Table of Contents
Letter to the Shareholders from the Chair of the Board and the President and CEO i
Company overview iv
Proxy Circular Summary vii
About CAE ix
Useful Information xiv
Notice of 2024 Annual Shareholders’ Meeting xv
Section 1 About Voting Your Shares 1
Section 2 Business of the Meeting 7
Section 3 About the Nominated Directors 13
Section 4 Corporate Governance 31
Section 5 Board Committee Reports 47
Section 6 Director Compensation 53
Section 7 Executive Compensation 58
Compensation Discussion and Analysis 61
Executive Summary 62
Shareholder Engagement 67
Compensation Philosophy 68
Executive Compensation Programs 70
FY2024 Compensation Outcome 83
Determination of NEOs’ Individual Performance 89
Compensation Governance 94
Alignment of Compensation and Performance 101
Compensation of our Named Executive Officers 104
Summary Compensation Table 104
Outstanding Share-Based Awards and Option-Based Awards 106
Incentive Plan Awards – Value Vested or Earned During the Year 107
Pension Arrangements 108
Termination and Change of Control Benefits 109
CAE INC. | 2024 | Management Proxy Circular
Section 8 Other Important Information 114
Appendix A – Board of Directors’ Charter 116
Appendix B – Non-IFRS and Other Financial Measures 120
Appendix C – Summary of the Employee Stock Option Plan 127
Appendix D – Summary of the Omnibus Incentive Plan 131
Appendix E – Summary of the Rights Plan 138
CAE INC. | 2024 | Management Proxy Circular
Letter to the Shareholders from the Chair of the Board and the President and CEO
June 14, 2024
Dear fellow Shareholders,
It is our pleasure to invite you to attend CAE’s 2024 Annual Shareholders’ Meeting (the “Meeting”). This year, we continued to work as One CAE to foster innovation and excellence for our customers and one another. We have a positive outlook for FY2025, following a year where we worked hard to retire Legacy Contracts (as defined herein) in our Defense and Security business. While Defense and Security fell below expectations, we saw continued robust performance in our Civil Aviation segment.
This was a year of meaningful progress for our Company, both in terms of addressing challenges as well as continuing to grow and invest in our core markets. As we have for years, we further strengthened our competitive position and demonstrated market leadership with the introduction of new technologies and solutions for our customers around the globe. Our Civil business continued to perform exceptionally well with continued growth in revenues, record margins, and strong order intake.
During the year, we took decisive actions to re-baseline our Defense business, with the acceleration of risk recognition on the Legacy Contracts. These actions, paired with leadership changes, organizational structure simplification, and the installation of a Chief Operating Officer, give us confidence in an improved performance profile for the segment. Additionally, we completed the sale of CAE Healthcare, a decision that reflects our commitment to streamline our portfolio to focus on our core businesses. The sale of Healthcare accelerates CAE’s deleveraging process and enables us to focus on securing growth opportunities in our larger core markets.
Board Leadership
CAE continues to focus on Board renewal to ensure that the Company and Shareholders benefit from fresh perspectives. Five new directors have joined the Board since 2022, with a sixth new nominee up for election at the Meeting. This is the result of a regular evaluation by the Board to ensure it reflects the appropriate skills and experience necessary to effectively oversee execution of CAE’s strategy today and into the future.
Our two most recent director additions are Sophie Brochu, who joined in August 2023, and Patrick Decostre, who joined in May 2024. Sophie and Patrick impart extensive executive leadership and operational experience in companies with international exposure and external acquisition growth journeys.
Sophie has held the position of President and CEO at two major companies in Quebec’s energy sector – Hydro-Québec and Energir. She brings significant experience to the Board in vital areas, including strategic leadership and management, government relations, human resources, executive compensation and sustainability, among others.
Patrick is President, CEO and a director of Boralex Inc., a provider of affordable renewable energy in North America and Europe. He brings to the Board several years of experience as a CEO and nearly two decades of experience building Boralex’s business from the ground up in Europe.
With these changes, 38% of CAE’s Board of Directors are now women, enabling us to reach our 2025 target of the Board’s Diversity Policy ahead of schedule.
We wish to extend a warm thank you to Michael E. Roach, who recently retired from the Board of Directors, and to Andrew J. Stevens, who is retiring this August. Mike and Andrew have both made significant contributions during their time on the Board, and we will miss their valuable input.
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Stakeholder Outreach
The Board continued its commitment to shareholder engagement, offering to meet with shareholders who together account for approximately 50% of our ownership. The Shareholders with whom we met provided valuable feedback, including on our executive compensation programs. We remain focused on aligning our performance and compensation outcomes with the interests of our Shareholders.
Commitment to Sustainability
Over the past 12 months, CAE has made substantial progress on its sustainability mandate. Our aim is to continue delivering long-term business value across our strategy, through built-in environmental, social and governance pillars. Climate change is one of the biggest global challenges of our time and CAE is committed to supporting the decarbonization of our customers and our industry. We submitted our near-term science-based reduction targets for approval to the Science Based Targets initiative, which solidly positions CAE on its net zero trajectory.
To cite a few examples of our efforts in this area, our training analytics capabilities allow for more efficient training, which reduces energy consumption. Our Flight Operations Solutions support the decarbonization of the aviation industry through the optimization of airlines’ flight plans and catering services, reducing fuel consumption, generating significant carbon savings and reducing waste. Our development of training capabilities adapted to Advanced Air Mobility (AAM) challenges enables the development of a new, all-electric industry that contributes to making air transportation more sustainable.
CAE’s sustainability strategy is also driven by our commitment to create social value and foster an inclusive and diverse culture. In fiscal 2024, we increased the percentage of women and other underrepresented groups in leadership positions, achieving a key target of our multi-year sustainability roadmap. More information regarding our sustainability efforts can be found at https://www.cae.com/sustainability/.
Closing words
This year, CAE took the appropriate measures to reset conditions for enhancing profitability and operational efficiency. We have streamlined our portfolio and invested in new technologies that will allow us to capture an extended share of our core markets. The appointment of Nick Leontidis, Civil Group President over the last decade and a 36-year CAE veteran, to Chief Operating Officer will drive additional synergies between our Defense & Security and Civil Aviation business segments and increase operational efficiency. These actions, along with CAE’s excellent reputation, customer-centric approach, strong technical capabilities, long-standing customer relationships and global presence position us for long-term success and value creation.
To our Shareholders — thank you for your ongoing support and confidence in our noble mission to make the world a safer place. Your trust becomes even more paramount in periods of turbulence. The Board values your input and insights, and we look forward to continued dialogue.
And, to CAE employees, we extend our appreciation for their commitment to the company’s core values and strategy which help ensure the continued satisfaction of our customers.
We will once again hold our Meeting in virtual format via live webcast available at https://web.lumiagm.com/461348319. Shareholders are encouraged to cast their vote in advance by proxy and participate from any geographic location in real time through a web-based platform or by telephone. We believe this is an important step to enhancing accessibility to our annual meeting for all our Shareholders and reducing the carbon footprint of our activities.
As in prior years, important matters affecting our Company will be considered at the Meeting. We will, as always, review CAE’s financial position, including business operations and the value delivered to Shareholders. We will also respond to your comments and questions.
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This Circular gives you details about all the items for consideration and how to vote. It also contains profiles of the nominated Directors, information on the auditors, and sections on the Board committees and CAE corporate governance practices. Whether or not you plan to attend the Meeting, we encourage you to review the enclosed information, consider the resolutions put forth by the Board and vote your Shares.
The Board remains committed to acting in the best interests of the Company and all its Shareholders.
We thank you for your continued confidence in and support of CAE and look forward to hearing from you at this year’s Meeting.
 |  |  |  | ||||||||
Alan N. MacGibbon, P.C., O.C. Chair of the Board | Marc Parent, C.M. President and Chief Executive Officer | ||||||||||
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Proxy Circular Summary
This summary highlights some of the important information you will find in this Management Proxy Circular (“Circular”). These highlights do not contain all the information that you should consider, and you should read this entire Circular before voting your Shares.
Shareholder Voting Matters
Voting Matter | Board Vote Recommendation | Page Reference for More Information | ||||||
Election of 13 Directors | FOR each nominee | 8 | ||||||
Appointing PricewaterhouseCoopers LLP (PwC) as Auditors | FOR | 10 | ||||||
Advisory Vote on Executive Compensation | FOR | 11 | ||||||
Approving the Reconfirmation of CAE’s Rights Plan | FOR | 12 | ||||||
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Review this Proxy Circular and Vote in One
of the Following Ways
of the Following Ways
Voting by Proxy is the Easiest Way
Below are the different ways in which you can give your voting instructions, details of which are found in the enclosed proxy form or your voting instruction form, as applicable. Please also refer to Section 1 – About Voting Your Shares for more information on the voting methods available to you:
by mail: sign, date and return your proxy form in the envelope provided.
by telephone: call the telephone number on your proxy form.
on the Internet: visit the website listed on your proxy form.
by appointing another person to attend and vote at the Meeting online on your behalf.Voting Online at the Meeting
Log in online at https://web.lumiagm.com/461348319 and follow the steps listed in the Section “Attending and Participating.”viii | CAE INC. | 2024 | Management Proxy Circular
About CAE
Who We Are
At CAE, we equip people in critical roles with the expertise and solutions to create a safer world. As a technology company, we digitalize the physical world, deploying software-based simulation training and critical operations support solutions. Above all else, we empower pilots, cabin crew, maintenance technicians, airlines, business aviation operators and defence and security forces to perform at their best every day and when the stakes are the highest. Around the globe, we are everywhere customers need us to be with approximately 13,000 employees in more than 240 sites and training locations in over 40 countries. CAE represents more than 75 years of industry firsts—the highest fidelity flight and mission simulators as well as training programs powered by digital technologies. We embed sustainability in everything we do. Today and tomorrow, we’ll make sure our customers are ready for the moments that matter.
Founded in 1947 and headquartered in Montreal, Canada, CAE has built an excellent reputation and long-standing customer relationships based on experience, strong technical capabilities, a highly trained workforce and global reach. CAE’s common shares are listed on the Toronto and New York stock exchanges (TSX / NYSE) under the symbol CAE.
Our Mission
Our mission is to lead at the frontier of digital immersion with high-tech training and operational support solutions to make the world a safer place.
Our Vision
Our vision is to be the worldwide partner of choice in civil aviation and defence and security by revolutionizing our customers’ training and critical operations with digitally immersive solutions to elevate safety, efficiency and readiness.
Our Operations
Our operations are managed through two segments:
Civil Aviation: We provide comprehensive training solutions for flight, cabin, maintenance and ground personnel in commercial, business and helicopter aviation, a complete range of flight simulation training devices, ab initio pilot training and crew sourcing services, as well as aircraft flight operations solutions. The civil aviation market includes major commercial airlines, regional airlines, business aircraft operators, civil helicopter operators, aircraft manufacturers, third-party training centres, flight training organizations, maintenance, repair and overhaul organizations (MRO) and aircraft finance leasing companies.
Defense & Security: We are a global training and simulation provider delivering scalable, platform-independent solutions that enable and enhance force readiness and security. The defence and security market includes defence forces, OEMs, government agencies and public safety organizations worldwide.
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Our Strategy
CAE’s Four Strategic Pillars
 | Efficient Growth Our business features a high degree of recurring revenues due to the underlying characteristics of our technology-enabled solutions and regulatory requirements across our markets. We seek to maximize the benefits of our strong competitive position to deliver premium growth and profitability through a focus on operational rigour, cost optimization, capital efficiency, and a disciplined approach to pursuing organic and inorganic growth. | ||||
 | Technology and Market Leadership We have a long rich and long-dated history of customer centricity, innovation and delivering state-of-the-art technology solutions that define the forefront of the industries we operate in. As a result, we constantly seek new ways to enhance the performance of our customers by fostering a culture of continuous improvement and innovation. This drives technology leadership, deeper customer partnerships, and new customer development, enabling us to capitalize on the ample headroom in our large, growing addressable markets. | ||||
 | Revolutionizing Training and Critical Operations We are a global thought leader in the application of training, digital immersion, critical operations, and modelling and simulation technologies. We seek to use data-driven applications and advanced analytics to produce measurable and demonstrated outcomes in our markets. The efficacy of our technology solutions enables customized, collaborative, and multi-domain offerings. Furthermore, our technologies are deployed with a focus on driving sustainability. | ||||
 | Skills & Culture Our core values are innovation, integrity, empowerment, excellence and One CAE. We employ these values across a diverse global team to drive a unique social impact. We seek to create an employee experience and environment that values teamwork, professional growth, and engagement. As a result, our employees across the globe share a passion to prepare our customers for the moments that matter. | ||||
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Executive Compensation Highlights
—Executive short-term incentive payout based on a corporate performance factor of 4% reflective of strong performance in Civil Aviation, but with Defense & Security results impacted by the accelerated risk recognition on eight contracts that were entered into prior to the COVID-19 pandemic that are fixed-price in structure, with little to no provision for cost escalation (the “Legacy Contracts”)
—43% payout factor for Performance Share Units that vested in FY2024 (with a performance measurement period from FY2022 to FY2024), aligned with shareholder experience over the period
Our Executive Compensation Best Practices | |||||
Minimum threshold levels of corporate performance to be met to allow for payments under the annual and long-term incentives | |||||
Caps on annual bonuses and Performance Share Units (“PSU”) payout factors | |||||
Balanced mix of short, medium and long-term compensation | |||||
Pensionable earnings based on actual years served | |||||
Change of control severance limited to two times salary and bonuses | |||||
Robust clawback policy, including a market-leading ability to clawback incentive-based compensation in circumstances of misconduct without the need for a financial restatement | |||||
Minimum share ownership and option profit retention guidelines | |||||
Anti-hedging policy | |||||
Post-employment Share ownership requirement for CEO | |||||
Double trigger vesting of equity in case of change of control | |||||
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Governance Highlights
The following table shows some of the ways CAE continues to adhere to the highest standards in corporate governance.
Our Corporate Governance Best Practices | |||||
Number of Director nominees | 13 | ||||
Number of non-employee Independent Director nominees | 12/13 | ||||
Board Committee members (including the Governance Committee, which is responsible for recommending new Directors to join the Board) are all independent. | |||||
Average age of Director nominees | 61 | ||||
Annual election of Directors | |||||
Other Board commitments and interlocks policy | |||||
Separate Chair and CEO roles | |||||
Director tenure and age term limits | |||||
Share ownership requirements for Directors and executives | |||||
Board orientation/education program | |||||
Number of Board meetings held during FY2024 | 8 | ||||
Number of financial experts on the Audit Committee | 2 | ||||
Code of Business Conduct | |||||
Annual advisory vote on executive compensation | |||||
Formal Board and Committee evaluation processes | |||||
No dual-class shares | |||||
Diversity targets on the Board and in executive officer positions | |||||
Enterprise risk management oversight including sustainability matters | |||||
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Our Director Nominees
| Name | Age | Director Since | Position | Independent | Committee Memberships | Board and Committee Attendance FY2024 | Other Public Boards | ||||||||||||||||
Ayman Antoun | 58 | 2022 | Corporate Director | YES | Audit, HRC | 100% | 1 | ||||||||||||||||
Margaret S. (Peg) Billson | 62 | 2015 | Corporate Director | YES | GC (Chair), HRC | 94% | 1 | ||||||||||||||||
Sophie Brochu | 61 | 2023 | Corporate Director | YES | Audit, HRC | 100% | 1 | ||||||||||||||||
Patrick Decostre1 | 51 | 2024 | President and CEO, Boralex Inc. | YES | N/A | N/A | 1 | ||||||||||||||||
Elise Eberwein | 59 | 2022 | Corporate Director | YES | Audit, HRC | 100% | N/A | ||||||||||||||||
Ian L. Edwards2 | 62 | N/A | President and CEO, AtkinsRéalis | YES | N/A | N/A | 1 | ||||||||||||||||
Marianne Harrison | 60 | 2019 | Corporate Director | YES | Audit (Chair), GC | 100% | N/A | ||||||||||||||||
Alan N. MacGibbon | 68 | 2015 | Corporate Director | YES | N/A | 100% | 1 | ||||||||||||||||
Mary Lou Maher | 64 | 2021 | Corporate Director | YES | Audit, HRC (Chair) | 100% | 2 | ||||||||||||||||
François Olivier | 59 | 2017 | Corporate Director | YES | Audit, GC | 93% | 1 | ||||||||||||||||
Marc Parent | 63 | 2008 | President and CEO, CAE | NO | N/A | 100% | 1 | ||||||||||||||||
Gen. David G. Perkins, USA (Ret.) | 66 | 2020 | Corporate Director | YES | GC, HRC | 100% | 1 | ||||||||||||||||
Patrick M. Shanahan | 62 | 2022 | President and CEO, Spirit AeroSystems Inc. | YES | Audit, GC | 100% | 2 | ||||||||||||||||
1.Mr. Decostre was appointed to the Board of CAE on May 16, 2024.
2.Mr. Edwards does not currently serve as a Director on the Board of CAE and will become a Director following his election at the Meeting.
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Useful Information
Certain Defined Terms
| In this document, referred to as this “Circular”, the terms “you” and “your” refer to the Shareholder, while “we”, “us”, “our”, “Company” and “CAE” refer to CAE Inc. and where applicable, its subsidiaries. | ||
Currency, Exchange Rates and Share Prices
| All amounts referred to in this Circular are presented in Canadian dollars, unless otherwise stated. In a number of instances in this Circular, including with respect to calculation of the in-the-money value of stock options denominated in Canadian dollars, information based on our Share price has been calculated on the basis of the Canadian dollar. | ||
Discontinued Operations and Reclassification of Comparative Figures
| On February 16, 2024, we announced the closing of the sale of our Healthcare business. Consequently, certain comparative figures contained in this Circular have been reclassified as a result of our Healthcare segment being presented as discontinued operations in CAE’s Management’s Discussion and Analysis and Consolidated Financial Statements for the year ended March 31, 2024. | ||
Non-IFRS and Other Financial Measures
This document includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods. Definitions of all non-IFRS and other financial measures are provided in Appendix B of this document to give the reader a better understanding of the indicators used by management. In addition, when applicable, this document may include a quantitative reconciliation of the non-IFRS and other financial measures to the most directly comparable measure under IFRS. Refer to Appendix B of this document for references where these reconciliations are provided. | ||
Information Currency
| The information in this Circular is current as of June 14, 2024 unless otherwise stated. | ||
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Notice of 2024
Annual Shareholders’ Meeting
Annual Shareholders’ Meeting
What the Meeting is About
1.Receive CAE Consolidated Financial Statements and the auditors’ report for the fiscal year ended March 31, 2024;
2.Elect Directors who will serve until the end of the next annual Shareholders' meeting;
3.Reappoint PricewaterhouseCoopers LLP as our auditors who will serve until the end of the next annual Shareholders' meeting and to authorize the Company’s Board to fix the auditors’ remuneration;
4.Vote, in an advisory, non-binding manner, on CAE’s approach to executive compensation described in this Circular;
5.Approve the reconfirmation of CAE’s Amended and Restated Shareholder Protection Rights Plan Agreement (“Rights Plan”); and
6.Transact any other business that may properly come before the Meeting.
You have the Right to Vote
As a holder of record of common shares of CAE (“Shares”) at the close of business on June 21, 2024, you are entitled to receive notice of and vote at the Meeting.
You are asked to consider and to vote your Shares on items 2 to 5 and any other items that may properly come before the Meeting or any adjournment or postponement thereof.
If you are unable to attend the Meeting online and want to ensure that your Shares are voted, please submit your votes by proxy as described under “How to Vote Your Shares” in the accompanying Circular. To be valid, our transfer agent, Computershare Trust Company of Canada, must receive your proxy by 11:00 a.m. (Eastern Time) on August 12, 2024. If the Meeting is adjourned or postponed, Computershare must receive your proxy no later than 24 hours (excluding Saturdays, Sundays and holidays) prior to any such adjournment or postponement.
Accompanying this Notice of Annual Meeting is the Circular, which contains more information on the matters to be addressed at the Meeting.
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Attending and Participating
Our Meeting will be held in virtual-only format, which will be conducted via live webcast. Shareholders will have an equal opportunity to participate in real time and vote at the Meeting online through a web-based platform regardless of their geographic location.
Participating in the Meeting online allows registered Shareholders and duly appointed Proxyholders, including non-registered (beneficial) Shareholders who have appointed themselves or another person as a Proxyholder, to participate at the Meeting and ask questions, all in real time. Registered Shareholders and duly appointed Proxyholders can vote at the appropriate time during the Meeting. Voting will be conducted by virtual ballot.
Guests, including non-registered Shareholders who have not duly appointed themselves or another person as a Proxyholder, can log in to the Meeting as set out below. Guests will be able to participate in the Meeting but cannot vote.
To access the Meeting, follow the instructions below, as applicable to you:
1.Log in online at https://web.lumiagm.com/461348319. The platform is compatible with all major browsers except for Internet Explorer.
2.Click “I have a Login” and then enter your Control Number (see below) and Password “CAE2024” (note the password is case sensitive); OR
3.Click “I am a guest” and then complete the online form.
In order to find the 15-digit Control Number to access the Meeting:
—Registered Shareholders: The control number located on the form of proxy or in the email notification you received is your Control Number.
—Proxyholders: Duly appointed Proxyholders, including non- registered (beneficial) Shareholders that have appointed themselves or another person as a Proxyholder, will receive the Control Number from Computershare by e-mail after the proxy voting deadline has passed.
If you attend the Meeting online, it is important that you are connected to the Internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting. You should allow
ample time to check into the Meeting online and complete the related procedure. For additional details on accessing and participating in the Meeting online from your tablet, smartphone or computer, please see the Virtual AGM User Guide provided by Computershare and accompanying this proxy circular.
Notice-and-Access
As part of an effort to reduce environmental impacts of excessive printing, and to save postage costs, CAE is opting to use the “Notice-and-Access” provisions of Canadian securities rules.
The “Notice-and-Access” provisions allow Canadian companies to post electronic versions of Shareholder meeting materials in lieu of mailing physical copies of such documents to Shareholder. Shareholders will instead only receive a paper notification with information on how they may obtain a copy of the meeting materials electronically or request a paper copy (Notification). Shareholders who have already signed up for electronic delivery of Shareholder materials will continue to receive them by email.
Non-registered Shareholders who have not objected to their intermediary disclosing certain ownership information about themselves to CAE are referred to as “NOBOs”. The non-registered Shareholders who have objected to their intermediary disclosing ownership information about themselves to CAE are referred to as “OBOs”. CAE has distributed the Notification in connection with the Meeting to intermediaries and clearing agencies for onward distribution to non-registered Shareholders. CAE will not be paying for intermediaries to deliver to OBOs (who have not otherwise waived their right to receive proxy-related materials) copies of proxy related materials and related documents (including the Notification). Accordingly, an OBO will not receive copies of proxy-related materials and related documents unless the OBO’s intermediary assumes the costs of delivery.
How to Access Meeting Materials
On Computershare Investor Services Inc.’s (“Computershare”) website: www.envisionreports.com/CAE2024e
On SEDAR+: www.sedarplus.ca
On CAE’s website: www.cae.com/investors/financial-reports/
Shareholders are reminded to read the Circular and other Meeting materials carefully before voting their Shares.
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How to Request a Paper Copy of the Meeting Materials
Before the Meeting
If your name appears on a Share certificate, you are considered as a “registered Shareholder”. You may request paper copies of the Meeting materials at no cost to you by calling Computershare toll-free, within North America at 1-866-962-0498 or direct, from outside of North America, at 514-982-8716 and entering your control number as indicated on your form of proxy.
If your Shares are listed in an account statement provided to you by an intermediary, you are considered as a “non-registered Shareholder”. You may request paper copies of the Meeting materials from Broadridge at no cost to you up to one year from the date the Circular was filed on SEDAR through the Internet by going to www.proxyvote.com or by telephone at 1-877-907-7643 and entering the 16-digit control number provided on the voting instruction form and following the instructions provided.
Please note that you will not receive another form of proxy or voting instruction form; please retain your current one to vote your Shares.
In any case, requests should be received at least five (5) business days prior to the proxy deposit date and time set out in the accompanying proxy or voting instruction form in order to receive the Meeting materials in advance of such date and the Meeting date.
After the Meeting
By telephone at 1-866-964-0492 or online at investor.relations@cae.com. A copy of the Meeting materials will be sent to you within ten (10) calendar days of receiving your request.
By order of the Board of Directors,
June 14, 2024
Montréal, Québec
 |  | ||||
Mark Hounsell General Counsel, Chief Compliance Officer and Corporate Secretary | |||||
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Section 1 – About Voting Your Shares
Record Date
June 21, 2024 is the record date for the Meeting.
Who can vote
Only holders of our Shares at the close of business on the Record Date are entitled to receive notice of and to attend, including by proxy, and vote at the Meeting or any adjournment or postponement thereof. The list of Shareholders on the Record Date is available for inspection by appointment during usual business hours at Computershare Trust Company of Canada, 650 de Maisonneuve west 7th floor, Montreal, QC H3A 3T2, and at the Meeting. As of June 14, 2024, 319,266,100 Shares are issued and outstanding. Each Share is entitled to one vote.
Principal Shareholders
To the knowledge of the Directors and executive officers of CAE (from records and publicly filed reports), there is no person who beneficially owns or exercises control or direction over more than 10% of the Shares.
All Directors and executive officers as a group (23 persons) beneficially owned or exercised control or direction over 623,272 Shares representing 0.20% of the class as at June 14, 2024.
Your Vote is Important
Your vote is important. Please read the information below to ensure your Shares are properly voted.
How do I participate in the Meeting?
The Meeting will be held in a virtual only format that will be conducted via live webcast online. Shareholders will not be able to attend the Meeting in person.
Participating in the Meeting online allows registered Shareholders and duly appointed Proxyholders, including non-registered (beneficial) Shareholders who have appointed themselves or another person as a Proxyholder, to participate at the Meeting and ask questions, all in real time, including verbally through a phone conference. Registered Shareholders and duly appointed Proxyholders can vote at the appropriate time during the Meeting.
Guests, including non-registered beneficial Shareholders who have not duly appointed themselves or another person as a Proxyholder, can log in to the Meeting as set out below. Guests will be able to participate in the Meeting but cannot vote.
To access the Meeting, follow the instructions below, as applicable to you:
1.Log in online at https://web.lumiagm.com/461348319. The platform is compatible with all major browsers except for Internet Explorer.
2.Click “I have a Login” and then enter your Control Number (see below) and Password “CAE2024” (note the password is case sensitive); OR
3.Click “I am a guest” and then complete the online form.
In order to find the 15-digit Control Number to access the Meeting:
—Registered Shareholders: The control number located on the form of proxy or in the email notification you received is your Control Number.
—Proxyholders: Duly appointed Proxyholders, including non-registered (beneficial) Shareholders that have appointed themselves or another person as a Proxyholder, will receive the Control Number from Computershare by e-mail after the proxy voting deadline has passed.
We recommend that you log in at least one hour before the start time of the Meeting. It is important to ensure you are connected to the Internet at all times if you participate in the Meeting online in order to vote when balloting commences. You are responsible for ensuring Internet connectivity for the duration of the Meeting. For additional details and instructions on accessing the Meeting online from your tablet, smartphone or computer, voting and asking questions during the Meeting, see the Virtual AGM User Guide provided by Computershare and accompanying this Circular.
For additional information regarding voting by proxy before the meeting, voting online, attending the virtual meeting or other general proxy matters, please contact Computershare at 1-800-564-6253 (Canada/U.S.) or 1-514-982-7555 (international/direct dial).
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Section 1 – About Voting Your Shares
How to Vote your Shares
You may vote your Shares in one of the following ways:
1. By proxy using all the voting channels that have been available in the past; this has not changed. Voting at the Meeting remains in the virtual-only form, without any possibility for in-person attendance.
by mail: sign, date and return your proxy form in the envelope provided.
by telephone: call the telephone number on your proxy form.
on the Internet: visit the website listed on your proxy form.
by appointing another person to attend and vote at the Meeting online on your behalf.Refer to the enclosed proxy form for instructions.
2. Virtually at the Meeting online by following the instructions below. The voting process is different for registered or non-registered (beneficial) Shareholders:
(a) if you are a registered Shareholder, you may vote at the Meeting by completing a ballot online during the Meeting. Follow the instructions above to access the Meeting and cast your ballot online during the designated time.
(b) if you are a non-registered Shareholder (including a participant in the employee plan) AND you wish to vote online at the Meeting, you must appoint yourself as Proxyholder in order to vote at the Meeting. You MUST complete and return a voting instruction form no later than 11:00 a.m. (Eastern Time) on August 12, 2024 appointing yourself as Proxyholder. Follow the instructions above to access the Meeting and cast your ballot online during the designated time. You will receive the Control Number for the Meeting from Computershare by e-mail after the proxy voting deadline has passed.
United States Beneficial holders: To vote at the Meeting, you must first obtain a valid legal proxy from your broker, bank or other agent and then register in advance of the Meeting. Follow the instructions from your broker or bank included with this Circular, or contact your broker or bank to request a legal proxy form. To register to attend the Meeting online, you must submit a copy of your legal proxy form to Computershare. Requests for registration should be directed to Computershare at 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, or by e-mail at uslegalproxy@computershare.com. Requests for registration must be labelled as “Legal Proxy” and be received no later than 11:00 a.m. (EDT) on August 12, 2024. You will receive a confirmation of your registration after Computershare receives your registration materials. Please note that you are required to register your appointment as Proxyholder at https://www.computershare.com/CAE.
If you have any questions or need assistance voting, you may contact Kingsdale Advisors, CAE’s strategic advisor, by telephone at 1-877-659-1819 (toll-free in North America) or 1-437-561-4996 (text and call enabled outside North America), or by email at contactus@kingsdaleadvisors.com.
3 | CAE INC. | 2024 | Management Proxy Circular
Section 1 – About Voting Your Shares
Voting by Proxy
If you choose to vote by proxy, you are giving the person or people named on your proxy form (referred to as a “Proxyholder”) the authority to vote your Shares on your behalf online at the Meeting or any adjournment or postponement thereof.
Proxies are being solicited by management
Through this Circular, management is soliciting your proxy in connection with the matters to be addressed at the Meeting (or any adjournment(s) or postponements(s) thereof) to be held at the time and place and for the purposes set forth in the accompanying Notice of the Meeting.
The solicitation is being made primarily by mail, but you may also be contacted by telephone or other means. We have retained Kingsdale Advisors to provide a broad array of strategic advisory, governance, strategic communications, digital and investor campaign services on a global retainer basis in addition to certain fees accrued during the life of the engagement upon the discretion and direction of the Company. The Company may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies.
Proxyholders other than management Shareholders desiring to appoint some person other than Alan N. MacGibbon, Marc Parent and Margaret S. (Peg) Billson as their representative at the Meeting may do so either by inserting such other person’s name in the blank space provided or by completing another proper proxy form and, in either case, delivering the completed proxy to CAE’s Corporate Secretary at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 or to Computershare Trust Company of Canada, 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 no later than 11:00 a.m. (Eastern Time) on August 12, 2024 (or, in the case of an adjournment or postponement, no later than 11:00 a.m. (Eastern Time) on the last business day preceding the day of such adjournment or postponement thereof). | ||
Unless you specify a different Proxyholder, the CAE officers and/or Directors whose names are pre-printed on the enclosed form of proxy (Alan N. MacGibbon, Marc Parent and Margaret S. (Peg) Billson) will vote your Shares. The Company may utilize the Broadridge QuickVoteTM system, which involves NOBOs being contacted by Kingsdale, which is soliciting proxies on behalf of management, to obtain voting instructions over the telephone and relaying them to Broadridge (on behalf of the NOBO’s intermediary). While representatives of Kingsdale are soliciting proxies on behalf of management, Shareholders are not required to vote in the manner recommended by the Board. The QuickVoteTM system is intended to assist Shareholders in placing their votes, however, there is no obligation for any Shareholders to vote using the QuickVoteTM system, and Shareholders may vote (or change or revoke their votes) at any other time and in any other applicable manner described in this Circular. Any voting instructions provided by a Shareholder will be recorded and such Shareholder will receive a letter from Broadridge (on behalf of the Shareholder’s intermediary) as confirmation that their voting instructions have been accepted.
4 | CAE INC. | 2024 | Management Proxy Circular
Section 1 – About Voting Your Shares
Voting of Proxies
You may indicate on the proxy form how you want your Proxyholder to vote your Shares, in which case the Proxyholder will vote in accordance with your instructions. You can also let your Proxyholder decide for you. If you do not specify on the proxy form how you want your Shares to be voted, your Proxyholder will have the discretion to vote your Shares as they see fit.
The enclosed proxy form gives the Proxyholder discretion with respect to any amendments or variations to matters described in the Notice of Annual Meeting and with respect to any other matters which may properly come before the Meeting (including any adjournment or postponement thereof), in each instance, to the extent permitted by law, whether or not the amendment, variation, or other matter that comes before the Meeting is routine and whether or not the amendment, variation, or other matter that comes before the Meeting is contested.
At the time of printing this Circular, the management of CAE knows of no such amendments, variations or other matters to come before the Meeting. However, if you have not specified how to vote on a particular matter, or if any amendments or variations to matters identified in the Notice of Annual Meeting, or any other matters that are not now known to management of CAE, should properly come before the Meeting or any adjournment or postponement thereof, the Shares represented by properly submitted proxies given in favour of the persons designated by management of CAE in the form of proxy will be voted on such matters pursuant to such discretionary authority.
Unless you specify a different Proxyholder or specify how you want your Shares to be voted, Alan N. MacGibbon, Marc Parent and Margaret S. (Peg) Billson will vote your Shares:
(a) FOR electing the nominated Directors who are listed in this Circular;
(b) FOR appointing PwC as auditors and for the authorization of the Directors to fix their remuneration;
(c) FOR approving the advisory resolution on executive compensation; and
(d) FOR approving the reconfirmation of the Rights Plan.
Registered Shareholders who wish to appoint a third-party Proxyholder to represent them at the Meeting must first use the form of proxy to appoint the Proxyholder and then must register their Proxyholder online. Failure to register the Proxyholder will result in the Proxyholder not receiving a Control Number and therefore being unable to participate in the Meeting.
To register a third-party Proxyholder, Shareholders must visit https://www. computershare.com/CAE by August 12, 2024 at 11:00 a.m. (Eastern Time) and provide Computershare with the Proxyholder’s contact information required. Computershare needs this information so they can confirm their registration and send an email notification with a Control Number. Your Proxyholder needs the Control Number in order to participate in the meeting and vote your Shares. Your third-party Proxyholder should receive the email notification after 11:00 a.m. (Eastern Time) on August 12, 2024.
To be effective, your proxy must be received before 11:00 a.m. (Eastern Time) on August 12, 2024 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time fixed for holding any adjournment or postponement of the Meeting.
If you have any questions or need assistance voting, please contact Kingsdale Advisors at 1-877-659-1819 (toll-free in North America) or 1-437-561-4996 (text and call enabled outside North America) or by email at contactus@kingsdaleadvisors.com. Late proxies may be accepted or rejected by the Chair of the Meeting at his or her discretion and the Chair of the Meeting is under no obligation to accept or reject any particular late proxy. The time limit for deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion, without notice.
Revocation of Proxies
You have the right to revoke a proxy by any of the following methods:
(a) Vote again by phone or Internet no later than 11:00 a.m. (Eastern Time) on August 12, 2024 (or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the date of any adjourned or postponed Meeting); or
(b) Deliver another completed and signed proxy form, dated later than the first proxy form, by mail or fax such that it is received by CAE’s Corporate Secretary at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 or by Computershare Trust Company of Canada, 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 no later than 11:00 a.m. (Eastern Time) on August 12, 2024 (or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the date of any adjourned or postponed Meeting.
5 | CAE INC. | 2024 | Management Proxy Circular
Section 1 – About Voting Your Shares
Electronic Access to Proxy-Related Materials and Annual and Quarterly Reports
We offer our Shareholders the opportunity to view management proxy circulars, annual reports and quarterly reports through the Internet instead of receiving paper copies in the mail. You will find more information on this matter in the Notice-and-Access section above.
Electronic Delivery in Future
Shareholders are asked to consider signing up for electronic delivery of meeting materials. Electronic delivery is a convenient way to make distribution of materials more efficient and is an
environmentally responsible alternative by eliminating the use of printed paper and the carbon footprint of the associated mail delivery process. Signing up is quick and easy, and can be done by visiting www.proxyvote.com and signing in with your control number. After voting on the matters to be addressed at the Meeting and following your vote confirmation, you will be able to select the electronic delivery box and provide an email address. Having registered for electronic delivery, going forward you will receive your meeting materials by email and will be able to vote on your device by simply following a link in the email sent by your financial intermediary, provided your intermediary supports this service.
6 | CAE INC. | 2024 | Management Proxy Circular
7 | CAE INC. | 2024 | Management Proxy Circular
Section 2 – Business of the Meeting
1 Receive CAE’s Consolidated Financial Statements
CAE’s consolidated financial statements including the auditors’ report, for the year ended on March 31, 2024 will be presented to Shareholders at the Meeting. They can also be accessed on CAE’s website at www.cae.com, on SEDAR+ at www.sedarplus.ca, or on EDGAR at www.sec.gov. No Shareholder vote is required in connection with the consolidated financial statements.
2 Elect 13 Directors
13 Nominees | 92.3%1 Independent | 61 Average Age | 98.5% % Votes FOR in 2023 | 98.7% Average Board Meeting Attendance | ||||||||||
1.The only non-Independent Director is CAE’s President and CEO. “Independent Directors” refers to the standards of independence established by CAE’s Corporate Governance Guidelines, applicable corporate governance rules of the New York Stock Exchange and SEC, and under the Canadian Securities Administrators’ National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201.
You will be electing a board of directors (“Board”) of 13 members. Each Director is elected annually for a term which expires no later than the next annual meeting of Shareholders.
All of the following nominees, except Ian L. Edwards, are currently members of the Board of Directors, and all have been recommended by the GC and the Board for election at the Meeting. Mr. Edwards will become a Director following his election at the Meeting. | ||||||||
—Ayman Antoun —Margaret S. (Peg) Billson —Sophie Brochu —Patrick Decostre —Elise Eberwein | —Ian L. Edwards —Marianne Harrison —Alan N. MacGibbon —Mary Lou Maher —François Olivier | —Marc Parent, C.M. —Gen. David G. Perkins —Patrick M. Shanahan | ||||||
8 | CAE INC. | 2024 | Management Proxy Circular
Section 2 – Business of the Meeting
Each nominee was elected at our 2023 annual Shareholders’ meeting held on August 9, 2023, by a majority of the votes cast (average of 98.5% of votes cast in favour), except for Messrs. Decostre and Edwards who are first-time nominees.
Please refer to Section 3 – About the Nominated Directors for further information regarding the experience, the selection process and other relevant information you should consider in casting your vote for each nominee.
Management has been informed that, if elected, each of such nominees would be willing to serve as a Director. However, in the event any proposed nominee advises that he or she is unable or unwilling to act for any reason prior to the Meeting, proxies held by the persons designated as proxyholders on the form of proxy will be voted in favour of the remaining nominees and for such other substitute nominee in their discretion unless the Shareholder has specified in the form of proxy that such Shareholder’s Shares are to be withheld from voting in the election of Directors.
Self-imposed term and age limits ensure CAE benefits from a combination of experience and fresh perspectives
The Board of Directors has passed a resolution establishing term limits comprising the following:
—up to three four-year periods of service, to aggregate twelve years maximum;
—no nominee may be proposed past their attaining 75 years of age; and
—the Chair of the Board may be in the role for a full five-year term regardless of his or her age or the number of years the individual has been a Director.
The Board of Directors believes these limits, subject to reasoned exceptions, are appropriate to ensure fresh skill sets and perspectives are periodically brought to the oversight of CAE’s business.
Majority voting requirement
Each Director of the Company must be elected by a majority (50% +1 vote) of the votes cast with respect to his or her election, other than at contested meetings.
In accordance with our Corporate Governance Guidelines, any nominee who receives a greater number of votes cast “against” him or her than votes “for” will not be elected as a Director. Notwithstanding the foregoing, if the nominee is an incumbent Director, such Director may continue in office until the earlier of (i) the 90th day after the election, or (ii) the day on which his or her successor is appointed or elected. In accordance with the provisions of the Canada Business Corporations Act and its regulations, the Board may reappoint an incumbent Director even if he or she does not receive majority support in the following circumstances:
—to satisfy Canadian residency requirements; or
—to satisfy the requirement that at least two Directors are not also officers or employees of the Company or its affiliates.
Detailed voting results will be disclosed after the Meeting
Promptly, after the Meeting, we will publicly disclose the number and percentage of votes cast for and withheld in respect of each nominee, as well as those cast for and against each other matter voted on by Shareholders at the Meeting.
The Board of Directors recommends that Shareholders vote FOR the election of the 13 nominated members of the Board. | ||
9 | CAE INC. | 2024 | Management Proxy Circular
Section 2 – Business of the Meeting
3 Appoint the Auditors
The Board, on recommendation by the Audit Committee, proposes that PricewaterhouseCoopers LLP (PwC), Chartered Accountants, Montréal, Québec be re-appointed as auditors of CAE to hold office until the close of the next annual meeting of Shareholders and that the Directors of CAE be authorized to fix their remuneration.
PwC has served as auditors of CAE since 1991.
PwC provides three types of services to CAE and its subsidiaries
1.Audit Services: fees billed for professional services for the audit of CAE’s annual consolidated financial statements and services that are normally provided by PwC in connection with statutory and regulatory filings, including the audit of the internal controls and financial reporting as required by the Sarbanes-Oxley Act of 2002 (“SOX”).
2.Audit-related Services: fees relating to work performed in connection with CAE’s acquisitions/divestitures, financings/prospectuses, translation and other miscellaneous accounting-related services.
3.Tax Services: fees relating to tax compliance, tax planning and tax advice.
Auditors’ independence
The Audit Committee has discussed with PwC its independence from management and CAE, has considered and concluded that the provision of non-audit services is compatible with maintaining such independence.
Furthermore, as per its policy, the Audit Committee reviews and pre-approves all non-audit services provided by the external auditors above a specified level.
Fees Paid by CAE to PwC in FY2024
The following chart shows all fees paid to PwC by CAE and its subsidiaries in the most recent and prior fiscal year.
Fee Type | 2024 ($ millions) | 2023 ($ millions) | ||||||
1. Audit services | 6.7 | 6.5 | ||||||
2. Audit-related services | 0.6 | 0.2 | ||||||
3. Tax services | 0.4 | 0.4 | ||||||
Total | 7.7 | 7.1 | ||||||
In order to further support PwC’s independence, the Audit Committee has set a policy concerning CAE’s hiring of current and former partners and employees of PwC who were engaged on CAE’s account in the recent years. Pursuant to this policy, CAE will not initiate nor pursue any discussion with any former partner, principal, Shareholder or professional employee(s) of PwC regarding potential or future employment in a reporting oversight role with CAE if they are in a position to influence the audit firm’s operations or financial policies, has ownership or partnership interests or financial participation in the audit firm or was a member of the CAE external audit team during the one-year period preceding the date that audit procedures commenced.
The Board of Directors recommends that Shareholders vote FOR the appointment of PwC as CAE’s auditors. | ||
10 | CAE INC. | 2024 | Management Proxy Circular
Section 2 – Business of the Meeting
4 Advisory Vote on Executive Compensation
As detailed in Section 7 – Executive Compensation, CAE’s executive compensation philosophy and programs are based on the fundamental principle of pay-for-performance to align the interests of our executives with those of our Shareholders. This compensation approach allows CAE to attract and retain high-performing executives who are strongly incentivized to create value for CAE’s Shareholders on a sustainable basis.
Section 7 of the Circular describes our overall approach to executive compensation, the objectives of our executive compensation program, how compensation decisions are made and the compensation paid to our most highly paid executive officers in the last three years. Section 7 also describes the continued Shareholder outreach conducted in FY2024, seeking input on our compensation programs.
At the Meeting, Shareholders will be asked to consider and to cast an advisory, non-binding vote on CAE’s approach to executive compensation – this is often referred to as “say on pay”.
The text of the “say on pay” resolution reads as follows:
‘‘Resolved that the Shareholders accept the approach to executive compensation
disclosed in this Management Proxy Circular’’.
disclosed in this Management Proxy Circular’’.
Because your vote is advisory, it will not be binding upon the Board. However, the Human Resources Committee (“HRC”) will review and analyze the results of the vote and take into consideration such results when reviewing executive compensation philosophy and programs.
If a significant proportion of the Shares represented, including by proxy, at the Meeting are voted against the above non-binding advisory resolution, the Board Chair or the HRC Chair will oversee a process to engage with Shareholders to give Shareholders the opportunity to express their specific concerns. The Board of Directors and the HRC will consider the results of this process and, if appropriate, review the Company’s approach to executive compensation in the context of Shareholders’ specific concerns.
Our approach to executive compensation was approved by 92.5% of the votes cast on the resolution during our August 9, 2023 annual meeting of Shareholders. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Shareholder Engagement, which describes our significant engagement initiatives with investors in FY2024, including with respect to our executive compensation programs.
The Board of Directors recommends that Shareholders vote FOR the resolution set out above. | ||
11 | CAE INC. | 2024 | Management Proxy Circular
Section 2 – Business of the Meeting
5 Approval of the Reconfirmation of the Rights Plan
CAE is a party to the Rights Plan, initially adopted on March 7, 1990, and last amended, restated and renewed on August 11, 2021. To remain effective, the Rights Plan must be reconfirmed every third annual meeting of Shareholders, including at the Meeting, by resolution passed by a majority of the votes cast by the Shareholders except those who do not qualify as Independent Shareholders (as defined in Appendix E). To the Company’s knowledge, there is no Shareholder who would not qualify as an Independent Shareholder for purposes of the Meeting. If it is not reconfirmed at the Meeting, the Rights Plan will terminate on August 14, 2024 and the rights issued under it will be void.
CAE believes that the Rights Plan preserves the fair treatment of Shareholders, is consistent with current best Canadian corporate governance practices and addresses institutional investor guidelines. The Rights Plan was not adopted in response to any actual or threatened take-over bid or other proposal from a third party to acquire control of CAE. It does not reduce the duty of the Board to act honestly, in good faith and in the best interests of CAE, and to act on that basis if any offer is made for the Shares of CAE. The Rights Plan is not intended to and will not entrench the Board.
At the Meeting, Shareholders will be asked to consider and vote to approve the reconfirmation of the Rights Plan, a summary of which is set forth in the attached Appendix E. This summary is qualified in its entirety by reference to the text of the Rights Plan, which is available upon request from the General Counsel, Chief Compliance Officer and Corporate Secretary of CAE at CAE Inc., 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6. The Rights Plan may also be accessed on CAE’s website (www.cae.com). Capitalized terms used in such summary without express definition have the meanings attributed thereto in the Rights Plan.
The text of the resolution approving the reconfirmation of the Rights Plan (the “Rights Plan Resolution”) is set forth below.
BE IT RESOLVED TO ADOPT THE FOLLOWING RESOLUTION:
THAT the reconfirmation of the Amended and Restated Shareholder Protection Rights Plan Agreement between CAE Inc. (the “Corporation”) and Computershare Trust Company of Canada, as rights agent, dated August 11, 2021, as may be further amended and restated from time to time, a summary of which is set forth in CAE’s Management Proxy Circular dated June 14, 2024, be and is hereby approved; and
THAT any officer of the Corporation be, and is hereby authorized and directed, for and on behalf of the Corporation, to finalize, sign or deliver all documents, to enter into any agreements and to do and perform all acts and things as such individual, in his or her discretion, deems necessary or advisable in order to give effect to the intent of this resolution and the matters authorized hereby, including compliance with all securities laws and regulations and the rules and requirements of the Toronto Stock Exchange, such determination to be conclusively evidenced by the finalizing, signing or delivery of such document or agreement or the performing of such act or thing.
The Board of Directors recommends that Shareholders vote FOR the Rights Plan Resolution. | ||
6 Other Business
We will also transact any other business that may properly come before the Meeting. At the time of printing of this Circular, the management of CAE knows of no such amendments, variations or other matters to come before the Meeting.
12 | CAE INC. | 2024 | Management Proxy Circular
13 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
This Section presents a profile of each nominated Director, including an explanation of each nominated Director’s experience, languages, education, skills, qualifications and core competencies, attendance at Board and Committee meetings from April 1, 2023 to March 31, 2024, total value of compensation received in FY2024, Share ownership information, the extent of fulfillment of the Minimum Ownership requirements, previous voting results, as well as participation on the boards of other public companies. A description of the Director Selection and Nomination Process, Board Attributes and Demographics and a tabular summary of our Directors’ Skills and Experiences follows the individual tables. “Market Value” refers to the product of the sum of the Shares and DSUs held by a Director multiplied by the closing price on the TSX of a Share on June 5, 2023 and June 6, 2024.
Management has been informed that, if elected, each of such nominees would be willing to serve as a Director. However, in the event any proposed nominee advises that he or she is unable or unwilling to act for any reason prior to the Meeting, proxies held by the persons designated as proxyholders on the form of proxy will be voted in favour of the remaining nominees and for such other substitute nominee in their discretion unless the Shareholder has specified in the form of proxy that such Shareholder’s Shares are to be withheld from voting in the election of directors.
Effective January 1, 2024, non-Canadian resident Directors are paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars, and their share ownership requirements are now in U.S. dollars. As such, for these Directors the “Total Value of Compensation Received in FY2024” includes payments made in U.S. dollars for the fourth quarter of FY2024, which were converted to Canadian dollars using the exchange rate on the last business day of the quarter (March 28, 2024), being $1.36 for each U.S. dollar. In addition, the “Market Value” of their securities held on June 6, 2024 has been converted to U.S. dollars using the Bank of Canada daily exchange rate on such date, being 0.73 U.S. dollars per Canadian dollar.
Footnotes specific to each nominee are presented immediately below their biography.
98.5% | 92.3%1 | 61 | 3.67 | 98.7% | ||||||||||
Average 2023 Votes FOR | Independent Directors | Average Age | Average Tenure2 (years) | Average Board Attendance | ||||||||||
1.The only non-Independent Director is CAE’s President and CEO.
2.For non-executive Directors.
14 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Ayman Antoun | ||
Age: 58 Oakville, Ontario, Canada Independent Director since: 2022 Committees: Audit, Human Resources Total Value of Compensation Received in FY2024: $246,847 Languages: English, Arabic | ||
Experience IBM–General Manager, Americas, which includes Canada, the United States and Latin America, and member of IBM’s Performance Team consisting of IBM’s top 50 executives globally (2020 – 2023); President, IBM Canada (2018 – 2020); held various senior executive sales leadership roles in Canada and the United States spanning Global Technology Services, Systems & Technology Group, Education Industry, Business Partners, and Global Sales Transformation (1988 – 2018) | ||
Skills, Qualifications and Core Competencies Knowledge of Industry developed while at IBM where he gained experience in software development, which is essential to CAE Strategic Leadership and Management skills and experience obtained during his 35 years at IBM holding executive roles, including running IBM’s largest geography (Americas) which covered all twelve major industries across fourteen countries Information Technology / Cybersecurity / Digital expertise developed during his time at IBM where his roles had a focus on Infrastructure, Cloud, Cognitive Solutions, Security and Digital Reinvention software and hardware Government Relations experience gained by leading IBM’s public sector unit for more than eight years, serving as IBM Canada President, where he engaged with local, provincial and federal governments on a regular basis, and while serving as the partnership executive for the Canadian government for over ten years | ||
 | ||
Education BS, Electrical Engineering, University of Waterloo Graduate, Executive program in financial analysis, business management and strategic planning, Harvard Business School | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.77% | 216,728,272 | ||||||
Votes Against | 1.23% | 2,692,284 | ||||||
Other Public Company Boards | ||||||||
TD Bank (2024 – present) | ||||||||
Board and Committee Attendance1 | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Audit Committee | 2 of 2 | 100% | ||||||
Human Resources Committee | 5 of 5 | 100% | ||||||
Total | 15 of 15 | 100% | ||||||
1.Mr. Antoun joined the Audit Committee on August 9, 2023. | ||||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | 1,725 | - | ||||||
DSUs | 14,362 | 5,820 | ||||||
Total | 16,087 | 5,820 | ||||||
Market Value | $414,723 | $168,082 | ||||||
| Minimum Ownership Requirement | $425,000 | $400,000 | ||||||
% of Achievement1 | 98% | 42% | ||||||
1.Mr. Antoun joined the Board on August 10, 2022 and must meet his required holdings over the five-year period from such date. | ||||||||
15 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Margaret S. (Peg) Billson | ||
Age: 62 Albuquerque, New Mexico, U.S. Independent Director since: 2015 Committees: Governance (Chair), Human Resources Total Value of Compensation Received in FY2024: $283,801 Languages: English | ||
Experience BBA Aviation–President & CEO, Aftermarket Services (2013 – 2016); President, Legacy Support (2009 – 2012) Eclipse Aviation–President & General Manager of the Airplane Division (2005 – 2008) Honeywell International–Vice-President & General Manager of Airframe Systems (2004 – 2005); Vice President & General Manager, Landing Systems (2002 – 2004); Vice President, Engine Systems Engineering and Program Management (1998 – 2001) Douglas Aircraft Company–Vice President Program Manager (1995 – 1997); Vice President Technical Services (1993 – 1995); held various quality assurance, engineering, and program management roles of increasing responsibility (1984 – 1993) | ||
Skills, Qualifications and Core Competencies Knowledge of Industry gained as a veteran aviation business leader with over 35 years of experience leading technology rich companies and engineering sectors for BBA Aviation, Eclipse Aviation, Honeywell and Boeing (McDonnell Douglas) Strategic Leadership and Management experience and Human Resources / Compensation expertise gained while holding executive roles at Honeywell, Boeing (McDonnell Douglas) and BBA Aviation, and such roles have provided her with significant insight into human resources and compensation issues encountered by companies conducting business within the aerospace sector R&D expertise developed while overseeing multiple full scale aircraft design and development programs such as the MD-11 at McDonnell Douglas and the EA-500 at Eclipse Aviation, as well as her responsibilities in product development at Honeywell Manufacturing / Supply Chain expertise obtained through her extensive experience being accountable for the on-time manufacturing of airplanes and components | ||
 | ||
Education BS, Aeronautical Engineering, Embry-Riddle Aeronautical University MS, Engineering Aerospace, California State University Long Beach | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 97.34% | 213,578,735 | ||||||
Votes Against | 2.66% | 5,841,823 | ||||||
Other Public Company Boards | ||||||||
GE Aerospace (2023 – present) | ||||||||
Arconic Corp. (2020 – 2023) | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Governance Committee (Chair) | 3 of 3 | 100% | ||||||
Human Resources Committee | 4 of 5 | 80% | ||||||
Total | 15 of 16 | 94% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | - | - | ||||||
DSUs | 71,024 | 61,168 | ||||||
Total | 71,024 | 61,168 | ||||||
Market Value | US$1,337,911 | $1,766,532 | ||||||
| Minimum Ownership Requirement | US$425,000 | $400,000 | ||||||
% of Achievement | 315% | 442% | ||||||
16 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Sophie Brochu | ||
Age: 61 Bromont, Quebec, Canada Independent Director since: 2023 Committees: Audit, Human Resources Total Value of Compensation Received in FY2024: $163,105 Languages: English, French | ||
Experience Hydro-Québec–President and Chief Executive Officer (2020 – 2023) Énergir (formerly Gaz-Métro)–President and Chief Executive Officer (2007 – 2019); Vice-President, Business Development and other executive roles (1997 – 2007) Began her career as a financial analyst at Société québécoise d’initiatives pétrolières (SOQUIP) in 1987 | ||
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained while serving as CEO at Energir and Hydro Quebec Human Resources / Compensation expertise gained during her service in CEO roles where she had ultimate oversight for succession planning, talent management and retention, and alignment of HR compensation programs with strategic orientations, as well as during her service on HR/Compensation committees of various public boards Government Relations expertise gained from her over 35 years of deep experience with energy utilities and regulated entities, both in Canada and the US, which involve various and complex governmental relations, both at the political and administrative levels, which resulted in her extensive strategic understanding of public policies Sustainability expertise through her over 25 years of experience in the deployment of health and safety programs, establishment of environmental frameworks, fostering of deep relationships with various stakeholders, and advancing of diversity and inclusion practices at the organizations that she oversaw | ||
 | ||
Education BA, Economics, Université Laval | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 99.69% | 218,731,614 | ||||||
Votes Against | 0.31% | 688,944 | ||||||
Other Public Company Boards | ||||||||
Compagnie de Saint-Gobain S.A. (2024 – present) | ||||||||
CGI Inc. (2019 – 2020; 2023 – present) | ||||||||
Bank of Montreal (2011 – 2023) | ||||||||
BCE Inc. and Bell Canada (2010 – 2020) | ||||||||
Valener Inc. (2000 – 2019) | ||||||||
Énergir (formerly Gaz Metro) (2007 – 2019) | ||||||||
Board and Committee Attendance1 | ||||||||
Board of Directors | 5 of 5 | 100% | ||||||
Audit Committee | 2 of 2 | 100% | ||||||
Human Resources Committee | 2 of 2 | 100% | ||||||
Total | 9 of 9 | 100% | ||||||
1.Ms. Brochu joined the Board, Audit Committee and Human Resources Committee on August 9, 2023. | ||||||||
Share Ownership2 | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | - | - | ||||||
DSUs | 5,667 | - | ||||||
Total | 5,667 | - | ||||||
Market Value | $146,095 | - | ||||||
Minimum Ownership Requirement | $425,000 | N/A | ||||||
% of Achievement | 34% | N/A | ||||||
2.Ms. Brochu joined the Board on August 9, 2023 and must meet her required holdings over the five-year period from such date. | ||||||||
17 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Patrick Decostre | ||
Age: 51 Montreal, Quebec, Canada Independent Director since: 2024 Committees: N/A Total Value of Compensation Received in FY2024: N/A Languages: English, French | ||
Experience Boralex Inc.–President and Chief Executive Officer (2020 – present); Vice President and Chief Operating Officer (2019 – 2020); Vice President and General Manager of Boralex’s European subsidiaries (2001 – 2019) | ||
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained in this role as CEO of Boralex since 2020, and during 20+ years in leadership positions in Europe for Boralex while building and growing the company Human Resources / Compensation expertise gained while serving as General Manager, COO and CEO of Boralex, dealing with human resources, organizational design, transformation and compensation Risk Management experience gained while serving as COO and CEO of Boralex, working with the board to set up new identification and risk management systems, including sustainability risks Capital Markets / M&A expertise gained through equity markets investor relations experience, as well as debt financing and refinancing, acquisitions and divestitures, and acquisitions integration throughout his time at Boralex | ||
 | ||
Education BSc, Civil Engineering in Physics, Université Libre de Bruxelles – École Polytechnique de Bruxelles Masters in Technological & Industrial Management, Université Libre de Bruxelles – Solvey Brussels School of Economics and Management | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | N/A | N/A | ||||||
Votes Against | N/A | N/A | ||||||
Other Public Company Boards | ||||||||
Boralex Inc. (2020 – present) | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | N/A | N/A | ||||||
Total | N/A | N/A | ||||||
Share Ownership1 | ||||||||
June 6, 2024 | ||||||||
Shares | - | |||||||
DSUs | - | |||||||
Total | - | |||||||
Market Value | - | |||||||
| Minimum Ownership Requirement | $425,000 | |||||||
% of Achievement | - | |||||||
1Mr. Decostre joined the Board on May 16, 2024 and must meet his required holdings over the five-year period from such date. | ||||||||
18 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Elise Eberwein | ||
Age: 59 Scottsdale, Arizona, U.S. Independent Director since: 2022 Committees: Audit, Human Resources Total Value of Compensation Received in FY2024: $274,003 Languages: English | ||
Experience American Airlines, Inc.–Executive Vice President, People and Communications (2013 – 2022) US Airways–Executive Vice President, People, Communications and Public Affairs (2005 – 2013) America West Airlines–Vice President, Corporate Communications (2003 – 2005) Served in key executive roles with Frontier Airlines and Western Pacific Airlines Began her aviation career as a flight attendant | ||
Skills, Qualifications and Core Competencies Knowledge of Industry gained over her 35 years in the commercial aviation sector while working for six airlines, including several start-up low-cost airlines and three major airlines: America West, US Airways, and American Airlines Strategic Leadership and Management experience gained while in leadership roles at US Airways and American Airlines which also included being a member of the executive management team leading two major airline mergers with responsibility for the subsequent integration work Human Resources / Compensation expertise gained through her roles leading all HR functions for more than 15 years, including serving as Chief Human Resources Officer for American Airlines, which resulted in her developing extensive executive compensation knowledge, talent development and succession planning experience Sustainability expertise obtained while developing and leading the diversity and inclusion initiatives as part of her responsibilities as CHRO of American Airlines | ||
 | ||
Education BA, Mass Communications, Lindenwood University Executive MBA, Colorado State University | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.78% | 216,751,071 | ||||||
Votes Against | 1.22% | 2,669,487 | ||||||
Other Public Company Boards | ||||||||
None | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Audit Committee | 4 of 4 | 100% | ||||||
Human Resources Committee | 5 of 5 | 100% | ||||||
Total | 17 of 17 | 100% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | 14,500 | 14,500 | ||||||
DSUs | 9,176 | 3,576 | ||||||
Total | 23,676 | 18,076 | ||||||
Market Value | US$445,995 | $522,035 | ||||||
| Minimum Ownership Requirement | US$425,000 | $400,000 | ||||||
% of Achievement | 105% | 131% | ||||||
19 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Ian L. Edwards | ||
Age: 62 Montreal, Quebec, Canada Independent Director since: First time nominee (Independent1) Committees: N/A Total Value of Compensation Received in FY2024: N/A Languages: English | ||
Experience AtkinsRéalis–President and Chief Executive Officer (2019 – present); Chief Operating Officer (2019); President, Infrastructure (2015 – 2019); Executive Vice-President, Infrastructure Construction (2014 – 2015) Leighton Group–Managing Director of Leighton Asia, India and Offshore (2012 – 2014); Executive General Manager of Leighton Asia (2008 – 2012) Gammon Construction Limited–Divisional Director (2008); Director – Civil Division (2007 – 2008) | ||
Skills, Qualifications and Core Competencies Strategic Management and Leadership experience gained as President and CEO of AtkinsRéalis, overseeing a repositioning of the company, including simplifying its operations and geographic spread, exiting business lines and evolving the company into a premier engineering services and nuclear company Human Resources / Compensation expertise developed as President and CEO of AtkinsRéalis, which role entails oversight of the overall remuneration framework throughout the organization, as well as through his role as Chair of the HR Committee during his tenure on the board of Canada Steamship Lines Sustainability expertise gained throughout his tenure at AtkinsRéalis, where sustainable projects drive over 50% of revenues and key pillars of growth are centered around energy transition Risk Management experience obtained while President and CEO of AtkinsRéalis, where he oversaw a complete overhaul of the company’s risk management system, including implementing an ERM process, regular business and project reviews at the CEO level, and strong board oversight | ||
 | ||
Education Higher and Ordinary Certificates, Civil Engineering, University of Central Lancashire Fellow – Institution of Civil Engineers Fellow – Hong Kong Institution of Engineers | ||
 | |||||||||||
2023 Voting Results | |||||||||||
Votes For | N/A | N/A | |||||||||
Votes Against | N/A | N/A | |||||||||
Other Public Company Boards | |||||||||||
AtkinsRéalis (2019 – present) | |||||||||||
Board and Committee Attendance | |||||||||||
Board of Directors | N/A | N/A | |||||||||
Total | N/A | N/A | |||||||||
Share Ownership1 | |||||||||||
June 6, 2024 | |||||||||||
Shares | - | ||||||||||
DSUs | - | ||||||||||
Total | - | ||||||||||
Market Value | - | ||||||||||
| Minimum Ownership Requirement | $425,000 | ||||||||||
% of Achievement | - | ||||||||||
1Mr. Edwards does not currently serve as a Director and will become a Director following his election at the Meeting. | |||||||||||
20 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Marianne Harrison | ||
Age: 60 Dover, New Hampshire, U.S. Independent Director since: 2019 Committees: Audit (Chair) (financial expert), Governance Total Value of Compensation Received in FY2024: $289,245 Languages: English | ||
Experience Manulife Financial Corporation–President and Chief Executive Officer of John Hancock Life Insurance Company, the U.S. division of Manulife Financial Corporation and a member of Manulife’s Executive Leadership Team (2017 – 2023); President and Chief Executive Officer of Manulife Canada, Manulife’s Canadian Division (2013 – 2017); held several leadership positions across the company, including President and General Manager for John Hancock Long-Term Care Insurance, and Executive Vice President and Controller for Manulife (2003-2017) TD Bank Group–Chief Financial Officer of Wealth Management after holding various other positions (1998 – 2003) PwC–Senior Manager after holding numerous other positions (1986 – 1998) | ||
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained while running all aspects of the P&L and serving as President and CEO of both John Hancock and Manulife Canada Finance / Accounting expertise developed during over 35 years in the financial industry including roles as Auditor for PWC; Corporate Controller Manulife Financial; and CFO Wealth Management TD Bank and was recognized by her election as a Fellow of the Profession, the highest designation for professional achievement conferred by the Chartered Professional Accountants of Ontario Risk Management experience gained throughout her career in financial services and as an active member of the Segment Risk Committee while serving as President and CEO John Hancock and Manulife Canada Capital Markets / M&A experience gained at Manulife Financial, where she was an active participant during mergers with both John Hancock and Standard Life, and the divestiture of Signature Services by John Hancock, as well as through having responsibility for the use of capital to ensure risk adjusted returns and company hurdle rates are met in both Canada and the US Segment | ||
 | ||
Education BA, English, University of Western Ontario Diploma in Accounting, Wilfrid Laurier University | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.01% | 215,050,902 | ||||||
Votes Against | 1.99% | 4,369,657 | ||||||
Other Public Company Boards | ||||||||
None | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Audit Committee (Chair) | 4 of 4 | 100% | ||||||
Governance Committee | 3 of 3 | 100% | ||||||
Total | 15 of 15 | 100% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | 15,600 | 15,600 | ||||||
DSUs | 38,751 | 28,706 | ||||||
Total | 54,351 | 44,306 | ||||||
Market Value | US$1,023,834 | $1,279,557 | ||||||
| Minimum Ownership Requirement | US$425,000 | $400,000 | ||||||
% of Achievement | 241% | 320% | ||||||
21 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
Alan N. MacGibbon Chair of the Board | ||
Age: 68 Toronto, Ontario, Canada Independent Director since: 2015 Total Value of Compensation Received in FY2024: $405,000 Languages: English | ||
Experience Deloitte LLP Canada– Senior Counsel (2012 – 2013); Managing Partner and Chief Executive and served on the Executive and Global Board of Directors of Deloitte Touche Tohmatsu Limited (2004 –2012); Global Managing Director, Quality, Strategy and Communications of Deloitte Touche Tohmatsu Limited (2011 – 2012) | ||
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained while serving as Managing Partner and CEO of Deloitte, where he was responsible for leading and managing the largest Canadian professional services firm with a partnership of over 800 partners and more than 8,000 employees Finance / Accounting expertise developed during his almost 35-year career at Deloitte, a leading global provider of audit and assurance, consulting, financial advisory services Risk Management experience gained through his roles at Deloitte where he advised large enterprises about the management of their risks Human Resources / Compensation expertise obtained while being Managing Partner and CEO of Deloitte Canada, where he dealt extensively with human resources and compensation issues as he had oversight of the succession planning and annual compensation planning and execution for all partners | ||
 | ||
Education BBA, University of New Brunswick Chartered Professional Accountant Chartered Accountant | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.89% | 216,990,218 | ||||||
Votes Against | 1.11% | 2,429,818 | ||||||
Other Public Company Boards | ||||||||
TD Bank (2014 – present) | ||||||||
Board and Committee Attendance1 | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Total | 8 of 8 | 100% | ||||||
1.As Chair of the Board, Mr. MacGibbon also attends all Committee meetings. | ||||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares2 | 4,088 | 4,088 | ||||||
DSUs | 83,720 | 69,709 | ||||||
Total | 87,808 | 73,797 | ||||||
Market Value | $2,263,690 | $2,131,257 | ||||||
| Minimum Ownership Requirement | $950,000 | $900,000 | ||||||
% of Achievement | 238% | 237% | ||||||
2.1,011 of these Shares are owned beneficially by Mr. MacGibbon’s spouse, under the direction of Mr. MacGibbon. | ||||||||
22 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Mary Lou Maher | ||
Age: 64 Toronto, Ontario, Canada Independent Director since: 2021 Committees: Audit (financial expert), Human Resources Total Value of Compensation Received in FY2024: $259,782 Languages: English | ||
Experience KPMG Canada–Canadian Managing Partner, Quality and Risk and Global Head of Inclusion and Diversity KPMG International (2017 – 2021); held various executive and governance roles, including Chief Financial Officer, Chief Inclusion and Diversity Officer and Chief Human Resources Officer (1983 – 2017) | ||
Skills, Qualifications and Core Competencies Finance / Accounting expertise developed during her many years at KPMG where she gained audit experience in retail, manufacturing, financial services (banking and brokerage), hospitality, healthcare and real estate and was recognized through her election as a Fellow of the Chartered Professional Accountants of Ontario Human Resources / Compensation expertise gained while serving as Chief Human Resource Officer, Chief Inclusion and Diversity Officer and Global Head of Inclusion and Diversity at KPMG, where she created KPMG Canada’s first ever National Diversity Council and was the executive sponsor of pride@kpmg Risk Management experience gained while serving as a member of the KPMG Canadian Executive and Global Risk Management leadership teams, which are responsible for managing risk and legal matters for KPMG Canada including Enterprise Risk Management Sustainability expertise obtained while at KPMG where she oversaw the talent development of their workforce and led their diversity, equity, and inclusion initiatives | ||
 | ||
Education BCom, McMaster University Fellow Chartered Professional Accountant | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.32% | 215,731,438 | ||||||
Votes Against | 1.68% | 3,689,120 | ||||||
Other Public Company Boards | ||||||||
Canadian Imperial Bank of Commerce (2021 – present) | ||||||||
Magna International Inc. (2021 – present) | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Audit Committee | 4 of 4 | 100% | ||||||
Human Resources Committee | 5 of 5 | 100% | ||||||
Total | 17 of 17 | 100% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | 6,500 | 6,500 | ||||||
DSUs | 17,671 | 9,775 | ||||||
Total | 24,171 | 16,275 | ||||||
Market Value | $623,128 | $470,022 | ||||||
| Minimum Ownership Requirement | $425,000 | $400,000 | ||||||
% of Achievement | 147% | 118% | ||||||
23 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| François Olivier | ||
Age: 59 Montreal, Quebec, Canada Independent Director since: 2017 Committees: Audit, Governance Total Value of Compensation Received in FY2024: $250,750 Languages: English, French | ||
Experience Transcontinental Inc.–President and Chief Executive Officer (2008 – 2021); joined in 1993 in the Printing Sector and rose through the ranks to ultimately take on the role of President of the Information Products Printing Sector, and then became Chief Operating Officer in 2007 Canada Packers–General Manager (1988 – 1993) | ||
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained in driving profitable business growth through M&A and in managing large-scale manufacturing operations notably while in the roles of CEO and COO at Transcontinental, where he consolidated the Canadian printing industry and made Transcontinental Canada’s largest printer and created a packaging division that became a leader in flexible packaging in North America International Markets experience obtained while CEO of Transcontinental, where he managed the multinational company with revenue of $3 billion and 9,000 employees operating in eight different countries Capital Markets / M&A expertise developed during his time at Transcontinental, which included developing and transforming the company through multiple mergers and acquisitions activities Manufacturing / Supply Chain experience gained while at Transcontinental, where he managed a network of 45 manufacturing locations in eight different countries | ||
 | ||
Education BSc, McGill University Graduate, Program for Management Development, Harvard Business School | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.15% | 215,351,390 | ||||||
Votes Against | 1.85% | 4,068,647 | ||||||
Other Public Company Boards | ||||||||
Fiera Capital Corp. (2022 – present) | ||||||||
Transcontinental Inc. (2008 – 2021) | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Audit Committee | 4 of 4 | 100% | ||||||
Governance Committee | 2 of 3 | 67% | ||||||
Total | 14 of 15 | 93% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | 7,500 | - | ||||||
DSUs | 53,678 | 45,002 | ||||||
Total | 61,178 | 45,002 | ||||||
Market Value | $1,577,169 | $1,299,658 | ||||||
| Minimum Ownership Requirement | $425,000 | $400,000 | ||||||
% of Achievement | 371% | 325% | ||||||
24 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
Marc Parent, C.M. President and CEO | ||
Age: 63 Montreal, Quebec, Canada Director since: 2008 Total Value of Compensation Received in FY2024: please refer to Section 7 – Executive Compensation – Compensation of our Named Executive Officers for details concerning Mr. Parent’s compensation. Languages: English, French | ||
Experience CAE Inc.–President and CEO (2009 – present); Executive Vice President and Chief Operating Officer responsible for all of CAE’s business segments and new growth initiatives (2008 – 2009); Group President, Simulation Products and Military Training & Services (2006 – 2008); Group President, Simulation Products responsible for the Company’s civil simulation products business as well as the design, manufacture and support of products for the Company’s civil and military training businesses (2005 – 2006) Bombardier Aerospace–Vice President and General Manager of Challenger 300, 604, and 850/870 programs as well as the CRJ 200 Regional Aircraft product line (2004 – 2005); Vice President and General Manager, U.S. Operations, with responsibilities encompassing Learjet facilities in Wichita and Tucson (2003 – 2004), Vice President and General Manager of Operations of the Toronto facility (2001 – 2003), Vice President, Operations of the de Havilland site in Toronto (2000 – 2001); Vice President Program Management for Product Development (1998 – 2000); Project Director responsible for the design, development and certification of the Q400 turboprop airliner (1995 – 1998) | ||
Skills, Qualifications and Core Competencies Deep Knowledge of Industry gained during 40 years of aerospace experience at Canadair, Bombardier and CAE Strategic Leadership and Management experience developed in executive roles at Bombardier and CAE including as COO and CEO International Markets expertise gained while overseeing a significant expansion of CAE’s global presence during his time as COO and CEO Capital Markets / M&A experience gained while overseeing 36 M&A transactions, creating 19 joint ventures and multiple organic transactions of customer outsourcing since the start of his CEO tenure in 2009, which has resulted in realizing benefits of scale through synergy capture and best-of-breed technology consolidation | ||
 | ||
Education Bachelor of Engineering, École Polytechnique de Montreal Graduate, Harvard Business School Advanced Management Program Active pilot holding a Transport Canada Airline Transport Pilot License | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 99.70% | 218,766,547 | ||||||
Votes Against | 0.30% | 654,919 | ||||||
Other Public Company Boards | ||||||||
Telus Corporation (2017 – present) | ||||||||
Board and Committee Attendance1 | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Total | 8 of 8 | 100% | ||||||
1.Upon invitation of Board Committees, Mr. Parent attended all or a part of their meetings. | ||||||||
Share Ownership2 | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | 393,075 | 354,879 | ||||||
FY2004 LTUs3 | 42,985 | 42,985 | ||||||
LTUs3 | 232,111 | 232,111 | ||||||
Total | 668,171 | 629,975 | ||||||
Market Value | $17,225,448 | $18,193,678 | ||||||
2.As President and CEO, Mr. Parent has a higher ownership target than an Independent Director (please refer to Section 7 – Executive Compensation - Compensation Discussion and Analysis - Compensation Governance – Executive Share Ownership Requirements for details concerning Mr. Parent’s Share ownership requirements). 3.Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs - Long-Term Incentive Program Design - Inactive Equity-Based Plans with Legacy Participants for information about the FY2004 LTUs and the LTUs. | ||||||||
25 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
General David G. Perkins USA (Ret.) | ||
Age: 66 Jackson, New Hampshire, U.S. Independent Director since: 2020 Committees: Governance, Human Resources Total Value of Compensation Received in FY2024: $274,003 Languages: English | ||
Experience US Army–Commander of the United States Army Training and Doctrine Command (TRADOC) (2014 – 2018); Commander, Combined Arms Center & Commandant, Command & General Staff College (2011 – 2014); Commander, 4th Infantry Division (2009 – 2011); joined in 1980 | ||
Skills, Qualifications and Core Competencies Knowledge of Industry developed while serving for over 40-year in the US Army, including as the Training and Doctrine Command (TRADOC) commander, where he was responsible for developing and specifying the operational requirements for all US Army systems Strategic Leadership and Management experience gained while serving and leading the US Army, which is one of the most complex and largest organizations in the world, and where under his leadership, TRADOC developed the Army’s strategic concept of Multi-Domain Operations which has become a driver for future changes in operations and training, not only in the US Military, but around the world Government Relations expertise developed while commanding TRADOC, which is responsible for designing, acquiring, building, and constantly improving the entire US Army in accordance with all policies and laws both in the US and internationally Human Resources / Compensation experience based on running a recruiting organization that recruited and hired over 120,000 personnel annually and was then responsible for developing and implementing a talent management and leader development strategy for over 1.2 million personnel | ||
 | ||
Education BS, U.S. Military Academy, West Point MS, Mechanical Engineering, University of Michigan Masters in National Security and Strategic Studies, U.S. Naval War College | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 97.41% | 213,727,489 | ||||||
Votes Against | 2.59% | 5,692,548 | ||||||
Other Public Company Boards | ||||||||
Oshkosh Corp. (2022 – present) | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Governance Committee | 3 of 3 | 100% | ||||||
Human Resources Committee | 5 of 5 | 100% | ||||||
Total | 16 of 16 | 100% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | - | - | ||||||
DSUs | 31,579 | 22,062 | ||||||
Total | 31,579 | 22,062 | ||||||
Market Value | US$594,868 | $637,151 | ||||||
| Minimum Ownership Requirement | US$425,000 | $400,000 | ||||||
% of Achievement | 140% | 159% | ||||||
26 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
| Patrick M. Shanahan | ||
Age: 62 Seattle, Washington, U.S. Independent Director since: 2022 Committees: Audit, Governance Total Value of Compensation Received in FY2024: $274,003 Languages: English | ||
Experience Spirit AeroSystems Inc.–President and Chief Executive Officer (2023 – present) U.S. Department of Defense–U.S. Acting Secretary of Defense (2019); 33rd U.S. Deputy Secretary of Defense, where he helped lead the development of several key Department of Defense policies and strategies (2017 – 2018) The Boeing Company–Senior Vice President, Supply Chain & Operations (2016 – 2017); Senior Vice President of Commercial Airplane Programs, managing profit and loss for the 737, 747, 767, 777 and 787 programs and the operations at Boeing’s principal manufacturing sites (2008 – 2016); Vice President and General Manager of the 787 Dreamliner, leading the program during a critical development period (2007 – 2008); Vice President and General Manager of Boeing Missile Defense Systems (2004 – 2007); Vice President and General Manager of Boeing Rotorcraft Systems (2002 – 2004); joined in 1986 | ||
Skills, Qualifications and Core Competencies Knowledge of Industry gained as CEO of Spirit AeroSystems and three decades employed by Boeing overseeing both their civil aviation and defence units and as the “customer” while serving in the U.S. Department of Defense Strategic Leadership and Management experience obtained through his service in the U.S. Department of Defense, including as the Acting Secretary of Defense and the 33rd Deputy Secretary of Defense, where he oversaw the management of coordinating and supervising all matters related to the U.S. Armed Forces, as well as during his time in leadership roles at and Boeing and Spirit AeroSystems Risk Management expertise developed through his roles at Spirit AeroSystems and Boeing overseeing development and execution of numerous complex civil aviation and defence programs Manufacturing / Supply Chain expertise gained through his roles at Spirit AeroSystems and Boeing overseeing development and execution of civil aviation and defence programs that included responsibilities for manufacturing operations, and supplier management functions, including implementation of advanced manufacturing technologies and global supply chain strategies | ||
 | ||
Education BS, Mechanical Engineering, University of Washington MS, Mechanical Engineering, Massachusetts Institute of Technology MBA, Massachusetts Institute of Technology’s Sloan School of Management | ||
 | ||||||||
2023 Voting Results | ||||||||
Votes For | 98.59% | 216,322,964 | ||||||
Votes Against | 1.41% | 3,097,073 | ||||||
Other Public Company Boards | ||||||||
Leidos Holdings, Inc. (2022 – present) | ||||||||
Spirit AeroSystems Inc. (2021 – present) | ||||||||
Eve Holdings, Inc. (2021 – 2022) | ||||||||
Board and Committee Attendance | ||||||||
Board of Directors | 8 of 8 | 100% | ||||||
Audit Committee | 4 of 4 | 100% | ||||||
Governance Committee | 3 of 3 | 100% | ||||||
Total | 15 of 15 | 100% | ||||||
Share Ownership | ||||||||
June 6, 2024 | June 5, 2023 | |||||||
Shares | - | - | ||||||
DSUs | 11,062 | 5,461 | ||||||
Total | 11,062 | 5,461 | ||||||
Market Value | US$208,379 | $157,714 | ||||||
| Minimum Ownership Requirement | US$425,000 | $400,000 | ||||||
% of Achievement1 | 49% | 39% | ||||||
1.Mr. Shanahan joined the Board on April 1, 2022 and must meet his required holdings over the five-year period from such date. | ||||||||
27 | CAE INC. | 2024 | Management Proxy Circular
Section 3 – About the Nominated Directors
Director Selection and Nomination Process
Part of the Governance Committee’s responsibility is to identify and recruit suitable potential Board members and recommend to the Board nominees for election at annual Shareholders’ meetings, taking into consideration the “Board and Executive Officer Diversity, Equity and Inclusion Policy” (the “Diversity Policy”).
To fulfill this mandate, the Governance Committee:
—Identifies desirable skill sets, industry experience, diverse backgrounds, international experience, relationships and other attributes that would assist the Board in the conduct of its responsibilities and also further CAE’s interests (refer to “Board Attributes” below), taking into account criteria that promote diversity, including but not limited to gender, age, race, national or ethnic origin, sexual orientation and disability.
—Reviews with the Chair, President and CEO and other Directors possible candidates, including the existing members of the Board, which may meet some or all of such attributes.
—Considers potential conflicts of interest, independence issues and interlocking directorships of potential candidates.
—Approaches with the Chair and other Directors potential candidates not already serving as Directors to determine their availability and interest in serving on CAE’s Board, and interviews those interested to determine their suitability for nomination.
—Reviews with other members of the Board the potential nomination of any new Director before a final determination to nominate them is made and assess the effectiveness of the Director nomination process at achieving CAE’s diversity objectives.
Board members must:
—Demonstrate high ethical standards and integrity, including abiding by CAE’s Code of Conduct;
—Act honestly and in good faith regarding CAE’s best interests;
—Devote sufficient time to CAE’s affairs and exercise prudence and diligence in fulfilling all their Board-related responsibilities;
—Give independent judgment on issues facing CAE;
—Understand and challenge CAE’s business plans and strategy;
—Effectively participate in all Board-related deliberations;
—Make reasonable efforts to attend Board and committee meetings; and
—Review the management materials provided in advance of, and otherwise prepare for, all Board meetings.
Under the articles of CAE, the Board may consist of a minimum of three and a maximum of twenty-one Directors. As provided in CAE’s by-laws, the Directors are to be elected annually and a majority of the Directors shall be resident Canadians. Each Director will hold office until the next annual meeting or until his or her successor is duly elected unless his or her office is earlier vacated in accordance with the by-laws. In accordance with the by-laws, the Board has fixed the number of Directors to be elected at the Meeting at thirteen.
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Section 3 – About the Nominated Directors
Board Attributes
The following matrix identifying the gender, language skills, age, diversity affiliation, tenure, professional skills, expertise and qualifications of nominated Directors is reviewed by the Governance Committee annually to ensure CAE benefits from an appropriate combination of skills, experience with CAE’s business matters and corporate governance standards and fresh perspectives:
—All non-employee Director nominees (12 out of a total number of 13 Directors) are independent.
—All Board Committee members are independent.
| Board Demographics | Ayman Antoun | Margaret S. (Peg) Billson | Sophie Brochu | Patrick Decostre | Elise Eberwein | Ian L. Edwards | Marianne Harrison | Alan N. MacGibbon | Mary Lou Maher | François Olivier | Marc Parent | Gen. David G. Perkins, USA (Ret.) | Patrick M. Shanahan | ||||||||||||||||||||||||||||
Gender | M | F | F | M | F | M | F | M | F | M | M | M | M | ||||||||||||||||||||||||||||
French1 | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||
English1 | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||
Other language(s)1 | ● | ||||||||||||||||||||||||||||||||||||||||
Under 60 | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||
60-69 | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||
70+ | |||||||||||||||||||||||||||||||||||||||||
LGBTQ2+ | ● | ||||||||||||||||||||||||||||||||||||||||
Visible minority | ● | ||||||||||||||||||||||||||||||||||||||||
Indigenous people | |||||||||||||||||||||||||||||||||||||||||
0-5 years tenure | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||
6-10 years tenure | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||
More than 10 years tenure | ● | ||||||||||||||||||||||||||||||||||||||||
1.At a minimum, business proficiency, unless otherwise indicated.
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Section 3 – About the Nominated Directors
| Skills and Experiences | Ayman Antoun | Margaret S. (Peg) Billson | Sophie Brochu | Patrick Decostre | Elise Eberwein | Ian L. Edwards | Marianne Harrison | Alan N. MacGibbon | Mary Lou Maher | François Olivier | Marc Parent | Gen. David G. Perkins, USA (Ret.) | Patrick M. Shanahan | |||||||||||||||||||||||||||||||
 | Knowledge of Industry Experience with, or understanding of, some or all of the markets or industries which are directly relevant to CAE, including civil aviation and defence. | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||
 | Strategic Leadership and Management Experience as senior executive of a public company or other major organization, and executive or management experience developing, evaluating and implementing a strategic plan. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||
 | Finance / Accounting Experience with, or understanding of, financial accounting and reporting and corporate finance, and familiarity with internal financial and accounting controls and IFRS. | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||
 | Human Resources / Compensation Experience with, or understanding of, executive compensation and benefits, including benefits and incentive programs, talent management and retention, leadership development, and succession planning. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||
 | Government Relations Experience with, or understanding of, regulatory, political and public policy in Canada, the United States and/or international jurisdictions. | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||
 | R&D Experience with the oversight of large-scale R&D programs. | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||
 | Legal / Governance Experience with, or understanding of, corporate governance issues and practices, including the legal, compliance and regulatory environment applicable to public companies or other major organizations. | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||||
 | Information Technology / Cybersecurity / Digital Experience with, or understanding of, the design and implementation, or oversight of the design and implementation, of enterprise-wide information technology systems, client-based digital infrastructures, data analytics, privacy and cybersecurity strategy and policies. | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||
 | Sustainability Experience with, or understanding of, sustainability practices and programs, including climate change and decarbonization, health and safety, diversity, equity and inclusion and social responsibility. | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||
 | Risk Management Experience with, or understanding of, the identification and assessment of risks and risk management systems. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||
 | International Markets Experience with, or understanding of, overseas markets where the Company has operations. | ● | ● | ● | ● | ● | ||||||||||||||||||||||||||||||||||||||
 | Capital Markets / M&A Experience overseeing the allocation of capital to ensure superior risk-adjusted financial returns and in capital structure strategy and corporate transactions, including mergers, acquisitions, or divestitures of major assets and/or private/public entities. | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||
 | Manufacturing / Supply Chain Experience with, or understanding of, sourcing, manufacturing, supply chain, infrastructure, information management, logistics, and product development, distribution and marketing. | ● | ● | ● | ● | ● | ● | |||||||||||||||||||||||||||||||||||||
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Section 4 – Corporate Governance
Our Commitment to Sound Corporate Governance
The Board and management team take pride in knowing that CAE has maintained the highest standards in corporate governance. CAE’s corporate governance is rooted in the basic principle that proper and ethical practices lead to the creation and preservation of Shareholder value.
Our governance structure enables independent, experienced and accomplished Directors to provide advice, insight and oversight to advance the interests of the Company and our Shareholders.
Regulatory compliance
As a Canadian reporting issuer with Shares listed on the TSX and the New York Stock Exchange (“NYSE”), CAE’s corporate governance practices are required to meet and exceed applicable rules adopted by the Canadian Securities Administrators (“CSA”) and the United States Securities and Exchange Commission (“SEC”), as well as provisions of the rules of the NYSE and of SOX.
Most of the NYSE’s corporate governance listing standards are not mandatory for CAE as a non-U.S. company, but CAE is required to disclose the significant differences between its corporate governance practices and the requirements applicable to United States companies listed on the NYSE. Except as summarized on CAE’s website (http://www.cae.com/investors/governance), CAE is in compliance with the NYSE requirements in all significant respects. CAE also complies with those provisions of SOX and the rules adopted by the SEC pursuant to that Act that are currently applicable to CAE.
Best practices and continuous improvement
The Board and its Governance Committee continue to monitor governance practices in Canada and the United States, and to implement changes to CAE’s governance policies and practices as necessary to comply with any new rules issued by the CSA and other applicable regulatory authorities. We also monitor recommended best practices of Shareholder representatives and other organizations and will implement any such practice we believe to be in the best interest of the Company.
Communication and Shareholder engagement
CAE is committed to ensure open, ongoing dialogue with Shareholders, other investors and the public. Through CAE’s Disclosure Policy and procedures, the Board ensures that communication of material information to investors is timely and accurate, and broadly disseminated in accordance with all applicable securities laws and stock exchange rules. CAE recognizes the importance of engaging in constructive and meaningful communications with Shareholders and values their input and insights. To that effect, we have put in place various means to ensure consistent and effective communication with Shareholders and to encourage them to express their views and provide direct feedback to the Board and management.
—We regularly communicate with our stakeholders through various channels, including via our website (www.cae.com). Shareholders, customers and other stakeholders can access comprehensive information about the Company through the investor section of our webpage (www.cae.com/investors) where annual and quarterly reports, news releases, sustainability reports, corporate presentations and governance-related documents are available.
—We host quarterly earnings conference calls with financial analysts and institutional investors to review CAE’s most recently released financial and operating results. Our earnings calls are webcast live and are followed by a question and answer period. Replays are accessible on our website.
—We also host Investor Days intended for capital markets professionals, including sell-side analysts and institutional investors on an ad hoc basis. These events enable CAE to explain our activities and communicate our strategy and vision for the Company in a comprehensive way to our Shareholders. These meetings also provide opportunities to engage with CAE’s executive team. These events can be attended in person or via live webcast. The replay of the event and the supporting presentation are available on CAE’s website after the event.
The Board encourages Shareholders to attend the Company’s annual Shareholders’ meetings. These meetings provide valuable opportunities to discuss the Company, its corporate governance and other important matters.
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Section 4 – Corporate Governance
The Company is committed to effectively engaging with Shareholders and other stakeholders on the topic of executive compensation on an ongoing basis.
Each year, we ask Shareholders at the Meeting to consider and to cast an advisory, non-binding vote on CAE’s approach to executive compensation – this is often referred to as “say on pay”. Although this is an advisory vote and the results are not binding, the HRC reviews and analyzes the results of the vote and takes into consideration such results when reviewing executive compensation philosophy and programs.
We appreciate the importance of engaging with our Shareholders to better understand their views, concerns, and priorities related to our business operations, performance, and executive compensation programs. In FY2023, we initiated a proactive engagement process with our Shareholders. We have continued this process in FY2024 and have committed to regular annual shareholder engagement with our Shareholders. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis - Shareholder Engagement, which describes our significant engagement initiatives with investors in FY2024.
Shareholders are also always invited to submit proposals to be considered at an annual Shareholders’ meeting of the Company and included in our management proxy circular. More information is provided under Section 8 – Other Important Information of this Circular.
CAE’s Global Communications and Investor Relations departments actively engage with investors to address any specific questions or concerns they might have. Shareholders may send comments or questions via email to investor.relations@cae.com. In addition, CAE’s transfer agent, Computershare Trust Company of Canada, has a toll-free number (1-800-564-6253) and website (www.computershare.com) to assist Shareholders.
Shareholders may communicate with the Board or management in writing to express their views on matters that are important to them, by addressing their correspondence to the Chair of the Board, either (i) by mail in an envelope marked “confidential” to the attention of the Chair of the Board, CAE Inc., 8585 Ch. de la Côte-de-Liesse, St-Laurent (Québec) Canada H4T 1G6 or (ii) by email at boardchair@cae.com.
Shareholders may ask to meet with the Chair of the Board, the Chair of any Board Committee or an individual Director to discuss compensation and governance-related topics for which the Board is directly responsible. The Chair of the Board will consider such
meeting requests in consultation with the Chair of the Governance Committee and the Corporate Secretary. The Board reserves the right to decline requests for meetings for any reason it deems appropriate, including where the proposed topics for the meeting are not related to compensation and corporate governance matters and are better handled by management.
We are committed to maintaining and continuously enhancing our Shareholders’ engagement. We offer various opportunities for our institutional investors and proxy advisory groups to learn about CAE through:
—Investor days;
—Investor roadshows throughout the year;
—In person or videoconference meetings with our President and Chief Executive Officer, Executive Vice President Finance and Chief Financial Officer, Senior Vice President, Investor Relations and Enterprise Risk Management, Chief Sustainability Officer and Senior Vice President, Stakeholder Engagement, Group Presidents and senior leaders within our global operations;
—Webcasts of our quarterly earnings conference calls with sell-side analysts and institutional investors;
—Executive presentations at institutional and industry conferences; and
—Quarterly earnings presentations available on our website.
We also receive feedback through:
—Our Shareholders’ Annual General Meeting;
—Regular discussions with sell-side analysts;
—A dedicated address for email inquiries;
—Our advisory note on our approach to executive compensation; and
—We continuously enhance our messaging to our investors to provide them with the most accurate guidance on our growth perspectives and the future value of their investment.
Board and management roles
The purpose of the Board and its committees is to build long-term value for the Company’s Shareholders and to ensure the continuity and vitality of the Company’s businesses by setting policy for the Company, overseeing strategic planning, monitoring the Company’s performance, providing management with appropriate advice and performance feedback. Management is responsible for and the Board is committed to ensuring that CAE operates in a
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Section 4 – Corporate Governance
legal and ethically responsible manner. The Board’s stewardship role, specific responsibilities, composition requirements and various other matters are set out in Appendix A – Board of Directors’ Charter to this Circular.
President and CEO’s role and responsibilities
The position description for the President and CEO is developed with input from the President and CEO, and is approved by the Governance Committee and the Board. The description (which is available on our website) provides that the President and CEO has the primary responsibility for the leadership, strategic and management direction and business results of CAE to ensure that CAE establishes appropriate goals, and manages its resources to meet these goals. It also provides that the President and CEO is accountable to the Board for, amongst other things, formulating and executing business strategies, overseeing CAE’s corporate governance structure and framework, overall responsibility for the management of CAE’s business, carrying out a comprehensive budgeting process and monitoring CAE’s performance against the budget, ensuring that CAE strategies are effectively implemented with timely progress towards strategic objectives, identifying and communicating risks and opportunities to the Board and dealing with them appropriately, keeping the Board fully informed of all important issues and aspects of the Company’s performance, opportunities and market developments, building and maintaining a network of strategic relationships with business leaders, governmental officials and investors, developing and implementing a human resource strategy which develops leadership capabilities, and creating an organizational structure and culture that optimize and sustain high levels of performance. The CEO is responsible for ensuring there is an effective risk management and business continuity framework in place, with appropriate systems to monitor, manage and mitigate such risks (including cybersecurity risks). In addition, the CEO is responsible for the implementation and communication of the Company’s sustainability and compliance policies, practices and strategy (including diversity, equity and inclusion; data protection and privacy; health &, safety (including aviation safety); environment and climate change; ethics and anti-corruption; and human rights (including modern slavery)). The CEO fosters a culture of ethical behaviour for CAE and to promotes compliance with CAE’s Code of Business Conduct and proactively ensures that CAE complies with all of its legal, accounting, ethical, moral and social responsibility obligations.
The Board Chair is independent
Mr. MacGibbon currently serves as the Chair of the Board. Mr. MacGibbon is a non-executive Director and, as such, is responsible for ensuring that the Board discharges its responsibilities independently of management.
Correspondence to the Independent Directors may be sent to the attention of the Chair of the Board, by email at boardchair@cae.com or at CAE’s address listed in this Circular.
The Board Chair position description (which is available on our website) sets out the Chair’s responsibilities and duties in guiding the Board in the fulfillment of their stewardship role, namely:
—Represent the Board in discussion with management;
—Represent the Board in discussion with third parties;
—Generally ensure that the Board functions independently of management;
—Chair and encourage free and open discussions at the Board meetings;
—Together with the Governance Committee (“GC”), identify guidelines for the selection of, and evaluation of conduct of the Directors;
—Ensure the effective and transparent interaction of Board members and senior management;
—Act as a resource to the President and CEO on significant strategy and business initiatives and meet with the President and CEO regularly to provide feedback and advice on behalf of the Board and other stakeholders;
—Report to Shareholders on behalf of the Board and play a role in the Company’s external relationships in consultation with the President and CEO; and
—Report to Shareholders on behalf of the Board.
Processes in place to ensure the Board may function independently of management
The Independent Directors met separately from the President and CEO at each of the meetings of the Board during FY2024, and at each meeting of the HRC, GC and Audit Committee. At the Board meetings, the Independent Directors’ meetings are chaired by the non-executive Chair; at Committee meetings, by the Chair of that Committee. The Board, its Committees as well as individual Directors are also able to retain and meet with external advisors and consultants at the expense of CAE in appropriate circumstances. In fact, the Board has regular access to information independent of management through the external and internal auditors, as well as independent compensation consultants and independent legal counsel. The Board believes that sufficient processes are in place to enable it to function independently of management.
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Section 4 – Corporate Governance
Delegation to standing Board committees composed entirely of Independent Directors
In order to enable it to effectively fulfill its responsibilities, the Board has established three standing committees currently composed of the following Independent Directors as of the Record Date:
| Governance | Audit | Human Resources | |||||||||
Ayman Antoun | X | X | |||||||||
Margaret S. (Peg) Billson | Chair | X | |||||||||
Sophie Brochu | X | X | |||||||||
Elise Eberwein | X | X | |||||||||
Marianne Harrison | X | Chair | |||||||||
Mary Lou Maher | X | Chair | |||||||||
François Olivier | X | X | |||||||||
Gen. David G. Perkins, USA (Ret.) | X | X | |||||||||
Patrick M. Shanahan | X | X | |||||||||
Andrew J. Stevens | X | X | |||||||||
The nature and scope of authority and responsibility delegated to each standing committee is set forth in the Committee Charters presented in Section 5 – Board Committee Reports which can also be found on our website under “Corporate Governance” along with each Committee Chair’s position description.
The appointment of specific Directors to each of the standing Board Committees is generally intended to reflect the relevance of Independent Directors’ skills and experience to the applicable Committee’s Charter (refer to Section 3 – About the Nominated Directors for details about the selection process and criteria).
Other Board commitments and Interlocks Policy
Some of the Directors serve on the boards of other public companies in Canada or another country or jurisdiction. The following policy applies to all Directors to avoid overboarding:
(a) No more than two Directors should serve on the same outside public board or outside board committee, unless otherwise agreed by the Board.
(b) Directors who are employed as chief executive officers, or in other senior executive positions on a full-time basis with a public company, should not serve on the boards of more than two public companies in addition to CAE’s Board.
(c) Directors who: (i) have full time employment with non-public companies, (ii) have full-time employment with public companies but not as CEO, or (iii) do not have full time employment should not serve on the boards of more than four public companies in addition to CAE’s Board.
(d) The President and Chief Executive Officer of CAE should not serve on the board of more than one other public company and should not serve on the board of any other public company where the chief executive officer of that other company serves on the CAE Board.
(e) Prior to accepting any additional public company board of directors’ appointment, a Director must first disclose the proposed appointment for review by the Governance Committee and the Chair of the Board.
None of CAE’s Directors is considered overboarded.
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Section 4 – Corporate Governance
Orientation and continuing education
New Directors meet with CAE executive officers, including the President and CEO and Executive Vice President, Finance and CFO, to discuss CAE’s expectations of its Directors and to discuss CAE business and strategic plans. New Directors also review CAE’s current business plan, detailed agendas and materials of previous Board meetings. New Directors of CAE receive a comprehensive reference manual containing all key corporate and Board policies, including the Code of Business Conduct and other relevant materials and executive briefing sessions. All Directors have regular access to senior management to discuss Board presentations and other matters of interest. CAE management and the Governance Committee keep all Directors aware of major developments in corporate governance, important trends and new legal or regulatory requirements. The Board also receives presentations from senior management on CAE’s performance and issues relevant to the business of CAE, the industry and the competitive environment in which it operates.
The Governance Committee encourages CAE’s Directors to attend conferences, seminars or courses whether they be industry-specific to CAE or relevant to fulfill their role as a Director, the cost of which will be borne by CAE. In addition to access through the Board’s website to an evergreen supply of current research and analysis, news reports and academic studies on best governance and compensation practices and other aspects of Board and fiduciary responsibilities and use of research and educational tools, throughout FY2024, management conducted or organized the education sessions noted in the following table. Also, CAE’s Directors are invited to visit CAE’s sites, attend industry events and trade shows. In recognition of the rapidly changing technology and competitive environment and new and emerging markets in our business, the Board requires management to provide an in-depth review of the business segments in which we operate at regularly scheduled meetings, as well as our industry in general. The Board and its Committees are continually updated by management on developments related to corporate governance, changes in the competitive landscape, Directors’ fiduciary duties, changes in law, technology, industry news and other educational material. In addition, the Board received quarterly updates from management on sustainability (including climate change) matters and on CAE’s compliance with such matters as anti-corruption, corporate policies and procedures, the use of foreign representatives, ethics in the workplace, export control laws, sanctions screening and data protection and privacy.
Date | Subject | Attendees | Presented by | |||||||||||
April 20- 21, 2023 | Strategic context updates, which include global technological, product and digital developments, civil aviation industry developments, Flight Services strategy, opportunities and priorities, defence & security industry developments, healthcare industry developments, financial developments, investor relations, sustainability and enterprise risk management developments | Entire Board | CEO EVP, Finance and CFO Chief Digital and Technology Officer Senior Vice-President, Global Strategy Chief Sustainability Officer and SVP, Stakeholder Engagement Senior Vice President, Flight Services & Global Manufacturing Operations Senior Vice President, Investor Relations and Enterprise Risk Management Group President, Civil Aviation Group President, Defense & Security President, CAE Healthcare | |||||||||||
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Section 4 – Corporate Governance
Date | Subject | Attendees | Presented by | |||||||||||
May 30, 2023 August 8, 2023 November 13, 2023 February 13, 2024 | Review of the control environment, update of accounting standards, update on the capital structure, M&A performance, bond offering market, financial ratios, Canadian and U.S. retirement plans, restructuring, integration and acquisition costs, legislative changes fiscal changes impact on operations and financing, international corporate tax reform, tax audits and compliance, securities and exchanges compliance and litigation developments, sustainability reporting trends, investor relations, enterprise risk management processes , geopolitical risk trends and developments in the use of artificial intelligence | Audit Committee | EVP, Finance and CFO Chief Accounting Officer and Corporate Controller Director, Internal Audit Chief Sustainability Officer and SVP, Stakeholder Engagement General Counsel, Chief Compliance Officer and Corporate Secretary Senior Vice President, Investor Relations and Enterprise Risk Management Director, Financial Reporting and Assistant Controller Vice President, Global Taxation Vice President, Treasury Director, Enterprise Risk Management PricewaterhouseCoopers LLP | |||||||||||
May 17, 2023 May 30, 2023 February 13, 2024 | Update on key health and safety indicators, executive compensation trends, and shareholder engagement | Human Resources Committee | Senior Vice President, Global Human Resources Senior Vice President, Flight Services & Global Operations Chief Sustainability Officer and SVP, Stakeholder Engagement Meridian Compensation Partners | |||||||||||
May 30, 2023 November 13, 2023 February 13, 2024 | Updates on Board succession planning, program execution, portfolio shaping initiatives, sustainability strategy, governance and reporting, carbon emissions inventory, renewable energy strategy and projects, environment and climate change risks. Updates on developments related to business continuity, crisis management and global security, ethics, anti-corruption, trade compliance, data protection, privacy, export controls, sanctions screening, and trends regarding whistleblowing, member independence and conflict of interests. Overview of diversity target and board succession planning trends, director compensation and compensation benchmarks | Governance Committee | Chief Sustainability Officer and SVP, Stakeholder Engagement General Counsel, Chief Compliance Officer and Corporate Secretary KPMG | |||||||||||
August 8, 2023 February 13, 2024 | Updates on talent and leadership programs and employee engagement initiatives, DEI initiatives developments, integration and onboarding program developments. Review of the Board’s oversight role and developments in occupational health and safety and aviation safety trends | Human Resources Committee | Chief People Officer General Counsel, Chief Compliance Officer and Corporate Secretary Chief Sustainability Officer and SVP, Stakeholder Engagement Meridian Compensation Partners | |||||||||||
August 9, 2023 | Updates on investor relations and enterprise risk management trends. Updates on the Flight Services business line developments, civil aviation industry developments, and D&S industry developments | Entire Board | Senior Vice President, Investor Relations and Enterprise Risk Management Group President, Civil Aviation Senior Vice President, Flight Services & Global Operations Group President, Defense & Security Senior Vice-President, Global Strategy | |||||||||||
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Section 4 – Corporate Governance
Date | Subject | Attendees | Presented by | |||||||||||
November 13, 2023 February 13, 2024 | Updates on aviation safety trends and developments, health & safety function, labour relations and investment policy trends. Review of new regulatory framework for executive compensation clawback policies | Human Resources Committee | Chief People Officer Chief Aviation Safety Officer (Defense & Security) Director of Global Safety, Quality Assurance and Compliance (Civil) Meridian Compensation Partners | |||||||||||
November 13, 2023 | Updates on risk management and insurance monitoring and governance of risks, IT and cybersecurity incident trends and internal roadmaps, global insurance programs, and liability insurance coverage market trends for Directors and officers | Audit Committee | Chief Accounting Officer and Corporate Controller General Counsel, Chief Compliance Officer and Corporate Secretary Global Leader, Operational Risk, Security and Business Continuity Management Global Leader, Insurance and Risk Management PricewaterhouseCoopers LLP | |||||||||||
November 14, 2023 | Training on sustainability, climate change and carbon emissions reduction. Overview of sustainability strategy | Entire Board | Chief Sustainability Officer and SVP, Stakeholder Engagement Ernst & Young | |||||||||||
February 13, 2024 | Updates on cybersecurity trends, investor relations and enterprise risk management, acquisitions and joint venture landscape, Flight Services business line developments, civil aviation industry developments, and D&S industry developments | Entire Board | EVP, Finance and CFO Senior Vice President, Investor Relations and Enterprise Risk Management Senior Vice President, Civil Flight Services & Global Operations Senior Vice-President, Global Strategy Group President, Civil Aviation Group President, Defense & Security Global Chief Information Security Officer | |||||||||||
Strategic planning oversight
The Board maintains a strategic planning process and annually sets a strategic plan that considers, among other things, the opportunities and principal risks of the Company’s business. It also reviews the effectiveness of the Board’s strategic planning process on a regular basis. The Board supervises management in the implementation of appropriate risk management and other systems. Separately from the strategic plan, the Board also approves an annual budget for financial performance.
The Board holds in-depth strategy sessions every year. In April 2023, the Board reviewed and approved the FY2024 budget and FY2024-FY2028 strategic plan. As part of the review, the Board considered the strategic plans and priorities for each of the three business segments. The Board also focused on the key risks and opportunities facing the business relating to strategic and operational execution, the changing economic and geopolitical environment, the competitive and regulatory environment, maintaining strong financial discipline and a strong capital position, operational resilience (including information security and data management), and stakeholder and regulatory expectations
on climate and social actions. The Board also reviewed trends emerging in strategic and financial decision making with a focus on the future of technology, industry and competitive trends, macroeconomic and geopolitical shifts, climate change, sustainability, diversity, equity & inclusion, digital, health, and strategic partnerships. The Executive Management Committee reviewed and discussed the feedback and perspectives provided by the Board and the Board then approved the updated strategic plan.
The Executive Management Committee updates the Board on the execution of the strategy and strategic considerations at every regular Board meeting. The Board must approve any transaction that will have a significant strategic impact on the Company.
Enterprise risk management oversight
Enterprise risk management is essential to CAE as the Company operates in several industry segments which present a variety of risks and uncertainties. CAE’s Enterprise Risk Management
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Section 4 – Corporate Governance
(ERM) Policy sets out its framework to ensure that risks are identified,assessed, managed, and reported proactively and in a manner that is consistent with the expectations of the Board and the interests of CAE’s internal and external stakeholders.
This framework relies on the Three Lines Model where the business segments, the risk management functions and the internal audit function work in collaboration to manage critical risks and continuously improve the risk management process:
—The first line is CAE’s leaders who are accountable for the risks they assume and for the daily management of their risks and controls. They are responsible for implementing preventive and corrective actions and maintaining and executing effective internal controls on a day-to-day basis;
—The second line involves various risk management, compliance, business continuity and controllership functions. These functions facilitate and monitor the implementation of effective risk management practices and assist risk owners in defining the target risk exposure and reporting adequate risk-related information throughout CAE. The second line also provides risk oversight across the enterprise and advises senior management in connection with ERM. Led by the Senior Vice President, Investor Relations and Enterprise Risk Management, the second line manages the ERM process and is supported as required by experts, risk champions, consultants and any other resources deemed appropriate to achieve the desired level of risk management; and
—At the third line, internal Audit provides to the Audit Committee and management an independent appraisal of CAE’s risk management framework, control environment and internal control systems. They advise and recommend to senior management opportunities for improvements in internal controls, risk management systems as well as bring to management’s attention organizational and operational benefits to be derived from engagements.
Pursuant to our ERM policy:
—The Board is accountable for the oversight of enterprise risk management. As such, the Board will review with management the Company’s risk appetite and risk tolerance and assess whether the Company’s strategy is consistent with the agreed-upon risk appetite and tolerance for the Company. The Board will also review and discuss with management all key enterprise risk exposures on an aggregate, company-wide basis, and the steps management has taken to monitor and to manage those exposures. This includes the review with management of the Board’s expectations as to each committee’s respective responsibilities for risk oversight and management of specific risks to ensure a shared understanding as to accountabilities and roles. The Board will work with management to promote and actively cultivate a corporate culture that understands and implements enterprise-wide risk management. The Board delegates the oversight of various aspects of risk management to Board Committees to assist in the fulfillment of its responsibilities. Risk-related roles and responsibilities are defined in the Board Charter and Committee Mandates.
—The Audit Committee and senior management provide an appraisal of CAE’s risk management framework, control environment and internal control systems.
—The Chairs of the Governance Committee, Audit Committee and Human Resources Committee each report to the Board after their respective committee meetings.
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Section 4 – Corporate Governance
Allocation of Enterprise Risks to the Board of Directors and Committees of the Board
The table below reflects principal oversight responsibilities for each of the 2024 enterprise risks listed:
You can find a more comprehensive discussion of risk management in Section 10 – Business Risk and Uncertainty of our Management Discussion and Analysis for the fourth quarter and year ended March 31, 2024, filed with the Canadian securities commissions and provided to the U.S. Securities and Exchange Commission under Form 6-K, and available on our website (www.cae.com), on SEDAR+ (www.sedarplus.ca), and on EDGAR (www.sec.gov).
Ethical business conduct
CAE has a written Code of Business Conduct that governs the conduct of CAE’s Directors, officers, employees, contractors and consultants. The Governance Committee is responsible for reviewing the design and ensuring compliance with CAE’s Code of Business Conduct. It also has oversight responsibilities with respect to the implementation of the Code throughout CAE, as well as the handling of issues raised thereunder and the annual attestation of compliance. The Code of Business Conduct is available on the Company’s website (www.cae.com). CAE uses EthicsPoint, a third-party whistleblower reporting service, to facilitate reporting of breaches of the Code of Business Conduct and any other misconduct. In addition to any individual reports the Board or its Committees may receive from management or the whistleblower service, the Governance Committee receives regular reports on CAE’s ethics and compliance programs, including a summary of alleged violations of CAE’s Code of Business Conduct and related policies, and the results of the annual certification process for CAE employees under CAE’s Code of Business Conduct.
Our objectives, management approach and highlights are outlined in our Global Annual Activity and Sustainability report, which is available at www.cae.com/sustainability.
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Section 4 – Corporate Governance
Conflicts of interest and related party transactions
The Company has a number of policies and procedures that govern the disclosure of conflicts of interest, and the review and approval of transactions with Directors, officers and employees.
Under the Company’s Code of Business Conduct and Conflicts of Interest Policy, all potential conflicts of interests must be immediately disclosed as they arise. Conflicts of interests refer to a set of circumstances which creates an actual, perceived or potential risk that the professional judgment or actions in relation to a person’s responsibilities and duties towards the Company will be influenced by a secondary interest, which usually benefits the person financially, professionally and/or personally (including any interest they may have in an existing or proposed material contract or transaction involving the Company in which they have some influence or perceived interest).
Any disclosure by Directors, officers and members of the Company’s Executive Management Committee in relation to potential conflicts of interest must be made to the Company’s Corporate Secretary. The Company’s Corporate Secretary provides a quarterly report to the Governance Committee of all potential conflicts of interests disclosed by Directors, officers and members of the Company’s Executive Management Committee. Further, Directors, officers, employees and individual consultants are required on an annual basis to provide an acknowledgement and certification of compliance with the Code of Business Conduct, which includes a statement confirming that they have declared or disclosed any actual, perceived or potential conflicts of interest.
In accordance with the Company’s Audit Committee Charter, the Audit Committee must review and approve all related-party transactions with organizations determined as related from associations with Directors and officers. None of the Company’s Directors or officers had a material interest in any material transaction or proposed transaction involving the Company in the last year.
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Section 4 – Corporate Governance
Sustainability
At CAE, sustainability is integral to who we are as a company and how we make a difference in the world. Sustainability is embedded in our culture and built into our business model, our decisions and actions. Our priority is to ensure the safety and well-being of our employees and customers, as well as creating long-term value for all our stakeholders where we are located.
CAE’s noble purpose, making the world safer, captures how CAE makes a difference in the world and drives its decisions and actions. Making civil aviation safer, and supporting peace and democracy with allied forces preparedness, are both rooted in the principles of sustainability impact.
Over FY2024, many of our initiatives had a significant social impact. Amongst those initiatives:
—We submitted our near-term (10 years) science-based reduction targets for the approval of the Science Based Targets initiative (SBTi). These ambitious targets will guide our decarbonization journey and help us transition from carbon neutrality to net zero emissions. To that extent, we have implemented a comprehensive decarbonization strategy with four value streams: aviation, sourcing, products and services, and buildings. We have made significant progress in each of these areas, such as electrifying our fleet, applying circular economy principles, optimizing our products for energy efficiency, integrating low-carbon technologies, and applying sustainable building standards. We have also engaged with our customers, suppliers, partners and industry peers to collaborate on solutions and best practices that support the decarbonization of the aerospace sector.
—Our sustainability strategy is also driven by our commitment to create social value and foster an inclusive and diverse culture. In FY2024, we increased the representation of women and people of colour among our senior leaders, executive officers and board of directors, and received several awards and recognitions for our diversity, equity and inclusion efforts. In FY2024, we achieved our target with 38% of CAE’s Board of Directors being women at the end of FY2024. We published our first Gender Equality report, established an Indigenous Advisory Board, launched several scholarships and programs to attract and develop talent from underrepresented groups, and supported various community initiatives and causes. Our efforts to strengthen relations with Indigenous Peoples in Canada and around the world have been recognized through our first certification as a Progressive Aboriginal Relations Bronze company.
—We have also integrated sustainability into our core business processes and decision-making, ensuring that sustainability is not just an add-on, but a fundamental aspect considered from the start of how we operate and grow. We are progressively incorporating sustainability criteria into our requests for proposals, mergers and acquisitions, capital expenditures and research and development investments business processes. We have also strengthened our sustainability governance framework, policies and disclosure practices, and conducted an external readiness assessment for our scope 1 and 2 emissions data in preparation for external assurance and compliance with upcoming mandatory disclosure of sustainability data in financial reporting.
—In addition to building-in sustainability into our business processes and decision-making, we have also enhanced our sustainability-related risk management process as part of our broader Enterprise Risk Management (ERM) framework which enables us to monitor and report on our sustainability risk profile and performance on a regular basis, and to ensure alignment and integration across our business units and functions. We also completed our initial climate change-related risk quantification analysis, using scenario analysis based on the guidance from the Task Force on Climate-related Financial Disclosures (TCFD). This analysis helped us identify and evaluate the materiality of the potential physical and transition risks and opportunities associated with different climate scenarios and their impact on our business, strategy and financial planning. The preliminary findings of this analysis will also help inform the design of our compliance plan with the upcoming applicable mandatory sustainability disclosure requirements in Canada and other jurisdictions where we operate.
—Our performance and achievements related to sustainability factors are set out in our Global Annual Activity and Sustainability report. Our objectives, management approach, initiatives and highlights across the Environmental, Social and Governance factors are also outlined in this report, which is available at www.cae.com/sustainability.
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Section 4 – Corporate Governance
Reporting standards
Our reporting references the GRI Sustainability Standards of the Global Reporting Initiative (GRI). An independent institution, the GRI provides a globally accepted framework for sustainability reporting across companies and industries. CAE also reports to the Sustainability Accounting Standards Board (SASB) according to two industry-specific standards, and to the Carbon Disclosure Project (CDP). We also provide TCFD reporting in our Global Annual Activity and Sustainability report. As the regulators further advance potential disclosure requirements, we are preparing for climate change risks financial reporting.
CAE abides by the principles of United Nations Global Compact as a signatory. We report on the United Nations’ Sustainable Development Goals (SDGs), under five goals to which our corporate strategy and business model are most aligned and by mapping these goals to our material sustainability issues. We intend to continue the process of integrating the SDGs and to report on our progress for the main areas of focus we have identified. Refer to our Global Annual Activity and Sustainability report for the reasons why CAE prioritizes and pursues the following five goals:
CAE’s commitment to the United Nations Global Compact and to the United Nations Women Empowerment Principles, as well as its considerations of sustainability factors are translated in its policies and codes, including the following policies available on CAE’s website:
—Anti-Corruption Policy;
—Code of Business Conduct;
—Conflicts Mineral Policy;
—Charitable Donations and Sponsorships Policy;
—Policy on Diversity, Equity and Inclusion in the Workplace;
—Environment, Health and Safety Policy;
—Gifts, Entertainment and Business Courtesies Policy;
—Human Rights Policy;
—Lobbying and Political Contributions Policy;
—Internal Reporting and Whistleblowing Policy; and
—Supplier Code of Conduct.
We monitor the latest developments in environmental, social and governance reporting expectations, its future integration to financial disclosure, and continuously adjust our disclosure in line with regulatory requirements and best practices.
Governance and oversight
The Board reviews, provides strategic guidance for and endorses major sustainability-related initiatives. Additionally, the Board approves our Global Annual Activity and Sustainability Report.
The Board’s Governance Committee receives updates three time a year on sustainability trends, market signals, pulses from all stakeholders and progress on CAE’s multi-year sustainability roadmap. These updates, which include progress on corporate disclosure of non-financial performance, are presented by the Chief Sustainability Officer (CSO) and Senior Vice President, Stakeholder Engagement. The Governance Committee regularly evaluates continuous enhancement of the company’s ethical practices and policies that govern our business actions while also overseeing CAE’s climate resilience strategy.
The Board’s Audit Committee performs a quarterly assessment of IT and cybersecurity risks and elements impacting internal control systems. The Committee has specific oversight responsibility for CAE’s enterprise risk management policy framework, including sustainability-related risks.
The Board’s Human Resources Committee oversees health and safety and aviation safety policies and procedures through a quarterly review to ensure effectiveness of the programs in place. The Human Resources Committee is also responsible for diversity, equity and inclusion topics and monitors management’s response to all related material issues.
From a management perspective, the EMC leads and oversees environmental, social and governance issues. The EMC guides the various teams and ensures that the appropriate resources and targets are in place and executed. Progress on sustainability risk management plan is also reported to the EMC and to the Board through the ERM governance and based on their framework.
Diversity initiatives
In May 2015, following the GC’s recommendation, the Board adopted the Board’s Diversity Policy. The Diversity Policy was amended in 2018, and in 2020 its scope was broadened by expressly enumerating women, Indigenous Peoples, persons with disabilities and members of visible minorities, as defined in the Employment Equity Act (Canada) (collectively, “Designated Groups”), among the diverse groups which are the focus of the Diversity Policy.
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Section 4 – Corporate Governance
The Diversity Policy confirms the guiding principle that the Board will nominate Directors and appoint executive officers based on merit and the needs of CAE at the relevant time, and, that CAE is strongly committed to finding the best people to serve in such roles.
The Diversity Policy also recognizes that diversity helps ensure that (a) Directors and executive officers provide the necessary range of perspectives, experiences and expertise required to achieve effective stewardship and management of CAE, and (b) a variety of differing perspectives are considered in addressing issues, while providing a greater likelihood that proposed solutions will be robust and comprehensive. CAE believes that diversity is an important attribute of a well-functioning Board and an effective team of executive officers.
The Diversity Policy provides that in identifying potential candidates to serve on the Board, the Governance Committee will (a) consider only candidates who are highly qualified based on their talents, experience, expertise, character and industry knowledge, (b) take into account criteria that promote diversity, including, but not limited to, gender, age, race, national or ethnic origin, sexual orientation and disability, (c) endeavour to use any available network of organizations and associations that may help identify diverse candidates, and (d) in order to support CAE’s commitment to all aspects of diversity, consider the level of representation of women and other Designated Groups on the Board; and in identifying potential candidates for appointment as President and CEO and for other executive officer positions, the Human Resources Committee and the President and CEO, respectively, will (a) consider individuals from a variety of backgrounds and perspectives with the Company’s diversity objectives in mind, and (b) consider the level of representation of women and members of other Designated Groups in executive officer positions.
In order to ensure that the Diversity Policy is appropriately implemented and to measure its effectiveness, at least annually:
—the Governance Committee will assess and report to the Board regarding the efficacy of the Director nomination process at achieving the Company’s diversity objectives; and
—the President and CEO will assess and report annually to the Human Resources Committee regarding the efficacy of the executive officer appointment process at achieving the Company’s diversity objectives.
In May 2018, the Board updated the Diversity Policy, and adopted a target that women represent at least 30% of Directors by 2022.
In May 2020, the Board updated the Diversity Policy to reflect that the Board seeks gender parity, with the target for Director representation continuing to be at least 30% women by 2022.
We reached our 30% target following the annual meeting of the Shareholders held on August 10, 2022. The Diversity Policy was also amended in May 2020 by adopting a target that women represent at least 30% of executive officers by 2022. We reached our 30% target during FY2022 when three (3) out of ten (10) members of our Executive Management Committee were women, prior to the expansion of the Executive Management Committee to eleven (11) members.
In June 2022, the Board amended the policy to broaden our targets to all diversity groups (including women, persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community) for both executive officers and Directors recognizing that diversity is an essential consideration in the selection process for Board candidates and executive officers. The Company’s targets were revised to reflect that at least 33% of executive officers and 40% of Directors form part of certain diversity groups (including women, persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community) by 2025. These new targets are coherent with CAE’s participation, for the fourth consecutive year, in the 50 – 30 Challenge, which is an initiative co-created by the Government of Canada, civil society and the private sector that aims to attain gender parity and significant representation (at least 30%) of under-represented groups, including racialized persons and Indigenous Peoples (including First Nations, Inuit and Métis), people living with disabilities (including invisible and episodic disabilities) and members of the LGBTQ2+ community, on boards and senior management positions in order to build a more diverse, inclusive, and vibrant economic future for Canadians. We are proud to report that both of these objectives were surpassed in FY2024, with 46% of directors and 46% of executive officers forming part of one or more diversity groups.
Directors
Women | Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community | ||||||||||
Target | Time frame | Target | Time frame | ||||||||
30% | By 2022 | 40% | By 2025 | ||||||||
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Section 4 – Corporate Governance
Executive Officers
Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community | |||||
Target | Time frame | ||||
33% | By 2025 | ||||
Our targets align with CAE’s Diversity, Equity & Inclusion initiative to foster an inclusive, diverse, bias-free environment and strengthen the representation and development of women in leadership positions. Furthermore, CAE received the Gold-level of the Parity Certification by Women in Governance for its efforts in promoting gender parity in the workplace and was included in the 2023 Bloomberg Gender-Equality Index, a fifth year in a row, setting a new standard of transparency as a core part of a company’s commitment to gender equality. The Company was also named in 2023 a Top Company for Women in Emerging Technologies by Women and Drones, one of the Top 100 Companies in Canada, and one of Forbes’ Top Female-Friendly Companies. Our Chief Diversity, Equity and Inclusion Officer was recognized as one of the Top 10 DE&I Leaders in Canada by HR Manage magazine in 2023.
Also, in signing the BlackNorth Initiative pledge, we proudly committed CAE to taking deliberate action to attract talent from the Black community, and to create a workplace where black employees have the support to grow, an organization that celebrates the vibrancy and richness that diversity brings, and most of all, a company where every member of our team can succeed and thrive – with no exception.
For more information on other Diversity, Equity and Inclusion initiatives, please refer to our Annual Activity and Corporate Social Responsibility report available on our website.
As of June 14, 2024, five (5) out of thirteen (13) Directors (i.e., 38%) and three (3) out of eleven (11) members of our Executive Management Committee (i.e., 27%) were women. One (1) out of eleven (11) members of our Executive Committee (9%) has a disability. No (0%) Aboriginal peoples were represented on the Board or the Executive Management Committee. One (1) out of thirteen (13) Directors (8%) and two (2) out of eleven (11) members of our Executive Committee (18%) was a member of a visible minority. One (1) out of thirteen (13) Directors (8%) was a member of the LGBTQ2+ community. No members of the LGBTQ2+ community were represented on the Executive Management Committee. The foregoing disclosure about diversity is derived from information provided by the Directors and executive officers. In accordance with privacy legislation, such information was collected on a voluntary basis, and where a particular individual chose not to respond, CAE did not make any assumptions or otherwise assign data to that individual.
Women | Persons with disabilities | Indigenous Peoples | Members of visible minorities | Members of LGBTQ2+ community | Total Number | Number of individuals that are members of more than one group | ||||||||||||||||||||||||||||||||
Number | % | Number | % | Number | % | Number | % | Number | % | |||||||||||||||||||||||||||||
Board of Directors | 5 | 38 | 0 | 0 | 0 | 0 | 1 | 8 | 1 | 8 | 7 | 1 | ||||||||||||||||||||||||||
Executive Team | 3 | 27 | 1 | 0 | 0 | 0 | 2 | 18 | 0 | 0 | 6 | 1 | ||||||||||||||||||||||||||
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Section 4 – Corporate Governance
Assessment of Directors by the GC
The GC has the mandate and responsibility to review, on an annual basis, the performance and effectiveness of the Board as a whole and each individual Director. The Chair of the Governance Committee annually approves a comprehensive questionnaire which is distributed by a third-party supplier to each member of the Board regarding various aspects of Board and individual performance. The questionnaire covers a wide range of issues, including the operation and effectiveness of the Board and its committees, the level of knowledge of the Directors relating to the business of CAE and the risks it faces, and the contribution of individual Directors, and allows for comment and suggestions. A separate questionnaire is distributed to members of CAE’s Executive Management Committee. The third-party supplier compiles responses to the questionnaires and prepares a report to the Governance Committee which provides a report to the full Board. The Governance Committee may then recommend
changes based upon such feedback to enhance Board performance or refer any areas requiring follow-up to the relevant committees. In addition to the foregoing, each Director individually meets with the Chair of the Board at least once annually to discuss his or her individual performance and the performance of the Board as a whole. As well, the Chair of the Board’s performance is evaluated and assessed through one-on-one meetings between each Director and the Chair of the Governance Committee. Both the Chair of the Board and the Chair of the Governance Committee then report back to the full Board.
Compensation
Refer to Section 5 – Board Committee Reports – The Human Resources Committee, Section 6 – Director Compensation and Section 7 – Executive Compensation – Compensation Governance – Role of the HRC.
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Section 5 - Board Committee Reports
The Governance Committee
Assists the Board in developing and implementing our corporate governance guidelines, monitoring assessments of CAE’s corporate governance by various stakeholders and recommending where necessary possible improvements in CAE’s governance, identifying individuals qualified to become members of the Board and determining the composition of the Board and its committees, monitoring the interests of Directors and executive officers, reviewing the role and conduct of the Board, evaluating the performance of the Board and its Committees, reviewing the independence of each member of the Board, preparing the Board’s succession plan, determining the Directors’ remuneration, developing and overseeing an assessment process for the Board, overseeing CAE’s principal compliance programs, and reviewing and recommending for Board approval our corporate policies concerning business conduct, insider trading and anti-hedging, high standards of corporate governance, ethics, sustainability matters, diversity, equity and inclusion, and human rights.
The members of the GC are all Independent Directors and the GC’s charter is available in the governance section of our website at CAE.com.
The GC held three meetings in FY2024; aggregate attendance: 94%
 |  |  |  |  |  | |||||||||||||||
| M.S. Billson (Chair) | M. Harrison | F. Olivier | Gen. D.G. Perkins, USA (Ret.) | P.M. Shanahan | A.J. Stevens | |||||||||||||||
The members of the Governance Committee are selected for their experience and knowledge with respect to governance matters generally. Descriptions of the Governance Committee members’ credentials and past experience that positions them to be qualified and effective members of the Governance Committee can be found in Section 3 - About the Nominated Directors.
Highlights for FY2024 —With the assistance of the Board’s compensation consultants, the GC recommended for approval by the Board changes to Director compensation, effective January 1, 2024, based on peer group benchmarking. —The GC reviewed and approved revised Anti-Corruption, Business Partner Risk Management, Business Courtesies and Whistleblowing policies. —The GC reviewed CAE’s sustainability performance, including the process timeline relating to CAE’s carbon emission reduction targets currently under review by the SBTi. —The GC agreed to recommend for approval by the Board an updated version of CAE’s Corporate Governance Guidelines. —The GC reviewed and approved amendments to CAE’s Board of Directors Charter, and the Governance Committee Charter and Annual Workplan. | ||
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Section 5 - Board Committee Reports
The Audit Committee
Assists the Board in its oversight of the integrity of our consolidated financial statements, review of public disclosure documents, compliance with applicable legal and regulatory requirements, the independence, qualifications and appointment of the external auditors, the performance of both the external and internal auditors, oversight of related-party transactions, management’s responsibility for assessing and reporting on the effectiveness of internal controls (including review of IT and cyber-security risks and elements impacting controls) and our enterprise risk management processes.
Also see our Annual Information Form for the year ended March 31, 2024 (which you can access on our website at CAE.com, on SEDAR+ at sedarplus.ca and on EDGAR at sec.gov), for information about the Audit Committee, including its mandate and Audit Committee policies and procedures for engaging the external auditors.
All members of the Audit Committee are Independent Directors. Marianne Harrison and Mary Lou Maher have been determined by the Board to be the Audit Committee financial experts. In addition, the Board, in its judgment, has determined that each other member of the Audit Committee is financially literate. The Charter of the Audit Committee is available in the governance section of our website at CAE.com. and in the Annual Information Form for the year ended March 31, 2024.
The Audit Committee held four meetings in FY2024; aggregate attendance: 100%.
|  |  |  |  | | | ||||||||||||||
M. Harrison (Chair) | A. Antoun | S. Brochu | E. Eberwein | M. Maher | F. Olivier | P.M. Shanahan | ||||||||||||||
The members of the Audit Committee are selected for their experience and knowledge with respect to financial reporting, internal controls and risk management. Descriptions of the Audit Committee members’ credentials and past experience that make them qualified and effective financial decision-makers can be found in Section 3 – About the Nominated Directors.
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Section 5 - Board Committee Reports
Highlights for FY2024 —The Committee reviewed in detail quarterly interim consolidated financial information and earnings press releases before their public release. —The Committee also reviewed and recommended approval to the Board of the quarterly Management Discussion and Analysis (“MD&A”) and the press releases for the quarterly results. —The Committee reviewed the MD&A section of CAE’s annual report for the fiscal year ended March 31, 2023 and audited consolidated financial statements of CAE prepared by management for the fiscal year ended March 31, 2023 with management and PwC, and thereafter recommended that they be approved and filed with the Autorité des marchés financiers and the SEC. —The Committee approved the CAE Internal Audit plan and budget for the FY2024/FY2025 cycle and approved the Internal Audit Director Objectives. —The Committee reviewed PwC’s FY2024 work plan and approved PwC audit engagement letter and services fees. —The Committee oversaw the compliance process related to the certification and attestation requirements of SOX and related SEC rules, as well as of the rules relating to audit committees and certification of financial information adopted by the CSA. —The Committee also reviewed fraud review processes, litigation, securities and exchanges compliance, information technology and cyber security risks, sustainability reporting framework, insurance coverage, related-party fees, capital structure, M&A performance, S&P rating and outlook, financing activities, treasury, tax planning and compliance, and IFRS accounting standard changes. —The Committee established an Audit Subcommittee to meet regularly and oversee specific matters, notably accounting for and presentation of non-routine transactions including impairments, detailed reviews of unfavourable contract adjustments in the Defense and Security business associated with the Legacy Contracts and internal control and risk management practices related to the Legacy Contract adjustments. —The Committee reviewed and approved a revised version of the Policy and Procedures for Audit and Non-Audit Services. —The Committee reviewed amendments to the Enterprise Risk Policy, the Hiring Policy Regarding External Auditors, and the Audit Committee Charter and Annual Workplan and recommended these modifications for approval by the Board. —The Committee reviewed audit service performance and any best practices to implement going forward. | ||
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Section 5 - Board Committee Reports
The Human Resources Committee
Assists the Board of Directors in its oversight responsibilities relating to compensation, benefits, incentives, nomination, evaluation and succession of the President and CEO, other officers and management personnel; oversees the Company’s environment, global occupational health and safety and aviation safety policies and practices, pension plan administration and pension fund investments, and management development and succession planning.
All members of the HRC are Independent Directors. The charter of the HRC is available in the governance section of our website at CAE.com.
The HRC held five meetings in FY2024, aggregate attendance: 94%.
| | | | |  | | ||||||||||||||
| M. Maher (Chair) | A. Antoun | M.S. Billson | S. Brochu | E. Eberwein | Gen. D.G. Perkins, USA (Ret.) | A.J. Stevens | ||||||||||||||
The HRC is responsible to oversee the Company’s executive compensation programs and succession planning. We ensure that members of the HRC have the experience and knowledge to fulfill this role. Descriptions of the HRC members’ credentials and past experience that make them qualified and effective HR decision-makers can be found in Section 3 – About the Nominated Directors.
As past CEOs and/or government leaders/managing directors, all members of the HRC possess the financial knowledge required in order to assess and determine the applicability of measures and targets utilized in determining variable compensation and assessing executive performance against targets and overall Company performance.
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Section 5 - Board Committee Reports
Highlights for FY2024 —The HRC completed an annual review of the Company’s long-term (LTIP) and short-term (STIP) incentive plans to ensure market competitiveness, alignment with the Company’s strategic ambitions and Shareholders’ interests, and reviewed and approved the FY2025 STIP and LTIP design. —The HRC conducted a compensation risk assessment with the assistance of its independent compensation consultant to identify potential risks associated with the Company’s compensation programs, practices and policies. —The Chair of the HRC engaged directly with multiple Shareholders to seek input on the Company’s executive compensation programs. —The HRC reviewed the new Omnibus Incentive Plan for the Company’s LTIP as well as the Company’s new clawback policies, and recommended them for approval by the Board. —The HRC also reviewed and approved the Company’s comparator group for executive compensation benchmarking. —The HRC reviewed and approved the executive management’s compensation, including the FY2023 STIP payout and FY2024 LTIP awards, as well as the CEO’s FY2024 objectives and performance. —The HRC reviewed and approved the succession plan for the Company’s executives, conducted talent and leadership reviews as well as other HR initiatives and Diversity, Equity and Inclusion efforts. —The HRC reviewed the Company’s retirement savings plans and approved changes to the Retirement Plans Investment Policy. —The HRC also reviewed the quarterly health and safety reports as well as the aviation safety and labour relations annual reports. | ||
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Section 6 – Director Compensation
Director Compensation
This Section provides information pertaining to the compensation, Share ownership and Share ownership requirements of our non-employee Directors.
Our compensation program for non-employee Directors has the following objectives:
—Attract and retain highly qualified, committed and talented members of the Board with an extensive and relevant breadth of experience; and
—Align the interests of Directors with those of our Shareholders.
The Board sets the compensation of non-employee Directors based on recommendations from the Governance Committee.
The Governance Committee reviews the compensation of non-employee Directors every second year, unless required sooner, and recommends to the Board such adjustments as it considers appropriate and necessary to recognize the workload, time commitment and responsibility of the Board and committee members and to remain competitive with Directors’ compensation trends. Any Director who is also an employee of the Company or any of its subsidiaries does not receive any compensation as a Director.
Director compensation benchmarking and comparator group To benchmark Directors’ compensation, the Governance Committee uses the same comparator group of companies as that used to benchmark Named Executive Officers’ (“NEOs”) compensation. This comparator group comprises a mix of Canadian and U.S. publicly-listed companies that have relevance to CAE in terms of head office location, market segment or business activities, revenue and market capitalization. —Same comparator group as for NEOs. —Director comparator group last updated in FY2024. —Directors are paid a flat all-inclusive fee to reflect responsibilities, time commitment and risks of being effective Directors. | ||
Effective January 1, 2024, Directors’ all-inclusive fees were set as follows: | ||||||||
Position | Annual Fee1 | Form of Payment1 | ||||||
| Board Chair | $420,000 | $230,000 in DSUs $190,000 in cash or DSUs at Director’s election | ||||||
| Board Member | $240,000 | $155,000 in DSUs $85,000 in cash or DSUs at Director’s election | ||||||
Board Committee Chair2 | $25,000 | Cash or DSUs at Director’s election | ||||||
| Board Committee Member | $11,000 | Cash or DSUs at Director’s election | ||||||
1.Fees for Canadian resident Directors are earned and paid in Canadian dollars. Fees for non-Canadian resident Directors are earned and paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars.
2.The Governance Committee Chair compensation is $20,000. Committee Chairs do not receive additional compensation for Committee membership.
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Section 6 – Director Compensation
Refer to Section 7 – Executive Compensation of this Circular for the companies included in CAE’s latest comparator group and detailed selection criteria.
Non-Employee Directors’ Deferred Share Unit Plan (Directors’ DSU Plan)
A DSU is equal in value to one Share of CAE and accrues additional units in an amount equal to each dividend paid on Shares. DSUs earned by non-employee Directors vest immediately but are only redeemable after termination of the Director’s service with CAE. Payment in cash is then made based on the market value of the equivalent number of Shares, net of tax and any other applicable withholdings.
Risk mitigation
As per the terms of the DSU Plan, the rights and interests of a Director in respect of the DSUs held in such participant’s account are not transferable or assignable other than for specific cases of legal succession.
CAE maintains Directors’ and executive officers’ liability insurance for its Directors and executive officers, as well as those of its subsidiaries as a group.
Minimum shareholding requirements Directors are required to own the equivalent of five times the Board annual cash fee in the form of Shares and/or DSUs. The required holding must be acquired over a five-year period from the initial date of election of the Director to the Board. A non-employee Director is not, once the minimum Share and/or DSU ownership target is reached, obligated to acquire more Shares or DSUs if the value of his/her investment in CAE drops due to stock market fluctuations. —Minimum shareholding requirements align Directors’ and Shareholders’ interests. —Equal to five times the annual Board cash fee. —The required holding must be acquired over a five-year period from the initial date of election of the Director to the Board. | ||
Anti-Hedging Policy The policy provides that no Director or CAE executive (defined to include senior officers and vice-presidents) may, at any time, purchase or otherwise enter into financial instruments, including prepaid variable forward contracts, instruments for the short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to or that may reasonably be expected to have the effect of monetizing equity awards or hedging or offsetting a decrease in the market value of any CAE securities, including but not limited to DSUs. | ||
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Section 6 – Director Compensation
Directors’ compensation table
The following table summarizes compensation earned by non-employee Directors of CAE during FY2024:
| Name | Total Fees Earned | Paid in Cash | Paid in DSUs1 | ||||||||
| Ayman Antoun | $246,847 | $246,847 | |||||||||
Margaret S. (Peg) Billson2 | $283,801 | $283,801 | |||||||||
Sophie Brochu3 | $163,105 | $163,105 | |||||||||
Elise Eberwein2 | $274,003 | $112,746 | $161,256 | ||||||||
Hon. Michael M. Fortier4 | $89,382 | $89,382 | |||||||||
Marianne Harrison2 | $289,245 | $289,245 | |||||||||
| Alan N. MacGibbon | $405,000 | $405,000 | |||||||||
| Mary Lou Maher | $259,782 | $30,250 | $229,532 | ||||||||
| François Olivier | $250,750 | $250,750 | |||||||||
Gen. David G. Perkins, USA (Ret.)2 | $274,003 | $274,003 | |||||||||
| Michael E. Roach | $250,750 | $250,750 | |||||||||
Patrick M. Shanahan2 | $274,003 | $112,746 | $161,256 | ||||||||
Andrew J. Stevens2 | $274,003 | $274,003 | |||||||||
1.Represents the value of DSUs determined based on the grant date fair value of the award in accordance with accounting standards. The value of each unit is set to the closing prices of the Shares on the TSX on the respective dates of each grant.
2.Effective January 1, 2024, non-Canadian resident Directors are paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars. The amounts shown include payments made in U.S. dollars for the fourth quarter of FY2024, which were converted to Canadian dollars using the exchange rate on the last business day of the quarter (March 28, 2024), being $1.36 for each U.S. dollar.
3.Sophie Brochu joined the Board on August 9, 2023.
4.Hon. Michael M. Fortier ceased serving as a Director on August 9, 2023.
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Section 6 – Director Compensation
Directors’ share-based awards
The following table shows for each non-employee Director the number of DSUs outstanding at the beginning of the fiscal year ended March 31, 2024, the number and the value of the DSUs that vested during such year, and the number and the value of all outstanding DSUs as at March 31, 2024. The non-employee Directors are not eligible to receive stock options or other option-based awards.
| Share-based Awards | ||||||||||||||||||||
| Name | Number of DSUs at the Beginning of FY2024 | Number of DSUs Vested During the Year1 | Value Vested During the Year2 | Number of DSUs at the End of FY2024 | Market Value of DSUs not Paid Out or Distributed3 | |||||||||||||||
| Ayman Antoun | 5,820 | 8,542 | $246,847 | 14,362 | $401,696 | |||||||||||||||
| Margaret S. (Peg) Billson | 61,168 | 9,856 | $283,801 | 71,024 | $1,986,543 | |||||||||||||||
Sophie Brochu4 | — | 5,667 | $163,105 | 5,667 | $158,510 | |||||||||||||||
| Elise Eberwein | 3,576 | 5,600 | $161,256 | 9,176 | $256,665 | |||||||||||||||
| Marianne Harrison | 28,706 | 10,045 | $289,245 | 38,751 | $1,083,857 | |||||||||||||||
| Alan N. MacGibbon | 69,709 | 14,011 | $405,000 | 83,720 | $2,341,647 | |||||||||||||||
| Mary Lou Maher | 9,775 | 7,896 | $229,532 | 17,671 | $494,254 | |||||||||||||||
| François Olivier | 45,002 | 8,676 | $250,750 | 53,678 | $1,501,381 | |||||||||||||||
| Gen. David G. Perkins, USA (Ret.) | 22,062 | 9,517 | $274,003 | 31,579 | $883,267 | |||||||||||||||
Michael E. Roach5 | 39,435 | 8,676 | $250,750 | 48,111 | $1,345,654 | |||||||||||||||
| Patrick M. Shanahan | 5,461 | 5,601 | $161,256 | 11,062 | $309,394 | |||||||||||||||
| Andrew J. Stevens | 92,082 | 9,516 | $274,003 | 101,598 | $2,841,692 | |||||||||||||||
1.Represents the number of DSUs each non-employee Director earned during FY2024. The DSUs vest immediately but are redeemable and paid out only after the non-employee Director ceases to be a Director of CAE in accordance with the terms of the Directors DSU Plan. Numbers containing fractions have been rounded up for calculation purposes.
2.The value was determined by multiplying the number of DSUs, including additional DSUs equivalent in value to the dividends paid on the Shares credited in-year, by the closing prices of the Shares on the TSX on the respective dates of each grant. The DSUs are granted at the end of each quarter.
3.The market value of the DSUs was determined by multiplying the number of all DSUs vested but not paid out or distributed, including additional DSUs equivalent in value to the dividends paid on the Shares credited in-year, as at March 31, 2024 by the closing price of the Shares on the TSX on March 28, 2024, which was $27.97. Numbers containing fractions have been rounded up for calculation purposes.
4.Sophie Brochu joined the Board on August 9, 2023.
5.Michael E. Roach ceased serving as a Director on May 16, 2024.
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Section 7 - Executive Compensation
Letter from the Chair of the Human Resources Committee
Mary Lou Maher
The Human Resources Committee is pleased to provide you with an overview of CAE’s executive compensation program for fiscal year 2024 and a preview of the changes we are introducing for fiscal year 2025. Our compensation framework directly links compensation to CAE’s long-term performance and value creation for our Shareholders.
We believe it is important to provide transparent disclosure of CAE’s performance, all aspects of our executive compensation program, the alignment between performance and compensation outcomes and feedback from our engagement with our Shareholders.
Over the past two years we have engaged directly with our Shareholders, seeking input on our compensation programs. Annually, we conduct a full review of our compensation programs and governance as well as incentive plan designs to ensure continued alignment with our business strategy and to be responsive to feedback received from Shareholders.
Operational and Financial Performance Highlights of FY2024
Throughout FY2024, we maintained key points of strategic focus, including the following:
—Efficient growth
—Technology and market leadership
—Revolutionizing training and critical operations
—Skills and culture
Linking Pay and Performance
During FY2024, our Named Executive Officers’ (NEO) compensation outcomes were closely tied to CAE’s performance.
The Short-Term Incentive Plan (“STIP”), which pays out based on performance targets focused on profitability and growth through adjusted earnings per share* (“EPS”), adjusted order intake* and revenue metrics. For FY2024 this paid out at 4% of target.
In assessing the CEO’s compensation outcomes for FY2024, the Board considered:
—The importance of balancing accountability for FY2024, which reflected many significant accomplishments, with shortfalls on overall financial performance and operational challenges in the Defense and Security business
—Recent shareholder experience and share price underperformance
Accordingly, the Board assessed the CEO’s 25% individual performance component for FY2024 at 50% of target, reflective of: the CEO’s leadership and the many achievements in the business; and the CEO’s accountability for the overall results of the business. This, combined with the 4% corporate performance factor, resulted in an overall STIP payout for the CEO of 15.5% of target.
The Long-Term Incentive Plan (“LTIP”) which is weighted 60% to Performance Share Units (“PSU”s), 20% to Restricted Share Units (“RSU”s) and 20% to Stock Options to provide a balanced focus on performance, long term Share price appreciation and shareholder aligned retention. Our PSUs granted in FY2024 vest contingent on the achievement of adjusted segment operating income margin*, Cash from operations and adjusted ROCE* targets. Our PSUs granted in FY2022 whose performance period concluded in FY2024 paid out with a performance factor of 43%.
*Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
We adjusted the targets and results under our incentive plans to exclude the impact of CAE Healthcare financial contributions starting in Q4 FY2024, aligned with the Healthcare business unit divestment timeline.
Looking ahead to FY2025, we note three design changes to the STIP:
—The financial component of our STIP (representing 75% of the payout) will now be a mix of Business Unit and CAE financial performance (2/3 weighting to BU performance and 1/3 weighting to CAE performance) for our Business Unit Leaders. The President and Chief Executive Officer and his direct reports will continue to be measured 100% on CAE overall financial results.
—STIP metrics will be comprised of adjusted EPS* and Revenue, weighted 2/3rd and 1/3rd respectively, to strengthen focus on profitable growth.
—For the STIP and LTIP, if the threshold level of performance is achieved the payout level will be 50% of target. As before, payout can be as low as 0% if performance is below the threshold level.
The majority of each executive’s compensation continues to be at risk, contingent on performance and a significant proportion of each executive’s compensation is in the form of equity-based compensation which aligns compensation outcomes with our performance and Shareholders experience over the longer term.
Shareholder Engagement
In FY2024, we conducted our annual Shareholder outreach initiative, offering to meet with many of our largest investors. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Shareholder Engagement.
The Committee believes that our compensation programs continue to focus on the alignment between our performance and compensation outcomes as well as the interests of our Shareholders.
Sincerely,
| |||||
Mary Lou Maher Chair of the Human Resources Committee | |||||
*Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
Compensation Discussion and Analysis
This Section describes our compensation philosophy, policies and programs, and provides the details with respect to the compensation awarded to our Named Executive Officers (“NEO”) in FY2024.
For FY2024, our NEOs were: —Marc Parent, President and Chief Executive Officer —Sonya Branco, Executive Vice President, Finance and Chief Financial Officer —Carter Copeland, Senior Vice President, Global Strategy —Abha Dogra, Chief Technology and Product Officer —Nick Leontidis, Group President, Civil Aviation1 | ||
1.Mr. Leontidis was appointed Chief Operating Officer on May 21, 2024, subsequent to the FY2024 year end.
Where to find it
Compensation Discussion and Analysis | Page | ||||
Executive Summary | 62 | ||||
Shareholder Engagement | 67 | ||||
Compensation Philosophy | 68 | ||||
Executive Compensation Programs | 70 | ||||
FY2024 Compensation Outcome | 83 | ||||
Determination of NEOs’ Individual Performance | 89 | ||||
Compensation Governance | 94 | ||||
Alignment of Compensation and Performance | 101 | ||||
Compensation of Our Named Executive Officers | Page | ||||
Summary Compensation Table | 104 | ||||
Outstanding Share-Based Awards and Option-Based Awards | 106 | ||||
Incentive Plan Awards – Value Vested or Earned During the Year | 107 | ||||
Pension Arrangements | 108 | ||||
Termination and Change of Control Benefits | 109 | ||||
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Section 7 - Executive Compensation
Executive Summary
CAE Performance
During the year, we experienced continued growth in revenues and backlog across the Company, with particularly strong performance in our Civil Aviation business. Despite this, we realized a substantial operating loss in Q4, driven by the accelerated recognition of risk on the Legacy Contracts and associated intangible asset impairments.
To correct course, we took decisive action, including the re-baselining of the Defense and Security business through leadership and organizational structure changes in addition to the aforementioned financial charges. As a result, we fully expect the Defense and Security business to become more profitable, starting in FY2025.
The growth outlook in our markets remains robust, bolstered by continued strength in air travel demand, increasing defence training requirements, and a growing customer appetite for market-leading software solutions. Additionally, we see continued prospects for further market share expansion resulting from our organic investments in both technology and capacity. While macroeconomic uncertainties, geopolitical tensions, and industry-specific challenges remain ever-present, we remain confident in the continued growth of CAE’s core businesses in the coming years.
This year, our Civil Aviation segment posted record performance, marked by best ever adjusted order intake* and double-digit growth in revenues and adjusted segment operating income*. Margin rates continue to be strong and ended the year at record highs. In our commercial products and training businesses, we see continued strong prospects for future growth, driven by ongoing increases in air travel demand as well as further customer interest in the outsourcing of training activities. In business aviation training, activity remained stable above 2019 levels, while continued “churn” in the ecosystem drove the creation of new pilots. FY2024 was a dynamic year in our Flight Operations Solutions business, with several major pursuits in the pipeline. Leveraging our technology investments and integrated platform approach, we aimed to capitalize on these opportunities and continue to attract new, large customers.
In the D&S business, our principal focus has been and remains on execution. The installation of new leaders and process improvement efforts point to future steady improvement in margin rates.
The growth outlook for D&S continues to be resilient with several opportunities in the near-term pipeline and on the horizon. In the near-term, key positions on several generational programs will serve as the backbone of our growth. Order intake continues to be a positive indicator with three successive years of >1x book-to-sales*, and we expect this to accelerate further in FY2025. As we look to the bottom line, we expect new orders to continue to replenish our backlog of business with larger and more profitable work, concurrent with the acceleration of the recognition of risk on Legacy Contracts. This is the principal driver of future increases in the overall profitability of the business.
We continue to be optimistic about the benefits of scale and synergy across the CAE enterprise, bolstered by the significant strides we’ve made in both market expansion and technology investment. For both our civil and defence customers, we believe that CAE is the unquestioned standard for quality and capability. As we finally put the lingering impacts of the COVID pandemic behind us, we remain very excited about our future, our competitive position, and our prospects for growth and market leadership.
As in FY2023, this year we continued to maintain our strategic focus on four main pillars. Key accomplishments in each are as follows:
Efficient Growth:
—Completed portfolio shaping actions including the successful sale of CAE Healthcare business division for an enterprise value of $311 million. The total consideration, after preliminary working capital and selling price adjustments, amounted to $293.4 million and is subject to further working capital adjustments based on closing accounts. This has enabled a sharper focus on our core markets and customers as well as a deleveraging of our business, and is intended to enhance the company’s longer-term return profile.
—Continued expansion of company adjusted segment operating income margins* to 12.8% while maintaining a focus on accelerating the retirement of contractual risks in Defense & Security and reaching new highs in Civil Aviation, including a full year adjusted segment operating income margin* of 22.5% and a record margin of 27.3% in Q4.
*Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
—Saw continued strong growth in both revenues and adjusted orders*. For the full year, consolidated revenue growth of 7% was led by nearly 12% growth in Civil. Furthermore, adjusted order intake* remained strong at ~$4.9 billion for a full-year book-to-sales ratio* of 1.15x.
—Generated strong free cash flow* for the year, at a cash conversion rate* of ~1.5x.
Technology and Market Leadership:
—Within Civil, we signed multiple key training agreements with airline partners including Akasa Air, Air France KLM Group, Air Europa, ITA Airways, and Delta Airlines among and many others.
—Further expanded our training centre footprint with the opening of CAE’s Savannah training centre and began work on the upcoming opening of new CAE training centres in Athens, Greece and Vienna, Austria. Additionally, added several Full Flight Simulators (FFS) to our existing network of centres in lockstep with customer demand.
—Continued the roll-out and development of CAE Flight Operations Solutions’ modernized software portfolio, including our cloud-based Operations Control, Crew Management, and Flight Management solutions.
—Secured key wins in Defense including the training for Canada’s Remotely Piloted Aircraft System (RPAS) as well as the Future Long-Range Assault Aircraft (FLRAA) program in the U.S., supporting prime contractor Bell Helicopter.
—Subsequent to the fiscal year end the Canadian government announced the award of a $11.2 billion, 25-year contract for FAcT to the SkyAlyne joint venture. Even though the $11.2 billon will be shared with CAE’s partner in the joint venture, this represents CAE’s largest strategic Defense & Security contract to date and is a testament to CAE’s relentless effort and expertise in this core market.
—Continued to broaden and strengthen our relationships with OEM partners and regulatory bodies. In FY2024 we signed an agreement with The Boeing Company to be the authorized training provider of Boeing’s Competency Based Training and Assessment (CBTA) curriculum.
Revolutionizing Training and Critical Operations:
—Continued expansion and adoption of CAE Rise™, our proprietary data enabled objective training technology. Additionally, we successfully paired CAE Rise™ with Biometrics Gaze-tracking technology to create a first-of-a-kind training offering for our customers.
—Successfully launched the Prodigy visual system, which is the first Level D qualified full flight simulation image generator powered by a gaming engine. Using Epic Games’ Unreal Engine, it provides high fidelity 3D visuals and full-motion simulation for a more realistic pilot training in a virtual environment.
—The CAE e-Series MR Visual System received an Edison award, one of the highest accolades a company can receive for innovation. The e-Series sets a new standard for training. Its exceptional realism creates unprecedented immersion for the training of complex procedures in a safe virtual environment.
—Successfully launched CAE Connect, an omni digital channel resource for the training ecosystem in Business Aviation Training.
Skills & Culture:
—Addition of a Chief People Officer to accelerate and enhance CAE’s employee value proposition and talent development efforts. This role heightens our focus on the acquisition and retention of key skills that are intended to deliver CAE’s growth in the years to come.
—Continued to increase gender and ethnic diversity in our senior leadership pool (directors and above), reaching a milestone level of 33% in FY2024.
—Reached record-high employee engagement scores once again in FY2024, fueled by our efforts to be an employer of choice.
—Submitted near-term, company-wide science-based decarbonization targets, which positions CAE on the net zero trajectory.
*Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
—Elevated our score to a B on our latest Carbon Disclosure Project, integrated the S&P 2024 Global Sustainability Yearbook as our sustainability performance ranks in the top 15% of our industry, and achieved Bronze certification on our initial EcoVadis evaluation, increasingly required by aerospace and defence OEMs for bid eligibility.
—Achieved our first certification as a Progressive Aboriginal Relations Bronze company, underlying our commitment to strengthen relations with Indigenous Peoples in Canada and around the world Named to Bloomberg’s Gender-Equality Index for the sixth consecutive year. Additionally recognized as one of Canada’s Top 100 Employers and as one of Canada’s Top Employers for young people, and Montreal Top Employer.
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Section 7 - Executive Compensation
Compensation Decisions
NEW in FY2024
To directly address the feedback received from CAE’s largest Shareholders, the Committee approved and incorporated the following modifications to its compensation program for FY2024.
Short-Term Incentive Plan (“STIP”)
The following changes were included in the STIP as of April 1st of 2023 (FY2024):
—Adjusted EPS*, adjusted order intake* and revenue continued to be the three primary financial drivers measured in the FY2024 STIP, with the weighting for adjusted EPS* increased by 10%, bringing our performance measures as follows: adjusted EPS* (60%), revenue (20%) and adjusted order intake* (20%)
Long-Term Incentive Plan (“LTIP”)
The LTIP mix remained the same, with 60% in PSUs, 20% in RSUs and 20% in stock options. The performance measures for the FY2024 PSU awards were modified as follows:
—Adjusted segment operating income margin* replaced adjusted EPS* as a profitability measure, resulting in adjusted EPS* now only being measured under the STIP, to ensure that the STIP and LTIP reflect different performance measures
—Net cash provided by operating activities replaced free cash flow* as a cash management measure
—Adjusted ROCE* was added to measure effective deployment of capital
—The FY2024 PSU performance measures are equally weighted: 1/3rd adjusted segment operating income margin*, 1/3rd net cash provided by operating activities and 1/3rd adjusted ROCE*
—Net cash provided by operating activities is measured cumulatively over the 3-year period. Adjusted ROCE* is measured at the end of the third year. Adjusted segment operating income margin* is measured on a yearly basis and weighted 1/6th in year 1; 1/3rd in year 2 and 1/2 in year 3.
In FY2024, the Omnibus Incentive Plan, pursuant to which the Company may grant Options, PSUs and RSUs that may be settled in Shares issued from treasury, was approved by our Shareholders at the annual and special shareholders’ meeting held on August 9, 2023, further encouraging CAE ownership by employees. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan
Governance
A double trigger was introduced in the Change of Control provisions for equity-based compensation (PSUs, RSUs and Stock options). All equity awards made starting in FY2024 will vest on a “double trigger” basis, requiring both a Change of Control and without fault termination of employment for equity vesting.
The CEO is required to maintain his Share ownership requirement of 500% of base salary for one year following retirement.
*Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
NEW in FY2025
Short-Term Incentive Plan (STIP)
The following changes were made to the STIP effective for FY2025:
—The Corporate Performance Factor will be composed of two financial measures, adjusted EPS* and revenue, respectively weighted 2/3rd and 1/3rd. These two measures will strengthen focus on profitable growth.
—The financial component of our STIP (representing 75% of the payout) will now be a mix of Business Unit and CAE financial performance (2/3rd weighting to BU performance and 1/3rd weighting to CAE performance) for our Business Unit Leaders. The President and Chief Executive Officer and his direct reports will continue to have financial performance measured 100% on CAE consolidated results.
—The STIP performance grid has been reviewed and will pay out at 50% of target for the achievement of threshold performance. As before, payout can be as low as 0% if performance is below the threshold level.
Long-Term Incentive Plan (LTIP)
—Our FY2025 LTIP will remain unchanged from FY2024 design.
—The LTIP performance grid has been reviewed and will pay out at 50% of target for the achievement of threshold performance. As before, payout can be as low as 0% if performance is below the threshold level.
*Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
Shareholder Engagement
We appreciate the importance of engaging with our Shareholders to better understand their views, concerns, and priorities related to our business operations, succession, performance, and executive compensation programs. In FY2023 we initiated a proactive engagement process with our Shareholders. We have continued this process in FY2024 and have committed to regular annual shareholder engagement with our Shareholders. As a part of this engagement, we offer to meet with our Shareholders to understand our Shareholders’ perspectives on our executive compensation programs as well as other matters within HR mandate.
For the FY2024 year, we offered to meet with 16 of our largest Shareholders, who together account for approximately 50% of our ownership. Many of these Shareholders indicated that they did not have issues that they wished to discuss and so declined the offer. For those Shareholders we did meet with, these meetings allowed us to share the Board objectives around executive compensation and listen to their feedback and questions about our executive compensation programs.
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Section 7 - Executive Compensation
Compensation Philosophy
Compensation Objectives
Much of CAE’s success in developing and growing its worldwide business is attributable to our highly qualified and motivated employees. The executive compensation programs are based on a pay-for-performance philosophy. Executives receive salaries, annual short-term incentive awards contingent upon attaining consolidated business results and individual achievements, and long-term incentive awards that motivate executives to create increasing and sustainable value for Shareholders. In addition, executives receive perquisites and participate in pension and benefits programs.
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Section 7 - Executive Compensation
Compensation principles
The principles underlying CAE’s executive compensation programs are as follows:
Pay for performance | The majority of compensation is variable, contingent on and directly linked to financial and operational performance metrics, and CAE’s Share price. | ||||
Balance | The portion of total compensation that is performance-based increases with an executive’s level of responsibility and strategic scope of the role. | ||||
Long-term focus | Long-term stock-based compensation opportunities have a larger weight than short-term cash- based opportunities for our executive leaders. | ||||
Shareholder alignment | The financial interests of executives are directly aligned with the interests of our Shareholders through stock-based compensation, and annual and long-term performance metrics that correlate with sustainable Shareholders value growth. | ||||
Competitiveness | Total compensation is market competitive to attract, retain, and motivate CAE’s executive team while fostering entrepreneurial spirit. This is achieved by setting target compensation competitively with the median of our comparator group with compensation outcomes above the median when performance is strong and below median when it is not. | ||||
Responsibility | Financial and operational performance must not compromise our ethical, environmental and health and safety objectives, outlined in our Code of Business Conduct. Commitment to ethical and corporate responsibilities fundamentally underlies all aspects of our behavior and compensation plans, which provide for compensation to be reduced if these objectives are not upheld. | ||||
The following illustrates the relative weight of each compensation policy element, at target:
President and CEO | Other NEOs | ||||
 |  | ||||
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Section 7 - Executive Compensation
Executive Compensation Programs
CAE’s executive compensation program has five main components: base salary, short-term incentive, long-term incentives, pension, and perquisites and benefits. The table below provides highlights of each component and describes the purpose and CAE’s policy for each component.
Overview
| Form | Plan Highlights | Plan Objectives | Policy | |||||||||||
Base Salary | Cash | Fixed pay annual review | Provide a base of regular income to attract and retain qualified leaders Recognize scope and responsibilities of the position as well as the experience and sustained performance of the individual | Set competitive with the median of the comparator group | ||||||||||
Short-term Incentive (STIP) | Cash | Annual award based on corporate (75%) and individual objectives (KPIs) (25%) Executives can elect to receive some or all STIP payment as Executive Deferred Share Units | Reward the achievement of the Company’s financial and operational objectives Reward the achievement of individual objectives aligned with the executive’s area of responsibility and role in realizing operational results Drive superior individual and corporate performance | Set competitive with the median of the comparator group Designed to result in above median payouts for superior performance Performance metrics are aligned to the strategic plan and approved annually | ||||||||||
Long-term Incentive (LTIP) | Performance Share Units (60%), Restricted Share Units (20%), Stock Options (20%) | LTIP value is awarded in different medium to long-term compensation vehicles with both time and performance vesting based on achievement of longer-term financial objectives | Align management’s interests with Shareholders value growth Reward the achievement of sustained market performance Attract and retain key talent | Set competitive with the median of the comparator group Ability to award LTI within a range and impact of Share price and financial performance designed to provide pay outcomes closely aligned with performance | ||||||||||
Pension | Monthly pension in cash at retirement | Defined Benefit Plan for executives representing 2% of average 5 best years of earnings (salary plus STIP), per year of pensionable service Supplementary Plan offered to the NEOs for pension above the income tax act cap on registered plans | Support retention of key executives | Set consistent with historical approach | ||||||||||
Perquisites and Other Benefits | Employee Stock Purchase Plan (“ESPP”) Perquisites | ESPP: Employees and executives may purchase CAE Shares up to 18% of their base salary; CAE matches 50% of the employee contributions, up to a maximum of 3% of the employee’s annual base salary Perquisites: Cash allowance to cover certain expenses to support health and well-being | Provide executives with a Share ownership building vehicle | Set to be market competitive | ||||||||||
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Section 7 - Executive Compensation
Base salaries
The base salaries of the President and CEO and other NEOs are determined in accordance with CAE’s compensation philosophy and policies. CAE’s executives’ salaries are positioned within a competitive range around the market median, based on the individual’s performance and level of experience and the scope and responsibilities of the role.
Base salaries are reviewed by the HRC annually considering individual achievements, general performance, benchmark information and market conditions.
Annual Incentive Program Design
-The annual short-term incentive plan motivates the achievement of specific annual financial and operational results -To further strengthen alignment with Shareholders the overall corporate performance factor is capped at 100% if the adjusted EPS* result does not meet the target | ||
The Short-Term Incentive Plan (STIP) provides for an annual cash incentive for executives and management employees based on CAE’s consolidated performance and individual achievements. The STIP motivates the achievement of specific annual financial and operational results, aligned with the corporate goals and strategy.
The table below outlines FY2024 STIP target ranges by NEO, which range from 0% to 250% of target for each executive:
STIP Target as a % of Base Salary | |||||||||||
NEO | Minimum | Target | Maximum | ||||||||
Marc Parent | 0% | 125% | 250% | ||||||||
Sonya Branco | 0% | 75% | 150% | ||||||||
Carter Copeland | 0% | 75% | 150% | ||||||||
Abha Dogra | 0% | 55% | 110% | ||||||||
Nick Leontidis | 0% | 75% | 150% | ||||||||
The STIP is based 75% on CAE performance and 25% on the executive’s individual performance. The Company performance factor consists of financial measures of varying weights that total 100%. The year-end result for each measure is assessed against predefined targets that are set and approved by the HRC at the beginning of the year. 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.
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The table below illustrates the annual STIP payout calculation for NEOs
In FY2024, the Company performance factor was based on three financial measures detailed in the table below:
STIP Measure | ||||||||
Performance Measure | Why this Measure is important | Weighting | ||||||
Adjusted EPS* | Intended to keep management focused on EPS achievement as a critical metric reflecting the profitability of the Company and directly linked with Shareholders interests | 60% | ||||||
Revenue | Highlights the importance of revenue growth in the Company strategy | 20% | ||||||
Adjusted order intake* | Demonstrates the level of growth in sales for the Company’s products and services, thus is representative of future operational growth | 20% | ||||||
To further strengthen alignment with Shareholders the overall corporate performance factor is capped at 100% if the adjusted EPS* result does not meet the target approved by the Board of Directors.
NEW In FY2024, the adjusted EPS* weighting was increased by 10%, bringing it to 60% to further increase management’s focus on Company profitability. Revenue and adjusted order intake* continued to be important measures in FY2024 STIP and were equally weighted at 20% each.
Demonstrating the depth of CAE’s commitment to sustainability, CAE executives have individual sustainability objectives, with diversity as the common objective tied to compensation. Compensation also considers each executive’s responsibility to always act in accordance with our values and our ethical, environmental and health and safety objectives, outlined in CAE’s Code of Business Conduct.
Following a review at year-end that considers overall business and individual performance as well as the performance of the business from a holistic and strategic perspective, the STIP payments for the President and CEO’s direct reports are approved by the HRC and, for the President and CEO, by the Board upon the HRC’s recommendation. Canadian and US-based executives can elect to defer all or a portion of the STIP payment as Executive Deferred Share Units. The amount deferred is converted into a number of DSUs, (see details under Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Executive Deferred Share Units).
NEW In FY2025, the financial component of our STIP (representing 75% of the payout) will now be a mix of Business Unit and CAE financial performance (2/3rd weighting to BU performance and 1/3rd weighting to CAE performance) for our Business Unit Leaders. The President and CEO and his direct reports will continue to be measured 100% on CAE overall financial results. This change aligns our compensation programs with market and reduces compensation risk.
Adjusted EPS* and revenue will be the two financial performance measures in the FY2025 STIP to calculate the Corporate Performance Factor, weighed 2/3rd and 1/3rd, respectively and pay out will be at 50% of target for the achievement of threshold performance. As before, payout can be as low as 0% if performance is below the threshold level.
* Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
Long-Term Incentive Program Design
| CAE’s long-term incentive plan aligns management’s interests with Share price growth and related Shareholders value creation, and rewards sustained market performance. | ||
The LTIP is designed to reward executives for their contribution to the creation of Shareholders value. For NEOs other than the CEO, the value of the LTIP grants varies by the level of responsibility and scope and is based on each executive’s performance as assessed by the HRC and the Board.
The table below outlines FY2024 LTIP target ranges by NEO:
LTIP Target as a % of Base Salary | |||||||||||
NEO | Minimum | Target | Maximum | ||||||||
Marc Parent | - | 485% | - | ||||||||
Sonya Branco | 100% | 175% | 250% | ||||||||
Carter Copeland | 40% | 95% | 150% | ||||||||
Abha Dogra | 70% | 135% | 200% | ||||||||
Nick Leontidis | 100% | 175% | 250% | ||||||||
CAE’s LTIP is comprised of PSUs, RSUs and Stock Options. All NEOs were eligible for an annual grant under each of these plans, and awards were allocated as follows:
LTIP Mix | ||||||||
Components | Weighting | Vesting | ||||||
PSUs | 60% | 3-year cliff vesting | ||||||
RSUs | 20% | 3-year cliff vesting | ||||||
Stock Options | 20% | 4-year ratable vesting (25% per year) | ||||||
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Performance Share Units
—PSUs directly tie CAE executives to the achievement of the CAE strategic plan. —One PSU is equal in value to one Share of CAE. —Vesting: 3-year cliff subject to the achievement of set performance criteria and the participant’s continued employment with CAE. | —Performance condition: Financial targets as set in the 3-year strategic plan approved by the Board. —Maximum payout multiplier set at 200%. | ||||
PSUs are a long-term incentive vehicle that vest based on the achievement of financial performance that is directly tied to the achievement of the CAE strategic plan.
NEW In FY2024, the Omnibus Incentive Plan, pursuant to which the Company may grant PSUs that may be settled in Shares issued from treasury, was approved by our Shareholders at the annual and special shareholders’ meeting held on August 9, 2023, further encouraging CAE ownership by employees. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan
NEW In FY2024, based on feedback received from our Shareholders, the PSU performance measures used by the Company were modified to include three equally weighted financial measures: adjusted segment operating income margin*, net cash provided by operating activities and adjusted ROCE*. These measures were used for PSUs granted under the Omnibus Incentive Plan in FY2024 and are further described below:
PSU Performance Measures | ||||||||||||||
Driver | Performance Measure | Weighting | Why this Measure is Important | Performance Assessment | ||||||||||
Profitability | Adjusted segment operating margin* | 33% | Reflects the efficiency and profitability of the Company's core operations after deducting operating expenses (excluding interest and taxes) | Measured yearly and weighted: -1/6th year one -1/3rd year two -1/2 year three | ||||||||||
Growth | Cash from operations | 33% | Focuses on the cash inflows and outflows directly related to the Company's day-to-day business operations, providing a clear picture of the Company's ability to generate cash to meet its obligations | Measured as a cumulative figure over a 3-year period | ||||||||||
Return | Adjusted ROCE* | 33% | Measures the efficiency with which the Company utilizes its capital to generate profits | Measured at the end of year 3 | ||||||||||
* Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
Restricted Share Units
—RSU is equal in value to one Share of CAE. | —Vesting: 3-year cliff subject to the participant’s continued employment with CAE. | ||||
RSUs are awarded to executives and senior management of CAE and its subsidiaries to enhance alignment with Shareholders and support retention.
NEW In FY2024, the Omnibus Incentive Plan, pursuant to which the Company may grant RSUs that may be settled in Shares issued from treasury, was approved by our Shareholders at the annual and special shareholders’ meeting held on August 9, 2023, further encouraging CAE ownership by employees. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan.
Stock Options
—Exercise price equal to the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before the date of the grant | —Option term: 7 years. —Vesting: 25% per year starting on the first anniversary date of the grant. | ||||
NEW In FY2024, the Omnibus Incentive Plan, pursuant to which the Company may grant Stock Options settled in shares issued from treasury, was approved by our Shareholders at the annual and special shareholders’ meeting held on August 9, 2023. Awards granted under the ESOP remain outstanding and governed by the terms of the ESOP, but no new award will be granted under the ESOP. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan.
Omnibus Incentive Plan
—Encourage greater Share ownership —Stock Options are settled in Shares issued from treasury —PSUs and RSUs are settled in Shares, in cash or in a combination thereof | —Provides flexibility to the Company to grant both whole Share awards, such as PSUs and RSUs as well as Stock Options | ||||
In an effort to streamline its equity-based incentive plans, to encourage greater Share ownership by employees and to foster a greater alignment between the long-term interests of the Shareholders and the interests of employees, the Board of CAE adopted on May 31, 2023 the Omnibus Incentive Plan (“Omnibus Incentive Plan”) which was approved by our Shareholders at the annual and special shareholders’ meeting held on August 9, 2023. The Omnibus Incentive Plan is a single plan that allows for different types of equity awards to be granted and to be settled through the issuance of Shares from treasury. The Omnibus Incentive Plan provides flexibility to the Company to grant both whole Share awards, such as PSUs and RSUs as well as Stock Options. The Omnibus Incentive Plan provides that Stock Options will be settled in Shares issued from treasury, while PSUs and RSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof. The Omnibus Incentive Plan does not permit Option grants to non-employee directors. In
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Section 7 - Executive Compensation
light of these features, the Omnibus Incentive Plan enhances the ability of the Company to attract, retain and reward key individuals to advance its business strategy, while promoting a greater alignment of interests with the Shareholders of the Company.
The HRC is responsible for administering and interpreting the Omnibus Incentive Plan. Under the terms of the Omnibus Incentive Plan, the HRC will, in its sole discretion, from time to time designate the executive officers and employees to whom awards shall be granted and determine, if applicable, the number of Shares to be covered by such awards and the terms and conditions of such awards.
The total number of Shares reserved for issuance under the Omnibus Incentive Plan is 10,000,000 (representing approximately 3.14% of the issued and outstanding Shares as at March 31, 2024).
The terms and conditions relating to the grants of PSUs, RSUs and Stock Options under the Omnibus Incentive Plan include the following:
Share Units
The HRC is authorized to grant PSUs and RSUs evidencing the right to receive Shares (issued from treasury or purchased on the open market), cash based on the value of a Share or a combination thereof at some future time to eligible persons under the Omnibus Incentive Plan.
RSUs generally become vested, if at all, following a period of continuous employment. PSUs are similar to RSUs, but their vesting is based on the attainment of specified performance metrics as may be determined by the HRC. The terms and conditions of grants of RSUs and PSUs, including the quantity, type of award, grant date, vesting conditions, vesting periods, settlement date and other terms and conditions with respect to these awards will be set out in the participant’s grant agreement. Subject to the achievement of the applicable vesting conditions, the payout value of a PSU or RSU will generally be determined on the settlement date using the volume weighted average price of the Shares on the TSX for the last five (5) trading days (as opposed to the market value of the Shares on the TSX for the past 20 trading days, as it is the case under the legacy PSU Plan and RSU Plan).
Stock Options
All Stock Options granted under the Omnibus Incentive Plan have an exercise price equal to the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before the date of the grant. A Stock Option shall be exercisable during a period established by the HRC which shall not be more than ten (10) years from the grant of the Stock Option. The Omnibus Incentive Plan provides that the exercise period shall automatically be extended if the date on which it is scheduled to terminate shall fall during a black-out period or within nine (9) trading days following the end of a black-out period. In such cases, the extended exercise period shall terminate ten (10) trading days after the last day of the black-out period.
For detailed disclosure pertaining to the terms and conditions of the Omnibus Incentive Plan, see Appendix D titled “Summary of the Omnibus Incentive Plan”. A complete copy of the Omnibus Incentive Plan can be accessed on SEDAR+ at www.sedarplus.ca or on EDGAR at www.sec.gov.
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Section 7 - Executive Compensation
Executive Deferred Share Unit Plan
—Executive DSU Plan helps our executives build their Share ownership in CAE. —Allows for elective deferral of STIP to DSUs. —One DSU is equal in value to one Share of CAE. | —DSUs are only payable when the executive leaves CAE. —Executive DSU plan is non-dilutive as all DSUs are paid out in cash. | ||||
In FY2017, CAE adopted an Executive Deferred Share Unit Plan (“Executive DSU Plan”). The purpose of the plan is to attract and retain talented individuals to serve as officers and executives of the Company and to help them build their Share ownership in CAE, and to promote a greater long-term alignment of interests between the executives and the Shareholders of the Company.
Canadian and US-based executives can elect to defer a portion of or their entire short-term incentive payment to Executive DSUs annually.
Each DSU has the same value as a Share of CAE. The DSUs accrue dividend equivalents payable in additional DSUs in an amount equal to dividends paid on Shares. The DSUs are only payable when the executive leaves the Company. Upon or within a defined period following the termination of their employment, DSU holders are entitled to receive a lump sum cash payment equal to the number of DSUs credited to their account as of that date multiplied by the Fair Market Value of one (1) Share on the settlement date.
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Section 7 - Executive Compensation
Inactive Equity-Based Plans with Legacy Participants
Some NEOs have outstanding participation in the following long-term incentive plans, which are no longer active (no further awards are made under the plans) but have yet to be fully paid out.
Fiscal 2005 Deferred Share Unit Plan
In FY2005, CAE adopted a Long-Term Incentive Deferred Share Unit Plan (“LTUP”) for executives of CAE and its affiliates that, as amended from time to time, applies to all grants made thereafter. No FY2005 Long-Term Incentive Deferred Share Units (“LTUs”) have been granted by CAE since FY2014. All LTUs are fully vested for remaining plan participants, having vested in 20% increments over five (5) years, commencing one (1) year after the grant date. LTUs accrue dividend equivalents payable in additional units in amounts equal to dividends paid on Shares. LTUs are only redeemable in cash following the unit holder’s retirement or termination of employment at the market value of Shares on the TSX on the settlement date.
Fiscal 2004 Deferred Share Unit Plan
In FY2004, CAE adopted a Long-Term Incentive Deferred Share Unit Plan (“FY2004 LTUP”) for executives of CAE and its affiliates to partially replace the grant of options under CAE’s ESOP. No FY2004 Long-Term Incentive Deferred Share Units (“FY2004 LTUs”) have been granted by CAE since FY2004. All FY2004 LTUs are fully vested for remaining plan participants, having vested in 25% increments over four (4) years, commencing one (1) year after the grant date. FY2004 LTUs accrue dividend equivalents payable in additional units in amounts equal to dividends paid on Shares. FY2004 LTUs are only redeemable in cash following the unit holder’s retirement or termination of employment at the market value of Shares on the TSX on the settlement date.
Fiscal 2015 Performance Share Unit Plan
In FY2015, CAE adopted a Performance Share Unit Plan (“PSU Plan”) for executives and senior management of CAE and its subsidiaries. Under the PSU Plan, a PSU has the same value as a Share of CAE. PSUs vest three years from the grant date, provided that the participant is employed by the Company on the vesting date and the performance targets are achieved.
PSUs granted under the PSU Plan are redeemed at the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant, Qualifying Event date or such other date as may be determined by the Human Resource Committee from time to time.
The PSU Plan is an unfunded plan and non-dilutive as all vested PSUs are paid out in cash. Therefore, no disclosure of the annual burn rate is provided. Awards granted under the PSU plan remain outstanding and governed by the terms of the PSU Plan, but no new awards will be granted under the PSU Plan. For details concerning the treatment of PSUs following executive termination, resignation, retirement and Change of Control, please refer to Section 7 – Executive Compensation - Compensation of our Named Executive Officers – Termination and Change of Control Benefits.
Fiscal 2015 time-based Restricted Share Unit Plan
In FY2015, CAE adopted a time-based Restricted Share Unit Plan (“RSU Plan”) for executives and senior management of CAE and its subsidiaries. Under the RSU Plan, an RSU has the same value as a Share of CAE. RSUs are granted for a three-year period and vest on the third anniversary of the grant if the participant remains employed with CAE until that time. Vested RSUs are redeemed at the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant, Qualifying Event date or such other date as may be determined by the HRC from time to time.
The RSU Plan is an unfunded plan and non-dilutive as all vested RSUs are paid out in cash. Therefore, no disclosure of the annual burn rate is provided. Awards granted under the RSU Plan remain outstanding and governed by the terms of the RSU Plan, but no new awards will be granted under the RSU Plan. For details concerning the treatment of RSUs following executive termination, resignation, retirement and Change of Control, please refer to Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Termination and Change of Control Benefits.
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Section 7 - Executive Compensation
Employee Stock Option Plan
CAE adopted the Amended and Restated Employee Stock Option Plan (“ESOP”), to provide key employees of CAE with an opportunity to purchase Shares and to benefit from the related Share price appreciation, closely aligning the interests of employees with those of Shareholders. Stock Options increase the ability of CAE to attract, retain and reward individuals with exceptional skills.
Stock Options have value only to the extent the Share price increases, so provide a transparent long-term incentive vehicle that directly aligns executives with Shareholder interests in Share price growth over the long-term. CAE’s Stock Options vest 25% per year have a term of seven years, to reward long term Share price growth.
The HRC establishes rules and guidelines for the administration of the ESOP, selects the employees to whom awards are granted and the number of Shares covered by such awards, sets the terms and conditions of awards and cancels, suspends and amends awards. The HRC has the sole discretion to make determinations under, and to interpret, the ESOP.
The ESOP permits, at the discretion of the HRC, the surrender and cancellation without re-issue of an in-the-money Stock Option for cash equal to the fair market value of the Share underlying the Stock option less the Option exercise price, in lieu of the Share itself (the fair market value of a Share is the closing price of a Share on the TSX on the trading day on which the election is made).
For detailed disclosure of the terms and conditions of the ESOP, see Appendix C titled “Summary of the Employee Stock Option Plan”. A complete copy of the ESOP can be accessed on SEDAR+ at www.sedarplus.ca or on EDGAR at www.sec.gov.
Securities Authorized for Issuance under the Equity Compensation Plans
The following table provides information as at March 31, 2024 on the Company’s compensation plans under which equity securities of the Company are authorized for issuance.
Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) A | Weighted-average exercise price of outstanding options, warrants and rights ($) B | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column A) (#) C | |||||||||
| Equity compensation plans approved by securityholders | |||||||||||
| Employee Stock Option Plan (“ESOP”) | 5,751,636 | 27.01 | 0 | ||||||||
Omnibus Incentive Plan1 | 1,779,993 | 28.66 | 8,220,007 | ||||||||
| Equity compensation plans not approved by securityholders | |||||||||||
| - | - | - | |||||||||
| Total | 7,531,629 | - | 8,220,007 | ||||||||
1.Under the terms of the Omnibus Incentive Plan, the Company has the option to settle Stock Options in Shares issued from treasury and PSUs and RSUs in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.
The following table details the annual burn rate (i.e., the ratio of securities granted vs CAE’s issued and outstanding Shares) for each of the three most recently completed fiscal years
2024 | 2023 | 2022 | |||||||||
| Employee Stock Option Plan (“ESOP”) | 0.0% | 0.20% | 0.23% | ||||||||
Omnibus Incentive Plan1 | 0.56% | - | - | ||||||||
1.The burn rate assumes that PSUs will vest based on a performance multiplier of 100%. If we assume that the PSUs will vest based on our maximum performance multiplier of 200%, the burn rate would increase to 0.84%. The burn rate also assumes that all awards will be settled in Shares issued from treasury. However, under the terms of the Omnibus Incentive Plan, CAE has the option to settle PSUs and RSUs through purchases on the open market or in cash.
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This burn rate indicates the number of Stock Options, PSUs and RSUs granted in each year as a percentage of the weighted average number of securities outstanding in the applicable fiscal year. CAE has monitored its long-term dilution by limiting the equity compensation to reasonable awards under its equity programs.
Plan | Plan Maximum1 | Outstanding Securities Awarded2 | Remaining Securities Available for Grant3 | ||||||||
Employee Stock Option Plan (“ESOP”)4 | 0 (0%) | 0 (0%) | 0 (0%) | ||||||||
| Omnibus Incentive Plan | 10,000,000 (3.14%) | 1,779,993 (0.56%) | 8,220,007 (2.58%) | ||||||||
1.The maximum number of securities issuable under each equity compensation plan expressed as a fixed number (together with the percentage this number represents relative to the weighted average number of issued and outstanding Shares as of March 31, 2024).
2.The number of outstanding share-settled securities awarded under each equity compensation plan as of March 31, 2024 (together with the percentage this number represents relative to the weighted average number of issued and outstanding Shares as of the same date).
3.The number of securities under each equity compensation plan that are available for grant as of March 31, 2024 (together with the percentage this number represents relative to the weighted average number of issued and outstanding Shares as of the same date).
4.Following approval of the Omnibus Incentive Plan in 2023, no grants were made under the Employee Stock Options plan.
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Section 7 - Executive Compensation
Pension, Benefits and Perquisites
—Promote long-term employment with the Company. —Pensions payable under the Supplementary Pension Plan are conditional upon compliance with non-competition and non-solicitation clauses. —No extra years of service are generally granted under the pension plans. | ||
Eligible employees participate in the Retirement Plan for Employees of CAE Inc. and associated companies. Executives at a vice president level and higher participate in the Pension Plan for Designated Executive Employees of CAE Inc. and associated companies (the “Designated Pension Plan”), and in the Supplementary Pension Plan of CAE Inc. and associated companies (the “Supplementary Pension Plan”). The Designated Pension Plan is a defined benefit plan to which CAE and participants contribute.
Pensions payable under the Supplementary Pension Plan are paid directly by CAE. See Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Pension Arrangements” for details about the value of the accrued benefit to each of the NEOs. Except as discussed in “Change in Control Contracts” below, CAE does not grant extra years of credited service under its pension plans. Receipt of pension benefits under the Supplementary Pension Plan is conditional upon compliance with non-competition and non-solicitation clauses.
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Section 7 - Executive Compensation
Employee Stock Purchase Plan
| Provide employees with a Share ownership building vehicle and a savings vehicle beyond the pension plan. | ||
Under the CAE Employee Stock Purchase Plan, employees may make contributions towards the purchase of Shares of up to 18% of their annual base salary. Under the plan, CAE contributes $1 for every $2 of employee contributions, to a maximum contribution of 3% of the participant’s annual base salary.
Change in Control Contracts
All NEOs are entitled to termination of employment benefits following a Change of Control of CAE if the executive’s employment is terminated without cause within two years following the Change of Control. This is to safeguard the Company’s normal course of business in case of Change of Control. See Section 7 – Executive Compensation - Compensation of our Named Executive Officers – Termination and Change of Control Benefits for a summary of the impact of various events on the different compensation programs for the NEOs and details about the approximate incremental value that could be realized by a NEO following termination or a Change of Control event.
Perquisites
Flexible perquisites provide executives with a cash allowance to cover certain expenses such as vehicle expenses, and health and well-being. Such allowance is typical for senior executive positions and is capped at predetermined levels by position.
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Section 7 - Executive Compensation
FY2024 Compensation Outcome
Our disappointing FY2024 financial performance produced overall consolidated EPS results that were below performance targets. The lower Adjusted EPS* and Adjusted Order Intake results had a significant impact on both our FY2024 STIP and LTIP incentive plan payout levels. The results of our FY2024 incentive plans are as follows: 4% payout for the STIP CAE performance multiplier and 43% payout for the PSU performance multiplier. These incentive plan outcomes reflect CAE’s financial performance against pre-established targets, specifically below plan performance of our EPS results in FY2024 and demonstrate the strong alignment between performance and incentive plan outcomes.
Base salaries
The salaries of the President and CEO and other NEOs are determined in accordance with CAE’s compensation philosophy and policy, and are reviewed and approved, in the case of the President and CEO, annually by the independent members of the Board of Directors. The HRC reviews benchmark data to ensure that the President and CEO’s and his direct reports’ total direct compensation (base salary, short-term and long-term incentives) are in line with CAE’s compensation philosophy. The changes to base salary are market competitive, based on benchmarking relative to our compensation peer group and reflect individual performance, experience and retention considerations of our executives. The salary increases below were determined at the start of FY2024 and were based on benchmarking conducted by the Committee’s independent compensation advisor.
The table below outlines base salaries of all NEOs:
NEO | FY2023 Base Salary1 ($) | FY2024 Base Salary1 ($) | Increase | ||||||||
Marc Parent | 1,260,000 | 1,323,000 | 5% | ||||||||
Sonya Branco | 565,950 | 594,250 | 5% | ||||||||
Carter Copeland | 675,000 | 708,750 | 5% | ||||||||
Abha Dogra | 675,000 | 708,750 | 5% | ||||||||
Nick Leontidis | 567,600 | 595,980 | 5% | ||||||||
1.For Ms. Dogra and Mr. Copeland, the base salary was converted to Canadian dollars using the FY2024 average exchange rate of 1.35.
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Section 7 - Executive Compensation
Short Term Incentive Plan
Corporate Performance
75% of short-term incentive awards for the President and CEO and other NEOs is based on the achievement of CAE performance measures, namely adjusted EPS*, revenue and adjusted order intake*. Details on these measures are described under Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Annual Incentive Program Design.
The table below illustrates the respective weights given to each FY2024 CAE corporate performance measure, as well as the actual results and related payout levels.
Performance Measure1 | Threshold (0%) | Target (100%)2 | Maximum (200%) | Actual Performance3 | Weighting | Score | ||||||||||||||
Adjusted EPS* | $0.90 | $1.05 | $1.20 | $0.85 | 60% | 0% | ||||||||||||||
Revenue | $4,934M | $5,194M | $5,454M | $4,993M | 20% | 22% | ||||||||||||||
Adjusted order intake* | $5,068M | $5,391M | $5,715M | $5,054M | 20% | 0% | ||||||||||||||
STIP Payout | 4% | |||||||||||||||||||
1.If the adjusted EPS* target is not met, the corporate performance multiplier is capped at 100%.
2.Targets were adjusted to exclude the impact of CAE Healthcare financial contributions starting in Q4 FY2024, aligned with the Healthcare business unit divestment timeline.
3.For incentive plans purposes, adjusted EPS* and revenue are normalized for foreign exchange. In addition, revenue includes proportionate revenue generated by Joint Ventures. The numbers presented in this column reflect such adjustments. Actual results before these adjustments are as follow: $0.87 for adjusted EPS and $4,283M for revenue.
The remaining 25% of the NEOs’ annual incentive is awarded based on pre-determined operational and financial measures specific to each executive. As with other performance measures, individual performance is assessed between 0% to 200%. For FY2024, the individual performance factor for NEOs varied between 50% and 200%. The HRC determined the President and CEO’s individual performance factor to be 50% which was recommended to and approved by the Board. The HRC reviewed and approved the President and CEO’s recommendations on the individual performance factors for his direct reports following a detailed discussion about corporate and individual performance (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Determination of NEOs Individual Performance).
In assessing the individual performance factor for the CEO, the HRC assesses the CEO’s performance relative to specific financial and operational CEO performance goals that are set at the start of the fiscal year. The specific targets for these goals are not disclosed as they include competitively sensitive information. However, the achievements relevant to the HRC’s consideration and assessment are listed below in Section 7. There were 12 specific categories of objectives for the CEO for FY2024, including but not limited to: growth, orders, profitability, cash generation, sustainability, talent, high-tech evolution and innovation. Mr. Parent’s performance relative to the established goals resulted in an individual performance assessment of 50%. This resulted in an overall short-term incentive payout factor of 16% of target for the CEO, which reflects an approximate $1.1M reduction in short-term incentive compensation relative to FY2023, aligned with the HRC’s assessment of CAE’s financial and operational performance.
* Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
Individual Payout
The table below shows the calculation of the FY2024 STIP payout to each NEO:
NEO | Year-end Base Salary1 | X | Target STIP (% of base salary) | X | ( | Corporate Performance Factor (75%) | + | Individual Performance Factor (25%) | ) | = | 2024 STIP Payout ($) | |||||||||||||||||||||||||||
Marc Parent | $1,323,000 | X | 125% | X | ( | 4% | + | 50% | ) | = | 256,331 | |||||||||||||||||||||||||||
Sonya Branco | $594,250 | X | 75% | X | ( | 4% | + | 50% | ) | = | 69,082 | |||||||||||||||||||||||||||
Carter Copeland | $708,750 | X | 75% | X | ( | 4% | + | 200% | ) | = | 281,729 | |||||||||||||||||||||||||||
Abha Dogra | $708,750 | X | 55% | X | ( | 4% | + | 170% | ) | = | 177,364 | |||||||||||||||||||||||||||
Nick Leontidis | $595,980 | X | 75% | X | ( | 4% | + | 180% | ) | = | 214,553 | |||||||||||||||||||||||||||
1.Annual base salary as of March 31, 2024. For Ms. Dogra and Mr. Copeland, the base salary was converted to Canadian dollars using the FY2024 average exchange rate of 1.35.
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Section 7 - Executive Compensation
Long Term Incentive Plan
FY2024 LTIP - Awards Granted in June 2023
The table below sets out the LTIP ranges and actual awards to the NEOs granted in fiscal year 2024:
NEOs | FY2024 LTIP award (% of base salary) | Salary at time of grant ($)5 | FY2024 LTIP award Value ($) | Weighting4 | |||||||||||||||||||||||||
PSUs (60%)1, 4 | RSUs (20%)2,4 | Stock Options (20%)3 | |||||||||||||||||||||||||||
($) | (#) | ($) | (#) | ($) | (#) | ||||||||||||||||||||||||
Marc Parent | 485% | 1,323,000 | 6,416,550 | 3,849,930 | 134,378 | 1,283,310 | 44,793 | 1,283,310 | 127,060 | ||||||||||||||||||||
Sonya Branco | 175% | 594,250 | 1,039,938 | 623,963 | 21,779 | 207,988 | 7,260 | 207,988 | 20,593 | ||||||||||||||||||||
Carter Copeland | 150% | 700,403 | 1,050,604 | 630,362 | 22,002 | 210,121 | 7,334 | 210,121 | 20,804 | ||||||||||||||||||||
Abha Dogra | 165% | 700,403 | 1,155,664 | 693,398 | 24,202 | 231,133 | 8,067 | 231,133 | 22,884 | ||||||||||||||||||||
Nick Leontidis | 250% | 595,980 | 1,489,950 | 893,970 | 31,203 | 297,990 | 10,401 | 297,990 | 29,504 | ||||||||||||||||||||
1.PSU awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, the granted units may vest in June 2026, subject to CAE’s performance compared to payout grids approved by the HRC and the participant’s continued employment with CAE. Depending on the overall performance each year during the performance period, the target rate of granted units will be multiplied by a factor ranging from 0% to 200%. Vested PSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.
2.RSU awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, 100% of the granted units will vest in June 2026, subject to the participant’s continued employment with CAE. Vested RSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.
3.Stock options awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan options are granted with an exercise price equal to the weighted average price per Share on the TSX on the five trading days immediately preceding the grant date. At each of the first four anniversaries of the grant, 25% of the award vests and becomes exercisable. Strike price for FY2024 stock options is $28.65.
4.The grant price on grant date is $28.65, representing the weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date.
5.Annual base salary at time of grant (June 2023). For Mr. Copeland and Ms. Dogra, the base salary was converted to Canadian dollars using a conversion exchange rate of 1.33 on grant date.
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Section 7 - Executive Compensation
FY2022 PSU (Performance Period Ending on March 31, 2024)
The below table presents the PSU performance and related payout details of the fiscal year covered in this disclosure. The vesting of the PSUs granted in FY2022 was tied to the performance of two financial metrics, adjusted EPS and revenue (calculated as the sum of CAE consolidated revenues and revenues from joint ventures, irrespective of CAE’s interest in such joint ventures), weighted 75% and 25%, respectively. Three-year financial targets were determined on the basis of the strategic plan approved by the Board of Directors and payout grids were set for each metric and approved by the HRC. For each metric, the target rate of granted units is multiplied by a factor ranging from 0% to 250%. The overall payout multiplier continues to range from 0% to 200%. In accordance with the terms of the FY2022 PSU Plan, the HRC reviewed CAE’s adjusted EPS* and revenue performance for the fiscal year ended March 31, 2024, and approved the following results for PSUs granted in FY2022:
Threshold (0%) | Target (100%) | Maximum (250%) | Actual Performance | Weighting | Score | |||||||||||||||
Adjusted EPS* - FY2022 | $0.67 | $0.80 | $1.03 | $0.84 | 1/6 | 140% | ||||||||||||||
Adjusted EPS* - FY2023 | $1.12 | $1.25 | $1.48 | $0.87 | 1/3 | 0% | ||||||||||||||
Adjusted EPS* - FY2024 | $1.24 | $1.371 | $1.60 | $0.87 | 1/2 | 0% | ||||||||||||||
FY2022 Adjusted EPS* Multiplier | 23% | |||||||||||||||||||
1.FY2024 target was adjusted to exclude the impact of CAE Healthcare financial contributions starting in Q4 FY2024, aligned with the Healthcare business unit divestment timeline.
Threshold (0%) | Target (100%) | Maximum (250%) | Actual Performance2 | Weighting | Payout Level | |||||||||||||||
Revenue - FY2022 | $3,340 | $4,175 | $5,427 | $3,821 | 1/6 | 58% | ||||||||||||||
Revenue - FY2023 | $3,708 | $4,634 | $6,023 | $4,788 | 1/3 | 117% | ||||||||||||||
Revenue - FY2024 | $3,959 | $5,0011 | $6,564 | $5,109 | 1/2 | 110% | ||||||||||||||
FY2022 Revenue Multiplier | 104% | |||||||||||||||||||
1.Target was adjusted to exclude the impact of CAE Healthcare financial contributions starting in Q4 FY2024, aligned with the Healthcare business unit divestment timeline.
2.For incentive plans purposes, revenue includes proportionate revenue generated by Joint Ventures, and the numbers presented in this column reflect such adjustments. Actual revenue before these adjustments was $3,371M for FY2022, $4,203M for FY2023 and $4,283M for FY2024.
The Committee considered that the overall performance multiplier of 43% of target for FY2022 PSU with the resulting 3-year performance period ending on March 31, 2024 appropriately linked compensation outcomes with CAE’s performance.
* Non-IFRS and Other Financial Measures (see Appendix B)
87 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
The below table shows for each eligible NEO the payout value of FY2022 PSU grants with the resulting 3-year performance period ending March 31, 2024. The actual amounts paid out to each eligible NEO in June 2024 for PSUs granted in FY2022 are as follow:
NEO | FY2022 PSUs award (# of units) | X | FY2022 PSUs Performance Factor (%) | X | Market Share Price ($) | = | PSU Value3 ($) | ||||||||||||||||
Marc Parent | 65,190 | X | 43% | X | 27.21 | = | 762,743 | ||||||||||||||||
Sonya Branco | 18,300 | X | 43% | X | 27.21 | = | 214,115 | ||||||||||||||||
Carter Copeland1 | 7,220 | X | 43% | X | 27.97 | = | 86,836 | ||||||||||||||||
Abha Dogra2 | - | X | - | X | - | = | - | ||||||||||||||||
Nick Leontidis | 18,360 | X | 43% | X | 27.21 | = | 214,818 | ||||||||||||||||
1.Mr. Copeland joined CAE on August 23, 2021 and received a one-time special LTIP grant on the first of the following month. Numbers presented in this table are based on equity valued as at March 31, 2024 close stock price ($27.97). The actual payout after vesting will be calculated using the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant.
2.Ms. Dogra was hired during FY2023, therefore no grant was allocated to her during FY2022.
3.PSUs were redeemed using the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant ($27.21).
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Section 7 - Executive Compensation
Determination of NEOs’ Individual Performance
| Marc Parent President and Chief Executive Officer | Marc Parent has been President and CEO of CAE Inc. since 2009. Prior to that, he held several leadership positions since joining CAE in 2005, including Group President, Simulation Products and Military Training & Services, and Executive Vice President and Chief Operating Officer. He has 40 years of experience in the aerospace industry, having previously held positions with Canadair and Bombardier Aerospace in Canada and the United States. Mr. Parent has been honoured with many awards. In 1999, he was named one of Canada's Top 40 under 40 Leaders. In 2011, he was named Canadian Defence Review's Defence Executive of the year (which he won again in 2020). He was named CEO of the Year by Les Affaires newspaper in 2018. In 2019, he received the Aerospace Industries Association of Canada’s James C. Floyd Award. In 2020, Mr. Parent was granted the Order of Canada. In 2021, he was awarded the Prix Prospère by the Conseil du patronat du Québec and inducted into Canada’s Aviation Hall of Fame. In 2022, Mr. Parent was named Industry Leader of the Year by the Living Legends of Aviation, inducted into Québec’s Air and Space Hall of Fame, named a Knight of the Ordre national du Québec, and awarded Aviation Week’s Philip J. Klass Award for Lifetime Achievement. And in January 2024, he was inducted as a Living Legend of Aviation, a group of 100 remarkable people of extraordinary accomplishment in aviation. Mr. Parent is a graduate of mechanical engineering from Montreal’s École Polytechnique and of the Harvard Business School’s Advanced Management Program. He was awarded an Honourary Doctorate by École Polytechnique, and is an active pilot holding an Airline Transport Pilot Licence from Transport Canada. Main targets and objectives for FY2024 and related results of Marc Parent, the President and CEO, are set out below. As previously discussed, this section paints a portrait of the major achievements of each NEO for FY2024. These were the main key performance indicators (KPIs) in determining the individual performance multiplier applicable to their annual incentive awards. | ||||
FY2024 Goals Growth: Deliver on growth objectives to drive business expansion in this and future fiscal years, with a particular emphasis on risk-adjusted growth and long-term visibility. Orders: Continue to build backlog in growing markets, leveraging market leadership positions to further expand market share. Expand profitability and generate cash: Further expand margins in all business segments and convert free cash flow in excess of 100%. Deleveraging: Reduce overall leverage ratios while continuing to invest in core markets, aided where applicable by portfolio shaping efforts. Innovation: Continue to develop and deploy industry-leading technology solutions to enhance competitiveness. Strengthen OEM and regulatory relationships: Continue to expand partnerships and relationships with key industry stakeholders, notably OEMs and regulators, to advance CAE technologies for the benefit of safety and mission readiness. Sustainability: Continue to foster a culture of diversity and inclusivity. Additionally, expand leadership in carbon reduction efforts through focused initiatives. | |||||
FY2024 Achievements | |||||
Growth: Achieved revenues of $4.3 billion in FY2024, equating to ~7% growth year-over-year. Additionally, adjusted book-to-sales ratio* for the year was ~1.15x, consistent with full year targets and signaling a continuation of the Company’s strong growth profile in the future. Additionally, successfully expanded CAE’s training solutions footprint to include Air Traffic Control (ATC) with a long-term service agreement with NAV CANADA. Expand profitability and generate cash: Continued to expand Civil adjusted segment operating income margin* to 22.5% for the year, finishing Q4 at a record level of 27.3%, driven by higher utilization in our training network and ongoing cost discipline. D&S profit contracted sharply during the year, largely reflecting the acceleration of risk recognition on Legacy Contracts. Additionally, CAE generated free cash flow of $418.2 million, representing approximately 26% growth for the year. Deleveraging: Aided by the divestiture of CAE Healthcare during the year, we continued to deliver CAE’s balance sheet, consistent with our commitments to achieve a sub 3.0x Net Debt/EBITDA ratio* during the fiscal year. Adjusted for Q4 non-cash items, we finished the year at 3.17x, vs 3.49x at the end of FY2023. Innovation: Further expanded CAE’s technology leadership in core markets with the introduction of numerous new technologies and the expansion of existing industry-leading solutions. Most notably, CAE was the first company in the world to achieve Level-D certification with the world’s first gaming-engine-based visualization system for simulation, CAE Prodigy. | Additionally, CAE’s E-Series MR Visual System was awarded the prestigious Edison Award for excellence in innovation. And finally, CAE’s industry-leading CAE Rise™ training system continued to expand objective training capability across core markets. Strengthen OEM and regulatory relationships: During FY2024, we made significant strides in strengthening our relationships with partner OEMs and regulatory stakeholders around the world. Our landmark agreement to become The Boeing Company’s authorized training partner for their CBTA training curriculum, as well as the expansion of our ECTS joint venture with Embraer served as meaningful catalysts for our future during FY2024. Similarly, countless partnerships like those with Bell Helicopter on the US Army’s FLRAA program, and our position with General Atomics on Canada’s RPAS program demonstrate our continued momentum as the industry’s training partner of choice. We continue to collaborate with leading regulatory bodies to define the future of training through the application of new technologies, and we remain committed to the impact such collaboration can and will have on safety. Sustainability: Continued to make meaningful strides in our diversity initiatives, expanding leadership diversity to 32.7% of our senior staff members, as well as 36% of executive officers. We were once again named one of Canada’s top 100 employers for diversity. Additionally, we successfully advanced our carbon reduction efforts with the submission of targets to the Science-Based Targets Initiative (SBTi) and we were recognized for our leadership with a bronze rating from Ecovadis and our inclusion in the S&P Global Sustainability index for 2024. | ||||
* Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
 Sonya BrancoExecutive Vice President, Finance and Chief Financial Officer | Sonya Branco was appointed Vice President, Finance and Chief Financial Officer at CAE in May 2016. In this role, she has global responsibility for the company’s finance and procurement activities. She oversees the financial operations of CAE’s in approximately 250 sites and training locations in over 40 countries, as well as the financial reporting, treasury, global taxation, mergers & acquisitions, structured financing functions and global strategic sourcing. Ms. Branco has more than 20 years' experience as a financial officer. She joined CAE in 2008 and was appointed to the role of CAE’s Vice President and Corporate Controller in 2011. Her diverse background includes valuable experience in public accounting and financial reporting, strategic planning and mergers and acquisitions. In her capacity as Corporate Controller, Ms. Branco oversaw all of CAE’s external financial information from subsidiaries and joint ventures globally. Over the past years, Ms. Branco’s role expanded from the financial reporting Controller role to a broader strategic and operational scope in the organization. Prior to joining CAE, Ms. Branco worked at BCE in Mergers & Acquisitions and at PricewaterhouseCoopers, where she practiced in Audit and Advisory services. Ms. Branco is a certified professional accountant and she holds a Bachelor of Commerce degree from Concordia University and a Master’s degree in Business Administration from McGill University’s Desautels Faculty of Management. Ms. Branco has received numerous awards and is a Gold Medalist of the Ordre des comptables agréés du Québec. She was named one of Canada’s Top 100 Most Powerful Women in 2020 by Women’s Executive Network. | ||||
FY2024 Goals Growth and profitability: Achieve financial targets set for the Company and working with Business Unit leaders to deliver on growth objectives Cash generation: Achieve increased cash flow generation and cash flow efficiency. Deleveraging and Financing Strategy: Deleveraging to reinforce balance sheet resilience and execute on financing strategy Capital allocation and portfolio shaping: Reinforce capital allocation with focused capital deployment and leading portfolio shaping initiatives. Strategic sourcing strategy: Deliver strategic sourcing strategy and execution to deliver savings, improved supply chain and procurement risk management. Sustainability: Continue to foster a culture of diversity and inclusivity. Additionally, expand leadership in carbon reduction efforts through focused initiatives. | |||||
FY2024 Achievements | |||||
Ms. Branco continued to provide strong financial stewardship to CAE in FY2024, managing through several fiscal challenges. Achieved revenues of $4.3 billion in FY2024, equating to ~7% growth year-over-year. Additionally, adjusted book-to-sales ratio* for the year was 1.15x. Continued to expand Civil adjusted segment operating income margin* to 22.5% for the year, finishing Q4 at a record level of 27.3%, driven by higher utilization in our training network and ongoing cost discipline. D&S profit contracted sharply during the year, largely reflecting the acceleration of risk recognition on Legacy Contracts. Ms. Branco led the focus on cash generation with disciplined capital deployment and delivery of increased efficiency of non-cash working capital resulting in free cash flow* generation of $418.2 million, a 26% increase over the previous year, for an annual cash conversion rate* of 151%. Also successfully increased efficiency in key metrics like days sales outstanding as well as strategic cash repatriation measures. Aided by the divestiture of CAE Healthcare during the year, by effective cash generation and management, Ms. Branco continued to deliver CAE’s balance sheet, consistent with our commitments to achieve a sub 3.0x Net Debt/EBITDA ratio* during the fiscal year. Net debt-to-adjusted EBITDA* finished the year at 3.17x, vs 3.49x at the end of FY2023. Ms. Branco led the successful inaugural public debt issuance, which was well received and broadly distributed with investors, establishing a new source of long-term financing for the Company and reducing financing costs. In addition, led the closing of annuity purchases representing significant balance sheet de-risking for the Company and cost savings. | Executed on the divestiture process for CAE’s Healthcare business, crystalizing an enterprise value of $311M, and the subsequent restructuring program to optimize organizational costs. Additionally, as part of the ongoing strategic evaluation of the CAE portfolio, also oversaw the sale of additional smaller assets and the wind down of CAE’s Presagis business and other HC-related business ventures. Ms. Branco delivered significant procurement value in the direct, indirect and real estate procurement spaces, through advisory services, innovative commercial expertise and strategic business solutions that helped our internal stakeholders achieve their desired business outcomes and created strategic value to the Company. These include the successful navigation through a volatile supply chain to deliver support and value for on-time delivery for the Civil Aviation operations and successful delivery of training centers for continued growth of the business units. Ms. Branco continued to drive digital transformation globally, leveraging data for increased visibility and efficiencies. Ms. Branco achieved increased DE&I representation within her teams and established effective governance and reporting practices in support of CAE’s 5-year ESG roadmap. In addition, Ms. Branco led the sustainability and long-term supply chain strategy through an engagement with Ecovadis to measure Supplier Sustainability performance and membership to the International Aerospace Environment Group (IAEG), to harmonize Sustainability expectations for suppliers from the largest aerospace and defence companies. For a second year, CAE held a Supplier Forum themed “Resilient Together”, envisioning a change in the supply chain to foster a sustainable future through innovation, transparency, and collaboration. We also shared our SBTi targets for carbon reduction and rolled out our Supplier recognition program. | ||||
* Non-IFRS and Other Financial Measures (see Appendix B).
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Section 7 - Executive Compensation
 Carter CopelandSenior Vice President, Global Strategy | Carter Copeland was appointed CAE’s Senior Vice President, Global Strategy, in August 2021. He is responsible for cultivating strategic plans aimed at driving growth in key areas, as well as optimizing organizational performance. He works in partnership with CAE’s Executive Management Committee, with a particular focus on the company’s growth agenda, as well as areas of resource allocation and organizational design. In June 2022, Mr. Copeland took over the responsibility of CAE Healthcare business in addition to his Global Strategy position. Additionally, he has responsibility for the ongoing evaluation of CAE’s business portfolio and he plays a crucial role in the CAE technology transformation. Prior to joining CAE, Mr. Copeland served as the President and co- founder of Melius Research, an independent research, consulting, and data analytics firm focused both on traditional industrial firms as well as emerging industrial technology companies. Before co-founding Melius, Mr. Copeland was Managing Director and Senior Analyst covering the Global Aerospace and Defense sector for Barclays PLC. Prior to Barclays, he held various roles of increasing responsibility in the aerospace and defence research practice at Lehman Brothers. Before beginning his career on Wall Street, Mr. Copeland served on the staff of the Federal Reserve Board of Governors in Washington, D.C., aiding in monetary policy work and conducting corporate finance research. Mr. Copeland graduated with honours from the University of Alabama, with a degree in Economics. He also holds an MBA from Washington University in St. Louis, where he was a recipient of the prestigious Wood Fellowship. He is a Chartered Financial Analyst and formerly served as a member of the Corporate Leaders program on the Council of Foreign Relations. Mr. Copeland is a co-author of the book Lessons from the Titans. | ||||
FY2024 Goals Set corporate strategic planning, manage oversight, and lead associated process management Oversight of CAE’s Healthcare business unit at the Executive Management Committee level Evaluation of CAE’s strategic capital deployment plans and portfolio shaping activities Co-lead efforts on cross-business unit performance evaluation and associated strategic alternatives, as well as benchmarking and risk-adjusted returns assessments Broaden CAE strategic partnerships across the Aerospace & Defence ecosystem | |||||
FY2024 Achievements | |||||
Continued to set the strategic vision for the Company, with a focus on maintaining market leadership, expanding CAE’s competitive position and supporting technology advancement. Through the oversight of integrated objective setting and the rollout of rigorous government frameworks, provided critical partnership with Company leaders to drive greater alignment and analytical rigor across the enterprise. Led the divestiture process for CAE’s Healthcare business, crystalizing an enterprise value of $311M, subject to customary adjustments. Before that, he oversaw continued operational momentum in CAE’s Healthcare business, most notably on sustained improvements in gross margin performance and cash conversion. Additionally, as part of the ongoing strategic evaluation of all elements of the CAE portfolio, he oversaw the sale of additional smaller assets and the wind down of CAE’s Presagis business. | Along with the leadership of the D&S business, he led additional detailed analyses of the ongoing risk profile of the D&S program portfolio to provide insights on current and future risk identification and associated risk mitigation efforts. In particular, he oversaw analysis of the risks associated with CAE’s Legacy Contracts, along with related risk mitigation efforts. In his Global Strategy function, he conducted numerous analyses in support of strategic mapping, operational excellence, and portfolio shaping/M&A. Principal among this work was a partnership with CAE’s Civil Flight Operations Solutions software business to shape future growth, profitability, and organizational structure. Continued to support advancement of the Company’s carbon reduction efforts, through the evaluation of revised frameworks and methodologies to focus the organization on optimizing its carbon footprint and associated capital deployment and efficiency efforts. | ||||
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Section 7 - Executive Compensation
 Abha DograChief Technology and Product Officer | Abha Dogra joined CAE in September 2022 and is currently Chief Technology and Product Officer (CTPO), and a member of CAE’s Executive Management Committee (EMC). She leads CAE’s global technology and product management teams by helping shape the company’s broader strategic direction to maximize business growth, while overseeing the development of CAE’s digital and technology roadmap. In her role, Ms. Dogra champions innovative thinking across CAE and within our customer and supplier ecosystem while being responsible for the growth of IT, engineering, and digital talent within the company. She also supports all global business operations, strategies, and optimization of investments to ensure the company’s continued market leadership role. Ms. Dogra is a senior executive with over 20 years of experience in the technology industry, driving commercial and non-commercial software products strategy and development. She has worked with Fortune 500 companies to develop high-density skilled teams across different geographies to benefit from diversity of thoughts in problem solving. Prior to CAE, she held a dual role at Schneider Electric as their North America Chief Information Officer and the SVP of Global Digital Technology. Throughout her diverse career, she has worked as a senior technologist in different areas, including Industrial Vertical at PTC, Security & Content Delivery Network (CDN) at Akamai, Information Storage at Iron Mountain, and Human Capital Management Solutions at ADP. Ms. Dogra holds a Master’s in Computer Science from Boston University and a Master’s in Business Administration with majors in Finance and International Trade from NMIMS in India. | ||||
FY2024 Goals Digitization of Civil Aviation and Defense & Security Training business operations for enhanced customer experience Advance technology and innovation objectives in current and future markets Digital transformation of critical business processes for efficiency Establish clear AI & analytics strategy Enhance sustainability metrics, including increasing the number of diverse leaders by a minimum of 10% and reduction of carbon emission through Green IT initiatives | |||||
FY2024 Achievements | |||||
Established a 3-year strategic plan driven by 3 Pillars -People, Process and Products and successfully executed the first year of the plan, while creating the foundation for CAE’s future digital vision. Generated efficiencies by creating a Unified global technology & Product Management function integrating Defense & Security and establishing a common culture and operating model aligned with the People strategy. Deployed a global strategy for tech Hubs gaining efficiencies while leveraging talent globally. Upskilled the Global Technology and Products leadership team, notably with the hiring of a Chief Information Security Officer and a Global Product Management Leader. | Reduced technical debt by implementing a ‘Platform & Product’ approach and established governance of digital and software asset purchases. Released the first ever Level-D certified gaming engine based visual system (Prodigy), 15 insights to provide evidence-based training to pilots for increasing safety & competency through the CAE Rise™ platform and first version of CAE’s training digital platform called CAE Connect to create seamless experience for customers & employees. Improved CAE breach readiness to align with industry standard with 24X7 monitoring. | ||||
92 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
 Nick LeontidisGroup President, Civil Aviation1 | Nick Leontidis was appointed CAE’s Group President, Civil Aviation, in June 2013. In this position, he is responsible for CAE’s Civil business, which comprises the world’s largest civil aviation training network, and provides comprehensive training solutions for pilots, cabin crew, maintenance technicians and ground personnel, in commercial, business aviation, helicopter, and the emerging eVTOL markets. Prior to his appointment as Group President, Mr. Leontidis served as CAE’s Executive Vice President, Strategy and Business Development for more than four years. During this time, he played an important leadership role, responsible for CAE’s overall corporate strategy, overseeing all mergers and acquisitions activities and the creation of the New Core Markets segment businesses. Mr. Leontidis joined CAE as a software engineer in 1988, and was promoted to Vice President of the Visuals Systems group in 1999. From 2001 to 2009 he held a series of executive positions of increasing responsibility in the Civil business unit, where he was instrumental in the creation and growth of the training and services business. His positions included Vice President, Sales and Marketing; Executive Vice President, Simulation Products; Executive Vice President, Civil Aviation Training and Equipment; and finally Executive Vice President, Customers, where he was responsible for sales, marketing, business development, strategic planning, program management and customer services functions across the Civil Simulation and Training business unit. Mr. Leontidis holds Bachelor’s and Master’s degrees in Engineering from Concordia University | ||||
FY2024 Goals Achieve financial targets set for the Civil Aviation business unit Execute integration of Sabre’s AirCentre. Achieve financial and customer renewal objectives Further expand the Civil Training business’s global footprint to enhance customer experience Continue to advance our technology and innovation objectives in current and future markets Capture growth through commercial airline outsourcing Enhance sustainability metrics, including increasing the number of diverse leaders by a minimum of 10% and ensuring no less than 30% of identified high-potentials are diverse candidates | |||||
FY2024 Achievements | |||||
With the Civil leadership team, accomplished exceptional performance, inclusive of an adjusted segment operating income* of $548.9M, achieving the highest adjusted segment operating income* performance in the Civil segment’s history, as well as an adjusted order intake* of $3 billion, significantly exceeding target and representing a book-to-sales ratio* of 1.24x. Oversaw strong sales of 64 Full Flight Simulators (FFS). Worked on the integration of Sabre’s Air Centre business (Civil Flight Operations Solutions), which is expected to be complete by early FY2025. Continued to maintain strong progress in growing the Business Aviation Training (BAT) network with the expansion of the Savannah Training Centre. Plans are in progress for the opening of the Vienna Training Centre in FY2025. Additionally, deployed 4 new FFSs within the global BAT training network. Continued partnership with Aegean Airlines with the Athens training centre newly operational. Additionally, deployed 12 new FFSs within the global CAT Network. Expanded our high-tech innovation applications by significantly ramping up adoption of CAE Rise™. Some of the notable achievements include delivering the first version of self-serve Rise analytics portal, deriving industry and customer-specific insights from Rise training data for 18 customers and expanding the use of CAE Rise™ for our own training network with a 66% usage rate by instructors. | Largely contributed to entering a new adjacency with NAV Canada agreement. CAE will establish an Air Traffic Services training centre in Montreal to provide initial training to flight service specialists, tower controllers, and instrument flight rules controllers. Training will commence in Q3 FY2025 and we forecast delivering training to over 500 students within the first three years of operations. Through this partnership, he addressed a critical need for the Canadian aviation ecosystem and set the stage for CAE’s expansion into additional international markets. Re-organized the Civil Leadership Team to better serve our customers through a more integrated approach. Combined our commercial aviation training and simulation products organizations and have regionalized the front-end and delivery teams to maximize customer touchpoints and intimacy as well as to drive an efficient execution. Optimized the real estate footprint and energy efficiency initiatives in our buildings to achieve similar carbon emissions compared with FY2023 notwithstanding the growth of the Civil business. Increased the number of diverse leaders among the senior leadership teams as well as the representation of diverse candidates in the identified high potential group. | ||||
1.Mr. Leontidis was appointed Chief Operating Officer on May 21, 2024, subsequent to the FY2024 year end.
Not all details of the NEO targets have been disclosed due to the potential competitive prejudice to CAE in doing so. The NEOs’ performance against their objectives was reviewed by the HRC, in addition to having been reviewed by the President and CEO during the fiscal year.
* Non-IFRS and Other Financial Measures (see Appendix B)
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Section 7 - Executive Compensation
Compensation Governance
Role of the HRC in setting executive compensation
The HRC acts as an advisory committee to the Board of Directors. The Board assigns responsibilities to the HRC to review, approve, and administer CAE’s compensation programs. The key components of the HRC’s compensation mandate as well as the decision-making process are outlined in the table:
Performance Measure | Management | CEO | Independent Compensation Consultant | HRC | Board | ||||||||||||
Executive compensation and benefits programs design | Develop | Review | Review | Recommend | Approve | ||||||||||||
Annual NEO compensation | Develop | Recommend | Review | Approve | - | ||||||||||||
Annual CEO compensation | - | - | Develop | Recommend | Approve | ||||||||||||
Annual and long-term incentive plan measures, targets and performance results | Develop | Review | Review | Recommend | Approve | ||||||||||||
Comparator group for executive compensation benchmarking purposes | Review | Review | Develop | Approve | - | ||||||||||||
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Section 7 - Executive Compensation
Role of the independent compensation consultants
The HRC retains executive compensation experts to prepare and review executive compensation materials and to provide advice on compensation programs. Meridian Compensation Partners (“Meridian”) has been acting as the HRC’s independent compensation consulting firm since October 2020.
Meridian’s mandate during FY2024 was to prepare and review materials presented to the HRC including updates to CAE’s comparator group for benchmarking executive and Board of Directors compensation and on the design of the Company’s executive compensation programs. No CAE Director or officer has any affiliation with Meridian and Meridian meets the independence standards applied to executive compensation consultants.
CAE’s management also retain the services of experts in the field of executive compensation. In the past two years it has used the services of PCI Compensation Consulting (“PCI”) to assist with several analyses related to executive compensation.
The following table shows the fees related to executive compensation work paid by CAE to Meridian and PCI in FY2023 and FY2024.
Meridian | PCI | |||||||||||||
FY2024 | FY2023 | FY2024 | FY2023 | |||||||||||
Executive Compensation | $212,668 | $263,818 | 10,000 | $15,515 | ||||||||||
All Other Fees1 | 43,342 | - | - | - | ||||||||||
Total | $256,010 | $263,818 | 10,000 | $15,515 | ||||||||||
1. Fees related to work for the Governance Committee, in connection with director compensation.
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Section 7 - Executive Compensation
Risk Mitigation
The HRC and the Board of CAE believe that (i) executive compensation should be contingent on performance relative to pre-established targets and objectives and (ii) management must achieve targets and objectives in a manner consistent with CAE’s ethical standards, internal policies and key values. The HRC and the Board regularly review the Company’s compensation policies and practices to ensure that they do not encourage inappropriate risk-taking.
There are numerous risk management practices in place to ensure CAE compensation programs do not encourage inappropriate risk-taking behaviors but focus on long-term Shareholders value creation.
The following characteristics of our compensation program in FY2024 were identified as having risk-mitigating effects:
What we do | |||||
ü | Provide a balanced pay mix of short, medium and longer-term compensation | ||||
ü | Balance of fixed and at-risk compensation | ||||
ü | No overlap of metrics between annual and long-term incentives | ||||
ü | 60% of long-term incentives vest contingent on performance | ||||
ü | Most performance metrics focused on a three-year period | ||||
ü | Provide for overlapping performance periods and vesting of equity, to ensure executives are exposed to long term risks of their decision making | ||||
ü | Caps on annual bonuses and PSU payout factors | ||||
ü | Robust clawback policy, including a market-leading ability to clawback incentive-based compensation in circumstances of misconduct without the need for a financial restatement | ||||
ü | Prohibit executives from hedging CAE securities | ||||
ü | Robust and market aligned Share ownership guidelines and requirement to retain 25% of the net proceeds of option exercises while employed by CAE | ||||
ü | CEO required to maintain Share ownership requirement for one-year post-retirement | ||||
ü | The HR Committee retains an independent compensation consultant | ||||
ü | Annual Say on Pay vote and engagement with Shareholders on executive pay | ||||
What we don’t do | |||||
× | Offer excessive perquisites | ||||
× | Guarantee annual base salary increases or bonus payments | ||||
× | Guarantee a minimum level of vesting for performance-based awards | ||||
× | Single-trigger vesting of equity upon a Change of Control | ||||
× | Offer loans to executives or directors | ||||
× | Re-price, backdate or exchange underwater stock options | ||||
× | Count PSUs or options toward Share ownership guidelines | ||||
× | Offer excessive severance arrangements to executives | ||||
× | Overemphasize any single performance metric | ||||
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Section 7 - Executive Compensation
The HRC conducts an annual compensation risk assessment with the assistance of its independent compensation consulting firm Meridian to identify potential risks associated with CAE’s compensation programs, practices and policies. In FY2024, the assessment concluded that the risks associated with the compensation programs are not reasonably likely to have a material adverse effect on the Company.
After considering the overall compensation program and taking into account both its knowledge of the past performance of the CAE management team and the nature of CAE’s various businesses, the HRC is not aware of any risks arising from the CAE’s compensation policies and practices that would be reasonably likely to have a material adverse effect on CAE.
Comparator Group
| The CAE comparator group was reviewed in FY2024 to ensure the companies in the group and underlying selection criteria are still relevant. No changes were made to the comparator group. | The comparator group includes size appropriate companies operating in at least one of CAE’s market segments, with a similar financial and operational footprint, or with which CAE competes for talent. | ||||
CAE’s comparator group comprises a mix of size appropriate and business relevant Canadian and US companies. The primary criteria for selecting the comparator group companies are:
—Principal place of business
—Company size based on revenue and market capitalization generally 1/3x to 3x CAE on revenue and market capitalization
—Companies with business operations outside of Canada (approximately 90% of CAE’s revenues are generated outside of Canada)
—Companies that compete with CAE for talent (CAE recruits executive talent from the U.S. and internationally and three of the CEO’s direct reports are based in the U.S.)
When CAE benchmarks executive compensation relative to the comparator companies, compensation values in USD for peer U.S. resident executives are converted at par (1:1), to manage foreign exchange considerations in benchmarking compensation.
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Section 7 - Executive Compensation
Comparator Group Financials1
Revenue (C$M) | Market Cap (C$M) | |||||||
North American Group | ||||||||
Air Canada | 21,833 | 7,035 | ||||||
CGI Inc. | 14,449 | 34,398 | ||||||
WSP Global Inc. | 14,437 | 28,145 | ||||||
Booz Allen Hamilton Holding Corporation | 13,634 | 26,080 | ||||||
BRP Inc. | 10,367 | 6,817 | ||||||
CACI International Inc | 9,918 | 11,432 | ||||||
AMETEK, Inc. | 8,712 | 57,264 | ||||||
Synopsys, Inc. | 8,202 | 118,050 | ||||||
Spirit AeroSystems Holdings, Inc | 7,987 | 5,677 | ||||||
Gartner, Inc | 7,801 | 50,326 | ||||||
Teledyne Technologies Incorporated | 7,586 | 27,545 | ||||||
Open Text Corporation | 7,522 | 14,100 | ||||||
Autodesk, Inc | 7,354 | 75,435 | ||||||
Cadence design Systems, Inc | 5,521 | 114,904 | ||||||
IDEX Corporation | 4,372 | 24,995 | ||||||
Woodward, Inc., | 4,071 | 12,584 | ||||||
Curtiss-Wright Corporation | 3,758 | 13,267 | ||||||
NFI Group Inc. | 3,546 | 1,531 | ||||||
Hexcel Corporation | 2,442 | 8,197 | ||||||
CAE Inc. | $4,283 | $8,903 | ||||||
% Rank | P16 | P23 | ||||||
1.Based on the most recent annual reports.
Comparator Group Financials
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Section 7 - Executive Compensation
Executive Share Ownership Requirements
—Share ownership requirements must be achieved within 5 years from hire or promotion to executive position. —Only Shares, DSUs and 50% of RSUs are included. | —Majority of NEOs retain 25% of the net profit realized from option exercise in CAE Shares for the duration of their employment at CAE. | ||||
Under CAE’s Share Ownership Guidelines Policy, each executive is expected to meet a minimum equity ownership in the Company. Shares, DSUs and 50% of RSUs are counted towards Share ownership:
Share Ownership Targets (as a % of base salary) | |||||
NEO | % of Base Salary | ||||
Marc Parent | 500% | ||||
Sonya Branco | 250% | ||||
Carter Copeland | 200% | ||||
Abha Dogra | 200% | ||||
Nick Leontidis | 250% | ||||
The Share ownership guidelines must be met within five years from the date of hire or promotion to the executive position. The Share ownership requirements are tested monthly until the requirement is met. Once the required Share ownership value is reached, the minimum number of Shares/units to be held by the executive is locked-in and the executive is required to hold at least this number of Shares/units until retirement or termination of employment.
In addition, for each option exercise, the CEO, CFO and Group Presidents retain CAE Shares equivalent in value to 25% of the net profit realized on such option exercise for the duration of their employment with CAE. This policy further aligns executive interests with those of our Shareholders and ensures that executives do not take advantage of short-term Share price movement.
In FY2023, the Share ownership guidelines were changed to require the CEO to retain his Share ownership requirement for one year after retirement.
As of March 31, 2024, three of the five NEOs met the ownership guidelines. The table below sets forth the minimum number of Shares/units to be held by the NEOs who have already met the requirement, the required value in dollars to meet the ownership guidelines and the actual value held as a percent of the annual base salary.
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Section 7 - Executive Compensation
NEO | Share Ownership Requirement as Percent of Salary (%) | Ownership Status | Target Date | Number of Shares/ Units to be Held Once Requirement Met (#) | Value Required to Meet Guidelines1 ($) | Completion to Meet Share Ownership Guidelines (%) | Value Held in Shares/ Units2 ($) | Value of Shares/Units Held as Percent of Salary3 (%) | ||||||||||||||||||
Marc Parent | 500 | Already Met | N/A | 286,858 | N/A | 100 | 19,021,5114 | 1,438 | ||||||||||||||||||
Sonya Branco5 | 250 | Already Met | N/A | 36,553 | N/A | 100 | 1,414,003 | 238 | ||||||||||||||||||
Carter Copeland | 200 | Time to meet | August 2026 | 51,200 | 1,417,500 | 16 | 223,929 | 32 | ||||||||||||||||||
Abha Dogra | 200 | Time to meet | September 2027 | 51,200 | 1,417,500 | 15 | 216,619 | 31 | ||||||||||||||||||
Nick Leontidis | 250 | Already Met | N/A | 65,044 | N/A | 100 | 7,874,096 | 1,321 | ||||||||||||||||||
1.Not applicable if the Share ownership requirement is already met.
2.Calculated based on the number of Shares, DSUs, LTUs, and 50% of RSUs held as of March 31, 2024 and the average closing Share price during five trading days preceding March 31, 2024 ($27.69) in accordance with the Share Ownership Guidelines Policy.
3.Calculated based on the annual base salary as of March 31, 2024. For Mr. Copeland and Ms. Dogra, the base salary was converted to Canadian dollars using the FY2024 average exchange rate of 1.35.
4.Includes 358,153 Shares, 42,985 FY2004 LTUs, 232,111 LTUs and 53,696 RSUs, which respectively represent a value of $9,917,260, $1,190,255, $6,427,154 and $1,486,842, for a total value of $19,021,511 as of March 31, 2024 using the average closing Share price during the five trading days preceding March 31, 2024 ($27.69). Numbers containing fractions have been rounded up for calculation purposes.
5.Mrs. Branco met her share ownership requirement in March 2019, representing 250% of her salary on this date. Since then, she maintained the minimum number of Shares/units (36,553 Shares/units), as required per the Share Ownership policy. As of March 31, 2024, she held a total of 51,065 Shares/units, which value represents 238% of her salary.
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Section 7 - Executive Compensation
Alignment of Compensation and Performance
Shareholders Return Performance Graph
The following graph compares the cumulative Shareholders return of the Shares with the cumulative returns of each of the S&P/TSX Composite Index and the S&P Aerospace & Defense Select Industry Index for a five-year period commencing March 31, 20191, along with a discussion of the trend in executive officer compensation over the same period (in the paragraph that follows the table).
Comparison of Five-year Cumulative Total Return of CAE Inc. vs. S&P/TSX Composite Index and S&P Aerospace & Defense Select Industry Index
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||||
CAE Inc. | $100 | $61 | $123 | $111 | $105 | $96 | ||||||||||||||
S&P/TSX Composite Index | $100 | $86 | $124 | $149 | $141 | $161 | ||||||||||||||
S&P Aerospace & Defense Index | $100 | $84 | $141 | $140 | $133 | $161 | ||||||||||||||
1.$100 invested in Shares traded on the TSX on March 31, 2019. Values are as at the last trading date during the month of March in the specified years and from the S&P/TSX Composite Total Return Index and S&P Aerospace & Defense Select Industry Total Return Index, which assume dividend reinvestment.
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Section 7 - Executive Compensation
Discussion of trend in executive officer compensation over the same period
The CEO realizable pay and performance table shown below in this section reflects annual incentive payouts, which are generally well aligned with Share price and financial performance. Additionally, all of our long-term incentive awards are in the form of CAE equity, the value of which aligns with our financial performance and directly tracks the value of our equity over the lifetime of the award, it is the realized and realizable value of these awards, rather than their grant date value, which is tied directly to our Share price. The components of our executive compensation that align with performance are:
—Annual incentive: Results on the annual scorecard have directionally aligned with Share price performance over the five-year period. Payouts have ranged from 4% to 154% of target over the last five years.
—PSUs: Our PSUs, which are linked to key financial objectives, have paid out in relation to our financial, operating and Share price performance over the five-year timeframe, with well below target payouts in the last two completed cycles (76% of target for FY2021 PSUs, and 43% of target for FY2022 PSUs). PSUs precisely track the underlying value of CAE’s Share price, so there is 100% alignment with Share price performance over the 5-year period.
—RSUs: RSUs precisely track the underlying value of CAE’s Share price, so upon redemption there is 100% alignment with Share price performance over the 5-year period.
—Stock options: Stock options are only valuable to recipients to the extent that Share price appreciates. As of March 31, 2024, FY2020, FY2022, FY2023 and FY2024 stock options grants are out-of-the-money and have no value. Only FY2021 options grants are in-the-money. This is aligned with shareholder experience.
CEO Realizable Pay and Performance
A significant portion (68%) of Mr. Parent’s President and CEO compensation consists of fully at-risk long-term incentives (the FY2024 LTIP mix is 60% PSUs, 20% RSUs, 20% stock options), which are designed to focus the CEO on CAE’s long-term success. LTIP is directly affected by the performance of CAE’s Share price:
—Stock options only have value to the extent the Share price increases;
—RSUs are directly impacted by Share price;
—PSUs are directly impacted by Share price and financial performance.
The table below is a look back comparing grant date total target direct compensation for Mr. Parent to the realizable value of this compensation during the last three years to Shareholder returns. The analysis is based on the return of a $100 investment by a Shareholder at the start of a period, compared to $100 of total direct compensation for the CEO for each year. In all cases, Shareholder returns are closely aligned with CEO realizable compensation value, which suggests our compensation programs are strongly aligned with Shareholder value creation.
Total Target Direct Pay1 | Realizable Pay2 | % Change in CEO Pay | % Change in TSR | From | To | Change in CEO relative Pay to $100 of CEO Pay | Change in TSR Relative to $100 Invested in CAE Shares | |||||||||||||||||||
Fiscal 2022 | $7,446,013 | $5,170,404 | -31% | -22% | March 31, 2021 | March 31, 2024 | $69 | $78 | ||||||||||||||||||
Fiscal 2023 | $8,946,974 | $6,707,958 | -25% | -14% | March 31, 2022 | March 31, 2024 | $75 | $86 | ||||||||||||||||||
Fiscal 2024 | $9,382,819 | $6,580,244 | -30% | -8% | March 31, 2023 | March 31, 2024 | $70 | $92 | ||||||||||||||||||
Average | $8,591,935 | $6,152,869 | -28% | -15% | $72 | $85 | ||||||||||||||||||||
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Section 7 - Executive Compensation
1.Includes salary, target bonus, long-term incentive grant of PSUs, RSUs and stock options as reported in the Summary Compensation Table. Excludes pension and all other compensation value.
2.Includes salary, actual bonus paid, value of stock options that are in-the-money and the market value of unvested PSUs and RSUs (assuming PSUs vest at target for FY 2023 and FY2024 grants, actual performance multiplier of 43% for FY2022 cycle). Equity valued as at March 31, 2024 close stock price ($27.97). Excludes pension and all other compensation value.
The table below compares target and realizable CEO compensation values.
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Section 7 - Executive Compensation
Compensation of Our Named Executive Officers
Summary Compensation Table
The first of the following tables provides a summary of compensation earned during the last three fiscal years ended March 31 by the President and Chief Executive Officer, the Executive Vice President, Finance and Chief Financial Officer, and by the three most highly compensated policy-making executives who served as executive officers of CAE or its subsidiaries as at March 31, 2024 (collectively, “Named Executive Officers” or “NEOs”).
Name and Principal Position | Year | Salary | Share-Based Awards1 | Option-Based Awards2 | Non-Equity Incentive Plan Compensation | Pension Value4 | All Other Compensation5 | Total Compensation | |||||||||||||||||||||
Annual Incentive Plan3 | Long-Term Incentive Plan | ||||||||||||||||||||||||||||
Marc Parent President and Chief Executive Officer | 2024 | $1,312,500 | $5,133,249 | $1,283,306 | $256,331 | $0 | $1,851,000 | $100,235 | $9,936,621 | ||||||||||||||||||||
2023 | $1,250,000 | $4,888,963 | $1,223,011 | $1,362,380 | $0 | $1,890,000 | $91,270 | $10,705,624 | |||||||||||||||||||||
2022 | $1,174,400 | $3,360,561 | $1,441,052 | $2,482,500 | $0 | $2,045,000 | $95,250 | $10,598,763 | |||||||||||||||||||||
Sonya Branco Executive Vice President, Finance and Chief Financial Officer | 2024 | $589,533 | $831,967 | $207,989 | $69,082 | $0 | $283,000 | $74,276 | $2,055,847 | ||||||||||||||||||||
2023 | $556,016 | $1,086,771 | $271,659 | $292,879 | $0 | $332,000 | $73,189 | $2,612,514 | |||||||||||||||||||||
2022 | $530,833 | $943,328 | $405,152 | $648,821 | $0 | $545,000 | $73,404 | $3,146,538 | |||||||||||||||||||||
Carter Copeland6, 7 Senior Vice President, Global Strategy | 2024 | $706,145 | $840,476 | $210,120 | $281,729 | $0 | $307,000 | $50,786 | $2,396,256 | ||||||||||||||||||||
2023 | $649,157 | $776,661 | $195,814 | $551,925 | $0 | $400,000 | $49,495 | $2,623,052 | |||||||||||||||||||||
2022 | $330,784 | $361,028 | $154,830 | $271,384 | $0 | $212,000 | $28,526 | $1,358,552 | |||||||||||||||||||||
Abha Dogra6.8 Chief Technology and Product Officer | 2024 | $703,185 | $924,507 | $231,128 | $177,364 | $0 | $282,000 | $50,786 | $2,368,970 | ||||||||||||||||||||
2023 | $378,239 | $654,783 | $164,418 | $350,295 | $0 | $320,000 | $26,654 | $1,894,389 | |||||||||||||||||||||
Nick Leontidis Group President Civil Aviation9 | 2024 | $591,250 | $1,191,955 | $297,990 | $214,553 | $0 | $372,000 | $71,886 | $2,739,634 | ||||||||||||||||||||
2023 | $563,095 | $1,135,302 | $284,751 | $410,801 | $0 | $788,000 | $69,713 | $3,251,662 | |||||||||||||||||||||
2022 | $533,897 | $946,642 | $406,303 | $670,983 | $0 | $798,000 | $68,870 | $3,424,695 | |||||||||||||||||||||
1.Represents the value of Share-based awards granted under the RSU Plan and the PSU Plan in years FY2022 and FY2023 and under the Omnibus Incentive Plan starting in year FY2024. The value disclosed for the RSUs and PSUs represents the award date value calculated by multiplying the number of RSUs and PSUs awarded at target (100%) by CAE’s weighted average Share price during the five trading days immediately preceding the grant date ($36.82 for units granted in June of FY2022, $35.71 for units granted in September of FY2022, $33.47 for units granted in June of FY2023, $26.83 for units granted in August of FY2023, $21.61 for units granted in October of FY2023 and $28.65 for units granted in June of FY2024). Such value differs from the accounting grant date fair value determined in accordance with IFRS2, Share-based Payments, as the accounting fair value is assessed with the Share price on the date of the award (rather than on a weighted average price). The accounting grant date fair value would be as follows if using the Share closing price on the TSX on the respective grant date($37.24 on June 1, 2021, $37.08 on September 1, 2021, $31.23 on June 10, 2022 , $25.49 on August 22, 2022, $22.82 on October 4, 2022 and $27.83 on June 9, 2023): Mr. Parent: $3,398,895 in FY2022 (a difference of $38,333), $4,561,766 in FY2023 (a negative difference of $327,197) and $4,986,329 in FY2024 (a negative difference of $146,920); Ms. Branco $954,089 in FY2022 (a difference of $10,760), $1,014,038 in FY2023 (a negative difference of $72,733) and $808,155 in FY2024 (a negative difference of $23,812); Mr. Copeland: $374,879 in FY2022 (a difference of $13,851), $726,003 in FY2023 (a negative difference of $50,657) and $816,421 in FY2024 (a negative difference of $24,056); Ms. Dogra: $691,446 in FY2023 (a difference of $36,663) and $898,046 in FY2024 (a negative difference of $26,461); Mr. Leontidis: $957,440 in FY2022 (a difference of $10,798) and $1,059,322, in FY2023 (a negative difference of $75,981) and $1,157,839 in FY2024 (a negative difference of $34,116. Note that the actual value paid, if any, will differ.
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Section 7 - Executive Compensation
2.Represents the value of option-based awards granted under the ESOP in years FY2022 and FY2023 and under the Omnibus Incentive Plan starting in year FY2024 and determined based on the grant date fair value of the award in accordance with IFRS2. Note that actual value received, if any, will differ. The value of each option is determined using the Black-Scholes model with the following assumptions:
FY2024 June | FY2023 October | FY2023 August | FY2023 June | FY2022 September | FY2022 June | |||||||||||||||
Dividend yield | 0.72% | 0.88% | 0.78% | 0.64% | 0.65% | 0.64% | ||||||||||||||
Expected volatility | 41.86% | 43.73% | 43.40% | 42.00% | 40.07% | 40.53% | ||||||||||||||
Risk-free interest rate | 3.72% | 3.33% | 3.24% | 3.30% | 0.71% | 0.76% | ||||||||||||||
Expected option term | 4.52 | 4.5 | 4.5 | 4.5 | 4.25 | 4 | ||||||||||||||
Black-Scholes Value | 36.29% | 39.37% | 35.95% | 34.92% | 32.13% | 30.92% | ||||||||||||||
3.Represents the STIP payout earned in each fiscal year and paid in the first quarter of the following year (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – FY2024 Compensation Decision - Short-Term Incentive Plan for details).
4.The pension value shown corresponds to the compensatory value reported in the Defined Benefit Plan Table and includes the service cost and the impact of the increase in earnings in excess of actuarial assumptions.
5.All other compensation in FY2024 comprises other benefit expenses and allowances paid by CAE as follows:
Automobile Expenses ($) | Health & Insurance Benefits ($) | Other Perquisites ($) | Employer ESPP Contributions ($) | Dividend Equivalents | Total ($) | |||||||||||||||
Marc Parent | $42,999 | $17,861 | - | $39,375 | - | $100,235 | ||||||||||||||
Sonya Branco | - | $12,590 | $44,000 | $17,686 | - | $74,276 | ||||||||||||||
Carter Copeland | - | $3,536 | $47,250 | - | - | $50,786 | ||||||||||||||
Abha Dogra | - | $3,536 | $47,250 | - | - | $50,786 | ||||||||||||||
Nick Leontidis | $31,447 | $13,490 | $9,211 | $17,738 | - | $71,886 | ||||||||||||||
Note: Mr. Marc Parent reimburses all variable costs related to his personal use of the CAE corporate aircraft. Accordingly, no amount is included for FY2024 under “All other compensation”.
6.Amounts paid in US dollars have been converted to Canadian dollars using an average exchange rate of $1.35 in FY2024, same rate as used in the MD&A and financial statements.
7.Mr. Copeland joined CAE on August 23, 2021 and received a one-time special LTIP grant of 2,890 Restricted Share Units, 7,220 Performance Share Units and 13,000 stock options on September 1, 2021. Mr. Copeland assumed the responsibility for the Healthcare division as a temporary assignment from June 20, 2022 to December 31, 2022 and permanently as of January 1, 2023 until the sale of the division. In recognition for assuming these additional responsibilities, he received: a temporary assignment salary premium of $35,539, a one-time special LTIP grant of 730 Restrictive Share Units, 2,170 Performance Share Units and 2,200 stock options on August 22, 2022 and a special completion bonus of $99,000.
8.Ms. Dogra joined CAE on September 6, 2022 and received a one-time special LTIP grant of 7,580 Restricted Share Units, 22,720 Performance Share Units and 18,300 stock options on October 4, 2022.
9.Mr. Leontidis was appointed Chief Operating Officer on May 21, 2024, subsequent to the FY2024 year end.
105 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
Outstanding Share-Based Awards and Option-Based Awards
The following table details the outstanding awards under CAE’s Share and option-based plans for the NEOs.
Option-Based Awards | Share-Based Awards Market or Payout | ||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price1 ($) | Option Expiration Date | Value of Unexercised In-the-Money Options2 ($) | Number of Shares or Units of Shares that have not Vested3 (#) | Market or Payout value of Share- based Awards that have not Vested4 ($) | Value of Vested Share-Based Awards not Paid Out or Distributed5 ($) | ||||||||||||||||
Marc Parent | 127,060 | 28.65 | 06/09/2030 | - | |||||||||||||||||||
112,100 | 33.47 | 06/10/2029 | – | ||||||||||||||||||||
125,200 | 36.82 | 06/01/2028 | – | ||||||||||||||||||||
482,300 | 20.57 | 06/02/2027 | 3,569,020 | ||||||||||||||||||||
253,500 | 34.17 | 05/29/2026 | – | ||||||||||||||||||||
343,000 | 27.14 | 06/05/2025 | 284,690 | ||||||||||||||||||||
408,000 | 22.17 | 06/08/2024 | 2,366,400 | ||||||||||||||||||||
Total | 6,220,110 | 379,632 | 10,618,307 | 7,694,436 | |||||||||||||||||||
Sonya Branco | 20,593 | 28.65 | 06/09/2030 | - | |||||||||||||||||||
24,900 | 33.47 | 06/10/2029 | – | ||||||||||||||||||||
35,200 | 36.82 | 06/01/2028 | – | ||||||||||||||||||||
105,900 | 20.57 | 06/02/2027 | 783,660 | ||||||||||||||||||||
74,200 | 34.17 | 05/29/2026 | – | ||||||||||||||||||||
22,250 | 27.14 | 06/05/2025 | 18,468 | ||||||||||||||||||||
Total | 802,128 | 76,777 | 2,147,453 | 519,301 | |||||||||||||||||||
Carter Copeland | 20,804 | 28.65 | 06/09/2030 | - | |||||||||||||||||||
2,200 | 26.83 | 08/22/2029 | 2,508 | ||||||||||||||||||||
16,100 | 33.47 | 06/10/2029 | – | ||||||||||||||||||||
3,000 | 35.71 | 09/01/2028 | – | ||||||||||||||||||||
Total | 2,508 | 59,142 | 1,654,202 | - | |||||||||||||||||||
Abha Dogra | 22,884 | 28.65 | 06/09/2030 | - | |||||||||||||||||||
18,300 | 21,61 | 10/04/2029 | 116,388 | ||||||||||||||||||||
Total | 116,388 | 62,569 | 1,750,055 | - | |||||||||||||||||||
Nick Leontidis | 29,504 | 28.65 | 06/09/2030 | - | |||||||||||||||||||
26,100 | 33.47 | 06/10/2029 | – | ||||||||||||||||||||
35,300 | 36.82 | 06/01/2028 | – | ||||||||||||||||||||
144,200 | 20.57 | 06/02/2027 | 1,067,080 | ||||||||||||||||||||
75,800 | 34.17 | 05/29/2026 | – | ||||||||||||||||||||
115,000 | 27.14 | 06/05/2025 | 95,450 | ||||||||||||||||||||
34,200 | 22.17 | 06/08/2024 | 198,360 | ||||||||||||||||||||
Total | 1,360,890 | 90,848 | 2,541,019 | 6,274,530 | |||||||||||||||||||
1.Pursuant to the terms of the plan, options under the ESOP and the Omnibus Incentive Plan were granted with an exercise price equal to the weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date (if the grant date falls within a blackout period or within five trading days following the end of a blackout period, the date of grant shall be presumed to be the sixth trading day following the end of such blackout period).
2.Options are in-the-money if the market value of the Shares covered by the options is greater than the option exercise price. The value shown is equal to the excess, if any, of the Share closing price on the TSX on March 28, 2024 ($27.97) over the option’s exercise price. The actual value realized will be based on the actual in-the-money value upon exercise of the options, if any. The options vest at 25% per year commencing one year after the grant date.
3.Represents the aggregate number of units that have not met all performance or employment conditions for payment as of March 31, 2024.
4.Payout value is established based on the expected payout as per the performance targets achieved as of March 31, 2024 for PSUs and based on the Share closing price on March 28, 2024 ($27.97) for LTUs, and for RSUs and PSUs payable in June 2024 and September 2024, June 2025, August 2025 and October 2025 and June 2026.
5.Represents the portion of units under the LTUP that are vested at the end of the fiscal year and the units under the Executive DSUP and for which payment is deferred to the termination of employment.
106 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
Incentive Plan Awards – Value Vested or Earned During the Year
The following table shows the value that was vested or earned, as well as the gain earned from options exercised, by the Named Executive Officers during FY2024 in respect of incentive plans.
Option-Based Awards-Value Vested During the Year1 ($) | Number of Options Exercised During the Year (#) | Gain on Exercise During the Year ($) | Share-based Awards-Value Vested During the Year2 ($) | Non-Equity Incentive Plan Compensation- Value Earned During the Year3 ($) | |||||||||||||
Marc Parent | 992,332 | - | - | 2,103,832 | 256,331 | ||||||||||||
Sonya Branco | 290,519 | - | - | 616,159 | 69,082 | ||||||||||||
Carter Copeland | 2,712 | - | - | - | 281,729 | ||||||||||||
Abha Dogra | 45,659 | - | - | - | 177,364 | ||||||||||||
Nick Leontidis | 296,692 | - | - | 629,082 | 214,553 | ||||||||||||
1.This represents the value of potential gains from options that vested during FY2024. These generally include the portion of the options that were awarded in the last four fiscal years that vested in the year. The potential gains are calculated as the excess, if any, of the closing price of Shares on the TSX on each of the option vesting dates in FY2024 over the exercise price. The actual value realized, if any, will differ and will be based on the Share price on the actual exercise date.
2.The value of Share units that vested during FY2024 include: (i) the PSUs that vested on June 2, 2023 based on the average closing price of Shares on the 20 trading days preceding June 2, 2023, specifically $908,473 for Mr. Parent, $266,069 for Ms. Branco and $271,649 for Mr. Leontidis. Mr. Copeland and Ms. Dogra did not benefit from these grants; (ii) the RSUs that vested on June 2, 2023 based on the average closing price of Shares on the 20 trading days preceding June 2, 2023, specifically $1,195,359 for Mr. Parent, $350,090 for Ms. Branco and $357,433 for Mr. Leontidis. Mr. Copeland and Ms. Dogra did not benefit from these grants. None of the other PSUs or RSUs have vested as of March 31, 2024.
3.This represents the value paid to the NEOs under the short-term incentive plan for FY2024 year (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – FY2024 Compensation Decision - Short-Term Incentive Plan for details).
107 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
Pension Arrangements
—Pensions payable under the Supplementary Pension Plan are conditional upon compliance with non- competition and non-solicitation clauses. | —No extra years of service are generally granted under the pension plans. | ||||
Canadian based NEOs and key executives are members of the contributory Designated Pension Plan registered in Canada, whereas the US based NEOs and key executives are members of the CAE 401K plan for US employees. All NEOs and Key executives are also members of the non-contributory Supplementary Pension Plan. The amounts payable under these arrangements are based on “average annual earnings” which are calculated on the basis of the 60 highest-paid consecutive months of base salary and STIP payouts.
The Supplementary Pension Plan provides a pension benefit upon normal retirement at age 65 so that the pensions payable under CAE’s pension arrangements will result in an annual pension equal to 2% of average annual earnings (being the five-year top average salary and actual short-term incentive compensation for NEOs other than the President and CEO for each year of pensionable service). The President and CEO’s short-term incentive compensation used for the purpose of determining his average pensionable annual earnings is the target bonus. His maximum annual pension benefit is limited to $1,050,000. Executives may retire from the Company from age 60 with full pension entitlement. An executive is considered as having retired for the purposes of the Supplementary Pension Plan if, at the time of termination of employment with CAE, he/she is at least age 55 with a minimum of 5 years of participation in the Supplementary Pension Plan. The annual pension benefit will be reduced by between 0.5% and 0.25% per month prior to NEO’s normal retirement age depending on the age of the NEO at time of retirement.
Pensions payable under the Supplementary Pension Plan are paid directly by CAE. In Canada, CAE is obligated to fund or provide security to ensure payments under the Supplementary Pension Plan upon retirement of the executive. CAE has elected to provide security by obtaining letters of credit for a trust fund established for those executives who have retired. CAE has secured certain NEO’s and key executives’ pension benefits by a letter of credit for a trust fund established for the executives.
CAE does not generally grant extra years of credited service under its pension plans. Receipt of pension benefits under the Supplementary Pension Plan is conditional upon the compliance with non-competition and non- solicitation clauses.
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Section 7 - Executive Compensation
Annual Benefits Payable | |||||||||||||||||||||||
Number of years of credited service (#) | At March 28, 2024 ($) | At age 65 ($) | Accrued obligation at start of the year ($) | Compensatory change1 ($) | Non- compensatory change2 ($) | Accrued obligation at year-end3 ($) | |||||||||||||||||
Marc Parent | 19.17 | 892,000 | 1,031,000 | 12,411,000 | 1,851,000 | (147,000) | 14,115,000 | ||||||||||||||||
Sonya Branco | 15.25 | 271,000 | 606,000 | 3,158,000 | 283,000 | 238,000 | 3,679,000 | ||||||||||||||||
Carter Copeland4 | 2.60 | 48,600 | 554,000 | 486,000 | 307,000 | 77,000 | 870,000 | ||||||||||||||||
Abha Dogra4 | 1.57 | 28,800 | 379,000 | 158,000 | 282,000 | 40,000 | 480,000 | ||||||||||||||||
Nick Leontidis | 24.00 | 527,000 | 553,000 | 7,614,000 | 372,000 | (42,000) | 7,944,000 | ||||||||||||||||
1.The change in benefit obligation that is compensatory includes the service cost and the increase in earnings in excess or below what was assumed. The service cost is the estimated value of the benefits accrued during the calendar year.
2.The change in benefit obligation that is not compensatory includes interest cost, change in assumptions, and gains and losses other than for a difference in earnings and the decrease in the discount rate used to value the pension plans which increases the accrued obligation.
3.The present values of the accumulated benefits reported in the above table are calculated in accordance with the assumptions used for financial reporting purposes. See Note 19 to CAE’s consolidated financial statements for the fiscal year ended March 31, 2024. The total present value of accumulated benefits in our financial statements is calculated in accordance with IFRS.
4.Mr. Copeland’s and Ms. Dogra’s pension are payable in US dollars converted to Canadian dollars using the FY2024 average exchange rate of 1.35.
Termination and Change of Control Benefits
Payment entitlements upon termination
The various compensation plans applicable to the NEOs also contain different provisions that apply upon termination of employment or Change of Control of CAE. CAE does not have a formal policy for providing severance payment in the case of termination of employment but may provide severance payments and benefits as required by law.
CAE has nevertheless entered into employment agreements with Mr. Parent that provide for the payment of severance amounts and certain other benefits in the event of involuntary termination other than for cause. Mr. Parent’s severance entitlement on termination of employment other than for cause is two years’ salary plus target bonus, and continuation of benefits. Mr. Parent would also be entitled to two years of service credited to the Supplemental Pension Plan. CAE also entered into employment agreements with Mr. Copeland and Ms. Dogra that provide for the equivalent of one year of salary payment in case of termination of employment other than for cause. Severance amounts are undetermined for the other NEOs.
CAE is also party to agreements with all its executive officers who are NEOs, pursuant to which such executives are entitled to termination of employment benefits following a Change of Control of CAE where the executive’s employment is expressly or constructively terminated without cause within two years following the Change of Control. In such event, the executive is entitled to two years of annual compensation (salary, short-term incentive and employee benefits, payable as a lump sum), two years of credited service and the immediate vesting of supplementary credited service for the purposes of any pension or retirement income plans, payment of long-term incentive Deferred Share Units, and vesting of all unvested stock options, RSUs and PSUs, as per plan provisions.
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Section 7 - Executive Compensation
Compensation Program | Resignation and Termination for Cause | Involuntary Termination | Retirement | Change of Control1 | ||||||||||
Annual Short-Term Incentive | Forfeit | Partial payment based on performance and time in position | Partial payment based on Company performance and time in position | Two times the greater of average three-year bonus or target bonus in case of termination2 | ||||||||||
Stock Options | Resignation: Vested options remain exercisable until the earlier of 30 days following the termination or the expiry date; unvested options are forfeited Termination for cause: All options, whether vested or unvested, are forfeited | Stock Options granted prior to FY2024: Vested options remain exercisable until the earlier of 30 days following the termination or the expiry date; unvested options are forfeited Stock Options granted as of FY2024: Vested options remain exercisable until the earlier of 90 days following the termination or the expiry date; unvested options are forfeited | Stock Options granted prior to FY2024: Vested options remain exercisable until the expiry date; unvested options continue to vest and must be exercised within 30 days following vesting date Stock Options granted as of FY2024: Vested options remain exercisable until the expiry date; unvested options continue to vest and must be exercised up to the earlier of 90 days following the vesting date or the expiry date | Stock Options granted prior to FY2024: All options become vested, as per plan provisions. Stock Options granted as of FY2024: Options will vest in full and become exercisable if they are not converted into or substituted by an alternative award; if converted, they will vest in full if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control and will remain exercisable until the earlier of one year following the termination or resignation, or the expiry date | ||||||||||
Performance Share Units | Resignation: Vested PSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs are forfeited Termination for cause: All PSUs are forfeited | PSUs granted prior to FY2024: PSUs partially vest at a rate of 1/6, 1/3 and 1/2 for each full year of employment completed since the grant date PSUs granted as of FY2024: Vested PSUs will be settled as soon as possible; the Human Resources Committee may determine, in its sole discretion, that a pro-rated portion of the unvested PSUs (based on the number of fiscal years completed since the grant date) will immediately vest | Vested PSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs will continue to vest and be paid out as scheduled, based on their vesting terms, including the achievement of performance criteria | PSUs granted prior to FY2024: Unvested PSUs vest as of the Change of Control date; all vested PSUs become payable at the closing price of CAE Shares on the TSX on such date, as per plan provisions PSUs granted as of FY2024: PSUs will vest in full if they are not converted into or substituted by an alternative award; if converted, they will vest in full and be settled as soon as possible after vesting if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control | ||||||||||
Restricted Share Units | Resignation: Vested RSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs are forfeited Termination for cause: All RSUs are forfeited | RSUs granted prior to FY2024: RSUs partially vest at a rate of 1/3 for each full year of employment completed since the grant date RSUs granted as of FY2024: Vested RSUs will be settled as soon as possible; the Human Resources Committee may determine, in its sole discretion, that a pro-rated portion of the unvested RSUs (based on the number of fiscal years completed since the grant date) will immediately vest | Vested RSUs granted as of FY2024 will be settled as soon as possible; unvested RSUs will continue to vest and be paid out as scheduled, based on their vesting terms | RSUs granted prior to FY2024: Unvested RSUs vest as of the Change of Control date; all vested RSUs become payable at the closing price of CAE Shares on the TSX on such date, as per plan provisions RSUs granted as of FY2024: RSUs will vest in full if they are not converted into or substituted by an alternative award; if converted, they will vest in full and be settled as soon as possible after vesting if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control | ||||||||||
Deferred Share Units Grants from 04/2004 | Vested units are paid out | Vested units are paid out | All units become vested | All units become vested | ||||||||||
Supplemental Pension Plan (SPP) | Resignation: If five or more years of participation in the SPP, accrued deferred pension at age 65 termination for cause: No benefits payable from the SPP | If five or more years of participation in the SPP, accrued deferred pension benefits at age 65 | If age 55 or older with a minimum of five years of participation in SPP, immediate monthly pension payable | Immediate vesting and two years of additional service in case of termination2 | ||||||||||
Severance payments | - | Severance amount3 in case of termination | - | Severance amount4 in case of termination2 | ||||||||||
110 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
1.Change of Control is defined in the Change of Control Agreements between CAE and each Named Executive Officer. A Change of Control may be triggered by a number of events, notably an acquisition by a person of 20% of CAE’s voting rights which is accompanied by a change in the composition of the Board, an acquisition by a person of 35% of CAE’s voting rights or an acquisition of Shares representing half the equity of CAE. Compensation programs have various definitions of Change of Control events with different impacts on compensation. The provisions illustrated in the above table are for specific events that would provide the maximum benefits to the executives.
2.Pursuant to the Change of Control Agreements between CAE and each NEOs, termination is defined as an involuntary termination that occurs within the first two years following the Change of Control.
3.In the event of involuntary termination when severance is payable, it will be determined at the time of termination, taking into consideration the appropriate factors and current state of legislation and jurisprudence. Mr. Parent’s severance entitlement on termination of employment other than for cause is two years’ salary plus target bonus, and continuation of benefits. Mr. Parent would also be entitled to two years of service credited to the Supplemental Pension Plan. Mr. Copeland’s and Ms. Dogra’s severance entitlement on termination of employment other than for cause is one year of salary. The severance amount is undetermined for other NEOs.
4.The severance amount is equal to two times the sum of base salary, target bonus (or actual bonus averaged over the last three years, if greater), and the sum of the value of employee benefits and perquisites provided to the executive.
In the event of death during active employment with CAE, the executive is deemed to have retired the day before his/her death if he/she was at least age 55, otherwise, he/she is deemed to have terminated his/her employment the day before his/her death.
111 | CAE INC. | 2024 | Management Proxy Circular
Section 7 - Executive Compensation
Amounts payable to NEOs upon specified termination events
The following table sets forth estimates of the amounts payable to the NEOs upon specified events, assuming that each such event took place on March 31, 2024. The table does not quantify benefits under plans that are generally available to salaried employees and do not discriminate in favor of executive officers, including the Retirement Plan for Employees of CAE Inc. and associated companies, the ordinary DSU plan and the Employee Stock Purchase Plan. In addition, the table does not include the value of outstanding equity awards that have previously vested, such as stock options and DSUs/ LTUs, which are set forth above in Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Incentive Plan Awards – Value Vested or Earned During the Year. For descriptions of the compensation plans and agreements that provide for the payments set forth in the following table, including our change in control agreements, see Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Termination and Change of Control Benefits.
Marc Parent | Sonya Branco | Carter Copeland | Abha Dogra | Nick Leontidis | |||||||||||||
Involuntary Termination | |||||||||||||||||
Salary/Severance1 | 6,053,500 | Undetermined | 708,750 | 708,750 | Undetermined | ||||||||||||
LTUs | – | – | – | - | - | ||||||||||||
Options | – | – | – | - | - | ||||||||||||
RSUs2 | 794,573 | 203,930 | 105,101 | 67,917 | 207,693 | ||||||||||||
PSUs2 | 825,846 | 213,902 | 107,417 | 63,616 | 217,432 | ||||||||||||
Supplementary Plan | 1,463,000 | – | - | - | - | ||||||||||||
Total | 9,136,919 | 417,832 | 921,268 | 840,283 | 425,125 | ||||||||||||
Retirement | |||||||||||||||||
LTUs | – | – | - | - | - | ||||||||||||
RSUs | – | – | - | - | - | ||||||||||||
PSUs | – | – | - | - | - | ||||||||||||
Options | – | – | - | - | - | ||||||||||||
Supplementary Plan | - | – | - | - | - | ||||||||||||
Total | |||||||||||||||||
Termination Following Change in Control | |||||||||||||||||
Salary/Severance3 | 6,053,500 | 2,179,875 | 2,575,125 | 2,291,625 | 2,185,930 | ||||||||||||
LTUs4 | – | – | – | - | – | ||||||||||||
Options5 | 892,255 | 261,220 | 1,881 | 87,291 | 266,770 | ||||||||||||
RSUs6 | 3,003,782 | 634,919 | 452,387 | 437,647 | 733,681 | ||||||||||||
PSUs6 | 8,082,997 | 1,655,218 | 1,243,728 | 1,272,691 | 1,948,726 | ||||||||||||
Supplementary Plan7 | 1,463,000 | 281,000 | 492,000 | 464,000 | 683,000 | ||||||||||||
Total | 19,495,534 | 5,012,232 | 4,765,121 | 4,553,254 | 5,818,107 | ||||||||||||
1.In the event of involuntary termination when severance is payable, it will be determined at the time of termination, taking into consideration the appropriate factors and current state of legislation and jurisprudence. Mr. Parent’s severance entitlement on termination of employment other than for cause is two years’ salary plus target bonus, and continuation of benefits. Mr. Parent would also be entitled to two years of service credited to the Supplemental Pension Plan. Mr. Copeland’s and Ms. Dogra’s severance entitlement on termination of employment other than for cause are one year of salary. Mr. Copeland’s and Ms. Dogra’s severance were converted into Canadian dollars using the FY2024 average exchange rate of 1.35.
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Section 7 - Executive Compensation
2.The RSU and the PSU values have been established by multiplying the number of units that would have vested upon involuntary termination as of March 31, 2024, based on performance during completed years, where applicable, and using the average fair market value of Shares on the TSX during the 20 trading days preceding the vesting date of March 31, 2024 which would be$26.88. Note that actual value would differ.
3.Severance as per the Change of Control Agreements for each NEO.
4.The LTU value has been calculated by multiplying the number of units that would have vested upon a Change of Control as of March 31, 2024, and which will be redeemable within the year following the year the executive’s employment is terminated. As of March 31, 2024, all LTUs had already vested.
5.Option value has been calculated by multiplying the number of options that would have vested upon a Change of Control as of March 31, 2024 using a closing price of Shares of $27.97 on March 28, 2024, less the applicable option exercise price. Note that actual value will differ.
6.RSU and PSU values have been established by multiplying the number of units that would have vested upon a Change of Control as of March 31, 2024 using a closing price of Shares on the TSX of $27.97 on March 28, 2024. Note that actual value would differ.
7.The Supplementary Pension Plan benefits set forth for each NEO reflect the incremental value of benefits for each termination event that exceeds the present value of benefits set forth in the “Pension Benefits” tables above.
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Section 8 – Other Important Information
Other Important Information
The management of CAE is aware of no business to be presented for action by the Shareholders at the Meeting other than that mentioned herein or in the Notice of Meeting.
Interest of informed persons in material transactions
No informed person (including any Director or executive officer) of CAE, any proposed Director of CAE, or any associate or affiliate of any informed person or proposed Director, had any material interest, direct or indirect, in any transaction since the commencement of CAE’s most recently completed financial year or in any proposed transaction which has materially affected or would materially affect CAE or any of its subsidiaries.
Indebtedness of Directors and executive officers
CAE does not offer its Directors or executive officers loans. CAE and its subsidiaries have not given any guarantee, support agreement, letter of credit or similar arrangement or understanding to any other entity in connection with indebtedness of CAE’s Directors or executive officers.
Shareholders proposals
To propose any matter for a vote by the Shareholders at an annual meeting of CAE, a Shareholder must send a proposal to the General Counsel, Chief Compliance Officer and Corporate Secretary at CAE’s office at 8585 Côte-de-Liesse, Saint-Laurent, Québec H4T 1G6 ninety (90) to one hundred fifty (150) days before the anniversary of CAE’s previous annual meeting, or within such other timeframe as prescribed by the applicable legislation. Shareholders will be required to submit notice of matters that they wish to raise at CAE’s 2025 annual meeting between March 17, 2025 and May 16, 2025. CAE may omit any proposal from its Circular and annual meeting for a number of reasons under applicable Canadian corporate law, including receipt of the proposal by CAE subsequent to the timeline noted above.
Request additional information
CAE shall provide to any person or company, upon written request to the General Counsel, Chief Compliance Officer and Corporate Secretary of CAE at CAE Inc., 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6, telephone number 514-734-5779 and facsimile number 514-340-5530:
1. one copy of the latest Annual Information Form of CAE together with one copy of any document or the pertinent pages of any document incorporated by reference therein;
2. one copy of the 2024 Annual Financial Report containing comparative financial statements of CAE for FY2024, together with the Auditors’ Report thereon and Management’s Discussion and Analysis; and
3. one copy of this Circular.
All such documents may also be accessed on CAE’s website (www.cae.com). Additional financial information is provided in CAE’s comparative financial statements and Management’s Discussion and Analysis available on SEDAR+ at www.sedarplus.ca for the most recently completed financial year.
The contents of this Circular have been approved by the Board of Directors of CAE.
 |  | ||||
Mark Hounsell, General Counsel, Chief Compliance Officer and Corporate Secretary | |||||
| June 14, 2024 Montréal, Québec | |||||
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Appendix A – Board of Directors’ Charter
Appendix A – Board of Directors’ Charter
CAE INC.
(“CAE” or the “Company”)
(“CAE” or the “Company”)
Responsibilities
CAE’s President and Chief Executive Officer and the Company’s other executive officers are responsible for the management of the Company. The Board of Directors (the “Board”) is responsible for the stewardship of the Company and for monitoring the actions of, and providing overall guidance and direction to management. The Board shall act in the best interest of the Company.
Committees
The Board may establish committees, as it deems necessary or desirable, to assist it in the fulfillment of its duties and responsibilities, with such terms of reference as the Board may determine and may delegate from time to time to such committees or other persons any of the Board’s responsibilities that may be lawfully delegated. As such, the Board currently maintains an Audit Committee, a Human Resources Committee and a Governance Committee. Each committee is comprised entirely of independent directors, as determined by the Board in light of securities laws and applicable exchange rules, and each member of a committee is appointed by the Board after thorough review of the requirements for membership on each such committee. The independent directors will periodically, as they see fit, hold meetings without management.
Strategy
The Board will maintain a strategic planning process and annually approve a strategic plan. Separately from the strategic plan, the Board also approves an annual budget for financial performance.
Enterprise Risk Management
The Board is accountable for the oversight of enterprise risk management. As such, the Board will review with management the Company’s risk appetite and risk tolerance and assess whether the Company’s strategy is consistent with the agreed-upon risk appetite and tolerance for the Company. The Board will also review and discuss with management all key enterprise risk exposures on an aggregate, company-wide basis, and the steps management has taken to monitor and to manage those exposures. This includes the review with management of the Board’s expectations as to each committee’s respective responsibilities for risk oversight and management of specific risks to ensure a shared understanding as to accountabilities and roles.
The Board will work with management to promote and actively cultivate a corporate culture that understands and implements enterprise-wide risk management.
Corporate Governance
Corporate governance issues are the responsibility of the full Board. This includes the disclosure thereof, including in the Company’s Annual Activity and Corporate Social Responsibility report and Management Proxy Circular.
The Board periodically reviews a Disclosure Policy for the Company that, inter alia, addresses how the Company shall interact with shareholders, analysts and other stakeholders and covers the accurate and timely communication of all important information. The Company communicates with its stakeholders through a number of channels including its website, and they in turn can provide feedback to the Company in a number of ways, including e-mail.
The Board, through its Governance Committee, regularly reviews reports on compliance with the Company’s Code of Business Conduct and ethical practices. It periodically reviews Company policies with respect to decisions and other matters requiring Board approval.
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Appendix A – Board of Directors’ Charter
Audit, Finance and Risk Management
The Board, directly and through the Audit Committee, oversees:
(i) the integrity and quality of the Company’s financial reporting and the effectiveness of internal controls;
(ii) the risk management framework, including the identification of the principal risks of the Company’s business, and ensures that there are systems in place to effectively monitor, manage and mitigate these risks;
(iii) cybersecurity governance, risk management, incident reporting and cyber risk disclosure;
(iv) the Company’s compliance with legal and regulatory requirements;
(v) the qualifications and independence of the Company’s external auditors;
(vi) the performance of the Company’s internal accounting function and external auditors; and
(vii) the adequacy of the Company’s material public documents prior to their release.
Succession Planning
The Board, with the help of the Human Resources Committee, ensures a succession plan is in place for the President and Chief Executive Officer and for other senior employees of the Company and monitors such plan.
Oversight and Compensation of Management
The Board considers recommendations of the Human Resources Committee with respect to:
(i) the appointment and compensation of senior officers of the Company at the level of Senior Vice President and above;
(ii) the implementation of processes for the recruitment, training, development and retention of senior employees who exhibit the highest standards of integrity and competence and any recommendation for improvement of the processes in place to develop high potential individuals, such as the Annual Leadership Development Process;
(iii) the compensation philosophy for the Company generally;
(iv) the adoption of any incentive compensation and equity-based plans, including stock option, stock purchase, deferred share unit, restricted share unit or other similar plans, in which employees are or may be eligible to participate; and
(v) the Company’s retirement policies and special cases.
The Board communicates to the President and Chief Executive Officer and periodically reviews the Board’s expectations regarding management’s performance and conduct of the affairs of the Company. The Board also periodically reviews the President and Chief Executive Officer’s position description and objectives and his performance against these objectives. Each year, after a performance evaluation, the Board approves, with the recommendation of the Human Resources Committee, the President and Chief Executive Officer’s compensation.
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Appendix A – Board of Directors’ Charter
Environmental, Social and Governance (ESG) Matters
The Board, through the Governance and Human Resources committees, oversees and reviews the Company’s ESG policies, practices, strategy and reporting (including Diversity, Equity and Inclusion; Data Protection and Privacy; Health & Safety (including Aviation Safety); Environment and Climate Change; Ethics and Anti-Corruption; and Human Rights (including Modern Slavery)).
The Board, through the Audit Committee, reviews trends in corporate disclosure of non-financial performance (including ESG related disclosure) and oversees the establishment and maintenance of a system of processes and controls to ensure the integrity, accuracy, and reliability of ESG disclosures to be included in financial reporting.
Directors’ Qualifications, Compensation, Education and Orientation
The Board, through the Governance Committee, develops a process to determine, in light of the opportunities and risks facing the Company, what competencies, skills and personal qualities are required for new directors in order to add value to the Company while ensuring that the Board is constituted of a majority of individuals who are independent. With regards to Board composition, the Board ensures adherence to the term limits imposed on all directors and considers criteria that promote diversity, including but not limited to gender, international background, nationality, age and industry knowledge, in light of the Company’s Policy Regarding Board and Executive Officer Diversity.
The Board, through the Governance Committee, develops a program for the orientation and education of new directors, and ensures that prospective candidates for Board membership understand the role of the Board and its committees, the nature and operation of the Company’s business, and the contributions that individual directors are expected to make, and develops a program of continuing education if needed for directors.
The Board considers recommendations of the Governance Committee with respect to the level and forms of compensation for directors, which compensation shall reflect the responsibilities and risks involved in being a director of the Company.
Assessment of Board and Committee Effectiveness
The Board considers recommendations of the Governance Committee for the development and monitoring of processes for assessing the effectiveness of the Board, the committees of the Board, the committees’ chairs, the Chair of the Board and the contribution of individual directors, which assessments shall be made annually. These results are assessed by the Chair of the Board and/or the Chair of the Governance Committee and are reported to the full Board, which decides on actions deemed necessary, if any. The Board ensures that the number of directors and the composition of the Board permit the Board to operate in a prudent and efficient manner.
Retirement Plans
The Board is responsible for overseeing the management of the Company’s retirement plans and does this through its Human Resources Committee.
Outside Advisors
Directors may hire outside advisors at the Company’s expense, subject to the approval of the Chair of the Board and have access to the advice and services of the Company’s Corporate Secretary, who is also the General Counsel and Chief Compliance Officer.
Last updated – February 14, 2024
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Appendix B – Non-IFRS and Other Financial Measures
Appendix B – Non-IFRS and Other Financial Measures
This Circular includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.
DEFINITIONS
A non-IFRS financial measure is a financial measure that depicts our financial performance, financial position, or cash flow and either excludes an amount that is included in or includes an amount that is excluded from the composition of the most directly comparable financial measures disclosed in our financial statements.
A non-IFRS ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar representation, that has a non‑IFRS financial measure as one or more of its components.
A total of segments measure is a financial measure that is a subtotal or total of two or more reportable segments and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.
A capital management measure is a financial measure intended to enable an individual to evaluate our objectives, policies and processes for managing our capital and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.
A supplementary financial measure is a financial measure that depicts our historical or expected future financial performance, financial position or cash flow and is not disclosed within our primary financial statements, nor does it meet the definition of any of the above measures.
Certain non-IFRS and other financial measures are provided on a consolidated basis and separately for each of our segments (Civil Aviation and Defense and Security) since we analyze their results and performance separately.
PERFORMANCE MEASURES
Gross profit margin (or gross profit as a % of revenue)
Gross profit margin is a supplementary financial measure calculated by dividing our gross profit by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.
Operating income margin (or operating income as a % of revenue)
Operating income margin is a supplementary financial measure calculated by dividing our operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.
Adjusted segment operating income or loss
Adjusted segment operating income or loss is a non-IFRS financial measure that gives us an indication of the profitability of each segment because it does not include the impact of any items not specifically related to the segment’s performance. We calculate adjusted segment operating income by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note
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Appendix B – Non-IFRS and Other Financial Measures
5 of our consolidated financial statements for the year ended March 31, 2024), the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023) and the cloud computing transition adjustment (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2022). We track adjusted segment operating income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Adjusted segment operating income on a consolidated basis is a total of segments measure since it is the profitability measure employed by management for making decisions about allocating resources to segments and assessing segment performance. Refer to Section 12.3 - Non‑IFRS measure reconciliations of the FY2024 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue)
Adjusted segment operating income margin is a non-IFRS ratio calculated by dividing our adjusted segment operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.
Adjusted effective tax rate
Adjusted effective tax rate is a supplementary financial measure that represents the effective tax rate on adjusted net income or loss. It is calculated by dividing our income tax expense by our earnings before income taxes, adjusting for the same items used to determine adjusted net income or loss. We track it because we believe it provides an enhanced understanding of the impact of changes in income tax rates and the mix of income on our operating performance and facilitates the comparison across reporting periods. Refer to Section 12.3 - Non-IFRS measure reconciliations of the FY2024 MD&A for a calculation of this measure, which calculation is incorporated by reference into this Circular.
Adjusted net income or loss
Adjusted net income or loss is a non-IFRS financial measure we use as an alternate view of our operating results. We calculate it by taking our net income attributable to equity holders of the Company from continuing operations and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, after tax, as well as significant one-time tax items. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024), the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023) and the cloud computing transition adjustment (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2022). We track adjusted net income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Refer to Section 12.3 - Non-IFRS measure reconciliations of the FY2024 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
Adjusted earnings or loss per share (EPS)
Adjusted earnings or loss per share is a non-IFRS ratio calculated by dividing adjusted net income or loss by the weighted average number of diluted shares. We track it because we believe it provides an enhanced understanding of our operating performance on a per share basis and facilitates the comparison across reporting periods. Refer to Section 12.3 - Non-IFRS measure reconciliations of the FY2024 MD&A for a calculation of this measure, which calculation is incorporated by reference into this Circular.
For incentive plans purposes, this measure is further adjusted for currency fluctuations.
EBITDA and Adjusted EBITDA
EBITDA is a non-IFRS financial measure which comprises net income or loss from continuing operations before income taxes, finance expense – net, depreciation and amortization. Adjusted EBITDA further adjusts for restructuring, integration and acquisition costs, and
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Appendix B – Non-IFRS and Other Financial Measures
impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024), the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023) and the cloud computing transition adjustment (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2022). We use EBITDA and adjusted EBITDA to evaluate our operating performance, by eliminating the impact of non-operational or non-cash items. Refer to Section 12.3 - Non-IFRS measure reconciliations of the FY2024 MD&A for a reconciliation of these measures to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
Free cash flow
Free cash flow is a non-IFRS financial measure that shows us how much cash we have available to invest in growth opportunities, repay debt and meet ongoing financial obligations. We use it as an indicator of our financial strength and liquidity. We calculate it by taking the net cash generated by our continuing operating activities, subtracting maintenance capital expenditures, intangible assets expenditures excluding capitalized development costs, other investing activities not related to growth and dividends paid and adding proceeds from the disposal of property, plant and equipment, dividends received from equity accounted investees and proceeds, net of payments, from equity accounted investees. Refer to Section 7.1 - Consolidated cash movements of the FY2024 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
Cash conversion rate
Cash conversion rate is a non-IFRS ratio calculated by dividing free cash flow by adjusted net income. We use it to assess our performance in cash flow generation and as a basis for evaluating our capitalization structure.
LIQUIDITY AND CAPITAL STRUCTURE MEASURES
Non-cash working capital
Non-cash working capital is a non-IFRS financial measure we use to monitor how much money we have committed in the day-to-day operation of our business. We calculate it by taking current assets (not including cash and cash equivalents and assets held for sale) and subtracting current liabilities (not including the current portion of long-term debt and liabilities held for sale). Refer to Section 8.1 - Consolidated capital employed of the FY2024 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
Capital employed
Capital employed is a non-IFRS financial measure we use to evaluate and monitor how much we are investing in our business. We measure it from two perspectives:
Use of capital:
•For the Company as a whole, we take total assets (not including cash and cash equivalents), and subtract total liabilities (not including long-term debt and the current portion of long-term debt);
•For each segment, we take the total assets (not including cash and cash equivalents, tax accounts, employee benefits assets and other non-operating assets), and subtract total liabilities (not including tax accounts, long-term debt and the current portion of long‑term debt, royalty obligations, employee benefit obligations and other non-operating liabilities).
Source of capital:
•In order to understand our source of capital, we add net debt to total equity.
Refer to Section 8.1 - Consolidated capital employed of the FY2024 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
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Appendix B – Non-IFRS and Other Financial Measures
Adjusted return on capital employed (ROCE)
Adjusted ROCE is a non-IFRS ratio calculated over a rolling four-quarter period by taking net income attributable to equity holders of the Company from continuing operations adjusting for net finance expense, after tax, restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events divided by the average capital employed from continuing operations. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024), the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023) and the cloud computing transition adjustment (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2022). We use adjusted ROCE to evaluate the profitability of our invested capital.
Net debt
Net debt is a capital management measure we use to monitor how much debt we have after taking into account cash and cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total long-term debt, including the current portion of long-term debt, and subtracting cash and cash equivalents. Refer to Section 8.1 - Consolidated capital employed of the FY2024 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.
Net debt-to-capital
Net debt-to-capital is a capital management measure calculated as net debt divided by the sum of total equity plus net debt. We use this to manage our capital structure and monitor our capital allocation priorities.
Net debt-to-EBITDA and net debt-to-adjusted EBITDA
Net debt-to-EBITDA and net debt-to-adjusted EBITDA are non-IFRS ratios calculated as net debt divided by the last twelve months EBITDA (or adjusted EBITDA). We use net debt-to-EBITDA and net debt-to-adjusted EBITDA because they reflect our ability to service our debt obligations. Refer to Section 12.3 - Non-IFRS measure reconciliations of the FY2024 MD&A for a calculation of these measures, which calculation is incorporated by reference into this Circular.
Maintenance and growth capital expenditures
Maintenance capital expenditure is a supplementary financial measure we use to calculate the investment needed to sustain the current level of economic activity.
Growth capital expenditure is a supplementary financial measure we use to calculate the investment needed to increase the current level of economic activity.
The sum of maintenance capital expenditures and growth capital expenditures represents our total property, plant and equipment expenditures.
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Appendix B – Non-IFRS and Other Financial Measures
GROWTH MEASURES
Adjusted order intake
Adjusted order intake is a supplementary financial measure that represents the expected value of orders we have received:
•For the Civil Aviation segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract. Additionally, expected future revenues from customers under short-term and long-term training contracts are included when these customers commit to pay us training fees, or when we reasonably expect the revenue to be generated;
•For the Defense and Security segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract. Defense and Security contracts are usually executed over a long-term period but some of them must be renewed each year. For this segment, we only include a contract item in adjusted order intake when the customer has authorized the contract item and has received funding for it.
For incentive plans purposes, this measure is further adjusted for currency fluctuations.
Adjusted backlog
Adjusted backlog is a supplementary financial measure that represents expected future revenues and includes obligated backlog, joint venture backlog and unfunded backlog and options:
•Obligated backlog represents the value of our adjusted order intake not yet executed and is calculated by adding the adjusted order intake of the current period to the balance of the obligated backlog at the end of the previous fiscal year, subtracting the revenue recognized in the current period and adding or subtracting backlog adjustments. If the amount of an order already recognized in a previous fiscal year is modified, the backlog is revised through adjustments;
•Joint venture backlog is obligated backlog that represents the expected value of our share of orders that our joint ventures have received but have not yet executed. Joint venture backlog is determined on the same basis as obligated backlog described above;
•Unfunded backlog represents legally binding Defense and Security orders with the U.S. government that we have received but have not yet executed and for which funding authorization has not yet been obtained. The uncertainty relates to the timing of the funding authorization, which is influenced by the government’s budget cycle, based on a September year-end. Options are included in adjusted backlog when there is a high probability of being exercised, which we define as at least 80% probable, but multi-award indefinite-delivery/indefinite-quantity (ID/IQ) contracts are excluded. When an option is exercised, it is considered adjusted order intake in that period, and it is removed from unfunded backlog and options.
Book-to-sales ratio
The book-to-sales ratio is a supplementary financial measure calculated by dividing adjusted order intake by revenue in a given period. We use it to monitor the level of future growth of the business over time.
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Appendix B – Non-IFRS and Other Financial Measures
SUPPLEMENTARY NON-FINANCIAL INFORMATION
Full-flight simulators (FFSs) in CAE’s network
A FFS is a full-size replica of a specific make, model and series of an aircraft cockpit, including a motion system. In our count of FFSs in the network, we generally only include FFSs that are of the highest fidelity and do not include any fixed based training devices, or other lower-level devices, as these are typically used in addition to FFSs in the same approved training programs.
Simulator equivalent unit (SEU)
SEU is a measure we use to show the total average number of FFSs available to generate earnings during the period. For example, in the case of a 50/50 flight training joint venture, we will report only 50% of the FFSs under this joint venture as a SEU. If a FFS is being powered down and relocated, it will not be included as a SEU until the FFS is re-installed and available to generate earnings.
Utilization rate
Utilization rate is a measure we use to assess the performance of our Civil simulator training network. While utilization rate does not perfectly correlate to revenue recognized, we track it, together with other measures, because we believe it is an indicator of our operating performance. We calculate it by taking the number of training hours sold on our simulators during the period divided by the practical training capacity available for the same period.
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Appendix C – Summary of the Employee Stock Option Plan
Appendix C – Summary of the Employee Stock Option Plan
The ESOP includes the following provisions:
| Eligibility | Any salaried employee of CAE or its subsidiaries is eligible to participate in the ESOP. The ESOP does not permit grants to non-employee Directors. Subject to ESOP provisions related to employee death, retirement, or termination without cause, no option granted under ESOP may be exercised unless that employee wishing to exercise such option is currently employed by CAE or one of CAE’s subsidiaries and has served continuously in such capacity since the date of the grant of such option. | ||||
| Limitations on Grants | An ESOP participant (which may include an employee management insider of CAE) may not hold options on more than 5% (on an undiluted basis) of the issued and outstanding Shares. The number of Shares issuable to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued and outstanding Shares. The number of Shares issued to insiders of the Company within any one-year period under all security-based compensation arrangements cannot exceed 10% of the Company’s issued and outstanding Shares. | ||||
| Exercise Price | The weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date (if the grant date falls within a blackout period or within five trading days following the end of a blackout period, the grant date shall be presumed to be the sixth trading day following the end of such blackout period). | ||||
| Termination of Employment | Death: options may be exercised to the extent that the optionee was entitled to do so at the time of death. The options can be exercised only during the period expiring on the day that is earlier of six months following the date of death and the option termination date. Retirement: all unvested options shall continue to vest following the retirement date. Such retired optionee shall be entitled, (a) to exercise any vested options held as of the retirement date until the termination date for each such option; and (b) to exercise any options vesting after the retirement date only during the 30-day period following the vesting date of the post retirement vesting options, after which any such options which remain unexercised shall expire. Involuntary termination for cause: each unvested option shall terminate and become null, void and of no effect on the date on which the optionee ceases to serve the Company. Involuntary termination without cause and resignation: the optionee has the right for a period of 30 days (or until the normal expiry date of the option if earlier) from the date of ceasing to be an employee to exercise his or her option to the extent that he/she was entitled to exercise it on the date of ceasing to be an employee. Upon the expiration of such 30-day period (subject to extension if the end of the period falls within a blackout period), each option shall terminate and become null, void and of no effect on the date on which such optionee ceases to serve the Company. | ||||
| Transferability/ Assignment of Options | Options are not transferable or assignable otherwise than by will or by operation of estate law. | ||||
| Financial Assistance | The ESOP does not contain any financial assistance provisions to facilitate employees’ participation in the program. | ||||
| Amendments | The ESOP provides that its terms, as well as those of any option, may be amended, terminated or waived in certain stated circumstances. The ESOP specifies in what situations Shareholders approval is required. | ||||
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Appendix C – Summary of the Employee Stock Option Plan
| Amendments not Requiring Shareholders Approval | The HRC has the authority, in accordance with and subject to the terms of the ESOP, to amend, suspend or terminate the ESOP or any option granted under the ESOP without obtaining Shareholders approval to: (a) (i) amend any terms relating to the granting or exercise of options, including the terms relating to the eligibility for (other than for non-executive Directors) and limitations or conditions on participation in the ESOP, the amount and payment of the exercise price (other than a reduction thereof) or the vesting, exercise, expiry (other than an extension of the termination date except as contemplated in the ESOP), assignment (other than for financing or derivative-type transaction purposes) and adjustment of options, or (ii) add or amend any terms relating to any cashless exercise features; (b) amend the ESOP to permit the granting of Deferred or Restricted Share Units under the ESOP or to add or amend any other provisions which result in participants receiving securities of the Company while no cash consideration is received by the Company; (c) make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any applicable stock exchange; (d) correct or rectify any ambiguity, defective provision, error or omission in the ESOP or in any option or make amendments of a “housekeeping” nature; (e) amend any terms relating to the administration of the ESOP; and (f) make any other amendment that does not require Shareholders approval by virtue of the ESOP, applicable laws or relevant stock exchange or regulatory requirements; provided such amendment, suspension or termination (i) does not adversely alter or impair any previously granted option without the optionee’s consent and (ii) is made in compliance with applicable laws, rules, regulations, by-laws and policies of, and receipt of any required approvals from, any applicable stock exchange or regulatory authorities having jurisdiction. | ||||
| Amendments Requiring Shareholders Approval | The ESOP provides that Shareholders approval is required to make the following amendments: (a) increase the maximum number of Shares issuable under the ESOP, except in the case of an adjustment pursuant to Article VIII thereof (subdivisions, consolidations or reclassifications of Shares or other such events); (b) increase the number of Shares that may be issued to insiders or to any one optionee under the ESOP, in both cases except in the case of an adjustment pursuant to Article VIII thereof (subdivisions, consolidations or reclassifications of Shares or other such events); (c) allow non-employee Directors to be eligible for awards of options; (d) permit any option granted under the ESOP to be transferable or assignable other than by will or pursuant to succession laws (estate settlements); (e) reduce the exercise price of an option after the option has been granted or cancel any option and substitute such option by a new option with a reduced exercise price granted to the same optionee, except in the case of an adjustment pursuant to Article VIII of the ESOP; (f) extend the term of an option beyond the original expiry date, except in case of an extension due to a blackout period; (g) add a cashless exercise feature payable in cash or Shares, which does not provide for a full deduction of the number of underlying Shares from the ESOP reserve; (h) add any form of or amendment to financial assistance provisions in the ESOP which is more favourable to optionees; and (i) amend any provisions to the amendment provisions of the ESOP. | ||||
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Appendix C – Summary of the Employee Stock Option Plan
| Change of Control | In the circumstances of a change in the beneficial ownership or control over the majority of the Shares of CAE or the sale of all or substantially all of CAE’s assets, the vesting of all options issued would be accelerated. A change of control is defined as (i) any event or circumstance where any person, any joint actor thereof or any person acting jointly or in concert therewith, or any combination thereof, acquires beneficial ownership or exercises control or direction, directly or indirectly (whether through a purchase, issuance or exchange of Shares or other voting securities, reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions having similar effect (or a plan of arrangement in connection with any of the foregoing)), other than solely involving the Company and any one or more of its subsidiaries, of a majority of the Shares or other voting securities of the Company or of any successor or resulting corporation or other person; or (ii) the sale or other disposition to a person other than a subsidiary of the Company of all or substantially all of the Company’s assets. | ||||
| Adjustments | If certain corporate events affect the number or type of outstanding Shares, including, for example, a dividend in stock, stock split, stock consolidation or rights offering, adjustments will be made to the terms of the outstanding option grants as appropriate in such circumstances. | ||||
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Appendix D – Summary of the Omnibus Incentive Plan
Appendix D – Summary of the Omnibus Incentive Plan
The Omnibus Incentive Plan includes the following provisions:
| Eligibility | The HRC, in its sole discretion, from time to time designates the executive officers, employees and consultants of the Company or any of its subsidiaries to whom awards of PSUs, RUSs and/or Stock Options shall be granted and determine, if applicable, the number of Shares to be covered by such awards and the terms and conditions of such awards. The Omnibus Incentive Plan does not permit Stock Option grants to non-employee directors. | ||||
| Limitations on Grants | The number of Shares issuable from treasury to any one participant shall not exceed more than 5% (on an undiluted basis) of the issued and outstanding Shares. The number of Shares issuable from treasury to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued and outstanding Shares. The number of Shares issued from treasury to insiders of the Company within any one-year period under all security-based compensation arrangements cannot exceed 10% of the Company’s issued and outstanding Shares. The total number of Shares available for issuance under the Omnibus Incentive Plan shall be 10,000,000. | ||||
| Exercise Price of Stock Options | All Stock Options granted under the Omnibus Incentive Plan have an exercise price which shall not be less than the market price of the Shares on the date of the grant. For purposes of the Omnibus Incentive Plan, the “market price “of the Shares as at a given date shall be the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before such date. The HRC may, in its discretion, provide for procedures whereby Shares are sold, at the request of the participant, to cover the exercise price and the applicable withholding taxes, otherwise known as a “cashless exercise”, or to provide cash payments representing the value of the remaining Shares underlying the Stock Options. In the event of a “cashless exercise”, as permitted by the HRC, a participant may authorize a third-party broker to (i) pay on his or her behalf the Exercise Price for the number of Shares in respect of which the Stock Option is exercised, (ii) sell such portion of the Shares received upon exercise of the Stock Option which is sufficient to cover such Exercise Price and the amount necessary to satisfy any withholding tax obligations of the Company or any subsidiary, and (iii) remit to the Company or such subsidiary, as applicable, the portion of the proceeds sufficient to cover such withholding tax obligations. | ||||
| Stock Option Term | The HRC shall determine, at the time of granting a Stock Option, the period during which the Stock Option is exercisable, which shall not be more than ten (10) years from the date of grant. Unless otherwise determined by the HRC, all unexercised Stock Options shall be cancelled at the expiry of such term. Should the expiration date for a Stock Option fall within a black-out period or within nine (9) trading days following the end of a black-out period, such expiration date shall be automatically extended to that date which is the tenth (10th) trading day after the end of the black-out period. | ||||
Share Unit Grant Date | Unless otherwise determined by the HRC, the date of grant of PSUs and RSUs shall not be before the sixth (6th) trading day following the day on which the HRC approves the grant of PSUs and RSUs. Should the date of grant fall within a black-out period or within five (5) trading days after the end of a black-out period, then the date of grant shall be deemed to be the later of the sixth (6th) trading day following the end of such black-out period or the sixth (6th) trading day following the day on which the HRC approved the grant. | ||||
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Appendix D – Summary of the Omnibus Incentive Plan
| Vesting | Each PSU, RSU or Stock Option awarded to a participant shall be exercisable at such time or times and/or pursuant to the achievement of such performance criteria and/or other vesting conditions as the HRC may determine in its sole discretion at the time of granting the particular award. Unless otherwise determined by the HRC, PSUs credited to a participant’s account in respect of which the performance criteria have not been achieved, shall automatically be forfeited and be cancelled effective the last day of the applicable performance period. | ||||
| Settlement of Share Units | All vested PSUs and RSUs shall be settled as soon as practicable following the applicable “share unit vesting determination date” but in all cases prior to the last day of the restriction period. The applicable settlement date shall be determined by the HRC but shall not fall within a black-out period or within five (5) trading days after the end of a black-out period, unless the last day of the “restriction period” falls within this period. For the purposes of the Omnibus Incentive Plan, the “share unit vesting determination date” shall be the date on which the HRC determines if the vesting conditions with respect to PSUs or RSUs (including any applicable performance criteria) have been met, and as a result, establishes the number of PSUs or RSUs, as applicable, that become vested, if any. For the purposes of the Omnibus Incentive Plan, the “restriction period” shall be the applicable restriction period in respect of a particular PSU or RSU, which period, unless otherwise determined by the HRC at the time the PSU or RSU is granted, shall end on the trading day preceding December 31 of the calendar year which is three (3) years after the calendar year in which the PSU or RSU was granted. The Company, in its sole discretion, may settle (or cause a subsidiary to settle), vested PSUs or RSUs, by providing a participant (or the liquidator, executor or administrator, as the case may be, of the estate of the participant) with: (i) in the case of settlement of PSUs or RSUs for their cash equivalent, delivery of cash to the participant representing the cash equivalent, through wire transfer, cheque or any other form of payment deemed acceptable by the HRC; (ii) in the case of settlement of PSUs or RSUs for Shares, delivery of Shares issued from treasury and/or purchased on the participant’s behalf on the open market; or (iii) in the case of settlement of the PSUs or RSUs for a combination of Shares and the cash equivalent, a combination of (i) and (ii) above. | ||||
Determination of Amounts | For purposes of determining the cash equivalent of PSUs or RSUs to be paid, such calculation will be made as of the settlement date based on the market value on such date multiplied by the number of vested PSUs or RSUs in the participant’s account, net of any applicable taxes. For the purposes of determining the number of Shares to be issued or delivered to a participant upon settlement of PSUs or RSUs, such calculation will be made as of the settlement date based on the whole number of Shares corresponding to the vested PSUs or RSUs recorded in the participant’s account, net of the whole number of Shares to be sold to satisfy any applicable taxes. | ||||
| Termination of Employment | Termination for Cause: all awards granted to such participant, whether vested or unvested on the termination date, shall be forfeited. For the purposes of the Omnibus Incentive Plan, the determination by the HRC that the participant was discharged for cause shall be binding on the participant. “Cause” shall include a breach of the Company’s Code of Business Conduct or other CAE policy, failure to perform specified and required duties after a written warning, serious misconduct or negligence of, among other things, a professional, ethical or legal nature, or moral turpitude. Resignation: (i) all unvested PSUs, RSUs and/or Stock Options granted to such participant will be forfeited on the termination date; | ||||
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(ii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (iii) all vested Stock Options granted to such participant will remain exercisable until the earlier of: (A) thirty (30) days after the termination date; and (B) the expiry date of the options, after which time all such Stock Options will expire. For greater certainty, if, following a participant’s resignation, the end of the thirty (30) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period. Retirement: (i) all unvested PSUs and/or RSUs granted to such participant will continue to vest as determined by the HRC and will be settled, as applicable, based on their vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC; (ii) all unvested Stock Options granted to such participant will continue to vest in accordance with the terms of the Omnibus Incentive Plan and the participant’s grant agreement. Once vested, such Stock Options may only be exercised until the earlier of: (A) ninety (90) days following their vesting and (B) the expiry date of the Stock Options, after which time all unvested Stock Options will automatically expire. For greater certainty, if, following a participant’s retirement, the end of the ninety (90) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period; (iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (iv) all vested Stock Options granted to such participant will remain exercisable until their expiry date after which time all such Stock Options will automatically expire. Death or Long-Term Disability: (i) all unvested PSUs and/or RSUs granted to such participant will fully vest at target on the termination date and be settled as soon as possible (regardless of vesting terms including, if applicable, achievement of performance criteria); (ii) all unvested Stock Options granted to such participant will vest on the termination date and may only be exercised until the earlier of: (A) six (6) months following the termination date; and (B) the expiry date of the Stock Options, after which time all unvested Stock Options will automatically expire; (iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (iv) all vested Stock Options granted to such participant will remain exercisable until the earlier: of (A) six (6) months after the termination date; and (B) the expiry date of the Stock Options, after which time all such options will automatically expire. For greater certainty, if, following a participant’s death or long-term disability, the end of the six (6) month period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period. Termination without cause: | |||||
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(i) the HRC may, in its sole discretion, determine that a portion of the PSUs and/or RSUs granted to such participant, pro-rated to the number of fiscal years completed since their grant, will immediately vest on the termination date and be settled (based on their vesting terms, including, if applicable, achievement of performance criteria, up to the termination date, as determined in the final and sole discretion of the HRC); (ii) all unvested Stock Options granted to such participant will be forfeited on the termination date; (iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (iv) all vested Stock Options granted to such participant will remain exercisable until the earlier of: (A) ninety (90) days after the termination date; and (B) the expiry date of the Stock Options, after which time all such Stock Options will automatically expire. For greater certainty, if, following a participant’s termination without cause, the end of the ninety (90) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period. | |||||
| Transferability/ Assignment of Awards | Except as specifically provided in a grant agreement approved by the HRC, each award granted under the Omnibus Incentive Plan shall not be transferable or assignable otherwise than by will or by the laws of succession. | ||||
| Financial Assistance | Unless otherwise determined by the HRC, the Company shall not offer financial assistance to any participant in regards to the exercise, vesting or payment of any award granted under the Omnibus Incentive Plan. | ||||
| Amendments | The Omnibus Incentive Plan provides that its terms, as well as those of any grants, may be suspended, terminated, amended or revised in certain stated circumstances. The Omnibus Incentive Plan specifies in what situations Shareholders approval is required. | ||||
| Amendments not Requiring Shareholders Approval | The Board may suspend or terminate the Omnibus Incentive Plan at any time, or from time to time amend or revise the terms of the Omnibus Incentive Plan or any granted awards without the consent of the participants, provided that such suspension, termination, amendment or revision shall: (i) not materially adversely alter or impair the rights of any participant, without the consent of such participant, except as permitted by the provisions of the Omnibus Incentive Plan; (ii) be in compliance with applicable law and with the prior approval, if required, of the Shareholders, a stock exchange or any other regulatory body having authority over the Company; and (iii) be subject to Shareholders approval, where required by law or the requirements of a stock exchange, provided that the Board may, from time to time, in its absolute discretion and without approval of the Shareholders of the Company make the following amendments: a.amend any terms and conditions relating to the granting of awards, including the terms relating to the eligibility for and limitations or conditions on participation in the Omnibus Incentive Plan (other than to allow non-employee directors of the Company to be eligible for awards of Stock Options under the Omnibus Incentive Plan), the amount and payment of the exercise price (other than a reduction thereof) or the vesting, exercise, expiry (other than an extension of the expiry date except if due to a black-out period) and adjustment of awards as provided hereunder; | ||||
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Appendix D – Summary of the Omnibus Incentive Plan
b.make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any relevant stock exchange; c.correct or rectify any ambiguity, defective provision, error or omission in the Omnibus Incentive Plan or make amendments of a "housekeeping" nature; d.amend any terms relating to the administration of the Omnibus Incentive Plan; and e.make any other amendment that does not require Shareholders approval by virtue of the Omnibus Incentive Plan, applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any relevant stock exchange. The Board may also, by resolution, advance the date on which any award may be exercised or payable or, subject to applicable regulatory provisions, including any rules of a stock exchange, extend the expiration date of any award, in the manner to be set forth in such resolution, provided that the period during which a Stock Option is exercisable or a PSU or RSU remains outstanding does not exceed: (i) in the case of Stock Options, ten (10) years from the Stock Option grant date subject to an extension due to a black-out period; and (ii) in the case of PSUs and RSUs, the last day of the restriction period in respect of such PSUs and RSUs. The Board shall not, in the event of any such advancement or extension, be under any obligation to advance or extend the date on or by which any Stock Option may be exercised or any PSU or RSU may remain outstanding with respect to any other participant. | |||||
| Amendments Requiring Shareholders Approval | The Omnibus Incentive Plan provides that the Board shall be required to obtain Shareholders approval to make the following amendments: (i) increase the maximum number of Shares issuable under the Omnibus Incentive Plan, except in the case of an adjustment as provided under the Omnibus Incentive Plan; (ii) increase the number of Shares that are issuable or that may be issued to insiders or to any one participant under the Omnibus Incentive Plan, except in the case of an adjustment as provided under the Omnibus Incentive Plan; (iii) allow non-employee directors of the Company to be eligible for awards of Stock Options under the Omnibus Incentive Plan; (iv) permit any award granted under the Omnibus Incentive Plan to be transferable or assignable other than by will or pursuant to succession laws; (v) reduce the exercise price of a Stock Options after the Stock Option has been granted to a participant or cancel any Stock Option and substitute such Stock Option by a new Stock Option with a reduced exercise price granted to the same participant, except in the case of an adjustment provided under the Omnibus Incentive Plan; (vi) extend the term of a Stock Option beyond the original expiry date, except in case of an extension due to a black-out period; (vii) add any form of financial assistance and any amendment to a financial assistance provision in the Omnibus Incentive Plan which is more favourable to participants; and (viii) amend any provisions to the amendment provisions of the Omnibus Incentive Plan. | ||||
| Change of Control | In the context of a change of control, all awards granted to a participant will be converted into or substituted by alternative awards, to the extent possible, and Stock Options, PSUs and RSUs which are not converted into or substituted by an alternative award shall vest and, in the case of Stock Options, become exercisable in full immediately prior to the consummation of the transaction constituting the change of control. If alternative awards are available and a participant is terminated without cause or submits a resignation for good reason within twenty-four (24) calendar months after a change of control, all outstanding alternative awards which are not then exercisable shall vest and alternative awards in | ||||
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Appendix D – Summary of the Omnibus Incentive Plan
| which Stock Options were converted will become exercisable in full upon such termination or resignation. Alternative awards in which PSUs and RSUs were converted will be settled as soon as possible after vesting. Alternative awards in which Stock Options were converted will remain exercisable until the earlier of: (i) one (1) year after the termination or resignation; and (ii) the original expiry date of the Stock Options, after which time all such alternative awards will expire. A change of control is defined as (i) any event or circumstance where any person, any joint actor thereof or any person acting jointly or in concert therewith, or any combination thereof, acquires beneficial ownership or exercises control or direction, directly or indirectly (whether through a purchase, issuance or exchange of Shares or other voting securities, reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions having similar effect (or a plan of arrangement in connection with any of the foregoing)), other than solely involving the Company and any one or more of its subsidiaries, of a majority of the Shares or other voting securities of the Company or of any successor or resulting Company or other person; (ii) the sale or other disposition to a person other than a subsidiary of the Company of all or substantially all of the Company’s assets; (iii) the Company undergoing a liquidation or dissolution; or (iv) as a result of or in connection with: (A) a contested election of directors; or (B) a reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions involving the Company or any of its subsidiaries and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Board of directors no longer constitute a majority of the members of the Board of Director. | |||||
| Adjustments | In the event of any subdivision, consolidation, reclassification, reorganization or any other change affecting the Shares, or any merger, amalgamation or consolidation of the Company with or into another corporation, or any distribution to all security holders of cash, evidences of indebtedness or other assets not in the ordinary course, or any transaction or change having a similar effect, the Board shall in its sole discretion, subject to the required approval of any stock exchange, determine the appropriate adjustments or substitutions to be made in such circumstances in order to maintain the economic rights of the participants in respect of awards under the Omnibus Incentive Plan, including, without limitation, adjustments to the exercise price, adjustments to the number of Shares to which a participant is entitled upon exercise or settlement, adjustments permitting the immediate exercise of any outstanding awards that are not otherwise exercisable or adjustments to the number or kind of Shares reserved for issuance. | ||||
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Appendix E – Summary of the Rights Plan
Appendix E – Summary of the Rights Plan
The Rights Plan includes the following provisions:
| Issue of Rights | CAE issued one right (a “Right”) in respect of each Common Share outstanding at the close of business on March 7, 1990 (the “Record Time”). CAE has issued and will continue to issue Rights on the same basis for each Common Share issued after the Record Time but prior to the earlier of the Separation Time and the Expiration Time (both defined below). | ||||
| Rights Certificates and Transferability | Before the Separation Time, the Rights will be evidenced by certificates or book entry confirmation statements for the Common Shares and such Rights are not transferable separate from the Common Shares. From and after the Separation Time, the Rights will be evidenced by separate Rights Certificates or in separate book entry confirmation statements and will be transferable separate from and independent of the Common Shares. | ||||
| Exercise of Rights | Rights are not exercisable before the Separation Time. After the Separation Time and before the Expiration Time, each Right entitles the holder to acquire one Common Share for the exercise Price of $100 (subject to certain anti-dilution adjustments) (the “Exercise Price”). This Exercise Price is a price in excess of the estimated maximum value of the Common Shares during the term of the Rights Plan as determined by the Board of Directors. Upon the occurrence of a Flip-In Event (defined below) prior to the Expiration Time (defined below), each Right (other than any Right held by an “Acquiring Person”, which will become null and void as a result of such Flip-In Event) may be exercised to purchase that number of Common Shares which have an aggregate market price equal to twice the Exercise Price of the Rights for a price equal to the Exercise Price. Effectively, this means a Shareholder (other than the Acquiring Person) can acquire additional Common Shares from treasury at half their Market Price. | ||||
| Definition of “Acquiring Person” | Subject to certain exceptions, an Acquiring Person is a person who is the Beneficial Owner (defined below) of 20% or more of the outstanding Common Shares. | ||||
| Definition of “Beneficial Ownership” | A person is a Beneficial Owner if such person or its affiliates or associates or any other person acting jointly or in concert: 1.owns the securities in law or equity; and 2.has the right to acquire (immediately or within 60 days) the securities upon the exercise of any convertible securities or pursuant to an agreement, arrangement or understanding (other than a customary underwriting agreement, pledge of securities or business combination agreement requiring Shareholder approval). However, a person is not a Beneficial Owner under the Rights Plan where: 1.the securities have been deposited or tendered pursuant to a take-over bid, unless those securities have been taken up or paid for; 2.by reason of the holders of such securities having agreed to deposit or tender such securities to a take-over bid pursuant to a Permitted Lock-Up Agreement; 3.such person (including a fund manager, trust company, pension fund administrator, trustee or non-discretionary client accounts of registered brokers or dealers) is engaged in the management of investment funds for others, as long as that person: a)holds those Common Shares in the ordinary course of its business for the account of others; and b)is not making a take-over bid or acting jointly or in concert with a person who is making a take-over bid; or 4.such person is a registered holder of securities as a result of carrying on the business of or acting as a nominee of a securities depository. | ||||
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Appendix E – Summary of the Rights Plan
| Definition of “Separation Time” | Separation Time occurs on the tenth business day after the earlier of: 1.the first date of public announcement that a Flip-In Event has occurred; 2.the date of the commencement or announcement of the intent of a person to commence a take-over bid (other than a Permitted Bid or Competing Bid) or such later date as determined by the Board; and 3.the date on which a Permitted Bid or Competing Bid ceases to qualify as such or such later date as determined by the Board. | ||||
| Definition of a “Flip-In Event” | A Flip-In Event occurs when a person becomes an Acquiring Person. Upon the occurrence of a Flip-In Event, any Rights that are beneficially owned by an Acquiring Person or any of its related parties to whom the Acquiring Person has transferred its Rights will become null and void as a result of which the Acquiring Person’s investment in CAE will be greatly diluted if a substantial portion of the Rights are exercised after a Flip-In Event occurs. | ||||
| Definition of “Permitted Bid” | A Permitted Bid is a take-over bid made by a person (the “Offeror”) pursuant to a take-over bid circular that complies with the following conditions: 1.the bid is made to all registered holders of Common Shares (other than Common Shares held by the Offeror) on identical terms and conditions; 2.no Common Shares may be taken up or paid for under the bid for 105 days following the commencement of the bid or such shorter minimum period as is permitted by securities legislation; 3.no Common Shares may be taken up or paid for unless more than 50% of the outstanding Common Shares held by Shareholders other than the Offeror and certain related parties have been deposited pursuant to the bid and not withdrawn; 4.the Common Shares may be deposited to and withdrawn from the take-over bid at any time before its expiry; and 5.if, on the date specified for take-up and payment, the condition in paragraph 3 above is satisfied, the bid shall remain open for an additional period of at least 10 days to permit the remaining Shareholders to tender their Common Shares. | ||||
| Definition of “Competing Bid” | A Competing Bid is a take-over bid that: 1.is made while another Permitted Bid is in existence; and 2.satisfies all the requirements of a Permitted Bid except that no Common Shares may be taken up or paid for under the Competing Bid until it has been open for deposit for at least the same number of days as the minimum initial deposit period of the Permitted Bid. | ||||
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Appendix E – Summary of the Rights Plan
| Definition of “Permitted Lock-Up Agreement” | A Permitted Lock-Up Agreement is an agreement between a person making a take-over bid and one or more Shareholders (each a “Locked-up Person”) under which the Locked-up Persons agree to deposit or tender their Common Shares to such take-over bid and which provides: 1.(i) no limit on the right of the Locked-up Persons to withdraw its Common Shares in order to deposit them to a Competing Bid (or terminate the agreement in order to support another transaction) where the price or value represented under the Competing Bid (or other transaction) exceeds the price or value represented under the original take-over bid; or (ii) limits such right to withdraw its Common Shares in order to deposit them to a Competing Bid (or terminate the agreement in order to support another transaction) where the price or value represented under the Competing Bid (or other transaction) exceeds the price or value represented under the original take-over bid by as much as or more than an amount specified under the original take-over bid, and the specified amount is not more than 7% of the price or value represented under the original take-over bid, and the Competing Bid (or other transaction) is made for the same number of Common Shares as the original take-over bid; and 2.for no “break-up” fee or “top-up” fee in excess of the greater of: (i) 2.5% of the price or value payable under the original take-over bid to Locked-up Persons; and (ii) 50% of the amount by which the price or value payable to Locked-up Persons under a Competing Bid (or other transaction) exceeds the price or value payable to Locked-up Persons under the original take-over bid, shall be payable by such Locked-up Persons in the event that the original take-over bid is not successfully completed or if any Locked-up Person fails to tender their Common Shares under the original take-over bid. | ||||
| Definition of “Independent Shareholders” | Independent Shareholders generally means holders of Common Shares other than (i) any Acquiring Person, any Offeror, any Affiliate, Associate or joint actor of an Acquiring Person or Offeror, or (ii) any person holding Common Shares under any employee benefit plan, stock purchase plan, deferred profit sharing plan or similar plan or trust for the benefit of employees of the Company or its subsidiaries unless the beneficiaries of the plan or trust direct how Common Shares will be voted and whether such shares will be tendered to a Take-over Bid. | ||||
| Redemption of Rights | The Rights may be redeemed by the Board at its option with the prior approval of the Shareholders at any time before a Flip-In Event occurs at a redemption price of $0.00001 per Right. In addition, the Rights will be redeemed automatically in the event of a successful Permitted Bid, Competing Bid or a bid for which the Board has waived the operation of the Rights Plan. CAE is not required to pay the redemption price to any holder of Rights unless the holder is entitled to receive at least $10.00 in respect of all Rights held by such holder. | ||||
| Waiver | Before a Flip-In Event occurs, the Board may waive the application of the Flip-In provisions of the Rights Plan to any prospective Flip-In Event which would occur by reason of a take-over bid made by a take-over bid circular to all registered holders of Common Shares. However, if the Board waives the Rights Plan with respect to a particular bid, it will be deemed to have waived the Rights Plan with respect to any other take-over bid made by take-over bid circular to all registered holders of Common Shares before the expiry of that first bid. Other waivers of the “Flip-In” provisions of the Rights Plan will require prior approval of the Shareholders. The Board may also waive the “Flip-In” provisions of the Rights Plan in respect of any Flip-In Event provided that the Board has determined that the Acquiring Person became an Acquiring Person through inadvertence and has reduced its ownership to such a level that it is no longer an Acquiring Person. | ||||
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Appendix E – Summary of the Rights Plan
| Term of the Rights Plan | Provided that the reconfirmation of the Rights Plan is approved by Shareholders at the Meeting, the Rights Plan will continue indefinitely, provided that it must be reconfirmed every three years. If the Rights Plan is not approved by Shareholders at the Meeting, the Rights Plan will terminate on August 14, 2024. | ||||
| Amending Power | Except for minor amendments to correct typographical errors and amendments to maintain the validity of the Rights Plan as a result of a change of law, Shareholder or rightsholder approval is required for amendments to the Rights Plan. | ||||
| Rights Agent | The rights agent is Computershare Trust Company of Canada. | ||||
| Rightsholder not a Shareholder | Until a Right is exercised, the holders thereof as such, will have no rights as a Shareholder. | ||||
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