. FW Cook fees for advisory services provided in 2020 is $188,473. Kingsdale continues to be retained for services related to governance trends, specific governance items, proxy solicitation and shareholder advisory services.

In 2020, $67,743 was paid to Willis Towers Watson for advisory services provided to management. The total executive compensation fees represent 2.3 percent of the total fees in 2020 paid to Willis Towers Watson for all services provided to management, including actuarial and pension consulting, corporate risk and insurance brokering services.

Compensation risk

Effective risk management is integral to achieving our business strategies and to our long-term success.

The Board believes that our executive compensation program should not increase our risk profile. The Compensation Committee is responsible for overseeing compensation risk. It reviews the executive compensation program, incentive plan design and our policies and practices to ensure they encourage the right decisions and actions to reward performance and align management interests with shareholder interests.

Incentive plan targets are linked to our corporate objectives and our corporate risk profile. The Compensation Committee believes that our approach to goal setting, establishing performance measures and targets and evaluating performance results helps mitigate risk-taking that could reward poor judgment by executives or have a negative effect on shareholder value.

All of the Compensation Committee members other than Mr. Paull and Mr. Monser are members of the Governance Committee. In addition, Ms. Courville and Mr. Monser are also members of the Audit and Finance Committee, and Ms. Courville and Mr. Paull are also members of the Risk and Sustainability Committee. This cross-membership provides directors with a broader perspective of risk oversight and a deeper understanding of our enterprise risks, ultimately strengthening overall risk management.

Regular risk review

The Compensation Committee conducts a comprehensive compensation risk review approximately every two years to ensure that we have identified the compensation risks and have appropriate measures in place to mitigate those risks. An independent consultant assists the Compensation Committee with the review, which includes oversight of:

•

the targets for the short-term incentive plan (STIP) and PSU plan, anticipated payout levels and the risks associated with achieving targeted performance

•

the design of the long-term incentive awards, which reward sustainable financial and operating performance

•

the compensation program, policies and practices to ensure alignment with our enterprise risk management practices

In 2019, Management retained Willis Towers Watson to perform a detailed risk assessment of our compensation plans, programs and practices. Willis Towers Watson concluded that there did not appear to be significant risks associated with our compensation programs. The Committee reviewed Willis Towers Watson’s findings and agreed that our compensation policies and programs did not encourage excessive risk-taking that could have material adverse effects on CP. A subsequent risk assessment is expected to be completed in 2021.

Managing compensation risk

We mitigate risk in three ways:



1. Plan design		• we use a mix of fixed and variable (at-risk) compensation and a significant proportion is at-risk pay • short and long-term incentive plans have specific performance measures that are closely aligned with the achievement of our business strategy and performance required to achieve results in accordance with guidance provided to the market • the payout under the STIP is capped and not guaranteed, and the Compensation Committee has discretion to reduce the awards • the payout for the STIP is designed to reflect the stretch targets for the achievement of exceptional performance • the long-term incentive plan has overlapping vesting periods to address longer term risks and maintain executives’ exposure to the risks of their decision-making through unvested share based awards

2. Policies		• we promote an ethical culture and everyone is subject to a code of business ethics • we have share ownership requirements for executives and senior management so they have a stake in our future success • any violations of our code of business ethics can be reported under our business ethics reporting policy • we have a disclosure and insider trading/reporting policy to protect our interests and ensure high business standards and appropriate conduct • our disclosure and insider trading policy contains within it, an anti-hedging policy which prohibits directors, executive officers and employees from buying financial instruments that are designed to hedge or offset a decrease in the market value of equity awards or shares or share based awards • our anti-pledging policy prohibits directors and senior officers from holding our shares in a margin account or otherwise pledging the securities as collateral for a loan • we also have a policy that prohibits employees from forward selling shares that may be delivered on the future exercise of stock options, or otherwise monetizing their option awards, other than through exercising the options and subsequently selling the shares through a public venue or the Company’s cashless exercise option • our clawback policy allows the Board to recoup short and long-term incentive compensation paid to a current or former senior executive if the incentive compensation was calculated on the basis of financial results that were subsequently restated or corrected in whole or in part and/or, the senior executive engaged in gross negligence, fraud or intentional misconduct that caused or contributed to the need for restatement or correction, as admitted by the senior executive or as reasonably determined by the Board, which has sole discretion to determine whether it is in our best interests to pursue reimbursement of all or part of the incentive compensation in these circumstances and the Board’s actions would be separate from actions that may be taken by law enforcement agencies, regulators or other authorities • DSUs held by the President and CEO, executives, and senior management are not settled for cash until at least six months after leaving the Company • our whistleblower policy applies to all employees and prohibits retaliation against anyone who makes a complaint acting in good faith

3. Mitigation measures		• senior executives have a significant portion of their compensation deferred • we must achieve a specific threshold of operating income, otherwise no short-term incentive awards are granted • financial performance is verified by our external auditor (completion of annual financial statement audit) before the Board makes any decisions about short-term incentives • the Compensation Committee adopts principles for adjusting payout under the STIP, and provides them to the Board as part of their review of the Compensation Committee’s recommendations and performance overall • the Compensation Committee takes the business landscape and any external factors into account when exercising discretion and determining incentive awards • we regularly benchmark executive compensation against our compensation comparator group • safety is part of individual performance under the STIP for the President and CEO and executives in operations roles in addition to being a specific STIP measure which applies to all employees • all long-term incentive eligible employees are subject to two-year non-compete and non-solicit covenants should they leave CP • different performance scenarios are stress-tested and back-tested to understand possible outcomes • we review and consider risks associated with retention-related compensation

Key policies

In addition to CP’s code of business ethics and the business ethics reporting policy, a number of other policies act to mitigate compensation risk. You can read more about ethical behaviour at CP and our code of business ethics and other policies beginning on page 6.

Clawbacks

Our clawback policy allows the Board to recoup short and long-term incentive compensation paid to a current or former senior executive if:

•

the incentive compensation received was calculated based on financial results that were subsequently restated or corrected, in whole or in part; and/or

•

the senior executive engaged in gross negligence, fraud or intentional misconduct that caused or contributed to the need for the restatement or correction, as admitted by the senior executive or as reasonably determined by the Board.

The Board has sole discretion to determine whether it is in our best interests to pursue reimbursement of all or part of the incentive compensation and these actions would be separate from any actions by law enforcement agencies, regulators or other authorities.

Anti-hedging

Our disclosure and insider trading and reporting policy prohibits directors, executive officers and employees from buying financial instruments that are designed to hedge or offset a decrease in the market value of equity awards or shares they hold directly or indirectly.

Anti-pledging

Our anti-pledging policy prohibits directors and executive officers from holding any CP securities in a margin account or otherwise pledging the securities as collateral for a loan.

Non-compete

and

Non-solicitation

We are mindful of the demand for experienced and talented railroaders, particularly those with backgrounds in precision scheduled railroading. To manage near-term retention risk, our long-term incentive award agreements contain

non-compete,

non-solicitation

and other restrictive clauses, including

non-disclosure

restrictions.

Compensation program

Total direct compensation consists of salary, annual short-term incentive and a long-term incentive award that focus executives on driving strong financial, safety, operational and customer satisfaction results while building shareholder value. Executives also receive pension benefits and perquisites as part of their overall compensation.


Element	Purpose	Risk mitigating features	Link to business and talent strategies

Salary Fixed cash (see page 18)	• competitive level of fixed pay to reflect scope of responsibilities and market data • reviewed annually	• benchmarked against our comparator group to ensure market competitiveness	• attract and retain talent • no automatic or guaranteed increases to promote a performance culture

Short-term incentive plan (STIP) Variable cash bonus (see page 18)	• performance-based incentive to reward achievement of annual corporate and individual objectives to attract and retain highly qualified leaders • established target awards based on level of employee	• year-end performance is measured against predetermined, approved targets • actual payouts are based on the achievement of pre-determined corporate and individual objectives • payouts range from 0% to a maximum of 200% of target awards	• motivate high corporate and individual performance • performance metrics are aligned to the strategic plan and approved annually • align personal objectives with area of responsibility and role in achieving financial, safety and operating results

Deferred compensation Deferred share units (see page 46)	• encourages share ownership while aligning management interests with growth in shareholder value • executives and senior management can elect to receive their short-term incentive and their annual PSU grant in DSUs if they have not yet met their share ownership requirement • company provides a 25% match of the deferral amount in DSUs	• deferral limited to the amount required to meet the executive’s share ownership guidelines • helps retain key executive talent • company contributions vest after three years	• sustained alignment of executive and shareholder interests because the value of DSUs is tied directly to our share price • cannot be redeemed for cash until a minimum of six months after the executive leaves CP

Performance share units (PSUs) Long-term incentive (see page 24)	• equity-based incentive to align with shareholder interests and focuses on three-year performance • accounts for 60% of an executive’s long-term incentive award • vest after three years	• use pre-defined market and financial metrics • the number of units that vest is based on a performance multiplier that is capped • no guarantee of a minimum payout	• focuses the leadership team on achieving challenging medium-term performance goals • payout based on share price and company performance • attract and retain highly qualified leaders

Stock options Long-term incentive (see page 26)	• equity-based incentive to align with long term performance and growth in share price • accounts for 40% of an executive’s long-term incentive award • vests over four years, term is seven years	• focuses on appreciation in our share price, aligning with shareholder interests • only granted to senior management and executives	• focuses the leadership team on creating sustainable long-term value

Pension Defined contribution and defined benefit pension plans (see page 45)	• pension benefit based on pay, age and service and is competitive with the market • supplemental plan for senior management and executives	• balances risk management of highly performance-focused pay package	• attract and retain highly qualified leaders

Perquisites Flexible spending account (see page 40)	• competitive with the market to support health and well-being	• restrictions for the CEO and executives	• attract and retain highly qualified leaders

2020 Executive compensation

Salary

We review salaries every year based on the executive’s performance, leadership abilities, responsibilities and experience as well as succession and retention considerations. The Compensation Committee also considers the economic outlook and the median salary and practices of the comparator group before making decisions. The base salaries of all NEOs are set in U.S. dollars consistent with industry practice. As Mr. Ellis was not an NEO in 2019, his 2019 salary has been converted to USD using the 2019 average exchange rate of 1.3269, and his 2020 salary has been converted using the 2020 average exchange rate of 1.3415.



Executive	2020 (in USD)		percent change from 2019		2019 (in USD)

Keith Creel		1,193,513		3.0%		1,158,750

Nadeem Velani		602,000		6.3%		566,500

John Brooks		551,250		5.0%		525,000

Mark Redd		446,250		5.0%		425,000

Jeffrey Ellis		396,160		12.2%		353,191

Short-term incentive plan (STIP)

The short-term incentive award is an annual incentive that focuses executives on achieving strong financial, safety, operational and customer satisfaction results.

The table below summarizes the terms of our current short-term incentive plan.



Purpose		• performance-based incentive for achieving predetermined annual corporate and individual performance goals that are tied directly to our strategy and operational objectives

Term		• measure performance over a one-year period

Payout		• corporate performance is assessed against financial, safety and operational measures • individual performance is assessed against individual performance objectives • awards are pro-rated for eligibility in calendar performance year and can range from 0 to 200 percent of base salary • cash awards are paid out in February following the performance year

Restrictions		• must meet minimum level of corporate and individual performance • must achieve corporate operating income hurdle for any payout on individual or corporate performance to occur • performance multiplier is capped for exceptional performance • actual award is capped as a maximum of 200 percent of target award to limit payout and excessive risk-taking

The table below outlines the target STIP opportunities for our NEOs:


Our STIP target is based on a percentage of base salary and reviewed annually for market competitiveness	STIP target as a percent of base salary
	Executive	Minimum	Target	Maximum
	Keith Creel	0%	125%	250%
	Nadeem Velani	0%	90%	180%
	John Brooks	0%	90%	180%
	Mark Redd	0%	80%	160%
	Jeffrey Ellis	0%	70%	140%

For executives, their STIP target is weighted at 75 percent for corporate results and 25 percent for individual performance, whereas most other employees have greater emphasis placed on individual and departmental goals with their corporate and individual performance weighted at 50 percent each. This supports our view that the annual bonus should be tied to overall corporate performance and the areas of our business that each employee can influence directly.

We calculate each award by multiplying the executive base salary by their short-term incentive target as well as the corporate and individual performance factors as shown below:

Year EndSalary($)Target Opportunity Performance FactorsX XTargetshort-termincentive(as a % ofbase salary)[Corporateperformancefactor75%(0-200%)+Individualperformancefactor25%(0-200%)] =2020short-termincentive($)

The corporate performance factor consists of financial, operating and safety measures of varying weightings that total 100 percent. The year end results of each measure is assessed against

pre-defined

targets that are set at the beginning of the year (see page 21 for a complete review of the targets and results for the 2020 STIP).

The individual performance factor is based on the executive’s performance against annual objectives and other

pre-defined

quantitative and qualitative goals that reflect the strategic and operational priorities critical to each executive’s role, including operational management, safety, financial and other objectives such as customer satisfaction.

2020 STIP awards

The table below shows the calculation of the 2020 STIP awarded to each NEO. All salaries have been converted to Canadian dollars using an average exchange rate of $1.3415 for 2020, with the exception of Mr. Velani, whose salary is set in U.S. dollars, but paid in Canadian dollars, and is subject to a foreign exchange adjustment of $1.3499. Mr. Ellis’ salary was set in Canadian dollars.

Target Opportunity Performance FactorsTargetshort-termincentive(as a % ofbase salary)Corporateperformancefactor75%(0-200%)Individualperformancefactor25%(0-200%)2020short-termincentive award($)Year EndBase Salary($)3,442,3591,263,4521,149,741827,327638,0041,601,097812,640739,502598,644531,449125% 172%172%172%172%172%172%175%175%175%170%90%90%80%70%xxxxxx +++++[[[[[ [[[[[ =====xxxxNadeem VelaniJohn BrooksJeffrey Ellis(1)Mark Redd(1)Keith Creel

(1)	Mr. Redd and Mr. Ellis elected to defer a proportion of their 2020 STIP award to DSUs.

Assessing individual performance

Executives set individual performance objectives before the start of every financial year. The individual performance factor ranges from 0 to 200 percent.


Executive	2020 individual performance factor			The individual performance factor for the CEO cannot exceed the corporate performance factor. This ensures the payout factor for the CEO aligns with CP’s overall performance.
Keith Creel		172	%
Nadeem Velani		175	%
John Brooks		175	%
Mark Redd		175	%
Jeffrey Ellis		170	%

The Compensation Committee sets the individual performance factor for the CEO. The CEO reviews the performance of his direct reports against their objectives, and recommends their individual performance factors to the Compensation Committee.

See the profiles beginning on page 28 to read about each executive’s individual performance in 2020.

Assessing corporate performance

In 2020, we demonstrated the strength, commitment and resiliency of our CP family. In one of the most challenging years we have faced, our performance was remarkable as our precision scheduled railroading operating model enabled us to achieve our lowest-ever operating ratio of 57.1 percent and only saw a 1 percent decrease in our revenues from 2019. Our adjusted diluted earnings per share

(1)

rose 7.5 percent to a record $17.67 from $16.44 in 2019. From a safety perspective, we finished 2020 with our lowest ever Federal Railroad Administration (FRA)-reportable rates for both personal injuries and train accidents.

FRA-reportable

personal injuries were down 22 percent from 2019 with a frequency of 1.11 and

FRA-reportable

train accident frequency fell by 9 percent from the prior year to 0.96.

In addition to the current industry standard FRA train accident frequency metric, an additional safety metric for FRA personal injury frequency was included as a performance factor of the STIP in 2020. Our employees work in an industrial setting where the potential for injury is high. Adding this measure reinforces CP’s commitment to ensure our employees get home safe each day. The STIP weighting for safety will continue to be 20 percent, with 10 percent each allocated to FRA train accident frequency and FRA personal injury frequency.

2020 Scorecard results

The table below shows the 2020 scorecard and results. The targets were set with stretch goals to motivate strong performance.

The Board sets a corporate hurdle for operating income at $2 billion. There is no payout if we do not achieve that corporate hurdle. If we achieve the hurdle but corporate performance is below threshold for all measures, then only the individual performance factor is used to calculate the awards. Corporate results between 50 and 200 percent of target are interpolated.


Performance measure (Weighting)	Why the measure is important	Threshold (50%)			Target (100%)			Exceptional (200%)			2020 Reported Result		2020 STIP Result (2)		Score
Financial measures
STIP Operating ratio (35%) Operating expenses divided by total revenues based on an assumed fuel price and foreign exchange rate	Continues our focus on driving down costs while focusing on growth strategy		59.9	%		59.4	%		58.9	%		57.1%		57.2%		200%
STIP Operating income (35%) ($ millions) Total revenues less total operating expenses based on an assumed foreign exchange rate	Highlights the importance of revenue growth to our corporate strategy		3,275			3,330			3,410			3,310		3,346		121%
Safety measures
FRA Train Accident Frequency (10%) Number of FRA reportable train accidents which meet FRA reporting thresholds per million train miles	CP has long been an industry leader in rail safety and we are more focused on it than ever, committed to protecting our people, our communities, our environment and our customers’ goods		1.10			1.06			0.99			0.96		0.96		200%
FRA Personal Injury Frequency (10%) Number of FRA reportable injuries per 200,000 employee hours	As safety is our top priority, we introduced FRA Personal Injury as an additional safety metric under our STIP for 2020		1.40			1.35			1.25			1.11		1.11		200%
Operating measure
Trip Plan Compliance (10%) Calculated as the number of shipments completed on time (less than 12 hours late vs. baseline plan), divided by the total number of shipments completed	Trip plan compliance is a detailed schedule of performance and the core of CP’s product offering. It balances between customer needs and what we are capable of delivering It is critical to the service we provide customers and to our growth strategy.		75	%		80	%		85	%		85%		85%		200%
Corporate performance factor																172%

(1)	Adjusted diluted EPS is a non-GAAP measure. Non-GAAP measures are defined and reconciled on pages 61-69 of CP’s Annual Report on Form 10-K for the year ended December 31, 2020.

(2)

The Compensation Committee may adjust the results for unusual or

non-recurring

items that are outside our normal business and do not accurately reflect our ongoing operating results or business trends and affect the comparability of our financial performance year over year. Results used under the STIP could therefore differ from our reported GAAP results. Significant items that were adjusted so that they do not impact, either favourably or unfavourably, the assumptions made when the STIP targets were planned include: foreign exchange rates, fuel price and land sales, all of which were adjusted to reflect the original assumptions made in our 2020 budget. Consequently, Operating Income was adjusted upwards compared to our reported results which increased the bonus payment.

Compensation committee discretion

The Compensation Committee has developed principles for the use of discretion. Adjustments should not relieve management from the consequences of their decision-making. Adjustments should also neither reward nor penalize management for decisions on discretionary transactions, events outside their control (such as foreign exchange rates and fuel prices that are beyond the assumptions used in the planning process) or transactions outside normal corporate planning and budgeting.

As a result, the Compensation Committee can reduce the corporate performance factor for any executive officer as it deems appropriate, as long as it follows the principles. The Board can also use its discretion to adjust the targets and payouts up or down, following the principles set out by the Compensation Committee. The Compensation Committee did not exercise any discretion for short-term incentive plan and annual long-term incentive plan in 2020.

Following a thoughtful review and discussion of overall company performance and shareholder return, the Compensation Committee recommended to the Board that it would be appropriate to exercise positive discretion to the payout and vesting performance factors for a 2018 retention grant for which the performance period ended on December 31, 2020. The grant, consisting of PSUs and performance stock options (PSOs), was awarded to a number of key senior leaders (including Mark Redd prior to him becoming an NEO). See Outstanding share-based awards and option-based awards on page 42 for more details.

(1)

Long-term incentive plan (LTIP)

Our long-term incentive awards focus executives on medium and longer term performance to create sustainable shareholder value.

The table below summarizes the terms of our current long-term incentive plans.


	Performance share units (60%)	Stock options (40%)
Purpose	• notional share units to align compensation with medium-term financial and market objectives	• equity-based compensation to align executives with long-term performance of our shares and business
Term	• three years	• seven years
Vesting	• the number of units that vest is based on performance over a three-year period • cliff vest at the end of three years to the extent performance vesting conditions are met and Board approval	• vest 25% every year beginning on the first anniversary of the grant date
Payout	• paid out in cash based on units earned and the average closing share price for the 30 trading days prior to the end of the performance period on the TSX or NYSE • includes dividends earned quarterly at the same rate as dividends paid on our shares • no guarantee of a minimum payout • if performance is exceptional on a measure the Board may approve a payout of up to 200%	• right to buy CP shares at a specified price after vesting • does not attract dividends • only have value if our share price increases above the exercise price
Restrictions	• must achieve threshold performance level on a measure otherwise the payout factor for that measure is zero and a portion of the award is forfeited	• no exercises can be made during a blackout period • financial assistance is not provided to facilitate the purchase of shares under the stock option plan
Assignment	• not permitted other than by operation of law	• options will continue to vest and expire on the scheduled expiry date if the holder’s employment ends due to permanent disability. If an option holder dies, the options will expire 12 months following the date of death and may be exercised by the holder’s estate. • can only be assigned to the holder’s family trust, holding corporation or retirement trust, or a legal representative of a holder’s estate or a person who acquires the holder’s rights by bequest or inheritance

(1)

Although the recommendation to exercise discretion with respect to payout and vesting performance factors was made following the conclusion of the performance period ending December 31, 2020, the July 2018 special retention grants do not vest until July 20, 2021 and are settled based on the average closing price per share on the applicable stock exchange during the immediately preceding 30 days prior to July 20, 2021.


	Performance share units (60%)	Stock options (40%)
Termination Provisions
Resignation	• all units cancelled	• 30 days to exercise any vested options; unvested options are cancelled
Retirement (1)	• units continue to vest as long as unit holder has a minimum of six months of service in the performance period	• options continue to vest and expire on the earlier of five years from retirement or the original expiry date
Termination without Cause	• pro-rated to termination date as long as unit holder has a minimum of six months of service in the performance period	• six months to exercise vested options; unvested options are cancelled
Termination with Cause	• all units cancelled	• all options cancelled
Change of Control (2)	• pro-rated to change of control date • if unit holder is terminated without cause – pro-rated to termination date	• all options vest immediately (2)

(1)	Retirement with three months’ notice required in 2020. For 2021, six months’ notice will be required to allow for business continuity and knowledge transfer.

(2)	Stock options have a double trigger clause requiring a change of control and the option holder to be terminated without cause.

Stock options and PSUs are approved and granted annually in January immediately after the fourth quarter financial statement blackout period, and after the Compensation Committee has reviewed the

year-end

financial results in detail.

Grants are also made during the year for special situations such as retention or new hires. Special grants can include PSUs, stock options, Restricted Share Units (RSUs), or DSUs. These grants are made on the first Tuesday of the month following CEO approval as long as the Company is not in a blackout period. If we are in a blackout period, the grant is made after the blackout has been lifted.

In addition, the CEO, the Chair of the Board and the Chair of the Compensation Committee have authority to grant options to certain employees based on defined parameters, such as the position of the employee and the expected value of the option award. In 2020, the Compensation Committee authorized a pool of 50,000 options for allocation by the CEO, who granted 8,297 options to seven employees for retention and to recognize performance.

Non-Compete

and

Non-Solicitation

non-compete,

non-solicitation

and other restrictive clauses, including

non-disclosure

restrictions.

2020 long-term incentive awards

To determine the appropriate value of long-term incentive grants provided to the NEOs, the Compensation Committee considers the practices of our comparator group and internal factors, including executive retention, dilutive impact and long-term value creation.

Target award levels are set based on a percentage of salary. The table below shows the 2020 long-term incentives targets and grant awarded in 2020 for the NEOs.


	2020 long-term		2020 long-term
	incentive		incentive		Allocation
	target		award		Performance share units				Stock options
Executive	(as a % of salary)		(grant value) ($) (1)		($)		(#)		($)		(#)

Keith Creel (2),(3)		560%		10,983,025		6,826,446		19,144		4,156,579		57,432
Nadeem Velani (4)		300%		2,975,517		1,818,076		5,172		1,157,441		17,455
John Brooks (2)		275%		2,491,031		1,548,288		4,342		942,743		13,026
Mark Redd (2),(4)		250%		1,833,492		1,139,643		3,196		693,849		9,587
Jeffrey Ellis		200%		1,338,239		817,705		2,326		520,534		7,850

(1)	See the summary compensation table on page 39 for details about how we calculated the grant date fair values of the PSUs and stock options. Both were calculated in accordance with FASB ASC Topic 718.

(2)	The grant value of the awards based on the NYSE trading price has been converted to Canadian dollars using a 2020 average exchange rate of $1.3415.

(3)

Effective January 1, 2020, Mr. Creel’s long-term incentive target was increased to 660 percent of his base salary; however consistent with Mr. Creel’s 2017 employment agreement (as amended January 1, 2019), his LTIP target has been reduced by 100% to fund an upfront performance options grant that he received in 2017. Therefore, his target was 560 percent of his base salary in 2020.

(4)	Mr. Velani and Mr. Redd elected to defer a proportion of their 2020 PSU award to DSUs.

Performance share units (PSUs)

PSUs focus executives on achieving medium-term goals within a three-year performance period. The Board sets performance measures, thresholds and targets at the beginning of the performance period.

The number of units that vest is based on our performance over the three-year period. We must achieve threshold performance on a measure, otherwise the payout factor for that measure is zero and a portion of the award is forfeited. If performance is exceptional on a measure, the Board may approve a payout of 200 percent. PSUs earn additional units as dividend equivalents at the same rate as dividends paid on our shares. The award is paid out in cash on the number of units earned and the average closing share price for 30 trading days prior to end of the performance period on TSX or NYSE. However, PSU awards may also be paid out in shares purchased on the open market, on the CEO’s recommendation, using the

after-tax

value.

2020 PSU awards

The performance period for the 2020 PSU awards is January 1, 2020 to December 31, 2022. Performance will be assessed against the measures in the table below. Awards will be interpolated if results fall between threshold and exceptional.

2020 PSU performance measures

Why the measure is important

Threshold

(50%)

Target

(100%)

Exceptional

(200%)

Weighting

PSU three-year average return on invested capital (ROIC)

Net operating profit after tax divided by average invested capital

Focuses executives on the effective use of capital as we grow

Ensures shareholders’ capital is employed in a value-accretive manner

15.3%

16.0%

16.7%

70%

Total shareholder return (TSR)

Measured over three years. The percentile ranking of CP’s TSX Compound Annual Growth Rate (CAGR) relative to the companies that make up the S&P/TSX 60

Compares our TSR on the TSX to the broader S&P/TSX 60 to reflect our progress relative to the Canadian market

Aligns long-term incentive compensation with long-term shareholder interests

25th
percentile

50th
percentile

75th
percentile

15%

Total shareholder return (TSR)

Measured over three years. The ordinal ranking of CP’s NYSE CAGR relative to the Class 1 Railroads

Compares our TSR on the NYSE to the publicly traded Class 1 Railroads to ensure we are competitive against our primary competitors.

Aligns long-term incentive compensation with long-term shareholder interests

4th

3rd

1st

15%

At the end of the three-year performance period, the starting point for determining relative TSR will be the

10-day

average closing share price of our shares on the appropriate index prior to January 1, 2020 and the closing point will be the

10-day

average closing share price of our shares on the appropriate index prior to January 1, 2023. TSR is adjusted over the period to reflect dividends paid. The payout multiplier is interpolated if our performance falls between 50 and 200 percent. If results are below the threshold level for any of the performance measures, units for that specific measure will be forfeited.

We calculated the number of PSUs to be granted to each executive by dividing the grant value by the theoretical value of a PSU (using the Willis Towers Watson binomial lattice model methodology), applied to our

30-day

average closing share price on the TSX or the NYSE prior to the day of the grant.

The table below shows the details of the 2020 annual PSU award grant. The grant value of the PSU awards based on the NYSE trading price have been converted to Canadian dollars using a 2020 average exchange rate of $1.3415.

Executive

Grant value ($)

Number of PSUs

Grant price

Keith Creel

6,826,446

19,144

US$

265.81 (NYSE)

Nadeem Velani

(1)

1,818,076

5,172

$351.55 (TSX)

John Brooks

1,548,288

4,342

US$

265.81 (NYSE)

Mark Redd

(1)

1,139,643

3,196

US$

265.81 (NYSE)

Jeffrey Ellis

817,705

2,326

$351.55 (TSX)

(1)	Mr. Velani and Mr. Redd elected to defer a proportion of their 2020 PSU award to DSUs.

New for 2021 PSU awards

As we continue to focus on growth and the effective use of capital investments, the Board has approved increasing the maximum payout opportunity for the PSU measure, ROIC from 200 percent to 270 percent. The targets for ROIC have been set with stretch goals to motivate strong performance over the next three years. This will result in an overall maximum payout opportunity of 249 percent for the 2021 PSU awards for all eligible employees. Other PSU performance measures and all weightings from our 2020 PSU awards remain the same.

Stock options

Stock options focus executives on longer term performance. The management stock option incentive plan was introduced in October 2001. Stock options granted before 2017 expire 10 years from the date of grant and generally vest 25 percent each year over four years, beginning on the first anniversary of the grant date. Options awarded on or after January 1, 2017 have a seven-year term and vest 25 percent each year beginning on the first anniversary date of the grant. The grant price is the last closing price of our common shares on the TSX or the NYSE on the applicable grant date. Options only have value for the holder if our current share price increases above the grant price before the expiry of the option.

For all grants, if the expiry date falls within a blackout period, the expiry date will be extended to 10 business days following the last date of the blackout period. If a further blackout period is imposed before the end of the extension, the term will be extended another 10 days after the end of the additional blackout period.

2020 stock option awards

We calculated the number of options to be granted to each executive by dividing the grant value by the theoretical value of an option (using the Willis Towers Watson binomial option pricing methodology), applied to our

30-day

average closing share price on the TSX or the NYSE prior to the day of the grant, as applicable.

The table below shows the details of the 2020 annual stock option award grant.

Executive

Grant value ($)

(1)

# of options

Grant price

Keith Creel

4,156,579

57,432

US$

265.81 (NYSE)

Nadeem Velani

1,157,441

17,455

$351.55 (TSX)

John Brooks

942,743

13,026

US$

265.81 (NYSE)

Mark Redd

693,849

9,587

US$

265.81 (NYSE)

Jeffrey Ellis

520,534

7,850

$351.55 (TSX)

(1)	The grant value of the stock option awards based on the NYSE trading price have been converted to Canadian dollars using a 2020 average exchange rate of $1.3415.

About the stock option plan

The table below sets out the limits for issuing options under the plan:


		As a percent of the number of shares outstanding
Maximum number of shares that may be reserved for issuance to insiders as options		10%
Maximum number of options that may be granted to insiders in a one-year period		10%
Maximum number of options that may be granted to any insider in a one-year period		5%
		As a percent of the number of shares outstanding at the time the shares were reserved
Maximum number of options that may be granted to any person		5%

We measure dilution by determining the number of options available for issuance and the number of options outstanding as a percentage of outstanding shares. Our potential dilution at the end of 2020 was 1.7 percent. Notwithstanding the limits noted above, the dilution level, measured by the number of options available for issuance as a percentage of outstanding shares continues to be capped, at the discretion of the Board, at 7 percent.

The table below shows the burn rate

for the last three fiscal years, calculated by dividing the number of stock options granted in the fiscal year by the weighted average number of outstanding shares for the year.


as at December 31	2018		2019		2020
Number of options granted		282,125		224,730		217,240
Weighted number of shares outstanding		142,885,817		138,771,939		135,438,610
Burn rate		0.20%		0.16%		0.16%

The table below shows the options outstanding and available for grant from the stock option plan as at December 31, 2020.


	Number of options/shares		Percent of outstanding shares
Options outstanding (as at December 31, 2020)		1,387,366		1.04	%
Options available to grant (as at December 31, 2020)		895,969		0.67	%
Shares issued on exercise of options in 2020		285,068		0.21	%
Options granted in 2020		217,240		0.16	%

Since the launch of the stock option plan in October 2001, a total of 18,078,642 shares have been available for issuance under the plan and 15,795,307 shares have been issued through the exercise of options.

Making changes to the stock option plan

The Board can make the following changes to the stock option plan without shareholder approval:

•

changes to clarify information or to correct an error or omission

•

changes of an administrative or a housekeeping nature

•

changes to eligibility to participate in the stock option plan

•

terms, conditions and mechanics of granting stock option awards

•

changes to vesting, exercise, early expiry or cancellation

•

amendments that are designed to comply with the law or regulatory requirements

The Board must receive shareholder approval to make other changes, including the following, among other things:

•

an increase to the maximum number of shares that may be issued under the plan

•

a decrease in the exercise price

•

a grant of options in exchange for, or related to, options being cancelled or surrendered

The Board has made two amendments to the stock option plan since it was introduced in 2001:

•

on February 28, 2012, the stock option plan was amended so that a change of control would not trigger accelerated vesting of options held by a participant, unless the person is terminated without cause or constructively dismissed; and

•

on November 19, 2015, the stock option plan was amended to provide net stock settlement

as a method of exercise, which allows an option holder to exercise options without the need for us to sell the securities on the open market, resulting in less dilution.

Payout of 2018 PSU award

On December 31, 2020, the 2018 PSU grant for the performance period of January 1, 2018 to December 31, 2020 vested and was paid out on February 5, 2021.

The NEOs and all other eligible employees received a total payout of 200 percent on the award. The table below shows the difference between the actual payout value and the target grant value for each NEO.

2018 targetgrant value($)(1)2018 PSUaward(# of units)Dividendequivalents(# of units)2018 PSUperformancefactor(0-200%)Market shareprice(2)PSU value($)(3)4,369,7571,199,385424,798406,650384,53118,300 5,2121,7791,7031,671540154525049200%US$335.39$432.25US$335.39US$335.39$432.2516,089,9674,639,0311,564,1561,497,3341,487,303 [ + ] X = Keith Creel Nadeem Velani John Brooks Mark Redd Jeffrey Ellis

(1)	The grant value for Mr. Creel, Mr. Brooks and Mr. Redd was converted to Canadian dollars using an exchange rate of $1.2957 for 2018.

(2)	Reflects the 30-day average closing share price prior to December 31, 2020 on the TSX ($432.25) and NYSE (US$335.39) when both markets were open.

(3)	The PSU payout value for Mr. Creel, Mr. Brooks and Mr. Redd was converted using a 2020 year-end exchange rate of $1.2732.

How we calculated the 2018 PSU performance factor

The PSU performance factor for the three-year period from January 1, 2018 to December 31, 2020 is 200 percent, as shown in the table below. The payout value has been calculated in accordance with the terms of the PSU plan and the 2018 award agreement.

PSU performance measures

Threshold

(50%)

Target

(100%)

Maximum

(200%)

PSU

result

Weighting

PSU

performance

factor

3 Year Average Adjusted Return on Invested Capital

(1)

14.5%

15.0%

15.5%

16.6%

60%

200%

TSR to S&P/TSX Capped Industrial Index

25th
percentile

50th
percentile

75th
percentile

85th
percentile

20%

200%

TSR to S&P 1500 Road and Rail Index

25th
percentile

50th
percentile

75th
percentile

88th
percentile

20%

200%

PSU performance factor

200%

(1)	Adjusted Return on Invested Capital is a non-GAAP measure. Non-GAAP measures are defined and reconciled on pages 61-69 of CP’s Annual Report on Form 10-K for the year ended December 31, 2020.

KEITH E. CREEL

PRESIDENT AND CHIEF EXECUTIVE OFFICER


		Mr. Creel has been President and Chief Executive Officer (CEO) since his appointment on January 31, 2017. He joined CP in February 2013 as President and Chief Operating Officer (COO). Prior to joining CP, Mr. Creel had a very successful operating career that began in 1992 at Burlington Northern as a management trainee in operations, which later led to his appointment to EVP and COO at CN in 2010. Mr. Creel obtained a Bachelor of Science in marketing from Jacksonville State University and completed the Advanced Management Program at the Harvard Business School. He served as a commissioned officer in the U.S. Army and is a Persian Gulf War veteran. At CP, our purpose is to deliver transportation solutions that connect North America to the world. By doing this safely and efficiently, we create long-term, sustainable value for our employees, shareholders and the broader economy. From our multi-year strategic business plans to our daily operations and sales and marketing playbooks, everything we do is driven by, and tested against, our purpose and our values of accountability, diversity and pride.

Accomplishments in 2020

This past year, we could not have anticipated the impact of the

COVID-19

pandemic. We took measures to protect our employees, our customers and the communities in which we operate. Through collaboration, adaptability, accountability and partnership with union leadership and CP employees, our heroic front-line essential workers rose to the challenge to support the North American economy and continue to provide goods and services at a critical time in the world’s history. Under Mr. Creel’s leadership, our world-class railroaders took the global pandemic as an opportunity to demonstrate our resilient, industry-leading culture which will continue to propel us into the future. To acknowledge these extraordinary efforts, we provided each of our union employees who worked or were laid off in 2020 with a

one-time

gross payment of $1,500. Despite the pandemic, our employees continued to serve our customers, neighbours and communities.

We continued to focus on our five foundations designed to achieve our goal of being the best railroad in North America by providing service, controlling costs, optimizing assets, operating safely and developing people. In 2020, we dedicated further focus on environmental, social, and governance (ESG) objectives including diversity and inclusion initiatives, innovative technology and driving safety improvements which further enable long-term sustainable, profitable growth.

Led by Mr. Creel, we were able to achieve our lowest-ever yearly operating ratio in 2020 of 57.1 percent. This is a result of the company’s disciplined approach to precision scheduled railroading. Despite challenging macroeconomic conditions, including the

COVID-19

pandemic, revenues only decreased by 1 percent to $7.71 billion from $7.79 billion in 2019. Diluted earnings per share (EPS) increased 3 percent to a record $17.97 from $17.52 and adjusted diluted EPS

(1)

rose 7.5 percent to a record $17.67 from $16.44.

(1)	Adjusted diluted EPS is a non-GAAP measure. Non-GAAP measures are defined and reconciled on pages 61-69 of CP’s Annual Report on Form 10-K for the year ended December 31, 2020.

Throughout 2020, we continued to invest in our people by progressing our focus on diversity and inclusion with the establishment of our Diversity Commitment. Our Indigenous, racial and gender diversity councils work to ensure we create a feedback rich environment which supports our corporate direction and provides education to facilitate a deeper understanding of one another. We continue to invest in our employees through our foundational leadership programs as well as new leadership initiatives. In 2020, we launched a new program aimed at front line leaders, as well as introducing CP’s new leadership competency framework designed to drive results, provide thought leadership, lead by example and coach and develop talent. CP’s veteran program was recognized by Canada’s Best Diversity Employers

of 2020 and we were named in the top 10 Military Friendly

employers in the United States for 2021.

We accelerated key safety initiatives this year which include: leveraging 10 analytics to develop the train inspection portal, the first to be approved by Transport Canada, implementing cold wheel technology to proactively monitor the heat imprint on wheel braking systems and implementing a broken rail detection system at a fraction of the cost of the traditional centralized traffic control method.

By using the train inspection portal, we can detect 87 percent more defects than manual inspection, which achieves safety improvements and better asset management. To proactively address the working activity of the braking system, our cold wheel technology monitors the wheel temperature instead of air temperature. Currently in use for coal and potash trains, we anticipate further use cases with grain, sulphur and intermodal trains. The broken rail detection system was implemented in

non-signal

dark territory which allows notification of a broken rail before a derailment occurs. The result is improved safety and performance creating better outcomes for our customers and the communities in which we operate.

Our commitment to the Home Safe program is unwavering, as it empowers all employees to begin a safety conversation, regardless of seniority or position, in the workplace and at home. This program, along with a personal commitment from each of our employees, has resulted in industry-leading 0.96 Federal Railroad Administration (FRA) train accidents per million train miles and 22 percent improvement in FRA Personal Injury frequency ending the year at 1.11. Operating safely is a constant journey evidenced by CP hosting its second Safety Awards for Excellence, celebrating outstanding employee safety leadership.

We recognize that long-term sustainable growth requires ambitious vision. Led by Mr. Creel, we continued the next stages of our growth, building on our culture of innovation to adapt our business and continue to work with all stakeholders to position CP for a sustainability driven future. Looking ahead, we continue to confront the challenge of climate change. We released our first climate statement in July 2020 to underscore our commitment to being a leader in the North American transition to a low carbon future. At CP, we have improved our fuel efficiency by 43 percent since 1990 and currently, CP is 13.8 percent better than the North American Class 1 freight railway average.

We acknowledge that fuel efficiency alone is not enough and we are leveraging emerging technologies, renewable fuels, partnerships and innovative ways of running our business. Our commitment includes: setting a science-based target to reduce our emissions in line with the Paris Agreement, conducting scenario analysis to understand the range of possible impacts from climate change as they relate to our business and we plan to formalize the integration of climate-related risks into our enterprise risk-management mitigation strategies.

Mr. Creel has led our operational excellence by driving actionable results, including, developing one of the largest private solar operations in the province of Alberta to come online in early 2021 generating up to five megawatts of electricity while avoiding an estimated 2,600 tonnes of carbon emissions a year, equal to taking 570 cars off the road. Through our fleet modernization program, economic efficiency continues to progress with: high-efficiency product grain trains moving 40 percent more grain than the standard traditional grain trains; and trip optimizers to be installed on 85 percent of our high-powered line locomotives by 2025. We are adapting our business and operations to changing conditions in order to fight against climate change including a pilot project for a hydrogen-powered locomotive, which supports the decarbonization of the freight transportation sector.

CP was recognized for our leadership in sustainability by being named to the 2020 Dow Jones Sustainability Index North America. We are proud to have achieved a leadership level score of

A-

for our 2020 climate change disclosure reporting as evaluated by CDP, an internationally recognized

non-profit

organization that assesses companies on their climate-related performance and transparency. CP’s progress was featured as a “Story of Change” by CDP, intended to inspire other companies.

Mr. Creel spearheaded our efforts to extend our reach through various initiatives in 2020 including a strategic multi-year agreement with A.P. Moller-Maersk benefiting North American customers and the environment, and the Hapag-Lloyd AG extension of our long-term rail service agreement. We joined the TradeLens blockchain shipping platform, opened a new multi-commodity transload facility in Montréal, Québec and expanded our reach to the Port of Saint John, New Brunswick. In 2020, we also successfully completed the acquisition and commercial integration of Central Maine and Québec Railway (CMQ) and acquired full ownership of the Detroit River Rail Tunnel resulting in reduced operating costs for CP.

Even with the challenges presented by the

COVID-19

pandemic, Mr. Creel held town hall meetings to connect with employees, and met regularly with external stakeholders, including investors, industry associations, government, regulators, customers and policy makers. We are proud to share that Mr. Creel was named Railway Age 2021 Railroader of the Year. Institutional Investor’s 2020

All-Canada

Executive Team named CP

top-ranked

in capital goods/industrial sector, recognizing Mr. Creel as the top CEO.

2020 compensation

The table below shows the compensation awarded to Mr. Creel for 2020. The assessment was reviewed by the Compensation Committee, and reviewed and approved by the Board.


Compensation (in CAD $‘000)	2020
Fixed
Salary		1,601
At-risk
Short-term incentive		3,442
Long-term incentive
- PSUs		6,826
- Stock options		4,157
Total direct compensation		16,026
Total target direct compensation		12,569
Note: All values above are derived from the Summary Compensation Table on page 39 Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants Total target direct compensation includes base salary, target short-term and target long-term incentives

2021 compensation

The Compensation Committee, in collaboration with FW Cook, conducted a comprehensive review of Mr. Creel’s compensation in conjunction with competitive market information as well as corporate and individual performance. In order to align Mr. Creel’s 2021 compensation with CP performance levels and Class 1 Railroad CEOs, we have increased his 2021 target LTIP award by US$1 million (C$1.34 million). No changes were made to Mr. Creel’s base salary or target STIP percentage.

Realized and realizable pay

The value of Mr. Creel’s incentive compensation is based on our performance over the period and, for the long-term incentive, our share price when the awards vest. The graph below shows the three-year average of Mr. Creel’s granted and realized and realizable pay from 2018 to 2020.


		Summary compensation table. Reflects average of salary earned, actual cash bonus and long-term incentives granted as disclosed in the summary compensation table on page 39 Realized and realizable. Reflects average of salary earned, actual cash bonus, the value of long-term incentive awards that have vested or been exercised and the estimated current value of unvested long-term incentive awards granted from 2018 to 2020 • the value of vested 2018 PSUs paid in February 2021 was calculated using the 30-day average trading price of our shares prior to December 31, 2020 of US$335.39 on the NYSE with a performance multiplier of 2.0 and includes reinvested dividends up to the payment date • the value of unvested 2019 and 2020 PSUs are based on the closing price of our shares on December 31, 2020 of US$346.69 on the NYSE with a performance multiplier of 1.0 and includes reinvested dividends • the value of unvested/unexercised stock options is based on the closing price of our shares on December 31, 2020 of US$346.69 on the NYSE • the values for salary earned and actual cash bonus are as disclosed in the summary compensation table on page 39 • the value of any realized and realizable PSUs and stock options have been converted into Canadian dollars using the 2020 year-end exchange rate of $1.2732

Pay linked to shareholder value

The table below shows Mr. Creel’s total direct compensation in Canadian dollars in each of the last three years, compared to its realized and realizable value as at December 31, 2020. We also compare the realized and realizable value of $100 awarded in total direct compensation to Mr. Creel in each year to the value of $100 invested in shares on the first trading day of the period, assuming reinvestment of dividends, to show a meaningful comparison of shareholder value.


(in CAD $‘000)							Value of $100

	Compensation awarded ($)		Realized and realizable value of compensation as at December 31, 2020 ($)		Period		Keith Creel ($)		Shareholder ($)
2018		11,491,066		29,528,025		Jan 1, 2018 to Dec 31, 2020		257		199
2019		14,029,129		24,107,429		Jan 1, 2019 to Dec 31, 2020		172		187
2020		16,026,481		19,467,579		Jan 1, 2020 to Dec 31, 2020		121


PART III
Item 10	Directors, Executive Officers and Corporate Governance	1
Item 11	Executive Compensation	7
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52
Item 13	Certain Relationships and Related Transactions, and Director Independence	53
Item 14	Principal Accounting Fees and Services	53

PART IV
Item 15	Exhibits, Financial Statement Schedule	55
Item 16	Form 10-K Summary	55
	Signatures	56


Compensation Discussion and Analysis		8
Our Approach to Executive Compensation		9
Compensation Governance		12
Compensation Program		17
2020 Executive Compensation		18
Named Executive Officer Profiles		28
Share Performance		38
Executive Compensation Details		39
Summary Compensation Table		39
Incentive Plan Awards		42
Retirement Plans		45
Termination and Change in Control		48