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CANADIAN PACIFIC RAILWAY LTD/CNCommon Shares, without par value, of Canadian Pacific Railway LimitedPerpetual 4% Consolidated Debenture Stock of Canadian Pacific Railway CompanytrueFY0000016875CA 0000016875 2021-01-01 2021-12-31 0000016875 2021-06-30 0000016875 2022-04-15 0000016875 us-gaap:CommonClassAMember 2021-01-01 2021-12-31 0000016875 cp:Perpetual4ConsolidatedDebentureStockMember 2021-01-01 2021-12-31 iso4217:USD xbrli:shares
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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, 2021
OR
 
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, 2021, 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 $51,279,545,149 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 15, 2022, there were 929,873,437 shares of the registrant’s common shares outstanding.
Auditor Name: Deloitte LLP                        Auditor Location: Calgary, Canada                        Auditor Firm PCAOB ID: 1208

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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, 2021 (“2021 Form
10-K”)
on February 23, 2022. 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 2021 Form
10-K
the Part III information not previously included in the 2021 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 2021 Form
10-K.
This Amendment No. 1 on Form
10-K/A
does not reflect events occurring after the filing of the 2021 Form
10-K.
Accordingly, this Amendment No. 1 on Form
10-K/A
should be read in conjunction with the 2021 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 28, 2022 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.

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CANADIAN PACIFIC RAILWAY LIMITED
FORM
10-K/A
TABLE OF CONTENTS
 
  
 
 
PART III
  
Item 10
       1  
Item 11
       8  
Item 12
  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      55  
Item 13
  Certain Relationships and Related Transactions, and Director Independence      57  
Item 14
       58  
PART IV
  
Item 15
  Exhibits, Financial Statement Schedule      59  
Item 16
  Form 10-K Summary      59  
  Signatures      60  
 

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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 
         Directors
 
   
 
  
 
All of the individuals nominated for election to the Board are current directors and were elected at the last annual and special meeting of shareholders on April 21, 2021.
 
The nominated directors are qualified and experienced, possessing a broad range of skills that facilitate strong oversight of CP’s management and strategy and have agreed to serve on our Board.
 
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 of February 28, 2022 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 55 for full details on share ownership by our directors.
 
 


















    
2021 Overall Attendance
 
       
      
  
The 2022 nominee directors attended all of their Board and Committee meetings in 2021.
      
Senior Executive Leadership Experience
 
              
   All of the nominee directors have senior executive leadership experience.       
Professional Affiliations
 
 
All of the 2022 nominee directors are members of the Institute of Corporate Directors (ICD).
 
Isabelle Courville
Chair
 
 
 
Independent
Age:
59
Director since:
May 1, 2013
Residence:
Rosemère, Québec, Canada
2021 voting results:
99.52%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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.
 
 
CURRENT PUBLIC COMPANY BOARD EXPERIENCE
SNC-Lavalin
Group Inc.
(2017 to present)
 
    Chair of Human Resources Committee  
    Member of Governance and Ethics Committee  
Veolia Environment S.A.
(2015 to present)
 
    Chair Research, Innovation and Sustainable Development Committee  
    Member of Accounts and Audit Committee and the Nominations Committee  
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
(1)
              
     
Board   14 of 14        100%  
Audit and Finance   5 of 5        100%  
Governance   3 of 3        100%  
Compensation   3 of 3        100%  
Risk and Sustainability   3 of 3        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)
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 (IGOPP) (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: 4,500
DDSUs: 56,719
Meets share ownership requirements
 
(1)
 
Ms. Courville is an ex-officio member of all standing committees and may attend committee meetings at her discretion.
 
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The Hon. John Baird, P.C.
 
 
Independent
Age:
52
Director since:
May 14, 2015
Residence:
Toronto,
Ontario, Canada
2021 voting results:
99.40%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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.
 
 
CURRENT PUBLIC COMPANY BOARD EXPERIENCE
Osisko Gold Royalties Ltd
. (2020 to present)
 
    Chair of Governance and Nomination Committee  
    Member of Environmental and Sustainability Committee  
Canfor/Canfor Pulp (CPPI)
(2016 to present)
 
    Chair of the Board  
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board   14 of 14        100%  
Governance   3 of 3        100%  
Risk and Sustainability   3 of 3        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)
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: 33,603
Meets share ownership requirements
 
Keith E. Creel
 
 
Not Independent
Age:
53
Director since:
May 14, 2015
Residence:
Wellington,
Florida, U.S.A.
2021 voting results:
99.78%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
President and Chief Executive Officer of CP since January 31, 2017. Brings experience 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.
 
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board   14 of 14        100%  
BUSINESS EXPERIENCE
 
  President and Chief Executive Officer of CP (2017 to present)
  President and Chief Operating Officer of CP (February 2013 to January 2017)
  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)
  Superintendent and general manager at Grand Trunk Western Railroad (1999 to 2002)
  Trainmaster and director of corridor operations at Illinois Central Railway prior to its merger with CN in 1999
  Began his railroad career in 1992 as an intermodal ramp manager at Burlington Northern Railway in Birmingham, Alabama
INDUSTRY RECOGNITIONS
 
  Named “2021 CEO of the Year and Strategist of the Year” by The Globe and Mail’s Report on Business magazine
  Named “Railroader of the Year” for 2022 & 2021 by Railway Age magazine
  Named “Railroad Innovator” for 2014 by Progressive Railroading in recognition of his leadership at CP
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: 72,960
DSUs: 162,447
Options: 3,474,287
Meets executive share ownership requirements (see page 12)
 
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Gillian (Jill) H. Denham
 
 
Independent
Age:
61
Director since:
September 6, 2016
Residence:
Toronto, Ontario, Canada
2021 voting results:
95.62%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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.
 
 
CURRENT PUBLIC COMPANY BOARD EXPERIENCE
Lifeworks Inc
. (2008 to present)
 
    Chair of the Board  
Kinaxis Inc.
(2016 to present)
 
    Chair of Compensation Committee  
    Member of the Audit Committee and the Nominating and Governance Committee  
Canaccord Genuity
(2020 to present)
 
    Lead Director  
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board   14 of 14        100%  
Audit and Finance   6 of 6        100%  
Compensation
(1)
  1 of 1        100%  
Risk and Sustainability
(1)
  2 of 2        100%  
BUSINESS EXPERIENCE
 
  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
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 - Past
 
  Centre for Addiction and Mental Health (CAMH) (2015 to 2019)
  Ontario Teachers’ Pension Plan (2007 to 2010)
EDUCATION
 
  Honours Business Administration (HBA) degree, Ivey Business School, Western University
  MBA, Harvard Business School
SHARE OWNERSHIP
Shares: 0
DDSUs: 24,499
Meets share ownership requirements
 
Edward R. Hamberger
 
 
Independent
Age:
71
Director since:
July 15, 2019
Residence:
Delray Beach, Florida, U.S.A
.
2021 voting results:
99.84%
for
    
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board   14 of 14        100%  
Audit and Finance   6 of 6        100%  
Risk and Sustainability   3 of 3        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: 8,587
Has until July 2025 to meet share ownership requirements
 
(1)
 
Ms. Denham moved from the Risk and Sustainability Committee to the Management Resources and Compensation Committee on September 29, 2021.
 
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Matthew H. Paull
 
 
Independent
Age:
70
Director since:
January 26, 2016
Residence:
Wilmette, Illinois, U.S.A.
2021 voting results:
99.43%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience in the following areas: senior executive leadership, accounting & financial literacy, accounting & financial expertise, executive compensation/human resources, investment management, governance, government/regulatory affairs and legal, risk management and strategic oversight.
 
 
CURRENT PUBLIC COMPANY BOARD EXPERIENCE
Air Products
 & Chemicals Corporation
(2013 to Present)
 
    Chair of Audit and Finance Committee  
    Member of Corporate Governance and Nominating Committee and Executive Committee  
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board
  14 of 14        100%  
Compensation (Chair)
  3 of 3        100%  
Risk and Sustainability
  3 of 3        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
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: 15,190
DDSUs: 36,713
Meets share ownership requirements
 
Jane L. Peverett
 
 
Independent
Age:
63
Director since:
December 13, 2016
Residence:
West Vancouver, British Columbia, Canada
2021 voting results:
98.78%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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.
 
 
CURRENT PUBLIC COMPANY BOARD EXPERIENCE
CIBC
(2009 to present)
 
    Chair of the Corporate Governance Committee  
    Member of Audit Committee  
Northwest Natural Gas Company
(2007 to present)
 
    Chair of Audit Committee  
    Member of Governance, Organization and Executive Compensation Committee  
Capital Power Corporation
(2019 to present)
 
    Member of People, Culture and Governance Committee and the Health, Safety and Environment Committee  
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board
  14 of 14        100%  
Audit and Finance (Chair)
  6 of 6        100%  
Governance
  3 of 3        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)
PAST PUBLIC COMPANY BOARD EXPERIENCE
 
  Encana Corp. (2003 to 2017)
  Postmedia Network Canada Corp. (2013 to 2016)
  Hydro One 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: 25,759
Meets share ownership requirements
 
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Andrea Robertson
 
 
Independent
Age:
58
Director since:
July 15, 2019
Residence:
Calgary, Alberta, Canada
2021 voting results:
99.79%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board
  14 of 14        100%  
Governance
(1)
  2 of 2        100%  
Compensation
  3 of 3        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)
  University of Alberta, Faculty of Medicine & Dentistry (2021 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: 8,563
Has until July 2025 to meet share ownership requirements
 
Gordon T. Trafton
 
 
Independent
Age:
68
Director since:
January 1, 2017
Residence:
Naperville, Illinois, U.S.A.
2021 voting results:
99.82%
for
 
 
DIRECTOR SKILLS AND QUALIFICATIONS
 
Brings experience 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.
 
 
OVERALL 2021 ATTENDANCE
        
 
100%
 
     
Meeting Attendance
              
     
Board
  14 of 14        100%  
Governance
  3 of 3        100%  
Risk and Sustainability (Chair)
  3 of 3        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)
  Vice-President, Operations Integration, CN (2001 to 2003)
  Vice-President, Transportation and IT Services, Illinois Central Railroad (1999 to 2001)
  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: 25,550
Meets share ownership requirements
 
(1)
 
Ms. Robertson moved from the Corporate Governance, Nominating and Social Responsibility Committee to the KCS Acquisition and Integration Committee on September 29, 2021.
 
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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 CBCA. 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.
 
 
 
 
Additional information about current directors not standing for election
On January 28, 2022, Ed Monser, who had served as a director since December 2018, informed the Board that he would not be standing for
re-election
at the Meeting. On February 17, 2022, Rebecca MacDonald who had served as a director since May 2012, informed CP that she would not be standing for
re-election
at the Meeting. Both Mr. Monser and Ms. MacDonald will continue to serve as members of the Board until the 2022 Meeting, when their current terms will expire.
Executive Officers
The information regarding executive officers is included in Part I of our 2021 Form
10-K
under Information about our Executive Officers, following Item 4. Mine Safety Disclosures.
 
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 late 2019 and will receive the Code again in late 2022. 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.
       
 
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. For 2020/21, we modernized our code of ethics training process to enhance employee understanding of the Code.
 
 
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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 long-standing 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.
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 2021.
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 TSX, the SEC and the 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 Board standing 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. Of the current Audit and Finance Committee members, Ms. Peverett, Mr. Monser and Ms. Courville 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).
 
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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, 2021. 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
Jill Denham
Rebecca MacDonald
Andrea Robertson
 
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COMPENSATION DISCUSSION AND ANALYSIS
 
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Circular and this Amendment No. 1 on Form
10-K/A.
Our executive compensation program is designed to pay for performance, and to align management’s interests with our business strategy and the interests of our shareholders. This section of this Amendment No. 1 on Form
10-K/A
provides shareholders with descriptions of our compensation programs and 2021 compensation decisions for our Named Executive Officers (NEOs), listed below.
 
 
2021 NAMED EXECUTIVE OFFICERS
 
 
Keith E. Creel
President and Chief Executive Officer
 
Nadeem S. Velani
Executive Vice-President and Chief Financial Officer
 
John K. Brooks
Executive Vice-President and Chief Marketing Officer
 
Mark A. Redd
Executive Vice-President Operations
 
Jeffrey J. Ellis
Chief Legal Officer and Corporate Secretary
 
Where to find it
 
  
 
9
 
     10  
     13  
Compensation Programs      18  
     19  
     31  
     39  
  
40
   40
Incentive Plan Awards    43
Retirement Plans    47
Termination and Change in Control    50
CEO Pay Ratio    51
 
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Our approach to executive compensation
Our executive compensation program supports our operations-focused culture, 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:
 
competitive market pay practices to attract and retain talent
 
a compensation mix that is incentive-driven with a large proportion of total direct compensation that is variable or
“at-risk”
to support our pay for performance culture
 
compensation components paying out over multiple performance periods to link to our short and long-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:
 
 
The Compensation Committee reviewed and approved changes to our executive compensation programs in 2016 for the 2017 program year in response to shareholder feedback. Since that time we have continued to monitor the effectiveness of our executive compensation programs in supporting our pay for performance philosophy and commitment to create long-term value for our shareholders. Our unwavering commitment to safety is also at the forefront of design considerations as evident in our short-term incentive plan where 20 percent of the target opportunity is based on our performance against rigorous safety goals.
Compensation mix
Attracting and retaining high performing executives is key to our long-term sustainable growth and success. 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 our shareholders. We also require our executives to own CP equity and our share ownership guidelines increase by executive level (see page 12).
 
 
2021 total target direct
compensation mix
for our NEOs are
shown in the graph.
 
For 2021, 90 percent of
our CEO’s total target
direct compensation
and an average of
80 percent for our
other NEOs was at risk.
  
 
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Benchmarking
Our comparator group in 2021 remains the same, however with the close of the KCS transaction into voting trust on December 14, 2021, KCS has been removed from the comparator group going forward. Our comparator group consists of companies we compete with for talent. It includes Class I railroad peers as well as 11 capital-intensive Canadian companies. For certain positions within the organization, we apply a heavier weighting to Class I railroad peers; however, we consistently review alignment and compensation practices against our comparator group.
Our 2021 compensation comparator group is as follows:
 
 
Class I 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
 
 
 
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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 increases 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). Notional shares in the form of performance share units (PSUs), restricted share units (RSUs), and stock options are not considered for ownership requirement. 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 Executives’ DSU Plan (see page 49 for further plan details). 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
th
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 105 executives and senior management employees in 2021. 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.
 
Executive Level
  
Ownership requirement 
(as a multiple of base salary) 
     
 
Our NEOs are compliant with ownership guidelines:
 
•  Mr. Creel, Mr. Velani, Mr. Redd and Mr. Ellis have achieved their ownership requirements.
•  Mr. Brooks is expected to meet his ownership requirement within the specified period.
 
 
 CEO
 
  
 
6x 
 
   
 
 Executive Vice-President
 
  
 
4x 
 
   
 
 Senior Vice-President
 
  
 
2x 
 
   
 
 Vice-President
 
  
 
1.5 to 2x 
 
   
 
 Senior management
 
  
 
1x 
 
   
Equity ownership (at February 28, 2022)
 
             
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       9,142,560       8,357,306       14,497,050       22,854,356        15.00x  
             
Nadeem Velani
    4x       3,330,624       255,757       3,239,889       3,495,646        4.20x  
             
John Brooks
    4x       3,098,312       1,063,168       1,495,529       2,558,697        3.30x  
             
Mark Redd
    4x       2,996,728       1,979,420       1,466,240       3,445,660        4.60x  
             
Jeffrey Ellis
    2x       1,210,000       516,323       1,466,295       1,982,618        3.28x  
 
(1)
 
Minimum ownership values for Mr. Creel, Mr. Brooks and Mr. Redd have been converted to Canadian dollars using an exchange rate of 1.2698.
(2)
 
Total ownership values for Mr. Creel, Mr. Brooks and Mr. Redd are based on US$70.28, the closing price of our shares on the NYSE on February 28, 2022 and have been converted to Canadian dollars using an exchange rate of $1.2698. Values for Mr. Velani and Mr. Ellis are based on $89.25, the closing price of our shares on the TSX on February 28, 2022.
 
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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 Frederic W. Cook & Co., Inc. (FW Cook). Management receives advice and support from Willis Towers Watson, external consultants.
 
 
 
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Qualified and experienced 2021 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 to carry out its duties. The table below shows the key skills and experience of each member:
 
 
 
(1)
 
Ms. Denham joined the Compensation Committee on September 29, 2021.
(2)
 
Mr. Monser ceased to be a member of the Compensation Committee on September 29, 2021.
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, risk management 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
 
financial literacy, oversight of financial analysis related to compensation plan design and practices
 
pension benefit oversight, investment management
 
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 2021 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.
All of the Compensation Committee members other than Mr. Paull and Ms. Denham are members of the Governance Committee. In addition, Ms. Courville and Ms. Denham are also members of the Audit and Finance Committee, and Ms. Courville, Ms. Denham 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.
 
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Independent advice
The Compensation Committee and management retain separate independent executive compensation advisors to provide advice on compensation-related matters and to avoid any conflicts of interest:
 
   
Compensation Committee advisor
FW Cook
 
Management Compensation advisor
Willis Towers Watson
•  Compensation Committee retains FW Cook to act as an independent compensation advisor, attending committee meetings (unless otherwise requested by the Committee Chair)
•  the Compensation Committee approves all compensation-related fees and work performed by FW Cook
 
 
•  management engages Willis Towers Watson to provide market survey data, analysis and advice to management related to compensation matters
The next table below shows the fees paid to FW Cook and Willis Towers Watson in 2020 and 2021 for compensation advisory services.
 
     
     
2021
    
2020
 
         
     
Committee advisor
    
Management advisor
    
Committee advisor
    
Management advisor
 
         
Fees
 
  
FW Cook
(1)
 
    
Willis Towers Watson
 
    
FW Cook
(1)
 
    
Willis Towers Watson
 
 
         
Executive compensation-related fees
  
$
226,608
 
  
$
88,394
 
  
$
188,473
 
  
$
67,743
 
         
Other fees
  
$
0
 
  
$
1,525,184
 
  
$
0
 
  
$
2,882,009
 
         
Total fees
  
$
226,608
 
  
$
1,613,578
 
  
$
188,473
 
  
$
2,949,752
 
 
(1)
FW Cook fees have been converted to Canadian dollars using the average exchange rate for 2021 of $1.2535
Fees paid
In 2021, $88,394 was paid to Willis Towers Watson for compensation advisory services provided to management. Fees paid to Willis Towers Watson for all services provided to management, including actuarial and pension consulting, corporate risk and insurance brokering services were $1,613,578. The total executive compensation fees represent 5 percent of the total fees in 2021.
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.
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
 
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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
A detailed risk assessment of our compensation plans, programs and practices was conducted in 2019 by Willis Towers Watson. 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 was expected to be completed in 2021, however in light of the Merger Agreement between CP and KCS, and after consultation with Willis Towers Watson, management determined that a risk assessment would be more pertinent to be completed in 2022.
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
•  STIP payout is capped and not guaranteed, and the Compensation Committee has discretion to adjust the amount of 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, and any violations of our code of business ethics can be reported under our business ethics reporting policy
•  we have share ownership requirements for executives and senior management so they have a stake in our future success
•  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
 
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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.
 
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Compensation program
Total direct compensation consists of salary, annual short-term incentive and a long-term incentive award. 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 19)
  
•  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
Variable cash bonus
(see page 19)
  
•  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 predetermined 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 49)
  
•  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
•  matching DSUs 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
       
Long-term incentive
Performance
share units
(see page 26)
  
•  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 predefined market and financial metrics
•  the number of units that vest is based on a performance modifier 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
       
Long-term incentive
Stock options
(see page 27)
  
•  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 47)
  
•  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 pay packages that have a high percentage of variable pay
  
•  attract and retain highly qualified leaders
       
Perquisites
Flexible
spending
account
(see page 42)
  
•  market competitive benefit to support health and well-being
  
•  capped perquisites for the CEO and executives
  
•  attract and retain highly qualified leaders
 
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2021 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 competitive pay practices of the comparator group before recommending the salary increases for Board approval. The table below outlines base salaries of all NEOs set in U.S. dollars consistent with industry practice.
 
  Executive
  
2021  
(in USD)  
  
percent change from 2020  
  
2020
(in USD)
  Keith Creel
   1,193,513      0.0%     
1,193,513
  Nadeem Velani
   640,000      6.3%     
602,000
  John Brooks
   580,000      5.2%     
551,250
  Mark Redd
(1)
   525,000      17.6%     
446,250
  Jeffrey Ellis
(1)
   446,869      12.8%     
396,160
 
(1)
 
Increases for Mr. Redd and Mr. Ellis were approved to progressively align their tenure, scope of responsibility and performance with the competitive market
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 to achieve predefined 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 based on 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 modifier for each metric is capped at 2x target 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.
 
Our 2021 market review
resultedin STIP adjustments
for Mr. Velani, Mr. Brooks,
Mr. Redd and Mr. Ellis to
maintain their target total
direct compensation
positioning relative to the
competitive market.
          
STIP target as a percent of base salary
     
Executive
 
Minimum
 
Target
 
Maximum
      Keith Creel   0%   125%   250%
      Nadeem Velani   0%   100%   200%
      John Brooks   0%   100%   200%
      Mark Redd   0%   90%   180%
      Jeffrey Ellis   0%   80%   160%
For executives, the 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.
 
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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:
 
 
The corporate performance factor consists of financial, operating and safety measures of varying weights that total 100 percent. The year end result of each measure is assessed against predefined targets that are set at the beginning of the year (see page 22 for a complete review of the targets and results for the 2021 STIP).
The individual performance factor is based on the executive’s performance against annual objectives and additional predefined 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.
2021 STIP awards
The table below shows the calculation of the 2021 STIP awarded to each NEO. The salaries of Mr. Creel, Mr. Brooks and Mr. Redd have been converted to Canadian dollars using an average exchange rate of $1.2535 for 2021.
 
 
 
(1)
Mr. Brooks and Mr. Redd elected to defer a portion of their 2021 STIP award to DSUs.
 
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Table of Contents
Assessing individual performance
Individual performance objectives are set at the start of every financial year. The individual performance factor ranges from 0 to 200 percent.
 
       
  Executive
  
2021 individual performance factor  
         
The individual performance factor
for the CEO cannot exceed the
STIP corporate performance factor.
 
This ensures the payout factor
for the CEO aligns with
CP’s overall performance.
  Keith Creel
  
125%
        
  Nadeem Velani
  
175%
        
  John Brooks
  
175%
        
  Mark Redd
  
175%
        
  Jeffrey Ellis
  
                                                            175%
        
            
  
        
        
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 31 to read about each executive’s individual performance in 2021.
 
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Assessing corporate performance
In 2021, we demonstrated resiliency and tenacity to deliver strong results in one of the most challenging operating years we have faced. By relying on our precision scheduled railroading operating model and with a dedication to safety, we overcame network outages in British Columbia and extreme cold temperatures to achieve a 4 percent increase in 2021 revenue to $8.0 billion from $7.7 billion in 2020 and a 17 percent decrease year over year in
FRA-reportable
personal injuries frequency to a
record-low
0.92 from the previous
record-low
of 1.11 in 2020. Our adjusted diluted earnings per share
(1)
increased to $3.76, from $3.53 in 2020, while our adjusted operating ratio
(1)
was 57.6 percent, a 50 basis point increase from 57.1 percent.
In spite of the adversity we faced in 2021, we ended the year with a historic milestone in our journey to create the first single-line rail network linking the U.S., Mexico and Canada, with the KCS transaction closing into voting trust on December 14, 2021. This transaction represents tremendous growth opportunities for our Company to continue to create long-term shareholder value by expanding the market reach for CP and KCS customers, providing new competitive transportation options, and supporting the North American economy.
2021 Scorecard results
The table below shows the 2021 scorecard and results. The targets were set with stretch goals to motivate strong performance and create shareholder value as we continue to focus on our multi-year plan and remain a leader in safety.
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%)
 
   
  Maximum  
(200%)
 
   
 
2021
  Reported  
Result
 
   
 
2021
STIP
  Result  
 
   
    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
    57.1%       56.8%       56.4%       57.6%
(1)
      56.3%
(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
 
 
3,426
 
 
 
3,517
 
 
 
3,616
 
 
 
3,389
(1)
 
 
 
3,461
(2)
 
 
 
69%
 
 
 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       1.01       0.96       1.10       1.10       50%  
 
 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 beginning 2020
 
    1.15       1.10       1.05       0.92       0.92       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%       76%       76%       60%  
Corporate performance factor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
125
 
 
 
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(1)
Adjusted diluted EPS, Adjusted operating income and Adjusted operating ratio are
non-GAAP
measures.
Non-GAAP
measures are defined and reconciled on pages
94-104
of CP’s 2021 Form
10-K.
(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 2021 budget. Consequently, operating ratio and operating income were adjusted downwards and upwards, respectively compared to our reported results, increasing 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.
This means that 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, vesting factors 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 2021.
In 2021, the only use of positive discretion was related to the payout and vesting performance factors of a 2018 special retention grant in which one NEO was impacted (Mark Redd was awarded this grant prior to him becoming an NEO). As previously disclosed in the 2021 proxy, the grant, consisting of PSUs and performance stock options (PSOs), had exceeded the diluted EPS target and missed the revenue target by less than one percent due to
COVID-19
impacts on our volumes. After a thorough review and discussion of overall company performance and shareholder return, the Board approved the application of positive discretion. See Outstanding share-based awards and option-based awards on page 43 for more details.
(1)
 
(1)
 
Although the recommendation to exercise discretion with respect to payout and vesting performance factors were made following the conclusion of the performance period ending December 31, 2020, the July 2018 special retention grants did not vest until July 20, 2021 and were 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.
 
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Table of Contents
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
 
•  may be paid out in shares at the discretion of the CEO
 
•  accumulates quarterly dividends
 
•  no guarantee of a minimum payout
 
•  if performance is exceptional on all measures the Board may approve a payout of up to 249%
 
      
•  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
 
 
Termination Provisions
 
      
 
       
Resignation
 
•  all units cancelled
      
•  30 days to exercise any vested options; unvested options are cancelled
 
       
Retirement
(1)
 
•  units continue to vest providing the unit holder meets the retirement age and service requirements and has a minimum participation period of six months during a 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 continue to vest for six months following termination date
 
       
Termination with Cause
 
 
•  all units cancelled
      
•  all options cancelled
       
Change of Control
 
•  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 notice of six months is required starting in 2021 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.
 
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Table of Contents
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.
Grants are also made during the year for special situations such as retention or new hires. Special grants can include PSUs, stock options, RSUs or DSUs. These grants are made following CEO approval on the first Tuesday of the month, when there is no blackout in effect. If the Company is 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 2021, the Compensation Committee authorized a pool of 250,000 options for allocation by the CEO, who granted 28,423 options to nine employees for retention and to recognize performance.
2021 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.
Long-term incentive awards are typically granted annually to NEOs and eligible employees. In 2021, Mr. Creel received two stock option grants, the first consisting of the regular annual grant on January 29, 2021 and the second, a special upfront grant on March 27, 2021. In respect of the announcement of the merger with KCS on March 21, 2021, CP and Mr. Creel agreed to amend his employment agreement to retain him until at least 2026. These amendments were approved by the Board and were made to secure Mr. Creel’s role in leading the successful integration of CP with KCS as well as retaining his experience and skills to achieve continued success.
The special stock option grant will vest ratably in equal portions over a four year period and will expire seven years from the grant date, consistent with the provisions of our stock option plan. To self-fund this award, Mr. Creel’s employment agreement was amended to reduce the value of his annual long-term incentive plan by US$2.1 million in each year of 2022, 2023, 2024 and 2025 (an aggregate of US$8.4 million).
The table below shows the 2021 long-term incentives awards for the NEOs as of December 31, 2021:
 
Executive
  
2021  
long-term  
incentive award  
(grant value)  
($)
(1)
  
    
Allocation
 
 
  
Performance share units
 
    
Stock options
 
 
  
($)
 
    
(#)
 
    
($)
 
    
(#)
 
 
  Keith Creel
(2), (3)
     22,049,529        7,138,547        84,695        14,910,982        754,530  
  Nadeem Velani
     2,682,113        1,684,658        19,605        997,455        57,790  
  John Brooks
(2)
     2,420,435        1,500,279        17,800        920,156        49,835  
  Mark Redd
(2), (4)
     2,008,552        1,245,063        14,772        763,489        41,350  
  Jeffrey Ellis
     1,383,789        869,182        10,115        514,607        29,815  
 
(1)
See the Summary compensation table on page 40 for details on how we calculate 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 2021 average exchange rate of $1.2535.
(3)
 
Mr. Creel’s 2021 stock option value reflects the annual grant of 237,145 stock options on January 29, 2021 and the special upfront grant of 517,385 stock options received on March 27, 2021, in conjunction with amendments to his executive employment agreement on March 21, 2021.
(4)
 
Mr. Redd elected to defer a proportion of his 2021 PSU award to DSUs.
 
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Table of Contents
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.
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, Return on Invested Capital (ROIC)
(1)
from 200 percent to 270 percent. The targets for ROIC have been set with stretch and exceptional goals that are more difficult to achieve than the prior year 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. The total shareholder return metrics and weightings remain the same.
The performance period for the 2021 PSU awards is January 1, 2021 to December 31, 2023. Performance will be assessed against the measures in the table below.
 
2021 PSU performance measures
 
  
  Why the measure is important
 
 
Threshold   
(50%)   
 
 
Target   
(100%)   
 
 
Stretch   
(200%)   
 
 
Exceptional   
(270%)   
 
 
Weighting   
 
  PSU three-year average return on invested capital   (ROIC)
(1)
  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
 
  15.5%   16.3%   16.7%   17.1%   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
 
  25
th

percentile
  50
th

percentile
  75
th

percentile
  n/a   15%
  Total shareholder return (TSR)
  Measured over three years. The ordinal ranking of CP’s   NYSE   CAGR relative to the Class I railroads
  
Compares our TSR on the NYSE to the publicly traded Class I railroads to ensure we are competitive against our primary competitors.
 
Aligns long-term incentive compensation with long-term shareholder interests
 
  4
th
  3
rd
  1
st
  n/a   15%
 
(1)
 
Adjusted ROIC is a
non-GAAP
measure.
Non-GAAP
measures are defined and reconciled on pages
94-104
of CP’s 2021 Form
10-K.
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, 2021 and the ending point will be the
10-day
average closing share price of our shares on the appropriate index prior to January 1, 2024. TSR is adjusted over the period to reflect dividends paid. Awards will be interpolated if results fall between threshold and exceptional. If results are below the threshold level for any of the performance measures, units for that specific measure will be forfeited.
The table below shows the details of the 2021 annual PSU award, granted on January 29, 2021.
 
       
Executive
 
  
Grant value ($)
(1)
 
      
Number of PSUs
 
      
Grant price
 
 
    Keith Creel
 
  
 
 
7,138,547
 
 
 
    
 
 
84,695
 
 
 
    
 
 
US$67.24 (NYSE)
 
 
 
    Nadeem Velani
 
  
 
 
1,684,658
 
 
 
    
 
 
19,605
 
 
 
    
 
 
$85.93 (TSX)
 
 
 
    John Brooks
 
  
 
 
1,500,279
 
 
 
    
 
 
17,800
 
 
 
    
 
 
US$67.24 (NYSE)
 
 
 
    Mark Redd
(2)
 
  
 
 
1,245,063
 
 
 
    
 
 
14,772
 
 
 
    
 
 
US$67.24 (NYSE)
 
 
 
    Jeffrey Ellis
 
  
 
 
869,182
 
 
 
    
 
 
10,115
 
 
 
    
 
 
$85.93 (TSX)
 
 
 
 
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Table of Contents
(1)
See the Summary compensation table on page 40 for details on how we calculate the grant date fair values of the PSUs. The grant values of the PSU awards based on the NYSE trading price have been converted to Canadian dollars using a 2021 average exchange rate of $1.2535.
(2)
Mr. Redd elected to defer a proportion of his 2021 PSU award to DSUs.
New for 2022 PSU awards
The close of the KCS transaction into voting trust on December 14, 2021 marks a significant milestone for CP. The impacts of the accelerated timing of the trust closing have made it necessary for us to
re-evaluate
how to most effectively align our compensation plans with performance as well as to retain and motivate our talented railroaders during this transformative time for CP. After careful consideration and review, the Board has decided that because of the KCS transaction it is prudent to make near-term changes to the PSU plan design. To further strengthen the link between pay and performance, the Board has approved two performance metric changes to the 2022 PSU plan design. For the performance period covering January 1, 2022 to December 31, 2024, a three-year cumulative free cash flow metric with an adjusted net debt to adjusted EBITDA (earnings before interest, tax, depreciation and amortization)
(1)
modifier (maximum of up to 1.5x) to incentivize deleveraging of the balance sheet following the KCS transaction was introduced. This will replace ROIC
(1)
as the KCS transaction-related impacts such as timing uncertainty and purchase accounting implications make goal setting and measuring ROIC performance challenging. The Board will ensure continued rigour in target setting as the metrics are changing in 2022 from ROIC to free cash flow with an adjusted net debt to adjusted EBITDA modifier.
In addition, our relative TSR on the NYSE will be compared to constituents of the S&P 500 Industrials index. This replaces our current Class I railroad peer group that has been reduced to four companies following the close of KCS into voting trust, which is too small for meaningful evaluation of relative TSR performance. All weightings and payout factor ranges from our 2021 PSU awards will remain the same.
 
(1)
 
Free cash, Adjusted net debt to Adjusted EBITDA, and Adjusted ROIC are
non-GAAP
measures.
Non-GAAP
measures are defined and reconciled on
pages 94-104
of CP’s Annual Report on Form
10-K
for the year ended December 31, 2021.
Stock options
Stock options focus executives on long-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 closing price of our 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.
Options may be granted by the Board, the Compensation Committee, the Chief Executive Officer, the Chair of the Board or the Chair of the Compensation Committee, as the case may be, as administrator of the option plan, as determined from time to time (the Administrator), to any officer, employee or consultant of CP or any subsidiary, including a family trust, personal holding corporation and retirement trust (together, Eligible Persons).
The exercise price of shares subject to an option will be determined or ratified by the Administrator and will not be less than the market price of the shares at the date on which an option is granted, calculated as the closing price of a board lot of the shares on the TSX (if the option is granted in Canadian dollars) or on the NYSE (if the option is granted in United States dollars) on (i) the last trading day preceding the grant date, if the option is granted before the close of trading on the grant date or (ii) the grant date, if the option is granted after the close of trading on the grant date. The exercise price may also be as permitted or required by the TSX or NYSE, as applicable.
CP is also entitled to issue share appreciation rights (SARs) pursuant to the terms of the option plan to Eligible Persons at the same time as the grant of an option.
 
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Table of Contents
SARs, if granted, will have the following terms (or such other terms as are consistent with the related options):
 
  a.
the number of SARs to be granted shall, in the sole discretion of the Administrator, be:
 
  i.
one SAR for every two optioned shares, or
 
  ii.
one SAR for each optioned share;
 
  b.
the reference price for a SAR will be same as the exercise price of the related option
 
  c.
SARs may be exercise from time to time by an optionholder as follows:
 
  i.
on and after the second anniversary of the grant date, as to 50% of the SARs or any part thereof;
 
  ii.
on and after the third anniversary of the grant date, as to the remaining 50% of the SARs or any part thereof;
 
  d.
exercise of SARs will result in a reduction in the number of option shares on the basis of one optioned share for each exercised SAR; and
 
  e.
exercise of an option will result in a reduction in the number of SARs on the basis of:
 
  i.
one SAR for each optioned share purchased in excess of 50% of the number of optioned shares, where one SAR was granted for every two optioned shares; and
 
  ii.
one SAR for each optioned share purchased, where one SAR was granted for each optioned share.
 
  f.
The expiry date of a SAR will be ten years after the grant date.
CP did not grant any SARs in 2021 and as of March 10, 2022, CP does not have any SARs outstanding.
2021 Stock option awards
The table below shows the details of the 2021 stock option award grants.
 
         
Executive
  
Grant Date
 
    
Grant value ($)
(1)
 
      
# of options
 
      
Grant price
 
 
    Keith Creel
(2)
 
    
 
29-Jan-21
 
 
 
    
 
4,378,658
 
 
 
      
 
237,145
 
 
 
      
 
US$67.24 (NYSE)
 
 
 
    
 
27-Mar-21
 
 
 
    
 
10,532,324
 
 
 
      
 
517,385
 
 
 
      
 
US$71.64 (NYSE)
 
 
 
    Nadeem Velani
 
    
 
29-Jan-21
 
 
 
    
 
997,455
 
 
 
      
 
57,790
 
 
 
      
 
$85.93 (TSX)
 
 
 
    John Brooks
 
    
 
29-Jan-21
 
 
 
    
 
920,156
 
 
 
      
 
49,835
 
 
 
      
 
US$67.24 (NYSE)
 
 
 
    Mark Redd
 
    
 
29-Jan-21
 
 
 
    
 
763,489
 
 
 
      
 
41,350
 
 
 
      
 
US$67.24 (NYSE)
 
 
 
    Jeffrey Ellis
 
    
 
29-Jan-21
 
 
 
    
 
514,607
 
 
 
      
 
29,815
 
 
 
      
 
$85.93 (TSX)
 
 
 
 
(1)
 
See the Summary compensation table on page 40 for details on how we calculate the grant date fair values of the stock options. The grant value of the stock option awards based on the NYSE trading price have been converted to Canadian dollars using a 2021 average exchange rate of $1.2535.
(2)
 
As discussed in the 2021 Long-term incentive awards on page 25, Mr. Creel received the regular annual stock option grant and a second, special upfront grant in relation to the announcement of the merger with KCS on March 21, 2021.
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, together with any other share compensation arrangement, may be reserved for issuance to insiders as options
 
  
10%
 
Maximum number of shares that may be issued under the option plan and any other share compensation arrangements to insiders in a
one-year
period
 
  
10%
 
Maximum number of shares that may be issued under the option plan and any other share compensation arrangements 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 shares that may be reserved for issuance to any person as options
 
  
5%
 
 
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Table of Contents
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 dilution at the end of 2021 was 1.15 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
 
    
 
2019
 
      
 
2020
 
      
2021
 
 
    Number of options granted
 
      
 
1,123,650
 
 
 
      
 
1,086,200
 
 
 
      
 
1,346,358
 
 
 
    Weighted number of shares outstanding
 
      
 
693,859,695
 
 
 
      
 
677,193,050
 
 
 
      
 
679,709,375
 
 
 
    Burn rate
 
      
 
0.16%
 
 
 
      
 
0.16%
 
 
 
      
 
0.20%
 
 
 
The table below shows the options outstanding and available for grant from the Stock Option Plan as at December 31, 2021.
 
      
Number of options/shares
 
      
Percent of outstanding shares
 
 
Options outstanding (as at December 31, 2021)
 
      
 
7,392,188
 
 
 
      
 
0.80%
 
 
 
Options available to grant (as at December 31, 2021)
 
      
 
3,312,565
 
 
 
      
 
0.36%
 
 
 
Shares issued on exercise of options in 2021
 
      
 
711,922
 
 
 
      
 
0.08%
 
 
 
Options granted in 2021
 
      
 
1,346,358
 
 
 
      
 
0.14%
 
 
 
Since the launch of the stock option plan in October 2001, a total of 90,393,210 shares have been available for issuance under the plan and 79,688,457 shares have been issued through the exercise of options as at December 31, 2021.
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.
 
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Payout of 2019 PSU award
On December 31, 2021, the 2019 PSU grant for the performance period of January 1, 2019 to December 31, 2021 vested and was paid out on February 8, 2022. The NEOs and all other eligible employees received a performance payout factor 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.
 
 
(1)
The grant value for Mr. Creel, Mr. Brooks and Mr. Redd was converted to Canadian dollars using an exchange rate of $1.3269 for 2019.
(2)
 
Reflects the
30-day
average closing share price prior to December 31, 2021 on the TSX ($92.51) and NYSE (US$72.56) when both markets were open.
(3)
 
The PSU payout value for Mr. Creel, Mr. Brooks and Mr. Redd was converted using a 2021
year-end
exchange rate of $1.2678.
(4)
 
Mr. Redd’s 2019 PSU award reflects his annual grant on February 14, 2019 as well as an additional grant on September 3, 2019 in relation to his appointment to Executive Vice President, Operations. Both 2019 PSU awards had the same performance period, performance measures and payout factor of 200%.
How we calculated the 2019 PSU performance factor
The payout value has been calculated in accordance with the terms of the PSU plan and the 2019 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)
 
    
 
15.3%
 
 
 
    
 
16.0%
 
 
 
    
 
16.4%
 
 
 
    
 
16.5%
 
 
 
    
 
70%
 
 
 
   200%
 
             
TSR to S&P/TSX 60 Index
(2)
 
    
 
25
th

percentile
 
 
 
 
  
 
 
50
th

percentile
 

 
 
  
 
 
75
th

percentile
 

 
 
  
 
 
88
th

percentile
 

 
 
    
 
15%
 
 
 
   200%
 
             
TSR to Class I railroads
(2)
 
    
 
4
th
 
 
 
    
 
3
rd
 
 
 
    
 
1
st
 
 
 
    
 
1
st
 
 
 
    
 
15%
 
 
 
   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
94-104
of CP’s 2021 Form
10-K.
Results for Adjusted Return on Invested Capital for PSU purposes have been adjusted in 2021 to remove the impacts of the KCS acquisition in order to more accurately reflect the operating performance of our core business from 2019-2021.
(2)
 
TSR performance was rated against companies in the respective indices at the beginning and end of performance periods in accordance with the terms of the PSU plan and the 2019 award agreement.
 
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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 2021
As the
COVID-19
pandemic continues to be a unique and challenging situation for all of us, we focus on controlling what we can control. We pursue measures to protect our employees so that we can deliver excellent service to our customers, manage our resources in lockstep with our business, create innovative supply chain solutions, serve the communities we operate in and create compelling value for our shareholders. By leveraging our comprehensive preparedness framework and contingency action plan, we have been able to sustain the safe, efficient and productive railroad operations vital to the economy. We remain focused on our five foundations of providing service, controlling costs, optimizing assets, operating safely and developing people.
Despite the pandemic, we have many successes to celebrate including the historic agreement to combine CP and KCS to create the first U.S.-Mexico-Canada rail network. The combination of the two fastest growing Class I railroads will be subject to STB approval, which will create a network with expanded reach that brings new competitive options to customers, while creating jobs and bringing environmental benefits to the public. We have achieved significant milestones including the STB authorization of CP to use a voting trust for this transaction, and the engagement and support of over 700 customers/shippers. In addition, we received Mexican regulatory approvals, CP shareholders overwhelmingly supported this transformative combination and we successfully closed the
CP-KCS
transaction into the voting trust, a critical milestone in the journey to make Canadian Pacific Kansas City Limited (CPKC) a reality. The STB’s review is expected to be completed in the fourth quarter of 2022. Furthermore, it was over a year ago that CP officially acquired the Central Maine and Québec Railway (CMQ) and we are proud to share it has been a seamless operational integration which has provided expanded economic opportunities across New Brunswick and Atlantic Canada.
Our operating ratio was 59.9 percent in 2021, a 280 basis point increase from 57.1 percent in 2020. The increase was primarily due to acquisition-related costs associated with the KCS acquisition, the unfavourable impact of changes in fuel prices and lower volumes as measured by RTMs. Adjusted operating ratio
(1)
was 57.6 percent, a 50 basis point increase from 57.1 percent. The increase is due to the same factors discussed above, except adjusted operating ratio in 2021 excludes the acquisition-related costs. This is a result of the company’s disciplined approach to precision scheduled railroading. Despite challenging macroeconomic conditions, including the
COVID-19
pandemic and natural disasters (wildfires and flooding), revenues increased 4 percent to $8.0 billion from $7.7 billion in 2020. Diluted earnings per share (EPS) increased 16.4 percent to $4.18 from $3.59 and adjusted diluted EPS
(1)
rose 6.5 percent to $3.76 from $3.53.
Our journey to being Sustainably Driven has continued to progress in 2021, with a particular focus on one of our core values: diversity. We recognize that fostering an inclusive environment where all employees feel empowered to strive for and achieve success supports our high-performance culture and is integral to our growth and success as an organization. Mr. Creel continues to champion the work of our Indigenous, racial and gender diversity councils. In 2021, the diversity councils launched a women’s mentorship program, Indigenous liaison network and provided awareness and education opportunities to employees. Our efforts to create a
 
(1)
 
Adjusted diluted EPS and Adjusted operating ratio are
non-GAAP
measures.
Non-GAAP
measures are defined and reconciled on pages
94-104
of CP’s 2021 Form
10-K.
 
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more diverse and inclusive workplace, including our veterans program and work placements for new Canadians, were recognized as CP was named to Canada’s Best Diversity Employers
®
of 2021 and a top 10 Military Friendly
®
employer in the United States for 2021.
Our employees’ commitment to the Home Safe program supports mutual respect, partnership and compliance to be vigilant about personal safety and the safety of
co-workers.
This program facilitates CP remaining an industry leader in train accident statistics for the 16th consecutive year with a
FRA-reportable
train accident frequency of 1.10 and 2021 saw
FRA-reportable
personal injuries down 17 percent from 2020 with a frequency of 0.92, which is tied for second best frequency of all Class I railroads. Operating safely is a constant journey and we are proud to celebrate outstanding employee safety leadership through our annual Safety Awards for Excellence.
We continue to build on our legacy of innovation, leadership and precision scheduled railroading, by taking an industry-leading approach to managing the challenges and addressing the opportunities related to climate change. We released our first Climate Strategy in 2021 outlining the company’s approach to drive innovative climate action and manage climate-related risks through actions across five strategic pillars. To guide implementation of the Climate Strategy, we have established two science-based emissions reduction targets that address 100 percent of CP’s Scope 1 and Scope 2 emissions, and more than half of Scope 3 emissions. Our Climate Strategy and supporting science-based emissions reduction targets have been developed in alignment with the goals of the Paris Agreement and the
Pan-Canadian
Framework on Clean Growth and Climate Change, which seek to limit global temperature increases to well below 2°C.
As part of our overall approach to transparent Environmental, Social and Governance (ESG) reporting, we participate in leading sustainability disclosure frameworks. In 2021, CP was named to the Dow Jones Sustainability North America Index (DJSI North America) for the second consecutive year. In addition, CP is proud to once again be recognized by CDP, an internationally recognized
non-profit
organization, for leadership on climate action and transparent reporting. CP was named to the CDP A List for the first time in 2021 for climate-related disclosure. CP was also recognized by Corporate Knights as one of Canada’s Best 50 Corporate Citizens for 2021 and as one of the 2022 Global 100 Most Sustainable Corporations in the World for our industry leading approach to sustainability.
Mr. Creel has led the strategy and built our momentum to provide a superior level of service, create capacity by optimizing assets (longer train lengths) and leveraging technology to help our customers, the environment and the economy. We increased our terminal network capacity and reduced operating costs. Nearly half of the locomotives in service are equipped with Fuel Trip Optimizer (FTO), which is an
on-board
software designed for the safe automated movement of freight trains, resulting in improved fuel efficiency and a reduction in overall emissions. As part of CP’s Climate Strategy, our investment in the innovative Hydrogen Locomotive Program reinforces our commitment to sustainable growth and greenhouse gas emission reductions. This aligns with our commitment to customers to create efficiencies in the supply chain and we are proud to have entered into multi-year agreements with Canadian Tire, Canpotex and Loblaws.
We are proud to share Mr. Creel was named the 2021 CEO of the Year and Strategist of the Year by The Globe and Mail’s Report on Business Magazine, which credited Mr. Creel with orchestrating the biggest merger and acquisition deal of 2021. For the second year in a row, Mr. Creel was named Railway Age magazine’s Railroader of the Year, an honour shared in 2022 with KCS President and Chief Executive Officer Patrick J. Ottensmeyer. The magazine described Mr. Creel and Mr. Ottensmeyer as exemplary and visionary leaders who are reconfiguring the North American railway landscape. Mr. Creel was also named to the 2022
All-Canada
Executive team by Institutional Investor magazine and awarded Best Investor Relations (IR) by a Senior Management team (large cap) at the 2021 IR Magazine awards.
2021 compensation
The table below shows the compensation awarded to Mr. Creel for 2021. The assessment was reviewed by the Compensation Committee, and approved by the Board.
 
 
 
Compensation (in CAD $‘000)
 
  
2021
 
 
 
Fixed
 
        
 
Salary
 
    
 
1,496
 
 
 
 
At-risk
 
        
 
Short-term incentive
 
    
 
2,338
 
 
 
 
Long-term incentive
 
        
 
- PSUs
 
    
 
7,139
 
 
 
 
- Stock options - annual
 
    
 
4,379
 
 
 
 
- Stock options - upfront
 
    
 
10,532
 
 
 
 
Total direct compensation
 
    
 
25,884
 
 
 
Note:
All values above are from the Summary Compensation Table on page 40. Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants.
 
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Table of Contents
2022 compensation
The Compensation Committee, with guidance and advice from FW Cook, conducted a comprehensive review of Mr. Creel’s compensation in conjunction with competitive market information as well as corporate and individual performance. Based on the findings of this review, the Committee increased Mr. Creel’s 2022 total direct compensation by US$900,000 (C$1.12 million).
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 2019 to 2021.
 
 
 
    
 
 
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 40
 
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 2019 to 2021
•  the value of vested 2019 PSUs paid in February 2022 was calculated using the
30-day
average trading price of our shares prior to December 31, 2021 of US$72.56 on the NYSE with a performance multiplier of 2.0 and includes reinvested dividends up to the payment date
•  the value of unvested 2020 and 2021 PSUs are based on the closing price of our shares on December 31, 2021 of US$71.94 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, 2021 of US$71.94 on the NYSE
•  the values for salary earned and actual cash bonus are as disclosed in the summary compensation table on page 40
•  the value of any realized and realizable PSUs and stock options have been converted into Canadian dollars using the 2021
year-end
exchange rate of $1.2678
 
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, 2021. 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.
 
  
 
  
Compensation
awarded
($)
 
   
Realized and realizable value
of compensation as at
           
Value of $100
 
    
December 31, 2021
           
Keith Creel
    
Shareholder
 
(in CAD $‘000)
 
 
($)
    
Period
    
($)
    
($)
 
2019
     14,029,129       35,835,646        Jan 1, 2019 to Dec 31, 2021        255        193  
2020
     16,026,481       20,745,748        Jan 1, 2020 to Dec 31, 2021        129        140  
2021
(1)
     25,883,203       13,215,773        Jan 1, 2021 to Dec 31, 2021        51        104  
(1)
 
Compensation awarded in 2021 is higher than 2019 and 2020 as a result of the special upfront grant of stock options in March 2021 and is expected to normalize in 2022.
Mr. Creel’s compensation awarded values are as disclosed in the summary compensation table. Mr. Creel’s realized and realizable value for salary earned and actual bonus received have been converted to Canadian dollars using the following average exchange rates: $1.3269 for 2019, $1.3415 for 2020 and for $1.2535 for 2021. The value of any realized and realizable long-term incentive is converted into Canadian dollars using the 2021
year-end
exchange rate of $1.2678.
 
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Table of Contents
NADEEM S. VELANI   
EXECUTIVE VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
 
 
  
Mr. Velani has been Executive Vice-President and Chief Financial Officer since October 17, 2017. Mr. Velani joined CP in March 2013 after spending approximately 15 years with CN where he held a variety of leadership positions in financial planning, sales and marketing, investor relations and the Office of the President and CEO.
 
Mr. Velani is a key member of the CP senior management team responsible for the long-term strategic direction of the Company. Responsibilities include financial planning, investor relations, reporting and accounting systems, as well as pension, tax, treasury and internal audit functions. Mr. Velani obtained a Bachelor of Economics from Western University and an MBA in Finance/International Business from McGill.
Accomplishments in 2021
Mr. Velani’s commitment to generate sustainable profitable growth is unwavering even during a challenging economic environment. Mr. Velani continues to execute the Company’s strategic multi-year plan and make capital investments creating efficiencies within our business. Capital investments include locomotive modernization and covered hoppers that in combination with our High Efficiency Product (HEP) trains will enable CP to move 40 percent more grain per train. By leveraging the foundations of precision scheduled railroading, we are able to respond quickly and effectively to changing environments enabling us to adjust to the market while continuing to drive long-term shareholder return. Our operating ratio was 59.9 percent in 2021, a 280 basis point increase from 57.1 percent in 2020. The increase was primarily due to acquisition-related costs associated with the KCS acquisition, the unfavourable impact of changes in fuel prices and lower volumes as measured by RTMs. Adjusted operating ratio
(1)
was 57.6 percent, a 50 basis point increase from 57.1 percent. The increase is due to the same factors discussed above, except adjusted operating ratio in 2021 excludes the acquisition-related costs. Despite challenging macroeconomic conditions, revenues increased by 4 percent to $8.0 billion from $7.7 billion in 2020. Diluted earnings per share (EPS) increased 16.4 percent to $4.18 from $3.59 and adjusted diluted EPS
(1)
rose 6.5 percent to $3.76 from $3.53.
With strong shareholder support, we have closed KCS into the voting trust effective December 14, 2021. CP issued $6.7 billion of debt in the U.S. and $2.2 billion of debt in Canada to fund, in part, the cash consideration required for the acquisition of KCS, which, subject to receipt of control approval from the STB, would create North America’s first single-line rail network connecting Canada, the U.S. and Mexico. We experienced the largest demand for Canadian debt issuance with very favourable coupon rates.
With Mr. Velani’s leadership, CP was named to the 2021 Dow Jones Sustainability North America Index (DJSI North America) for the second consecutive year. The index comprises sustainability leaders representing the top 20 percent of the largest 600 North American companies evaluated by S&P Global, selected from a record number of participants in 2021. CP’s continued inclusion on the index is the result of a long-term organizational commitment to continuous improvement and reporting sustainability practices. CP’s recent sustainability efforts have focused on improving fuel efficiency, evaluating innovative
zero-emissions
technology, creating a more sustainable supply chain, establishing a diverse and inclusive workplace and investing in the health and safety of our employees and the communities in which we operate. In addition, CP is proud to be recognized by World Finance’s 2021 Sustainability Awards as a leader in the transportation industry for the second year in a row for strong sustainability performance. Mr. Velani is a member of the advisory board for the Institute for Sustainable Finance (ISF). ISF is the first-ever multi-disciplinary and collaborative hub in Canada that brings together academia, the private sector and government with the singular focus of increasing Canada’s sustainable finance capacity. Its mission is to align mainstream financial markets with Canada’s transition to a prosperous sustainable economy, including long-term environmental sustainability.
As
co-chair
of CP’s Diversity and Leadership Development Steering Committee, Mr. Velani champions company-wide leadership programs including the women’s leadership network and mentoring program. Mr. Velani was named to the 2022
All-Canada
Executive team by Institutional Investor magazine and awarded Best Investor Relations (IR) by a Senior Management team (large cap) at the 2021 IR Magazine awards.
 
(1)
Adjusted diluted EPS and Adjusted operating ratio are
non-GAAP
measures.
Non-GAAP
measures are defined and reconciled on pages
94-104
of CP’s 2021 Form
10-K.
 
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Table of Contents
2021 compensation
The table below is a summary of the compensation awarded to Mr. Velani for 2021. The assessment was reviewed by the Compensation Committee, and approved by the Board.
 
 
 
Compensation (in CAD $‘000)
 
  
2021
 
 
 
Fixed
 
        
 
Salary
 
    
 
807
 
 
 
 
At-risk
 
        
 
Short-term incentive
 
    
 
1,103
 
 
 
 
Long-term incentive
 
        
 
- PSUs
 
    
 
1,685
 
 
 
 
- Stock options
 
    
 
997
 
 
 
 
Total direct compensation
 
    
 
4,592
 
 
 
            
Note:
All values above are from the Summary Compensation Table on page 40. Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants.
 
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Table of Contents
JOHN K. BROOKS  
EXECUTIVE VICE-PRESIDENT AND CHIEF MARKETING OFFICER
 
 
Mr. Brooks has been Executive Vice-President and Chief Marketing Officer (CMO) since February 14, 2019. Mr. Brooks started his railroading career with Union Pacific and later helped start I&M Rail Link, LLC, which was purchased by the Dakota, Minnesota and Eastern Railroad (DM&E) in 2002. When CP acquired the DM&E in 2007, Mr. Brooks was Vice-President of Marketing.
 
With more than 27 years in the railroading business, Mr. Brooks has held senior responsibilities in all lines of business, including coal, chemicals, merchandise products, grain and intermodal. Mr. Brooks is responsible for strengthening relationships with existing customers, generating new opportunities for growth, enhancing the value of the Company’s service offerings and developing strategies to optimize CP’s business.
Accomplishments in 2021
Mr. Brooks remains committed to engaging with customers and collaborating to support an effective supply chain. Our Canadian franchise has the shortest length of haul for all the key markets we serve, with access to major ports on the West and East coasts allowing us to provide a superior level of service to our customers, as evidenced by our best ever customer satisfaction scores and net promoter scores.
The proposed historic combination of CP and KCS requires the right set of circumstances, leadership and customer support. Over 700 customers/shippers wrote to provide their support of the
CP-KCS
transaction recognizing this unique combination will bring together a combined
CP-KCS
network (subject to STB approval), that has zero overlap, which means not a single shipper will lose options. As a result of the transaction, we will be able to provide new markets, new routes and new alternatives to reach consumers across North America for all lines of business. The supply chain challenges brought on by the pandemic have proven how important capacity, fluidity and competitive shipping options are to provide solutions to a congested supply chain.
Our precision scheduled railroading operating model and disciplined planning and execution allows for faster train speeds and reduced dwell resulting in better asset utilization and reduced costs for CP and our customers. Our
8,500-foot
High Efficiency Product (HEP) trains increase capacity and efficiency in the grain supply chain for customers and stakeholders. Our Intermodal business unit with CP’s unique landholdings in Vancouver, Calgary, Toronto, Montreal and Chicago enables us to grow and create solutions for our customers. Inside our Vancouver terminal we created the
first-of-its-kind
transload facility by partnering with A.P. Moller-Maersk.
Other successes include our domestic intermodal business growth of 10 percent year over year, demand management, and the equipment guarantee program. We are proud to continue our near-century-long commercial relationship with Canadian Tire with a multi-year agreement. In addition, we entered into long-term agreements with Canpotex and Loblaws while Hapag-Lloyd added the port of Saint John, New Brunswick, Canada to the westbound rotation of their service. This aligns with our commitment to sustainability, and these initiatives will help reduce carbon emissions as a result of traffic being diverted to rail instead of trucks. Our values of accountability, diversity and pride drive the CP team to develop and implement solutions that facilitate providing safe, reliable and efficient service.
2021 compensation
The table below is a summary of the compensation awarded to Mr. Brooks for 2021. The assessment was reviewed by the Compensation Committee, and approved by the Board.
 
 
 
Compensation (in CAD $‘000)
 
  
2021
 
 
 
Fixed
 
        
 
Salary
 
    
 
723
 
 
 
 
At-risk
 
        
 
Short-term incentive
 
    
 
1,000
 
 
 
 
Long-term incentive
 
        
 
- PSUs
 
    
 
1,500
 
 
 
 
- DSUs
 
    
 
66
 
 
 
 
- Stock options
 
    
 
920
 
 
 
 
Total direct compensation
 
    
 
4,209
 
 
 
Note:
All values above are from the Summary Compensation Table on page 40. Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants.
 
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MARK A. REDD  
EXECUTIVE VICE-PRESIDENT OPERATIONS
 
 
  
Mr. Redd has been Executive Vice-President Operations since September 1, 2019, bringing to his role considerable leadership experience in rail operations and safety excellence. He joined CP in October 2013 as General Manager Operations U.S. West and has held various leadership positions. In February 2017, he became Senior Vice-President Operations Western Region.
 
Mr. Redd was proudly named CP’s 2016 Railroader of the Year. He leads the 24/7 operations of our network, which includes responsibility for network transportation, operations, mechanical, engineering, procurement, operations technology and labour relations. Mr. Redd began his railroading career at Midsouth Rail in Jackson, Mississippi, and then moved to KCS as a locomotive engineer and then appointed Vice-President Transportation. He is also a former Chairman of the operating board for the Port Terminal Railroad Association in Houston, Texas. Mr. Redd holds a Bachelor and Master of Science in Management from University of Phoenix and Executive MBA from the University of Missouri – Kansas City.
Accomplishments in 2021
We have an obligation to deliver safe and reliable service, which is part of our success platform, and this is accomplished through the strength and character of our incredible team of railroaders. Under Mr. Redd’s leadership, we remained resilient throughout 2021. Even when facing extreme and changing conditions such as natural disasters and the ongoing pandemic, the CP network kept running to deliver for our customers, the economy and the environment. Our unwavering focus on progressing safety excellence continues as CP remains an industry leader in train accident statistics for the 16th consecutive year with a
FRA-reportable
train accident frequency of 1.10 and 2021 saw
FRA-reportable
personal injuries down 17 percent from 2020 with a frequency of 0.92, which is tied for second best frequency of all Class I railroads.
With progressively longer, heavier, and faster trains, we increased our terminal network capacity and reduced operating costs. Nearly half of the locomotives in service are equipped with Fuel Trip Optimizer (FTO), which is an
on-board
software designed for the safe automated movement of freight trains, resulting in improved fuel efficiency and a reduction in overall emissions. As part of CP’s Climate Strategy, our investment in the innovative Hydrogen Locomotive Program reinforces our commitment to sustainable growth and greenhouse gas emission reductions. We also released the new intermodal virtual assistant, PORTAGE, in which drivers can access the virtual assistant to resolve issues quickly. This technology provides an enhanced customer experience while allowing CP employees to focus on providing support for more complex issues, resulting in improved operating efficiencies throughout our network. Under Mr. Redd’s leadership, we continue to grow our network with technology enhancements, including the installation and commissioning of a Train Inspection Portal System. The system is utilized under industry unique regulatory exemptions to inspect train movements by remote inspectors. This technology is also coupled to CP’s industry leading cold wheel technology whereby CP performs air brake inspections to ensure cars are braking effectively. These technologies ensure freight cars with defects are removed from service and promptly repaired for continued safe operation with fewer online failures, increased train velocity and lower overall terminal dwell.
Develop People is one of our five Foundations, and we continue our leadership and development training programs during the pandemic as we are committed to a culture of continuous improvement. Mr. Redd is proud to
co-chair
our Diversity and Leadership Steering Committee and fosters the development of a diverse and inclusive operations team, mentoring, recognizing employee’s commitment to safety through CP’s annual Safety Awards, and by frequent visits to the field.
2021 compensation
The table below is a summary of the compensation awarded to Mr. Redd for 2021. The assessment was reviewed by the Compensation Committee, and approved by the Board.
 
 
 
Compensation (in CAD $‘000)
 
  
2021
 
 
 
Fixed
 
        
 
Salary
 
    
 
646
 
 
 
 
At-risk
 
        
 
Short-term incentive
 
    
 
814
 
 
 
 
Long-term incentive
 
        
 
- PSUs
 
    
 
1,426
 
 
 
 
- DSUs
 
    
 
19
 
 
 
 
- Stock options
 
    
 
1,011
 
 
 
 
Total direct compensation
 
    
 
3,916
 
 
 
Note:
All values above are from the Summary Compensation Table on page 40. Total direct compensation includes base salary, actual short-term paid and actual long-term incentive grants.
 
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