CEO Compensation at Cannabis Producer Hexo Rises to CA$11 Million

Article by Matt Lamers, Marijuana Business Daily

CEO compensation at marijuana producer Hexo rises to CA$11 million Published 5 hours ago | By Matt Lamers Total compensation for the top executives at struggling marijuana producer Hexo Corp. grew almost 20% year-over-year to 14.4 million Canadian dollars ($11.1 million) in fiscal 2020, led by the company’s CEO, according to a financial disclosure filed with the U.S. Securities and Exchange Commission last month.

Total compensation for the top executives at struggling marijuana producer Hexo Corp. grew almost 20% year-over-year to 14.4 million Canadian dollars ($11.1 million) in fiscal 2020, led by the company’s CEO, according to a financial disclosure filed with the U.S. Securities and Exchange Commission last month.

CEO Sebastien St. Louis’s compensation rose 26% to CA$11.2 million in 2020, even though his salary was “voluntarily reduced” to Quebec’s minimum wage for three pay periods in the second quarter, according to the filing.

The company declined to answer Marijuana Business Daily’s questions about the salary reduction.

The compensation disclosure comes after Hexo reported a net loss of CA$546.5 million for its latest fiscal year ended July 31, 2020.

St. Louis’s fiscal-year 2020 compensation consisted mostly of options-based awards (CA$10.7 million), while his salary was listed at CA$457,589.

Over the past three years, St. Louis’ compensation totaled roughly CA$21.5 million.

If Hexo were to terminate St. Louis without cause, the CEO is entitled to:

  • A lump-sum severance equal to two times his annual salary.
  • Two times any annual incentive earned during the previous year.
  • Two times any executive cash bonus earned during the previous year.

“Change of control” payments to the CEO are similar to those stated above.

In addition, St. Louis’ employment agreement “provides for an annual cash bonus equal to the difference between (i) 5% of the corporation’s earnings before tax in excess of $30 million but subject to a maximum of $250 million for each fiscal year and the (ii) a specified annual incentive amount … ” according to the SEC filing.

There has been no payout to date under this bonus provision.

According to the filing, Hexo’s board advanced an annual incentive to the CEO equivalent to CA$1.5 million in stock options on June 26, 2020.

That was about a week after Hexo completed the sale of a flagship greenhouse in Niagara, Ontario, it acquired as part of its CA$263 million acquisition of rival producer Newstrike Brands.

The greenhouse was sold off for CA$10 million.

Of the four other executives present in both 2019 and 2020, the filing shows two received higher compensation and two got lower compensation.

Dan Walter, managing consultant at California-based management consulting firm FutureSense, said it is too early to conclude whether a cannabis CEO is over- or underpaid.

“Because we don’t know who these companies are going to be when they grow up,” he said.

He compared every cannabis company right now to Freddy Adu, an American soccer player who was once touted a prospective superstar.

“Maybe the next Pelé, maybe a good soccer player but not a game changer,” Walter said.

“It’s much harder for a CEO to liquidate equity than the value on the paper looks like.

Read the full article here.

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